Nexstar Media Group Inc (NXST) 2012 Q1 法說會逐字稿

Good day and welcome to the Nexstar Broadcasting Group's 2012 first 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.

In addition, given Nexstar's announcement on July 21, 2011 that the company's Board of Directors decided to explore and evaluate strategic alternatives intended to maximize shareholder value, including a possible sale of the company, Nexstar does not intend to disclose developments with respect to the strategic review progress until such time as the Board has approved a transaction or otherwise deems disclosure appropriate. As such, management will not be making comments on this topic today.

At this time I'd like to turn the conference over to your host, Nexstar President and CEO, Perry Sook. Please go ahead.

Thank you, Morisi, and good morning, everyone. Thank you all for joining us to review Nexstar's 2012 first quarter results. Tom Carter is here with me the call today.

2012 is off to an excellent start for Nexstar with another record quarter led by robust growth in all of our financial and operating metrics. Nexstar generated record first quarter net revenue and with the operating leverage of our model the revenue increase resulted in our highest ever first quarter broadcast cash flow, adjusted EBITDA and free cash flow. Our 19.6% rise in first quarter net revenue was highlighted by 7.8% growth in our core and a 70% rise in our retrans revenue.

It's evident how our operating efficiencies are translating into the solid revenue growth turning it into cash flow as our EBITDA margins rose to 34.2% from 28.6% in the year ago period. And if you look back to the first quarter of 2010 our margin was 30.4% so 34.2% we feel in Q1 '12 compares impressibly.

Overall, 2012 will be a watershed year for the company as the improving ad environment, combined with a substantial increase in our retransmission revenue growth rates, continue double-digit growth from our eMedia operations and the benefit of what are projected to be record political revenues, all will drive record top line revenue and bottom line profitability for the company.

In addition, we managed the company, as you know, for free cash flow. Tom and his team have remained active in further re-engineering and delevering the balance sheet. During the first quarter we repaid approximately $18 million in borrowings and most recently announced additional plans to strengthen our capital structure. Tom will go over those activities in just a few moments.

Nexstar generated total first quarter net revenue of $83.6 million, which as I mentioned is 19.6% rise from the year ago period, with increase being broad-based with strong growth in local, national, political, retrans, eMedia and our revenue from management fees.

Nexstar's continued leadership in new business development resulted in a 7.8% rise in first quarter local and national revenue, inclusive of 5% increase in local and 15.6% rise in national spot revenue. 2012 first quarter marks our tenth consecutive quarter of core television advertising revenue growth and Nexstar's sixth quarterly sequential increase in our core revenue growth rate.

While we look forward to the benefit of growing political advertising activity throughout 2012, Nexstar's gross revenue growth in the first quarter even excluding political was a robust 16.3% that included a 9% rise in automotive category spending. In addition to strengthen core advertising activity, Nexstar's record first quarter revenue, EBITDA and free cash flow highlight continued growth in every one of our non-television advertising revenue sources.

Our Q1 core TV ad revenue growth was complemented by the 70.2% rise in retransmission fee revenue, 12.5% increase in eMedia revenue, and a 1.5 million improvement in our management agreement payments related to the final payment from the Four Points management agreement. As we discussed on the last call with the renewal of more than 130 retransmission consent agreements at the end of 2011, we project very significant revenue growth from this source throughout the year.

In total the higher margin non-core revenue streams grew by 62.3% year-over-year and accounted for 24.6% of our 2012 first quarter net revenue compared with 18.1% in the comparable year ago period. And with the exception of the management fee we'll see continued growth from these sources throughout the remaining quarters of 2012.

Our continued focus on expense management and achieving further operating efficiencies resulted in record first quarter operating income for first quarter of 2012 of $17.5 million and three-and-a-half-fold rise in our free cash flow to $12.7 million, that's a 43% rise over the $8.9 million we did two years ago in the first quarter of 2012.

With the success of our diversification and platform building strategies we've successfully transitioned the traditional single streamed television revenue model into a multi-tier revenue model that uses our core on-air television operations as our foundation and leverages the value of our content and our local relationships.

Our focus on leveraging this localism is embedded and embraced throughout the Nexstar organization and will be reflected in our results throughout the remainder of this year. With the ad environment improving, auto and other key advertising categories increasing, upcoming quarters will benefit from higher overall ad spending and significant political revenue, along with the continued growth of retrans and eMedia.

Taking a minute now to look at the two-year cycle run rate, Nexstar generated $98.1 million of free cash flow over the last eight quarters, which equates to $1.70 per share in free cash flow, and we see the trailing eight-quarter run rate rising as we move sequentially through 2012.

I'll discuss later how our expected growth, including the timing of recently completed acquisitions and retrans agreements, will lead to free cash flow growth during the 2011/2012 two-year cycle. But first let me quickly review our quarterly and recent highlights and then Tom will take you through additional financial detail.

Our first quarter retransmission consent fee revenues reached a quarterly record of $14.5 million that represents a year-over-year increase of 70.2%. Taking into consideration the new economics, renewals of other agreements in 2012, escalators in our existing agreements, our Q1 '12 results confirm our expectation that 2012 retrans revenue would not only be a record, but it will grow for the full year at a percentage rate approximately twice that of our full year 2011.

eMedia revenue growth also remains healthy. We further expand our base of revenue applications and continue to monetize our mobile marketing and mobile video initiatives. Q1 eMedia revenue came in at $4.1 million surpassing last year's first quarter by 12.5% and making it the 21st consecutive quarter of eMedia growth. We anticipate this trend continuing throughout 2012 as well.

Also benefiting our eMedia revenue will be the full year's integration of our Internet technology provider company golocal.biz, which was acquired in mid-2011. In the first quarter we recorded $2 million of management fee revenue, as I mentioned, which we discussed previously represents the final payment from our management services agreement for the Four Points Media Group. Nexstar generated $4.2 million in new local direct advertising in Q1 of '12 that represented 9.3% of our local billing.

Looking a little closer at category data for Q1, Nexstar was up in three of our top four and five of our top ten advertising categories. In total automotive spending grew over 9% over the prior year led again by strength in our local dealer advertising. Of note, automotive spending represent in first quarter 23% of core ad revenue and that still gives us room for growth to get back to the pervious 25% to 26% contribution from this category we have seen at its peak.

In addition to auto, we also saw increases in furniture, paid programming, other media, as well as department and retail stores with slight declines in fast food, medical, attorneys and lottery advertising.

Political revenue of $2.8 million in Q1 of '12 was behind the $3.2 million in Q1 of '10. While the republican presidential primaries remained active through March, we did see higher congressional spending in Pennsylvania due to redistricting delays actually lighter congressional spending in Pennsylvania and also the shift of the Texas presidential and congressional primaries from March to May.

For prospective, we have 15 stations here in Texas. We see the delayed Texas primary spending essentially shifting that revenue from Q1 to Q2. With the combination of many local races coming across our markets and the rise of the PAC and issue spending, our political revenue for the quarter was split almost evenly between categories in PAC and issue spending.

Overall, 2012 is expected to be a record political billing year for Nexstar. A majority of the spending, obviously, will relate to the presidential elections and like other years battleground states are projected to be highly, highly active. Pennsylvania and Wisconsin where we have seven stations in total have risen the level of priority with open seats when recall elections to come today in the state of Wisconsin.

Tom will now provide further detail on our financials and after that I'll come back with some additional comments. Tom?

Thanks, Perry, and good morning, everyone. I'll start with a review of Nexstar's Q1 income statement and balance sheet data, after which I'll provide an update on our capital structure.

Q1 2012 net revenue was $83.6 mill, as Perry mentioned, up 19.6% over the year ago quarter. Core revenue was up 7.8% to $62.8 million. The components of that were local revenue up 5% to $45.4 million and national revenue up a healthy 15.6% to $17.4 million. Political revenue was $2.8 million for the quarter up from $6 million in Q1 of '11.

Retrans revenue was up 70.2% to $14.5 million and eMedia continued its trend of double-digit growth up 12.5% to $4.1 million. Broadcast cash flow was $34.1 million for the quarter, an increase of 37.1% over Q1 of '11 and adjusted EBITDA was $28.6 million up 43.1% over the year ago quarter. Free cash flow for Q1 of '12 was $12.7 million up from $3.6 million in Q1 of '11.

Nexstar's first quarter corporate expenses were $5.4 million or 12.4% ahead of a year ago. Of the additional $500,000 in corporate expenses, the majority of the increase was associated with the addition of our GoLocal operations, which are accounted for in the personnel cost there and for in our corporate overhead, as well as the additional professional and management expenses associated with our strategic review process.

In Q1 of '12 we incurred $217,000of non-cash option expense compared to $285,000 in the year ago quarter. Station direct operating expenses, consisting primarily of news, engineering, and programming, and selling and general administrative expenses all net of trade expense, were $20.6 million for the three months ending March 31, 2012 compared to $17.6 million for the same period in 2011, an increase of $3 million or 17%.

The increase largely reflects the expenses which we didn't have a year ago for the new stations in Michigan, Wisconsin and Indiana, and higher sales in eMedia related to those higher revenue levels. Fixed expenses on a same-station basis were up only 3% year-over-year.

Following significant reductions in our total debt over the past few years, Nexstar repaid approximately $18 million of borrowings under the credit facility during the first quarter. Additionally, reflecting the strong cash flows expected throughout 2012 we took further actions to reduce leverage and in April we called for the redemption of $34 million of Nexstar's 17% senior subordinated notes due 2014. We will be funding a portion of that redemption from cash and a portion of that redemption from our revolving credit facility. In any case, we expect the annualized interest savings at a minimum to approximately $850,000.

Turning to the balance sheet I will review key items as of 3/31/12. Total leverage at that date was 5.67 times versus the total permitted leverage covenant of 7.5 and our first lien leverage test at 3/31/12 was 1.41 versus the covenant of 2.50.

Reflecting repayments, repurchases, redemptions and the elimination of almost all of the expensive pieces of our capital structure, Nexstar's outstanding debt as of 3/31/12 consisted of $6.7 million outstanding under the credit facility down from $24.3 million at 12/31/11. We also had $147.75 million outstanding under the term loan, which reflects the slight reduction associated with our amortization there.

Our second lien debt, the 8 7/8 notes, stood at $318.6 million and the other debt consistent primarily of two tranches of the 7% senior sub notes were $37.5 million, and again that's pre-redemption, and $112.1 million for the second tranche. In total, that amounted to $622.7 million at 3/31/12 down from $640.4 million at year end, and we had cash of $11.8 million on the balance sheet at 3/31.

Total interest expense for the first quarter was $12.9 million compared to $13.7 million for the same period in 2011. Cash interest expense for the quarter was $12.1 million compared to $12.5 million in the same period a year ago as debt levels and our average cost of debt continued to decrease.

Nexstar's Q1 2012 CapEx was $4 million compared to $4.2 million in the year ago quarter and we're on track for our full year budget of CapEx of approximately $17 million, which reflects our initiatives to accelerate local HD originations.

Overall, we have successfully managed the top line, our fixed in variable costs and the balance sheet for cash and remain focused on further actions that can enhance value and we expect to continue to pull AR free cash flow for debt reductions.

That concludes the financial review for the call and now I'll turn it back over to Perry for some closing remarks before Q&A.

Thanks very much, Tom. To recap, our unwavering focus is on leveraging our localism and the company is consistently delivering industry leading top line results as a result. With all of the options available to consumers these days, television viewing remains at record levels across all demographic groups and advertisers recognize that broadcast television is the most effective medium for driving awareness and building both traffic and brands. At the same time Nexstar has effectively migrated our content across every viable platform and monetized it at every step, whether online, mobile or through the myriad of cable, SAP and Telco distribution platforms.

Given that over 74% of our core revenue is local, Nexstar is and always has been very focused on building brands for local advertisers. We have developed direct relationships with the owners and managers of local businesses in the markets which we serve and we incentivize our local sales teams based on their ability to develop new advertiser relationships. Our new to television sales metric that I report on every quarter consistently highlights our progress on this front and this remains the significant differentiating factor in our ability to drive our top line.

In addition, over the long term we've been very successful in leveraging the strength of our news programming into high levels of political advertising. This focus has led to an even year political revenue compound annual growth rate of over 20% from 2006 through 2010. The record 2012 budgets for state and local candidacy spending are being complemented by a broad range of advocacy spending and we are also benefiting from continued high levels of partisanship in our country.

The record first quarter results reinforce our view that we're poised for continued local, national, political, retrans and eMedia revenue growth for the remainder of 2012, and at the same time we're making consistent and meaningful progress in reducing the company's leverage. Given that we ended the first quarter ahead of the industry and Q2 is showing very good pacings right now, we reiterate our expectation that 2012 will prove to be a record year across all financial metrics. Of course, with net revenue in 2012 to date pacing ahead of plan, we also expect to generate record free cash flow for the full year.

On the distribution front, due to the volume of renewed retrans contracts and the high number of subscribers they represent we believe our percentage growth in retrans revenue will approximately double in 2012 the growth rate we reported for the full year of 2011. First quarter results, obviously, have borne this out. Since we pioneered this revenue source in 2005 we've generated a compound annual growth rate of over 53% through the end of 2011. In all, in 2011 retrans revenue grew 25% to $37.4 million and in Q1 our retrans revenue in Q1 of '12 was up 70%.

This eMedia operation that we continue to operate continue to record year-over-year double-digit revenue gains as we successfully leverage the local content and relationships of our television stations to build our unique local online businesses. eMedia revenue has proven to us to be recurring, sticky, sustainable and profitable and we continue to pursue areas of future growth.

For example, we recently announced our relationship with the Kid's Doctor to collaborate on the launch of real-time children's health and developmental content for not only our Nexstar 31 portal websites, but also our local lifestyle news programming airing in the afternoons.

Additionally, our acquisitions which closed in the second half of 2011 are expected to add an incremental $20 million in revenue and approximately $10 million in EBITDA in 2012.

Since our IPO in 2003 Nexstar has generated a 37% compound annual growth rate of free cash flow for the two-year cycles starting with 2003/2004 through the two-year cycle that included 2009/2010 when we generated a total of $79.6 million.

If we were to maintain our 37% CAGR growth rate for the two-year cycle of 2011/2012 when we need to generate a total of $109 million in free cash flow in 2011 and 2012 and by subtraction that would mean that 2012 would have to come in somewhere north of $75 million of free cash flow. With our visibility on our 2012 growth drivers both Tom and I remain confident that the company will exceed these levels.

I hope you appreciate the passion we have for our business and how this passion drives consistently strong results in growth and I'd like to thank you all for joining us. So with that, let's get to your Q&A and address your specific areas of interest. Operator?

(Operator Instructions). Our first question comes from Aaron Watts with Deutsche Bank.

Hey, guys.

Morning.

Morning.

I don't know if you can give us any color just to strip away the acquisitions you guys closed on in the back half of '11 and give us a sense for on an apples-to-apples basis what first quarter perhaps revenue growth was.

Sure. Let me take that, Aaron. When we -- the way we look at it is kind of on a steady-state basis and we strip away the acquisitions and we also take out the three station affiliation switches that we had in 2011. So we view that as kind of our unaffected stations and core growth there was 1.3% for Q1 and overall growth was about 13.5%. Is that helpful?

That is.

So in effect the acquisitions represent five to six points of both revenue and expense growth on an all-in basis.

Got it, okay. And as I look at local and national here, obviously national's been a little bit lagging of local in the last few quarters now it's pacing ahead, or at least performed better in the first quarter. Is that an auto pop or what else is going on there?

It's driven primarily by the switch of agencies for Gulf States Toyota, which affects Texas, Arkansas, Louisiana, and it went from an agency that was handled locally to an agency that's now handled nationally. So it's really an inside baseball move. I would just focus on our core number, which is obviously in line with and slightly ahead of our plan.

Okay. And, Perry, I think you said that the second quarter was going pretty well so far for you. I was just curious is it lumpy out there like month to month, up down or do you feel like there is some kind of momentum building for the core ad environment. Just some general thoughts since I know you don't like to give specifics.

Yes, I don't see it as lumpy. I mean, you would expect in the month of May to have marginally more revenue because of all of the season finales in primetime and people will tend to pay up for those slightly, Mother's Day and things of that sort. But fanatically I mean second quarter looks a lot like first quarter to us and that's the way the revenue is coming in.

And last one for me, appreciate you taking the questions. Obviously great year-over-year growth in retrans fees coming in to you, I was curious if we should expect any kind of movement on the expense side of that and what you might have to kind of pay back to the networks.

Any of that is already contracted and in our results from operations so it's in our operating expenses now.

Okay, so no big movement coming on that line item.

No.

Okay. Thanks again.

We'll take our next question from Bishop Cheen with Wells Fargo.

Hi, Perry. Hi, Tom. Thanks for all the color presentation in detail. I have two questions but I was looking back at my old notes so this is Q1 2009 when we all thought the world was ending. And, Perry, you commented to a question on that call that how much can your non-core revenue grow, and you said, "I think it can beat 25%." And I remember the trades, some of the trades thought you were crazy. You're there. Up from 18T to just about 25%, correct?

Yes, I can't argue with your math.

Okay. You may have even said it before Q1 of '09 but I have it from my notes so belated well done. Two questions because you covered so much. Tom, technically if you want to put debt on top of the second lien notes, could you remind us again what the limiter is? Is that a $200 million maximum dollar amount that could go on top of the 8 7/8?

When you say on top, first lien debt?

Yes.

First lien debt is limited by two things. One is a $200 million basket, which you referenced, and the other is the 5.5 times secured covenant. There is no first lien covenant in the indenture it's just 5.5 times secured debt is the incurrence test and seven times total debt is the incurrence test, and then underneath that you have a carve out of $200 million. So you're not limited by $200 million in terms of first lien debt.

Got it. I'm not suggesting you would do that, but I just wanted to know given all the events that are possible, what could go on top of it under the existing covenants?

I understand.

And second you have such a great upcoming dilemma. Political, no matter how bullish you are it seems to be tough to keep up, but then comes 2013. Could you give us a little color again on how you go about replacing political, and if you can if you can quantify it for us by X percent historically were you've been able to pass two or three years to replace X percent of political via the other non-traditional or non-core revenues.

I think that if you go back and look at 2011, which was obviously the year after 2010, for the full year our net revenue was down 2.2% over the prior year and that's the closest that we've come to closing the gap since the last century, since the '90s. We will see continued growth in our retrans and eMedia and even a 3% growth on core revenue that's moving north of quarter billion dollar revenue line, so 3% or 4% growth there with the inventory returning back to the stations for sales and non-political advertisers that still can close literally 1/4 of the political gap.

So obviously that's our job and our job is to continue to find new revenue sources that will help to drive and diversify away from the core ad and the political ad revenue model. But obviously the better this year is the steeper that hill is for next year as well.

Okay, that is helpful. I will pass it on. Thank you, guys.

Our next question comes from Edward Atorino with Benchmark.

When you were talking about the steady state or whatever, I mean the core business, according to the press release, was 7% or something like and you said 1.3. What was 1.3?

Well, 7% is the gap measurement between 2011 and 2012. That includes the acquisition that we made in July of 2011 in Green Bay and December of 2011 in Evansville. If you back those two out and back out the effect of the affiliation changes, which happened in the summer of 2011, our core business was up 1.3% not 7.8%.

Okay. That's very clear, okay.

I'll take our next question from Barry Lucas with Gabelli & Company.

Thank you and good morning. I've got several areas I'd like to touch on, Perry. I think you singled out PAC versus issue money and maybe candidate money and I was hoping you could maybe provide a little more color. Are the PACs and Super PACs providing a significantly greater proportion of political advertising dollars than we've seen previously? I mean, there's certainly the expectation given the Super PACs.

Yes, Barry. In the first quarter 51% of our reported political revenue came from PAC or issue advertisers, 49% was candidacy ad spend so that is a similar quarter. That's the first time that candidacy ad spend has been in the minority, although it wasn't by much. To put that in perspective, if you go back to 2010 approximately 1/3 of our political revenue was issue or PAC revenue and 2/3 candidacy ad spend.

Interesting phenomenon. One for Tom and then I'll come back to you, Perry. It looks like you did a really good job on the balance sheet, Tom. You talked about $12 million in free cash flow but net debt was down not quite double that but about $20 million. So what's going on in the working cap area? Is that where the improvement came from?

Yes, but we're a little bit held hostage to the funds flow and I think we may have even talked about this on the fourth quarter. We got a large payment from the termination of the Four Points agreement on January 3 so only -- it was almost an $8 million payment, some of which was a receivable year end that was the incentive payment due in the -- earned in the fourth quarter but payable in the first quarter.

So that alone made up about $6 million of favorable working capital. Before we were always lagging kind of one quarter behind on the receipt of those funds, but with the termination agreement, obviously, the funds became due when the deal closed. So that was probably the biggest working capital item.

Having said that, working capital obviously is always kind of a -- we're always collecting fourth quarter revenues, which are our best core revenue quarter, in the first quarter so that's always favorable to us. And with our expenses under control accrued expenses are down. We had a big interest payment due on April 15 so it's just really the ins and outs of the cash and the accounts payable within the quarter.

Okay. Great, that's helpful.

But, as I mentioned before, the actual -- the redemption occurs on Friday and we will be borrowing less than the $34 million required payment for the redemption, actually including interest probably something on the order of about 80% of that will be borrowed the other 20% will come from cash. So further debt reduction, net debt reduction.

Okay. And last area back to Perry, if you can shed any light or color or thoughts on the LIN New Vision deal that would be illuminating and particularly in light of your own strategic review process.

I'm not sure that it would be prudent for us to say anything ahead of them commenting on the deal that they made. We obviously looked at the deal and we're not able to even with hubing and retrans make the -- the final price would not have been an accretive deal for our shareholders. So we stick true to our process of continuing to look for accretive acquisitions and leverage neutral acquisitions while continuing to run our strategic process.

And I guess the comment that I would make on that, as I said several quarters ago, we're in the early innings of the ballgame I would say now we're probably at the seventh inning stretch and we're closer to the end of evaluation of all of our alternatives than the beginning. Having said that, no announcement is imminent or forthcoming and we won't have any further comment until there is such an announcement to be made.

Thanks very much, Perry.

We'll take our next question from Andrew Finkelstein with Barclays.

Hey, guys. Thanks for taking the question. First, I just wanted to go back to auto. I think you guys said it was up 9% in the quarter. One, do you have what it would have been on that sort of same-station basis and maybe how it's looking in the second quarter. I know at some point the comps -- I think the auto comps get easier given the tsunami last year.

Andrew, the 9% is same-station. If it were a GAAP basis it would be about double that.

Okay, and then any thoughts on auto going forward? Do your comps get easier as you lap sort of the impacts from the tsunami?

The tsunami occurred I believe on March 18 or 19 of last year so we started to see the effect in second quarter. Having said that, automotive is pacing for the second quarter about where it was -- where we finished up in the first quarter. So we're seeing strong spending from General Motors, from Nissan, from Mercedes, from Mazda, Subaru, Acura and Ford dealers as well.

So it's very well -- nine of our tracked manufacturers, nine of the ten were over last year. And obviously, as we mentioned earlier, local dealer advertising which makes up literally 49% of our total automotive spending also was up on a same-station basis 14% over the prior year.

Okay, great. And then was there any impact of Super Bowl this year on NBC versus FOX and if you could maybe talk a little bit about what you expect for the Olympics.

We did about $1.5 million in Super Bowl revenue on our NBC affiliates. That was the on-air portion, online was another $300,000 to $400,000 of revenue from Super Bowl. That was ahead of our goal and about 5% ahead of what we did on our FOX stations in the year prior.

As far as Olympics, we have an ambitious goal there for our NBC stations. We are about 70% of the way there. It's approximately a $5 million goal between on on-air and online and we feel very confident that we will hit that come the open ceremonies.

Okay, great. And then one balance sheet question, I guess you do have the rest of the 7% bonds due in '14. It seems that you might have wanted to wait to wrap-up the strategic review as that's kind of dragging longer. How do you think about waiting on any refinancing decisions around the bonds now that we're sort of middle of 2012?

Well, again, I think your commentary is correct. We don't want to do something only to have to undo it later depending on what the outcome of the strategic process is. So those two kind of go hand-in-glove in terms of dealing with the [sevens] in concert with whatever strategic initiative or path we set off down and don't want to have to take two steps where one step would be more appropriate.

But you're comfortable sort of waiting further as that maturity day gets closer.

It is -- if for not other reason, quite honestly, I could -- I believe we will have enough free cash flow to retire the majority if not all of those bonds just out of free cash flow between now and January of '14. So in theory we could just pay them off, I think the right answer is to refinance a portion of them and use a portion of our free cash flow in the remainder of the year to retire them as well.

Okay, that's great. Thanks.

Our next question comes from John Kornreich with JK Media.

Yes, hi, a couple questions. Can you help us with retrans for this year and next? Does the what looks like it's going to be close to 60 million of retrans this year reflect basically all your distributors and/or is there something meaningful coming up for negotiation this year that would be reflected in 2013? I would think with 60 million 2013 would kind of be a pause year. Any comments on that one?

Well, I'd say pause is relative, if you mean pause relative to a 50% increase I would --

No, I mean like inflation index only.

I would say it would be more than that.

In '13?

Yes.

Okay.

But you're right, we had said before that we expected a 50% increase between '11 and '12. I think the early return is there and if you just annualize Q1 of '12 that will be -- we'll exceed that and '13 will not see that type of growth between '11 and '12. You won't see that again between '12 and '13 but you will see something more than, as you put it, a CPI or an inflationary growth trend between '12 and '13.

If you look at the top five distributors, Comcast, Time Warner, Direct TV, EcoStar, and somebody else, they're already in this 60 million number?

Yes.

Okay, so whatever you got new is not significant and next year should be inflation index plus?

Yes, John, you can put a double-digit increase, a 10% increase on next year just from escalators and the dozen or so agreements we have this year that will expire. And none of our top five expire in 2012 but two of our top five expire at the end of '13 and one expires early in '14.

So these were three-year deals, basically?

Yes.

Okay. I thought they were five-year deals.

And then let's put it this way, all of our top five will re-price again between the end of '13 and the end of '14.

Okay. Did I hear you say that the two-year free cash flow should be $110 million at least because it was 34 last year, right? You said at least 75 this year.

Yes. If you continue the growth trend that we've historically grown, which is 30% plus, and you apply that to the 2009/2010 two-year growth it would be north of $100 million of free cash flow and we already had 35 or 34 in '11.

But you made a statement that it would be at least 75 this year, which brings you to 110.

Correct.

Okay, I get it. Also, there's no more management fees after this quarter, correct?

Correct.

Okay. Looking at the core ad revenues, I'm a little puzzled by them actually. On a same-station basis it looks like local was actually down maybe 1% or so even though auto, the biggest category, was especially strong in the local end of it. So what's going on in local where your biggest guy is up significantly and yet the whole category same-station, same-station was actually flat to down?

Well, I think Perry mentioned some of it has to do with shifting in categories within local and national. I would say if you told me local was down I would say that's really not -- that's the way we keep score, but if you normalize that local would be up a low single-digit because of these category shifts where someone in 2011 was deemed local and in 2012 they're deemed national.

Okay. Looking at your two-year free cash flow, whether 2011/2012 and 2012/2013 projection, guess, whatever you want to call it, you come up with like $1.80 a share per year average. So make sure you emphasize that to your strategic buyers.

Well, I think Perry mentioned the $1.70 a share so our math is not far off.

Okay, thanks for all your help.

Thank you, John.

(Operator Instructions). We'll take our next question from Edward Atorino with Benchmark.

I don't have another question. I already asked my question, thank you. Sorry about that, guys.

No worries.

It appears there are not further questions at this time. I'd like to turn the conference back to our speakers for any additional or closing remarks.

Okay, thank you very much. I just wanted to reemphasize what John Kornreich just mentioned at the end. If you look at our free cash flow over the last eight quarters it averages out to an average of $1.70 per share per year. And I think as we said we see our trailing eight-quarter run rate rising as we progress through the remainder of 2012.

So thank you very much for joining us. We look forward to reporting on our second quarter results in late July or early August. And, as always, if you have specific questions Tom and I are available afterwards. Thanks very much, everyone.

That concludes today's conference. Thank you for your participation.