Nexstar Media Group Inc (NXST) 2013 Q3 法說會逐字稿

Please stand by, we're about to begin. Good day and welcome to the Nexstar Broadcasting Group 2013 Third Quarter Conference Call. Today's conference 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 change and circumstance.

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

Thank you, Lexie, and good morning everyone. I'd like to thank you all for joining us this morning as we review our excellent third quarter operating results as well as cover up our recently announced transactions. As always, Tom Carter, our CFO, is on the call with me this morning.

As I said, operationally, Nexstar had an outstanding third quarter led, again, by a strong growth across all of our financial metrics. Nexstar's record third quarter net revenues, one of our highest ever third quarter broadcast cash flow, adjusted EBITDA and free cash flow.

In addition to our operating successes, Nexstar continues to actively and opportunistically identify acquisition targets that adhere to our strict criteria for accretion and creating strong new local platforms. Nexstar and Mission have been active and successful in further building our station platform for continued growth and return of political advertising revenue in 2014.

In September, we and Mission, entered into agreements to require a total of five additional television stations and freedom markets for a total consideration of a $103.25 million in transactions that are expected to be immediately accrued to Nexstar's free cash flow in the first full year of operations following closing early in 2014.

The 19 stations' CCA transactions announced in April combined with the five stations, Citadel and Stainless transactions, again, we announced in September, those -- together, materially, will enhance our scale and allowing us to further leverage our infrastructure, our operating disciplines and our local market presence.

As such, the net result of our transactions announced in 2013, is that post-acquisition, Nexstar will generate meaningfully incremental free cash flow post. We will de-lever quickly over the first full year of operating the new stations and our leverage will be in an attractive level in the mid-3 times level by the end of 2014. Pro-forma for the completion of all announced transactions, we believe that Nexstar will generate free cash flow of approximately $330 million over the 2014-2015 two-year cycle.

This translates to average pro-forma free cash flow of approximately $5.50 a share in the 2014-2015 period.

Looking back at the quarter, all of our non-political revenue sources posted significant year over year increases leaving to record Q3 net revenue BCF, adjusted EBITDA and free cash flow.

The successful integration of our recently acquired stations combined with the execution of strategies that leverage localism, leverage content and advertiser relationships drove the 39.8% rise in third quarter net revenue despite the $9.1 million year over year decline in political advertising and the comparisons will the prior period that benefited from approximately $6 million in advertising revenue from the Summer Olympics.

Excluding political advertising revenue and reflecting our integration of the station acquisitions completed in late 2012 and early 2013, our third quarter station revenue grew 52.9%, inclusive of core television ad revenue growth of 44%, a 69% rise in retransmission revenues and 124% increase in digital media revenues.

Over all, core revenue growth highlighted solid spending in the auto, fast food, cable retail and legal categories.

Our core revenue growth number also continues to reflect healthy levels of new business and new television add revenue for Q3 of 2013 was $6.2 million which was a 13.7% increase over the prior year.

Total third quarter retransmission fee and digital media revenue taken together rose 82%to $35.6 million and accounted for 28.3% of our 2013 third quarter net revenue. By comparison, total third quarter retransmission fee and e-MEDIA revenue comprise 21.7% of net revenue in a year-ago period and 19% of net revenue in the third quarter of 2011.

third quarter 2013 BCF and adjusted EBITDA grew 17.3% and 18% respectively, inclusive of one-time expenses of approximately $1 million related to our strategic activities. Free cash flow was up four-fold from third quarter 2011, the previous non-political period and by nearly 9% when compared to last year. When again, we had over $10 million of political spending as well as over $6 million of advertising related to the 2012 Summer Olympics.

The operating efficiencies, we are deriving from our expanded scale, the integration of recently completed acquisitions and our (inaudible) focus is highlighted on our third quarter BCF at the adjusted EBITDA margins which were solid in a non-political and non-Olympic period at 38.2% and 32.9% respectively. Those compare to BCF and adjusted EBITDA margins of 34.9% and 28.1% respectively in the 2011 third quarter.

Looking forward now, the transactions we've announced thus far in 2013, CCA, Citadel, and Stainless further expand our revenue and operating base and geographic diversity. And upon completion, we will own or provide services to 96 stations reaching approximately 14.6% of all US television households, leaving Nexstar with considerable runway to continue our M&A activities.

Consistent with our M&A criteria that emphasizes the development of the duopolies, we will own or provide services to multiple stations in 33 of the 51 markets in which we operate.

As we've noticed previously, typically BCF margins are from 500 to 700 bases point higher in a duopoly market than a non-duopoly market. So, our ability, thus far, in 2013 to increase by 8 new duopoly markets reflects our strategic focus on driving BCF growth down the income statement in the EBITDA and, ultimately, to free cash flow.

Tom will review our capital structure shortly, but our strength and balance sheet provide us with additional flexibility allowing us to continue to acquire other stations in accretive transactions. Also we continue to de-lever and for the return capital shareholders with our fourth $0.12 quarterly dividend to be paid later this quarter.

We are nearing the one-year anniversary of the declaration of our first dividend and we expect the board to review our dividend pay out relative to our significantly expanded free cash flow run rate, additional M&A opportunities and other capital requirements.

For Nexstar, free cash flow as our primary performance metric and as we move toward the completion late this year or early next of the CCA Stainless and Citadel acquisitions, and the 2014 political spending cycle, our prospects for generating very significant free cash flow for this year over the current and next two year cycle is highly visible and reflects are continued success on this front.

Tom will now provide further details on our financials and we'll review the expected financing of our recently announced transactions and our revised capital structure, Tom?

Thanks, Perry, and good morning everyone. I'll start with the review of Nexstar's Q3 income statement and balance sheet data. After which, I'll provide an update on our capital structure and recently announced transactions.

For Q3 2013, total net revenue was up approximately 40% to 125.8 million. Local revenue was up 42% to 63.6 million and national revenue was up 48.4% to 28.6 million.

Core revenue was 92.3 million, up 44%. On the same station basis, our core revenue was down approximately 1.5% as a result of the runoff of approximately $5 million of Olympic core revenue from Q3 '12. After the Q3 '12 Olympic revenue, same station core revenue was up approximately 6%. And on non-NBC core billings, we're up 5% consistent with the overall non-Olympic revenue trajectory.

Political revenue was down to $1 million, $9 million reduction from the year before political period. Retransmission revenue was $25.6 million, up 69%. Digital media revenues were $10.1 million up from $4.5 million, of that $6 million or $5.5 million increase approximately, $4 million was attributable to some buyout payments of contracts which have runoff and then canceled. Adjusted free cash flow was $21.6 million, adjusted EBITDA $41.4 million and Broadcast cash flow was $48.1 million.

Nexstar's third quarter corporate expenses were $6.7 million compared to $5.8 million a year ago and we're consistent with Q2 levels. As indicated in our earlier conference calls, we projected the corporate overhead would remain above normalized levels during 2013 as we continue to incur transaction-related expenses related to our recent acquisition in capital market activities.

As a result, we expect our normalized quarterly corporate expense run rate of roughly $5.5 million to increase by approximately $0.5 million to a $1 million a quarter.

Consistent with that expectation, in Q3, we incurred about 900,000 in one-time expenses related to recent station group activities including legal accounting and professional services and an additional $500,000 associated with our options activity during that quarter.

Also as previously noted, in anticipation of the CCA station acquisition, we expect Q4 corporate expense to increase as staffing and infrastructures added to manage and operate additional stations.

Accounting for all pending transactions normalized Q4, corporate overhead will be approximately $66.6 million and on the same station basis, fixed cost excluding affiliation expenses were up approximately 2% during the quarter.

Turning to the balance sheet, I will review a few items -- a few key items as of September 30th. Total net leverage at September 30, '13 was 4.87 times versus the permitted leverage covenant of 7 and a quarter. And first lien at 9/30 was 2.11 versus a covenant of 3.5.

The only changes to the capital structures during the quarter were $28 million increase from the revolver borrowings as the initial payment for the Citadel, Stainless acquisition and a $10 million reduction in the 8 7/8 second lien debt as we repurchased notes in the open market. Such good quarter end.

On October 1, 2013, Nexstar Broadcasting Groups wholly-owned subsidiary, Nexstar Broadcasting Inc., completed a $275 million dollar aggregate principal amount offering of our 6.875% notes due 2020.

These notes have the same terms as and are treated as a single class with Nexstar's existing $250 million dollar of 6.875% notes, which we're originally issued on November 9, 2012. The notes were priced at par plus a quarter plus accrued interest for May 15, 2013.

Nexstar and Mission use the net proceeds from that offering together with the proceeds from $150 million dollar increase in the existing senior secured facilities and cash on-hand to commit a tender offer for any in all of the outstanding 8.875% senior secured notes which are due in 2017 and to partially fund the accusation of the five, Citadel and Stainless as acquisitions which were announced in September.

We also used some of the funds to pay related fees, expenses, and for general corp. purposes.

In mid-October, we announce the expiration and final result of the cash tender offer and consent solicitations to purchase the outstanding, approximately $315 million dollars of aggregate principle outstanding under the 8.875% notes. On October 1, the issue was made a cash payment for approximately $293 million of the aggregate principal amount of the notes that we're tender before the expiration of the tender offer.

As a result, approximately $22 million of the aggregate principle amount of the notes remains outstanding and we have issued an irrevocable notice to redeem all of those notes on November 16th in accordance with the provision of the [indenter]. Those that were -- that redemption will be funded from cash on hand currently on the balance sheet.

As such, the blended rate on the refinancing of 8.785% note approximately 5.75%, composed of $275 million of the 6.875% notes and $150 million of borrowing under credit facility at approximately 3.75%.

The committed cost of financing for the CCA is below transaction is 4% which will reduce Nexstar's overall weighted cost of borrowing, so approximately 5% from the current level of approximately 5.75%.

Outstanding debt as of September 30th consisted of approximately $397 million outstanding under the term loans and $55 million borrowings under the revolver. The second lien debt was outstanding at approximately $310 million dollars as of 9/30. Subsequently, reduced to $23 million amount and the 6.875% percent notes were $250 million, and as I mentioned previously, that has been increased to $525 million.

Totally interest expense in the third quarter was $16.9 million compared to $12.4 million for the same period in 2012. Cash interest expense for 2000--the actual cash interest expense was $16 million compared to $11.7 million for the same period of the previous year.

Nexstar's CapEx, $4.3 million and Q3 '12, compares to approximately $3.8 million the previous year. And it reflects additional station acquisitions, including construction and equipment cost for the new broadcasting and news facility in Memphis and other Fresno hub activities and our acceleration of local HD origination.

Our year to date CapEx is approximately $16.9 million and we see fiscal year '13 CapEx coming in at approximately $20 million. Additional CapEx during Q4 will be focus on our newly acquired station as well as relocation of the corporate offices within Dallas.

Looking further out, considering the 2013 announced transaction and addition of approximately 24 stations by early next year, we're budgeting CapEx for 2014, approximately $20 to $22 million. We believe our results again demonstrate we're successfully managing our M&A initiatives and disciplined acquisition criteria. The top lien and fixed in variable costs and the balance sheet or cash and remained focus on further actions to enhance value.

Also as noted a moment ago, we're paying our 4th dividend later this month or early in December, I should say. And, our intention is to review the dividend pay-out ratio and policy annually which suggests the boards will review it, either later this year or early in 2014.

At the present rate of $0.48 per share, we're allocating approximately $14 million to annual dividend payment, easily obtainable under our free cash flow parameters as currently mentioned.

Looking forward, the integration and realization of synergies from the stations acquired in late 2012 and early 2013. Reinforce our view on the synergies and the cash flows to be garnered from this transactions announced earlier this year.

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

Thanks very much, Tom. First and foremost, our goal is to deliver growing levels or free cash flow for our shareholders. We built a long term track record of success on this front and we remain confident and committed to identifying and acting on new opportunities that will create further value for our shareholders.

In this regard, we believe that we have the debt capacity combined with the target that capacity to do approximately $400 million of additional acquisitions should those opportunities meet our criteria without the issuance of additional equity and while maintaining what we believe to be prudent leverage levels.

There's a fair amount of this type of activity in our pipeline at this time and we will harvest any and all of it, provided we see a path to free cash flow accretion in your one or any acquisitions.

Another subject that investors are beginning to focus and call us on is 2014 political expectations. As political has been a revenue source that's thrown at a double digit clip every even number of year which we could see continuing next year as well. 2014, is expected to be robust for Nexstar based on our geography and the statewide races therein, as well as the entire House of Representatives turning over and one-third of the Senate being replaced on 2014.

Finally, we believe we're still in the early innings of closing the disparity with our distribution partner between what we're being paid as part of cable packages offered to consumers versus what are programming is worth based on viewership. Given that in the average market broadcast station account for about 35% or more of the aggregate viewing, whether collectively compensated is about 7% of what cable networks get paid in aggregate. In this regard, we have a number of retransmission consent negotiations currently underway.

In closing, let me assure you that our corporate operations and integration teams are energize by the planned, addition of the new 24 stations that we will close on in the coming months. And, we believe that our acquisition and operating plans combined with prudent management of our capital structure is a great formula for a sustained long-term growth and appreciation of shareholder value.

So, with that I'd like to thank you all for joining us on the call this morning. Now, let's open the call for Q&A to address your specific areas of interest. Lexie?

Thank you. (Operator Instructions). And we'll take that first question from John Janedis for UBS.

Perry, more of a big picture M&A question. You're (inaudible) activity broadly has obviously slowed just a little bit over the past couple of moths. Have you seen multiples [check] up or bid-ask spreads widen and has the potential regulation out there had an impact on the pace of deals?

In answer to your first question I would say in a word, no. And as I said earlier we have the member of M&A opportunity that are kind of in our pipeline in various stages of the development. And I would say, schematically, you know, we won't transact unless we can attract-- transact at accretive multiples and free cash flow accretion. And we think that is in the art of the possible, so I don't think we've seen multiples go up at all.

As far as potential regulatory rumination coming out of Washington, I don't think that it had a chilling effect on the deals per se. I just think when you look - and these deals take a certain amount of time to develop and then you know we have some at development that's new. And we have someone in development that we've been, you know, in development sense, 1st quarter of this year, that may come to fruition later, later in this quarter.

But I just think that in the national rhythm of things, you know, your acquire, you digest you continue to prospect and -- but I don't think there's anything in a correlation between, you know, propose discussions in Washington and in the deal market, per se. It certainly has affected our activity. We're as busy as we've ever been.

Okay, great things. Thanks. It's going to be a separate on advertising. We talked a couple quarters back about the potential for Obamacare money. Have the issues with the exchanges had an impact either way in our dollars.

And then separately, assuming they will be allowed to advertise, do you see e-cigarettes as a potentially big category for next year?

First on the AHCA money, you know, accumulatively, we have on the books a little over $1 million of money specifically to promote AHCA, primarily from the state exchanges, the state run exchanges. And that number has been growing. The problem with the website may have slow down, any money that might have come for this federal run exchange states in which we operate. But that that money is in advertising as far and we just see it growing as we get closer to implementation date in 2014.

E-cigarettes, we're going to spend a lot of time thinking about that. It is a category, I see I see it having a younger demographic and perhaps a late night audience, so I'm not sure that you're going to see a lot of those kinds of advertisement in prime time per se.

But I haven't though about it as being a big category yet. We believe that anything that you can legally buy and sell in this country, you are free to able to advertise but within the parameters of good taste and there are probably (inaudible) parts and programs that would be more introduced into that kind of advertising than others.

Thank you very much.

And we'll take our next question from Marci Ryvicker with Wells Fargo.

Thanks. I have a couple, the first, Tom and Perry, how does your core same station advertising look in Q4 compared to the up 5% and 6% that you talked about for the third quarter?

Marci, October is is in the books and it was the best month of the year in terms of core revenue growth versus the prior year. Not surprisingly October was the biggest political month last year, so the placement on that, that inventory coming back but I would tell you that it was core revenue in October on a same station basis was up double digits for us.

And are there any expectations to the rest of the quarter once you'd cycle to the political?

Yes, I think we will continue to see growth. I don't know that there will be double-digit growth in November and December, but I think when the quarter is said and doneme you'll see a single-digit growth along the lines of what we reported on our non-NBC stations in the third quarter.

Okay. And then any update on when CCA might close? Was this delayed because of the government shutdown?

I think it was hampered by the government shutdown. It's hard to say exactly what is -- what they're thinking but I would say from our perspective, it would be late this year or early next year. So just from a modeling perspective, I think, we've got it coming in now January 1.

Okay. And then the last question is, your e-MEDIA revenue was really strong this quarter. Can you just talk about what's driving this and maybe what we could expect going forward?

Sure. Well as I mentioned in my comments, there was about $4 million of per week termination payments included in that in e-MEDIA number. That is from long-term deals with our television stations where they basically pre-paid in order to get out of the servicing agreement that we have so that they could take it in-house, so that drove a fair amount of that.

Those agreements will affect in a negative way, revenue in future quarters to the tune of approximately $400,000 to $500, 000 a quarter going forward. But again, if you look at e-MEDIA revenue on a same station basis, it was up about 3% and if you look at e-MEDIA revenue, X Olympics from last year, it's up low double digits.

Great. Thank you so much.

Marci, just on a going forward basis, our digital media revenue for the fourth quarter for both October and for November and December is pacing mid-teens ahead of the prior year. And then obviously, if that's what we do in a same station basis, add in the acquisitions and add in the contribution from (inaudible), you'll see growth on a GAAP basis and substantially above that in the Q4.

Got it. Thank you.

We'll now take our next question from Michael Senno with Credit Suisse.

I just had a question in terms of your guidance for 550 and free cash the 2 years. Obviously, the retrans market has shifted a bit after the [CVS] negotiation. You have some upcoming agreements and I was just curious, what some of the puts and takes and swing factors that have built into your guidance in terms of where retrans could land and where ad revenue could land?

The retrans -- we have 27 agreements. They're up this year and, I think, for our internal modeling, we have assumed that we would renew those at current market rates which would be substantially increases from these agreements that were negotiated free. And in a couple of cases, 4 or 5 years ago.

I don't -- we haven't really updated that projection internally based on breaking news because, I think each negotiation will stand on it's and so I think, there is an up to what we are forecasting internally in our model and our budget for 2014.

As far as core ad revenue, again, we feel that we will continue on at a low single digit clip in 2014, I mean, that's our underlying assumption. I will note that oftentimes in heavy political years, because the supply-demand factor, you can see another point of growth just from average unit rate yield because the rising tide lifts all boats.

We've not forecasted that in but that certainly has happened in the past. So we still see core revenue growth that that's approximately 3% and then mid-teams growth in our digitial media revenues and obviously, political will grow at a double digit clip over 2012 on a same station basis and in the aggregate.

Thanks. And, well, just one other question in terms of Washington. You guys discussed early, you have a new FCC chairman and there's been lot more attention on this sector. I was just curious if you think that with the new Chair coming in, you expect any change and viewpoint as it pertains to JSAs.

I think it's probably too early to tell, but I wouldn't anticipate any -- there's been an open rule making proceedings since 2004 on TV JSAs. And I think it's pretty much still business as usual. We submit all of those agreements at the time of acquisitions.

So, when they -- the acquisitions are approved by the FCC. The -- those agreements and our intent enter into them are embedded in those assumptions. So, I really think that -- what I would expect -- we're still waiting the results of the 2010 quadrennial ownership review of all rules related to broadcast ownership.

And I have to embark on the 2014 quadrennial review. I think everything including the UHF discount, the National Ownership Cap, JSAs. I mean these should all be included in a very fulsome review of television ownership rules. There's not just one, there are many rules that we feel are anachronistic and out of date.

And we'll file those comments at the appropriate time. But, I do think that we'll take a while for the Chairman and his staff and the new Commissioner and his staff to be seated and get settled. And so, I don't anticipate much happening of a substantive nature until 2014.

Thanks.

We'll take our next question from Davis Hebert with Wells Fargo Securities. Your line is open at this time.

Sorry, that's on mute. I'm here. Just a few questions. First on the FOX agreement. Are you in discussions with extending that? I believe it expires at the end of this year.

Yes, we are. We have an agreement and principles to extend that agreement through 2016 and have hopes to extend it further. We'd agreed on the terms. We haven't announced anything publicly until the agreement is signed by both parties, but we have an agreement of principle at yield that that both parties are willing to enter into extend all of our FOX agreement out through -- the end of 2016 at this time.

Okay, that's good to hear. And then, on the M&A front, given the pipeline you have in front of you. Do you first see a scenario where you could potentially use equity to finance these transactions, or?

You know, as we said, I think that realistically with looking at what's in the pipeline that we could do at approximately $400 million, maybe a little bit more depending on the size of the target. You know keeping our leverage below 5.5 times on a max leverage basis and assuming they were free cash flow accretive that we would do acquisitions to that level of magnitude.

Beyond that, the potential would exist to issue equity. But, I would say that the way we would keep score is the deal pro-forma for the issuance of additional equity would still have to be accrete of on a free cash flow per share basis.

So, it raises a high bar. I wouldn't rule it out but I don't see it in the foreseeable future that we would issue equity. It would be a big deal. And it will obviously have to be attractive pro-forma for the issuance of that equity to our existing shareholders.

Okay, good enough. And then, just a housekeeping question, on the reach you point out in your press release. I think you have 14.6%, does that include or exclude the UHF discount?

There is no UHF discount embedded in that number. So, that is the -- that is the full monty if you will.

Okay, good stuff. And then last question from me. Aside from Time Warner Cable and CBS, that obviously took a lot of the headlines around retrans, but there's some other blackouts going on around the country. We had Time Warner cable and Journal, DISH and Media General, I think is still on going. Is there any read-through for the small markets?

Do you think the MVPDs are pushing back underneath certain terms because they think they have more weigh in this negotiations or how should we think about that for as it affects Nexstar?

We have 27 active discussions ongoing right now and there is no push back beyond the usual push back of the rate you're asking for are too high. We believe that content always wins in these discussions. So the leverage ultimately rests with the content holder and in our market, we produce 1,300 hours a week of local content and another approximate 100 hours a week of local lifestyle programming contents.

So I think that that is the lever and the tenure and the tone of the negotiations is no different than it is at this time every year. So I don't see any read-through there of any change of decision. Again, I believe that the local content holders and the national content holders ultimately have the upper hand on the distribution partners.

Okay, thank you.

And we'll take our next question from Tracy Young with Evercore.

So one house keeping question, if you could just tell us how to back out the one-time items that you mentioned earlier in your conversation.

And the other questions for you, Perry is, are the local broadcasters talking about Aereo and how should we be thinking about that? Thanks.

Tracy, I'll answer the first question and Tom can answer the -- your last question first. Local broadcasters only talk about Aereo at investor conferences and on earnings calls. So we spend very little time talking about it internally. I don't want to say much more than that because we are a party to a law suit against Aereo that was filed in Salt Lake City with our ABC and CW stations two week ago. So I really can't comment much more on it other than that.

And on the expend side, there were approximately $900,000 in transaction-related expenses in corporate overhead in Q3. There is approximately -- that's $800,000 in corporate overhead, a $100,000 in station operating expense associated with severance from ongoing station consolidation. And then moving forward from a revenue perspective on e-MEDIA is approximately $450,000 a quarter in reduced revenue.

Great, thank you very much.

And we'll take our next question come Edward Atorino with Benchmark

It was already answered. I was going ask about the outlook for TV, so you've that one, thank you.

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

Thank you, good morning. A couple questions Perry, could you flash out the categories a little bit more and talk about what (inaudible) and some of the other larger categories were in terms of percentage change on a same station basis as well as those categories that might have been down?

Sure, I think from a top 10 category report, we saw fast food and cable and other media and department stores, retail and attorneys were all up. Insurance in healthcare, schools and furniture we're down, but down slightly maybe one or two points.

Again if you just -- at [Auto], we were up slightly over the prior year. If you look the amount of -- if you exclude the Auto revenue that was in Olympics last year, and then compare the category against them. And because Auto was a very heavy Olympic advertiser for us last year.

You know, we were up mid-single digit amounts in automotive and that's been (inaudible) like what most of the year has looked liked for us.

Okay. And any regional or meaningful regional variances areas in our country that are hot and other that might not be quite so hot.

Well, as it relates to the Auto category, our -- we're seeing a little bit of weakness in the Southwest, just relating to Gulf States Toyota, budget's not returning but that is very geo-specific. Toyota and the rest of country is generally pretty healthy.

Our -- most of the other Japanese nameplates are up substantially. Ford continues to bellwether for us and that is up for the quarter, as it relates to automotive. But, beyond that, I mean the only differences I would suggest is as Tom reported earlier, if you look at core ad growth. Ex-NBC affiliates, it was up mid-single digits. And if you look at core ad growth, including the NBC affiliates, it was down about a point.

So, that is a approximately $5.5 million of Olympic revenue in the prior year on air. And about $500,000 that went to our digital media sites.

Great. The last one come back to the commission and the new chairman. So what's realistic thoughts, not that they are unrealistic, Perry, but realistic thoughts about time table for spectrum auction and maybe if you could just recap your point of view on whether or not Nexstar would be a likely participant.

Sure. The commission is endeavoring to get this auction off in 2014. I believe that it will either happen in 2014 or perhaps 2015. It is such a multi-variable equation and I don't envy their task in trying to get it all organized and get it off the ground.

And I think that our primary channels are likely not -- we're note -- like do not add the spectrum into the auction with our primary channels across the board. We do have a number of Class As and low-powers that take up frequency that quite frankly, we could put that signal on and in a number of cases, we do put it on a D2 of one our primary channels and achieve the same, if not better coverage results.

So there is some real estate there, we would consider -- I mean, I obviously we will add -- we will look at it actively but I don't imagine that we will be a major participant, at least, this time around.

Great, thanks very much Perry.

And we'll take our next question from Doug Arthur with Evercore.

No. My question was on spectrum so I think -- were pretty covered there, thanks.

And we'll take a follow up question from Davis Seder with Wells Fargo Securities.

Hi, yes. Thanks for taking a follow-up. Tom, I apologize, you already covered this because there are a lot moving of parts in the balance sheet. But the revolver balance at 9/30 is $55 million. How do you plan to manage that balance going forward? Because I think I recall from the bond, the bond deal maybe you had some incremental borrowing coming from the upcoming acquisition as well.

I appreciate that. A lot of this is timing, Davis. Just to kind of set things straight, the bonds closed on October 1, so the very next day. If you look at the pro-forma balance sheet as of -- if you pro-forma 9/30 for the bond deal and for the acquisitions, you end up with $547 million of term loans, nothing outstanding under the revolver, $525 million of bonds at about $60 million of cash. You then will have --

Okay.

You then have kind of shorter than $80 million of remaining commitments through Citadel, Stainless, and CCA. We have a $184 million undrawn term loan A, and we have now $105 million revolver and $60 million of cash. So in essence, we have $280 million of commitments and we've got $340 million of sources.

Okay. All right, so when it's ...

It's fully financed.

Okay, so when it's all said and done, we'll see that revolver revert back to 0 essentially, undrawn.

It's 0 right now.

0 right now, got it. Okay. All right, thank you.

It's all the activities subsequent to September 30th.

Okay, got it. Appreciate it.

Yes.

We'll take our next question from John Kornreich with JK Media.

Yes, a couple of questions. Can you remind us, please, the dates for renewals for ABC, NBC, CBS.

Sure, John. As I mentioned, FOX runs through 2016 as do the CW and MyNetwork. NBC runs through the end of 2014, and that will be next up on our list. And then ABC is through the end of 2017, and CBS is through the end of 2018.

Okay. According to the P&L statement in the first page, retrans fee revenue gross is running a little over 100 million; call it 100 million. Right now, what is your estimated, or what is your gross margin on that 100 million. And if I look out through renewals which is another five years or so, five years through CBS, what do you think it will get down to.

I think that we have said that. And all those look back at 2012, Tom can answer the current gross margin question with -- I think we said in 2012, retrans was approximately a 90-margin business for us and if kind of fast forward through the next 5 years, which would take us at 2017 or somewhere thereabout. Retrans revenue with cost certainty and expected growth on top line would be somewhere in the low 60-margin business, potentially 65, at 60-65 margin for us at that point.

And because the payments to the networks escalate over time, but we saw all the revenue but we do expect that the contribution, dollar contribution, five years hence, will be at least 50%, if not, more than what we had in 2012 in terms of that net to our bottom line. We expect that those hours will grow by 50% even at the margin on those dollars shrinks.

And keep in your mind, John, that about 12% of our retrans revenue comes from non-big four affiliates which is not subjects to a tribute back to the network.

But you had a 90% margin in 2012, I mean, I don't see why it would have changed in 2013, nothing came up. It would have been 90 and '13 or so, and right?

Sure thing. They came up and obviously we acquired stations that had already begun paying. So I would tell you right now, our margin right now is probably in the mid to high 70s.

Okay. Okay. I don't know if this was addressed or not but I don't understand this, net revenue up 40%, BCF up 17 -- that that -- which means that expenses were 58% versus 40% net revenue gain.

Well, first of all, it's the lost of political between 12 and 13, and you're right. We're paying more in network affiliation fees.

Okay. But on the other hand, your -- I mean your retransmission fees as reported is up 70%. That would have been a margin enhancer. There's quote a difference.

Margin enhancer, when you consider that some of the stations were buying had already begun paying retransmission.

Right.

And the other thing, John, is there acquisitions in here as well. So, these are not same ...

I know, but it's as reported. With acquisitions, you reported 40% revenue and with acquisitions, you reported in there 60% increase in expenses.

It's still apples for apple even if that's -- in both cases, the acquisitions are included.

Well, it's apples for apples. And you're right, we have more affiliated expense and we have less political revenue.

Last thing. I understand and the political revenue is very profitable. I -- and that we're down 90%. When you said that core revenue was up 5%, 6% without the -- I just want to make sure I understand this. You're talking about core ad revenue, not core -- it's not about total revenue.

That is it's local and national revenue is our definition of what we call core.

And that was up 5, 6 without the Olympics?

That is correct.

Okay, thanks so much. That's it.

Thank you, John.

And we'll take a follow up question from Marci Ryvicker with Wells Fargo.

Thank you. Really quickly, the raise in your free cash flow guides for 2014 and 2015. Where are the incremental synergies coming from?

Well, it's really just two things. It's the -- and I'm assuming you're going the 300 to 330.

Yes.

It's the Stainless and Citadel acquisition and the refinancing.

Got it, thank you.

It appears there are no further questions at this time. Mr. Sook, I'd like to turn the conference back to you for any additional closing remarks.

Thank you. Very quickly, just thank you all for joining us here today. We look forward to reporting our 4th Quarter result in Q1 of 2014. Happy holidays and obviously as always, if you have further questions, please give Tom or I a call. Thanks again. Bye now.

This concluded today's conference. We thank you for your participation.