E W Scripps Co (SSP) 2011 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the E.W. Scripps Company fourth-quarter earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions). As reminder, today's conference is being recorded.

I would now like to turn the conference over to our host, Mr. Tim King. Please go ahead.

Thanks, Brad. Good morning, everybody, and thanks for joining us on this recap of the E.W. Scripps Company's fourth-quarter results. We are going to switch things up a little bit this morning by starting with Rich Boehne, our President and CEO, who will provide some context for the fourth quarter as a prelude to a promising 2012 after a year of dramatically reshaping our operations. Then Tim Wesolowski, our CFO and Treasurer, will provide a deeper dive into the quarter.

When we open up the lines for your questions, we'll be joined by Brian Lawlor, who runs the TV Division; Tim Stautberg, who runs the Newspaper Division; and Doug Lyons, our Corporate Controller.

The commentary you will hear from our executives this morning may contain certain forward-looking statements and actual results for future periods may differ from those predicted. You can read more about some of the factors that may cause results to differ from what you are about to hear by referring to the Form 10-K

As a reminder, you can also always go to scripts.com for more information. If you click on our investor relations link at the top of the page, you can access today's release and financial tables as well as a streaming audio replay this call. We will have it up there later this afternoon and it will run through March 7.

Having said that, here is Rich Boehne to begin today's discussion.

Good morning, everyone. Thanks for joining us. The fourth quarter was a nice launching pad for the attractive opportunities we see ahead now in 2012. As you saw in the release, revenues came in a bit better than guidance and excluding a couple of nonrecurring items, expenses were down as promised.

Let me right up front though apologize for all the complicating factors in our 2011 results. As the old saying goes, you don't want to watch the sausage being made, but the eventual outcome is very good. That's the story of 2011 and 2012 here at Scripps. We got a lot of ugly work out of the way last year in 2011, setting ourselves up for what we believe will be a very successful future.

We entered this year, 2012, a very different, newly restaged Company with stronger growth prospects and improving results from our current businesses. We ended last year by expanding our television footprint, adding a total of nine additional TV stations concentrated in three of America's very best media markets, Indianapolis, Denver, and San Diego. That was an opportunistic deal for the McGraw-Hill stations at a very attractive price, plus it moves our cash flow mix more toward TV and digital.

Now that is not to say we don't like or believe in the economic opportunities offered by printed media. We do, but a heavier reliance on electronic delivery platforms gives us the opportunities to grow while we are revamping the business model for printed newspapers. Now led by Tim Stautberg, the Newspaper division is moving rapidly to simplify business and focus on the most attractive audiences, products, and revenue categories.

While expanding our TV footprint and restructuring the newspapers under new leadership, we also moved in 2011 to dramatically step up our launch of new digital products. By combining all of our resources into one organization, we are taking better advantage of scale to develop and launch high-quality paid and free services for smartphones and tablets as well as for desktops and laptops. We unleashed a number of these new apps during the holidays while shoppers were loading up their new devices.

Our team is rapidly rolling out new mobile services for the basics like breaking news, weather, and traffic, and also for audiences in local markets eager to pay for high-quality local news experiences, and there is much, much more to come.

Finally, we put a few bucks to work in 2011 in new businesses that either complement our current revenue streams or leverage their expertise and assets. For example, we now have investments in two TV programming ventures, helping us build our own brands and expand our cash flow margins in TV markets. We are an investor in a media content exchange company called Ebyline. We are a member of a TV consortium developing and launching mobile and connected TV services.

And with a partner, we just launched a new social games enterprise called fiveonenine games. That news went out just Wednesday and our first game called Political Rampage will launch any day. Fiveonenine games is an early-stage venture that extends our historic expertise as a news organization onto this new and fast-growing games platform. Much more to come there as well.

And in 2011, we did all this while maintaining a very strong balance sheet, even doing the McGraw-Hill deal with just barely putting a dent in our balance sheet and we maintain great financial flexibility.

As I said, Scripps is on its way to being a very different Company over the next few years, thanks in large part to the tough decisions, opportunistic investments, and commitments to new businesses that we made in 2011.

Unchanged in 2012 is our dedication to building value for shareholders through outstanding service to our communities across the country. Our investments in high-quality journalism and news content have enlarged our audiences on all platforms and created environments of increasing value to advertisers. We look forward to more journalistic and economic success in the year ahead.

The National Association of Broadcasters announced just a few days ago it plans to honor our long entrepreneurial and deep commitment to public service by giving Scripps its Distinguished Service Award for 2012. Some of the past recipients include people like Walter Cronkite and Edward R. Murrow and only once in the past has there been a company, and in fact a family company, Cox, that has been honored with this award. This is a big deal for us and very humbling for the organization and we look forward to the April event when we will actually be given the award.

Now I am going to turn it over to Tim Wesolowski to walk you through the numbers.

Good morning. Our fourth quarter can best be summarized in a way I would like to repeat every quarter, strong increases in local television advertising and improving revenue trend at our newspapers, and lower consolidated costs and expenses when you exclude acquisition and restructuring charges.

Our consolidated revenues reflect the sawtooth nature of a company with so much political opportunity in even numbered years. Our reported revenue was $197 million, down about 10.5% from the year ago period, but the record-breaking performance for political advertising in 2010 masks the strength of our underlying business. Excluding political dollars from both the 2011 and 2010 numbers, our consolidated revenues actually would've risen slightly led by double-digit growth in TV, which I will talk more about in a minute.

Our expense line requires some explanation this quarter. We reported chargers that lowered operating income in the quarter but will improve our performance over the long run. Those included almost $3 million of charges relating to the acquisition of the nine TV stations for McGraw-Hill and about $3.5 million for restructuring charges. The latter figure represents our ongoing efforts to simplify the newspaper business model as well as a reduction in force in the newspaper division that occurred in December.

Through attrition, not filling certain open positions, and the separation from the Company of about 130 employees, we eliminated roughly 160 positions in the fourth quarter. It was a difficult decision but a necessary one given the continuing operating challenges in the newspaper industry.

Excluding these acquisition and restructuring charges, our costs and expenses fell about 2% to $174 million. That reflects good expense discipline when you consider that we accrued $7.5 million in incentive awards in the fourth quarter that had not been part of our guidance in November.

Let me walk you through this briefly. Our 2011 incentive awards were triggered if we exceeded our consolidated cash flow targets by about 25%. During the year we didn't think we would meet that threshold, so we didn't accrue anything. As it turns out, our consolidated fourth-quarter revenue and expense performance were better than we anticipated, so the awards were accrued entirely in the fourth quarter.

The impact would not have been as pronounced if we had been accruing throughout the year. It only looks a bit lumpy because it all fell in the fourth quarter.

We recorded income from continuing operations before tax of $6.8 million. The tax provision brought our net income to $6.1 million or $0.11 per share.

Now let's turn to the operations. We acquired the McGraw-Hill stations in Q4 but we closed the deal on December 30, so the stations had no material impact on our quarterly performance. We will of course get the full benefit of the 2012 election cycle from our new stations.

Television revenue was down 16% from the $101 million we reported in the fourth quarter of 2010, which benefited from a large dose of political revenue. But it is important to look at the performance of the station using the two other metrics in our release. On an apples-to-apples basis excluding political revenues in both periods, our TV revenues were up 11% over the fourth quarter of 2010. On an apples-to-apples comparison to the fourth quarter of the most recent nonelection year, our revenues were up 15% over the fourth quarter of 2009. That growth is largely due to the strong performance of the local advertising category, which was up 14% in the quarter.

National advertising, which had been softer for all broadcasters for some time and is less than half the size of local, was flat during the last three months of the year. It was down in the mid singles in the third quarter, so flat is an improvement.

Even though political was off by a wide margin versus last year, we did book $3.5 million in political ads. That compares with $28 million we reported in the fourth quarter of 2010 but it's about 20% better than our performance in the fourth quarter of 2009. We think a large part of this increase is due to the fact we set up our own political office in Washington.

Our retransmission consent revenue was up 30% in the quarter to about $4 million. Much of our retransmission consent rights are tied up for years to come in agreements reached before we spun off Scripps Networks Interactive.

We negotiated numerous smaller deals at market rates at the end of 2011 but the really big contracts, Time Warner and Comcast, are much further out. This category will show nice, steady dollar growth for some time as we sign small and midsized contracts at rates well above their current level.

You have heard us talk about the reorganization of our digital operations. The financial performance of digital and mobile initiatives is reported in the numbers of our core operating division. TVs digital revenues grew 21% year-over-year in the quarter, about twice the 11% growth we reported in the third quarter.

Turning now to expenses in the TV division, employee costs were affected by the accrual for annual incentive awards I mentioned a few minutes ago. Despite that increase in employee costs, total expenses for the television division declined 2%. Bottom line, TV segment profit was $22.3 million. That is down from $37.3 million in the year ago quarter and up sequentially from $7.5 million in the third quarter of 2011.

Over at the newspapers, our local brands are making great strides in transforming their operations but near-term challenges persist. Still, we did better at the top line than many of our peers and slightly better than our own guidance in November. Total revenue declined 3.3% year-over-year to $110 million. It had been steadily moderating all year and Q4 had the second smallest year-over-year decline since the spinoff of the cable networks in 2008. As was the case all year, circulation revenue was stable versus prior year at $31 million.

Print advertising revenue was $68 million in the quarter, which was about 5% lower than last year, an improvement from the third quarter when year-over-year print ad revenue was down almost 8%.

Local advertising declines narrowed to just under 3% and classified was down about 9%. Within classified, automotive and help-wanted performed better than that 9% figure but the decline in the real estate category is stubborn and remains down in the double digits.

National advertising is even a smaller piece for newspapers than it is for TV and was down 22% in the quarter. The preprint and other line has been down most of the year but flattened out in the fourth quarter at $22 million.

Let's talk quickly about newspaper digital revenues. Reported digital revenues and reported pure play digital revenues were down 14%. This is the final quarter that I get to explain the change in the way we report digital revenues. You will recall in 2011 we began reporting digital revenue from certain of our digital offerings net of the amounts paid to our digital partners. If our 2010 revenues had been reported on the same net basis, total digital revenues would have been down 3.6% and pure play digital advertising would have decreased 2.8%.

On the expense side of the ledger, our newspaper costs moved up slightly due to the factors you've heard about before. The restoration of the 401(k) match, which had been suspended in 2009, and the incentive awards I discussed a minute ago.

The expense for newsprint and press supplies also increased in the quarter. This was driven by a small increase in newsprint prices and additional costs associated with the printing of single sheet advertisements tied to a reinvigorated print and deliver initiative.

Print and deliver is an effort that finds new ways to garner more local marketing dollars by utilizing our market penetration and distribution network. We believe it will produce several million dollars of incremental and profitable revenue in 2012.

Segment profit from our newspaper group was $9.6 million, down from $14.7 million in the year ago period. The syndication and other segment settled into a pattern that will be more typical of how it looks going forward now that we have outsourced the syndicate functions. Revenues in the fourth quarter were $2.5 million and there was a small segment profit.

Now let's turn to the nonoperating items. You may have heard us in our recent webcast reinforcing the financial case for the McGraw-Hill acquisition. Brian can tell you in the Q&A that the transition is actually going better than we had hoped and we are as enthusiastic as ever about the potential of these stations to create durable value for our shareholders.

Our streak of five quarters in a net cash position ended with the McGraw-Hill closing on December 30. We had $128 million of cash on the balance sheet at the end of the quarter but we borrowed $212 million to finance the deal. That is still a very healthy financial condition for a company that just made its largest acquisition in some time, especially in light of the fact that we believe we will generate significant free cash flow in 2012.

Despite the acquisition, we continued our share repurchases a decent clip. During the fourth quarter, we repurchased 1.6 million shares at a weighted average price of $7.39, a significant discount from last night's closing price. Through December 31, we purchased $51 million of shares at a weighted average price of $8.27 and we're still operating under an existing trading plan.

So that's the fourth quarter. Strong local ad sales in TV ahead of the 2012 political season, glimpses of fundamental improvements in newspapers, and declining expenses.

Before we open it up for you to ask your questions, I will touch briefly on the first-quarter guidance that was in the release. Let's talk first about TV because the acquisition compels me to give you two sets of numbers.

We expect our reported TV revenues including our new stations in Indiana, Colorado, and California to be up 40% and our reported TV expenses to be up 30%. On a same station basis, we expect revenues to be up in the low double digits based on the continuing strength of local spot revenue and we expect expenses to be down in the low single digits.

Over at the newspapers, we expect revenues to be down in the low to mid single digits and expenses to fall at mid single digit rate.

Expenses for corporate and shared services typically have a quarterly run rate of about $8 million. The figure will be about $1.5 million higher in the first quarter because of the accounting treatment of equity incentives for certain retirement eligible executives such as the CEO who sitting next to me. These shares normally vest over four years but we have to expense them right away when they are granted to retirement-eligible folks.

As a reminder of the full-year revenue guidance we gave last month, we expect TV revenues to increase more than 50% on a reported basis and more than 15% on a same station basis. Newspaper revenue is expected to be down slightly to approximately $400 million.

And new today was full-year guidance for below the operating line of your models. Depreciation and amortization is expected to be in the ballpark of $45 million and CapEx will be between $20 million and $25 million.

With that, we'll open it up for questions.

(Operator Instructions). Alexia Quadrani, JPMorgan.

Thanks. This is Townsend Buckles for Alexia with a few questions. First, your strength in core TV advertising that you saw in Q4 now to start the year appears to be a nice outperformance versus your peers, some of which have talked about some softness in January. Can you talk about where you have seen some of these stronger gains by category as well as geography if you're seeing differences there?

Sure, it's Brian. We had a pretty good quarter as you just mentioned related to our core business and much of that was in some of our top categories. Services was our top category, followed by auto, retail, food services, and travel and leisure, and all five of our top categories showed year-to-year growth. Significant double-digit growth in services, auto, and food services.

I know you guys typically look for auto. Auto was plus 25 in the quarter for us, wrapping up what turned out to be a heck of a year of consistent double-digit growth. And services another key category for us, which includes a lot related to the legal category, the medical category, home improvement, and investment category, that was up 23%. So pretty good growth in our core categories.

As it relates to just geography, the Midwest probably performed better for us as a whole than some of our other regions. Our top spot market, so excluding political just in terms of core growth was Cleveland, up over 10% year-to-year. Detroit was up almost 7%. We saw growth in Cincinnati. Tulsa performed very well as well and West Palm did pretty well in Florida.

I appreciate the detail. That's really helpful. How does the Super Bowl factor into your Q1 guidance, if at all?

You know, we have three mid market sized NBC affiliates, so less than $1 million of revenue.

Okay, looking for the full year, the slowdown in core TV revenue that sort of implied in your guidance, is that just conservatism against tougher comps or is that something you are seeing in the marketplace?

We are not seeing it in the marketplace. I think we feel good about the guidance we have provided. We are expecting a pretty active political season and so to some degree there will be a displacement factor that would impact our local and national spot business.

That makes sense. Just turning to the newspaper side, can you give a sense of where you guys are with your restructuring efforts? I know Tim is hard at work there and it looks like you're expecting costs to come down faster than revenue in Q1. Do you expect margin improvement for the year in the revenue scenario that you have outlined here?

Townsend, we do expect some margin improvement for the year but in terms of the restructuring, a lot of the realignment that we have done with the Scripps 3.0 plan has taken place realigning our businesses functionally, getting all of the incentives properly structured. There's just a lot involved there transitioning from a culture that is very decentralized and autonomous with publisher dominion to one that is functionally aligned. We've done a lot of that work and so now 2012 is really the year to focus on selling and generating great content.

The last piece that we are working on and we are rolling it out this year is a transition from 13 different revenue systems, both circulation and advertising systems onto a common platform. And so we are rolling that out across our markets in 2012 and probably into 2013, so that's the last piece.

But other than that, everybody is focused on what they need to do from a sales standpoint and we have made all of our publishers chief revenue officers which you're probably seeing a lot of across the industry, but their sole focus is on generating circulation and advertising sales and commercial printing and alternate distribution revenue in their local markets. We think bending the trend as it were is going to be a key to success for us in our local markets.

And we can see some stronger margin performance in the back half of the year as some of these other initiatives work through?

I hope so, but I want to be careful we're not talking about a return to the Halcyon Days here. We're just talking about generating if we can increase segment profit out of this portfolio of newspapers. That's the key for us.

Got it. Thanks a lot, guys.

Michael Kupinski, Noble Financial.

Thank you so much for taking the question and congratulations on a solid quarter, guys. I was just wondering in terms of the development, how has that been going for the lead-in programming to your news, given the prospect that you will not renew some of your popular syndicated programming later this fall? Are those plans underway now or any updates on that?

Michael, it's Brian. Yes, we've been working on this project for two years. It was probably 2.5 years ago that we made the decision to cancel our agreement with Wheel and Jeopardy! in seven of our markets and the development process started at that point. It's been incredibly active over the last two years and I am really comfortable with the products that we have in development that we will launch September of this year.

I do want to clarify one thing. You said that these are shows that would be used as lead-ins to our news. That's actually not the case in most markets. Really Wheel and Jeopardy! especially in the East Coast markets run in the 7 p.m. to 8 p.m. time period so it would actually be coming out of the news and serve as lead-ins to our primetime programming.

In the Midwest, where prime runs 7 to 10, we have about a half hour of programming that leads into prime and so one of our two shows, we are developing two new shows for those time periods. One may run as an early news lead-in and one may run out of news into prime time.

That's even a better opportunity. So in terms of the recent ratings, I was wondering if you can give us an update on that as well? And then as that relates to the McGraw-Hill stations, which I know have been lagging a little bit?

And then if you can just -- given the fact that you've kind of outperformed on political in the last quarter, I was wondering if you can update your thoughts on what your opportunities might be on political. It seems like your guidance is still a little light given the prospect for heightened political activity this year.

Let me start with the last point on political. We have had a respectable first quarter, Florida, Michigan, and Ohio -- I'm sorry, Florida, Michigan have done well with their primaries, but there's still a lot of volatility as it relates to ultimately identifying what are going to be the key swing states, how funded are the Super PACs. I think there is a giant question around just how long the primary season goes and then ultimately at what point are the two candidates identified where kind of the war chest get opened?

It's our feeling that the longer the primary season goes on, states in specific primaries will benefit but everyone else kind of for the most part sits on the sidelines and waits. And to some degree, dollars that could be spent ultimately may not be spent.

So I think the guidance we've said all along is that we expect to surpass our 2008 presidential cycle, which was about $42 million, and I think we feel, we continue to believe that's the case, but there's a lot of volatility in the process. We will be watching this Tuesday very closely. I think this Tuesday will clearly define for us where the process will go related to Super Tuesday and beyond. And so there's different variables that can really affect what the next quarter looks like based on what we see coming out of this coming Tuesday.

As it relates to the McGraw-Hill stations, our new four television stations, now that we have gotten in there, we are less than 60 days of operating those television stations. As Tim said in his opening comments, we are probably more excited now about the opportunity than even when we bid and acquired the stations. They are exactly what we thought, no surprises as we have gotten in and begun the integration process and we are very much on track in terms of pulling their best practices out so that we can scale them across our group and maybe looking at their operations to see what some of our systems and best practices can be scaled into their group.

And so I think, look, the first half of this year there probably won't be a significant monetary upside as we work into the processes, but long-term we continue to feel very good about the value of the investment that we have made there.

And in terms about your ratings on your legacy stations, can you give us an update on what that has done in the last quarter?

Yes, we are in the middle of the February sweep now. We're three weeks in. We have one week to go. We are very pleased with our news tracking which is of course the thing we can control the most. It has been nice to see a little bit of a bounce back on NBC, The Voice being in prime time and scaled across a couple of nights has provided a bigger audience than maybe we have seen in the past.

So I think our stations in terms of ratings are performing well in the first quarter as we had hoped and obviously we spend a lot of time here focusing on quality journalism and making sure that the news products that we put on our air are serving our communities and I think that investment will continue and it will continue to build strong brands that will create value in 2012 and beyond.

And the NBC stations I know are midmarket, but how significant will the Olympics be for that station group?

It will be as significant as it has been in the past, against midmarket. So it equates to a couple of million dollars, less than $5 million across the three stations, so I guess in the big scale of things, probably not overly material but a couple million dollars certainly helps move the needle a bit.

And then Gannett recently formalized the move toward a pay for content model with a substantial increase in subscriptions, prices and so forth. I know that you have not formalized your digital initiatives in the newspaper group at this point, but do you have some comments on the general plan that Gannett had and how this fits into your thoughts and what you might be testing in some of your markets at this point?

Michael, it's Rich. Yes, and again, we are looking at plans for not just TV markets, not just newspaper markets but also in our TV markets as well.

I will maybe let Tim start and talk about what he's doing in the newspaper markets. Then I will come back for just a second.

Sure, what Gannett mentioned during their Analyst Day is in keeping with where we are heading as well now. I think maybe there will be some differences with respect to how metering is handled and I think a lot of newspapers are kind of experimenting with that right now to optimize the user experience and the audience and a whole lot of other variables.

We have a test going on right now in Memphis where we do have a pay wall, metered pay wall up, smartphone and tablet applications up and running, priced. And so we are learning a lot from that but we are also paying close attention to the experiences of other newspaper companies.

But like Gannett and like others, we are encouraged by the opportunity to begin to generate more revenue from our consumer-facing business and frankly, circulation revenue has been a fairly stable revenue stream for us and like Gannett, we see that as an opportunity to grow and support our journalism in our local markets likely by bundling with home delivery full access across the digital platforms and then doing some strategic pricing around digital-only.

But I think the time is now given all of the technology advances and consumer behavior that has changed over the past couple of years with respect to their approach to paying for content, the time is right to do this and it is our intention to get this up and running, get the platforms up and running across our newspaper group by the third quarter, and certainly by the end of this year rolling out a similar strategy to Gannett's.

Michael, it's Rich again. If you stand back I think we kind of think this debate over pay versus free is kind of misguided. There should be services that are free and there should be services that are paid and if you can build high-quality products that people want to pay for, that's what you should do.

We are already pretty deep into the paid. We launched a lot of paid apps in December as I said for the holiday season and again, those cut across newspaper and TV markets. We are as aggressive in our TV markets as we are in our newspaper markets and we see a very good future there.

Barry Lucas, Gabelli & Co.

Good morning and thank you. Maybe just two if we could start with Brian. We had some legislation in place or moving forward on spectrum clearly with the purchase of the McGraw-Hill stations. Scripps is not a seller of spectrum or you don't appear to be a seller in any auction down the road, but how comfortable are you with the provisions, the hold harmless provisions and what might you think is the FCC's Plan B. since nobody seems to be a seller?

I can't speak to what the -- Barry, it's Brian. I can't speak to what the FCC's Plan B is but what I can tell you is that we are not a seller. We've been in communities for 30, 40, 50 years serving those communities and with network-affiliated television stations and strong news brands and we expect to be in those same communities and maybe some others for another 30, 40, 50 years. And so that's the foundation of who our Company is, so I don't see this new regulation changing our course at all.

As it relates to our comfort zone with the language of the bill and the protections that are in there, I think what's in there is the best case scenario for broadcasters. I think it was inevitable that there was going to be an auction offered. Obviously the government needs the money. The FCC wants some spectrum. They will get some spectrum. I don't know how much and that's their issue to work out.

But ultimately the protection is for our ability to continue to serve our entire service areas. The protections on the northern border were a huge issue to us having television stations in Cleveland and Detroit and the fact that we will be held harmless if we choose not to sell, the reality is that if we have to move any of our channel positions that will be made full on those expenses, I think are all things that were important to us. We were pleased to see that every one of those was within the bill.

And so ultimately I think it was probably the best of a situation that we'd prefer probably didn't happen but I think everyone gets what they want and we stay in business we stay very focused on the communities we are in.

Great, thanks. Maybe sneak one in for Rich and Tim. You closed the year in very good financial shape even after the purchase of the MHB stations. This should be a very good year for free cash flow generation with the help of political advertising on Brian's stations. So I don't know if you can drill down a little bit but maybe just really identify the priorities for the use of cash when you've got a modest buyback program for what is about reinstituting the dividend or what have you?

Barry, it's Rich. Let me sort of walk you through I guess let's say four buckets for how we would use cash. First, as we just talked about, we are investing in and building digital businesses and we're doing that against business plans that we think have a good return. That is not at this point looking like it's going to consume an enormous amount of capital but we do want to continue to invest in the digital businesses.

Second, we want to expand our business in markets where we already have valuable franchises especially in our TV markets, where we might have an opportunity to pick up a second station or create partnerships or just in some way build out and take advantage of the scale and the brand we already have.

As you said, we think our shares are a good deal. We tend to go after them and then also now we can pay down a little bit of debt and do that at the same time.

I don't know if I would put those in any specific order because it always depends on what we think is -- offers the best return. But those are probably the four big buckets and then obviously we always at every Board meeting talk about dividends.

Tim, do you want to add anything?

No, I think that is good. So we've got as you know, about $24 million left on our share repurchase plan and I think it's quite likely that we will be completing that program in 2012.

We did well on our share repurchase last year based on where the stock is trading today.

Okay. Thanks, Rich.

Craig Huber, Huber Research Partners.

Yes, good morning. I apologize, I just got on the call late. Can you talk about cost expectation for newspapers after the first quarter and for the remainder of the year here? Given these extra digital investments, you said it would be small but I'm just wondering if you think you'll still be down roughly mid single digits the remaining part of the year?

Crag, it's Tim Stautberg. I'd say that's probably a fair estimate of the way that we have approached 2012. We made some very difficult decisions in the fourth quarter to position ourselves for at least stability if not growth in segment profit from the group for 2012. So I think that [ease] up good control over expenses the balance of the year for the newspaper division and a lot of the digital efforts, I don't know that they're going to amount to sizable expense hits to the newspaper group the back half of the year.

Then I have a similar question on the TV side for costs. After the first quarter here adjusting for the McGraw-Hill stations, what are you currently budgeting your cash cost or the percent change year-over-year please?

It's Brian. I think consistent with first quarter, we're looking at probably being down low single digits through the year.

Okay, that's good to hear because obviously that's a big opportunity for you guys on the cost fund, both segments here particularly versus your peers and stuff.

Another nitpick question if I could and you might have covered this. On the newsprint side, what was the percent change in the quarter for consumption versus the average price? Percent change?

I think both consumption and price were pretty flat. Price up just a little bit. Consumption -- now we are doing a fair amount of commercial printing work, too. So, Craig, that's factored into the consumption side, but frankly I think we are flat with both.

I assume for the year -- what are you assuming for newsprint prices? Flattish versus a year ago?

For 2012, I think that would be the expectation, maybe a little bit higher if -- depending upon how the backend of the year goes. You know, the big question mark is clearly you've got capacity issues and the suppliers and their own financial situation, but then energy prices, which is a big wildcard that we just don't know the balance of the year what oil prices are going to do, and that's a big input into the cost for the newsprint providers.

Great, thank you.

Dennis Leibowitz, Act II partners.

Thanks, just most have been answered but your guidance for newspapers for the year indicates a decline of 3.4%, something like that, which is pretty much what you had in the fourth quarter. Is that conservative or does that imply basically no improvement in the pace from what you are experiencing?

Dennis, it's Tim Stautberg. We are approaching 2012 conservatively. We have been through since 2007 many, many difficult years, so we want to be very, very cautious in the way that we approach and plan our spending against the opportunities in our local markets. We still are challenged by advertising decisions made by the larger major retailers, not only with their run of press display advertising in our paper but also their pre-prints and that's the big unknown is to what extent they continue to reduce their newspaper budgets.

We can control local advertisers in terms of the energy and effort we spend meeting with them and proposing schedules both in print and on digital, but a lot of the major retailers, their decisions are made in faraway places. So I think that's the big caution for us for the balance of the year.

Okay, thanks.

Michael Kass, Blue Mountain Capital.

Thanks for taking the question. I was wondering if you could give us any sort of insight in terms of quantifying both the investment and the return that you are looking for in these digital investments. In particular just kind of looking at the digital lines in each segment, it looks like newspapers are basically -- digital is tracking with local ad spend and digital is only a little bit better than television. How do you think -- how much are you investing in these? Kind of what's the return hurdle and how can we kind of track that going forward?

Sure, it's Rich. So what you are looking at today also is sort of steady-state and you are looking mostly in the rearview mirror as opposed to looking ahead. So what we have done is combined all of our resources across the Company into one organization.

On the cost side, going into this we also picked up a lot of advantages of scale and consolidation, so we are reallocating a fair amount of expense that will help us increase that revenue line we think nicely without having to put a lot of additional capital in and put a lot of new resources into the P&L.

So I think going forward what you're going to see is a lot of investment in new products that we will try to track for you at least by example by product and give you an idea of how we are doing.

The hurdle is pretty easy. We want to show a return on investment that is accretive to the value of the Company. So we would be looking for a pretty strong return every time we put incremental capital into building digital products.

But like I said, we have just put the organization together. We launched a lot of new products at the end of the year. But as we head on through this year, we'll begin to provide I think a lot more clarity for you and help you track along with us.

But we are looking for a strong return. This is not a hobby or a misguided adventure. We think it's a very important development if we are going to continue to serve and take good cash flow out of these markets.

Thanks.

Howard Rosencrans, Value Advisory.

Hi guys, thank you very much. It seems like you've got some impressive momentum in the TV business. Regarding your buyback, just trying to understand how you are addressing it. I believe you indicated that the average cost on the 51 you have done was 8 and a little. Is that what you said?

I believe that's right, yes.

And Q4 was 7 and change. Is there sort of a number you have in your mind in terms of stock price as to where you would not be as aggressive or what are the metrics you are using? How are you measuring your return? Are you looking out a couple years and saying okay, we will be generating X when the McGraw-Hill properties are really kicking. We will get a turn in newspaper. How are you looking at what sort of number you might be paying for your stock?

Sure, Howard, so we look at this on a couple of different bases and it is really kind of the most important one as we look out at their cash flows for both our existing properties as well as the recent McGraw-Hill acquisition, look at them out over the next four years based on where we think the businesses are going to go. And then really look at a DCF basis and see what we think the value of those shares are. And we have been active in buying the shares because we think that there's a gap between what we think they are worth and where the market is.

And so we will continue to do that as long as we have got authorization from the Board. As I mentioned, we've got about $25 million left and as long as we believe that there is still a good investment opportunity for us.

Okay, and the second question is regarding the TV stations, both the TV stations that you have and the acquired stations. Just give me a quickie answer on one thing but then follow-up with the balance. I am not exactly clear on where the ratings are of the stations. If I'm not mistaken, and please correct me, you are pretty much running last or near last in most of your markets. Obviously suggesting there is plenty of room on the upside, although maybe I mistaken on where you stand on a ratings standpoint both at the legacy stations and the McGraw-Hill.

But I'm trying to understand, do you expect that over time these stations will move to being number one in the market, number two in the market, number three in the market? Just in terms of a global sense, what sort of investment you feel like you need, whether you need sort of an outsized investment to sort of get there and whether one day you envision these stations will be -- will sort of get the margins that competitors get?

Is that sort of a three-, four-year goal? Your stations are I don't know, 15, 20, low 20 sort of margins in most of the industry. The good operators with good stations can run 30 plus. Do you need to really be a Fox station to get there? Anyway, whatever color you can provide, thank you.

Howard, it's Brian Lawlor. Let me begin by just speaking to our ratings position in each of our markets. We are not last in all or anywhere close to all of our markets. We have several number one television stations. I think we have three number one television stations of our legacy television stations. Most of our others are number two and three in their market. I think almost all, maybe with the exception of one or two are in the top three in competitive position in their market with several strong number ones and several very competitive number twos.

So we do run good television stations. As it would relate to the newly acquired television stations in Denver, San Diego, Indianapolis, and at Bakersfield, these are basically about number three to number four in their markets and in one or two cases, they actually are number two in news. I think we have huge upside with them.

As it relates to A, ratings improvement, we do think that there is an opportunity to increase the exposure of the brand, attach a loyal audience with some investment we will make, and be able to realize a return on those investments.

But also as it relates to margins, this is something that since the split of the Company 2.5, almost 3 years ago, we've been focused on trying to build our margins. We have a slight disadvantage as it relates to retransmission opportunity because some of our rights still sit with SNI but I think we've proven over the last three years that as those rights come up, that we are negotiating very aggressive rates at or above market value and so you've clearly seen those returns. Those returns will continue consistently for a period of time.

The decisions we have made in programming are A, because we think we can do it better; and B, because there's a better upside as it would relate to margin and those plans have already begun to play themselves out.

We launched Right This Minute last year on (technical difficulty) television stations in lieu of buying syndicated programming. That has had a very positive return to the bottom line. That will expand to 12 of our markets this year at the same time that we launch the new programming, the half hours that will replace our access programming.

We have implemented a fair amount of hubbing and efficiencies across our group which have begun impacting -- positively impacting our bottom line. So I think for the long-term, you've seen good improvement in our margins over the last 2.5 years since the split of the Company. We expect that to continue. We see big upside as it relates to the new television stations we just acquired and it is absolutely our plan that over a period of several years and again we will continue to be slightly disadvantaged in retransmission for several years, but as it relates to everything else, I think we've got momentum so that we will absolutely be competitive with our peers on a margin standpoint down the road.

Okay, it's very, very helpful. Thank you very much and I apologize for my confusion on where the legacy station ratings stood. Thank you very, very much.

(Operator Instructions). Gentlemen, it does appear at this time there are no further questions from the phone lines. Please continue.

All right, I would like to thank everyone for their interest this morning. Brad, thank you for your help and go ahead and begin your wrap up.

Thank you, sir. Ladies and gentlemen, this conference will be available for replay today after 11 a.m. Eastern through midnight, March 3. You may access the AT&T Teleconference Replay System at any time by dialing 1-800-475-6701, entering the access code 233993. International participants may dial 320-365-3844. (Operator Instructions)

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