The E.W. Scripps Company (SSP) Q1 2013 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to The E.W. Scripps Company First Quarter Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. And I would now like to turn the conference over to the Vice President of Investor Relations, Ms. Carolyn Micheli. Please go ahead.

Thanks, Brad. Good morning, everyone, and thank you for joining us for this recap of The E.W. Scripps Company's First Quarter Results. We're going to start this morning with Scripps' CFO and Treasurer, Tim Wesolowski. Then Rich Boehne, our President and CEO, and as of last Wednesday, Chairman of our Board, will provide additional details about the quarter. Then we'll open up the lines for your questions. Also in the room are Tim Stautberg who runs the Newspaper division; Brian Lawlor who runs the TV division; Adam Symson, Chief Digital Officer, and Doug Lyons, our Corporate Controller. The commentary you'll hear from our executives this morning may contain certain forward-looking statements. 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 and other regulatory filings. You can visit scripps.com for more information such as today's release and financial tables. You also can sign up to receive e-mails anytime we disclose financial information, and you can listen to an audio replay of this call. The link to the replay will be on our site this afternoon and will be available for a week. Now, here is Tim Wesolowski with a summary of the first quarter.

Thanks, Carolyn, and good morning. We're coming off a record year in 2012, and broadly speaking, the first quarter unfolded about like we anticipated. We made good progress rolling out our digital bundle in the newspaper group, hiring experienced sales folks who are focused on selling digital advertising to our existing and new accounts and building the audience for our homegrown shows in the broadcast group. Two things that were a bit different than we expected tended to offset each other on the bottom line: some softness in spot advertising in a couple of TV markets and a slower ramp in spending to grow our digital business. And the comparison to prior year is muddied by a loss of political, the Super Bowl and last year's noncash charge. I'll try to hit on each of these factors as we walk through the results. Let's begin with a consolidated results. Revenues for the first quarter declined 4% to $199 million. More than half of that decline, about $4.5 million, was due to the absence of political advertising in the TV division following our record performance in 2012. Our costs and expenses for segments, corporate and shared services, were $188 million, that's a 1% decline over last year. And if you take out the incremental investment from the P&L in our digital operations, costs and expenses declined nearly 3%. The company reported a pretax loss of $7.6 million in the first quarter and that's basically flat from the first quarter of 2012. But the prior year included a non-cash acquisition integration charge of just under $6 million. You may recall that this noncash charge resulted from the termination of an agreement with the national sales firm of the stations we acquired. Net loss for the quarter was $2.7 million or $0.05 per share. That compares to a net loss of $4.4 million or $0.08 per share in the year ago quarter. Excluding that noncash charge, last year's EPS was a loss of $0.02 per share. Turning to the broadcast division. Revenue in the first quarter was $97 million, down $2.7 million from the first quarter of 2012. As you read in the release, the increase in retransmission fees, digital and national advertising were not enough to offset declines in local advertising and expected declines in political. While a couple of our local advertising markets were lighter than anticipated, we knew first quarter would be impacted by the loss of political advertising and the Super Bowl. Our TV portfolio does not include any CBS stations, and Brian discussed in our last call that the Super Bowl and March Madness provided upside for groups with CBS stations. If you take out the impact of political and the Super Bowl advertising, our broadcast revenues in the first quarter are up 2.6%. The division's performance was impacted by a solid national advertising that was up 4.6% for the quarter. But as I mentioned earlier, local advertising was a bit soft in the quarter, down 5% to $54 million. That was mostly within the services, which is our largest category, which was down 7%. Auto was up a healthy 8% even though we lost some local advertising late in the quarter. That happened when some carmakers moved previously booked schedules over to March Madness on CBS. Second quarter is looking stronger for us in both categories, and we expect to be on a more level playing field with the NBA Finals on our ABC stations, as well as the return of Dancing with the Stars and The Voice. There are other bright spots in the television revenue numbers as well. Total revenues in the 4 former McGraw-Hill stations were up 3.3%, a good sign that our recent acquisitions are performing well. Also, digital advertising revenues in the broadcast division increased 23% to $3.8 million. Our retransmission revenues were up a strong 35% year-over-year and we expect to see nice double-digit growth in retrans in 2013 and over the next several years. Expenses in broadcast fell nearly 2%, primarily due to lower syndicated programming costs. This was from our decision to replace expensive syndicated programming in the access hour with our own programming in a handful of markets. Our 3 Scripps-owned shows continued to perform well. The List, our newsmagazine that runs in access hour in 6 markets, is consistently growing in households and key demographics. In less than 6 months on air, The List's rating with women ages 25 to 54 ranks it as the 12th most-watched syndicated TV show nationally in that demographic. It beats shows such as Dr. Oz, Extra, Katie, Inside Edition and Steve Harvey. Let's Ask America, our company's access game show, is also showing impressive growth. In the February ratings period, the show grew 25% with adults 25 to 54; and 10% with women 25 to 54 from the November 2012 rating period. Finally, Right This Minute, our daytime program that's a partnership with Cox and Raycom, hit some big milestones in the last few months. Our syndication sales partners cleared the program in New York, L.A. and Chicago, giving us more than 60% clearance nationally. And we're seeing ratings growth from Right This Minute at the majority of our properties. Those of you that have been following us for a while know that taking control of our programming and driving ratings growth are fundamental to our long-term margin improvement plan and that plan is working. Our segment profit in the first quarter of 2013 was more than double that of the same quarter in 2011, the last nonpolitical year. And our segment profit margin improved by 7 percentage points. We still have work to do, but we've made a great deal of progress. Growing our segment profit margins remains a top priority. Turning now to the newspaper division. The story is all about starting the rollout of our subscription bundles and controlling expenses. We launched subscription bundles at 2 of our newspapers in late March. We plan to roll out the bundles in all of our markets this quarter and next. And while it's still early, we're encouraged by the results of other companies that are ahead of us on this path. Rich will talk more about the subscription packages in a few minutes. In terms of newspaper revenue, the trends we saw in the first quarter are broadly in line with what we've seen with newspapers in the last year or so. Total revenue in the first quarter was $99.5 million, down 4.7% from the first quarter of 2012. Advertising and marketing services revenue was down 5% compared with the year ago quarter, that total was $63 million. Local advertising was about flat at $20 million. Classifieds came in at $18 million. That category continues to struggle, as you know, and was down more than 9%. Preprint and related products were down 6% to $16 million. And national advertising was down 21% to $2 million. Digital revenues rose 3% to $7 million. Pure-play digital revenues increased 13% over the year ago quarter. Digital revenue tied to print classifieds struggled along with weakness in the individual verticals. Revenue from subscriptions decreased 3.6% to $30 million, driven largely by weakness in single copy and home delivery volume. That number was not impacted by the subscription bundles. As I mentioned, we had only rolled this out in 2 markets and they were in the last couple of weeks of the quarter. Total segment expenses decreased 4% to $94 million. Newsprint expenses decreased 8% due to lower volume and lower price. First quarter segment profit in the newspaper division decreased 17% to $6 million. Now I wanted to spend a minute talking about the investment we are making through the P&L in our digital capabilities. Recall that our digital efforts support both the TV and newspaper segments. And the 4-platform strategy is critical to success in each of our 26 local markets. The lion's share of our spending is directly tied to converting our digital efforts into dollars. Our combined digital revenues in newspapers and TV was about $40 million in 2012 and we'd be disappointed if that number didn't about double in 2015. Our spending falls into 3 roughly equal buckets: dedicated sales resources or feet on the street; a streamlined process for salespeople to take an order, get it served and bill it to the client; and third, a heavier production of content. First, feet on the street. Through the end of April, we added 35 digital-only salespeople to the team and we plan to get to 100 by year end. We expect to see the positive impact of those new hires on our digital revenue by later this year. Second, the investment in a more streamlined digital revenue operations process will also help us increase revenue. That project's on track. Through the year, we'll be implementing new technology workflows in a much more efficient process that will free up our sales teams to spend more time face-to-face with clients and prospects. We expect to roll out the new sales management system to the television markets this fall, and we'll follow with our newspaper sales teams early in 2014. Finally, in addition to veteran salespeople, we're hiring veteran journalists to create premium news content across our properties. This is an investment in creating the kind of in-depth and exclusive local content people will pay for. That's critical to the success of our 4-platform strategy. And I'd like to finish this morning with a look at our cash position, and finally, our guidance. Our cash position remains strong at $221 million compared to $243 million at the end of the fourth quarter, largely down because of normal seasonal factors and our share repurchases in Q1. In November, you'll remember the board approved a share repurchase authorization that would allow us to buy back up to $100 million of our shares. We repurchased 942,000 shares in the first quarter for $11 million. And our cash on hand of just over $220 million is still more than our debt of $192 million. I'll wrap up my presentation with a review of our guidance. You can read what we've said in our release, and I just wanted to touch on a few things. In February, we said full year shared services and corporate expense would be in the $60 million to $65 million range. We've trimmed that back to the lower end of the range at $60 million. That's because while we're off to a good start, the hiring of digital salespeople has gone a bit more slowly than we expected. We're looking for seasoned salespeople and we're taking our time to make sure we have the right ones. Also, we said we expected TV revenues to be down high single digits for 2013. Due to the first quarter results, we now expect that decline to be about 10%. But don't read too much into that though. Our previous view had us down 9%, so this is really a minor adjustment. And for the second quarter, we expect television revenues to be down low single digits because of the loss of political revenue. Backing out political, we expect our total revenue to be up in the mid-single digits. Television expenses should be about flat. Newspaper revenue and expenses are expected to be down in the low single digits. The decline in expenses should be greater than the decline in revenues. Again, see our release for the full details. And now, let's hear from Rich.

Thanks, Tim. That's a detailed look at the first quarter. Before we take questions, let me take just a few minutes to look ahead and let you know we are -- where we are most focused heading into the summer and the back half of the year. Just a reminder, there'll be lots of noise in our 2013 results from beginning to end. Obviously, the most prominent complicating factor is the tough year-over-year TV revenue comps due to the every other year political advertising cycles. But if you look across the cycles at our performance, we continue to improve the financial results and the value of the company aided by our attractive geographic footprint in many crucial political swing states and a strategy we have to make the Scripps stations among the most attractive sales platforms during critical campaign seasons. So despite the tough comps this year, we look forward to be on the sunny side of the cycle in 2014. During 2013, we are particularly focused on 3 hot spots that should deliver substantial upside later this year and even more so as we head into '14. The first is the focus on local TV news ratings in all of our markets. Across our station groups, that's where the juice is, particularly in Denver, Indianapolis and San Diego, the largest former McGraw-Hill markets. Those 3 have made strong progress and are ahead of where we hoped they would be when we closed the deal 16 months ago. In fact, year-over-year in the first quarter, Denver, Indianapolis and San Diego were, collectively, among our best performers. Brian can provide some highlights, not just in these markets but in others. The local per news performance built on high-quality enterprise journalism will be our largest cash flow upside over the next few years. You may have recently read about the fruits of our labor in Denver and Phoenix where our stations won Peabody Awards for stories of high impact in their communities. We see, time and again, that good journalism expands audiences and that has happened here again. Our second area of focus in 2013 is the rollout of the digital and print bundled subscriptions in newspaper markets. We got off to a strong start earlier this year in Memphis and at the papers along the East Coast of Florida. In Memphis, which launched the bundle in late March, more than 15% of subscribers have already activated their digital service. That strong start in Memphis is encouraging as we roll through the rest of the group. 11 of our 13 markets will be launched before Memorial Day. This is a critical period for the newspapers as we rebalance the business model with more revenue from subscribers who are attracted by high-value content on tablets, smartphones and, of course, also on print. We are creating content worth paying for across all those platforms. Our third area of focus this year is the execution of our plan to build a larger base of digital advertising revenue in all of our TV and newspaper markets. As you well know, we're adding about $20 million in expense this year for the expansion of digital operations. The bulk of that is going for advertising systems and feet on the street, sales reps focused solely on digital advertising. At Scripps, I'd like to think we're experienced in creating value by what we be call investing through the P&L, adding expense based on an expected return and profitable revenue. The return isn't instant. It'll take us much of this year to locate the most talented sellers, nearly 100, and get them in place in our local markets. As a good sign, in the first quarter the revenue growth that we saw in the markets that we have already staffed is running about twice what we saw in the first quarter in the other combined TV markets. It's an excellent opportunity and we're plowing ahead. At the same time, we're investing in and launching market-leading mobile products and improving our websites to capture the growing digital audiences. Our expansion of digital products and platforms built upon high-quality content that's worth paying for is essential to capturing value in all of our local markets. Those are the 3 areas where we are most focused this year. Finally, just a final reminder that Nackey Scagliotti, who is the great-granddaughter of our founder, retired as board chair last week. And the board and the Scripps family asked me to take on the Chairman's duties. It's a big honor for me, but much more important is the accountability that, as Chairman, I have to our owners including all of the you on this call. We have a skilled board and we added to its heft last week with the election of Kelly Conlin, the CEO of NameMedia and an experienced leader and entrepreneur in both digital and more traditional media settings. We're honored Kelly agreed to join the board and provide wise counsel to our development of strategies for creating value. So on behalf of the board and all the talented employees at The E.W. Scripps Company, thank you for entrusting us with your precious capital. We're determined to deliver the attractive returns that you expect. Now, with that operator, we're ready to take questions.

[Operator Instructions] And our first question today comes from the line of Alexia Quadrani with JPMorgan. Nadia Lovell - JP Morgan Chase & Co, Research Division: This is Nadia in for Alexia. Just a couple of questions. On the broadcasting side, can you give us any color on how the current quarter is looking? What major categories are outperforming, and what's lagging?

We'll let Brian Lawlor take that.

Second quarter is kind of in line with first quarter, although our biggest category, services, which we called some attention to in our -- in some statements is pacing much better. So automotive remains strong, retail has bounced back from last year and we're seeing that similar trend in second quarter. Food services, travel and leisure were a bit off in the first quarter and were still pacing a little soft there. But auto, strong; services, bouncing back. And although it's not one of our top 5 categories, telco has got some pretty good momentum with some pretty good spending out West, in California and Arizona. Nadia Lovell - JP Morgan Chase & Co, Research Division: Okay, great. And then on the newspaper side, as you mentioned earlier, you'll be rolling out bundled packages in 11 of the 13 markets by Memorial Day, can you give us a little color on what those packages look like, what your pricing strategy is in general and any color on expectation for revenue upside?

Sure, Nadia. This is Tim Stautberg. We're really excited about the bundling of our digital products along with our print subscriptions for the folks that are out there that have been loyal subscribers. We have close to 600,000 of them across our footprint and encouraged about the activation of their digital subscriptions and access to all of that content. As a precursor to having a deeper relationship with them, the pricing that we'll offer to digital-only subscribers will range anywhere from probably $9.99 to $14.99 a month. And then we'll look to price our Sunday-only print subscription in all of our markets just a little bit above that with the hope that many folks who are digital-only subscribers over time will look to actually take a Sunday paper as well and have a deeper, richer experience with us. So that should give you a sense. I think that's in line with a lot of other newspaper companies. Nadia Lovell - JP Morgan Chase & Co, Research Division: Okay, great. My last question is more on the M&A environment. As you've mentioned before, you're the largest ABC group in the country and that's provided you with some advantage. I'm wondering could you look to expand that footprint in ABC, or do you have a preference to diversify in your affiliate exposure?

Nadia, it's Brian. Look, I think -- ideally, we would be more diversified, not have as many stations in one affiliation, although we do enjoy the scale and leverage of being the largest ABC group. We think that does give us a bit of advantage. But that said, I think that as we showed last year, we're active in the space and we continue to look at everything that pops up. If there was an opportunity that strategically made sense for us to diversify our portfolio in terms of affiliation, we would. But we also wouldn't look at any ABC -- we would look at ABC stations. Again, I think we're very strategic as it relates to specifically what we're trying to accomplish as a company. So we would get larger with ABC or we would like to also get larger outside of ABC, whatever the best opportunity presenting itself would be.

And we do have a question from the line of Craig Huber with Huber Research Partners.

Just some questions on the newspaper side. First, I believe, last quarter, Tim, your daily and Sunday circulation volume for print was down 5% each year-over-year. How was that in the first quarter, please?

Yes. Craig, first quarter our daily was down 6% and Sunday was down close to 8% for print.

Okay. And then another housekeeping question. For newsprint, what was the percent change there for consumption and average price year-over-year?

I think we're down probably 2% or so in price and volume was the difference, 6% or 8% there.

Okay. And then if you could also -- the other Tim, the shared services and corporate costs, I guess, you talk about $60 million this year. The increase this year versus last year, can you just break apart the dollars, roughly for us -- roughly, you gave us 3 different areas, but it's roughly 1/3, 1/3, 1/3 for each of them?

Are you talking about the year-over-year increase in that line, Craig?

Yes, yes, yes.

Yes. So we have been investing in the digital group through 2012. So last year in the first quarter, that number was about $8.5 million. It was just shy of $12 million in 2013. That -- most of that was related to content and systems. We really started hiring the sales folks more here in 2013.

And then this year, that $60 million number you're talking about for the full year, I guess it's roughly like $37 million or so last year. How much of that do you think will repeat next year, and what do you think, you get a ballpark, how much will it be lower in 2014?

So we haven't given out any 2014 guidance yet. And if you think about those 3 different buckets that they're in, we anticipate that we'll be successful on the sales side with adding the feet on the street. We could be very well ramping that into 2014 as well. That middle piece that we've talked about, the systems, there'll be some reduction in that, I anticipate, in 2014. And then the content piece will kind of play out depending upon where we're successful. One of the real advantages of this investing through the P&L that Scripps has been so successful at is, if it works, we can keep doing it; if it doesn't work, we can turn it off and move it somewhere else.

And also, I believe on the McGraw-Hill TV station, I think you said the revenues, they were up 3.3% year-over-year. I'd be curious how the margins trended versus a year ago?

Craig, it's Brian. Margins are growing.

Okay. No chance you'll give us a sense of quantity -- give us some quantity around that like percentage points or...

No chance.

No chance. And can you talk a little bit further, Brian, about the costs for your TV station group. I mean, just the big swing factors this year, programming costs, in particular?

Yes, I think you know -- it's Brian still, Craig. We talked about the fact that our total expenses were down 1.6% in the quarter. Programming is a large of that. Our programming costs year-to-year are down almost 12% with syndication costs being down 18%. And so, that's obviously a large part of it. Our payroll is relatively flat. So when you think about the fact that even -- as you look at the fact that we're down even with the investments we've made in our own programming and with reversed compensation and all, I think, clearly, the programming has been a big part of that strategy. When we talked -- a couple of years ago, we talked about being pretty aggressive as it related to lowering our programming costs. And I would tell you that over the last 2 years, if you just look at our legacy markets, Craig, we've lowered our programming costs -- our syndicated costs by about 50%.

And my last question, Brian. I get this question a lot from investors. I know you guys have no interest in selling your company and all that, but investors do ask me all the time, if the company, Scripps, was sold, are your retrans contracts transferable to somebody else?

It really depends contract-to-contract. Those are individual provisions within our negotiations and so I can't speak on the whole because every one looks differently. So it would really depend on, a, our contracts, and b, somebody who were to acquire us, what their contracts would look like. So they're very different in each case, Craig.

Craig, it's Rich. And just to emphasize that even though where you started that, that's correct. The company's not for sale.

And then on the flip side of the question, please. If you guys did buy any TV stations out there, how are your retrans contracts written -- the stations that you buy, would those be able to transfer to your existing contracts, some of which are not very good, of course?

Yes, I guess I would answer it the same way. We do have some deals that we have very favorable language in and most of those are the deals that we've been able to negotiate as they've expired over the last couple of years. Again, some of it relates to what other companies may have in their agreements with their own PPDs. So obviously, that's an important consideration. As we've discussed in the past, we do have some limitations. Most of them are relatively short term and we're long-term investors. And so while something may create a little bit of a disadvantage for 12 or 18 months, inevitably we think we'll get our full value for the long haul.

My last thing about that. What about this Comcast and Time Warner contracts that are locked in for many years here, as far as 2019. Would you get stuck having to move over those contracts if you bought it -- if you bought anything, the charge of retrans?

I want to be a little careful with how I address that. But I would tell you that, for example, the McGraw-Hill contracts, that -- or acquisition that we had, they did not roll into our existing deal. And so there is clearly opportunity for us to be able to have agreements outside of our existing deal through acquisition.

And we do have a question from the line of Michael Kupinski with Noble Financial.

As you mentioned, the local television advertising was just a little soft. Was there a difference between a larger market stations versus smaller markets or regional differences that you can talk about?

Mike, it's Brian. You know what, It really was just kind of market-by-market. I can't tell you that there is a Midwest issue or a West Coast issue. I mean, our largest market that was soft was Denver and then Kansas City, Baltimore, Tampa, Phoenix. They were all, on their spot business, down year-to-year. So but -- all of the others were up. So there's not really a trend there. It really is specific to markets.

And it seems like you said that services category is coming back a little bit in the second quarter. Any thoughts on the health care category as you go into the second quarter? Are you seeing any signs there?

We're seeing a bit of improvement. That was an area that was pretty soft for us for the first quarter. I think we are optimistic that there'll be some pretty good spending in health care in the back half of the year. Some of it may come in the form of some issue advertising related to Obamacare. The states are mandated to spend some educated -- education money on the rollout within the states in the back half of the year. And so how that gets hold into specific categories versus issue remains to be seen, but we do expect that to be a pretty healthy category for us in the back half of the year.

And just in terms of rank, what -- health care is what in terms of the total -- of your advertising, in terms of the category itself?

In terms of -- within services, maybe 20%, something like that.

Okay. And then in -- thank you, Brian. Local advertising in newspapers was just a little bit better than I was looking for. Was that due to Naples or did you see some local ad trends moderate across all the newspapers at this point?

Yes, Mike, it's Tim. Naples is doing well. And fortunately, the winds are blowing from west to east and the Treasure Coast newspaper has also picked up some momentum in the quarter and they're starting to see some growth there as well. It's also a reflection of the emphasis we have on our local sales activity and focusing on businesses that we can go in and spend time with and we're doing a pretty good job with how we're going to market and having the right products and solutions for them, help drive their business. It's helping to overcome a lot of the softness and weakness from the larger retailers, which we've been battling against for many years. But we're really pleased to see some progress there on those midsized and smaller accounts in our local markets.

And in the newspaper group, the expenses were just a little bit higher than I was looking for. Is that related to the company's rollout of their digital bundle at some of their markets or -- like in Memphis or was there -- can you talk about the expense line there?

Yes, they were pretty much on target with what we were guiding. We did put through an increase in compensation to a large majority of folks out there to help -- with over the years, we've had, had a pay freeze in place and it was something we felt that was important to do from a merit standpoint for certain folks. So there's a little bit of comp that might be there, but I can't think of anything that's out of line.

Okay. And I was just wondering in terms of the total FTEs, full-time employees, in the quarter, can you give us the year-over-year number at the end of the first quarter?

You're talking about total company, Mike?

I'm sorry, total company, yes.

We'll take that back out and get back as soon as we have it.

And we do have a question from the line of Michael Kass with BlueMountain Capital.

I just wanted to just follow up on 2 items that others had asked about. On the pay wall, could you maybe just clarify, are you guys seeing a price increase and kind of an opt-in or -- sorry, an opt-out strategy with respect to getting your current print subscribers to digital? I mean, obviously that's something that a lot of other -- of your peers have used to kind of effectively get a price increase as they've implemented these pay walls?

Yes, our approach is very similar to that.

And what kind of a price increase are you guys looking for from just the folks that are opting -- are being opted into the joint bundle versus what they were paying on a print subscriber bases?

Yes, Mike. It will really depend and it's really just getting started. It'll depend on an elasticity of demand for the subscribers. And of course, we have different frequencies of home delivery. But we're taking our cues also from what other newspaper groups are learning and getting intelligence from what's working and what successes folks have had. So we're very encouraged the kind of results that you're seeing and again that year-over-year with their increases is certainly something that's -- has us very excited.

In terms of just the print, the price increase that you're attempting to push through, is it similar to the kind of 15% to 20% that we see at some of your peers?

We're taking our cues from what they're doing. And those are, what, $0.50 to $1 dollar a week for folks would be nice.

Great. And then with respect to just the local decline in Q1, I mean, that's something we didn't see in a lot of peers. I think you mentioned something about that having to do with Super Bowl, but I was kind of lost -- the explanation was a little lost to me. I was wondering if you might be able delve into that a little bit. Was that the -- was that what you attributed to or is there -- are there other factors?

Michael, it's Brian. A couple of things. Number one, we don't have any CBS stations and so the Super Bowl was on CBS, but a year ago it was on NBC, and we do have a couple. So we lose the revenue in the Super Bowl that we had a year ago and we don't get to move it to anywhere else because we don't have any CBS. So going into the quarter and even on last quarter's call, I talked about the fact that I knew that would take some money off of our books, keep it in the market -- in each of those markets and then move it to another station. So that was one situation. And the fact that we don't have any CBS also plays in -- big college basketball in the first quarter leading into March Madness, and in fact, we had some automotive orders on the books that got canceled at the end of the first quarter to move it over because some CBS markets had some additional inventory. So those 2 things, just a little bit of a disadvantage by not having CBS stations. And we knew that going in this time, so we benefit from your portfolio with your affiliation and there's times where it goes down. The other thing that probably drove that was just a couple of the key markets and I touched on this earlier. Just relative softness. I alluded to the fact that Denver, Baltimore, Kansas City, Phoenix and Tampa were all down year-to-year in terms of the overall spot environment inside that market. So I think, really the -- and services being softer, which is a big local category. So I guess if you roll all that up, that would explain our shortfall.

Okay. And so the first group of that is stuff that you presumably aren't seeing in Q2, but the second half, meaning the services in the market-by-market is stuff that's continuing into Q2?

I think, I mentioned earlier, services is actually looking much better in second quarter.

And we do have a question from the line of Barry Lucas with Gabelli & Company. Barry L. Lucas - Gabelli & Company, Inc.: A couple of items, maybe let me start with Tim Stautberg. Other than sort of the acceptance or sign-up rate that you're seeing in Memphis, anything else even in these early days that you can point to as indicators of success on the digital bundle?

Yes. Barry, We're still really, really early here it. And we're probably 6 weeks, 6 to 8 weeks, in from our launch in Memphis. So we're now in -- 6 of our markets have rolled out, we'll roll out another 5 before the end of this month and then 2 more later this summer after we get some systems configured to work with our approach. There's lot of technical stuff that goes on behind the scenes to make the customer experience enjoyable and to give you the ability to just have one user name and password working across all of these different products and platforms, and we've worked through a lot of those issues to where it's going really smoothly. So I'd say we're encouraged by how well it's working. And then the pickup, the activation rate, in Memphis with 15% of the home delivery subscribers is encouraging. We're hoping that number marches towards 50% over the course of the next year because we think it's important that our subscribers have an experience with all of our different platforms and products, and that time spent with our content as a proxy for value, we'll be available to measure that over time and that will then help us understand, from a consumer-facing standpoint, how much revenue we should be able to generate. Plus, the digital only uptake is impressive. We think early on even in some of our community markets where we're seeing any given day 50 folks signing up for a digital-only account, many of them signing for what we call premium account, which include some frequency of home delivery. So the way that we've approached metered access to our content, the interface with the consumer experience in terms of the offers that they're presented all are working well in our view. We'll have a lot more to report, I think, after second quarter results. Barry L. Lucas - Gabelli & Company, Inc.: Great. Maybe I could put it just another way, Tim, and squeeze a bit more out of you. If you are successful in this path and you got the rollout essentially complete the end of June, since we can't see the internal dynamics, maybe you could just share some expectations with what subscription or circulation revenue goals might be? How much it moderated? Could it be up at some point? That sort of thing.

Yes. We'd be disappointed if our circulation revenues weren't growing by the end of this year, by fourth quarter. What's exciting for us and not just the management team, but in our buildings is the chance to start to grow again in a measurable way where we now know who our subscribers are. We have a relationship with about 40% of the households in our local markets. That means we have no known relationship with 60% and that 60% is a target. So I think key is to just make our relationship stronger with that 40% of the households, so about 600,000 subscribers. And then we have 800,000 that we're going to be aggressively marketing to and encouraging to become a subscriber either digital or premium subscriber. So those numbers, over time, I think are going to be -- it's going to be a meaningful transition for not only Scripps, but I think the industry over the next 2, 3 years, and is going to be able to shift the focus, shift us to a consumer-facing enterprise. Barry L. Lucas - Gabelli & Company, Inc.: Great. Maybe if I could ask Brian a question or 2, it would be helpful. Brian, I know you certainly sound enthusiastic about what you're seeing thus far in the first year plus at McGraw-Hill stations. And speculation is at minimum there could be over $2 billion worth of television stations coming to market, so is there any way you could maybe put a little box on what your priorities, where you did mention network diversification, the overwhelming bulkier stations at top 50? So was it large to midsized markets? Is it underperformance that you want to turn around? And maybe then, just how big your appetite might be?

Barry, it's Rich. Let me give you a little color and then Brian can add on as well. Just a reminder that we've talked about a lot, we're very disciplined buyers and we focus on cash-on-cash return on investment. And so finding deals at what we think are attractive prices is absolutely critical. Because in general, we are not roll-up enthusiasts. Instead, we're much more focused on either great markets we're in or getting into additional very attractive markets and then taking as much additional revenue as we can out of these great markets that's going deeper is much more our strategy than going broad and trying to roll up the industry. Having said that, we are looking and have looked at pretty much everything that's come along. I'll let Brian add -- talk about some of the market dynamics we really find attractive.

Yes. Barry, it's Brian. To Rich's point, we don't have a desire to get bigger for the sake of getting bigger. I think that we go into every opportunity looking strategically how it fits our footprint and makes our company better. If you look at our portfolio, there's probably a lot to tell about who we are, where markets 10 through 60, we like network affiliates, we like stations with strong brands and somebody who -- it clearly is in the news game. And I think that we have an open mind to moving beyond 10 to 60 if the right opportunity presented itself, we still would like to be in market -- in network affiliates. We'd like to potentially be able to expand our footprint in some of the markets we're in possibly. There's geographic strategies that we have. There's affiliate strategies. We would like to be a little bit more diversified, if we could. We like states that are active politically because of the way we handle political. We think it's a competitive advantage for us. So it's a little bit insight on how we look at the world.

And we do have a question from the line of Wescott Rochette from S&P Capital IQ. Westcott Rochette - S&P Equity Research: On reverse retransmissions, can you just remind us where you are in that process? Whether those contracts are locked up long term or where those negotiations stand?

Westcott, it's Brian. We've been in our current affiliation agreements now for about 2.5 years with both our ABC and NBC. And since the point that those contracts were signed, we had an agreement where we were returning some revenue to our networks, and so that continues to be part of our expense line moving forward. We have all of those expenses rolled up within programming. And so when you hear me talk about the fact that total programming is down 11.6%, that includes all of our programming costs related to our homegrown programs that we're investing in as well as any reverse retrans that we're paying. So even with all of that rolled in, we're still able to have double-digit declines in programming. So it's clearly within moderation. Westcott Rochette - S&P Equity Research: Okay. But then -- then to paraphrase then, it's a percent of retransmission kind of going forward that you agree to?

I'd prefer not to give it. Westcott Rochette - S&P Equity Research: All right. Okay. and there's been a lot of talk about consolidation. What about on the newspaper side? Just given that there's seems to be a lot of newspapers out there actively being shopped. Is there a situation that would interest you on that side of the business?

It's Rich. I mean, again, we look at a lot of -- everything that comes through. But just in general, we've not been a buyer of newspapers, of additional newspapers.

And we do have a question from the line of Michael Kass with BlueMountain Capital.

With respect to the 3 homegrown TV programs that you guys referenced, could you maybe -- maybe for those of us that are little less sophisticated in that area, I mean what is the ultimate opportunity to maybe sell those outside of your current footprint? And what would be the time frame on that and how would we have a sense that, that is a realistic prospect that might be able to generate revenue?

Michael, it's Brian. I think that first and foremost, the most important thing to us is being able to build programming that's creates good loyal viewership inside of each one of our markets. That's where we have the best return. And I think, so far, we've been pretty successful with that. As Tim talked about, we continue to see very strong growth in 25% growth quarter-to-quarter in ratings with Let's Ask America, The List being ranked 12th nationally of all syndicated shows. So I think we're very proud of the quality and the performance of the shows we have. Continuing to grow those, we've only been on the market -- on the air, 6 or 7 months now against a lot of legacy shows in the access time period so we still got a lot of work to do. But we're very pleased with those -- where those are at. Long term, we have had calls from other broadcasters and even syndicators that are seeing the success of these shows and have interest in taking it beyond the Scripps markets and so we're having conversations. And so I think you could expect to see an expansion beyond our current markets coming up at some point, probably sooner-than-later future. As it relates to Right This Minute, that was our first project, that's a partnership with Cox and Raycom. We produce the show out of Phoenix. And 3 years in, we now have MGM syndicating the show. And as you heard in Tim's comments, it's now cleared in over 60% of the country. It got cleared on WNBC in New York, KABC in L.A. and in Chicago and Boston and Miami. And so I think we've learned a lot from that model and we're pretty excited to be part of a group of broadcasters that's able to develop a good enough show to get that kind of clearance.

Is that -- are there syndication revenues that you're looking at from what you say 60% of clearance, is that material to your results? I mean I'm just trying to get a sense of is this something that we should start looking at as an opportunity for you guys that's meaningful?

Look, I think it's early. And so again, we built these to be successful and profitable within our own markets. While we've internally modeled some things, they're really not part of the numbers we share moving forward just because we wouldn't want to mislead you. All in, it's really an uncertain space for us. But as we get into it and we start to get more expertise in this, I think there could be an opportunity and we'll be more forthright about that opportunity as we better understand it. Tim, you want to comment on that?

Yes. And I will just describe that the math works on this if we keep this in our markets only, so we did a -- we're experienced at building programming. And when we look at the return on these shows, we get a very nice return from building these shows, getting rid of that expensive syndicated programming in our own market. And we really view this syndication potential on this as really kind of an option or an upside going forward. We've got a -- Brian and his team have done a great job executing a multi-phased program and expanding our margins in the TV group, and this would be one of those things that could be a help down the road.

That's really helpful. And then just lastly, on the share buyback, was curious if you guys had been active after the end of the quarter? And more broadly it sounds like what -- your stock's obviously up almost 50% over the last 2 months. Can you give any indication of kind of where you are a buyer of your stock and where you'd rather preserve your capital for a rainy day or later days?

We'll let the CFO answer.

Well, I expect we'll be pretty active in the second quarter in our share repurchases. Part of -- there's a lot of things that go into the decisions on how active we are at buying shares, one of which is the level; the other of which is what's going on in terms of the share count. As you know, we've got some -- a fair number of options that are outstanding. At the end of the year, we had 6 million options outstanding at an average price of about $9.77. They've been under water for quite a while. And we've seen a -- we got about $16 million of option proceeds in Q1, so I think as some of that money comes in, expect to be pretty active in share repurchases in Q2.

And we do have a question from the line of our Alfred [ph] Anderson with Anderson [ph] Family LP.

First of all, I'd like to congratulate Rich on his elevation to Board Chairman. I think that's a positive mood -- move and we're looking for great things. I represent a number of smaller shareholders, as you know, and I have a number of questions, one of which is for Tim Wesolowski. And Tim, if you remember, I was looking at the 10-K from the end of last year, and I should have asked this question at the Annual Meeting but I forgot, and I wondered what the $6 million of investment in plant property and equipment was for head office, do you happen to remember?

So that's primarily related to 2 things: one, it is some IT spending that we're doing as we're moving some of our IT operations out from the field into a more centralized area; and we are also, as you may have seen when you were here, because of the digital growth that we're experiencing, we are spending some money on the offices here to get more people in less space so we can execute all of these plans that we've got on the digital side.

Good. I thought that might be the case, but I wasn't quite sure. The second question is for Tim Stautberg. And we heard a little bit about which TV stations were contributing the most and growing the fastest and doing well by names of cities. I was wondering if you could give us the same sort of information on newspapers, which are contributing the most to your $6 million first quarter profit?

Yes, Alfred. We tend not to -- that's where we might differ a little bit from our TV friends who have ratings and other things that folks can see visibly market-wise. What I can say is that typically our larger markets are the ones that are contributing more, and we've talked a lot about Naples being a very attractive market for us. That's certainly the case. And I would say that the larger the markets, the better they are from a contribution standpoint.

Good. That tells me something, too. And finally, this is -- I'd look at, like the previous questioner asked some questions about the share repurchase program and I know that you, management, the directors and so forth, have all been selling their shares for several years as the price has gone up. And the company keeps rebuying shares to try and keep this share level stable and a little bit more even to reduce the level of shares outstanding. By and large, though, the shares that are repurchased are just rewarding management members and recovering them by repurchasing the shares that were issued. And so the total number of shares outstanding at the end of the year are not going down very fast. We're all very pleased that the share price has gone up by 40% or 50% since November. But we wonder -- I wonder whether at the current level or the company is selling at 20x earnings and almost double shareholder equity, whether one wouldn't want to reconsider holding back some of that capital and maybe even giving the shareholders who don't profit by, in any other way, the smaller shareholders like myself, sort of a $0.50 annual dividend which would only cost you about $25 million of your precious capital.

Alfred. It's Rich. Let me touch on that a couple of ways. First, we really like stock-related compensation for employees because it aligns their interests with those of the shareholders and it's worked extremely -- it's worked really, really well. At the same time, and we look at total compensation versus market. And in general, we probably tend to be a little lighter on the cash side and a little heavier on the equity side. And again, we think that's a good thing because it aligns interest better with the shareholders than leaning more heavily on the cash side of compensation. And additionally, we have rules around, especially for the senior people, stock ownership so you might see some selling as people need to pay taxes or send a kid to college. But in general, our employees, especially our managers, are very well aligned with the shareholders. And again, we think that's a good thing. On the use of cash, we just still tend to like share repurchase. It's certainly my favorite alternative for returning capital because it benefits people who have, for whatever reason decided that they want to be sellers. And we, over time chip away at the outstanding number. We talked about dividends, but so far we've continued to favor share repurchase and making sure that we have a financial flexibility to make investments like we're doing on the digital side where we expect a very attractive return and in programming and potentially in additional markets at the same time. So I guess at this point, I'd say no change in our thinking on dividends, but we look at it all the time, and historically, over the years, off and on the company has paid a dividend and we'll continue to keep it on the table as an option.

[Operator Instructions] It does appear at this time there are no further questions from the phone lines. Please continue.

That wraps up the first quarter earnings call for E.W. Scripps Company. Thank you very much.