The E.W. Scripps Company (SSP) Q1 2012 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the First Quarter Earnings conference call. [Operator Instructions] And as a reminder, the conference is being recorded. I would now like to turn the conference over to Tim King. Please go ahead.

Thank you, very much, John and good morning, everybody. We appreciate you joining us for this recap of The E.W. Scripps Company's first quarter results. As usual, we're going to start this morning with prepared remarks from Rich Boehne, our President and CEO; and Tim Wesolowski, our CFO and Treasurer. At that point, we'll open up the lines for your questions, when we'll be joined by Tim Stautberg, who runs the Newspaper division; Brian Lawlor will runs our TV division; and Doug Lyons, our Corporate Controller. Now the commentary you'll 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're about to hear by referring to the Form 10-K. As a reminder, you can always go to scripps.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 of this call. It'll be up there from sometime this afternoon until May 15. Having said that, here is Rich Boehne to begin today's discussion.

Good morning, everyone and thanks for joining us. We're off to a pretty good start this year as you'll hear from Tim Wesolowski in just a minute. TV advertising revenue on an apples-to-apples basis grew 12%, retransmission revenue grew 37% and digital revenue grew 20%; and those increases coupled with a decrease in TV expenses resulted in a nice move up in segment profit. The investments we made in high-quality news programming are paying benefits. At the newspapers, ad revenue declines narrowed and circulation revenues, thanks again to our commitment to a quality news product, held steady. Expenses were down and segment profit increased. The first quarter is always the smallest in our business but it sets the tone for the remainder of the year. As I said, we're encouraged as we look ahead. Now here's Tim for some detail on the quarter then I'll be back to talk about how our key strategy should unfold through the balance of 2012. Tim?

Good morning. While there was an expected net loss in the quarter, the period actually shaped up in ways that give us plenty of encouragement. Not just for 2012 but for the long-term prospects of our businesses. The core TV business is healthy. Our acquired stations are integrating nicely and performing well and the newspaper business is making progress in its quest for stability. We're reporting late in the earnings season and I'm glad to say our first quarter stacked up very well compared with other media companies in a wide variety of key operating metrics. As I go through the numbers, you'll hear me refer to reported numbers and the same station numbers. Obviously, that reflects the acquisition of 9 new TV stations last December. Our reported revenue in the first quarter was $207 million, a 15% jump from the $180 million a year ago. On a same station basis, consolidated revenue moved up about 2.5%. Our expense line this quarter requires a little explanation. You'll see acquisition integration costs of $5.8 million in our P&L, it’s a noncash expense. That reflects a change to the national web firm that handles national sales at the acquired stations. We canceled the contract with that firm and moved the relationship over to the firm that reps the Scripps stations. The move makes perfect business sense for us and there was no cash payment by us. However, accounting rules require that we record a contract termination charge, again, this is a noncash amount. You've probably seen in the footnotes of our financial tables that we may have messed up your models a bit by changing the way we handle pension expense. Starting this quarter, we will only include the current service cost portion of defined benefit expense in segment profit. You may recall that we froze our pension plan in 2009, so there's a very little current service cost. Almost all of our pension expense relates to past service. The impact of this in the results of Q1 2011 was less than $2 million. So our year ago expense numbers don't exactly match the figures that are already plugged into your model. We've restated the 2011 periods to reflect this change, that's why a full table with quarterly breakdowns from last year is in the footnotes. So here are the expense numbers that I believe matter most to you. On a same station basis, our expenses in the quarter were $179 million, about flat with last year. If you back out the noncash acquisition expenses I just mentioned, our operating expenses were down 3.8%. On the bottom line, our net loss was $0.08 per share, compared to a net loss a year ago of $0.15. Excluding the noncash acquisition costs, our net loss would have been $0.02, which is the apples-to-apples figure that compares to the first call consensus of a net loss of $0.03. Now let's look at the divisions. You expected the news from our TV division to be encouraging and it was. Our reported revenue increase was 44% but even on a same station basis, our top line grew nearly 12% compared to the first quarter of 2011. Same station revenues were up 15% compared to the first quarter of 2010, the last time political revenues were a big part of the picture. Not surprisingly, political spending was a big driver of the improvement. We've booked nearly $5 million in political ads during the quarter, versus 1/10 of that year ago. But the real story here is the strength of local advertising, which was up more than 7% on a same station basis. At a time when there's a lot of talk about the anemic economic recovery, 7% growth in local spot advertising tells me that our stations are doing a lot of things right, at the local level. Key categories pacing that growth are auto, services and retail. Of course, the big story in TV this year will be the influx of political ads in the third and fourth quarters. Those of you who follow this business know there's great peril in trying to predict the twists and turns of the election season this far out but most observers agree, it was a positive sign for TV ad revenues when the Republicans settled on a presumptive nominee 4 months before their convention in Tampa. Our guidance for the full year hasn't changed. We think it's doable for our legacy stations to exceed the $42 million of political revenue that we reported in the previous presidential cycle. It might be better or it could be worse, it's just too soon to tell. But what I can say with certainty is the first quarter got us off to a good start. We booked $4.7 million in political revenue in the first 3 months of the year, that compared to $3.1 million in the first quarter of 2008, the last presidential election year. You know we can't tell much about the full year 2012 from these figures, but I do like this trend. Our reported retransmission consent revenue was nearly $8 million, much of the increase from last year of course, is due to the new stations. But even on a same station basis, our retrans revenue grew 37% thanks to numerous agreements signed during 2011. As most of you know, the 2 biggest contracts with Time Warner and Comcast aren't scheduled for renewal until the end of 2015 and 2019, but this category will continue to show a steady dollar growth over the next few years. TV's digital revenues were up 50% to $3 million, and on a same station basis, they grew a healthy 20% year-over-year in the first quarter, about the same rate they did in the fourth quarter. Just as the new stations pushed revenues up dramatically, they also increased our cost. Reported expenses in the quarter moved up 30% but if you exclude the new properties, expenses were down 1% as we had projected. When all is said and done, segment profit grew nicely in the first quarter, it increased to $18 million in the most recent period, from less than $7 million in the 2011 quarter. Over to Newspaper division, our total revenue in the first quarter was $104 million, which was down just 1.7% from the year ago quarter. That figure is the lowest year-over-year quarterly decline since the fourth quarter of 2006. But the fact that the year-over-year decline is so much smaller than you're used to hearing in the industry, is largely attributable to one large market: Naples, Florida, which had a terrific quarter. Naples is knocking it out of the park, and may continue turning in attractive percentage increases as we move through the year, but it's a seasonal market. Because the snowbirds moved out and ad revenue moves with them, the dollar amounts will not have as large of an impact on the segment until next winter. Excluding Naples, the Newspaper division's decline in the quarter would've been 3.8%, pretty much in line with the decline in the fourth quarter. So the fact is, the trend line is slowly going the right way for the division, but we don't want anyone to extrapolate too much from the minus 1.7% figure. It was helped dramatically by a single market that has now begun it's off season. That being said, there's very good progress being made in the newspaper division. The circulation revenue continues to be stable, coming in essentially flat for the fourth quarter in a row. The circ revenue in total was about $31 million in the first quarter. And $60 million, print advertising revenue, was about 5% lower than last year, which compares favorably with our peers. The local advertising declines were just under 5%. National advertising, which is a very small piece of the revenue pie for newspapers, was down about 1/3. Classified was something of a surprise, slipping just 4% in the quarter, that's the best year-over-year figure in more than 5 years. Within classified, the real estate category showed the greatest improvement. It was down double digits in the fourth quarter but in the first quarter, it was down just 1.3%. While we're pleased with these numbers, I should again say that the real estate advertising in Naples drove much of this improvement. The preprint and the other line has been down most of the year but was flat at $17 million in the first 3 months of 2012. Digital revenue from our newspaper operations increased slightly to $6.5 million. On the expense side of the ledger cost and the Newspaper division decreased 2.5%. There were a number of factors that contributed to that figure. Our headcount was down about 10% from a reduction in force in the fourth quarter. Newsprint prices were essentially flat, but our cost for newsprint and press supplies increased 6% due to additional costs associated with the vendors who helped us with the print and deliver initiative. As you may recall, we believe a reinvigorated single sheet print and deliver initiative in our newspaper markets will produce several million dollars of incremental and profitable revenue in 2012. This initiative allows the advertisers to target down to the zip code level. Segment profit from our newspaper group was $7.2 million or 12% better than the figure in the year ago quarter. The syndication and other segment is becoming more predictable after a year of significant change in how we operate that business. Revenue in the first quarter was $3.2 million, and the segment swung from a small loss in the 2011 quarter, to segment profit of more than $700,000 in the first quarter of 2012. Now let's turn to the nonoperating items for the quarter. Our days as a debt-free company ended with the station acquisition but we still have a very strong balance sheet featuring minimal leverage and the ability to stay flexible, thanks to cash on hand and additional borrowing capacity. We've padded our cash position during the quarter, increasing our cash and cash equivalents by about $12 million to a total of $140 million, as of March 31. That was done despite debt payments and share repurchases totaling around $10 million. We have long-term debt of $192 million and current debt of $16 million at the end of the quarter. We continued our share repurchases during the quarter but at a somewhat slower pace. We repurchased 600,000 shares at a weighted average price of $9.28. In the past 5 quarters, we purchased 7 million shares. There are about 18 million left on the 75 million authorization that's good through the end of this year. That wraps up the first quarter. Double-digit ad growth at the TV stations; continuing strength in TV's other revenue streams such as retrans and digital; newspaper advertising declines that continued to moderate better than the industry; good expense control in both divisions; and all coming as we approach what's likely to be a heated political season. Before we take your questions, let me quickly go over the guidance we gave for the second quarter. We expect our reported TV revenues, including the new stations, to be up more than 40% again, and our reported TV expenses to be up approximately 30%. On a same station basis, we expect the revenues to be up in the high single to low double-digit range, based on a continuing strength of local spot revenue, and we expect expenses to be flattish. Over the newspapers, we expect revenues to be down in the low to mid-single digits, and expenses to fall at a mid-single-digit rate. Expenses for corporate and shared services will be about $8 million and as we said in the release, we believe we'll end the 2012 with minimal net debt. Now I'll hand it back to Rich.

Thanks, Tim. Before we take your questions, let me focus on a few of the developments you can watch for, over the coming months. First, we're continuing an aggressive build-out and launch of new digital products for all of our markets. Our driving goal is to reimagine our core brands for the fast-growing digital audiences and platforms, desktops, laptops, smartphones and tablets. This effort includes both the new digital products and an expansion of our ad sales force to penetrate the digital opportunity on our markets. We're also expanding our digital offerings in categories such as weather and traffic, and we're determined to build a second revenue stream through subscriptions for many of these new digital products, and much more to come as we move through the year. Also coming soon, actually very soon, is the launch of our first full-scale social game, Campaign Story, which will take advantage of the insatiable appetite for political intrigue in this presidential election year. You can get more information at 519games.com, the site of our games company, launched this year in partnership with our friends at Capitol Broadcasting. Thanks to good cash flow and a strong balance sheet, we're in a position to make prudent investments and attractive opportunities, opportunities for which we expect a return that builds value for shareholders. As you heard Tim say, this should be a good year for further improving our financial flexibility, which we believe to be a strategic asset and an advantage in this marketplace. Also this year, you can expect us to begin to deliver on the opportunity on the 4 new TV markets we added at the beginning of the year. Denver, Indianapolis and San Diego, are among America's most attractive media markets. Bakersfield is a small market with promise, and we've begun to meet and plan with Azteca, our network partner for the 5 Spanish-language stations we've picked up in Colorado and California. All in all so far, it's very good in the former McGraw-Hill markets. We're also positioning the Scripps TV stations to be the best place for candidates and issue supporters to invest their precious resources in this critical election year. Coupled with what we do on air through our democracy 2012 public-service programming, our skills at placing political advertising, makes us the go-to place for campaigns. At the newspapers, we continue our focus on simplifying the business, consolidating back-office functions and attracting profitable revenue. We have purposely reduced the number of products we sell in each market to make it easier for our advertisers to impact their desired audiences, and to be more profitable for us. Across the company, we continue to invest in high-quality journalism content. Not only is it much of the reason for our strength in local television ratings and the driver of the stability of our valuable newspaper audiences, it's also the foundation of our new digital products, which will seek to network our communities like never before. As we like to say at Scripps, "What matters most is what you put in print and put on the screens." That commitment to high quality media content that creates high-value environments for advertisers, has been the backbone of our investing strategy for many years, and that commitment continues to drive our decisions as we manage the relentless innovation of these new platforms. As I said at the beginning, we're off to a good start in 2012 and we look forward to working on your behalf to increase the value of the Scripps enterprise. Thanks for joining us today and operator, we're ready for questions.

[Operator Instructions] And our first question will come from the line of Alexia Quadrani from JPMorgan.

It's Townsend Buckles for Alexia with a few questions. First on the TV side, Brian, or Keith, about how much of your ad growth came from auto both local and national? And you mentioned bringing in new advertisers to television. Is this mostly from newspapers or other mediums that you're gaining share?

Townsend, it's Brian, good to hear from you. Auto category, I don't have it broken out. Well I guess I can have it broken out here by our local, national. But auto was up double digits in the first quarter on the same station basis, as well as with our new stations. In terms of the breakout, a lot of the growth, probably the biggest growth came from factory farm. Obviously, some of the Japanese automakers last year were challenged after the tsunami and the earthquake, and they are obviously aggressively going after increasing market share. So we saw a strong growth there. The other area that we had very strong growth was individual dealers. And I guess this gets to your second point about attracting new advertisers. We've had a very focused approach on the development of new dollars adding new advertisers to television. And we added -- I'll tell you, just in the first quarter, we added over 40 new car dealers to our television stations that were not there a year ago. So a very concerted effort in this quarter. I pointed and highlighted the factory farm, but I can tell you every other category, the domestic factory and the domestic dealer groups were all positive as well.

Okay, I guess just for the overall growth rate, on a same station basis, can you just give us a sense of how much auto drove that increase? So we can get a sense of the magnitude?

Auto was plus 12%.

Okay. Well, I guess, use it as a percentage of your total ad base.

Oh, it's just over 20% of our total business.

Okay, and just moving into the newspaper business. Can you talk about what's really going right down in Naples? Is that an overall market that's bounced back? Or is it something that's unique to the paper?

I'll let Tim take that.

Yes, thanks, Townsend, for the question. And Naples is on fire. The leadership down there has really approached this market with vigor -- as we headed into the winter months with a strong push, incenting folks in the proper way and getting everybody focused on the right thing. So they're making things happen. They weren't comfortable to sitting back and letting stuff come across the transom, and we have really reached out to a lot of new advertisers, small and midsized businesses in this market. A big push in print and deliver advertising in this market. This is actually a market that stabilized and starting to grow again and just the confidence that you can feel and hear about from local businesses is a positive -- we're starting to see some really good things down here in Naples and expect that to continue, the balance of the year. But its impact will not be as great, as we head into the summer months, although they are not letting any excuses get in the way of continuing revenue growth for this market.

It's good to hear. And Tim, it looks like you're making good progress in the cost structure. Can we expect costs to continue running down mid-single digits in the back half or at least at a pace greater than the revenues? And I guess bigger picture, how close do you feel you are getting the business as efficient as it can get?

Yes Townsend, I'd say that between now and the end of the year, we're expecting costs to be down low to mid-single digits. In Naples, if we continue to grow, it's tough to keep those costs down just because we're printing a lot more volume of advertising. But in general, we'd expect that run rate to continue to be below last year and we expect to continue to drive efficiency wherever we can. But redeploying those resources where they matter most in driving value, which is on the content side and on the sales side. Everything else we just need to be ruthlessly efficient but we need to make sure what we put in our printed newspapers and in our digital products is attractive and drives audience. And then we need to make sure we have first-rate folks out there offering our audiences to local advertisers and pushing hard on the revenue side. So those are key ingredients we don't want to shortchange.

And now we'll go to the line of Michael Kupinski with Noble Financial.

You've identified the prospect of achieving $42 million in political for the legacy stations. Do you have a handle on the amount of political that you might receive from the McGraw-Hill stations? Is it possible to generate $18 million roughly from those stations?

Michael, it's Brian. $18 million sounds pretty aggressive based on the models that we're looking at. I think we've safely put that, I would add $10 million to your model, there's a lot that still needs to be determined. Quite frankly, today is a big day in Indiana where we have our television station in Indianapolis, where Lugar is in his primary today. The outcome of that, if Lugar were to win, I think we'll see moderates spending. If Lugar were to lose, that would really kick in -- kick up that race. And so there's a bunch of things that we're still continuing to track. It's a little early on those new stations, but I think, if you want to put a safe number of $10 million into our model, that's kind of what we're working from.

And then if you look at the second quarter guidance, certainly the legacy stations, your -- the guidance looks pretty strong, in fact, a little bit better than what I was looking for. But if you factor in the guidance there, it looks like the McGraw-Hill stations might be a little softer. Is there anything there that you can -- what might be, some of the reasons why we're looking for a little bit softer growth there?

I don't know that we're necessarily looking for specifically softer growth there. I think that many of the things that we're doing to build value through our audience are just going to take a little bit of time, but we've been pretty proactive in the first 4 months. We've began to initiate a lot of the programs that we think will create value especially as it relates to ratings. Increasing ratings will be the biggest driver of long-term value for the stations and so, kind of hard to get that quick momentum,3 or 4 months into owning these stations. I think our value continue to grow with them through the year. But I would not -- certainly I wouldn't classify them as soft as we look at second quarter, Michael.

Okay. And if you look at the amount of political that generated in the first quarter, would you say that -- and obviously, the lion volume share came from the legacy stations? I mean, did you get much political from the McGraw-Hill? I know that the ratings there are strong, but did you get much political there?

No, we really didn't get a ton there. There was not a lot of spending for the Colorado primary, which would've been probably the biggest presidential opportunity of the markets that we're in. California hasn't happened yet. Indiana is today. So it was really Colorado -- excuse me, and there really wasn't a ton of spending. Colorado's prominence is now beginning to elevate and I do think that that market, along with us, we look at Florida and Ohio, are going to be strong drivers of our political revenue through the remainder of the year.

Okay and then -- and can you give us an update on the progress of the development for programming for the TV stations and has that started now? I mean, are we starting to see some expenses kicking in related to that? Or is that just more of a third quarter phenomenon?

No, quite frankly, by the time we hit the third quarter, a lot of our expenses will already have been realized. And so that would -- much our investment there in terms of solidifying the product, building out sets, hiring all of that has already begun and folded into the numbers we've already seen.

And then, just in terms of the digital pricing strategy in the newspapers, you alluded to that a little bit, that you're expecting something by the end of the year. So part of that strategy is largely a 2013 event. We're not to assume much revenue impact this year, right?

Tim?

Yes, Michael, that's correct. We're expecting, that will be up and running on all of our digital platforms and then looking at subscription models that package digital access by the fourth quarter. But it's really a 2013 benefit to us financially.

And now we'll go to the line of Craig Huber with Huber Research.

A few questions if I could. What was the percent change year-over-year for your programming cost on the TV side, excluding the acquisition, of course?

Craig, it's Brian. We were down more than 20% in our programming costs, quarter to -- first quarter to first quarter.

And for the full year, what are you expecting, please?

Again more than 20% decline. I will point out that the better than 20%, is obviously on the same station basis. If you look at the programming, expenses that are added in from all of our new stations, they still -- we still have a savings in there relative to the cuts that we've made.

Okay, good. And then on the auto side, you mentioned down -- I'm sorry, up 12% in the quarter. How is that trending auto in same station, in the second quarter please, for TV?

We are pacing positive.

So up better than a 12% number or net range?

Well, it's early. We're not pacing up more than 12% but it's only May 8, and a lot of the business comes as you work through at the back side of a quarter. And many of these auto dealers -- especially, I spoke earlier about the success on the individual dealer side, they live month-to-month, and as you get towards the end of the quarter, there's people who are obviously trying to drive market share and move products. So normal trending is that we do a fair amount of automotive business within the quarter. We're already pacing up, and I expect that we will have some positive results there.

And then, can you just update as if you would, on your plans here on the TV side for mobile?

I think we continue to work on that strategy. There's a couple of different facets to mobile. There's the live over the air television as part of Pearl and MCV, with the dial product that's being introduced, which is the mobile that comes off of our television towers. And we have 4 markets that are lit up currently: West Palm Beach, Kansas City, Tulsa and Detroit are streaming a mobile service now. I think that's probably chicken and egg. We're a little bit ahead of the consumers but I expect that the branding and the products associated with the dial product are now going to begin -- are beginning to hit the market. On the digital side, there's a lot that we do, related to mobile that is pushing to specific mobile devices where I still think the only broadcast group in the country that can do live streaming to mobile devices, that business is up and running and served us very well during tornadoes in the first quarter and several of our markets, and is also a profitable business for us. And we continue to make other investments as it relates to mobile streaming, both live and extensions of our content on those devices. So I think we have multiple business strategies around mobile and so we'll we continue to be very aggressive in all those spaces.

Then, Tim, if we could jump over to the newspaper side. Could you just talk a little bit further about, the copy is having a good success, without taking out a so-called mid-single digits from a cost front on the newspaper side. What areas are you tackling there? And then also, can you maybe quantify for us, how much the digital investments hurt the numbers in the current quarter, please?

Sure, Craig. I'd say that the areas that we continue to focus on are some of the back office functions and activities in our businesses, on the production side as well. On the distribution front, to the extent that we can take a look at the logistics of our carrier distribution and being more efficient with route structures, that's certainly an area that -- to go after and to continue to work to refine. So all of those are important to us also, as we are rolling out common platform for advertising and circulation revenue, and having a standard processes and standard platforms that will yield savings, not only from software and maintenance costs but also just the support necessary for those systems. Right now we have, across our 13 newspaper markets, at least 2 dozen or more, different revenue systems that are on different servers that require support. So there's still a push to be more efficient and to take activity that doesn't add value out of the systems. So those are all incremental improvements. That's the biggest area of focus right now. And as I mentioned earlier, to the extent that we continued to put resources to work on the sales side and on the content side, we want to make sure that we are fully prepared for the programming to those digital platforms with compelling product and not shortchange change ourselves as we enter into this new era. I can't remember the second piece of that question.

Yes, I was just curious, if you can just ballpark for us what do you think the digital investments were in newspaper's side in the quarter? So how much of that actually hurt your numbers?

Yes, I don't know that it actually hurt our numbers in the first quarter. I think that our investment in digital has been pretty steady state. We were just reallocating resources towards the development of these paid applications on the smartphone and tablets. That's the big push there but it's coming from other resources. Now from an enterprise standpoint, which Rich and Tim Wesolowski and -- might be able to address, we are investing there for the whole enterprise.

Craig, it's Rich. And as Tim said, we combined all of our digital resources into one organization and are focused on consistent products across all of our markets. So while we're making an awful lot of progress very fast, we've been able to reallocate a lot of our expenses. And the net new investment at this point, you're not even quite seeing show up in the financials, it's a really good investment story for us. Now we'll see how that plays out in the future, as we -- and if we need to put more money in, but at this point, through reallocation, we're able to invest and not increase our overall expenses.

And if can get back on Naples for a second. if you can just quantify for us, how much was the ad revenue up there in the quarter? And maybe, if you could just talk a little bit more, Tim or Rich, about, did you get -- I guess the initiatives that your folks down there in Naples are doing to help drive more revenues I mean, is it -- which is more of like 50-50, the market is doing better for you guys but also you guys are sort of reinvigorating their process and new people down there? Or just what's going on please?

Go ahead Tim.

Sure. Craig, I -- the revenue, ad revenue in the Naples market was up double digits, it was up 11%, 12%. It is a function of this is a very upscale market with well-educated, affluent -- so there was a period, starting in '08, '09, where it struggled like a lot of other markets, but really the confidence has returned here. I think the prices from -- on a real estate standpoint, have stabilized and that has unleashed a lot of transactions. And it's that activity which a lot of the businesses here in the Naples market will see and respond to and invest with us. It's also the fact that in our Naples market, on the sales side, they have strong leadership and the right mix of products, and a real efficient way to go to market, which is frankly what we're looking to do in all of our newspaper markets. But here you have a really wonderful market that's contained. The TV stations in this market are largely run out of Fort Myers to the North. And so it really is a great newspaper market for us and one that we expect to continue to drive great results.

Craig, it's Rich. As we've talked about quite a lot, long-term we have a lot of faith in the Florida market and Florida is on sale right now. And it's an opportunity as more people get tired of the cold weather up north, and decide they still want to find a place down south, we really think it's going to be a very good place for us to have media properties.

All right and now we'll go to the line of Eduardo Atorino (sic) [Edward Atorino] with Benchmark.

It was close. I had a -- what programming as a percent of total costs, was it 25% or so for TV?

Okay, give me a second here. I'll can get you an exact number.

Sure. And I guess, second half cost for the stations would be down year-over-year, the old stations?

I think we're targeting to be in the flat range.

For the second 1/2?

Well, for -- yes, for the full year.

Okay, so.

Hold on, I'll have the number here in one second. Yes, about -- just a little under 20% of our total cost, in the first quarter. So I'm sure, a year ago, it would've been more than 20%-ate.

Okay. Oh, but -- and now that you own the McGraw-Hill stations, did you find anything good or bad that you didn't expect?

I think we have found a lot of good. We're really excited about being in these markets and these television stations. I think these are good television stations.

Yes, they are.

So mission-driven journalists, we've got good sales teams there, and I was happy to see that our first quarter revenue and cash flow performance is better than expected. So we feel really good about them. We've been executing our plan. No surprises. We're very much on plan in terms of the things we wanted to do, with clearly a focus on building a content distribution platform that will allow us to realize a significant cash flow on all platforms. And so I think, we're absolutely on plan, and actually are probably more excited today than we even were in October today, we've got the phone call that we were going to be acquiring these stations.

Yes. Did I miss circulation numbers for newspapers, did you give that? Circulation, I got. It's in the press release. Okay.

Well. That's correct Ed.

Yes, I found it. Never mind.

All right and now we'll go the line of Barry Lucas with Gabelli & Company.

I've got several actually this morning. If we can start with Tim on the print side. Tim, we've had several reports already in the first quarter from The New York Times and AHB role [ph] with regard to success on payrolls and getting paid for digital content. And I know you're -- it feels like you're a couple of quarters away from that. Is anything you can take from those comments, whether it was from Marony [ph] or The Times, that help you or can accelerate deployment of digital subscription revenues?

Yes, Barry, I'd say that certainly all of the experiments that are going on, and frankly they're -- I don't think that they're experiments anymore, they're real world business activities. We're taking all of that into account as we're developing and refining how we go to market. We believe and have, from the early stages that bundling with our home delivery print editions full access to all of our digital platforms is a key ingredient. The bundling approach that the cable systems businesses have done, we look to as a guide. And I think that that's the way to go, the ala carte approach in addition to print may not work as well. So we have a lot of lessons that we can glean from what's going on, at BI - LO , New York Times and elsewhere. It will come down also to what you actually have on these different digital platforms and how we program to them. This is a big project. Not only is important to have the right apps for the tablet and the smartphone, and also have a strong website that's intuitive and thoughtfully approached but also, from a newsroom standpoint, having our newsroom resources realigned to program to those different devices in a way that optimizes the consumer experience. With the leadership of that of Simpson at our Scripps Digital Group, we're very comfortable and confident that, when we roll this out in the third quarter and then start to look at going to market from a subscription standpoint in all of our markets in the fourth quarter, we're going to have a lot of benefit of past experience from the likes of BI - LO and others and are very encouraged by the opportunity to start to build revenue streams, like our TV folks have with retransmission consent and our Scripp's networks friends have with the affiliate few revenue streams in addition to advertising. So there's a lot of benefit to us. But it's important that we make sure we program these platforms thoughtfully and provide good value.

Tim, you touched a little bit on Naples and it's good to hear that you've been market recovering, and maybe you take some lessons that are learned in the market. But -- and this would be for either you or for Brian, but are you seeing similar trends up either in the Treasure Coast or at Tampa or West Palm, so print or TV is -- has Florida bottomed than is it about to improve?

Let me -- I'll jump in real quick and then I'll let Brian talk about the TV markets. The Treasure Coast on the other side, which is Stuart, Fort Pierce and Vero Beach, actually is a bigger market area and 3-plus distinct communities, not seeing the kind of strength there, that we are in Naples, but there are pockets and so, I think it's still early stages. I think a lot depends on the market but Brian can jump in on Palm Beach and Tampa.

Barry, it's Brian. Similar to what Tim is saying, I don't see a consistency across both of our Florida markets. West Palm is very strong. It was our fastest-growing spot-only market taking out political and then when you add in political, it was a huge market. It was our biggest growth of any of our markets in the first quarter. Tampa was a little bit softer. Still a positive market for the quarter, driven a bit by political but their spot market was softer and not as aggressive as the West Palm Beach market.

Helpful. As long as I got you Brian, and need not to quibble, but this is the easiest quarter early comp, I think on auto for the television stations because most of the dealers or dealer groups would have been pulling out the Japanese nameplates. So is -- are you just being cautious on what you're seeing in auto? Or it's slow to evolve? Or how would you describe that?

I don't -- Barry last year automotive was -- actually for the last 2 years, automotive has been up double digits every single quarter. Some of them going back 2 years ago, were 30%, 40% growth. The reality is we keep growing on top of that. And so, I think plus 12% is a pretty good quarter on top of a full year of -- a full 2 years of growth every single quarter. And as I said earlier, I like our pacing for second quarter, I think it'll end up being a very positive story as well.

Okay. So I'm just coping a little. Retrans. You picked it up a little bit, you described Time Warner and the Comcast deals. Anything in the shorter run that can help you DirecTV, Dish, that can -- in a renewal that could help amp up that number a bit?

Nothing else in '12. All of our deals that will go through all of this year, done and you saw that 30%-plus growth, same station. So I expect it will have a very nice year. Some of the deals you referenced will be coming up, as well as others, '13, '14, prior to us getting to Time Warner. And so, as those come due, of course, we have not been able to fully capture those, because of our prior agreement. I think those will add events that will allow us to have jobs at the point that we're able to renew each of those.

All right and now we'll go to the line of Howard Rosencrans with Value Advisory.

A couple of different questions. Can you talk a little about the reverse retrans side of the equation?

Hey Howard, it's Brian. In a look for a competitive reasons, I am not going to get overly specific with you, but our deals with our networks were renegotiated more than 2 years ago. And at that point, those -- that was part of our conversation. I think we publicly said that we are in fact, are sharing some of our retrans with the networks. So I'm not going to say to what degree. But we do believe that this new business model forges a very healthy relationship in the network affiliate partnership. And we think that, that builds a strong business and a strong business model moving forward for both of those businesses. And so, we have renewals for several more years out, with both NBC and ABC. Reversed retrans, if that's what you want to call it, is part of those models but it’s something that we're very comfortable with, and the costs are something that we certainly can manage.

Okay. So you don't think you're sort of benefiting unusually from sort of a timing issue, where you're capturing a lot and not giving back much. Do you think it's -- is that a fair way to represent here if I'm being clear?

Yes, I think that's fair. Yes, there's no timing here.

Okay. Everything sounded very encouraging on the call, I guess I'm -- all on the call so far. I guess I'm a little surprised you weren't more aggressive with your repurchases. What -- why slow them given all the good stuff we're talking about. And I mean the stock was up in the fourth quarter, but we've done a pretty good job of giving that back by now. Are you going to be -- what are your price points? Or I mean, we can all sit here and do our models and figure out that buying stock at these levels is pretty darn accretive given 0 borrowing cost and it's not as if you guys, as you've commented, you have no net debt. So why aren't we moving more aggressively?

Well we -- Howard, it's Rich. We buy inside of a program over a fairly long period of time. So we're not attempting to go in and react to ups and downs in the short-term market. So we get -- we're working against an allocation that we have in place. And I'll let Tim come -- Tim Wesolowski come back and remind you of where we are in the share repurchase. In general, we like share repurchase. It's -- we're investing in ourselves and over the long term, it has worked out very well for us. Go ahead, Tim.

Good morning, Howard. Thanks for your question. Yes we -- the board authorized $75 million worth of repurchases in the fourth quarter of 2010. We've got about $18 million left and my expectations are, that we would be using that throughout the rest of this year as the repurchase authorization that was done in '10 expires at the end of '12.

So we just -- we could -- we buy consistently over time. We just have not attempted to be on there and taking advantage or trying to play the market each and every day. But like I said in general, we're very committed to continuing to invest in ourselves.

And now, we'll go to the line of Michael Kupinski with Noble Financial.

It's just a couple of follow-up questions. I was wondering if you finalized your thoughts on the Spanish stations at this point. I mean, how are those trending for you? And any thoughts on -- would you I thought -- have thought of, as an option value on the value creation of those stations?

Hey Michael, it's Brian. We continue to be really excited about -- getting the opportunity of getting into the Spanish-language business. These are good markets that we're in. In the state of Colorado, we have multiple sticks there. In addition to that being in California, both Bakersfield and San Diego, provides great upside for us. I think last time I said that our #1 priority is just getting our arms around these television stations and the angle will provide the biggest upside. And so we've focused a little bit more there. What we have done is named the head of our Spanish-language focus, Ed Fernandez, who runs our station in Detroit. He's taking on a larger role for us and he is a former General Manager at the Telemundo station in Chicago. He knows the industry and that side of the business very well and I've asked him to kind of spearhead our analysis and focus on those specific stations to see what the upside opportunity is. And based on his expertise, knowledge of the market relationships, we see -- he's inside allowing us to have a more aggressive strategy moving forward. And so, he's in the process now of during his evaluation with myself and a couple of other members of the team we put together. We've got -- we're getting to know the Azteca people pretty well. And we continue to think there's big upside, and we're just finalizing our strategy there.

Okay. Great. And then on -- in terms of, what's going on in Washington, can you maybe address a little bit of the -- your perspective on the spectrum options and repacking issues? And then also the prospect of posting political ad rates what your thoughts are? I know that's -- I think that's just for the top 50 stations if I recall. This might affect you, any thoughts there?

On the spectrum options, we've said all along, we're not a seller. We have -- we're committed to our communities and we think that there's a tremendous opportunity for us to use all of our spectrum to be able to serve our communities better, whether it's through mobile opportunities, the extension of multi-cast channels and perhaps data streaming and things like that. And so there's still obviously, lots of information that hasn't been disclosed about what those prices and all would be. But we don't see ourselves as a seller, we've been in this market for a long time. And we'll continue to be in the markets for a long time. As it relates to the -- putting the political data online, that role was just announced in the last 2 weeks. It's at the OMB currently for review. Yes, I think we understand what commission Is trying to accomplish. We do believe that there's a better way to disclose the information. The FCC desires to make public without publishing online every rate for every unit for specific moments in time, in a political window. And so, I think we're hoping for a continued discussion on this topic. We think it's an important topic.

All right and now we'll go to the line of Edward Atorino with Benchmark.

I got sort of a Mickey Mouse question. Could you just break apart depreciation and amortization between news and TV? I mean, it's usually in the press release, I don't see it. I need to fill-in a blank on my model. I'm sorry. It's close to 23% in total.

Let's see here. Hold on a second.

I'm sorry.

You know what actually Ed, I think we're going to be talking to you later on this afternoon. We might have a number for you by then if that's okay.

Terrific. Now that's no problem.

All right and now we'll go to the line of Alfred Anderson [ph] with Alfred Anderson Family [ph].

Yes, it is. I like this -- about earnings call. I got a lot more interesting [indiscernible]. I have some questions about the full year political advertising. I noticed that a lot of your TV stations I've heard have swings states like Colorado, Florida. And you got TV stations at Cleveland, Indianapolis, San Diego, Denver, Detroit, and West Palm, and I guess Tampa too. You mentioned that you had $42 million in the last election cycle from the previous Scripps stations. Then you forecast a range of at least $10 million for the addition of McGraw-Hill stations. So the first question is, how much were the McGraw-Hill station's political revenues in the last presidential cycle? And then following on some of that, whether a range possibilities political advertising for this entire year might run in the neighborhood of $60 million to $90 million, whether you think that would be encompass an entire range of possible outcomes?

Alfred, it's Brian, you dropped off a little bit there, I had a hard time hearing you. But let me take on a couple of questions there. Related to our acquisition of the new stations. As you go back and look, I think the guidance we've put out, the $10 million, it's probably in about the range of what they did in 2010. It is below what they did in 2008 but every election cycle is specific to markets and races. And they were driven in 2008 by specific races that were highly competitive and specifically in Denver. Those variables do not exist in this cycle. And so, that money won't be in that state and so as a result of that, we've modeled based on -- we look at every single market. We look at every single race. We look at where the markets -- where the competitive situation is positioned. We look at what races that are open. We look at what's tossed up, what's considered to be lean, what's considered to be solid. And we model the support of each one of those. It's really a science and we spend a lot of time -- I think our head of sales, is the best in the business. He knows the political business like nobody else in the industry. And so, we're very acute in the way we attack our modeling for political. And so I think we're comfortable with the guidance we've given on the news stations. In terms of -- I think as you were curling up, you talked about, $60 million to $90 million. Your high end, we don't see. Again, it comes down to specific races and specific markets. We're a business with a finite amount of inventory. We don't add -- we can't add news pages like a newspaper. And so, we have to model a business. While some markets start early, we're talking right now about the fact that Ohio and Florida have started early. Some of those were built. Some of the other ones you outlined maybe at Michigan or in Arizona, maybe late to the game. And so, all of that advertising may come in a 6-week window. And so you're limited to the election laws and how you're allowed to price that business, as well as you work within the finite amount of inventory you have. And so I think we modeled all of that. I feel comfortable with our guidance. I hope to be on the positive side of that guidance. But the opportunity potentially, to add 50% or 100% to our guidance, I would say, is probably not realistic.

Good. The -- where I was coming from is, if you had $42 million from your previous stations and now you have the influence of the Super PACs coming up into what promises to be a very exciting election year. And then you add on the new stations of that $10 million. We've got $52 million more or less guaranteed, if things were exactly in the same -- sort of previously. But you're expecting, or most people are expecting, something much tighter. So $60 million with a full year political would seem to be a low number. And I just tried to establish a range of what the top end might be, going up to $90 million. But currently, you're not -- even though you model it all very carefully, and you can't really give out the numbers because you're quite uncertain yourself about how much is on these Super PACs are going to affect the total advertising revenue. Is that more or less correct, my assessment?

Yes. I think the one thing you want to keep in mind is, while our Super PACs may bring more money to the political cycle, it would be great if they were all spending all of their money now. We know that the candidates and the parties are going to back-load all of theirs, until the last 6 or 8 weeks. But much of the Super PAC money is brought into the same cycle and into the same window of those 6 to 8 weeks. We already sell out all of our inventory within those weeks. Obviously, we're aggressive, new stations and so our news day parts are coveted by political candidates. And so, all of our unit rates are -- or all of our inventory is sold out and our unit rates are maximized as best as we can. So even though there may be more Super PAC money in the system, our ability to drive up or add additional units, probably doesn't exist to the degree we wish it could.

Okay. I get that point. That's very interesting. Time will tell. We're looking forward to the big bonanza. Oh, one final follow-up on that. The TV revenues, I've sort of, assumed that almost goes straight to profit. I mean, you don't very many incremental cost once you take this political advertising book or space, you don't have any extra costs associated with that, do you?

That's correct.

Hey Alfred, it's Rich. It's just on the political, I think what you get from us is a company that, we're very transparent. And if we had exact projections, we would give them to you. We are very well positioned. We will get more than our share, if the money moves very fast and it comes in a very tight window. If we get closer and we have a better feel for it, certainly we'll change our guidance. But you're just getting a good transparent look, at a company that we think handles political spending better than most.

Yes, I was looking at it as a shareholder. As you know, I have quite a few shares. In fact, I bought some yesterday. And if you take a second half of the year and you have, on top of your regular operations, at least an $80 million profit, and you've only got, was it 5 million shares, 5.5 million shares? It looks like quite large per-share profit coming in for the full year.

Yes, we exactly hope so.

And there are no more questions on the phone lines at this time.

John, thanks very much for your help this morning and to everyone else on the call. We appreciate your interest. We'll talk to you again next quarter.

All right and ladies and gentlemen, that does conclude the conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect.