Welcome to the Fourth Quarter 2013 Media General Incorporated Earnings Conference Call. My name is Ellen, 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. Ms. Nabhan, you may begin.

Thank you, Ellen, and good morning, everyone. Welcome to Media General's Fourth Quarter 2013 Conference Call and Webcast. Earlier this morning, we announced fourth quarter and full year 2013 results. The press release is on our website. A transcript of comments from today's call will be posted immediately after the call, and a replay also will be available. Today's presentation contains forward-looking statements. They 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, Senior Vice President, Finance, and Chief Financial Officer. I'll turn the presentation over to George now.

Thank you, Lou Anne. Good morning, everyone, and thank you for tuning in. We are very pleased to be able to give you this morning, the first installment report on the new Media General. A lot has happened since our last third quarter call on October 31. Specifically, less than 2 weeks after our last quarterly call, we closed on our all-stock merger with Young Broadcasting. We said then that the November 12, tax-free combination of our 2 companies would be immediately accretive to free cash flow, and we talked about our strong balance sheet and attractive synergies. And soon after the closing of the merger, we paid off all the existing debt of both companies using new credit facilities we'd arranged over the summer. This refinancing lowered our annualized cash interest expense by about $36 million compared to both companies pre-merger costs. And our good performance and the strong balance sheet we mentioned now has allowed us to deliver on the net leverage we promised. When we announced the merger, we estimated leverage at 4.3x by the end of 2013. In fact, we closed out 2013 at 4.27x. We also have promised $30 million of total operating and financing synergies when we announced the merger. And we said they'd we realized in 12 to 15 months from the closing. Today, our projected synergies stands at $44 million, including $29 million of financing synergies and at least $15 million of operating synergies. We believe the operating synergies will go higher. Let me pause for a moment to give you an overview of our company. We own or operate 31 network-affiliated television stations in 28 markets. Our stations reach 16.5 million, or 14%, of all U.S. TV households. We operated across the full range of market sizes, from San Francisco, the…

Thank you, George, and Good morning. I'll first provide some highlights for the full year 2013 that I think will be helpful as you build your models for 2014. Before I begin, let me explain that in accordance with Generally Accepted Accounting Principles, the merger was accounted for as a reverse acquisition. While Media General Inc. is the legal acquirer, and the name of the combined entity for financial reporting purposes, the historical financial statements of Young, which was deemed the accounting acquirer, are now the historical financial statements of the new Media General. Consequently, the official consolidated financial statements reported in our press release, this morning, included the Young operating results for periods prior to November 12, 2013. That means that these results do not include most of legacy Media General's results in 2013 or any in 2014, I mean, 2012. Because legacy Media General results represent more than half of the combined company's net operating revenue and broadcast cash flow, we appended supplemental combined company information to the press release. The as adjusted results provide information for the combined company by including legacy Media General revenues and expenses for the period prior to November '12. No adjustments were made to this data. It was simply added together. The combined figures in the supplemental information do not include any of the financing or operating synergies created by the merger. This supplemental combined information does not purport to be indicative of what would have happened had the merger occurred at the beginning of 2013, nor is it indicative of results that may occur in the future. However, we think the supplemental information on the combined company will be helpful to you. In addition, to the extent you want to build any prior year's perspective into your models, you will find…

Thank you, Jim. Before we move to questions, I'd like to add that we're making excellent progress with the integrations of Media General and Young. With our values, management team, and stations aligned, and working together, we're sharing and quickly assimilating the best of what each company brought to our merger. I am very proud of everything we're accomplishing and all that it portends, and it means the new Media General is well-positioned to increase shareholder value. We've also said we expect to be an acquirer in our industry's continuing consolidation. That continues to be the case. And now, we'll be pleased to take your questions.

[Operator Instructions] The first question is from David Cohen with Midwood Capital.

I was wondering if you could give a sense of your expectations for growth potential in the core in 2014.

Yes, David. We're looking for '14 to be quite strong. It started well with January and February especially with the Olympics numbers. March is looking good, we don't have a whole lot of view into the second quarter yet. But we don't see any clouds on the horizon. And as you probably saw in the Journal this morning, there's a front-page story about the housing market and the improvements in the housing market, prices up 10%, sales up nearly 10%. I learned a long time ago the importance of housing on the broadcast industry and on the economy on consumer spending, on confidence, and so we're looking for a real strong year and political on top of that and it should be a blockbuster for Media General.

And having the strong translate [ph] for 2.2% in 2014 over -- on an adjusted basis over '12. You think you do significantly better than that? I mean is it 5% growth potential?

I don't think we're going to put a number on it, David.

Okay. And then, on -- from an expense standpoint, the reverse comp that you highlighted, the $34 million, I presume that's in your station operating expense? Is that correct?

That's correct.

So if I take that out and I -- then you're roughly $162 million of station operating expenses, excluding that particular cost element. What sort of growth or expansion of that adjusted cost base would you anticipate? So you -- you did say the expenses should grow, I just want to bracket the rate of growth.

We expect them to grow in the low single digits.

That's excluding the reverse comp?

Yes.

The next question is from Barry Lucas with Gabelli & Company.

Just a couple of quickies. Jim, do you have an actual share count at year-end?

No. I don't think I have that. The actual share count at year end, I don't know if I have that with me, Barry.

Okay. What if you look into that, George, maybe you could talk a little bit or provide a little bit of color on categories? Where was auto on a combined adjusted basis in the fourth quarter and what are you seeing in that important category in 1Q?

Happy to do that, Barry. Fourth quarter was strong for us in all of our top 5 categories. Auto was up double digits, health was up strong double digits, retail and fast food also were up. So it was a really good quarter for us on all of that. And as you can imagine, Q1 is going in the same kind of way with especially with the Olympics and that creates a lot of noise, but with the Olympics, auto is up very strong, health is up again, home improvements up, groceries up. It's been a real good quarter.

Okay. And maybe bigger picture, George. Since you've indicated previously and again today that Media General is a potential acquirer. What are you seeing in the M&A pipeline? And given your proximity to Washington in the last couple of articles in the Wall Street Journal regarding sidecar arrangements, how do you view the regulatory environment, and what effect that may have on your desire or lack thereof to buy additional stations?

Well, we're not seeing anything slowing down at all in the M&A market. But there's a fair bit of activity out there. It does not seem to be impacted by the SEC and any changes that they might make in the regulatory world. I think that it will come to pass, the people will understand that JSAs are good for consumers and they're good for localism. If there are regulatory changes, we know the broadcasters will adopt your practices and adapt. So we don't see anything that's happening at the SEC as anything that we should be particularly worried about.

The next question is from Harper Stephens with Thompson Davis Asset Management.

If one of you could comment on any plans to shares held by the Young holders. Is there an orderly planned exit or is there any lockup in place? Can you comment on that at all?

Yes, we sure can. James you want to take that?

Yes. There's a lockup in place that extends to mid-May. And there's is the opportunity for registered offering in between now and then.

Okay, any timing on that or is it up to them?

Yes, we're talking to bankers. We've filed the S-3, and we're getting ready, we're on track to do that -- for the specific timing, no.

The next question is from Matthew Dodson with JWEST LLC.

Just real quick. If you can help us understand your retran revenues gone up 40%, but your retrans fees has actually gone up faster than that? Why is that? Can you help us understand that?

Sure, Matthew. Retrans fees are going up as a result of contracts negotiated during 2013, particularly at the end of 2013. And so what you see happening in 2014 at the end of 2014 is more of the reverse comp for networks beginning to kick in at the end of the year. That's it.

So, down the road, we still expect the retrans fee to grow faster than your actual retran revenue?

No, I mean, I think all of those things even out. And as you know, retrans revenues have been very healthy and growing at a very healthy pace. We expect that to continue. The retrans reverse comp ultimately, we think, will even out at about a 50-50 kind of a number, and so we've been very fortunate. There are CBS contracts with the legacy Media General stations, have not kicked in, and we are not giving any reverse comp to CBS at this point. But, as I said, that will change as we get through this year and go into '15.

[Operator Instructions] The next question is from David Cohen with Midwood Capital.

So you've given a fair amount of detail on the building blocks for the forecast here. And I just wanted to -- maybe contrast those with the pro forma from the merger documents and sort of what some of the puts and takes are versus what's your expectations for 2014 were at that time?

Anything, particularly?

Well, figures related to revenue and broadcast cash flow?

Well, as you know, that the way the 2013 came in, revenue is in sort of fits and starts. We had each quarter finishing quite strongly, but each quarter also beginning a little bit more weakly than anybody thought it would. That was not just a Media General issue that was across the industry.

I was literally speaking to your outlook for '14?

Right. And so for 2014, what we're seeing is a real nice start based on the Olympics that you've seen. So the Olympics revenues are up significantly over where we were in 2010. The March Madness, the next event, sports event programming on the schedule also is coming in very well, and we're looking for the rest of the year, it is solid, but it's aided in particular for us because of our presence in strong political markets where we expected to do very well.

Okay. And how about your margins? Anything particular that's driving margins in 2014? Well, so I came out, I mean, I'm just doing some quick math. Kind of mid-'40s broadcast cash flow margins, which are contrast to, I think, low '40s in the pro forma projections?

I won't go into the specifics of your numbers and your math, but I will say that is true that in even-numbered years the margins go up fairly significantly because of all of the political revenue that drops nearly straight to the bottom line. And so you're right, that over odd-numbered years, even-numbered years, pickup in margins and we would anticipate seeing exactly that occurring. We know will occur in 2014.

And again, what was your comment about your expectations of political just maybe incrementally higher or higher than in 2012?

Well, I think [indiscernible] -- what we've said on political is it will be higher than 2010, remember 2012 is a presidential year that is red hot. So we expect 2014 to be above 2010 levels.

The next question is a follow up from Barry Lucas with Gabelli & Company.

Great. Just kind of a 2-parter on the retrans, George. So if we're talking about a 40% increase give or take in retrans in '14, and reverse in '13 was 34 going to 50, ballpark numbers would suggest that your net retrans is going order of magnitude from $60 million to $80 million in 2014?

Okay. James, you want to take that?

Yes, that seems right.

Okay. And then maybe if you could talk about any other big contracts or changes that -- or opportunities, if you will, for renewals, for the current year 2014 and 2015? What's kind of on the horizon there?

Well, you know that I would love to be able to talk about that, Barry. And you know that I won't. We used to give you a lot more detail on those kinds of things and we found as we're talking to cable companies that information was turned around and used against us. So we really won't get into the specifics. I will say that there is nothing on the short-term horizon for us.

Barry, shares at the end of the year, 88.5 million.

Actual?

Yes.

The next question is from Steve Roberts with NorthPointe Capital.

Yes, just trying to get the sense better on the political. How much of the 12 number was from national impact?

We don't break, we don't break out the political.

Okay. What was the increase from '08 to or what was the '08 number?

I don't have the '08 number.

We don't have that with us, Steve.

The next question is from Samir Kiroya with Kingdon.

I'm just wondering if you could comment on the corporate expense line in between broadcast cash flow and EBITDA. You know the margin -- that margin between the legacy Media General side and the Young side where it seemed to be a difference of several hundred basis points in margin, and then versus your peers on a pro forma basis seems to be generally higher than some of your peers. So I'm just curious if there's anything structural on there? Or what you can do to sort of close that gap?

Sure. Well, there is a stock-based compensation in there. And stock has enjoyed a nice run, so that's stock-based, which is non-cash, that's included in there. And also all the bonus money, even for all the stations within that number as well. So it depends on how the others account for those things and how much stock-based compensation they have to reconcile that to the peers.

Okay, but even on a historical basis, it seems to be running at a higher level. So even excluding maybe the stock noise for this year. I mean, is there anything that you guys -- and I know you got expenses growing up, low double -- low single digits. So maybe a better way is -- what's the normalized number for corporate expense, excluding some of the stock comp?

Yes, it's I think it was going to be about half of the 38 to 39, would be the normal -- would be normalized number. And the corporate, the core corporate expenses for Media General, I don't have it right in front of me, but in the last quarter, it was about $16 million to $17 million. And that excludes all of the bonus, legacy pension plan costs, and stock-based compensation.

So that was the combined company.

That was in legacy Media General.

Just Media General, okay.

So remember that we did not pick up very much from Young corporate and so what we did was over achieve on the corporate savings that we projected, we'd have for 2013. So we're actually quite proud of those numbers. Because we have projected for legacy Media General that would be $20 million number.

So is that a good run rate for an annual basis kind of $16 million to $17 million plus a little bit more for Young, times 4?

No. It's about, I said in my comments, it's about half of the $37 million to $38 million.

[Operator Instructions] We have no further questions at this time. I would now like to turn the call back over to Mr. Mahoney for closing remarks.

Well, thank you, all very much for tuning it. This has been a strong start for Media General and especially because of our combination with the Young Broadcasting, it's a story that keeps getting better. And that's by the quarter, but it's also as you heard this morning, for the long-term for the company. So we will look forward to bringing you further installments. And hope that you will turn into to listen to our progress. Thank you very much. Goodbye.

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