Sinclair Inc (SBGI) 2014 Q2 法說會逐字稿

Greetings, and welcome to the Sinclair Broadcast Group second-quarter 2014 earnings conference call.

(Operator Instructions)

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

Thank you, operator, and good morning, everyone. Participating on the call with me today are David Smith, President and CEO; Steve Marks and Steve Pruett, Co-Chief Operating Officers of Sinclair's Television Group; Chris Ripley, Chief Financial Officer; and Lucy Rutishauser, Senior Vice President, Corporate Finance and Treasurer. Before we begin, Lucy will make our forward-looking statements 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 second-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 [Ray Def C], this call is being made available to the 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 of 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.

Thanks, Lucy. Before we go through the results, let me review some of the activities that have taken place since our last earnings call. In May we announced the launch of ONE Media, a joint venture between Coherent Logix and Sinclair, with a vision to build a next generation broadcast platform, enabling broadcasters to compete in a mobile and portable device environment across all platforms.

In July we announced the launch of the American Sports Network, our collegiate sports initiative to be broadcast live on our [mikes net], CW and other channels. ASN has entered into multi-year comprehensive sports rights agreements with a number of distinguished NCAA conferences, including Conference USA, the Colonial Athletic Association, Big South Conference, Southern Conference and the Patriot League.

The American Sports Network initiative will be led by Doron Gorshein, COO of Sinclair Networks, a division of Sinclair. Our College Sports Initiative, which will produce a minimum of 160 live games per year is combining with our existing local high school sports productions and Ring of Honor Wrestling.

We are also in discussions with other broadcasters to syndicate the games in markets where Sinclair does not have a station. We are excited about the value that live sports content can bring to our [MyMETs] CWs, as well as to the colleges, their student athletes and the local viewers.

On the acquisition front, in July we received initial grant by the FCC of its approval for our previously announced acquisition of WGXA, a FOX/ABC combo in Macon, Georgia. We expect to close the acquisition on or about September 1, 2014. We announced that effective September 1, we will be adding the FOX affiliation to WTOV in Wheeling, West Virginia/Steubenville, Ohio market, in addition to the station carrying the eight NBC affiliate station and the Digi-Net Me-TV.

On July 31 we closed on our previously announced $985 million acquisition of the Allbritton television stations, and simultaneously sold the non-licensed assets of WTAT, the FOX affiliate in Charleston, South Carolina, which we had operated pursuant to a local marketing agreement for $14 million. In addition, we announced that we sold WHTM, the ABC affiliate in Harrisburg, PA to Media General for $83.4 million. This former Allbritton station will be transferred to Media General upon FCC approval.

To fund the Allbritton transaction we raised $550 million in the debt capital markets, and $400 million in the loan market. Lucy will take you through those terms later.

Yesterday the Board declared a 10% increase to our dividend, increasing the quarterly dividend per share from $0.15 to $0.165 per quarter, reflecting an approximate 2% dividend yield. Now, Chris will take you through the second-quarter results.

Thank you, David. Net broadcast revenues for the second quarter were $404 million, an increase of 45%, or $125 million higher than the second quarter 2013. This was also higher than our guidance, due to a better-than-expected core, political and digital interactive revenues.

Television operating expenses in the second quarter, defined as station production and station SG&A expenses before barter, were $217 million, up 56%, or $78 million, from the second quarter last year. Compared to guidance, TV expenses came in approximately $4 million lower on favorable sales and G&A expenses.

Corporate overhead for the quarter was $17 million, up $6 million versus the same period last year due to one-time acquisition costs and overhead-related staffing increases from acquired TV stations. Television broadcast cash flow in the quarter was $169 million, up $48 million, or 40%, from last year's second quarter BCF. The broadcast cash flow margin on net broadcast revenues for the quarter was 42%.

EBITDA was $157 million in the quarter, up $44 million, or 39% higher than the same period last year, and $8 million to $11 million higher than our guidance.

The EBITDA margin on total revenues was 35% for the quarter. Net interest expense for the quarter was $40 million, down $5 million versus the second quarter last year. The decrease was due primarily to the refinancing of the 9 1/4 notes last fall.

Our weighted average cost to debt for the Company is approximately 5.1%. Our most expensive debt, the 8 3/8% senior unsecured notes, are callable later this year. Absent higher returns, returning uses of cash, we'll most likely be calling those notes in October.

Diluted earnings per share on 98 million weighted average common shares outstanding was $0.42 in the quarter. We generated $81 million of free cash flow in the quarter, of which $15 million was dividends for shareholders.

Over the 12 months, we converted 59% of our EBITDA to free cash. We produced a 10% after-tax free cash flow yield on our market cap, and paid a 1.7% annualized dividend yield based on our second-quarter closing price of $34.75. Absent any additional share repurchases or dividend increases, we're on track to return approximately $144 million of free cash flow to our shareholders this year.

Now, Lucy will take you through the balance sheet and cash flow highlights.

Thank you, Chris. At June 30 total debt was $3.115 billion. Included in that amount was $99 million of non-guaranteed and BIE debt that we are required to consolidate on our books. We ended the quarter with $396 million of cash on hand.

As Dave mentioned, in July we completed an offering of $550 million of 10-year senior unsecured notes due 2024. The notes were priced at 100% of their par value, and bear interest at a rate of 5 5/8%. We also raised the new incremental tranche B term loan, an amount of $400 million, due July 2021, priced at 99.75%, and bears interest of LIBOR plus 2.75%, with a 75 basis point core.

As part of the amended and restated bank facility, lenders under the drawn and delayed draw tranche A term loan convert at $328 million of their commitments to revolving commitments. So, for those keeping track, that puts our current revolving commitments at approximately $485 million, our drawn tranche A term loans at $325 million, the delayed draw tranche A term loan at $36 million, and our tranche B term loans at $1.043 billion.

Among the more material terms amended were the elimination of the interest coverage and the operating company total indebtedness maintenance ratios, as well as increasing the first lien maintenance test from 3.75 times to 4 times. The bank and the bond proceeds, along with cash on hand, were used to fund the Allbritton acquisition and for general corporate purposes.

Now, pro forma for the financings and the Allbritton close, total debt at June 30 would have been $3.820 billion, and cash on hand would have been $134 million. The full $485 million of revolver would have been available.

So, taking the cash plus the revolver availability, plus the remaining $36 million of delayed draw term loan A, equates to total liquidity of approximately $655 million at the end of Q2, pro forma for the Allbritton closing and the financings. The availability will be used to fund the New Age and Macon acquisitions, potential investments in content, cable networks, digital interactive and other station transactions, as well as the potential call of the 8 3/8% notes in October of this year.

Capital expenditures in the second quarter were $15 million. For 2014, our guidance is approximately $73 million of CapEx, which includes incremental capital required for the American Sports Network live production trucks and the build-out of its network operating center.

Cash programming payments in the second quarter were $23 million, and our full-year guidance remains unchanged at approximately $93 million. Cash taxes paid in the second quarter were $26 million. We currently have approximately $185 million of share repurchase authorization remaining.

Total net leverage through the holding company at quarter end was 4.4 times. This excludes the VIE and non-guaranteed debt and is net of cash. The first lien indebtedness ratio was 1.8 times on a covenant of 4 times.

David Amy will now take you to our operating performance.

Thanks again, Lucy. For the second quarter net broadcast revenues, excluding political, were up 41% versus the second quarter of 2013. Political revenues were $12 million, as compared to $1.5 million in the second quarter of 2013.

Pro forma core advertising was down 1.8% in the quarter on weak national advertising and softness in FOX Prime Time, both of which we discussed on our last earnings call. Pro forma local core, however, was up low single-digit percents.

As reported, local net broadcast revenues were up 47%, including political, and up 46%, excluding political. Local revenues represented 80% of our total broadcast revenues for the quarter. As reported, national net broadcast revenues were up 36%, including political, and up 23%, excluding political.

Our fastest growing categories were political, automotive, medical, fast food, and travel and leisure. Direct response, retail and restaurants were soft.

As we turn to our outlook, which does not include Allbritton, New Age or Macon, for third quarter of 2014 we are expecting net broadcast revenues to be approximately $407 million to $410 million, up 34% to 35% as compared to third quarter of 2013. This assumes $27 million of political versus $3 million in the same period last year. For the year, our political estimate range remains unchanged at approximately $124 million versus all of $12 million last year.

Categories expected to do well are automotive, medical, pharmaceuticals, telecommunications, media, home products and retail. Direct response, fast food, schools, entertainment and grocery are expected to be soft.

On the expense side, we are forecasting TV production and SG&A expenses in the third quarter to be approximately $226 million, including $3 million of trade expense. For the year, TV expenses are forecasted at $885 million, which is approximately $2 million lower than our previous guidance based on favorable current expense trends, offset in part by the incremental ASN production costs.

We expect EBITDA in the third quarter to be approximately $151 million to $154 million, an increase of 42% to 44%. Based on our guidance, free cash flow in the quarter is expected to be approximately $50 million.

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

(Operator Instructions)

Aaron Watts, Deutsche Bank.

Hey, everyone. Thanks for all the color. Just to dig into the core trends a little bit, on the last call you said local would come in in the second quarter up low single-digits. It sounds like that's about the ballpark where it landed.

I think you all said national was negative, but improving. Can you maybe just talk about if that trend held up? It sounds like for the third quarter, national is still a little bit soft, so maybe just some more commentary around that?

Yes, actually -- Good morning, Aaron. The core, as we did state, in the second quarter came in exactly as we gave guidance to. And third quarter, we are expecting a slight increase of [law] and core. We remain optimistic about national.

And interesting comments about national, as we are in third quarter, we have 34 markets right now that are performing better in the third quarter nationally than they performed in second quarter. That's a huge positive for us.

In July and September, specifically, we are just slightly down in national, and in a little bit more than that in August, interestingly enough, seems like almost an anomaly. But we're quite close to where we need to be in July and September, and with those 34 markets turning it around in third quarter when compared to second, we can see the light at the end of the tunnel on national.

We're optimistic that this trend will continue. It is moving in the right direction. It's still a little bit negative, but clearly we see some light at the end of the tunnel on national.

And local continues to be good for us. The automotive category continues to be strong. We were plus in second quarter. We're expecting that third quarter will even be better than second quarter.

Another critical category, telecommunications, is just huge for us in the third quarter. So, we have a lot of things to be excited about.

Okay. That's helpful. And Lucy, one clarifier for you. I think you said New Age and Macon are still, obviously, needing to close. Do you have a dollar bracket for us to think about what funds are needed to do that?

Sure. Macon, we have $30 million, and New Age, we have $81 million.

Got it. And then lastly for me, a little bit more big picture, you've been making a lot of interesting moves on the content side. Obviously, that requires an initial investment and ramp-up period. How should we think about when the benefits start to flow through of some of these initiatives you've announced?

It's a good question, Aaron. The benefits that we would see are certainly going to take some time to get there. We have our first live games here for the American Sports Network beginning at the end of this month on August 30. And with that, we'll -- as we mentioned, we'll have 160 games in the first year. From a standpoint of timing, we're in the early stages, just developing a sales team and marketing team, so there's quite a bit that needs to get done.

We're clearing stations, primarily our MyNetworks and our CWs. That has a significant benefit to those stations in terms of the value that they have, not only to the consumer, but also to our cable partners in terms of the content that we're providing.

So, we would expect to see benefits in that regard, as well. Our stations are very excited from a standpoint of our management looking forward to getting these sports programs and generating additional revenue from that standpoint.

Other initiatives that we're working on, you'll be hearing more about in the next couple of quarters. As they develop, too, and as we start rolling those items that we had mentioned earlier on as far as what you can expect us to do with our free cash flow.

Okay, great. Thank you.

Alexia Quadrani, JPMorgan.

Hi, good morning. It's Nadia Lovell in for Alexia. Congratulations on closing the Allbritton deal and launching ASN.

Just a couple of questions. The political was a bit stronger than expected in Q2. Any markets that surprised on the upside so far? And anything that we should keep an eye on as we head into the thick of the local season in Q3 and Q4? And what are you seeing in terms of issue spending?

Well, as you mentioned, the political dollars are coming in as good as we had hoped for, and the pinch better, actually. Seeing that the political races usually heat up right around this time of the year, it bodes well for us that the first six months came in and met expectations and went beyond that.

We're giving guidance that third quarter will be good for us, as well, and we expect that fourth quarter will be robust. We're in so many markets and there are so many critical races. One in particular, the governor race in Florida, is huge for us because of our exposure in Florida between West Palm Beach, Pensacola, Tallahassee, and so on and so forth.

But there's a whole host of races within our resume of stations, whether it be governor races, senatorial or House, you could almost pick a state and we're right in the middle of it. The good news is, the numbers are coming in pretty much where we had hoped, and then some.

And then, now that Allbritton has closed, can you provide an update on what your strategy is for the expansion of the cable news channel? How soon can we start to see a roll-out of that content to other markets? And what sort of investments do you need to make there?

I think it's a bit early stage to define that for you. I think we had said previously that we wouldn't really spend any time focusing on that as a longer-term growth opportunity until we knew with certainty we were going to get the transaction closed, because there was always some regulatory concerns about Washington's behavior at that point in time. We're through that window, and we'll now spend an awful lot of time getting focused on what we're going to do there.

Were actually going over today for the first time to actually meet the staff. It's a new business for us starting today, even though we closed last week. And we'll, frankly, start working on the problem right now. It's a bit early to tell you where our longer-term plans are, but as they develop, we'll certainly be candid with you.

Just one last question. This is going back to ASN. I apologize if I didn't hear this, but what has interest been so far from the other TV operators for carriage deals?

We've had strong interest. This is Steve Pruett. I help a lot with the distribution of ASN. We've had strong interest across the board from both My and CW platforms, from large group owners to independents.

And Steve, I would just add to that. Right now, we're in discussions with 11 different companies. It would cover an additional 15 million households that we could distribute this in outside of our own (inaudible) footprint.

Okay. Thank you very much.

Thank you.

Avi Steiner, JPMorgan.

Thanks. Just a quick confirm -- you got into Allbritton last week, but this is only hitting the number September 1, is that right?

They'll hit our numbers August 1.

August 1.

Yes. Macon, we would expect to close somewhere around September 1.

Perfect. And on the New Age side, does that have to be restructured or rejiggered around, much like Allbritton was for approval?

There are some difficulties in there that we're looking at and trying to come up with solutions. So, we haven't reached a definitive conclusion, at this point, on exactly how to restructure some of the issues that we're faced with. But, we're working on it.

Excellent. Then, given where you are relative to the cap and some recent M&A in the space, and then let's assume no regulatory changes for now, is the next leg for Sinclair on the TV front more of a slots nature with other folks in the industry? How do we think about that?

I think you'll certainly see some level of portfolio optimization. We think there will still be some opportunities in markets and optimizing the portfolio, and I wouldn't be surprised if you see announcements relating to that in the near future.

Then, on the digital front, with your liquidity and again, given what you can and can't do, at least near-term, on the TV side, what are you looking to add to your portfolio?

That's a large question in terms of open-endedness, but what we've talking about from an strategic standpoint is expanding beyond just television stations themselves and including opportunities to create digital investment opportunities and build out our digital side cable channels that we've discussed. We talked just a little bit earlier about the sports network and the news network as opportunities there to expand.

And we're also looking at a variety of opportunities that we would call adjacencies to our existing business. So, that could be any number of opportunities in terms of just how the additional businesses could fit into our overall strategy. I guess the simplest way to look at it is to say, where is our best employment of our free cash flow besides returning money back to our shareholders, and that's to expand our footprint in any direction that make sense to us.

Just following up, and I realize the point -- the opportunity set is perhaps fairly large, but from the credit seat that I'm in, given liquidity and free cash flow, do you think these could be triple-digit, million opportunities, or am I over-thinking that?

In terms of adjacencies, we don't see spending -- and when you say triple digits, I'm assuming you mean that in nine-digits opportunities, and that's probably a little large. We're thinking more sub-$100 million type of opportunities, in that range.

Excellent. Super helpful.

Very last question for me just on the liquidity point that you highlighted, Lucy. And then I think you discussed the 8 3/8% notes. Is it likely you'd use cash to take that out, or should we wait and see?

Right now, we have the cash available to us based on the liquidity. It's really going to depend on whether or not there's a higher return in use of the cash. But at this point, I would say it's a good chance that we're going to call those in October.

Thanks a lot, folks.

Marci Ryvicker, Wells Fargo.

Thank you. Sorry for the background noise.

It feels like the industry is now moving more to station swaps, or soon-to-be station swaps. Can you talk about how maybe how accretive station swaps would be versus just an outright acquisition? That's my first question.

And then secondly, Dave, can you just clarify your comments on core? Are the same station pro forma, and can you say again, because I think you said a pretty quickly, what national core was versus local? Thank you.

On your first question, I'll take that on swaps and how accretive they will be. Swaps are difficult to execute, but as I alluded to, you'll probably see more of them happening.

They are accretive for us. Not quite as accretive, I'd say, as just outright acquisitions. But, given our retrans profile, they are accretive to us.

If it allows us to make a better footprint geographically and rationalize some other positions we have, let's say, in markets where we have weaker stations, it does make a lot of sense. Whenever you can figure it out, and it is challenging, we'll look to do that.

Marci, your questions on core, you were talking about our projections here for the third and fourth quarter, is that where you were heading?

Yes, and also just clarifying what it was in Q2?

Clarifying what it was in Q2? Yes. Lucy has that.

Let me jump in here for Dave. Q2, the core advertising, which is excluding political, was down about 1.8%. And for Q3, we're looking for that to be up slightly.

Now, that is a pro forma number, meaning that if we had all the stations that we currently owned, they were in the numbers last year. That does not reflect Allbritton. (multiple speakers)

Okay. And then you also said something about local. Did you say local -- how strong was local in the second quarter?

On a pro forma basis that I just talked about, local was up a little over 1%.

Great. Thank you.

Tracy Young, Evercore.

Three questions, if I could. The first relates to auto.

Could you talk a little bit more about where you're seeing the strength? There seemed to be some movement from Honda in June to YouTube, and then there was a recall on GM. So, I'm curious, is it foreign or national? Is it Tier 1 or Tier 3?

The second relates to ASN. How does it work in terms of bidding versus you and the networks for games?

Then finally, is it possible -- I know you're not giving guidance for third quarter for Allbritton, but can you give a pro forma for cash flow number? Thanks.

The auto spending for second and third quarter, as I mentioned earlier, we were up low single digits in second quarter. And in third quarter, we're anticipating high single digits, high to mid-single digits for third quarter.

As it pertains to Honda, Honda in the beginning of the year decided not to really go heavy in spot, but now we understand that they're having second thoughts about that after sitting on the sidelines for the first six months and are talking about coming back in. That is handled on a national level, so it will have an effect on our national billing when they do come back. So, that's your answer on the automotive part of it.

What was the second part of your question again?

Related to ASN, how you do the bidding versus the networks, and does one of you have a right of first refusal in terms of which games you bid for?

Each conference -- this is Steve Pruett. Each conference has a different arrangement with their television rights. But generally, they're -- as a division across networks, and some networks, it's in order of what their individual contract calls for of order of preference.

We fit somewhere in that preference cascade, if you will, depending on the conference. I'm not trying to be vague; it's just everyone is different. The order of preferences different.

You could assume that ABC and CBS are typically at the top of their preference on the major conferences. But, these are all Division I schools, so they all have various preferences with various networks, and we've managed to fit into that cascade.

These are games that typically you'll see on ESPN2 and ESPN3, so if you were to compare our schedule of games that will be airing and you put them alongside ESPN2, ESPN3, FOX Sports, you would find a very competitive and very alike type of game frame between those networks and ourselves.

Exactly. But the regional -- the important thing about this is many of our games regionally are quite important, and that is the advantage of our footprint.

And in some cases, we will even have multiple games -- eventually, multiple games for stations to select from to have more regional relevance to a certain footprint. That's not going to be this year, but it will be more so down the road.

Okay. Thank you.

James Dix, Wedbush.

Thanks very much. Just had three.

First, now that we're a little past mid-year, how are your retransmission revenue expectations coming in versus the beginning of the year, because I know you've had a couple bigger ones?

Then, in terms of the impact of Allbritton -- you may not want to get into any specific numbers, because it just closed. But any color as to how you think those properties seem to have performed versus your original expectations, given that it was quite a while before you could actually close?

And then finally, any comments just going forward, now that you've completed Allbritton on what your leverage targets are and just thoughts on use of free cash flow? Thanks.

Thanks. How are you, James?

On the retransmission question, I think we have pretty much a standard answer that we -- no matter how much we're getting, it's still well below anything we should be getting. And we're going to continue to fight that battle.

The forces are forming up against us, not only to try to slow us down as an industry, and to keep that growth from continuing. But, we're going to fight that, and fight that hard, and get what we deserve. It's a tougher and tougher battle, but that's okay. We're going to keep fighting.

On the Allbritton deal, we kept track of those all along -- as Steve Marks can give you more color. As we're going to be heading out over the next few days and meeting with the different staffs and getting to know them a lot better. And we're looking forward to it.

We're primarily focused on selling Allbritton and putting their efforts behind Politico. They have about 300 people over in DC that are employees of Politico, so that's where most of their attention was. But despite that, I'd have to say their performance was pretty good. But, Steve --?

Yes, Dave. I think out of all the groups that we've purchased over the last three years, this group has their act together. And we're not just saying that because were going over there this afternoon and want to get a warm reception.

But it's a very, very well run company. Were very excited to start working with them. They have a very, very strong competitive list of television stations. In each and every one of their markets, they do extremely, extremely well.

They'll really complement what we're doing at Sinclair. And I think it's very interesting to point out that over the last three years, there's not one single property that is not better off today than they were prior to us purchasing them.

And we expect the same expectation when we walk into this new acquisition. We're going to take it to another level. And that's what we've done with every single acquisition to date. So, we're very, very excited to be going there today and running those television stations. They'll really complement what we're doing, very much so.

And in terms of leverage targets and free cash flow use, now that we've closed Allbritton, they were on the higher end of where we'd like our leverage to be. But, we don't see using our free cash flow explicitly to delever.

As the business grows, you should see a natural delevering happening as that process plays itself out. We'll look to use our free cash flow within a combination of efforts around dividends, share repurchases and investments in new business opportunities and adjacencies within TV broadcast.

Great. Thanks very much.

David Siebert, Wells Fargo.

Good morning, everyone. Thanks for taking the questions. I'm going to ask a question on ATSC 3.0. You've talked about this standard and using your spectrum as a long-term valuation driver. It sounds like you have a lot of buy-in from other peers, the industries, et cetera. What regulatory hurdles do you anticipate in trying to move to this standard, just so I'm clear on that?

I don't necessarily think there's going to be any serious restriction in that area. And I say that because we're working on a plan right now that we've introduced preliminarily to a number of folks in the industry, whereby I think we can actually effect a transition to a new standard and have it completely unaffect the public, if you will.

I'm not going to get into details how we do that, because it's not particularly important. But one of the biggest constraints that's been troubling our industry is how are we going to pay for the transition, and how is the public going to be dealt with. We have a reasonable solution for that, but oddly enough, it ends up costing (inaudible).

It just requires a little cooperation amongst a few broadcasters in the industry. And that, as you can imagine, becomes increasingly easier, given that the number of broadcasters is declining. So, having rational, large-scale business discussions with people is somewhat easier in today's world.

I'm optimistic -- cautiously optimistic that when the time comes, members of Congress and/or the FCC will look at this, and I think intellectually, should say, why do we care what standard you use. Because frankly, they don't care what standard the funds come from, companies use or anybody else is using. We're trying to help them understand that we should be treated the same way as all the rest of the people who use technology everyday and interface with the public.

I think we have a good chance of accomplishing our objective of in a very inexpensive way for the broadcaster and for the consumer. We just started to float that, literally, in the last week.

That's interesting.

People will say, oh, that's interesting. I never thought of that, probably. We have some selling to do.

And frankly, the most interesting thing is, we go to the Hill and talk to key members of committees and things of that nature, we get a huge reception. From a standpoint of members looking at us as an industry and saying -- wow, we really didn't know you could do that kind of stuff. You can provide all this different level of competition and things going forward.

And the answer to that is, yes. And the only comment that revolves around that is -- just get out of our way as a government, and let us go compete. And you'll see some amazing things happen in terms of the distribution of information and content to this country that will wholly benefit the public.

Okay. Interesting. Thank you for that.

Second question, on News Channel 8, looking forward to seeing how this plays out. And I echo congratulations on the Allbritton deal. Can you talk about this asset, what competitive advantages they have maybe versus some of the other cable news networks that have a DC presence? And has you did your due diligence here?

Yes. I think it's, as I said to an earlier caller, we haven't spent two seconds looking at News Channel 8. I literally in the last two or three days have looked at ratings information for the first time in a year.

And what I find kind of fascinating is, just using -- take a 6:00 in the morning time period, if you will, and look at the May rating book. These are Nielsen numbers. The News Channel 8 at 6:00 AM in the morning, which is a critical time period for local news, has a higher number of thousands of people watching it than does CNN, CNBC, and headline news combined.

So when you think about what that means is, here's a local cable news channel that's been in business for around 20 years or so, that's never really had any capital put behind it. And frankly, they had no reason to, because they didn't have the platform necessary to roll out that model, because they had a limited number of television stations. So, with essentially, no practical effort and no money put at risk, they're as good as, or better than, all three of those networks combined.

And you look at that and say, boy, there's an opportunity for you. I think that's -- I'm very heartened by what I've seen so far in the last couple days. And I really look forward to the opportunity to now take on the FOX News Channel and MSNBC in that marketplace.

And if we can do it there, our view is, we can do it everywhere. I'm really optimistic about the opportunity there.

Just to add to that a little bit in terms of our credentials, we are the largest company in terms of producing news on a daily basis in the entire country. We produce, on a weekly basis, 1700 hours of news every single week through our stations. And that's -- that just gives you some idea of the scale that we have and the magnitude of our seriousness when it comes to producing a news product.

Okay thank you. One last question, if I could, for Chris. How do you think about a special dividend this year? I think Sinclair paid one in 2012, versus share repurchases?

No hard, fast decisions have been made on that, but I don't think you would see a special dividend this year. We did just increase the dividend -- the regular dividend. And we feel really good about the opportunity set in front of us in terms investments to grow shareholder value.

Okay. Thank you.

Tracy Young, Evercore.

Hi. Just a follow-up to the question I asked before. I realize again that it's early in the days for Allbritton, but is it possible for you to give any guidance in terms of free cash flow per share? Thanks. Pro forma?

Tracy, it's a fair question, one that we've been talking about here. And just the best way to communicate that to the market in terms of the magnitude of the acquisition and how it's going to reflect on our free cash flows per share.

To give you a quick answer now would be -- we're just not prepared to provide that in terms of any accuracy. But we know we have information that we need to get back to you and get back to the market. We'll have to work internally here to come up with the right answer so that we're not misleading anybody.

Okay. Thank you very much.

Thank you. We have reached the end of the question-and-answer session. I would now like to turn the floor back over to Mr. Amy for closing comments.

Thank you, operator. And thank you, everyone, for participating on our call today. So ends our call.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.