Welcome to the Third Quarter 2013 Media General, Inc. Earnings Conference Call. My name is Janine, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Lou Anne Nabhan. Lou Anne, you may now begin. Lou Anne J. Nabhan: Thank you, Janine, and good morning, everyone. Welcome to Media General's Third Quarter Conference Call and Webcast. Earlier today, we announced third quarter 2013 results. The press release is on our website. A transcript of the call's -- the comments from today's call will be posted immediately after the call, and a replay will also be available. Today's presentation contains forward-looking statements, which are subject to various risks and uncertainties. They should be understood in the context of the company's publicly available report filed with the SEC, including the section on Risk Factors. Media General's future performance could differ materially from its current expectations. Our speakers today are George Mahoney, President and Chief Executive Officer; and Jim Woodward, Vice President, Finance, and Chief Financial Officer. I'll now turn the presentation over to George. George L. Mahoney: Thank you, Lou Anne, and good morning, everyone. Thank you for tuning into our call. I'll begin with our third quarter results. As expected, our total revenue decreased in the quarter as a result of the near absence of last year's record Political and Olympics revenues. Total station revenues this year, less agency commissions, were $78.5 million compared with $93.8 million last year. Local gross time sales were $43.7 million compared with $47.4 million last year. National gross time sales this year were $22.9 million compared with $24.9 million last year. Core revenues, that is Local and National gross time sales combined, were $66.6 million this year compared with $72.2 million in the year-ago quarter. Excluding $10.3 million of Olympics incremental revenue from last year, the prior-year comparison becomes $61.9 million, and it represents a year-over-year increase of 7.6%, in line with the guidance we provided last quarter. Also adjusting for the Olympics, all major advertising categories increased in the third quarter this year. Our digital revenue continued to grow and increased 21% from last year's third quarter. This increase represents an acceleration from the excellent growth we saw in the first and second quarters this year when our digital revenues increased 18% and 17%, respectively. We continue to expand our digital audience. When comparing the second quarter of this year to the third quarter, we experienced a 21% increase in traffic growth across all platforms. Retransmission revenues this year were $13.2 million compared with $9.4 million last year, a 41% increase, despite having not yet renewed our contract with DISH. We plan to have the benefit of that new contract on July 1, but we voluntarily extended our agreement until September 30. Then, September 30 passed without a contract, and our stations have been dark on DISH since that date. It's important that we reach an agreement that begins to provide Media General with revenue that's more commensurate with the audience we deliver, and that's the point of our negotiations. Before we turn to our CFO, Jim Woodward, for more particulars on the quarter, let me say that we continue to focus intently on increasing our broadcast cash flow. In the third quarter of this year, broadcast cash flow increased by 21% from $19.3 million to $23.2 million compared to the previous odd-year of 2011. And our broadcast cash flow margin increased to 30% this year from 29% in the third quarter of 2011. That's exactly what we promised, and we're pleased with the progress. Let's now hear from Jim, and I'll then give you an update on our transaction with Young. James F. Woodward: Thank you, George. Operating income in the third quarter of 2013 was $8.2 million compared to $22.5 million in the third quarter of 2012. The decrease is due primarily to the virtual absence of Political and Olympic revenues in 2013. In addition, this quarter's operating income included $1.2 million of merger-related expenses. Total operating costs in the third quarter decreased by approximately $1 million, or 1.3%, to $70.3 million. This decrease is attributable to lower corporate and other expenses. Station production expenses increased 1.6% due to an increase in affiliate fees. Station selling, general and administrative expenses increased 8.3% due to merit increases, and because of 2 items for which there were revenue offsets: sales incentive trip expenses and higher revenue-sharing expense from our increased digital media revenues. Our stations continue to deliver a strong performance, managing discretionary spending in the third quarter. Corporate and other expense decreased $4.3 million, mostly attributable to the absence of a $3.3 million severance charge recorded in the third quarter of 2012 and savings resulting from the reduction in corporate staffing that we implemented in the second half of 2012. Partially offsetting this savings was additional expense related to the increase in our stock price and the impact on our stock-based compensation plans. During the quarter, Media General stock price increased from $11.03 to $14.26, a 30% increase in value. Our Core corporate expense in the third quarter was $4 million compared with $5.6 million last year, a nearly 30% decrease, and is attributable to last year's corporate restructuring and our ongoing efforts to manage expenses. When we announced our corporate restructuring, which was undertaken in response to the sale of the newspapers, we communicated an annual target of $20 million in Core corporate expenses. We now expect that number to be $17.5 million, a $2.5 million, or 13% improvement. We continue to look for additional opportunities. Total interest expense of $20.3 million was flat to last year. Tax expense was $2.5 million in the third quarter compared with $3.4 million last year. Tax expense continues to be noncash and related to our naked credit issue as previously discussed in our public filings. Our net operating loss or NOL carry forward for tax purposes was approximately $350 million at the end of the third quarter. Our merger with Young Broadcasting may partially restrict our ability to utilize the existing NOL, but preliminary estimates indicate that we will be able to utilize approximately $300 million of the $350 million. In addition, Young has existing NOLs of approximately $200 million, which are currently subject to an annual use limitation of $11.1 million. The study is underway of the combined NOL position, and that will determine the total available and maximize the annual utilization. The study will be finalized after closing. Preliminary findings are encouraging, and we would expect to be able to utilize approximately $500 million of the combined NOLs over the next 15 to 20 years. EBITDA in the third quarter, adjusted for merger-related expenses, was $15.4 million this year compared to $28.5 million last year. The year-over-year change mostly reflects this year's lower Political and Olympics revenues. Capital expenditures in the third quarter were $4.4 million compared with $3 million last year. The current quarter spending was spread over all stations, and mainly for equipment upgrades and replacements, vehicles, and building and set improvements. As previously announced, our new credit agreement will be in place following the merger -- completion of the merger with Young Broadcasting. As a reminder, the new credit facilities consist of a $60 million, 5-year revolving credit facility, and an $885 million, 7-year term loan. The revolving credit facility interest rate is LIBOR plus 2.75%. The term loan interest rate is LIBOR plus 3.25% with a 1% LIBOR floor. In addition, there is the $32 million term loan that will place certain debt on Young's balance sheet. It has an interest rate of LIBOR plus 3.25%. Proceeds from the new credit facility will be used to fund the $50 million contribution to Media General's pension plan and to repay all the outstanding debt of Media General and Young Broadcasting, including associated call premiums, transaction fees and expenses. Our new financing will reduce the combined current annual cash interest expense for the 2 companies from $75 million to $39 million. As we look to the future and our merger with Young Broadcasting, we're excited by the opportunities the merger will provide our shareholders, employees and customers. With that goal in mind, we are working daily and diligently with the Young management team to ensure a smooth transition and integration of the 2 companies. We are on track to capture the expected $15 million of operating synergies that we discussed with you before. We continue to expect to realize the majority of the savings within the first 12 months of closing, and we'll continue the process to evaluate and then cover additional savings opportunities. And now I'll turn it back to George. George L. Mahoney: Thank you, Jim. Let's talk about where we stand on our merger with Young. A week from today, on Thursday, November 7th, we'll hold a Special Shareholders' Meeting to consider and vote on the matters necessary to complete the merger. And provided there's a good result there, and our FCC approvals also are in hand, we expect to close on the transaction very quickly after the shareholders' meeting. I've traveled to almost all the Young stations in the last quarter. What I found further confirms that both Young and Media General approach their markets in the same ways. That shared broadcast vision will further animate and strengthen the smooth integration Jim described. And that in turn, means we'll be in a position to capitalize even more quickly on our new combined strength. Media General expects to further enhance shareholder value as a result of several benefits of the merger. Our strong balance sheet and enhanced credit profile; our new, long-term financing that significantly reduces interest expense, and so allows us to repay debt even more quickly; and a net operating loss carryforwards that continue after the closing, which favorably impact our cash taxes. As we said, together, Media General and Young are positioned to participate actively in our industry's consolidation, and to do so far better than either Media General or Young Broadcasting could have done alone. Altogether, it's a very bright future. And now we'll be pleased to take your questions.

[Operator Instructions] We have Sana Ronin[ph] on the line with a question.

Just 2 questions. Could you refresh us on how much of the term loan you've drawn down on, and what's the schedule expected for the remaining drawdown? And then secondly on the FCC approval, was that delayed by the shutdown at all and when do you expect to get that? George L. Mahoney: Jim, do you want to take the first part? James F. Woodward: Yes. We have not drawn down on the new term loan as it's not effective until the closing of the merger. George L. Mahoney: And on the FCC, we don't think we've actually been impacted too much by their shutdown. And so we expect the FCC's on track, and we're hopeful that we'll be able to get everything in hand quite soon.

We now have a question from Barry Lucas. Barry L. Lucas: A couple of little things. George, could you provide a bit more color at least on categories, in particular auto, what the percentage moves were there? George L. Mahoney: Yes, I'm happy to, Barry. You remember that what we've said was that net of Olympics impact, all of our categories, all major -- all of our major categories are up. And so we see double-digit increases in auto. We see double-digit increases in telecom. We're pleased with increases, additionally, in professional services, retail, entertainment and financial. It's a good picture for us on year-over-year growth in Q3. Barry L. Lucas: Great. And if we could even shift gears a little bit to geographies. I mean, keep looking at FLA, your largest market. What's the trend in the West Coast to Florida there? Any improvement? George L. Mahoney: Well, the market's been soft, as you know, all year. What we're particularly pleased about is some new audience development initiatives that we have, including our signing a [indiscernible] partnership with the Tampa Bay Buccaneers. The first step for us is to make sure that we gather the largest possible audience, and that's having some benefits. So we've done that. We've started a 4 o' clock news in the market. And we're real pleased with the Local growth that we're beginning to see trend. So that part is trending up for us in Tampa, and we feel good about the initiatives that we put in place and their impact on our revenues. Barry L. Lucas: Great. Two others, if I may real quick. This discussion or the dispute with DISH has been fairly protracted, and my sense is we're not talking about a nickel or dime per sub, per month for Ergen, that he's got maybe different fish to fry. And maybe you can just talk a little bit about -- not about that, not the negotiations necessarily, but what his point of view may be, and what motivates him, what moves him to resolve the issue? George L. Mahoney: I hear you, and while I might want to speculate on some of that, Barry, it's pretty hard for me. What I do have is information on how our 2 companies have behaved up to this point. And as you know, Media General has never gone dark before with any cable or satellite provider. DISH, on the other hand, has quite a history. It's done this 32 times in the last 3 years. It's been involved in the last 2 years in fully half of all the blackouts that have occurred in the country. So it's used to this, and we're not. But at the same time, it's important to us that we make some meaningful gains on being compensated for the audience that we deliver to DISH, to all cable and satellite providers. And the numbers on that are pretty interesting, and I help -- I think that they helped to explain broadcasters' positions. Broadcasters deliver 35% of the audience to cable and satellite providers, yet we receive only 7% of the fees that they pay for their content providers. So that's quite a disparity and it's a gap that needs to close. And so as I said, that's what our negotiations are all about with DISH. Barry L. Lucas: Okay. Thanks for expanding on that, George. Last item for me. Other than the variance of -- I think about $27 million of Political from 4Q of last year, 4Q of this year, give or take. How is the business trending? George L. Mahoney: Business actually looks pretty good, Barry. We're pleased. So you've seen pretty good third quarter, we like that, our numbers there. And the fourth quarter, our pacing looks good, and it also looks like it's improving. So we're pleased with the way the year is coming in, and we're pleased with the way we expect to finish.

Next call comes from Steve Roberts [ph].

Just to kind of follow up on the DISH contract. With the merger being so close, I'm assuming you're trying to negotiate for both companies combined? Is that the major sticking point on the contract, or is it more just the price per sub [ph], or price per household? George L. Mahoney: Steve, I know you can appreciate, I really will not get into the details of what we're talking about day-to-day with DISH.

Okay, fair enough. On corporate and other expenses, when we're looking forward on that, what -- should we just kind of flatline that number going forward? Or how should we think of that going forward? George L. Mahoney: Let's ask Jim to respond on that one. James F. Woodward: We're still developing our corporate budgets, our combined budgets. But flatlining that is probably not going to be a good approach. I wouldn't expect that number to go up substantially, but we'll have additional directors, and those fees and the related compensation, so flatlining wouldn't work. But I wouldn't expect it to go up significantly.

Okay. And will there be a -- once the merger is completed, will you be able to come -- do like a combined forecast for '14? James F. Woodward: We will definitely have budgets for '14. Whether we share that guidance or not, we haven't determined yet.

Next call comes from Michael Needleman[ph].

You mentioned the digital side of your business. I think you said it was up 21% in terms of numbers. Can you help me out a little bit in terms of breaking that out a little bit, or what it actually was in terms of revenues to digital? And how are you kind of describing that bucket in terms of what you're actually deriving that revenue from? And I had another question. George L. Mahoney: Okay, you're right, Michael. What we said was -- I used 21% 2 different times. And so what we said was that our revenue increased Q3 a year ago to Q3 this year, our revenue increased 21%. But also just in the change from Q2 to Q3, we had a 21% increase in our traffic on our digital side. So there, I think Media General is pretty pure play on digital. There's no other noise or other elements of digital. It is purely page views on the big web and mobile.

And do you break out the revenues other than just the increase? Because all you're saying is the increase in revenues, you didn't give the amount. George L. Mahoney: Well, I think it's in -- I think it was a chart. If -- when you look behind the release, you'll see that we provide the Q3 number of about $3.2 million in revenue this year compared to about $2.65 million or so a year ago in Q3.

Okay. And just quickly, 1 quick follow up on this. How much are you spending in this area as far as developing the sites and the expense on side of the equation on this part of your business? George L. Mahoney: Well, remember that what we did was we changed to a new CMS system this year. And I won't give you specifics on the dollars, but I will tell you that what we had before was pretty much a customized, homegrown system that was directed particularly for newspapers. And they have different needs. And so what we're able to do is reach out and get a broadcast-only system from WorldNow. And that gives us state-of-the-art, it also gives us some efficiencies and it also gives us new opportunities for revenue growth. So we're real pleased with that CMS system.

And my last question is in terms of the area of technology, what do you think that does in terms of your business? And possibly, how do you think competitively that kind of works its way out? And also, do you think that, that potentially has any kind of positioning or thoughts as far as negotiation with retrans? George L. Mahoney: You bet. Let me just give you the background for Media General, and I think for all broadcasters who considered the issue, is the Aereo is nothing less than flat-out piracy of our signals. And that's why you see so much litigation filed against Aereo. As you know, the Aereo litigation, in the broadest sense, has had sort of mixed results. There was the Aereokiller, now with a name change. But the Aereokiller litigation on the West Coast where broadcasters did quite well. In other parts of the country, they haven't done as well. And what we do is expect this will ultimately get to the Supreme Court. But for us, the issue is copyrighted material that's being taken in a context where everyone else is paying us appropriately as they should be paying us for our content. So we really can't stomach a world in which there's somebody out there that's taking something for which we believe we should be paid. So we think that, ultimately, the courts are going to resolve this the right way, which means that, ultimately, we believe the Aereo will have to pay retrans fees just like everyone else.

Next call comes from Ross Berner[ph].

A couple of quick questions. Can you give any insight in terms of the cash balance at Young? George L. Mahoney: No.

Okay. When will you be able to do it? Just after the close, I imagine? George L. Mahoney: Yes, after we close the deal, we'll have a combined cash balance, and that'll be the first time you get to see that.

Okay. My second question is about the $15 million of synergies. Is that really just structural operating synergies or is that -- have anything to do with contract-related synergies? Because it would just seem when you -- a merger like this between 2 comparably-sized companies, that that's a relatively low number. So can you maybe just give us a little more clarity on how to think about that? George L. Mahoney: Thanks, Ross. Jim's got a huge grin on his face because this is one of his favorite subjects. So I think you'll be pleased to hear, this is not one of those soft numbers that you mentioned. James F. Woodward: No, and it's both. We expect to pick up some synergies, obviously, from combining the operations, as well as negotiating combined contracts. And that obviously includes retrans, but there are other service contracts that both companies use that we'll be looking to renegotiate and gain some synergies there. And as far as the low number, I mean the way I've described that number is that if you are holding a couple of coffee this morning, that number is as real as the cup in your hand. It's a number we can put our hands on. And yes, as we continue to operate the company, we expect to do better than that. George L. Mahoney: Let me ask Jim, to just refresh us a little bit, too, on the financing synergies number, and how it actually turned in as we came through our refinancing this past summer. James F. Woodward: Well, the refinancing synergies were better than we had anticipated because the market was favorably inclined to our new credit profile and structure, and that's where we get to the $39 million of annual cash interest cost. And that's -- as you can see, $75 million to $39 million is very accretive to free cash flow. George L. Mahoney: Nearly a doubling, really, of what we expected on the financial synergies, Ross.

Right, right. Okay. And one other quick one is on just the NOLs seem like their significantly more favorable than we were projecting. Is -- anything that caused that? Or is it just kind of further analysis of the Young NOL that they had? James F. Woodward: Well, it's a further analysis of both sets of the NOLs. And like you, I am pleased with how that's going, and we'll finish that study after we close. But to have $500 million or so of NOLs to use in the future is, once again, it's very, very accretive to free cash flow. So it's really a combination of the 2. And I think the results of that, if I could brag on some folks, is that we have some very smart people looking at it, both internally and externally from both sides, Young and Media General, so they're doing a terrific job.

Okay. And my last question's kind of a broader, longer-term question. Just do you -- when do you think the conversation around spectrum and demand for spectrum that could lead to the monetization of it, not you specifically but for the industry. When do you think that might become something that's topical? George L. Mahoney: Well, it's obviously topical now after sitting at the FCC, Ross. They will still tell you, if you ask, that they expect to have a spectrum auction next year. We don't think that's actually the way it will turn out because there are a lot of things that are still in play, and they've also had a harder time probably delivering on that timetable because they haven't been fully staffed at the Commissioner level at the FCC itself. So we think that the auction is likely to stretch into 2015 at least. So on the pure spectrum side of things and auction kinds of things, we don't expect a really active conversation even in '14 on that. But I'd ask you to begin looking a little bit at some of the next generation things the broadcasters are talking about because that's an important an initiative for broadcasters that I believe, personally, industry will embrace. And there, there's some huge opportunities for us going forward. There's a lot of work yet to do to get there, but it's very exciting. And from a company that prides itself on innovation, this is one of those key things to be looking at for the future.

Is there a push back on the industry in general, getting benefit and monetizing an asset that they've -- that was given, that wasn't paid for? Is that... George L. Mahoney: What I'll tell you is that particularly, people who are network affiliates like Media General, appreciate all that they can do with their spectrum. And so what they've said is that they don't anticipate participating in the auction that the FCC has. So I don't know that it's pushback. Remember, the auction's completely voluntary from broadcasters. So it's not really a question of that. It's a question of looking at spectrum and realizing what you can do with it, and saying, look, the greatest value for our shareholders is to keep that spectrum, not participate in the auction, and then try to figure out what additional ways we have to reach audience, so that's the mobile DTV kinds of things that you've seen out there, or potentially down the road, to have some other services that we can carry alongside of our broadcast signal.

[Operator Instructions] At this time, we have no further questions. I would like to turn the call back over to Mr. Mahoney. George L. Mahoney: Well, thank you very much, Janine, and thank you, everybody, for tuning in this morning. As you can imagine, these are very exciting times for Media General. We are looking forward to closing quickly on our transaction with Young. We will look forward to briefing you on all of that, giving you some additional numbers, but also being able to talk about what this means as we put our 2 companies together. We feel really good about where this is. And as we've said, we feel that the whole flow of the transaction has accelerated and gained more steam the longer we've been involved with it. So my travels were another key piece of that and seeing an alignment of 2 cultures. So I'm particularly pleased with where we are right now, and we will look forward to briefing you all in the future. I thank you very much for your attention today. Goodbye.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.