Nexstar Media Group Inc (NXST) 2008 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the NEXSTAR Broadcasting 2008 first quarter results conference call. During the presentation, all participants will be a listen only mode. Afterwards we'll conduct a Q&A session. (OPERATOR INSTRUCTIONS). As a reminder this conference is recorded, Wednesday, May 7, 2008. I'd now like to turn the conference over to Mr. Joe Jaffoni, Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning, everyone. I'm just going to take a moment to read the Safe Harbor after which I will introduce management.

All statements and comments made by management during today's conference call other than statements of historical fact may be deemed forward-looking statements within the meaning of Section 21 of the Securities Act 1933 and Section 21A of Securities & Exchange 1934. Company's future conferences and results of on their actions as well as forward-looking statements are subject to change.

The forward-looking statements and comments made during the conference call are made only as of the date of today's conference call. Management will also be discussing non-GAAP financial information during the call. In compliance with the regulation G, reconciliation of non-GAAP information data to GAAP measurements are included in today's news announcement. The Company does not undertake any obligation to update forward-looking statements reflective of changes and circumstances.

At this time, I'd like to turn the call over to the host, NEXSTAR Founder, President and CEO, Perry Sook. Perry, please go ahead.

Thank you, Joe. Good morning, everyone. Thank you all for joining us today to discuss NEXSTAR Q1 2008 operating results. Matt Devine, our Chief Financial Officer is here, as always with me on the call this morning. And after our brief remarks, we'll open the floor to Q&A.

NEXSTAR's 2008 Q1 revenue broadcast cash flow and EBITDA exceeded last years results fell within the guidance. $67.7 million Q1 2008 reported net revenue includes approximately $1.8 million of net political revenue and compares with $62.1 million net revenue in the 2007 first quarter. In that quarter, approximately, $340,000 of net political revenue was included. Increases in local and political, new media, and retransmission consent revenues absorbed the declines in national, network compensation and trade and barter revenues.

In light of what we've seen reported to date, our first quarter financials indicate that NEXSTAR continues to outperform the industry and is on plan to generate annual record operating results this year. Let me review some Q1 highlights. New local broadcast revenue, new local direct broadcast revenue, totaled $2.9 million for the first quarter. If you look at our top ten category billing that decreased 4.4% with auto and fast food down, approximately, 5% and 8%, respectively.

Two top ten categories registered year-over-year increases, insurance and services, rising 26%, and legal was up about 2%. Our quarterly retransmission consent revenues were up 18% to $4.6 million, from $3.9 million in Q1 of 2007. New media revenue rose eight-fold to $2 million in the quarter, compared to quarter million dollars in Q1 of 2007. We've previously indicated that in 2008 we expect to at least double our 2007 new media revenue which totaled $5.1 million and we stand by that projection.

We changed the national rep firm to Cap Media for 24 of television stations in 14 of our markets. We've worked with Cap since the acquisition of our CBS affiliate in Johnston, Altoona and based on their outstanding performance there for us in that market, we extended the relationship with them as a means of improving our national sales performance. We also indicated that we believe within the next few years approximately 30% of Company's EBITDA generated from non-traditional revenue initiatives, such as online revenues, retransmission consent and other digital revenue sources.

2007 Q1 -- I'm sorry, in 2007 for the full year approximately 22% NEXSTAR EBITDA consisted of contributions from these high margin revenue streams and Q1 2008, approximately, 25% of NEXSTAR EBITDA was generated from those sources.

The Company's financial results throughout the year will benefit from several visible growth drivers. We expect to garner strong shares of political advertising, further grow our high margin retransmission revenue stream and realize a full year benefit of conversion of TV station websites into community portals. We are also expanding our new media initiatives and product offerings, as well as offering new incentive programs for advertisers and sales staff.

Let me now turn the call over to Matt Devine to provide additional detail on the financials and guidance. And, then, we'll both come back with more color. Matt?

Thank you, Perry. I'd like to review some of the key year-over-year Q1 line items on the Company's income statement and balance sheet. Net revenue of $63.7 million in Q1 over '08 was up, approximately, 2.6% verse the prior year first quarter. Cash operating expenses of $42.4 million compared to $41.3 million Q1 of '07. Broadcast cash flow of $21.3 million increased over $20.8 million in last year's first quarter. EBITDA of $18.1 million compared favorably to $17.7 million in last year's first quarter.

Total gross revenue was $71.2 million versus $69.3 million in Q1 of last year. Gross local was $41.9 million in Q1 of this year, up a little under 1% versus last year. Gross national revenues totaled $16.2 this year. Political revenues of $2.1 million compared with about $400,000 in last year's first quarter. New media revenues totaled $2 million in Q1 of '08 compared with $300,000 in Q1 of last year. Cash retransmission revenues of $3.3 million was up about 27%, compared to $2.6 million in Q1 of last year.

Total retrans revenues which includes ad spend component, came in $4.6 million this year. Compared to $3.9 million last year. And trade and barter are posted at $4.4 million this year versus $5 million last year. The Company generated a 33.5% BCF margin in the first quarter of this year. As Perry noted, the growth in local, political, digital revenues overcame declines in national, network comp, trade and barter. NEXSTAR's first quarter 2008 corporate overhead cost totaled $3.2 million and included, approximately, $600,000 of noncash employee stock option expense this quarter.

In Q1 of '07, corporate overhead totaled $3 million, and included $500,000 in employee stock option expense. Free cash flow, as defined this morning's announcement, was $4.3 million for the first quarter of '08 compared to $2 million in the year ago quarter. And the Company incurred $4.2 million of CapEx in the first quarter of this year, of which $2.8 million related to HD build-out, compared with $5.9 million of CapEx incurred in Q1 of last year. We project CapEx spending of $33 million in the full year of '08, of which, approximately, $30 million will relate to our HD conversion expenses.

As far as the balance sheet goes, cash on hand, March 31, '08, was $58.5 million compared with $16.2 million at year-end '07. Our outstanding bank debt totaled $400.8 million at March 31 of this year, compared with $356.7 million at year-end '07. Our 7% notes totaled $198.1 million. Resulting in operating company net debt of $540.4 million, at March 31, '08 versus $538.5 million at year-end '07.

Total leverage at March 31, '08 was 6.47 turns. The October '05 amendment senior credit facility covenant, provide for total leverage covenant of 6.75 turns through year-end '08. At the holding company our 11.38% notes fully acreeted to $130 million at Mar 31 of '08, compared to $126.5 million year-end '07.

Thus, total net debt including the holding company, was $670.4 million compared with $665 million at year-end '07. And that would represent leverage of 7.4 turns at the hold coal level. April 1, NEXSTAR redeemed, approximately, $47 million of the principle amount of our 11.38% note thus assuring not a applicable high yield discount operations pursuant to IRS code.

The principle payment was funded with cash generated from operations and from borrowings under the Company's senior secured credit facility. Also, on April 1, '08, these notes became catch interest pay-paying. And as such, will now be included in the Company's total leverage calculation in accordance with our senior bank credit facility.

I'd like to reiterate that at year-end '08, we're projecting total leverage not to exceed 5.5 turns at the hold coal level. Our guidance for the second quarter is net revenue between $69.5 and $71.5 million, compared with last year's second quarter $68.7 million. Station operating expenses are projected to come in between $42 and $43.5 million, compared to with, approximately, $42 million in last year's second quarter. And our corporate overhead should come in somewhere between $3.2 and $3.4 million compared to $3.2 million in last year's second quarter.

That concludes the brief financial review for the call. I'll, now, turn the call back to Perry for final some remarks before Q & A.

All right. Thank you very much, Matt. Great job. Let me briefly talk about the 2008 outlook and why we're on track to achieve record operating results this year.

Throughout the year, we'll realize strong levels of political spending and significant continued growth from each of our new revenue sources. First, total national political spending is on track to reach record levels, broadcast television predicted to take the lion's share of campaign advertising dollars. Our 680 hours a week of local news content, one of strengths, continues to attract political dollars based on correlation between news viewers and those who vote.

In addition our stations are deploying proven strategies, internally developed, to drive political revenue and revenue share and garner industry-leading shares of that political spend in our markets. Second, we're very confident of further growing our retransmission revenue stream. During the first quarter we announced a new six-year retransmission consent agreement with Wide Open West, leading provider of high speed Internet, cable and telephone services.

As we said before NEXSTAR initial retransmission agreements, that were three years in length completed in 2005, as such, 47% of contract dollars we currently earn expire before year-end 2008, and, approximately, 80% cumulatively of the contract dollars we currently earn expire before the end of 2009. We're very encouraged by the rate secured in recent agreements, as well as the tone of the other retransmission consent and negotiations that are currently under way.

In addition, the staggered nature of expirations and renewals created a scenario, where we'll achieve high margin revenue growth from the channel in 2008, and 2009, and beyond. Third, our new media initiatives and response from both advertisers and web users is proving to be unequivocal success. We're now launching our user-contributed user capability, auto classifieds and new local search feature.

We're follow this later in 2008 with custom micro sites and a significant expansion of our classified, including job boards, real estate and personals. As such in 2008, we will have a full year benefit of the conversion of our TV station websites and the community portals and partial year contribution from the rollout of these new features. New media revenue will grow substantially over 2007 levels as we said earlier, reflecting facts remain confident in achieving our goal of increasing new media revenue 2008 by, approximately, 100% from the initial 5.1 million recorded in 2007.

In the core business and consistent with the long-term approach to strategically and selectively building the platform. In Q1, we entered into a local service agreement with Mission Broadcasting for KTVE, the NBC affiliate serving Monroe, Louisiana, El Dorado, Arkansas, market Mission purchased KTVE and NEXSTAR owns KARD the FOX affiliate in that market. The purchase price represented an attractive multiple of the station's cash flow and transaction was completed in 2008, we will have new revenue from this source throughout 2008.

In addition, the NEXSTAR organization continues to adapt, innovate and anticipate the needs of consumers and advertisers. Earlier this year we launched the NEXSTAR GREEN and our DTV answers initiatives. Both campaigns have a primary focus on localism and serving our viewers, but they are also being embraced by advertisers and sponsors results in revenue streams for NEXSTAR with $3 million in sponsorship commitment for NEXSTAR GREEN and DTV answers on the books for 2008,t o date.

NEXSTAR is consistently achieving record operating results and outperforming industry adhering to core strategies for growth, which include building our midsized market platform, producing leading local newscast, and developing new revenue streams. We expect that our ongoing approach to actively managing our station portfolio, developing new revenue streams and focusing on balance sheet and capital structure, will serve investors well. With a solid portfolio of television assets, a growing new media platform, growing retrans revenue to benefit political advertising and the summer Olympics in 2008, all in all, the year is shaping up to be a great year for NEXSTAR Broadcasting.

In closing, thanks for everyone to join us. And now let's get to your Q&A to address specific areas of interest. Operator?

Thank you. (OPERATOR INSTRUCTIONS) Our first question comes from the line of Victor Miller, Bear Stearns & Co. Please proceed with the question.

Good morning, thanks for taking the call. With political up one-and-a-half, retrans 700,000, new media up 1.7 it is about $4 million in new revenue streams coming in. You mentioned, Matt, I think a specific number for national was $16.2 million. Seems like out of all of the places that was the most challenging part of the business. Maybe you can talk about what's driving that?

Secondly, Perry. Just, can you give us a sense of how the political, given the fact Obama and Clinton are still in a protracted battle for the win there. Is that been a net-positive or net-negative to the Company, in your mind? Lastly, with stock here at 570. Obviously, you've been putting above average growth rates for sometime and cleaning up the balance sheet in a significant way.

With the stock here much closer to its 52 week low than the 52 week high, but given the reality that your float is very small. Is there anything you can really do in terms of repurchasing shares? Or is that just kind of not -- not a discussion? Given the float and the size of the overall share base? Thanks.

Let me start and answer those in reverse order. Then, Matt can, certainly, jump in. I mean, we discuss the possibility and potential of repurchasing shares all of the time. What is the best use of free cash flow on the available to us in 2008? The bulk of the free cash flow, obviously, was going to retire the AHYDO (ph.) obligation we did on April 1 as well as finishing CapEx build-out for DTV.

I think going forward, certainly, in 2009, if we enter the year levered less than 5.5 times, our CapEx will go from somewhere in the mid-30s to somewhere less than ten. If we do our job on our distribution revenue stream and new media, that will backfill, potentially, two-thirds of political number we expect to get this year. I think we've got lots of opportunities to examine with a to do with the free cash flow in 2009.

As it relates to political, obviously, we operate in three markets in Indiana, and the political spend was very, very good to us in the months of April and May. In fact, we had more political on the books in the months of April than we reported -- that we ended the month of the first quarter -- or ended the first quarter. Where it goes from here, we have marginal exposure to West Virginia and Kentucky with our Hagerstown and our Evansville stations and obviously a small operation in Montana.

I think that what really needs to happen here is from an economic perspective as it relates to generating revenues, not a political commentary. Is that once front runners have been firmly established, then, the money flows from their supporters, they no longer have to hedge bets within their party. But, then, also, the issue money can begin to form both to support the candidates and for those that take the other side of that view.

So, I think for the political money to really flow across the country and across our platform, to achieve the numbers we've talked about, that will have to happen. I think will happen fairly quickly. As you know, in a Presidential election year, 75 to 80% of the political ads spend after the fourth of July in any event. Suffice it to say, the second quarter ahead of the internal expectations and ahead of Q1 in terms of political reported political revenue.

But, the last item as it relates to national. Obviously, automotive was a drag on the category. Overall, in the first quarter. And I think if we look at the internal performance of our stations by affiliation, our FOX affiliates hit it out of the park. We saw substantial share gains in our FOX affiliates, I think because of the BCS, the Super Bowl, and "Idol" being original programming in 200 -- in 2008 Q1. Where, I think, the writer's strike had more of an effect than we realize on the mentality of national buyers in the marketplace in terms of not buying into non-original programming or limited first-runs on networks other than FOX.

So, I think we saw that, obviously FOX represents about 20% of portfolio and we saw across the board, substantial share increases in our FOX's stations performance in Q1. I will say that we did make a proactive move at the end of first quarter to move, approximately, half of our television stations. But, approximately, 70% of our national revenue under the Caps communications media, Caps Media and Millennium Umbrella. Mellenium and Continental are the two sales brands that we are under over at Caps. And we do expect given the performance for us in Johnstown, Altoona, and the tremendous job there, expect the net positive to the national sales performance and going-forward basis.

I hope that's been responsive to the question. Let me know if I left anything out, Victor?

No. Always very precise. Always good, thank you.

Thank you.

Our next question from the line of Bishop Sheen, Wachovia. Please proceed with your question/

Hi, Perry, hi, Matt, thanks for taking the question. Matt, I got to put you on the hot seat. Because you have so many moving parts I want to make sure I understand the balance sheet, yes, you have done a great job of arbitraging it down. Let's do this snapshot of April 1, after the Sinko payment. Because I know you use some bank debt, some of the revolving capacity to do that. Can you walk me through the balance sheet as of April 1?

Yes. Well, the balance sheet would consist of bank debt of, about, I'll be a little off on this, because it is an April 1 date as opposed to a 3/31 date Bishop. But bank debt about $350 million. 7% notes of $198 million.

Right.

11 and 3/8 debt of about $83 million. And you know, cash on hand of somewhere around $15 million to net against all of that.

Got it. All right. That -- that, all, now .

Now, by --

-- makes sense.

-- the way, Bishop, just for your model, I guess, that weighted average cost of debt to the Company is a little over 6%.

Right. Okay. So, you have accomplished what you wanted. But as we look at the leverage going forward, that -- while you structurally still have a WholeCo, and about $83 million of the WholeCo, for the purposes of leverage, the 83 is totally Perry, with the seven's now, right?

It will be included in the bank's definition of total leverage, yes.

Right. Okay. So, as we get out to your 5.5 net by the bank facility, that includes that $83 million residual of the 11.38% correct?

That's correct, Bishop.

Okay.

That 5.5 a year-end number.

Right.

As you realize.

Right. I -- so plenty of cushion against the covenant and to go into the political offyear, hoping that, your new media is growing like topsy. I have two other questions. And then I promise to let you go.

Bishop, I should just add to your last thought, by responding and letting you know that, again, we will shed about $30 million of one-time CapEx expense as we go into '09. And that translates to in excess of $1.00 a share in free cash flow.

Well, if you're going to do $33 million in '08, of total CapEx.

Right.

Oh, are you saying that we're -- you're going to be, like, single digit in '09 on CapEx?

We'll be a number less than $10 million in '09.

Wow.

That's correct.

Okay. That's a great point. That gives you a lot of cushion as well.

All right. Two things you said, I just want to make sure I have it right. The cash-cash part of retrans was $3.3 part in Q1 '08 and that was against the cash-cash part of retrans Q1 '07 of what?

Oh, let me hunt down that number for you in a second. But it was up about $1 million.

Okay.

It was -- yes. It's 3.3 in cash in '08. 2.6 in cash in '07.

That's helpful. All right. And the last thing is your direct local. You may call it something else, but it is your most, probably, your most profitable revenue. The one that cost you the least. Can you give us a feel for where that is as a percentage of your nonpolitical, local or a percentage of your total nonpolitical broadcast revenue?

Sure. It was as I reported for new locate direct broadcast revenue, not the new media portion, but the new local broadcast revenue was, approximately, $2.9 million in the first quarter. And that was, approximately, 7% of our total local revenue for the first quarter.

Okay. So, and you called that "new," but I'm not sure what the definition, so much of new is. But I meant just the percentage of local business, you're selling direct and you don't have to pay a higher cost to sales, via the agencies, et cetera?

Sure. Well, let me, new local low direct broadcast revenue, are advertisers that never advertised on the broadcast station before and who also don't use a new agency. A new store comes to town or big box opens up, and that's new revenue to a particular market not what we consider new, local direct revenue. In terms of total direct revenue as a percentage of our total local, that number runs in a given carter all in somewhere between 15 and 20%.

Okay.

It's generally a high teens number of our revenue is total local revenue is direct revenue, noncommissionable to an agency.

How much upside do you think, as percentage of your local that has. Do you think you can improve upon that noticeably?

Obviously, our drive is to build -- the way to do it is to continue to generate new local broadcast direct revenue. And, again, that's -- that would be $3 million a quarter and that's certainly where we emphasize for the on-air side of our business. Development the sales people can earn, approximately, three to four X commission rate on new revenue generate as opposed to just handling existing business.

Now, if you look at the other side of that, our new media revenue, in the first quarter, again that's another $2 million. Majority of that, approximately, 70% of that noncommissionable. So, managers in the company have begun to look at local-plus new media as a true local-local revenue number in the marketplace.

When you do that, the increases, obviously, are a bigger number. But, that's another couple of million dollars that's, approximately, 70% direct business at this time.

Makes sense. Thank you Perry, thank you, Matt.

You're welcome, bishop.

Next question John Kornreich from Sandler Capital. Please proceed with the question.

Good morning. Just a couple, quickies.. Is your guidance for total retransmission this year still like the 22, 23 area?

Yes, that's a reason number, John.

Total.

Right.

And then three quarters of it might be cash.

That's correct.

You said $30 million new revenue and suggesting the online revenue in the seven area? 7.5?

I think the online --

[ inaudible ].

-- revenue will exceed that. Last year, John, $5 million and saying we'll more than double that this year.

Ten millionish.

Little north of that.

Actually -- the -- actual actually the digital revenues will exceed $30 million? You said, approximately 30 in the release?

Yes. That's correct, John, yes.

Okay. And, am I doing the numbers -- but, just refresh my memory, 11.38% bond is now cash pay?

That's correct.

And went -- was it April 1?

That's correct.

Okay. So, if I'm doing the numbers right, at the end of the year, this is roughly correct, I'm sure. The total debt outstanding using some free cash flow 640 area? And five divided by 5.5. You're saying that EBITDA should be pressing on $120 million. And SOI, therefore, adding back the corporate overhead, will be over $130 million?

Yes. We're not very -- you're not very far off, I think. So, we --

Okay.

-- basically agree with the numbers.

Okay.

I think there will be some debt reduction along the way that will probably bring the debt number down.

I did. Yes. Took off $30 million from the 670.

Okay.

The -- assuming the annualizing over $10 million in online by the end of the year, which you will be, in other words, fourth quarter, you know nicely ahead of $2.5 million. I assume if you allocate costs that you're plus on the margin there?

Yes. Last year the margin on online was about 40%. And you're correct to say that we're expanding that margin, John. I should tell you, as we sit we sit here today in excess of $6 million on the backs already this year. Feel very comfortable blowing through the 100% growth number we're talking about on online.

I'm just trying to get at the tone of business sort of kind of an amorphous guidance. If I look at the first quarter revenue and take out incremental, political, and incremental retrans, your revenues are down, so the underlying is down flat to down. Is that kind of the tone of quote, unquote underlying business?

Well, I I think that's break a fairway to look at it. It you just look at tradition ad spend local and national, X, everything else.

I'm including online. No reason to exclude that. But I am taking out the the incremental, whatever it is $800,000 of retrans and incremental, political, million-four that accounts for increase in revenue.

You're saying.

Underlying is about flat? Doesn't surprise me. I mean, business is tough.

Flat to slightly up, if you just are adding local, national, online, and comparing those numbers, yes. It is a slightly up number. It's a single digit.

Okay. And lastly, staying on the vein of underlying tone of business, you're saying kind of flattish, maybe up slightly. Is that the way it is right now? I mean, it is not falling off a cliff right now?

That is correct.

Yes.

Obviously, our -- we had a nice April. Obviously, it was a high single-digit revenue month up versus the prior year. If you strip out political and online, the base revenue was consistent with the tone for first quarter. So, no, not falling off the cliff, John.

Can we expect asset sales by the end of the year?

We hope so.

Okay. As you know, we continue to have ongoing dialogue with three party on three specific markets. But, we want to be prudent, divestors as we are prudent acquirers and make sure any nonstrategic assets divest are accretive to the shareholders and we're going to stay by that tenant as we work it through the year. I agree. If you sell a station right now for eight times on an after-tax basis, because you have a low basis, and, perhaps, you are not doing anything to deleverage.

That's exactly right.

Helping liquidity, don't need help there right now.

That's exactly correct. By the way, as you know, the Company has in excess $400 million of NOLs to shelter any proceeds that may materialize.

Right.

Related to a sale.

Good. Okay. Perry?

Yes, sir.

In these times when the underlying trends are pretty tough, and cutting costs are keeping costs under control are very, very important. You're lucky you have a CFO, like you have.

I don't disagree. I couldn't agree more. I read a great quote from Jeff Bezos from Amazon just in the last couple of days. And he said frugality drives innovation. I think that's us.

If you look at the margins, if you look at the top line growth versus the prior year, all in, and we grew each quarter of 2006, each quarter of 2007 versus the prior year, and we're committed to delivering that in each quarter of 2008, and did in Q. I'm not sure -- there are not a ton of other companies out there, I think, that have delivered top line growth now for three straight years or will for three straight years. These three years, in particular, very few, I submit, but I'll tell that you we're very focused on costs, our General Managers will attest to that fact. And I couldn't agree more.

I'll also tell you on the divestiture front that Matt is being very rigorous with the prospective buy-site candidates to make sure the money is good and any deal we reach would stick. So, that's what's taking the time to make sure they've got the, color of money in front of us.

You must be scratching your head after you released earnings this morning, stock went down 6% immediately.

Scratching the head? Yes. We actually haven't been to a terminal to look at it. But that would -- that surprises me.

Ha, ha. Okay, thanks a lot for your help.

Sounds like a buying opportunity. But. Thank you.

(OPERATOR INSTRUCTIONS) Our next question from the line of Edward Atorino from Benchmark Capital. Please proceed.

Good morning. Could you talk about the ad categories in the business sort of mixed? Where are the pluses and minus? Auto, obviously, struggling. Secondly, could you talk a little bit more about the GREEN initiative? Those revenues I presume in the normal TV ad categories. Where -- what is, sort of, the growth of that area? And what is the outlook for the GREEN category?

Sure. First of the categories, if I look at our Q1 numbers, I think we reported on automotive was down. Although if you look among the nameplate plates predictably foreign name plates were up. You know Lexus and Mazda and Acura. Folks like those. The automotive category down as we reported. Fast food down.

We saw attorneys, insurance up, Department of Retail stores basically flat. That's a relatively good sign. Tel-com, basically flat, given the tremendous spending we saw a year ago, we think that's a pretty good sign as well. And furniture, medical, again, are all kind of in the, plus or minus 1% or 2%, nothing of any great moment there.

As it relates to the GREEN initiative this is is a program we put together to generate not only awareness in our communities but generate a sponsorship opportunity for all of our television stations and our online platforms. Anecdotedly, we are attempting to pursue nontraditional revenue. Right, revenue shows up online, the online number; on-air, it goes in to the on-air number. Most recent sales in northwest Arkansas, the NBC and FOX combo, who, basically, sold a campaign to General Electric in construction with Wal-Mart to talk about compact fluorescent lightbulbs and green initiatives, recycling and low-power mode in the home.

Basically we produce proprietary local content on each of television stations each week and then we also have proprietary content online. Stories accumulate as they air. We're building reposit tore in our local markets and Springfield, Missouri, we collected a mountain of old computers to recycle. Many of the stations have initiated local outreach opportunities.

Again, it's about raising -- using the television stations and the online platform to raise awareness, also, what you can do. Obviously, been very timely with 3.95 a gallon gasoline and all of that. So, but, the advertisers we targeted have been nontraditional and have been energy companies.

They've been natural foods companies. Again, I mention GE and Wal-Mart, vendor dollars in north Arkansas that normally would not be coming to the tradition ad channel. Remodeling companies, and energy companies, as I said, they're pretty much across the board the kinds of folks that have been attracted to this initiative.

What's the dollars from that, again?

On the books for 2008 it is, if you look at the GREEN and it is, approximately, $3 million. And we have our DTV initiative, again, trying to educate viewers on the DTV transition and turned those into sponsorable elements both on-air and online, and that is about $1 million revenue as well. Both campaigns just launched in the first quarter 2008. So we think the advertiser reception has been very strong.

On the political front, I know it is a guess word, but any target number that you want to throw out? In terms of political? Think in the 30s? 20s?

Yes. We're going to stand by our previous prediction that a gross political number this year will come in somewhere in the mid-30s.

Yes. It should be fun. All we need is basic business to do a little better.

Yes.

Thanks much.

You're welcome.

Our next question comes from the line of Steve Shapiro from Golden Tree Asset Management. Please proceed with your question.

Good morning, Perry. If you look at the totality of the business, local is okay, national is obviously down. We don't know where that is going to bottom. You have new revenue streams, obviously, retrans is very solid. And demonstrable and digital and new media, promising but off a small base right now. As you look at everything in total, Perry. How does the quality of the business compare to three years ago, in your mind? Is it as good a business as it was three years ago?

Well, in 2005, we were in a unique position of having very noisy, public disputes with cable companies and we took several of the stations off the air. So, compared to with a we went through in 2005, so far 2008 has been a breeze. Again, I think we began to look at this business and say, okay, if the traditional ad channel is mature and/or not growing at rates investors not consider attractive what more can we do to leverage bricks and mortar in the places and local content and all of our feet on the street?

That's where new media and distribution were born. I mean, we're now in the first quarter, 25% of EBITDA came from things other than selling commercials on the TV stations. I -- I set a goal with our managers at the beginning of 2006 and said our goal is within five years of 30%. Well, I think it will be 30% within three years. And I think it will be 40%-plus within five years. And then, I think if I can develop this concept into reality where we have three distinct contributing revenue streams all with different growth characters, I mean, it's multi-platform for a reason that we don't want to be wholly dependent on any one platform on going-forward basis.

I think we are in a recession. I think that the business is cyclical and we do sell advertising through a recession. Recessions end. I would -- recessions end and I would expect it to end toward the end or not at the end of this year and national advertising will improve. From the current state of where it separate I don't think, none of the trends that we look at have lines going straight down.

They go up and they go down. That's taking a very long view back to the start of captain in '96 or the -- start of the Company in '96 or ownership career in 1991. So, I think that business is cyclical and we're in a tough part of the cycle. Again, that's why were focused on balance sheet improvement and strength there to make sure that we are are in a good position to ride through this.

Again, I look at '09 and I say look at the free cash flow that this Company is going to generate. For those of us, that obviously, read financial statements from the bottom up, that's a very good thing. I think that -- I'm very enthusiastic about the opportunities that that will create for us.

Okay. Thanks.

Our next question comes from the line of [Avi Steiner] from KBC Financial. Please proceed with your question.

Thanks, gentlemen. A couple things, one, based on how, at leat I interpret the guidance looks like bumping up against the 6.75 covenant second quarter. Wondering if right if you could help me bridge how you get there? Is it asset sales in vendor term change? Some sort of equity fusion? If you could, then, tell me if you're talking with the banks on an amendment and a couple of follow-ups, thank you.

Hi, Avi, this is Matt. We said all along we'll be in complains with the covenant end of Q2 with prudent cash management techniques. Okay? Thanks that allow the Company to backload, if you will vendor payment, which weather it is related to CapEx, okay? Or other items. And, so, we, we continue to believe that we will be in compliance with that covenant at June 30, as well as 9/30 and 12/31.

We have not baked in any asset sales to give us additional cushion if, you will, related to that compliance. So, I think any asset sales that may materialize, obviously, the proceeds would go against outstanding debt. But again, we've said consistently that we feel that we can cash-manage our way, okay, to covenant compliance.

Okay. And you're not talking with the banks now? Is that a fair statement? Or?

No. We wouldn't -- no. I don't see any reason to talk to the banks now, Avi. I know, we all know it would be a very, very expensive discussion to have with the banks. So I think I just don't see any reason to do it.

Okay. Well, I may follow-up with my guidance later. Or at least the model. A couple of other things. Along the lines of plans for '09 and hopefully better free cash flow on the CapEx decline. Would you look to address the balance the WholeCo notes at that point? And then I have one last one, thanks.

I think, I think as we, continue to deleverage the Company, we will get to a point, obviously, where if our leverage is below five to one we have a restricted basket to recalculate several hundred million dollars. We will look, probably, at that time, at our balance sheet and determine what the best use of our free cash flow will be.

And we are always looking, okay, to bring down our cost of capital. But, but we're really fast-forwarding a year or so out there, Avi. And, I really couldn't, you know, give you any commitments or promises other than the fact keenly aware of trying to keep our cost of capital down.

That's perfect. And I'm sorry, perhaps, these are all debt-related. Did I hear you say earlier, and this is my last, that April 1, kind of proforma for the bank AHYDO, payment. That bank debt was $350 million. Heard that correctly?

Yes. I misspoke, okay? We made that, approximately 350 AHYDO payment on April 1 out of the cash that we had on hand. That's my fault. I apologize to everyone. Again, I don't have an April one. Financial in front of me.

But I know we made about -- I don't know, $5 million bank repayment. Okay? On April 1, I believe it was, et cetera. And, so, and so I expect the number I just shared with you would be a number to get to in Q2.

I appreciate that again. Thanks a lot.

You're very welcome.

Our next question a follow-up from Bishop Sheen from Wachovia Securities. Please proceed with your question.

Poor, Matt, we just keep pinning you down. Avi really covered what I was going to zone in on. Once again, that 350 bank that you said sort of pro forma April 1. That is really not pro forma to take down of the sinker. That's kind of where you think you'll get to June 30th?

Yes.

Or is that.

That's more accurate, Bishop.

Where you think you're going to get to?

Yes.

So, and going to get there by paying it down with free cash flow?

Yes, well it is going to be a combination of items, obviously, significant debt reduction this quarter, again, due to prudent cash management techniques.

Right.

In addition to growing EBITDA in the quarter.

Okay. Again, not to hold your feet to the fire, but just playing bigger than a bread box. Where should I think of the actual bank debt of after April 1 after you make the sinker? If you used cash and bank debt to pay the sinker?

Number closer to $390 million.

That's what I'm looking for.

Yes. Yes. Again, I -- I misspoke. I apologize for that.

Okay. All right. And, then, again, you think you can hit that? It is a -- if I remember, through June 30th it, is a 6.75 cove?

Right.

And that doesn't go to 6.5 until September 30, I think?

Actually doesn't go to 6.5 until December 31 of this year.

AW. Okay.

So, it's 6.75.

So, it's 6.75 through the whole back half of the year?

Right.

And that you're going to hit because of all of the carve outs et cetera, et cetera. With threading the needle, very prudent cash management?

Yes. That will -- that timing, if you will, will help us. Okay? As we go forward, through the course of the second quarter.

Right. Well, it would seem, intuitively, June 30 is the challenge. September 30 should be a lot easier because of the political surge that will probably collect?

That's accurate.

Okay. So that's the one is the is the, Matt, balancing act so to speak and that's the one we'll keep our eye on.

Okay.

Thank you.

You're welcome.

Gentlemen, we have no further questions at this time. I'll now turn the conference back to you.

All right. Thanks again everyone for joining us. We look forward to reporting our second quarter results in about three months' time. If you have any specific questions, please feel free to contact us after the call.

Ladies and Gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you, please, disconnect your line. Have a great rest of the day, everyone.