Sinclair Inc (SBGI) 2013 Q4 法說會逐字稿

Greetings and welcome to the Sinclair Broadcast Group fourth-quarter 2013 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. David Amy, Executive Vice President and Chief Financial Officer. Thank you, Mr. Amy. You may begin.

Thank you, operator, and good morning, everyone. Participating on the call today with me are David Smith, President and CEO; Steve Marks, Chief Operating Officer of Sinclair Television Group; and Lucy Rutishauser, Senior Vice President, Corporate Finance and Treasurer; and Steve Pruett, another Chief Officer of our Chesapeake Television Group.

Before we begin, Lucy will make our forward-looking statement disclaimer.

Thank you, Dave. Good morning, everyone.

Certain matters discussed on this call may include forward-looking statements regarding, among other things, future operating results. Such statements are subject to a number of risks and uncertainties.

Actual results in the future could differ from those described in the forward-looking statements as a result of various important factors. Such factors have been set forth in the Company's most recent reports on Forms 10-Q, 10-K and 8-K, as filed with the SEC and included in our fourth-quarter earnings release. The Company undertakes no obligation to update these forward-looking statements.

The Company uses its website as a key source of Company information, which can be accessed at www.SBGI.net. In accordance with Regulation FD, this call is being made available to public.

A webcast replay will be available on our website later today and will remain available until our next quarterly earnings release. Redistribution of this call is prohibited without the express written consent of the Company.

Included on the call will be a discussion of non-GAAP financial measures, specifically television broadcast cash flow, EBITDA, free cash flow, and leverage. These metrics are not meant to replace GAAP measurements, but are provided as supplemental detail to assist the public in their analysis and valuation of our Company. A reconciliation of the non-GAAP financial measures to the GAAP measures in our financial statements is provided on our website under Investor Information, reports and filings.

Thank you, Lucy. This was a solid quarter for the Company, but before we go through the results, let me review some of the activities that have taken place since our last earnings call.

On October 1, we closed on the purchase of KDBC, the CBS affiliate in El Paso, Texas, for $21.4 million. On October 31, we closed on the purchase of the non-licensed assets of WPFO, the Fox affiliate in Portland, Maine, for $13.6 million, and entered into an agreement to provide sales and other services.

On November 21, we closed on the purchase of the non-licensed assets of KRNV, the NBC affiliate in Reno, Nevada, and KENV, its simulcast in the Salt Lake City DMA for $26 million, and entered into an agreement to provide sales and other services to the station.

On November 22, we closed on the acquisition of the 18 Barrington television stations for $370 million, and entered into agreements to operate or provide sales and other services to another six stations. As part of that transaction, we sold our Fox station, WSYT, and assigned our local marketing agreement and purchase options on WNYS, the MyNetwork affiliate, both in Syracuse, New York, to Bristlecone Broadcasting.

In addition, we sold our Fox affiliate, WYZZ, in Peoria, Illinois, to Cunningham Broadcasting Corporation. The total purchase price for the sales of the stations was $37 million, less working capital adjustments.

This week we entered into an agreement in principle for a $500,000 investment purchasing Series A Preferred Units of Timeline Labs, and anticipate utilizing their products on 15 of our news producing stations. Timeline specializes in proprietary tools that discover, measure, and display trending social content in real-time in such a way as to allow these items to be incorporated into live newscasts and shows.

Now, turning to our results. Net broadcast revenues for the fourth quarter were $382.3 million, an increase of 33.2%, or $95.2 million higher than fourth-quarter 2012. And higher than our guidance, as the Barrington acquisition closed a week earlier than forecast.

Same-station net broadcast revenues, excluding $128.4 million from the acquisitions, were up 7.7% when excluding $54.1 million in 2012 political revenues. Including political, same-station revenues were down 11.6%, and within our Q4 guidance. Growth not only came from the acquisitions, but also from our three core primary revenue sources: core time sales, retransmission fees, and digital interactive.

On a full-year basis net broadcast revenues were a record-breaking $1.2175 billion, up 32.3%. Excluding the acquisitions on a same-station basis, with 2013 being an odd year with the absence of political, net broadcast revenues were down 2.2%. On a pro forma basis, assuming all closed and pending station acquisitions and station sales are in our results for the full-year 2013, our net broadcast revenues for 2013, including synergies, would have been approximately $1.8 billion.

Television operating expenses in the fourth quarter defined as station production and station SG&A expenses, before barter, were $198.4 million, up 62.3%, or $76.1 million, from fourth quarter last year. Excluding $72 million related to the acquisitions and $1 million of stock-based compensation, same-station expenses were up $3.5 million, or 2.9%.

The increase versus last year was due primarily to higher reverse retransmission fees and compensation expense, offset in part by lower cost of sales commissions. On a full-year basis, TV operating expenses on a same-station basis were up 8.2%, also due to higher reverse retrans fees and compensation.

Corporate overhead in the quarter was $14.3 million, up $6.1 million versus the same period last year. $1.9 million of the increase relates to one-time acquisition costs. The remainder is due to increased staffing resulting in higher salaries and benefits, $2.3 million, and other expenses related to the acquisition of 63 television stations during the year. Corporate overhead for the full year was up 57.9% for the reasons just described.

Television broadcast cash flow, or BCF, in the quarter was $165.8 million, up $15.9 million, or 10.6%, from last year's fourth-quarter BCF. The broadcast cash flow margin on net broadcast revenues for the quarter was 43.4%.

The acquisitions contributed $54.9 million of BCF in the quarter. For the year, BCF was $507.7 million, an increase of 17.1%, or $74.3 million.

EBITDA was $155.2 million in the quarter, up $10.3 million, or 7.1% higher than the same period last year. The EBITDA margin on total revenues was 36.3% for the quarter. For the year, EBITDA was $470.8 million, an increase of 14.2%, or $58.5 million.

On a pro-forma basis, assuming all closed and pending acquisitions and sales are in our results for the full-year 2013, our EBITDA for the year would have been approximately $692 million. Net interest expense for the quarter was $39.8 million, up $3.4 million versus fourth quarter last year. The increase was due primarily to acquisition financings.

Our weighted average cost of debt for the Company is approximately 5.3%, with our highest cost coming from an outstanding $237.5 million of 8.375 senior unsecured notes, which are callable later this year. Included in the results are one-time items related to the refinancing and sale of the Syracuse station.

In the fourth quarter, we recognized a loss on extinguishment of debt of $43.1 million, related to the call of $500 million of 9.25% senior secured second-lien notes due 2017, and a gain of $1 million on the conversion of $5.4 million, 3% convertible senior notes due 2027. We also recognized a $3.3-million loss on the sale of our Fox station in Syracuse, the sale of which was required as part of the Barrington transaction.

Diluted earnings per share on 100.2 million weighted average common shares was $0.02 in the quarter. Excluding the $42.1-million loss on extinguishment of debt, we would have had diluted earnings per share of $0.29, as compared to $0.72 in the same period last year.

For the year, diluted EPS was $0.78 and $1.18, excluding $58.2 million losses on extinguishment of debt. The acquisitions, net of their financing costs, contributed $0.14 of diluted EPS in the quarter and $0.27 for the year.

We generated $101.1 million of free cash flow in the quarter, of which $14.8 million was distributed to shareholders. For the full-year 2013, we generated $263.4 million of free cash flow and distributed $56.8 million to shareholders.

Over the past year, we converted 55.9% of our EBITDA into free cash. We produced an 8.5% after-tax free cash flow yield on our market cap and paid a 1.7% annualized dividend yield based on our yearend closing price of $35.73.

On a pro-forma basis, for all closed and announced transactions, our current expectation for 2014/2015 blended free cash flow is approximately $420 million. This is slightly lower than our previous expectation, due to higher CapEx and cash taxes than we previously indicated.

So now with that, Lucy will take you through the balance sheet and cash-flow highlights.

Thank you, Dave. So we had a lot of financing activity take place in the fourth quarter, so let me try to walk you through it.

In October, we closed on a private offering of $350 million senior unsecured notes due 2021, which were priced at 100% of their par value and bear interest at a rate of 6.375%. The net proceeds from the notes along with bank debt was used to redeem in full the $500 million par value of the 9.25% senior secured second-lien notes due 2017.

As Dave mentioned, we recognized a $43.1-million loss in the fourth quarter on the redemption of the notes, which included a $25 million make-whole premium and the write-off of the unamortized deferred financing cost and original issue discount. The redemption of the 9.25% notes with lower cost debt will result in an increase of about $0.11 of after-tax free cash flow per share on an annualized basis.

In October we drew the $445 million of incremental term loan A that was raised in May of this past year, and that was used to fund the November closing of the Barrington stations and other fourth-quarter acquisitions. In October, we raised $450 million of incremental term loans, consisting of $250 million of term B loans maturing 2020, and $200 million delayed draw term loan A, maturing 2018. And that has not been drawn yet.

We also obtained an additional $57.5 million of capacity under our revolving credit agreement maturing 2018. The term B loans were used in combination with the $350 million 6.375% notes to redeem the 9.25% notes.

In October, holders of all outstanding $5.4 million original principal value of 3% convertible senior notes due 2027 were converted by the holders and settled for approximately $10.5 million in cash, pursuant to the indenture. In the fourth quarter, we recorded a gain of approximately $1 million on the settlement of the notes.

At December 31, total debt was $3.034 billion. Included in that amount was $88.5 million of non-recourse non-guaranteed VIE and non-wholly owned subsidiary debt that we are required to consolidate on our books.

We ended the quarter with $280.1 million of cash on-hand and have available the full $157.5 million under the revolving commitments and the $200 million undrawn term loan A. So approximately $600 million of liquidity before our 2014 free cash flow generation.

Capital expenditures in the fourth quarter were $16.6 million. For the year, CapEx was $45.4 million.

Now, as Dave mentioned, our 2014 CapEx forecast is higher than previously indicated and is now expected to be approximately $69 million. Of this, almost $20 million relates to Barrington, and once we closed those stations and had the opportunity to get in them and evaluate the condition of the facilities, we found that the stations were in need of more investment than originally anticipated.

Our 2014 forecast also includes $7 million related to the continuing development of HD news, and master control upgrades in our mid-sized markets, such as Oklahoma City; and $9 million towards consolidating studio and building operations in markets like San Antonio and El Paso.

Cash programming payments in the fourth quarter were $23 million, and $89.5 million for the year. For 2014, we are forecasting programming payments of $92.7 million. Of the $263.4 million of free cash flow generated in 2013, and after $21.6 million in taxes, $59 million was used to pay down debt, $56.8 million was paid in dividends to the shareholders, and the remainder was used for working capital and station acquisitions.

Total net leverage through the holding Company at quarter end was 4.61 times, and this excludes the VIE and nonrecourse, non-guaranteed debt and is net of cash. The first lien indebtedness ratio was 1.75 times on a covenant of 3.75 times.

The total indebtedness ratio through the television operating Company was 4.69 times on a covenant of 7, and interest coverage was 3.6 times on a covenant of 1.15 times. Assuming all announced transactions, including the Allbritton and New Age stations plus expected synergies, our 2012, 2013 pro forma total net leverage was approximately 4.8 times on a blended two-year basis.

For 2014, we expect total net leverage for the 12-month period to be approximately 3.75 times, and with all pending transactions to be approximately 4.55 times.

Steve Marks will now take you through our operating performance.

Thank you, Lucy, and good morning, everybody. For the fourth quarter on a same-station basis, total net broadcast revenues, excluding political, were up 7.7%. Political revenues were only $6.7 million, as compared to $54.1 million in the fourth quarter of 2012.

On a same-station basis, excluding political revenues, local net broadcast revenues were 10.8%. Local revenues represented 78% of our total broadcast revenues for the quarter. Including our newly acquired stations, local broadcast revenues for the fourth quarter were up 58.1% including political, and 64.4% excluding political.

National broadcast revenue representing approximately 22% of our broadcast revenues, on a same-station basis, excluding political, were down 3.1% due to accounts shifting to local. Including our newly acquired stations and the impact of political, national broadcast revenues were down 14.2%.

On a same-station basis the automotive category was up 5.4% in the quarter. Our fastest growing categories in addition to automotive were services, medical, grocery, entertainment, and home products.

Retail, direct response, telecommunications, and restaurants were soft. For the year, automotive which represented 25.1% of our same-station time sales was up 6.9%.

Turning to our outlook for first quarter of 2014, we are expecting net broadcast revenues to be approximately $366.8 million to $371.2 million, up 45% to 46.8% as compared to first quarter of 2013. This assumes $4.2 million of political versus $0.9 million in the same period last year.

Excluding the acquisitions, same-station net broadcast revenues are expected to be up 1.8% to 3.6%, and up 0.9% to 2.6% when excluding political. While these numbers are decent, the severe weather across the east coast, northeast, midwest, and now the northwest as well as the southeast has slowed advertising spending in many of our markets.

On the positive, February is benefiting from $8.2 million of incremental Super Bowl revenue, which aired on our 31 Fox affiliates, as compared to the $2.5 million last year, when it aired on our 11 CBS television stations.

As the number three NBC affiliated group in the country, we are also pacing for an additional $3.6 million of Olympic revenues, which is a revenue stream that we never participated in before, but are now able to as a result of the acquisitions. This is important in understanding the tendency of the Olympics, as there is distortion of revenue being placed on NBC stations during that two-week term. And so much so that the February Nielsen book by many will be discounted in value by advertisers.

As no surprise, those categories dependent on store traffic, such as retail, fast food, and restaurants as well as direct response, are expected to be weaker in the first quarter as a result of the severe weather through the first five weeks of the quarter.

Same-station automotive spending is expected to be up mid single-digit percents. Other categories expected to do well are services, particularly the insurance segment, medical, and media.

For the year, net broadcast revenues are expected to be approximately $1.675 billion to $1.695 billion, up 37.6% to 39.2% when compared to 2013, including approximately $122.5 million of political revenues, which as we previously guided, is flat to 2010 same-station levels.

Same-station net broadcast revenues, excluding political, are expected to be up 1.5% to 3.2%. These estimates do not include Allbritton or New Age, which are still pending.

Dave Amy will now take you through the remaining forecast. Thank you.

Thank you, Steve. On the expense side, we are forecasting TV production and SG&A expenses in the first quarter to be approximately $217 million, including $2.4 million of trade expense, which was previously forecasted in barter expense on a same-station basis. Expenses are expected to be up 8% in the first quarter and 8.6% for the year.

Excluding reverse retrans, expenses are forecasted to be up 4.8% in the quarter and 6.1% for the year on higher compensation, health insurance, plus additional staffing for the expansion of news in 11 of our markets, 5 of which are JSA markets. And we do not include any benefits for increased revenues in the first quarter for those expansions.

We expect EBITDA in the first quarter to be approximately $120.2 million to $124.1 million, an increase of 25.3% to 29.9%. For the year, EBITDA is expected to be $672.6 million to $690.6 million, an increase of 42.9% to 46.7% compared to 2013.

Including all pending transactions for the full year, pro-forma EBITDA would be approximately $785 million to $805 million. Based on our guidance, free cash flow in the quarter is expected to be in the high $60 million range, and $380 million to $390 million for the year on a reported basis.

So with that, I would like to open it up for questions.

Thank you. We will now be conducting a question-and-answer session.

(Operator Instructions)

Our first question comes from Alexia Quadrani from JPMorgan.

First off, if you could comment if the FCC decides to unwind the JSA. What your options are from there? And then a question on your commentary about auto, if you could give us a sense of how auto is pacing, ex the Super Bowl benefit.

Hi, Alexia. As far as your first part of your question, there's a lot of discussion in terms of rumors going on about what the FCC is anticipating or proposing regarding JSAs. As far as what we reported, we have about 20% of our revenue has been reported as coming in from our JSA relationships. And from our point of view, they're important relationships, and we don't, at this point, have a position that would, based on -- there's no ruling to describe to us what expectations are.

So it would just be a hypothetical discussion. But we do not anticipate any loss of value in that regard. On the auto, Steve, maybe you could take that one.

Sure, Dave. I think the automotive category is very encouraging for us in first quarter, given the weather circumstances. As we said in our script, the pace is mid single digits, and that is right on top of where we finished fourth quarter, actually.

So when you take into account the severe weather conditions in first quarter, I think it's very encouraging that we continue to pace in mid single-digit form in the auto category, which is so critical. And I think you could expect that category to continue to flourish. Given the weather conditions in first quarter, I think it's a pretty impressive pace number that we're putting up in that category.

Okay. Thank you. And a follow-up, if I may, about the cash. You got growing cash balance there. If you -- if M&A continued to take a bit of a pause, would you -- maybe you can update us on the priority of use of cash. Would you consider a special dividend?

We're holding off -- we just announced that the $0.15 this morning. What we would intend to do normally, in a normal circumstance is to increase that dividend over time. But for now, of course, we're holding off cash, waiting for the acquisitions as you mentioned. Don't expect to see any delay in terms or cancellation in terms of our acquisitions. So we fully intend to be closing on the Allbritton and the New Age deals here later on either in the second quarter, so don't know that we would be reflecting on or considering a special dividend at all.

But what I think you will see as we build our free cash flows is that over time, that $0.15 per share should start to increase. And what the Board likes to do is provide clarity and consistency to the market as far as what our dividends can be expected to be.

Thank you very much.

Our next question comes from Marci Ryvicker with Wells Fargo. Please proceed with your question.

Thank you, I have a couple. The first question is, I don't know if it's for Lucy or Dave, but the Q1 guide came in pretty light. I think $20 million less than EBITDA, $10 million lighter in revenue, $10 million heavier in expenses, yet when we look apples to apples on your full-year guide it's in line.

The market's having trouble reconciling this. We don't know what happened, what's going on in Q1 on either of those lines. And then how do we get comfortable and how are you comfortable with your full-year guide for both revenue and expenses?

So Marci, let me take Q1 here. So you have a couple things happening. One, as Steve mentioned, is the weather-related that's pounded us for January and the first two weeks here in February. So you have that happening on the revenue side.

On the expense side, when you back out the reverse retrans, we're talking about just under 5% expense growth, but remember we have a couple things happening there. One is the higher sales commissions on the higher revenue in the first quarter, so that's going to drive the expenses.

The other thing is we have the news expansion. So we talked about 11 news expansions for the year; 6 of those are going to hit in the first quarter. And as Dave mentioned, you're not going to see the corresponding revenue come in from those.

So when you back out sales commissions, you back out the news expansion, you're really talking more of 2% to 3% core expense growth. And you're going to have that news expansion take place throughout the year. Since those are coming in this year, that will be a new expense.

So look, we gave you a full-year guidance. We recognize that the modeling is complex with all the acquisitions. We're trying to help the market get some transparency here. This is our first time to ever even provide a full-year revenue guidance.

We feel comfortable with what we've put out there, otherwise we wouldn't have put a number out. So the only thing that will impact that would be the closing of New Age and Allbritton, which are not in those numbers at this point.

The one thing you guys have not talked about for the first time is core time sales, either in the fourth quarter or the first quarter. Can you give us color on core time sales, either including or excluding political for both?

Yes, fourth quarter the core time sales, those were up in the fourth quarter, both including and excluding political. For the first quarter, the core is pacing slightly down, and again, that's really attributable to the weather events.

So for the fourth quarter, was it up low singles, mid singles, any quantification?

We'd be looking probably more like the low single digits.

Okay. And then have you had any communication from the FCC regarding Allbritton and New Age? Do you -- are they talking about unwinding any of the JSAs or SSAs in those two acquisitions?

No, we have not heard anything to that effect at all.

And you still -- I think you still believe it will close sometime in Q2, is that what you said, Dave?

That's what we anticipate. The pacing item that we're involved in right now is just getting through some -- a second round with the DoJ here, and that's pretty much coming to a close. We would expect it should still be in the second quarter.

And then the last question I have, any thought about a share repurchase authorization, given where your stock price is right now? And I know you have these pending deals, but is that something that you would consider given that you're at the cap at this point?

Well, I think Dave talked about we're committed to the dividend and growing that. But I think when you start to look at where the analyst target prices are on the Company averaging in the low $40, you're talking about a 30% -- over a 30% discount on the stock right now, which is a huge over-reaction to the JSA conversation that's taking place.

So we can't ignore that. That's a lot of real value that investors are leaving on the table. So we do need to seriously start looking at potentially buying shares in, and we do have an authorization that's out there for just over $100 million that we could use.

Thank you.

Our next question comes from Aaron Watts with Deutsche Bank. Please proceed with your question.

Hello, everyone. One question on some of the operating performance, variance between the bigger markets and some of the smaller markets you've segmented out. And maybe that ties to another question, which is just a little more detail on what you're seeing and the differences between the local ad front and the national ad front.

Well, I think local is pacing stronger than national right now. There have been some account shifts, but that takes place year in, year out.

I think national, quite frankly, started a little bit late in 2014. The way the holidays fell in December, it gave Madison Avenue an excuse to pretty much take an extra week off. It's just one of those calendar events that took place, and essentially, it made the national business for first-quarter 2014, for all intents and purposes, a 12-week quarter instead of a 13-week quarter and I think that's part of the reason why national is a little bit softer for first-quarter 2014.

I would say, though, because of, again -- and you guys are living it, for those who are on the East Coast, the weather has been absolutely brutal. And advertisers on a national level, as well as a local level, are rearranging their dollars, holding onto it until the weather changes. And we just have not had a break on the weather.

So I do believe national got off to a little bit of a slower start, just because of the way the calendar fell. And our local business has been pretty good.

Okay. And on the weather issues that you had, are you really seeing some differentiation in the markets you have that haven't had the severe weather versus the ones that have? Is there a pretty big variance there?

Yes, I think when you look at out on the West Coast and our Texas stations, we're hitting home runs in Seattle, hitting a huge home run in San Antonio, which is our biggest billing market and has the great fortune of having both the Olympics and the Super Bowl in San Antonio right now. And again, it's critical for us because it is our biggest billing market. Where we're not having weather events, we are doing very well.

Okay. Thank you.

Thank you.

Our next question comes from David Bank with RBC Capital. Please proceed with your question.

Thank you, two questions. The first is could you comment on your reaction to the NFL on Thursday package from CBS, and what you think it does for potential revenues. Is it in your guidance? Does it represent potential upside? Does is cannibalize potentially other revenues?

The second question is more for David Smith specifically. Can you talk about what you anticipate for a time line for a potential standard change for ATFC. Where do you think we are in this process? What has to happen at this point? Thank you.

I think as far as the football question, any time you could get football on your air waves, it's a benefit to do so. So we're excited to have the additional games on our CBS stations. We have some outstanding CBS properties.

Typically with football as well as most other events, it doesn't necessarily mean that the markets are going to garner more cash. What will happen in these scenarios is that the CBS station will steal revenue shares from their competition in the marketplace by having the benefit of these eight additional games. So you could expect the CBS stations to grow revenue share, and clearly we anticipate that.

I don't believe because of the lateness of this call and getting the CBS football games, the additional ones, that that's necessarily in our guidance. But we do expect that in fourth quarter, we'll pick up revenue share in our CBS stations by benefiting with these eight additional games.

On the flip side, though, do you think you lose share? I'm trying to figure on a net basis, is this additive or neutral or is it negative?

I think from a revenue share basis, again, the market's not necessarily going to grow. The market stays the same, and we have better programming. We're going to steal revenue share from our competition in these individual marketplaces where we're CBS.

Okay.

David, I think the answer to the last part of the question is we're probably a couple years out. I think you're going to see in the near term here, probably an effort to move in the direction of starting to create and prototype what we would characterize as a final [sign for a] standard. A standard of probably, in some degrees, in some conjunction with the ATSC possibly; if not it will be done independent of the ATSC in some point in time probably in the future merged back to the ATSC.

We're of the view now that it's time to get going and get the technology side of it down on a piece of paper so that it's buildable. My sense is, my broader sense is that there is a broad -- a wide sense of support now in the industry, the world I think to some degree. The broadcast world in this country has recognized the necessity, the absolute necessity of portability and being able to talk to every device in the marketplace for all the obvious reasons.

And I think while it's a slow, it's an oftentimes painful process to get people to the conclusion that we need to be able to compete on all platforms, but nevertheless is happening. And our view is we'll get this done.

Okay. Thank you.

Our next question comes from Tracy Young with Evercore. Please proceed with your question.

Hi. I have a couple of clarification questions. First, is there any way you can give us the core decline in January on a reported basis?

Also, in your guidance for first-quarter 2014, you gave acquisition revenues of $109.3 million. How much of that was closures related to the deals that you did in the fourth quarter?

Lastly, you gave free cash flow guidance of $420 million. Are those -- is that just related to the stations you've closed? Thank you.

Okay. A lot of questions there, Tracy. I think the acquisition number, I think we'll probably have to do offline, because I don't have that here with me. The $420 million for the free cash flow, so that was a blended 2014, 2015 pro forma number for all closed and announced acquisitions.

Okay. Lastly, can you provide the core decline for January?

No, not at this point, Tracy.

Okay. Thank you.

Our next question comes from Davis Hebert with Wells Fargo. Please proceed with your question.

Good morning, everyone. Thank you for taking the questions. First question is on political. You gave full-year expectations for 2014. Just curious if you could provide an apples-to-apples number for 2012.

Yes, give us a second here, David.

Sure. In the meantime, curious your thoughts around political races this year and how that might compare to 2012.

We're in so many markets, it's hard to avoid the hot races. We're going to be bountiful, a lot of strategic markets for us, Florida, Michigan, Iowa, right on down the road.

We're already starting to see dollars pouring in from Texas. They have a primary going on in March. So we're very fortunate, and there's been a lot of number of articles written about our Company and how strategically placed we are for political in 2014.

So we put our guidance out there, and first quarter, we're right on top of our number in terms of political. So that's one category that clearly is going well as the year starts for 2014. I think it's going to be a great year for us in political, as the year goes forward.

Okay. So David, so your question, and let me clarify a couple things. So on an as-reported basis for 2014 for everything that we currently have closed, we estimated $122 million of political, and that would have been flat to 2010. On a pro forma basis, that number with Allbritton and New Age would be more like $140 million.

For 2012, just for what we've closed, the number would have been $190 million. Pro forma, though, for Allbritton and New Age, the number would be more like $225 million.

Okay. Got it. And my next question is around the account shifts from, I think it was national to local. Just curious what drives that. Is it some internal definition, or maybe if you could provide a little more color there.

There are a couple of retail accounts that are fairly significant for a national basis that went local. And again, I down-play it because these account shifts happen all the time, and really at the end of the day, we look at the bottom line. I don't think either category, whether it be local or national, is cause for concern.

I think like I said, I think we're off to a pretty good start, given the weather conditions and the fact that national started a little bit late this year. I clearly think that we're off to a good start, and our revenue shares, when the audits come out in first quarter will reflect that. Our performance in first quarter is exceptional in terms of revenue share.

Okay. That's helpful. Thank you.

Last question is on the balance sheet, wanted to confirm you guys still need the funding for Allbritton. And is that the only moving part at this point?

Yes, so when you think about the liquidity that we have, David, so we talked about we have the $200 million delay draw. We have just under $300 million of cash on hand, plus the revolver available to us. Allbritton and New Age combined is about $1.1 billion that we need to fund. So you're talking $500 million to $600 million that we would still need to raise in the marketplace to fund all that.

Okay. Perfect. Thank you.

Our next question comes from Lance Vitanza with CRT Capital. Please proceed with your question.

Hi. Thank you. First, I wanted to clarify, the EBITDA guidance for 2014 that you called out earlier on the call, I think you said $672.6 million to $690.6 million. If that's right, I wanted to get a sense to make sure I know what's in that guidance with respect to the pending acquisitions.

So Allbritton and New Age are not in any of our 2014 guidance.

Okay. Is it possible to provide some ballpark on how much EBITDA those two acquisitions would contribute on a pro-forma basis, as if those acquisitions closed Jan 1?

Yes. You're probably looking at about $300 million on the revenue side if we had them for a full year. And on the EBITDA side, I would say in the low $100 million area.

$100 million to $110 million, that kind of range?

Yes.

Okay. Great. The other question I had is on Aereo. Obviously, a lot of talk about that with the oral arguments scheduled for April now.

And I'm wondering if upheld, what options do you see for both the networks and the affiliates? And have you given any thought to the financial ramifications of that case?

I'll take that. I was just going to say it's -- if that's upheld, it would probably move towards a further issues regarding the intellectual property in discussion or cases. So what would take a bit longer to get through. I'm not sure how long it would take to go through intellectual property challenge and copyright issues that are not being discussed or focused on at the moment, so that would be another round.

And as far as where you're heading in regards to some of the network conversations and how they relate to us as local affiliates, there is -- what I keep seeing coming back is a lot of confusion from the marketplace or from the trades in regards to what would that mean if there is ultimately an area of model out there and there was -- there's a lot of complexity that would go -- that come into play regarding the MVPDs and how they would be able to -- or if the they would be able to adopt and area model.

That in and of itself would require a significant amount of legal work in terms of courts trying to figure out just what does that mean in terms of the obligations of a program suppliers, and MVPD versus having an Aereo-type model attached to it. Now you're talking years and years before that would probably get settled or worked through, if it ever did.

And now we're into such a hypothetical field or area in terms of what could come out of all this; it's difficult to say. But I think the point of it all is that there's no intention that is out there that the networks would abandon their affiliates over an Aereo model.

The truth of the matter is that the amount of support that we provide as affiliates to the network programming is significant, especially with the amount of local programming that we provide either through news production or through syndicated products that we purchase and build around the network programming.

So you can see that from market to market throughout the country, as far as what the definition is as far as a strong affiliate. In some markets, the CBS station is stronger, is the strongest station. In some markets, the ABS or the NBC might be the strongest station in the marketplace. That all has to do with just the historical branding, the legacy of the station, and it demonstrates the importance of local branding to the networks and to their viewing.

So I know that's a long answer in regards to what's going on with Aereo and the confusion that's out there. And don't know if that helps clarify it at all, but --

It does. Thank you. If I could sneak one more question in.

I was wondering about pricing trends in the syndication market. I imagine that unit costs are up a fair amount, and I'm wondering if you can provide any color there. And then specifically, what if anything, you are doing to offset or manage what I imagine are pretty substantial escalating costs?

Well, actually our costs are within control right now, and as we continue to get leverage by getting more stations, we expect two things to happen. Number one, we're going to target shows that are the best shows in the marketplace that we may not have on our air. And we're going to go after those shows.

And in addition to that, when you take a look at the markets that we're in, we have programs all across our lineup that are the best that money can buy. Our stations are fortified from top to bottom, and we have leverage right now in terms of buying.

So I expect the program costs to continue to be under control. So as this Company presents itself, syndication prices will only increase if we decide to go after a show that one of our competitors don't have. When somebody's introducing a new show to the marketplace, I think we have tremendous leverage. So I believe that expense item will continue to be under control as each year goes forward.

Thank you very much.

Thank you.

Our next question comes from James Dix with Wedbush. Please proceed with your question.

Thank you very much. Good morning. A couple things: in terms of the first quarter outlook, it seems like the impact of the weather on auto has not been as great as on some of the other categories, which you called out. Maybe some of that is due to the Super Bowl, but I was just curious as to if that was the case, and if so, why?

And then second, following up on, David, the color you gave on the share of revenue coming from JSAs, do you have a rough share of what your EBITDA is coming from JSAs and SSAs somewhat similar to that number? And then do you have any estimate as to that same number or that same percentage for the Allbritton deal in particular? Thank you.

Give me the first part of that question again.

Sure. It seems like with the auto pacing up in the first quarter, mid single digits, as though it's been less affected by severe weather than some of the other categories which you called out, like restaurants, et cetera. So A, is that true? And B, why do you think that is?

Interestingly enough, and again, positioning how well we're doing actually in first quarter, we have 18 categories that are pacing up right now. And typically in any given quarter, we range between 15 and 17 categories. As far as automotive, what's very encouraging about automotive is that if you take a look at where we finished in fourth quarter, which was mid single digits, and then you take a look at where we're pacing right now within first quarter, which again, is mid single digits, it's hard to quantify exactly what cost the weather has had on the automotive industry.

And what's encouraging is that we know we have a weather event that's been consistent for six weeks now, but yet the category is pacing almost identical to a non-weather event in fourth quarter. So that would lead me to believe that the category continues to be strong and leads for optimism throughout the course of the year that this critical category will continue to grow at a relatively decent pace for us.

So I think all things given in first quarter, that category in particular is very encouraging, given the fact that there is a weather event. So it's hard to quantify exactly what effect it had, but clearly it has an effect, there's no question about that.

James, I'll take the second question, because I realized that our public filings include revenues for the LMAs and the JSAs. And many people have tried to use those numbers to attempt to calculate an associated BCF.

The problem is when you do that, it's difficult to separate the expenses, because the stations have been put together. So what may appear to be 20% of revenues doesn't translate to 20% of the BCF. It's actually something much less, because if you think about it, the reason for the JSA is because the licensee needs to leverage the expertise and scale of the larger station to help their own profitability. So if you were to separate these stations, I would expect that much of the expense would be incurred on the licensee side, and therefore, our BCF impact would be less.

So when you consider, however, that the stock is down year-to-date 20%, again, I think shows the market's over-reaction to all this, because they've not only taken the stock down by more than the BCF percentage, but they've assumed that the broadcasters don't react to any potential rule changes. And quite frankly, that's just absurd.

Right. Just as a ballpark, would you say the BCF impact would be 5% on 20%? That order of magnitude less, just because of the dynamic you just laid out?

I don't know how we get to that number, James, to get you some satisfaction with the calculation. It's not something that you can just look at and say, here's an answer to your question. You could look at it from a standpoint of saying here's 20% of the revenue margins on the JSAs are going to be better typically, because of the fact that they are sharing services together, so that creates an efficiency.

So as the margin's higher than a 20% or the average margin that you would see within our Company, probably that's a fair statement. But to try to take that and separate that in a way that you're heading doesn't really work out. So I don't know that we can give you any satisfaction in terms of giving -- providing an answer there.

Okay. And then on Allbritton, if there were no side-car agreements involved in that, any rough sense as to what the impact would be in terms of your free cash flow expectations?

Allbritton's primarily built around a DC station, a Little Rock station, and those are the powerhouses that are within the group. So everything else, as good as they are, it's pretty secondary in that -- from that standpoint. So how we work around that, or if we have to work around that, it's all speculation. They would be minimal in terms of overall valuation.

Okay. Very helpful. Thank you.

Our next question comes from Howard Rosencrans with Value Advisory. Please proceed with your question.

Yes, hi. I wanted to confirm a couple numbers. So the blended 2014, 2015 average number for FCF, assuming all contemplated acquisitions are consummated, is $420 million, and the EBITDA number is $800 million.

More substantively, why don't you tell us what the outlook -- how much of your base, the subscriber base is resetting with retrans and what the outlook is for retrans and reverse retrans? Thank you.

Howard, I'll go ahead and take that one. This year we have just one -- really one contract that comes up and that's Charter on April 1. But when you think about here over the next two years, so through the first part of 2016, 100% of our contracts come up for renewal.

And your reverse, what comes up on that front? Can you give us any sense of what your expectations are? Will be follow suit now that you've set a precedent with the CBS, Time Warner?

Well, that was a CBS-Time Warner precedent, not a Sinclair precedent. But what I would say is the reverse is tied to the affiliation agreements. So we are pretty much locked in on those.

Our next affiliation agreement is ABC, which comes up August of 2015. And then we have NBC beginning of 2016, Fox at the end of 2017, and CBS at the end of 2018. We have clarity for the next several years on what the reverse ask is from the networks.

I recognize that the Time Warner-CBS was not yours per se, I'm just trying to get an understanding if you believe that that is the bogie, per se, that has been established for the market in terms of retrans now, or what your thoughts are in that regard.

Yes, I don't know why it wouldn't be, right. So they've gone in, and they've set the next market value. But remember, even at the $2, that is still below the current, where the current market value should be. And that's a $2, that if the trades are correct, that CBS gets by the end of year five. But $2 today even is still below what the market should be getting.

Thank you.

Our next question comes from Barry Lucas with Gabelli & Company. Please proceed with your question.

Thank you very much. Good morning. Steve, maybe you could clarify an issue around affordable care and/or political advertising. Is that -- are those dollars going toward political? Or you called out the insurance being a fairly strong category. Is that find its way into insurance or financial?

The affordable care is going under political, and the insurance goes under spot.

Okay. So your outlook for political advertising, given the relative spending for affordable care was I think relatively modest. What would your assumption be there?

I think so far, because of the problems that they've had and continue to have, the spending has not been bountiful, but it's been interesting on the insurance side, actually, where the spending has been quite a bit better than the government spending right now by a wide margin, actually.

So I do expect as you get a little bit further in the year, if they get their act together, that perhaps the government spending increases. But there was a lot of buzz about it from second quarter forward of 2013, and I think because of all the problems they had, it didn't materialize to be as big as we had hoped it would be. That doesn't mean that in the back half, some more money can't be spend on their behalf.

But so far, a decent amount of money being spent on the insurance companies, you're right.

Great. Thank you. Coming back to Aereo and beating that horse to death, I think you have a case heard or in Salt Lake. And wondering if, a, what your thoughts are there on the particular case to the extent you can provide them. And what a decision there, what impact a decision there could have at the Supreme Court level, if any?

I think the Supreme Court's going to be resolved here. I read something the other day that the oral arguments are momentarily. So I think any litigation we've got going out in Salt Lake will be probably could very well be diluted by virtue of what the Supreme Court does.

Great. Thank you, David.

Okay.

Our next question comes from Avi Steiner with JPMorgan. Please proceed with your question.

Thank you for going into overtime. One last one from me. I think you mentioned the share buyback capacity is $100 million or authorization, excuse me.

Can you talk about what your flexibility to buy back shares are under your covenants, and what room you have for increased dividend payments, if and when that's contemplated? Thank you very much.

Yes. Well, we have plenty of cash just sitting there on the balance sheet. And as far as any share buyback authorization, if that's what's in place, that can always be changed, increased depending on what the market does and how we want to react to it. So we have a great deal of flexibility in that regard to do whatever we want to do and need to do and where the leverage is coming from, it's from the acquisitions.

So I think what is a bit of an overhang right now is just a lot of market uncertainty about what they're hearing from regulators and what's taking so long, et cetera. So that will break through once we get through that in terms of the regulations and the approvals and we move to a closing. I think that bodes well for everyone that's invested in Sinclair. And I don't know that we'll have that kind of a concern going forward as far as worrying about stock buyback.

But the but would be if that doesn't happen and we see the leverage increase as we make those acquisitions, we'll have to take that into consideration as to how aggressive we want to be. Of course, the question we always get, Avi, is what in the world do we do with all the free cash flow that we generate? So that would be a pretty clear answer for you and for everyone else if the market continues to remain concerned or nervous about what's coming and doesn't really come back, like Lucy was saying earlier.

When you have the analysts out there with target prices that are in the 40s and we're trading now in the high 20s, that discount is really an enormous opportunity for the Company, as well, to invest and get a return on it.

Okay. So just to -- and thank you for all that. Just to confirm your flexibility under your debt agreements are well in excess of $100 million?

Yes. So Avi, there is a couple of restricted payments baskets that dividends and share repurchases fall under. So there is probably about -- there's $200-million baskets; there's another $300-million basket. And just under the covenant sensitivity, we could access those.

Now, I would say that as we've discussed in the past, we are always sensitive to the rating agencies. So we would not look to lever the Company up to a point where we would be at risk for a potential downgrade.

Excellent. That's what I wanted to hear. Thank you very much.

Our last question is going to come from Dennis Leibowitz with Act II Partners. Please proceed with your question.

Yes, Thank you. I was wondering when you were talking about 20% of revenue from JSAs, I wanted to clarify that that's just JSAs. Because as I understand it, the supposed proposals do not include shared services agreement.

And secondly, again, rumor, but the proposed rules would allow you to keep them and sell only 15% of the time. I was wondering how much of the time do you sell now?

So I'll take the first part of that. So that -- so what you see in our public filings that 20% some, is actually JSA/SSA and LMAs. So the LMAs aren't even part of any of the speculation that's out there. But so it would be something a lot less than even the number in the public filings that would be associated with JSAs.

Can you say what JSAs alone would be?

Yes, you're probably looking at for the JSAs, probably about 10% of that number.

How much of their time do you sell?

Right now we sell, under the joint-sales agreement, we sell all the time. There's some minor things, so it wouldn't be worth counting that, the minor pieces that the JSA partners sell.

Thank you.

Thank you.

At this time, I would like to turn the call back over to management for closing comments.

Well, thank you everybody. That ends our first quarter year-end conference call.

Thank you, everyone.

This concludes today's teleconference. Thank you for your participation. You may disconnect your lines at this time.