Greetings, and welcome to the Sinclair Broadcast Group Incorporated Third Quarter 2013 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 Financial Officer for Sinclair Broadcast Group. Thank you, Mr. Amy. You may begin.

Thank you, LaTonya, and good morning, everyone. Participating on the call with me today are David Smith, President and CEO; Steve Marks, Chief Operating Officer of Sinclair Television Group; and Lucy Rutishauser, Vice President, Corporate Finance and Treasurer. Before we begin, Lucy will make our forward-looking statement disclaimer.

Thank you, Dave. Good morning, everyone. Certain matters discussed on this call may include forward-looking statements regarding, among other things, future operating results. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ from those described in the forward-looking statements as a result of various important factors. Such factors have been set forth in the company's most recent reports on Forms 10-Q, 10-K and 8-K as filed with the SEC and included in our third 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 Reg FD, 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 expressed written consent of the company. Included on the call will be a discussion in non-GAAP financial measures, specifically television broadcast cash flow, EBITDA, free cash flow and leverage. These metrics are not meant to replace GAAP measurements but are provided as supplemental detail to assist the public in their analysis and valuation of our company. A reconciliation of the non-GAAP financial measures to the GAAP measures in our financial statement is provided on our website under Investor Information Reports & Filings.

Thank you, Lucy. This has been another active quarter for the company with solid results. Before we go through the results, however, let me review some of the activities that have taken place since our last earnings call. On August 8, we closed on the previously announced acquisition of Fisher Communications, Inc. for an aggregate purchase price of $373.2 million, that's approximately $25 million of working capital. On September 30 and October 1, we closed on the acquisition of certain stock and assets of 4 Titan television stations for an aggregate purchase price of $115.35 million and we will provide sales and other services to 2 other stations. Also on October 1, we closed on the purchase of KDBC, the Fox affiliate in El Paso, Texas, for $21 million. The Fisher, Titan and El Paso acquisitions were funded through cash-on-hand and from the proceeds of the equity offering raised in the second quarter. In September, we announced that we entered into a definitive agreement to purchase the broadcast assets of 8 television stations owned by New Age Media for an aggregate purchase price of $90 million. The 8 stations are located in 3 markets and reached 0.8% of the U.S. television households. The transaction is expected to close late in the first quarter of '14 and is subject to SEC approval and customary closing conditions. We intend to fund the acquisition through cash-on-hand or from the recently raised delayed-draw term loan A under the bank credit agreement. On October 31, 2013, the company closed on the purchase of the non-license assets of the WPFO, the Fox affiliate in Portland, Maine, for $13.6 million and we will provide sales and other services. Now turning to our results. Net broadcast revenues for the third quarter were $303 million, an increase of 34.7%…

Thank you, Dave. We have been just as busy on the balance sheet side as we were on the acquisition front. On October 11, we closed on a private offering of $350 million senior unsecured notes due 2021, which were priced at 100% of their par value and bear interest at a rate of 6.375%. The net proceeds from the notes, along with cash-on-hand, was used to redeem in full the 500 million par value of the 9 1.4% senior secured second lien notes due 2017. The redemption included a $25 million make-whole premium, which along with the write-off of the deferred financing cost, will result in a $43.1 million loss on extinguishment of debt to be recorded in the fourth quarter. The redemption of the 9 1/4% notes, with lower-cost debt, will result in about $0.11 of after-tax free cash flow per share on an annualized basis. On October 23, we raised $450 million of incremental term loans, consisting of a $200 million delayed-draw term loan A maturing April 2018 and $250 million of incremental term B loan maturing April 2020. We also obtained an additional $57.5 million of capacity under our revolving credit agreement maturing April 2018. The term loans are expected to be used to fund acquisitions and for general corporate purposes. In September, holders of all outstanding $5.7 million original principal value of the 4 7/8% convertible senior notes due 2018, converted their notes into approximately 338.6 thousand common shares pursuant to the indenture. In October, holders of all outstanding $5.4 million original principal value of the 3% convertible notes due 2027 were converted by the holders, which conversion was settled for approximately $10.5 million in cash pursuant to the indenture. In the fourth quarter, we expect to record a gain of approximately $900,000 on the…

Thank you, Lucy, and good morning, everybody. As Dave mentioned, net broadcast revenues of $303 million in the third quarter, adjusted for the early Fisher close, were within our guidance. On a same station basis, net broadcast revenues were up 11% excluding political; and down 2% with political. Political revenues in the quarter were $2.7 million as compared to $27.8 million in the third quarter last year. Including our acquisitions, local broadcast revenues were up 53.3% in the third quarter. While on a same station basis, local net broadcast revenues were up 14% when excluding political. Including the acquisitions, national broadcast revenues were down 7% in the quarter, while on a same station basis, national net broadcast revenues were up 0.7 when excluding political. On a same station basis, the automotive category was up 9.3% in the quarter. Our fastest-growing categories in addition to automotive were services, grocery, furniture, media and home products. Telecommunications and paid programming were soft. Turning to our outlook for fourth quarter of 2013, we are expecting net broadcast revenues to be approximately $368.1 million to $372.1 million, up 28.2% to 29.6% as compared to fourth quarter 2012. This assumes $5.9 million of political versus $54.1 million in the same period last year. Excluding the acquisitions, same station's net broadcast revenues are expected to be down 11% to 12.4% but up 6.7% to 8.4% excluding political. For the year, same station net broadcast revenues, excluding political, will be up 8.3% to 8.8%. Categories expected to grow on a same station basis are automotive, services and medical and home products; while retail, telecom, schools and paid programming are expected to be down. Auto on a same station basis is expected to be up by high-single digit percents in the quarter. Dave and Amy will now take you through the remaining forecast.

Thanks, Steve. On the expense side, we are forecasting TV production and SG&A expenses in the fourth quarter to be approximately $192.3 million, including $2.5 million of trade expense, which was previously forecasted in barter expense. On a same station basis, expenses are expected to be up 2.8% in the fourth quarter and 8.2% for the year. We expect EBITDA in the fourth quarter to be approximately $149.2 million to $153.2 million, an increase of 3% to 5.7%, including the absence of $48.2 million in political revenues. On a same station basis, EBITDA is expected to be down 27% to 20 -- to 9.8%, but up 9% to 13.4% with political excluded. For the year, EBITDA is expected to be $464.8 to $468.8 million. Based on our guidance, free cash flow in the quarter is expected to be in the low $100 million range and $260 million for the year on a reported basis, or approximately $400 million pro forma for all of our announced acquisitions. So with that, I'd like to open it up for questions.

[Operator Instructions] Our first question comes from Marci Ryvicker with Wells Fargo.

I have 2 questions. And I apologize, there were so many numbers, so I just wanted to make sure I understand the core business. So as what you said, Dave, I think, in your prepared remarks that Q3 core advertising same station was up 3%. And I was wondering what the pace may be in Q4 for core advertising. That's the first question. The second is, how do you view your ability to participate in accretive M&A now that the UHF discount has essentially been eliminated?

Okay. Well, I think you're focusing in on the fourth quarter there. Steve can take you through that. But based on the absence of political, what we were saying is that we expect EBITDA to grow from $149 million to $153 million. That's an increase in EBITDA of 3% to 5.7%. On the net broadcast revenues without political, when we exclude the acquisitions, we're expected to be down from a political standpoint 11% to 12.4%. But when we exclude political, that's up 6.7% to 8.4%.

And that includes retrans, correct?

Yes.

Okay. Would it be fair to characterize the core business as accelerating on a core basis, just advertising from Q3 to Q4?

We're having an enormous -- October was just enormous for us. And we expected that because of the crowding out of the political last year -- crowding out of the spot due to political last year. So October met our expectations and then some. And it was an extremely strong month for us. November and December, interestingly enough, picked up pace last week going into the month of November. And I do believe that the fourth quarter will show a better plus in core business than third quarter. So we're firing on all cylinders in terms of the core business. It's an extremely decent quarter for Sinclair in fourth quarter.

Marci, with regard to the forward-looking M&A, given that we're essentially at the cap, I think it's safe to say that there's still plenty of work for us to do from the standpoint of creating structures inside marketplaces. A perfect example there is the transaction which we just did in Portland, Maine. I kind of refer to these as almost bolt-ons to the primary stations of the marketplace. So I think when you think about just the kind of work that's got to be done, let alone of the possibility of creating alternative structures and partnerships with other companies to put businesses together, will provide us over the longer term a lot of opportunity to, certainly, create more value.

Our next question comes from Doug Arthur.

Two questions, if I could. This is Tracy Young. First question is Allbritton. Can you give us a sense now -- you said that was not in your guidance for Q4, but just should we still expect the January 1 close? And then the second question is, political is expected to be up next year versus 2010. Is there any way you could give us a pro forma for 2010?

Yes. So on the Allbritton question, we've pushed back guidance, that is now late in the first quarter, early in the second quarter, just because we had DOJ approval we need to get with the government shutdown and some of the backlog down at the FCC. And then as far as political, so 2014 is going to be interesting because not being a presidential year, you really have to start going and looking at race-by-race up against '10. So when you look at -- we have, if look at just toss-up rates, is we have about the same number of tossup senatorial races. But in '14, we will have fewer congressional and fewer governor toss-up races than what we had in '10. So pro forma for 2010, assuming we had all the acquisitions in there, including Allbritton and New Age, everything, political would have been $145 million. So pro forma, we think we would be more like a 2010 number in '14 than 2012 pro forma.

Our next question comes from Aaron Watts with Deutsche Bank.

Two questions for me. I guess the first is, obviously, you've made a lot of acquisitions in a condensed amount of time. Can you maybe just talk a little bit about the integration process and how that's going versus your expectations? I guess, that ties into some of the synergies that you would get, but also just absorbing all these assets, looking at best practices, all that good stuff. If you could just provide some color there.

I'll just give you a little bit of color from a sales perspective over the last, I guess, 18 months to 2 years with all these acquisitions. And speaking of most recently, where we just got our audits into third quarter, the stations that we've been matriculating into our portfolio are performing outstanding. And these are some of our biggest billing stations in our resume. Salt Lake City had a banner third quarter, maybe the highest revenue share that they ever had. Cincinnati, same thing; a banner third quarter, maybe the highest revenue share that they've had in years. Albany, New York, a banner third quarter, highest revenue share that they've had in years. Grand Rapids, same thing. West Palm Beach, same thing. Harrisburg, same thing. So the one thing that has been truly interesting is matriculating these properties into our culture. And I'm reading you the results. They're performing absolutely outstanding. So we're very excited about our new properties and having them fold into our culture and the performance has been the exceptional.

I think the mechanics of integrating this business is always a challenge, but the fact of the matter is it's something we do. We do it very well. It just takes time and it takes time to change the cultures at some level in these businesses to get them to move into the direction that we want. But we expect that as part of the understanding when we buy these things. It takes a little bit of time to get them where we want them and get the proper people in places -- in the right places and get them focused on doing what they need to be doing. So I don't think you should expect anything other than this is business as usual for us and it will stay business as usual.

Okay, great. And then, Dave, maybe one more big picture for you. We read about and see the networks try and monetize their content over a lot of different distribution platforms. Also hearing about viewing by appointment becoming more prevalent and maybe even more so in the future. Curious to your thoughts on what that means for your business television broadcaster and how that impacts viewing and advertising in the future.

Well, I think, notwithstanding all the stuff that's going on in the marketplace, I think what you have to do is just focus on our numbers. And our numbers kind of tell the story, don't they? That notwithstanding all of the stuff that's going on the marketplace and all the opportunities in places people couldn't watch television, all the delayed basis things they can watch television, and the fact the matter is, we're doing fine. If all those things didn't exist, would we be doing better? I think that's a fair statement. The market is what it is. We just have to learn to adapt to it and be thoughtful about how to compete against it, that's all. So this is what we do every day. It doesn't come as any shock or surprise. But again, our numbers tell the story that are reflective of the real marketplace and all the competition that's out there. So...

Yes. There was a conference just -- or one of the -- kind of webcast call-in from one of the other banks the other day that was all about over-the-top and what's going on with viewing, et cetera. And it was pretty interesting how, at the end of the day, the consultants that put the research together come back to over-the-air broadcasting and say without over-the-air broadcasting, none of these models work, whether it's cable or whatever. It all gets back to the demands by the consumer or over-the-air television.

We're still the dominant place people go to, to find out what's going on. Are they going to 42 other places? Of course they are. We all do. But the fact that the matter is, is at 5:00 in the afternoon, or 6:00 or 11:00 at night, or 7:00 in the morning, where they're going? They're coming to us because they want to know what's going on in the local marketplace. All news is local. All sports is local. The best majority of all advertising is now local. And we're a local business.

Great. Let me ask one more question. Over the last week or so, lot of the distributors have announced earnings and held calls, been asked about Aereo and their technology. And I think there's been some rhetoric that they would consider that technology if programming cost continued to rise. I'm curious with retrans and subscriber fees becoming a bigger piece of your revenue pie, how much of a threat is that down the road? Or do you think that's more rhetoric?

I think there's an awful lot of rhetoric out there right now. And I like I think this --- the broadcast networks and our interest are aligned. I mean, that's the bottom line. We're in the same business. We have the best interest in staying together and protecting our assets. And I think we'll do whatever is necessary to do that when the time comes. So Aereo is what it is. And we've said this in the past that if Aereo were a real business, I'm not here to tell you that it is or isn't at this point in time, but if it were a real business, there are no barriers to entry in that business. And I said this a year or 2 ago, that if we decided -- the local broadcaster decided they wanted to go into that business, then we would. And we can do it probably cheaper than they can. So and we do it in conjunction probably with the networks and as an industry. So I don't know. As I said, there's a lot of noise out there floating around and most of it is to be ignored.

Our next question comes from Mark (sic)[Alexia] Quadrani with JPMorgan. Alexia S. Quadrani - JP Morgan Chase & Co, Research Division: I just have one quick question. There seemed to be a bit of a change in tone recently at some of your peers' recent comments about the possibility of participating in the upcoming spectrum incentive auction, I guess, particularly with some of their Class A or lower power stations. Can you update us on your stance on the auction participation?

Yes, our stance hasn't changed. We don't -- I have no reason to believe we'll have anything for sale. I can understand those folks that have low-power television stations that are critical to their platform or their Class As, but on a relative basis, they are not material to us.

A couple of the Class As that we do have, Alexia, they get picked up or analoged. When we pick them up, we put some money behind them, converting them over to a digital broadcast. And they really compliment our stations in the markets where we have them. So and they bring in significant -- no, for low power, they bring in significant, overall, it's not a lot of money to us but it's a couple, $3 million of cash flow a year, but for the marketplace it's significant. So there is real value there. So I don't even know that a sale or an auction of our low power would really generate the kind of return that would justify putting them up for auction.

Our next question comes from Lance Vitanza from CRT Capital.

This is actually Brad [ph] in for Lance. Maybe a quick question on the Affordable Care Act in general. Do you guys see that impacting advertising revenues coming on later on in the quarter next year and the beginning of next year?

I would hope so. There was big -- obviously, when we talked last, we were talking about expenditures for fourth quarter. They have not been bountiful and, obviously, there's problems with the product right now. So I would expect that once they get the product fixed, they'll put together a advertising campaign for that we'll support it. So I do expect the expenditures in 2014. It's hard to pinpoint exactly how much money is going to be spent. But they should be active. And, obviously, they've got a marketing problem on their hands right now. So I expect them to attack it via advertising. And it should bode well for us.

And just a footnote. On the way in this morning to the office, I was listening to NPR. And there was an excerpt from the -- I guess the woman who is in charge of the whole website development and operation for the government. And she made kind of a very broad statement, but, nevertheless, the point was they essentially ceased all their advertising because the website, basically, failed. So they don't see any point in promoting something that doesn't work. Bur once it's fixed, they expect to back into the market again, spending a lot of money.

Great. And one quick follow-up. Just in a political off year next year with no presidential election, how do you sort of see advertising shaping up?

I think it's going to be a pretty good year next year. You've got to remember for us and, also, quite frankly, with this affordable health care, if they get out together pretty soon, we're sitting as a company with 30-some-odd Super Bowls with Fox, as well as the Olympics in 15 markets. So we're going to get off to a really good start. There's no question about that. We have the product for it. And if you've been looking recently, the high ticket items like the Olympics and the Super Bowl have been going for huge increases year-after-year. Last year, NBC with the Olympics just did a -- the local stations that was selling it just did a fabulous job in gaining share. So here we are sitting with -- between the Olympics and the Super Bowl, we're in 40 markets with first quarter activity that is high ticket items. And I think that will bode very well for setting up the year for us in 2014.

Our next question comes from Davis Hebert with Wells Fargo.

Lucy, I wondered if you could just talk about the remaining funding needs on the outstanding acquisitions and what we can expect, whether it's incremental term loans, et cetera. And maybe -- and if you already covered that, I apologize, but there are a lot of numbers, so...

Yes. So as you recall, we were initially in the market in early October looking to raise the funds for Allbritton in the bank market. And when it looked like it wasn't going to be closing imminently, we pulled that part of the financing. So once we have a little bit more clarity on timing of that, then we'll come back out to the market. Assuming that the markets all kind of hold up where they are today, I would expect that we would go back to the bank market. And it looks like we would need -- we still need, to fund Allbritton, about $6 million of funding there. Assuming that we don't raise any additional funding for, as David mentioned, bolt-on kind of acquisitions. At a minimum fee, $600 million.

Okay. And then New Age, as well, even though it's relatively small?

Yes, New Age's included in there.

In the $600 million?

Yes, we have the funding for New Age for that $90 million.

Okay. All right. And then on CapEx for 2014, you mentioned some projects, potentially, I guess, being delayed into next year. Is it too early to give a ballpark figure on CapEx?

Yes, I would think that giving some of the timing pushing into next year, if you're in that high 50s, about $60 million, you should be pretty much in the ballpark.

Okay. Great. And then one big picture question for David. ATSC 3.0, you guys have been sort of carrying the flag on that conversion. Can you give us an update on where that stands and what we're talking about from a timeframe perspective?

Yes, I think the process is clearly underway. I think there's a broad recognition now in the industry by the engineering community that we're -- if we're going to be competitive, the definition of the competition here is not necessarily only delivering our content via fiber or over-the-air to cable or satellite systems, but being able to talk to literally every device in the marketplace that we know of that exists today and the devices that we can contemplate that are going to be coming in the future. I'll just give you kind of a simple example, that if you're familiar with the Google Glass, I'm not here to tell you that's going to be a successful product. But the fact of the matter is, is that we can talk to that device if we choose to if we have the right platform. You could be watching television on Google Glass if you wanted to. So it's hard to contemplate, literally, all the technical capabilities and the different platforms that are going to evolve over time for watching video. And so the point there is that, if we want to be in those businesses and we want to be delivering our content and lots of other content through our pipe to any device in the marketplace, we have no choice but to change our platform. And I think we're on the road to getting that done. I wish I could give you a timeframe that was accurate, but I think there's a coalition forming in the industry right now that is very much interested in getting this done as quickly as possible. There are some obvious challenges involved. There, unfortunately, are some broadcasters, and frankly we're one of these, that has been saddled with VHF television stations. That was a practical matter, not a function in that environment. And we have to figure out how to help broadcasters who are stuck in that particular situation to solve that problem. And we think it's a very solvable problem because I think what's in the interest of the industry is that we all do this together. And we recognize that if we're going to survive in this industry, we have every reason to get this thing done as quickly as possible. And I think we will.

Our next question comes from Michael Senno with Crédit Suisse. Michael Senno - Crédit Suisse AG, Research Division: I just had 2 questions. One of them, you guys gave a pretty solid guidance on the free cash flow for '14. I just wanted to check. I think you said pro forma, but I'd just make sure of that. And it sounds likes the reported would come in a little bit lower because of Allbritton getting delayed. But also looking for some color since I think that is well above what many of us expected. Just in terms of taxes, you guys provided some color on CapEx. Or is it really just underlying trends that are driving it? And I just have one bigger-picture question after that.

Yes, Michael, that's a lot of questions there as far as what's happening. It was -- the over $400 million for '13 that we're describing is a pro forma for all of the acquisitions that we've either closed or have announced. And included in that is the -- when you get down to being specific about taxes, what we put in is our current tax expectations. So currently in '13 on a pro forma basis, that's just around $21 million in total taxes. And next year on that pro forma basis, we're kind of tripling that number. We're getting into the $60 million range for current taxes. So that can be a bit of an area where we may be on the same page or not since there is no specifically defined formula for free cash flow. But that's how we calculate our taxes and our -- in terms of our free cash flow calculation. Of course, Lucy had mentioned the $60 million in CapEx for next year. That, again, is assuming Allbritton closes on January 1. We would love to be able to close it January 1, but since we're currently under a second review here with the Justice, that won't be practical opportunity for us. It will be delayed further into the quarter.

Yes, Michael, I would just also add, as far as New Age, we're expecting that to close sometime during the first quarter. So when you start with the $500 million pro forma free cash flow, you are correct in that the actuals will come down from there just because of timing of Allbritton and New Age. And then, also, I think our depreciation and amortization is another area that I think everybody needs to check their model models. And I think there's probably going to be more depreciation, amortization than on a pro forma basis from these acquisitions than what may currently be in the models.

Yes. We just -- we do anticipate we do get a question about Allbritton, as far as are we are including estimates and that -- in our numbers for building out the cable news channel, those are included in the numbers that we're passing along to you. We're not including in the CapEx the ATSC 3.0 advances as that does take place and we start seeing the investments into our stations during our '14. And those are not in our numbers at this point. Michael Senno - Crédit Suisse AG, Research Division: Great. As a bigger-picture question. I was curious on your thoughts about as you guys have now attained scale on content development or potential partnerships with some other local broadcasters in terms of distribution, like how far out that may be and what that may look like?

I think you should assume that we're -- now that we've reached the scale that we have, that we're going to move as quickly as possible to start to create the structures that will put us in the content business at the local level and to some degree at the national level. As you've heard us talk about from time-to-time a couple of years ago we acquired a company called [indiscernible] Wrestling as kind of a prototype test for creating first run local content. From a ratings perspective, it's been a huge competitive success. It's really almost shocking how good the ratings are. Programming runs at 2:00 in the morning or 10:00 at night on the CW compared to what -- anything that runs on cable. And in some cases, lots of local television shows it beats. And another opportunity that we've been working with now for about a year or so is high school sports. I just saw an e-mail that came through yesterday, or day before yesterday, that the high school football game that can we had on our CW in San Antonio, Texas, beat badly Fox baseball postseason. So when you think about broadcast, I know there's a lot of people kind of look at it and say who watches it anymore. But the fact of the matter is, is that when a high school football game beats a national sports franchise, it says something about what the importance of local television is. So I think you have to look at us and expect us to start to figure how to optimize and take advantage of our scale at all levels across our entire platform.

[Operator Instructions] Our next question comes from Doug Arthur with Evercore.

Just going back to the broadcasting expense line item. I think you said it was up 9.6% pro forma and you cited reverse. Is reverse the primary reason for that? And then, obviously, you have more contract renegotiations ahead. But as you look out into '14, '15, is that line item going to ease off and stabilized a little bit over time?

Yes, so, Doug, that is the primary expense driver, the reverse retrans. It has been all year. We've talked quite a bit about that. When you look forward, so in '14, we have Charter coming up for renewal, I believe, in March or April of '14. So depending which network that crosses over, it will be as the revenue rises, the reverse may rise commensurate with that. But remember, the networks all have annual increases, so it'll be a natural rise regardless.

There are no further questions in queue at this time. I would like to turn the call back over to management for closing comments.

Well, thank you, LaTonya, and everyone else for participating on our earnings call this morning. And so if you have any additional questions, just feel free to contact us.

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