Nexstar Media Group Inc (NXST) 2008 Q4 法說會逐字稿

Good day and welcome to Nexstar Broadcasting Group's 2008 fourth quarter conference call. Today's call is being recorded. All statements and comments made by management during this conference, other than statements of historical fact, may be deemed forward-looking statements within the meaning of Section 21 of the Securities Act of 1933, and Section 21A of the Securities and Exchange Act of 1934. The Company's future financial conditions and results of operations 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 information during this call. In compliance with Regulation G, reconciliations of this non-GAAP information 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 in circumstances. At this time, I would like to turn the conference over to your host, Nexstar President and Chief Executive Officer, Perry Sook. Please go ahead.

Thank you, Martin, and good morning, everyone. Thank you all for joining us to discuss Nexstar's 2008 fourth quarter operating results. As always, Matthew Devine, our Chief Financial Officer, is here with me this morning. To sum it up, Nexstar performed very well in the fourth quarter with total net revenue growth of 12.3%. Nexstar exceeded the high-end of our guidance and clearly outpaced our peers. As a matter of fact, Nexstar's fourth quarter and full year net revenues BCF and EBITDA reflect record-setting performance for the Company. The fourth quarter revenue growth reflects strong year-over-year increases in political, retransmission consent and e-MEDIA revenues which helped to offset the weakness of traditional local and national television advertising spending in the quarter. Our station and corporate personnel deserve both credit and recognition for performing exceptionally well in this very challenging economy. In 2008, approximately $24.4 million was deployed for digital conversions, and the Company has an additional $5.4 million of expense to incur in 2009 which will then complete our DTV buildout.

In the fourth quarter, Nexstar repurchased $7.5 million of our 7% senior subordinated notes due in 2014 with approximately $4.5 million of cash on hand. Additionally, in the first quarter of 2009, we also bought back approximately $29 million of our outstanding notes and last week we commenced an offer to exchange up to $143.6 million of Nexstar Broadcasting's outstanding 7% senior subordinated notes due 2014 for up to $143.6 million in aggregate principle amount of Nexstar Broadcasting's 7% senior subordinated PIK notes due in 2014. Matt is very actively re-engineering our balance sheet. In light of disruptions in the credit markets and the economy's overall deterioration, Nexstar has controlled operating costs to preserve liquidity and remain in compliance with our debt covenants. For 2009, the Company has reduced planned capital expenditures. We've reduced corporate overhead, and station expenses through staffing consolidations, hiring freezes, except for sales, and other initiatives. Going forward, we will continue to evaluate additional measures, as needed.

I will run through some of the fourth quarter and full year highlights and after that, Matt will provide a financial review both for the quarter and the full year of 2008. Annual gross revenue of $319.5 million and net revenues of $285 million were record-setting achievements for Nexstar. Our gross political revenue for the year was $32.9 million. Nexstar's e-MEDIA and retransmission-consent revenue accounted for approximately $32 million of total revenue in 2008 and that represents a 43% increase compared with those totals for 2007. In the fourth quarter, new television local direct billing totaled $3.8 million for the fourth quarter marking a gain of over both the fourth quarter '07 and third quarter of '08. I think this reflects the effectiveness of our sales teams even in these challenging times.

Another indication of our sales effectiveness in this challenging environment is that four of our top 10 categories were up year-over-year in Q4 with insurance, telecom, legal, and radio cable newspaper all ahead of year ago levels. However, our top 10 total category billing decreased 13% overall with auto and fast food down 25% and 11% respectively. During the quarter, our automotives ad spend comprised approximately 21% of our core advertising and that is down from 24% in the fourth quarter of 2007. Quarterly retransmission-consent revenues of $6.3 million exceeded the fourth quarter '07 levels of $4.6 million by 37%. We benefited both in the quarter and throughout 2008 by executing new retrans agreements, renegotiating rates on expiring deals, as well as recognizing increased subscribers under certain of our existing agreements. More of the same is in store for 2009 and I will provide some additional detail on all of this after Matt finishes his comments.

Our fourth quarter e-MEDIA revenue came in at $2.8 million, exceeding last year's fourth quarter by 24%, and the Company succeeded in its goal of doubling our annual media revenue last year. In 2008, we recorded over $10.2 million in gross e-MEDIA revenue sales. Broadcast cash flow totaled $34.7 million in the fourth quarter of 2008. That's up over 23% from the fourth quarter of 2008 and our EBITDA grew to $30.3 million which was up over 26% from the fourth quarter of 2007. Let me now turn the call over to Matthew Devine to provide deeper detail on our financials and after which, I will come back and run through recent developments and talk about the strategies we're taking to weather this current environment. Matt.

Thanks, Perry. I would like to review some of the key year-over-year fourth quarter and year-to-date line items on the Company's income statement and balance sheet. On the income statement for the quarter, total gross revenues equaled $90.4 million versus $80 million a year ago. That's up 13% on a year-over-year basis. Net revenue reached $80.3 million, up 12.3% versus $71.6 million in the year ago quarter. Operating expenses came in at $45.6 million versus $43.4 million in the year ago fourth quarter. Broadcast cash flow reached $34.7 million versus $28.2 million, up 23.3% on a year-over-year basis. EBITDA came in at $30.3 million versus $24.1 million, up 25.6%. Gross local revenues for the quarter were $41.6 million versus $46.6 million in the year ago quarter, down 10.8%. Gross national revenues were $15.8 million versus $19 million last year. Gross political revenues were $19.5 million versus $1.8 million in the year ago fourth quarter. E-MEDIA revenues were up to $2.8 million in the quarter, up 24.2% compared to last year's fourth quarter.

The cash portion of our retransmission revenues reached $3.9 million in this year's 2008 fourth quarter versus $3.1 million in the year ago fourth quarter. Total retrans revenue came in at $6.3 million versus $4.6 million. Network comp was $900,000 versus $1 million last year, a decline of about 5%, and trade and barter revenues came in at $5 million versus $5.3 million in the year ago fourth quarter. So in spite of the recession, the Company generated a healthy 43.2% broadcast cash flow margin in the fourth quarter of 2008 and that compares very nicely to a 39.2% fourth quarter margin of '07. As Perry noted, the growth in political revenue, retrans and e-MEDIA revenue helped to offset declines in local and national advertising as well as declines in network comp and trade and barter.

Nexstar fourth quarter 2008 corporate overhead totaled $4.4 million, and included $400,000 of noncash employee stock option expense. On a full year basis, $2.3 million was recorded as noncash employee stock option expense. Free cash flow came in at $7.3 million in the fourth quarter of 2008 compared with $9.8 million in the year ago period. As Perry noted, this decline largely reflects the one-time capital expenditures for digital television upgrades which amounted to $10.8 million of the $12.7 million total fourth quarter CapEx spending. Excluding the HDTV CapEx, free cash flow was $18.1 million for the quarter. The Company's total 2008 CapEx spending was $30.8 million, up from $18.5 million in 2007 and total 2008 HDTV CapEx was $24.4 million. In 2009, the Company will incur an additional $5.4 million of CapEx to complete remaining digital television conversion requirements and we will allocate all other 2009 free cash flow to debt reduction.

For the full year 2008, on the P&L, our total gross revenues were $319.5 million versus $298.4 million in 2007. Net revenue of $284.9 million represents a 6.8% increase versus the year ago. Operating expenses came in at $173.3 million versus $168.3 million in full year 2007. Broadcast cash flow totaled $111.7 million versus $98.5 million in 2007, up 13.4%. EBITDA of $96.2 million for 2008 compared very favorably to $85.1 million in 2007. Gross local revenues for last year were $171.6 million which is a 2.3% decline versus 2007's $175.5 million. Gross national revenues were $66.1 million in 2008 versus $74.3 million in 2007, gross political of $32.9 million compared very nicely to $4.3 million of gross political in 2007. E-MEDIA revenues totaled $10.2 million verse $5.1 million in 2007. Cash retrans for 2008 came in at $14.4 million, up versus $11.8 million in 2007. Total retrans of $21.8 million compared very nicely to $17.2 million in 2007. Network comp for the full year was down to $3.5 million versus $4.4 million in 2007, and trade and barter for the full year of '08 came in at $18.4 million, $1 million lower than the 2007 number.

On a full year basis, the Company generated a 39.2% broadcast cash flow margin in 2008 compared with 36.9% in fiscal year '07. Turning to the balance sheet, cash on hand at December 31, 2008, was $15.8 million, and that compares with a $16.2 million at December 31, 2007. Our outstanding bank debt was $356.2 million at year end '08 compared with $356.7 million at year end '07. On 7% notes totaled approximately $191 million at year end '08 compared with $198 million at year end '07, and as Perry mentioned, during the fourth quarter the Company repurchased approximately $7.5 million of our 7% senior subordinated notes both $4.5 million that was generated with cash flows from operations. At the holding company level, our fully accretive 11.375% notes which became cash pay effective April 1, 2008, totaled $77.8 million at December 31, 2008, down from $126.5 million at December 31, 2007. Our 12% senior subordinated PIK notes amounted to $37.3 million at December 31, 2008. Total note debt at December 31, 2008, was $646.3 million compared with $665 million at December 31, 2007.

Total leverage at December 31, 2008, was 6.18x compared to a permitted leverage covenant of 6.5x. Pro forma for the deleveraging impact of our previously announced acquisitions of KARZ in Little Rock, Arkansas and WCWJ in Jacksonville, Florida, our total leverage at December 31, 2008 is 6.13x. We moved total leverage down from 8.3x at the end of 2005. Our covenant stepped down to 6.5x at the end of 2008 and it remains at that level for the next 18 months. Our credit agreement includes a restricted payment basket that allows up to $10 million of annual bond repurchases. In the fourth quarter of '08 we had exhausted that annual basket by buying in some of our 7% notes, as we previously mentioned. In first quarter of '09, we exhausted the 2009 basket by repurchasing approximately $29 million of our outstanding notes. This represents a 64% discount, and almost all of our repurchased notes were a more expensive cash paying 11.375% securities.

Last Friday, Nexstar Broadcasting commenced an offer to exchange up to $143.6 million aggregate principle amount of its outstanding 7% notes due 2014 in exchange for $143.6 million in aggregate principle amount of Nexstar Broadcasting's 7% senior subordinated PIK notes due 2014 to be guaranteed by each of the existing guarantors to the old notes and some cash. The exchange offer is being conducted subject to the terms and conditions set forth in the offering memorandum dated February 27, 2009, and the related letter of transmittal. The exchange offer is subject to certain conditions including the minimum tender condition that Nexstar Broadcasting receive valid tenders for at least $114.9 million of the aggregate principle amount of the old notes. The exchange offer is a private offering being made pursuant to an exemption under the Securities Act of 1933 and is subject to exchange offered documents distributable to eligible holders of old notes. As a result, Nexstar is unable to comment on the exchange offer at this time. Given the uncertain economic condition, Nexstar has discontinued the practice of providing quarterly guidance for net revenue, station operating expenses, and corporate overhead. That includes the financial review for the call, and if there are modeling questions, I will be available in the office and we can address them specifically. Let me now turn the call back to Perry for some additional remarks before Q&A.

All right. Thanks very much, Matt. Great job. Nexstar's responded to the challenging environment that emerged in the second half of 2008, and I am proud that our team made our goals in terms of political revenue targets, we achieved the growth we projected from retransmission and e-MEDIA revenues and took actions to reduce leverage and reduce expenses. We're not content just to survive in this environment. We remained focused on building value and exploiting the still untapped opportunities before us.

We have made further progress in strategically expanding our station portfolio with our announced acquisition of WCWJ in Jacksonville, Florida, and the soon to be completed acquisition of KARZ, formerly KWBF-TV in Little Rock, Arkansas. Both of these transactions fall under the category of being opportunistic, and both will be both accretive and deleveraging. KARZ, which will close now before the end of March, will complement our existing Little Rock station, KARK, the local NBC affiliate, and upon completion Little Rock will represent the 19th market where we provide services to more than one station. Post-closing, our immediate initiatives will focus on extracting financial synergies, leveraging our existing local sales team, our award-winning local news, and our substantially successful e-MEDIA operation in Little Rock across both of these stations. In addition, under our ownership, KARZ will generate retransmission revenues for the very first time. Our agreement to acquire WCWJ, the Jacksonville, Florida CW affiliate marks Nexstar's entree into the Florida market and the state's largest city and it will represent our 52nd television station. Upon closing, we anticipate following the FCC approval in the second quarter, the contributions from this station will immediately benefit from the application of our retransmission-consent agreements and launch of e-MEDIA offerings through the Company's proven community portal model for Jacksonville.

While the visibility on our core business is certainly tough, our developing digital revenue initiatives will help to minimize the impact of the significant drop off of political revenues in 2009 relative to 2008. In terms of retrans, we announced last month that we completed the first phase of our round 2 carriage agreement negotiations, and we renewed or reached new multiple retransmission-consent agreements with 179 cable operators, direct broadcast satellite providers and telcos. These agreements are expected to generate more than $75 million in revenue to Nexstar over their terms with approximately one third of that revenue to be realized in 2009. So for 2009, we will record an increase of in excess of 25% and retrans revenues over the 2008 levels and that's contractual and not obviously reliant on the state of the ad market. I think that this outcome is well ahead of expectations, and Nexstar has several additional retransmission agreements which will be renegotiated in 2009 so we expect further upside to the annualized run rate of our retrans revenue stream not only during this year, but also in future years. The increase will be significant in 2009, another substantial jump in 2010, when we'll have a full year run rate of most all of our major agreements renegotiated.

Our e-MEDIA story continues to be compelling. We are selling hyperlocal advertising on our community portals, and we aggregate the revenue here at corporate, obviously. We are not in the business of trying to sell the most page views or the most unique visitors to national advertisers. We're focused exclusively on a hyperlocal strategy and as we reported this morning, the revenue for 2008 was up 100% over 2007. Our online initiative is leveraging our brand and our content and our local relationships of our local television stations to launch and build a separate business. Our online revenue growth has been nothing short of remarkable, I think, and we look for substantial double-digit growth in that revenue stream again in 2009.

In addition to our balance sheet re-engineering that Matt has talked about, we're also actively taking further action on cost takeouts. The Company is undertaking a centralization effort to consolidate many of our back operations for traffic, master control, and accounting into a select number of regional hubs. Nexstar will continue to pioneer on several fronts, and I look forward to further building on our quadruple play of opportunities, meaning traditional media, subscription-based revenue, our e-MEDIA platform, and our yet untrapped digital and mobile media platforms. The world is certainly challenged, and media is challenged as well, but we at Nexstar are taking the challenge head on, and we expect to continue to come out on top of the industry in terms of performance. With all of that said, now, let's get to your Q&A so we can address your specific areas of interest.

(Operator Instructions) Our first question comes from the line of Bishop Cheen with Wachovia. Please proceed with your question.

Thanks for taking the question. Just housekeeping questions. Let me billboard them. Not many. A little more color on cost reduction and remind us again what is left on the M&A, the two stations, how much cash you will need to be out laying and on the first quarter buyback of mostly the 11.375%, I think, that was face for the $29 million, how much did you spend in first quarter for those buybacks

Hi, Bishop, this is Matt. How are you doing?

Good. How are you.

Thanks for the question. The first quarter buyback, we expended a little under $10 million to buy in a little under $30 million of our outstanding securities. All but $1 million of that was the 11.375% notes. If you calculate that, that comes down to something around $0.35 on the dollar that we bought in those securities. The question right before it, I think, addressed our pipeline acquisitions.

KARZ and WCWJ.

That's correct. In the case of KARZ, our second Little Rock station, that purchase price is a little over $3 million. We have got--we have an escrow deposit up there already of several $100,000, and we actually expect to close on that station next week, Bishop, and we think that's going to be a great acquisition for us. It comes to us at a multiple that we believe is less than five turns, and so we're excited about getting that in the portfolio expeditiously. The second one is WCWJ acquisition in Jacksonville, Florida. We're planning on that closing on either around June 30, July 1, and that's a station similar to the KARZ from the point of view that we'll pay a number of between $16 million and $16.5 million for that property, and we believe the cash flow that comes in on a pro forma base to us will be a number of somewhere around $3.5 million. So we'll fund both of those transactions, the smaller transaction next week just out of cash on hand and the second transaction if we need to draw on our revolve, we will, but that draw shouldn't be significant.

Okay.

The other item?

Cost production question. That's the harder one. I don't know if you can help quantify what your goal is and also against what you think might be the one-time charges that you would have to book through as well?

Sure. Let me start and Matt can pick it up, Bishop. We went into the year with a mandate of budgeting operating expenses at 5% below 2008 actual levels, so that was the starting point for our discussions. Subsequent to that, you have DTV analog turn offs, you have this regional hub consolidation that net of any severance cost we anticipate will be an additional $2 million of operating expense savings, and we've been able to pick up one-off things along the way here in terms of reducing our power aggregation costs and other technology improvements that have allowed us to improve the efficiency of workflow, particularly in news operations, so when we talk about the $2 million for the regional hub consolidation, that's net of any potential severance obligation in 2009, that would be the actual numbers recognized. The full year run rate of those fully consolidated operations obviously number north of that. Is that responsive to your question?

All right. So then most of the cost reduction is going to be in the regional hub consolidation and as part of this the switch analog to digital, and I think you said roughly it is a $2 million savings almost immediately to capture, right, once you make the switch on a run rate base?

That's correct. We have 16 out of the 47 full power TV stations that Nexstar owns went--the analog was turned off on February 17th. We're anticipating attempting to turn off another 11 of our television stations prior to the June 12 deadline for various extenuating circumstances, and then that would leave another 22 of our full power television station that we would turn off on June the 12th, turn off the analog, so, yes, the full year run rate is a number north of $2.5 million of electric costs, but all of those items would be on top of the 5% operating expense reduction mandate that went into 2009 from a budgeting process.

Right, and that's the big number, and that 5% of the operating expense mandate, that's like a run rate expected to be mostly captured throughout calendar of '09 or would that bleed over into calendar 2010 as well?

No. That will all be captured in the calendar year. Our total operating expenses in 2008 were about $173 million, so you can do that the math.

Okay. Yes, that is very helpful. I appreciate the answers.

You're welcome.

Our next question comes from the line of Jason Almiro with ING Investment Management. Please go ahead with your question.

Thank you for taking my call. Wondering if you can provide more color on the note exchange specifically how that might impact senior secured lenders and covenants?

We mentioned that there is a little bit of a gag order on related to talking about the exchange, especially while it is in the marketplace, so I really can't get into details on that with you, Jason, unfortunately, but I think, suffice it to say, that by utilizing PIK notes as opposed to current cash pay securities, that will help give us a larger cushion between our projected total leverage and our covenants, larger than what we have now, and so we just feel that it is just the prudent thing to do in spite of what appears to be an extended recessionary environment.

Okay. Thank you.

You're welcome.

Our next question comes from Barry Lucas with G&A belly and company. Please proceed with your question.

Good morning, Perry and Matt. A couple of items. You said about $5 million in change is left to be spent on digital upgrades in '09. What would total CapEx in '09 look like?

Yeah, Barry, thank you. As reported this morning our CapEx for 2008 ended up the year at about $31 million, and CapEx for 2009, all in, will be somewhere in the $10 million to $11 million range when it is all said and done.

Okay. Does that mean that a maintenance level is really under $10 million, almost in that $5 million, $6 million range?

Well, we obviously are pulling in the reins and in lockdown mode as it relates to CapEx and are looking only to fix things that are mission-critical and/or things that break. I think a true maintenance CapEx, you know ad infinitum run rate probably is in that $10 million range, but obviously, we've tightened the screws down very tight to navigate through 2009 and basically it is a maintenance and contingency budget, a couple of contracted obligations for newsroom conversions which will develop productivity improvement, but we deferred as many of those as we can out of 2009, so the $10 million to $11 million for '09 is a real lockdown number.

Let me ask you something more strategically oriented, Perry. When you look at the planned acquisition of the CW in Jacksonville, sort of like to know how that fits in, how you really make money there over the long haul, I mean if you look at Jamie Kellner and Acme and their ability to money in stand alone CWs, what's the plan there?

Sure. We're obviously waiting for FCC approval, and want to be careful here and don't want to give our competitors too much information, but this is already a very successful station, and in a market that we think huge long-term upside potential with the Jacks Port shipping literally doubling in size, the announcement of a new nuclear submarine base to be based in Jacksonville, we think there will be a floor under this economy for years to come, and again, taking a three to five year view, we think this is a great time to buy beach front property at distressed prices. Obviously, the station has no local content on it. We think there are opportunities there is. There is really not an e-MEDIA revenue push at the television station. We will hub, ultimately, certain functions of that station out of our existing hubs, it operates right now, by in large from traffic accounting, business, as a stand alone entity, and we think being part of a larger group just as we looked at line item expenses, a 51-station group can would I things on a per widget basis a lot cheaper than a smaller group can. All of that figured into the calculus, plus the day we take over the station there will be excess of $700,000 of retrans revenue that will begin to flow to the television station for the first time, so those are all of the keys, and again from a portfolio standpoint we had no CW affiliates other than the license we hold in Harrisburg, and we thought that a little exposure to that brand would be just fine, so we also note that there are a lot of college and professional sports opportunities in Jacksonville currently without an enthusiastic broadcast home, and we think there will be opportunity there as well to build out a local identity for this television station beyond the CW.

Great. Thanks very much.

You bet.

Our next question comes from the line of John Cornrich with Sandler Capital. Please proceed with your question.

Good morning. Matt, with a projected $20 million drop in CapEx, are you realistically hopeful that you can maintain the '08 level of free cash flow?

Yes, John.

At $26 million?

Yes. I think again I think shedding all of that one-time HD CapEx expense and getting that behind us is employing to translate very nicely into free cash flow, so, yes, I endorse those numbers.

Okay. Great. Very gut instinct response I am looking for, you mentioned the words beach front property a minute ago. Speaking of beach front property discount, your company has virtually no equity value, and the bonds, you bought back bond at $0.35 on the dollar, so basically the capital markets are saying there is a decent chance you're not going to make it financially, not as an operating company but financially, that you are a reorg candidate in the not too distant future flow. After all, the free cash flow per share actually exceeds your stock price. It is a pretty amazing thing. The street is saying something. The street may be dumb as--but that's what it is, pretty amazing turn of events that actual current free cash flow per share exceeds stock price, and then the bond securities traded at massive discount, so there is tremendous skepticism about your viability. What is your gut reaction to this?

Well, first of all I try not to take it personally, I don't know, but second of all I think if you look at the equity prices of just about every one of our peer group out there, feels like we're shopping at the $0.99 store, everything is $1.

At most.

That's true. All I can tell you is I would not bet against us. With the operating--this entire corporate staff saw no bonuses last year, will not see bonuses this year. My regional Vice Presidents, our co-COOs are both on the road today and everybody is working harder than ever before because we believe that if a company survives or a handful of companies survive in 2009 and moves past this choppy water, that we're going to be one of those companies, and again I just look at our results in the fourth quarter, and it was a tough consider for everybody, us included. We have a double-digit revenue increase in the fourth quarter. I looked at everything posted thus far. I can't find another one. I think it is tough for everybody, certainly tough for us. We're into this thing, eyes wide open between the debt exchange, the debt buyback, the operating expense reductions, the hub consolidations, buying stations at multiples less than our debt outstanding multiple, all of those things taken together and we have a very engaged and active board. We have been in touch with them on a weekly basis, and everybody is focused, and I can tell you we're not just taking business as it comes. I think we have continued to pioneer in retrans and pioneered in e-MEDIA. We have other thing that we plan to work on here, and obviously if you look at the amount of stock that at prices in excess of what it is trading at this morning, that Matt and I have bought over the last year, we're believers, and we're not in this for anything other than the end of the day and realizing that equity value along with all of our shareholders, so all I can say is I wouldn't bet against us.

Without mentioning the amounts, when was the last time you and Matt bought back stock personally?

When we announced our third quarter earnings, John.

Same for me. There were 40--in excess of 40 insider purchases in 2008, and over half of those came in the fourth quarter after we announced our third quarter numbers, and I mean it is our Director of Engineering, it is our co-COOs, and members of the Board of Directors and folks that are ABRY members of the Board of Directors are buying the shares personally, so I think that our absolute focus is to survive '09, stay out in front of any covet issues we have. If you look at what should happen in terms of political, E-MEDIA, and retrans revenue growth in 2010, the core business will be an important part of that but certainly not the only part of that. E-MEDIA, retrans, and political in 2010 could be $90 million to $100 million to this company, and the EBITDA from that would be more than the Company generated in total in 2005, so again we're focused, and the T-shirts say survive '09, and we will win in 2010, so that's the operating philosophy, and day-to-day execution mandate here at the company.

Thanks a lot. Matt, go out and buy 100 shares.

Good advice.

Thank you.

Thank you.

Thanks, John.

Our next question comes from the line of Dennis Leibowitz with Act II Partners. Please proceed with your question.

Thank. I had two questions. One, Matt, I think you mentioned that national business excluding political was down something like 17%, I think it was in the fourth quarter. I don't remember what you said about local. Is that continuing in the first quarter and is that consistent with your answer to John's question about being free cash flow positive for the year? The second question is on the retrans did you say it was up 25%? I am confused with the $130 million and 25 million. What I am trying to get at is what is the year-to-year increase?

Okay. Let me get some of that, Dennis. As far as year-to-year, okay, as far as retrans goes, year-to-year, '08 total retrans number was $21.8 million versus '07 $17.1 million, and so that was up 26.7%.

Let me just jump in, too, Dennis. You asked the question about I guess trajectory of local and national. Matt did report that local for the fourth quarter, obviously these numbers are excluding political, was down 11%, and national down 17%. I think the trajectory certainly continues into the first quarter. I think local will be in the same neighborhood, and national will be marginally worse than that. I heard numbers of other folks projecting down 40% and 50%. That's not the story here. It will be worse than the minus 17%.

And that trajectory, I mean, if it were to continue for a lot of the year, would you still be free cash flow positive, equal to last year, or even be positive?

Well, we don't project that trajectory to continue for the entire year. We obviously have that model built and know what things look like, and that's a tough put, but I can tell you we project second quarter will look a lot like first quarter, and there will be marginal improvement in the third quarter, and fourth quarter core revenues could be flat to slightly up due to the crowding out of political in 2008 fourth quarter, so that's the model and the schema we're working with here but we have believe the case and no we would not maintain the free cash level if it was minus 11% and minus 17% for the full year.

All right. On the retrans what I was trying to get at is not '08 versus '07 but '09 versus '08.

Okay. We reported that in the press release of a few weeks ago that these new agreements, the total cash revenue to the Company was in excess of $75 million, and we expect it to recognize a third of that cash in 2009, and that's just from those negotiations, and so we're starting with a base, you know, everybody can do the math of about $25 million which is about a 25% increase over the prior year, but there are several agreements and one pretty good sized one, which shall remain nameless, that is up for negotiation in the middle of this year and several more at then of the year, so I think they will be upside to that number because of the one substantial agreement that is up for negotiation in union June, and then I have a handful of pretty good sized agreements up at the end of the year which will influence the 2010 number you plus the escalators in the current agreement that will click up in 2010 as well.

Okay. Thanks.

Our next question comes from Andrew Finkelstein with Barclays Capital. Please proceed with your question.

Hey, guys, good morning. Perry, if you can follow up on the retrans thing, I am sorry for having you go through that again, just so we understand the new, the incremental that we should be looking for. I know on a past conference call you talked about replacing two-thirds of the political in '08 with retrans, and I think e-MEDIA revenue, so we're just trying to foot the recent press release on the retrans deals with that sort of comment.

Okay. So what can I help you with?

The incremental retrans for '09 versus '08, and is that target of the two thirds of the political still where you think things are going to come out?

Well, two thirds of the political will go from $32 million down to a number of about $4 million to $5 million this year, so you have $27 million and two thirds of that would be $18 million roughly. Have you growth of e-MEDIA and growth of retrans, and the $25 million number for this year is kind of the baseline number before the impact of the additional agreement that expires mid-point of the year, so yes, I think you can still add those numbers up to numbers that get you into that same neighborhood.

Okay. Great. And then Matt maybe any thoughts on liquidity, you know, you obviously spent money to buy back some bonds at a deep discount in the first quarter. You have got the acquisitions coming up. You potentially have the cash payment for the as part of the swap deal and acquisitions and so obviously it is going to take some spending to get these things done. Good in the long run, but your short-term liquidity, any thoughts in the revolver?

We looked pretty closely at all of that, Andrew, and doesn't seem to present us with a problem. We have a very full cash position today. We have plenty of availability left under the revolver. The transactions that we have talked about are deleveraging transactions. And so as we model it out, we don't see any liquidity crunch happening for us. As you know, we always keep on hand a number of $15 million plus of cash at the end of every day I guess I should say, and so we maintain that amount, okay, through our projections for this year.

And revolver, can you tell us where the revolver currently is?

I don't have that number in front of me, my friend. Let me see if I can--I don't have that number in front of me.

Thanks a lot.

(Operator Instructions). We have a follow-up question from the line of Bishop Cheen with Wachovia. Please proceed with your question.

Hey, Matt, thanks for taking it. I just want to follow up on where Andrew was going. I don't think it doesn't look like there is a liquidity problem either, but we always like to quantify thing, being geeks, it is our nature. so, look, you have -- I am ballparking here. Roughly when I look at the next few months, $19 million outlay for the two stations, $18 million outlay for the debt exchange pro forma it is successful, and then you have already spent 10 million roughly on the buyback, so that's a $47 million outlay from your revolver between now and union, granted, $16 million of it, let's say, comes in June. That's $47 million, so ballpark where was the availability? I know that the K isn't out yet, but when I looked through the Q of September, I think you had actual availability of roughly $19 million based on the most restrictive covenant, and there was full availability without covenant something like $70 million back then. So I am just trying to foot to where we are now. Can you give us a little guidance?

I can't do the math for you, okay, right now, but I can tell you some data points if that's helpful.

Sure.

Our revolver was drawn at year end to the tune of $31 million. There is a-- the revolver in total in $97.5 million. We have record setting EBITDA, okay? As we mentioned our leverage at the end of the year was closer to 6x than it was 6.5x, the covenant, and again we keep a fair amount of cash on hand, and the cash on hand obviously, makes its way into the equation, too, and obviously, with the exchange that's in the marketplace, that proves helpful to us on many fronts. Okay? And so I don't see a liquidity event.

Right. Sounds like it all comes down to the exchange freeing up capacity on the revolver. The capacity seems to be there clearly on the revolver, it is just a question of whatever restrictions are in the way of using that capacity and the debt exchange should help a great deal?

I think that's right, Bishop. Our revolver draws are really governed by our covenants our senior credit agreement, and obviously pro forma for the exchange, there will be substantial covenant room on both total and senior leverage.

Okay. And then just to follow up and the end of my grand inquisition, again, to Andrew's question of trying to replace on a gross level $27 million, the difference between $32 million of gross political and let's say $5 million of gross political, so again, with retrans ink it sounds like we get about $4 million coming our way this year and then with e-MEDIA growing like topsy, looks like there is implied $20 million in '09 and I don't want to over manage anyone's expectations, and then maybe another couple of million on our run rate basis of more annual retrans to come and I can get there to the $27 million. Is that kind of the way to think about it?

Yes. I think I would round the numbers a little differently than you did, Bishop, but I think the whole is that some of those parts that you just resighted.

Okay. Did I grossly misstate anything like the e-MEDIA going to a $20 million number? Wasn't it a $10 million-ish?

Right.

Right. So it is kind of a double again, and roughly $3.5 million, $4 million on the incremental retrans and then more to come via negotiations underway?

Yes, and not to put too fine a point on it, but if we put out a press release with some sort of guidance to an '09 number, you have to know that we're going to leave ourselves some head room vis-a-vis what our actual expectations are in that number, so I think Matt is right. You might round your components a little differently, but you're on the right track.

Okay. And then on the retrans, if you said it, I apologize. The mix, is the mix been improving on cash to trade, you were always kind of ahead of the game at kind of a two third and one third kind of mix?

Yes, cash and trade, it is cash and ad spend. There is no trade.

Yes, cash and ad spend. I didn't mean trade.

You're right in 2008, that mix was approximately two third/one third, and again in 2009 that mix will be approximately 80/20 cash versus ad spend.

So you're moving in the right direction on that.

We would like to think so.

All right. Thank you, gentlemen. Appreciate it.

You're welcome.

Our next question comes from the line of Edward Atorino with Benchmark. Please proceed with your question.

Two questions. I want to clarify my understanding. As a result of the swap, the PIK debt does not--does the PIK debt count under the bank covenant ratio, number one, and number two, I I know it is belabored to death, but the retrans, if you think the $75 million, take a third, that's $25 million, that's a cash number you're talking about, right on the retrans?

Two questions. The first question and answer is no, and the second question is yes.

So no meaning it doesn't count under the debt agreement?

That's correct. It is basically identical to the 11.375% securities that we had that when cash pay as you know.

So if you do the swap basic you got a little more cushion under the covenant?

Yes, we would have more cushion, absolutely.

I haven't done the number, but the pro forma what the--no, you can't.

As you know, I can't talk about that.

Okay. I will figure it out. And the retrans is a cash number, and one other question, if you look out a year, new media looks like could you be $15 million this year on new media if you ramp that up or is that too optimistic?

If we're $15 million on e-MEDIA I will be dramatically disappointed. We'll be substantially above that.

Okay.

It won't --

You're still on the double track, I guess?

Yes. It won't continue to double for forever, but we expect a substantial increase this year as we discussed, and another substantial increase next year as well we'll be bringing a couple of new stations onto the platform well, and I want to take a moment to talk about our station, our NBC affiliate in Little Rock Arkansas generated over $1 million in e-MEDIA revenue on their own, and that's in a mid 50's, I think market ranked 57, so if that work out to about $1 a -- $2 a television household in e-MEDIA revenue, and if we did that across our 10 million plus household base, you know, just to bring everybody up to last year's performance standard, we would be a number of 20 million, and we have more product that is we're adding and more revenue applications and more passive revenue, Paypal applications, things like that that are being lumped onto this as well, so not too fine a point on it, but that is a continued growth driver for the Company.

The $20 million would be '09 or '10?

I am saying that if everyone performed at the level of our Little Rock Arkansas station at roughly $2 a television household, total e-MEDIA revenue would be north of $20 million based on our household coverage, so that would be the aspiration for 2009, obviously we're sailing into some significant headwinds in the economy.

Gotcha.

But, yes, just to come back to your initial question, Ed, if we end up at $15 million, there will be a lot of unhappy faces around here.

Our next question is from the line of Joe Stein with Wells Fargo Please proceed with your question.

Thank you. My question was already asked.

There are no further questions at this time. I now turn the call back to you. Please continue with your presentation or closing remarks.

All right, Martin. Thank you. Want to thank everyone for taking the time to join us, and we'll look forward to convening again in three months time to report on first quarter and additional visibility on the remainder of 2009. Thanks again.

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.