Nexstar Media Group Inc (NXST) 2011 Q3 法說會逐字稿

Good day and welcome to Nexstar Broadcasting Group's 2011 third 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 CEO, Perry Sook. Please go ahead, Sir.

Thank you, Lori, and good morning, everyone. Thank you all for joining us to review Nexstar's third quarter 2011 operating results. Our Chief Financial Officer, Tom Carter, is on the call with me today. Brian Jones, our co-Chief Operating Officer, is also here this morning.

The 2011 third quarter was a very active and productive period for Nexstar as we extended our strong operating and financial momentum while continuing to build our platform for further growth. Nexstar's record third quarter revenue reflects our eighth consecutive quarter of core television advertising revenue growth which was complemented by significant double digit revenue gains in every one of our non-television advertising revenue sources. Nexstar's third quarter results again highlight the value created by revenue diversification initiatives, our select accretive station acquisitions and our continued success in generating new local direct advertising.

The revenue reported this morning is an all-time third quarter record for Nexstar that spans over our 15-year history and reflects the Company's success in overcoming a $6.7 million year-over-year political revenue decline as well as the challenges experienced by several of the major Japanese auto manufacturers following the earthquake and Tsunami of earlier this year. In addition to the record Q3 revenue, during the past quarter we further optimized our station portfolio through accretive transactions including the completion of the purchase of WFRV-TV in Green Bay and WJMN-TV in Michigan. We also significantly expanded the number of hours per week of proprietary local programming, primarily additional local news that we produced.

We added an ABC affiliation in Terre Haute, Indiana, and we agreed to acquire WEHT-TV, Evansville, Indiana's ABC affiliate which, upon closing later this year, will create Nexstar's 22nd duopoly market. We participated in the launce of Bounce TV, the nation's first over-the-air broadcast television network targeted specifically to African-American audiences, we launched that in ten of our markets and we further expanded our mobile offerings to bring local advertisers more innovative solutions that yield high interaction, sustainability and ROI while supporting our strategy of developing hyper local content and verticals for both consumers and advertisers.

Before we get deeper into our discussion this morning, just like last quarter I want to quickly address a piece of housekeeping with respect to our announcement on July 21 that the Company's Board of Directors decided to explore and evaluate strategic alternatives intended to maximize shareholder value including the potential or possible sale of the company. As indicated in that release, Nexstar does not intend to disclose developments with respect to this strategic review process until such time as the Board has approved a transaction or otherwise deemed disclosure to be appropriate. As such, we will not be making comments this topic today.

Looking deeper now into our revenue growth, the 5.3% rise in core ad revenue and another period of double digit increases in e-media, re-transmission fee and management fee revenue more than offset the impact of a 74.3% year-over-year reduction in political revenue. Excluding political revenue from both periods, Nexstar's 2011 third quarter gross revenue rose 8.4% year-over-year. Our total third quarter re-transmission fee, e-media, mobile, management fee revenue cumulatively rose 26% to $15.2 million from the year ago period. These high margin revenue streams accounted for about 20.3% of our 2011 third quarter total net revenue compared to 16.5% in the third quarter of 2010 which, as I noted a moment ago, benefited from $6.7 million in political revenue.

Furthermore, Nexstar's total net revenue for the third quarter of 2011 is 23.9% ahead of the $60.4 million total net revenue reported in the third quarter of 2009, our last odd year comparison. And our revenue from non-television advertising sources has grown by 56% since that time. Despite the still fragile economic environment, Nexstar's 2011 revenue comparisons, excluding political, have improved on a quarterly sequential basis each quarter throughout the year.

Looking again deeper into the third quarter, core local and national television ad revenue growth of 5.3% to $59.6 million marks a quarterly sequential improvement over the 4.3% increase in Q2 of 2011 and a 3.3% rise posted in Q1. It's also on top of the 12% growth we recorded in last year's third quarter. Third quarter 2011 local revenue rose by 3.9% while national revenue was up 8.9%. Nexstar's television ad revenue strength combined with the continued double digit growth in re-transmission fee, mobile and e-media and management fee elements of our revenue quadruple play resulted in the 2.3% increase in total third quarter net revenue to $74.8 million. We generated third quarter broadcast cash flow of $26.1 million, adjusted EBITDA of $21 million and free cash flow of $5.2 million.

Let me quickly review our quarterly and recent highlights and then I'll turn the call over to Tom to take you through additional financial detail. Once again, third quarter re-transmission fee revenue reached a quarterly record at $9.9 million, representing a year-over-year increase of 30.5% as we benefited from our newest contracts rolling in to the mix, including our new agreement with DIRECTV which was completed early in the third quarter. In Q1 and Q2 of this year, our quarterly re-trans revenue growth was 15.6% and 18.4% respectively. And we believe the dollar levels reported in Q3 and the percentage growth represent a good benchmark for Q4 of 2011 while the quarterly levels in 2012 will begin to reflect additional contract renewals as they are negotiated between now and the end of the year.

Our e-media revenue growth also remains very robust as we further expand our base of revenue applications to achieve further penetration and monetization of our mobile marketing and video initiatives. Q3 e-media revenue came in at $4.2 million surpassing last year's third quarter by 17.5% and marking the 20th consecutive quarter of growth for e-media and Nexstar's highest ever local e-media revenue totals for a quarter.

During the quarter we acquired GoLocal.biz which provides local business directory coupon, movie and entertainment listings to all of our Nexstar community portal websites as well as to other US local market clients. And, as indicated, when we announced this transaction, the integration of GoLocal.biz has proven to be immediately accretive to our operating results. It vertically integrates a critical function of our e-media offerings while creating new revenue opportunities outside of Nexstar.

In the third quarter, we recorded $968,000 of management fee revenue from our management services agreement with Four Points Media Group. It's important to note that in addition to the $500,000 quarterly base management fee, we accrued incentive compensation of $468,000 in Q3 as the Four Points Group has reached the 2011 full year broadcast cash flow threshold per the management agreement in just the first nine months of the year. In addition, all of the broadcast cash flow that Four Points generates in Q4 will be subject to an incentive fee payable to Nexstar.

Nexstar generated $4.4 million in new local direct advertising in Q3 of 2011. That represented a 10.2% of our local billing and a 14% increase relative to what we generated in new business in Q3 of 2010. Of note, we have shown successive year-over-year growth in new local direct billings on a quarterly basis for the past nine quarters driven by increased focus, project selling, event selling and individual initiatives at the station level. Our political revenue of $1.7 million in Q3 2011 marks an odd year quarterly record and 169% rise from the 2009 levels as during the quarter we are just seven weeks now away from 2012. The political season is heating up nationally and we do expect spending to continue to increase.

Looking now at other category data, Nexstar was up in five of our top seven advertising categories in Q3. In total, the automotive category notched a 4% gain over the prior year led in strength again by local dealer advertising, which was up double digits for the quarter. And of note, our Q3 auto spending on a dollar basis rose by 4.3% over the Q2 levels. Indicating to us what the expected resumption of spending by Toyota and other brands impacted by the earthquake and Tsunami that we have more upside in this category in the current quarter and into 2012. We also saw increases in the furniture category, attorney and legal spending and department and retail stores. We saw slight declines in fast food, other media and telecom.

Tom will now provide further detail on our financials after which I'll come back to talk briefly about our outlook. Tom.

Thanks, Perry, and good morning, everybody. I'll start with the review of Nexstar's Q3 income statement and balance sheet data after which I will provide an update our capital structure. As reported, net revenue increased 2.3% to $74.8 million. Core revenue, local and national increased 5.3% to $59.6 million. The components that were a 3.9% increase in local revenue and a 9% increase in national revenue. Political revenue, as expected in the odd year, declined to $1.7 million from $6.7 million the previous year's third quarter. Re-trans revenue fees increased 30.5% to $10 million for the quarter. As Perry mentioned, this was the first quarter that we saw the impact of the DIRECTV contract in addition to re-transmission revenues in our Green Bay station. E-media revenues were up a healthy 17.5% to $4.2 million. Broadcast cash flow stood at $26.1 million, down from $28.8 million as again we lost the high margin political revenue in the odd non-political year. Adjusted EBITDA was $21 million and free cash flow was $5.2 million for the quarter.

Nexstar's third quarter corporate expenses were $5.1 million or 5% ahead of a year ago. Of the additional $438,000 of cash corporate expenses, a large percentage was associated with our acquisition activity in Green Bay and in Evansville and legal professional and travel costs related to our ongoing strategic review process which was announced in July. In Q3, 2011 we incurred $290,000 of non-cash option expense and in Q3, 2010 that same expense was $313,000. Station direct operating competences consisting primarily of news, engineering and programming, selling, general and administrative expenses all net of trade expense were $40.4 million for the three months ended September 30, 2011, compared to $37.1 million for the same period in 2010, a $3.3 million or 8.9% increase. The increase largely reflects the new stations in Michigan, Wisconsin and increased expense related to our local news initiatives, our expanded local news initiatives, increased variable expenses associated with our JOA payments to Sinclair and Peoria and Rochester and various e-media related expenses.

We continue to actively manage the balance sheet and have successfully eliminated all of the most expensive pieces of our capital structure which, in turn, has significantly reduced our weighted average cost of borrowing. This net effect has reduced our weighted average cost of borrowing to approximately 7.5% as of September 30. Following a significant reduction in total debt in 2010, Nexstar lowered total debt by $20 million in the first nine months of 2011 as we have completed the accretive acquisitions of two CBS affiliates in Michigan and Wisconsin as well as the GoLocal.biz acquisition in Q3.

In August, we announced that Nexstar entered into a definitive agreement to acquire the assets of WEHT-TV, the ABC affiliate serving Evansville, Indiana, for $18.5 million plus any working capital adjustments applicable at the time of closing. We expect this acquisition to occur later this quarter. We also announced that we have entered into a definitive agreement to divest the FCC licenses related to WTVW-TV in the market to Mission Broadcasting for $6.7 million and will enter into a local services agreement with Nexstar -- I'm sorry, with Mission to provide sales and other services to WTVW upon the consummation of the transaction.

Reflecting the improvements in our capital structure the past two years, I'll review key balance sheet items as of 9/30/11. Total level at 9/30/2011 was 5.55 times down from 5.65 times at year-end 2010 and versus the permitted total leverage covenant of 7.5. First lean leverage at September 30, 2011, was 1.38 times compared with 0.9 times at 12/31/2010 and versus a 2.5 times covenant. Reflecting repurchases, redemption and elimination of all of the most expensive pieces of our capital structure, Nexstar's outstanding debt at 9/30/2011 consisted of first lien debt of approximately $6.8 million outstanding under the credit facility and $148.5 million under the term loan. If you remember, we did buy WFRV and WJMN on July 1 and we borrowed a little over $18 million at that time. We reduced the revolver balances during the quarter by an excess of $12 million to reach $6.8 million as of 9/30.

The second lien bonds outstanding were $318.1 million and again those are 8-7/8% coupon. The other debt consisted of the two tranches of the 7% senior sub debt, one with $37.5 million outstanding and the other with $112 million outstanding. Total debt as of 9/30 was $622.9 million with cash of $7.8 million on the balance sheet.

Total interest expense in the third quarter of 2011 was $13.1 million compared to $14.3 million for the same period in 2010. Cash interest expense for Q3, 2011 was $12.3 million compared to $11.1 million for the same period of 2010. Nexstar's Q3 CapEx of $3.8 million compares to $3.2 million in the year ago quarter and we're on track with our prior expectation of total CapEx for 2011 to come in at approximately $14 million.

Overall, we are successfully managing the top line, our fixed and variable costs and the balance sheet for cash and remain focused on further actions that can enhance value and we expect to continue to deploy free cash for debt reduction. That concludes the financial review for the call. Now I'll turn it back over to Perry for some closing comments and Q&A.

Thank you very much, Tom. Our record third quarter net revenue, our excellent core revenue growth and Q4 pacings highlight the growing stability in our markets and our ability to leverage our platform and our relationships with our local advertisers. We are one of but a few broadcasters that generated solid Q3 core and net revenue growth, both on an actual and same-station basis and we continue to rapidly grow our other receive streams thereby completely offsetting the impact of the political cycle in 2011 year-to-date. In the first nine months of 2011 Nexstar's net revenue rose to $220.3 million from $216.3 million in 2010 and that revenue total is also up 23.7% over the first nine months of 2009.

Beyond the revenue and operating momentum, our recent acquisition and programming activity have strategically strengthened our platform through accretive and deleveraging transactions and our expanded scale and that's bringing upside into our 2012 outlook. 2011 has been a water shed year for Nexstar in terms of our ability to overcome the odd year, even year revenue disparity related to the political ad cycle. In aggregate, our acquisitions and our initial round three re-transmission agreements are expected to contribute an incremental $30 million in net revenue and approximately $17 million in EBITDA next year. And with the anticipated significant net revenue growth throughout the year, margin shifts are past the levels we've achieved in 2010. In addition, Tom and his finance team have done a superb job in improving our capital structure and we plan to address that further in 2012 based upon our expected record levels of free cash flow.

As importantly with our strength in balance sheet, we now have the appropriate resources and financial flexibility to pursue additional growth initiatives that will inure to the benefit of our shareholders. It's evident that the political season is heating up as a range of republicans vie for the presidential candidacy and that will lead, we think, to robust political spending during the primaries and even the early primaries that will effect to a lesser degree Q4. We also expect issue spending to continue to increase as a result of many heated topics that face the country today including the debt crisis, increased government spending and continued high unemployment. We believe that political spending at state and local levels will also increase in the upcoming political season due to the highly charged issues such as state and municipal employee collective bargaining, immigration and state government budgets.

Looking at this current two-year cycle 2011 and 2012 we believe that through the end of next year we have the potential to generate a nine figure amount of free cash flow. Our combined 2009, 2010 free cash flow grew 45% from the 2007, 2008 cycle to $79.6 million. And when we reference the low nine figure amount, we're expecting continuation of the free cash flow growth trend in the period that will end with the 2012 fourth quarter and next year's presidential election. So with all that I would like to thank you again for joining us this morning and now let's get to your question and answers to address your specific areas of interest. Lori.

Thank you. (Operator Instructions) We'll go first to Aaron Watts with Deutsche Bank. Your line is open.

Hi, guys.

Good morning, Aaron.

A few quick clarifiers for me. Perry, when you were talking about the $30 million of revenue and $17 million EBITDA incremental re-trans that you're expecting next year, is that as we look at where 2011 lands, incremental to that is what we should expect in 2012?

Incremental to -- yes, in 2012, $30 million of net revenue and $17 million of EBITDA that accounts for the full year impact of our current and pending acquisitions as well as our re-transmission agreement round three that we'll have the full year benefit of next year.

Got it. All right. That's great. And then I think on your last call you guys talked about how DIRECTV and the acquisitions you have made that would add $10 million of revenues and $5 million of EBITDA in the second half of 2011. We can see what your re-trans bump got in the quarter, which is great. Can you may be help us understand what your same station local and national revenue growth was in the third quarter if we look at it on an apples-to-apples basis?

Sure. I guess, Aaron, the way that we're looking at it is kind of an unaffected comparison between Q3, 2010 and Q3 2011. When I say that it's X the acquisition in Green Bay and Marquette and it's also X the affiliation changes that we had in the three markets in Indiana and in Missouri. And if you look at that, our core revenue was up almost 3% and total revenue was really not much different, it was down about 1% if you X out those one-time events.

Got it.

Is that helpful?

Yes, that is. Was national still positive for you?

In that scenario, national was up over 6%.

Wow, okay. We've heard national has been a little softer for a lot of your peers. What do you attribute kind of the difference for you guys in that you were kind of able to put up that kind of number?

I think it's focus on the business. I do believe that the mid sized markets have probably have been more resilient than the larger markets. The larger markets tend to have more of a flavor of the month boom and bust kind of cycle but, Aaron, if I look at the fourth quarter or October, which is in the books for us, we had double digit increase in national ex-political in the month of October. That might be expected given the displacement of political in the prior year, but if I look at our categories and I think we're somewhat unique in the numbers we're reporting, automotive was up approximately 4%. It was a little over 4% for the quarter and that was with the absence of over $900,000 in Toyota spending due to the supply chain disruption.

So, if Toyota would have been flat, our automotive would have been up double digits. Again, unlike maybe like other report you've heard our local dealer spending was up 17% in third quarter over the prior year that is really helping to drive the increases in the automotive category. If I look aside from that, all in our foreign name plates were down 12% in the quarter. Domestic was up 3% but the real story for us is the local dealers and dealer association money and some of that comes through national or regional agencies but, again, I think again that we're very focused on the business and focused on playing for those dollars aggressively when those budgets are available.

Okay. That's helpful and then kind of the flip side of this line of questioning is just on the expense side looking at the expense increases in the quarter should we think of that as a kind of a one-time lift as you integrate these new purchases? How far out should we model in this kind of larger bump in expenses?

Again, if you X out the acquisitions and any one-time expenses associated with the affiliation changes, our core operating expenses were up 3% and a large percentage of that was additional payments made under the JOA to Sinclair in Rochester and Peoria where we had very good quarters. I think our general thought is the thesis on expenses in terms of low single digits remains it's just when you add on Green Bay and Marquette that's what drives the higher single digit total operating expense.

Got it. That's exactly what I wanted to make sure of. And then you mentioned the fees. When do the Four Point fees shut off or what are you expecting? Is that early next year?

It all depends when it closes but it's basically the earlier of March 31 or the closing of that acquisition and I know that Sinclair has stated they expected to close early in the first quarter. I don't know if that means January 1 or February or what, but we will accrue fees up through the closing.

Okay. Got it and then last one I appreciate you taking all of the questions. Fox has been out there with some -- closing some deals for their own stations on the re-trans side. Got a lot of press. Can you just give us an update of where you stand in your negotiation with them? Thank you.

Well, I was here until 8.00 last night if that's any cue. We have one of our top five MBPDs that we're in the final stages of documenting a new agreement which will impact obviously the full year 2012. We basically agreed on economics and we're working through the final stages of the language so that will be a significant positive impact.

Beyond that, we have approximately 122 agreements that are up for renewal at the end of this year. Of that, there are only 12 of them that have an excess of 10,000 subscribers. So I'm negotiating that 12 agreements myself and then working with our general managers basically calling the place from the press box as they deal with the individual MBPDs that serve only their markets and that's where the bulk of those 100 plus agreements reside.

Okay. All right. Thanks for all of the help.

You bet.

(Operator Instructions) We'll go next to Barry Lucus with Gabelli & Co. Please go ahead.

Thanks and good morning. I have several as well but just start with the management fee or the absence thereof, Perry. How do you make up the shortfall and are there any other deals similar to Four Points that might be able to back fill the deficit?

We will obviously accrue in 2011 our full earned incentive fee through the end of the year and depending on the amount of the incentive fee and depending on when the transaction closes there will likely be a termination payment due to us in the first quarter of 2012 but on a full-year 2012 run rate basis our new re-trans deals, one in particular that is a top five agreement that I'm currently working on closing, the incremental revenue from that will more than equal the management fee and incentive fee agreement from Four Points.

Having said that, we made a proposal this week on an additional management services agreement and we'll see where that goes. There are opportunities out there. Obviously we've been spending a lot of our time being responsive to requests and diligence and otherwise in our strategic alternatives review so we've not been laser focused on this but we do have a proposal in the works and we'll see where it goes.

Okay. Second item. Just looking over the station line-up and starting with Hagerstown, the NBC affiliate and your biggest station, so what is the Super Bowl shift back to NBC look like and how does that help you?

It's obviously a net positive. We've got 13 NBC affiliates in the portfolio versus eight Fox affiliates that we own and so we -- it's somewhat dependent on the teams but that should be for us. If history is any guide, somewhere between $1.5 million, $2 million of incremental revenue in the first quarter. We've already organized our NBC affiliates and have our group sales presentation planning calls and we've already got some business on the books but obviously a lot of it will come as first quarter budgets are released, but we do expect that to be a lift over last year for the Company.

Okay. Thank you. Last item. Something you said you wouldn't comment on, but if we can go back to the strategic review process for just a moment. You're almost four months into it, borders four months into it. Is there a time point where it goes away, you terminate it in a sense that it is business as usual. How should we think about just the timing on this whole thing?

Sure, well, I think that last quarter we used a baseball analogy, Tom and I are very fond of baseball analogies. I think we said at the beginning of last quarter on our earnings call that we were kind in the early innings of the ball game. I would characterize we're in the middle innings of the ball game. There are a number of parties. There are multiple diligence requests and site visit requests and trying to orchestrate all that in a portfolio of our size takes some time. As I said last quarter, the process is in full swing. We're actively engaged and I would characterize it as kind of the middle innings of the ball game. As to when an announcement would be made, I think it will be over when it's over but if we're in the middle of the innings of the ball game you can probably extrapolate from that.

Thanks, Perry.

Our next question is from Edward Atorino with Benchmark. Please go ahead.

Hi. Good morning. Two questions. Speaking of political, any early political of noteworthiness and the Olympics also takes place next year. I was trying to go back and look what you got in the 2008 period. Could you remind us of that and what you might think this year would bring since it's in London?

Sure. Well on political if I look at what's on the books for the fourth quarter it's over $1 million already. We almost billed $1 million in October and we've had off-year elections in Kentucky and West Virginia and in Louisiana. We also are involved now with our station in Green Bay with the recall election up in Green Bay that generated significant dollars for us, but I think important to note we have half that much on for November and we're post election after today and a lot of that is issue money, a lot of that is for state and local issues as well. So-- and some of the earliest primaries, the actual political period will trigger in mid December in terms of lowest unit rate obligations and all of that.

So, we're ramping up to be on that treadmill and obviously we -- with setting an odd-year record in 2011 for political revenue we think the same will be likely true for 2012, the upcoming even year. And as we said a moment ago Olympics for us, if history is any guide with our NBC portfolio and kind of the size of their markets our NBC's tend to be in largest markets like a Shreveport like a Little Rock, like a Wolksberry and Hagerstown we think that it's probably $1.5 million, potentially $2 million revenue lift for the first quarter over what we did with our smaller Fox station portfolio for the Green Bay/Pittsburgh Super Bowl in 2010.

Did I miss a forecast of fourth quarter political?

No, we didn't do a forecast, but I'm just telling you that there's over $1 million on the books for fourth quarter.

Got it. Okay. Thanks.

Thanks Ed.

We'll go next to John with John Kornreich with J.K. Media. Please go ahead.

Yes, good morning. CapEx for 2012 I imagine it will be up because you'll probably take advantage of a boom year to accelerate some projects, is that correct?

It will be up a little bit but I wouldn't say it's going to be up meaningful.

Less than $20 million?

Oh, clearly.

Yes, John, I actually have got a meeting on Thursday where we're going to review our CapEx for next year as well as that and the context of a three-year plan but we'll be roughly $14 million this year. We'll be -- it won't be more than $18 million next year and will likely be less.

Can you review again where you are in the affiliation agreement contracts with the networks? When do they expire?

We have eight Fox affiliates that expired last year that we continue to work on finalizing an agreement with them. We have basically an equal amount of NBC affiliates that expire at the end of this year, it's actually seven and I've been in discussions with NBC. As you know, NBC and Comcast are looking to bring forth potentially a proxy proposal where they would, over time, gain the negotiating rights on behalf of the affiliates and their owned and operated stations. That's obviously since May taken some time to develop but NBC, we have a very good relationship there. They said to us if we can't get the proxy out or it's too late in the year before we begin our discussions, we'll just do three or six month extensions of our current agreement.

Those are the only pending agreements. We renewed our one CW affiliation agreement in the third quarter for another five years and no money changes hands there. We do have a couple of CVS affiliates in 2012 and a couple more in 2013 and a couple more in 2014. So that will just kind of be done I think on a one-off basis as those comes up, but in terms of the major groups, we have Fox at NBC that we're working toward extensions with for those groups of stations.

Let me better understand re-trans. You did $10 million in the quarter which was again a jump, a big, sizeable 30% jump. In the $10 million, I take it, includes a fair amount of what you call round three. Is that correct?

Not a lot of agreements. There are less than a handful of the new agreements that affected third quarter. I think we highlighted the major one, but obviously we'll see the full effect of these 100 plus agreements at round three economics in 2012.

John, the way I would put it is the majority of the increase between Q2 and Q3 came from a new round three agreement.

Okay. So next year you'll have the full year benefit, I don't know if you want to comment. You feel comfortable with the re-trans being in the mid-$40 million next year?

I think we're confident that the growth trajectory of re-trans will continue as it has been which has kind of been a high teens or low $20 million that we've seen over the last couple years and in 2012 has the potential to be higher because of a couple of agreements. That's kind of the way we think about it.

Terrific. That's it, thanks.

Thanks, John.

(Operator Instructions) We'll go maximum to Michael McCaffery with Shenkman Capital. Please go ahead.

Hi, guys, thanks for taking my question. I with hoping you could just elaborate a little bit more on what you're seeing in the categories X auto. You mentioned a couple, Perry, in your initial comments but the one you didn't mention I was curious about was health care and just anything that's different now versus earlier this year would be helpful. Thanks.

Medical health care in the third quarter was up by $2,000, so basically flat over the prior year. If I look at October it was up 17%. That's the state of category there.

Fast foods. As I think we mentioned a slight design. Very small single digit decline in both Q3 and then in October. Furniture was up, as we said, in the 8% to 9% range. Attorneys up in the 3% to 5% range. Radio TV cable, newspaper, kind of fluctuates quarter to quarter based on where we have advertising commitments. They're free to spend those literally at any point over the year so if it was down a little bit in third quarter it will be up in the fourth quarter as people have to meet spending commitments by the end of the year.

Retail stores, up 13% in the third quarter, up 20% in October. So I think that people realize that Thanksgiving and Christmas are coming and there's 47 shopping day and this is when we make our money we need to get our share of market. And telecom again was down about 5% in the third quarter and from our prospective obviously the ups and downs of mergers and not mergers are very well documented but our top 10 product categories were up in the third quarter and up even more in the month of October versus the prior year.

Again, I would caution irrational exuberance around the October numbers because obviously there was a displacement of political advertising to the tune of almost $23 million. I think that as water fills available space as do the advertisers when the absence of the political you would expect the comps to be up in October.

So, with that said just going back to the health care specifically, are there specific campaigns that are being rolled out in the fourth quarter or is the October up 17% based on the easy comp that you just alluded to? I'm just trying to get a sense for pacing on that category specifically as it relates to the fourth quarter.

If I look at what's up, it's local organizations, Blues advertising for open enrollment and changes at the end of the year. Aspen Dental up for us and it represents a little less than 4% of our core ad spend so it's not a huge driver of our results, but I think what we see this time every year and I was traveling last weekend and heard all over the radio ads for open enrollment periods and make your elections now and I think this is when the HMOs jockey for position particularly as employees are making there health care elections for the coming year.

Great, thanks, guys.

Our next question is from Andrew Finkelstein with Barclays Capital. Please go ahead.

Hi, guys. Thanks. Perry, just following up what you were talking about. Do you think October came in as you would have expected in terms of getting the replacement dollars coming back against political and then if you look into the November/December numbers maybe you can talk about sort of how that's pacing once we sort of normalize out of the political?

Good well, October came in at our expectations because our core revenue was basically at budget. This is what we had anticipated and planned for. We have positive pace in November and December, maybe not to the order of magnitude of a plus nine, but we do have positive pace and people are concerned about national. We have positive pace in national in November and December kind of post political periods and we have positive pace on our core ad for the entire quarter.

So, I think a lot will be determined by holiday spending and advertising to capture holiday spend in the month of December. Typically, there are certain manufacturers like Lexus that have put a lot of money into the December To Remember campaign and I would -- if history is any guide, I would anticipate that and that money is not yet (inaudible) on the books. There is some concern about supply chain disruptions, particularly for Honda with the flooding in Thailand. Honda is not a huge driver of our automotive category, but that spending at this point business on the book is down for fourth quarter by a small amount over what it was in the fourth quarter of 2010.

But again, the where we're seeing tremendous growth obviously is in our local dealer ad spends which we concentrate on. We are taking these people to lunch and playing golf and bringing packages and sending the weatherman out to sign autographs for two hours on a Saturday morning and all of the things we can do to move sheet metal and our Ford dealers are up 11% in the third quarter, General Motors was up 50%, Dodge up 16%. Some of the smaller name plates with Jeep and Hyundai up in excess of 100%. Volkswagen, Kia along the same lines. Obviously the big drag for us was Toyota and Lexus in the third quarter due to the supply chain disruptions but, overall, I see a battle for market share.

I think that the new car sales results are better than expected and portend a spending rate or a new car sales rate I think next year better than perhaps people are expecting and dollars per new car sale really drive the advertising category for automotive. We think that there and probably a high single digit increase in the automotive ad category throughout all of 2012 just based on the way and the comps from a couple of the spending categories in automotive for the foreign name plates that had supply chain disruptions. Long way to say we think the automotive category is diverse and generally pretty healthy.

Yes, because it just seems with a really strong October and some of that replacement and positive pacing in November/December that the sort of core pacing for the quarter should be higher than sort of this low single digit number we've been seeing so I'm wondering what's maybe dragging it back. You mention auto is strong.

It is and well I think I reported on October. We think that obviously Toyota still in the fourth quarter. What I have on the books where we finished last fourth quarter, we are in excess of $800,000 down. Add on to that the business on book for Honda and that's another $200,000. We're $1 million in the hole on those two but yet we're projecting growth in the automotive category. That was basically the story for third quarter where Toyota spending was down almost $1 million, Toyota and Lexus, and we put a 4% increase to the board. So I think that still is playing out and next year, assuming no supply chain disruptions, I would expect each of those name plates to spend aggressively to recapture market share. They're totally market share driven companies and so I think that automotive will be very healthy next year.

But no other categories in the fourth quarter that are particularly dragging down the rest of the overall number?

No, we have positive pace so I wouldn't say we're being drug down by anything at this point. Obviously, we won't generate the amount of political in Q4 that we did last year but X that we think that fourth quarter will evolve pretty much like the third quarter result we've were talking about today.

Okay, great, thanks.

And with no other questions in queue, Mr. Sook, Mr. Carter, I'll turn the call back over to you for any additional and closing remarks.

We just want to say thank everyone for joining us on the call and obviously if you have additional questions you can reach Tom or I in the office and our 10-K will be filed tomorrow and we look forward to sharing our fourth quarter results in early March of 2012. Thanks again.

That does conclude today's conference call. Thank you all for your participation.