The E.W. Scripps Company (SSP) Q1 2015 Earnings Report, Transcript and Summary

Ladies and gentlemen, good morning thank you for standing by. And welcome to the First Quarter 2015 Scripps Company Earnings Conference Call. At this time, all lines are in a listen-only mode. Later, there will be an opportunity for your questions and instructions will be given at that time. [Operator Instructions] As a reminder, your conference is being recorded. I would now like to turn the conference over to our host, Vice President, Investor Relations Ms. Carolyn Micheli. Please go ahead.

Thank you, Tom. Good morning, everyone. And thank you for joining us for a recap of The E. W. Scripps Company's first quarter results. A reminder that this conference call and webcast includes forward-looking statements and actual results may differ. Factors that may cause them to differ are outlined in our SEC 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 that replay will be up there this afternoon and available for a week. No here is our CEO, Rich Boehne.

Thank you Carolyn and good morning everyone and welcome to the first earnings calls of Scripps that looks very different since April 1, when we closed our transaction with Journal Communications. We've got lots to cover with you today and we’ll be speaking probably a little longer than we usually do. We'll also be in New York next Wednesday holding an Investor Day with a more in-depth discussion; we can answer a lot of questions then as well. Sure hope you can make it. Email Carolyn Micheli if you need details about the event. This morning you will hear first from our CFO, Tim Wesolowski, who will recap our first quarter results as the old Scripps, our news papers are now operating as part of the new Journal Media Group in Milwaukie. In the second quarter we will begin to report without the newspapers but obviously with the former Journal Communications Broadcast operations merged into Scripps. Tim also will walk you through 2013, 2014 numbers that look at our company as though we had merged in Journal Broadcast assets at the beginning of 2013. We're calling those adjusted combined results and the goal is to help you with your modeling. And then Tim will share guidance for our second-quarter and full-year 2015 results which are based on comparisons to the 2014 adjusted combined results. If you look at it all together with all the pieces on one canvas, the picture we will paint for you this morning depicts a new company that emerges from a transformative transaction during the balance of 2015 and sets up for a strong performance in 2016. As you know, we welcomed 3,050 new employees from 12 new TV stations and 34 radio stations; we are now one of the largest nation's largest independent television station owners with 33 stations that reached nearly one and five households. Also, we were pleased to add radio to the mix and we're going to report the radio results as its own segment just like Journal did. And as you saw in our press release this morning, we will begin combining our various digital businesses into one reporting segment. As we emerge from the Journal transaction close we are changing how we look at our businesses and our digital performance. We hope this change also gives you more transparency into those businesses, as well as better understanding of our digital opportunities. Now, it's important to note, for example, all the digital expenses you see have already been reported elsewhere in the past. The big difference in this new segment is the absence of $25 million in newspaper digital revenue and the addition of revenue, although far less, from the still nascent Journal TV and radio markets. Adam Symson, our Chief Digital Officer, will talk with you in just a moment about our digital strategies and how we are building new businesses on digital platforms. And then Brian Lawlor, head of our expanded broadcast division, will talk about our television and radio operations. And also in the room today is Steve Wexler, our new head of radio, who came over from Journal. Then at the end I will have some wrap-up things to say on how we are focused on the rest of this year heading into next. And now over to Tim.

Good morning. This morning we provided a large amount of information about the new Scripps financial outlook and historical numbers on an adjusted combined basis. We provided this information in hopes they will help you form a full picture of our company going forward. I would like to walk you through what we provided and how we approached these numbers. First, I'll talk about our historical adjusted combined results; then I'll turn to our guidance for 2015 and explain the components of our digital segment. But before I get to that I would like to briefly discuss our first quarter performance. As Rich said, these results are based on our old structure so I won't spend a lot of time on them. You can of course see our release for more information and we will file our 10-Q later today. On a pre-transaction basis, television division revenues were up 17% I the first quarter of 2015. Retransmission revenue more than doubled in the quarter to nearly $28 million. In 2014 Retransmission agreements expired that had covered more than one-third of our subscribers and these results reflect the renewal of those agreements. Digital revenue from the TV division was up 21% over first quarter of 2014 and also contributing to the 17% increase is revenue from the two stations acquired from Granite in the second quarter of 2015. Television segment profit, again on a pre-transaction basis, increased nearly 6%. Newspaper operating revenues declined 7% from the year ago quarter. However, newspaper segment profit increased by $500,000 because of lower newsprint consumption and lower employee-related costs. Consolidated revenues were $215 million hats up 5.3% mainly due to the increase of retransmission revenue from the two Granite stations. Consolidated costs and expenses for segment Shared Services and Corporate were $198 million, up 5% primarily because of expenses from the two Granite stations and higher TV network fees. We reported a loss from operations before income taxes of $7.8 million in the first quarter on a pre-transaction basis compared to a loss of $800,000 in the 2014 quarter. Our 2015 results include $6 million of acquisition and integration cost for the Journal Communication’s transaction. We had a net loss in the first quarter of $5 million or $0.09 per share, and acquisition integration cost reduced earnings per share by approximately $0.07 in the current year quarter. That's it for now on the first quarter results. We will be glad to talk more in the Q&A portion of our call. If you want more information that's not in the release. Now let's turn to the supplemental information we provided this morning. As Rich said, this information illustrates what the combined Scripps/Journal broadcast operations might have looked like had we emerged at the beginning of 2013 given all the assumptions we've outlined. The assumptions and disclosures are included in the supplemental information that begins towards the end of our press release tables and I encourage you to read both of those very carefully. One of the things I am sure you saw right away in our release this morning is that we made digital its own reporting segment. In the past we've had digital revenue in the Newspaper segment, in the TV segment, and some in the Syndicated and Other segment. Digital expenses were also in the segments and there was some in Corporate. We reported this way because that is the way we were running the business. Digital was largely supporting our local brands and there were shared services across both TV and Newspaper. Now we are changing the way we're looking at the business, so we're combining all the digital revenue and expense into one reporting segment. The new segment will include revenue from our local markets as well as from Newsy, Weathersphere, and other national brands. Adam will talk more about our digital strategies in a moment. We thought it was important to provide you with a starting point to compare 2015 results. Since the Company has changed so dramatically, comparisons of the new Scripps with our reported historical numbers will be tricky, so we prepared adjusted combined financial statements for 2013, 2014, and the first quarter of 2015. Again, we've attempted to show what our results might have been as the Journal transaction closed on January 1, 2013 these are not the pro forma numbers you'll see in our 8-K which we will file in June. There is a non-GAAP to GAAP reconciliation in the supplemental information that lays out all of our assumptions. Some of the assumptions we have made include adding Granite results for the entire period, including a portion of the synergies, and using our 2015 current corporate cost structure in the prior periods. This information is provided on a consolidated basis through pretax income and by segment including our newest segment, Digital. We've also provided you with other information such as CapEx and D&A. I hope this is enough to get you started on your 2015 and 2016 models. We, as a management team, are using these numbers as the comparisons in our 2015 budget. We've spent a lot of time recently with investors understanding what information would be useful to them and I believe we got most of it in this supplemental information. If something's missing, let us know and we will see how we can provide it. Our goal is to be as transparent as possible so you can build your models and analyze results on an apples-to-apples basis. Now let’s take a look at the full year 2015, which we see as a transition period. We will be completing the integration of the Journal TV and radio stations, completing transition services agreements with the newspapers, and ramping up for 2016 which will bring a presidential election year and another big round of retransmission contract renewals. The year-over-year comparisons to reported historical results have the potential to be confusing due to all these changes, so we decided to provide our 2015 guidance as a comparison to the adjusted combined numbers to help you see trends in our business. Our guidance looks at the core segments by revenue and expense. We also include below-the-line items such as CapEx and D&A. We size up a few key revenue buckets such as retrans and political, and we provide a few expense areas as well, including transaction costs. We expect our effective tax rate to be in the 40% range, excluding the impact of transaction costs. We do not expect to pay any income tax in 2015. As we have discussed before, there will be a corporate tax of about $20 million on the spend which we'll pay this quarter. We've also provided 2015 pension expense in our guidance and we do not expect to make any cash contributions to the pension plan in 2015. I would like to cover a few capital allocation-related matters. As of April 30, a month after the close of the Journal transaction, our cash total $123 million while our total debt was $409 million, so that's net debt of $286 million or leverage of only two times our 2013, 2014 blended segment profit, less corporate expense, on an adjusted combined basis. Many people have asked us when we plan to reinstitute a share repurchase program now that that Journal deal is complete. We have an active $100 million board authorization and we're able to begin repurchasing shares again as of next Tuesday. On April 1 we refinanced Journal Communications' bank debt. Our new agreement includes a $200 million term loan and a $25 million increase in our revolving credit facility to $100 million. The proceeds of this loan also funded our $60 million special cash dividend to Scripps shareholders and the payment of transaction expenses. And now here is Adam Symson, who heads up the businesses that will make up our new Digital reporting segment.

Thank you so much Tim and good morning, everyone. It's great to be here with you to be able to talk about the businesses and strategies within our new Digital reporting segment and the opportunities we see ahead. Each of our peers defines its digital efforts a little bit differently, so I wanted to start by clarifying what Scripps includes in its Digital reporting segment. In other words, how we define the sum of the parts. We divide our digital efforts into broad areas. First are your local TV and now radio station markets and their websites, phone and tablet apps combined with the other digital advertising products and marketing services that we sell to our advertisers. Included in this is our unique WCPO Insider loyalty program. Second, are our nationally-reaching digital media brands that we build or buy. Some of these national brands may complement our local market strategy such as the Storm Shield and the Weathersphere family of consumer apps, and some can stand totally apart from the stations such as Newsy. Digital revenue from our local markets is the lion's share of total digital revenues. As Tim said, 2015 is a transition year and we are moving from working with a newspaper division that brought in about $25 million in digital revenue, and replacing those markets with new TV stations and radio stations that have had a much more nascent approach to digital products and sales. They've also had a correspondingly smaller revenue contribution. We've been analyzing the digital revenue opportunity in all of the former TV and radio markets and are making decisions about where investments will most immediately pay off. Just like it did with the legacy markets over the last few years, it will take some time to build them up, but we fully expect to see strong growth ahead. We’ll certainly be using our existing infrastructure to support these markets as well. Meanwhile, we continue to gain traction in building audience with our existing digital products. For instance, in the first quarter, the Scripps’ television market websites served up more than 270 million page views up 6% over the prior year. We also saw a growth in our total web users, the Scripps TV markets web products served an average of 22 million users per month during the first quarter, up 6% over the fourth quarter and looking at mobile app engagement, our monthly active users for our news apps was up 33% over the prior year. That's a key metric we focus on growing, because it’s a good proxy for audience loyalty. The second part of the new Digital segment again is the group of national digital media brands that provide us with audiences beyond our local markets. For instance, we do promote Storm Shield through our television stations now and we see strong numbers of users in those markets, because our meteorologists introduced Storm Shield to their viewers. But both Storm Shield and our more recent acquisition of the Weathersphere family of mobile apps has broad national user basis. Weather has been a durable category that TV stations have owned for decades, so we are capitalizing on that opportunity in the digital space now that consumers have begun to rely on their smartphones for weather information in addition to our local news programs. We also use our stations to promote Newsy by putting Newsy content on those station websites, but Newsy is also designed to serve audiences outside of our of our existing markets and we are leveraging this business to build a national Scripps audience too. National audiences are just now reaching scale on some of the most important emerging platforms for media, like over-the-top television and Newsy has put us into the OTT space. As you know, OTT television is programming delivered through the Internet. Newsy is already serving fast-growing audiences on Roku and Amazon's Fire TV and we're optimistic that we will be doing other platform and distribution partnership deals soon. Over just the last six months, Newsy’s OTT television video views has grown by more than 50%, it’s still early on, but we are counting on digital video being a big business. Last year, we delivered about 650 million Newsy video views across our partnerships and platforms. In the first quarter, that number was up 81% over prior year to 259 million video views. Like the rest of the digital media industry, we're still developing our growing digital audience and converting it into new revenue streams. We bought Newsy because we see it as a highly scalable business that appeals to a young demographic and has very promising OTT opportunity. We expect to continue to make strategic, relevant investments in this space because digital news and information consumption is the fastest-growing part of the media business. I'll be happy to answer your questions at the end of the call and now I'll hand things over to Brian.

Thanks, Adam, and good morning. I spent the last month or so visiting all of our new television and radio stations and I feel really good about the people and the properties we are gaining in this deal. Just over a month after close and the integration of operations and employees is well underway and going smoothly. One of the appealing aspects of merging with the former Journal stations was the upside we see at their stations and the task at hand now is growing ratings and revenue. As I've often told you, Scripps prides itself on being a good TV station operator and we expect to reap the rewards of our strategies after working through this transition year. It is now more than three years since we acquired the McGraw-Hill stations. Over that time we've grown our share of the station aggregated local news audience by 4 percentage points in the local morning news and 5 percentage points in the early news time period. We will put this same focus on Journal stations hoping to affect the same positive outcome in the coming months and years. As others have already said on this call 2015 is a year of integrating and setting the course for our new markets. We want to make sure that we are well positioned to capture the tremendous opportunity we see for 2016 political advertising. No I would like to take a look back for a moment at the first quarter, before the Journal stations came onboard, and talk about core ad revenue and key categories. Core spot advertising across our group was up 4.1% in the first quarter with local growing 5.6% and national up about 1%. That includes revenue from the two Granite stations we acquired last June. If we back out the Granite stations and take out all the incremental spending from the Winter Olympics last year and the Super Bowl this year, the local and national core business was down about 1.5%. Staying on the same stations comparison services grew more than 5% in the quarter surpassing auto as our top billing category. Services saw significant growth from medical, insurance and legal within that category. Auto was flat on a same station basis with each of the subcategories within auto performing similar to last year. The growth in services was offset by declines in retail, travel and leisure, and food services. Looking ahead to second quarter, now including the Journal stations, we see auto pacing a bit behind last year, but there are still six weeks to add automotive dollars so we are far from done in that category. Services remain very strong and we're seeing a better performance in retail compared to first quarter. Now I would like to turn to radio which, of course, we didn't yet own in the first quarter. The radio division had a very strong first-quarter performance growing more than 5%. The auto and financial categories drove much of that growth as did the benefit of the Green Bay Packers playing in the NFC championship game. We continue to see the radio environment as healthy, but we do see some auto and financial moderating in the second quarter. Of course the broadcast revenue story for Scripps continues to be around retransmission. Although the Comcast/Time Warner deal and the charter spin off would have meant some nice additional dollars hitting in 2015. We will still capture that upside at the end of this year when we renegotiate to bring about 3 million of our cable households from relatively low retransmission rates to full market rate. We expect to bring in roughly $220 million in retransmission revenue in 2016. We also expect more than 50% growth in our net retrans number from this year to next. Looking ahead to 2017, we'll see another 3 million pay-TV households renew with us near the end of next year, setting up for more strong growth two years out. In addition to the retrans picture, the 2016 election year is expected to bring record spending across the group. Together with Granite and Journal we brought in 143 million of political advertising in 2012. Now a lot has to happen between now and then to give us a clearer picture, but I think we would all be disappointed if we didn’t hit or that amount next time. So clearly, we are trying to move as fast as we can to get ready for 2016. And now, here's Rich.

Thanks Brian. Before we take your questions, let me touch briefly on a couple things. First, let me update you on some very good journalism. We just found out that our Washington bureau is receiving a Peabody Award for its story about the weak tracking of military sex offenders, which has led to some very quick Congressional action. And our new CBS affiliate in Nashville received the prestigious Hillman Prize following a four-year investigation into the problematic actions of Tennessee law enforcement agencies. In addition, our newly-acquired country radio station, KTTS in Springfield, Missouri, won that industry’s Crystal Award last month honoring its service to the community. The work behind these awards results in stronger audiences, revenues, and value for shareholders. Also just a quick governance note, we said goodbye this week to a long-time Board member, Paul has served on our board since 1986, he also has played management roles including serving as Vice President of Newspapers and Chairman a company subsidiary. Paul is a great-grandson of our founder Edward Willis Scripps, and has a true servant's heart and we're all point to really miss him. Charlie Barmonde has been elected to take Paul's place. Charlie is a member of the Scripps family and is a great, great-grandson of EW, he is a terrific young talent in the family. Charlie is a private investor and educator and an entrepreneur and he is an example of the Scripps family's commitment to this company and the family’s long time strong partnership with public shareholders. He was elected at our annual meeting on Monday and we want to give him a hearty welcome. No by necessity we've thrown a lot of data at you today, we have tried our very best to help you build the foundation of a model of the new Scripps. So before we take questions, though, let me boil it all down to the areas where we are most focused as we prepare to leverage our markets and brands for the best results in 2016. Number one is getting our TV markets in swing states, including the newly added ones in Florida, Nevada, and Wisconsin, and our sales systems all tuned up and ready for the political advertising opportunity is beginning as early as the end of this year and then coming full force in 2016. No incumbents, lots to prove for the Republicans and lots to lose for the Democrats; it should be a presidential election to remember. Number two is finalizing a number of retrans deals setting the stage for a big leap in net retrans in 2016, up, as Brian said more than 50% year-over-year. If you think about just those two alone, political spending and growth in net retrans, those two together represent an opportunity for sizable TV margin expansion in 2016. Number three is to leverage our local news expertise and resources to improve local news ratings where there is the best opportunity. And here too some of the quick payoff is in strengthening audiences in key politically active markets ahead of the election year. Number four is moving as quickly as we can to replace the digital revenue that left in the Journal transaction with sources that represent stronger organic growth, essential to that will be the successful deployment of our market leading products and services in the journal markets that offer the most promise. At the same time moving quickly to build audience and revenue for our National digital brands in the fast-growing mobile and over-the-top television marketplaces. And finally, number five is taking further advantage of our strong balance sheet to drive attractive returns for shareholders by securing more TV duopolies and local digital products and also focusing on the opportunity to purchase more of what we already know and value through the repurchases of our own stock, we will now be clear to go back into the market. Those are the areas where we will be most focused during the balance of 2015 setting us up for the strongest possible performance in 2016. And before we take questions just a reminder, at the investors meeting in New York next week. We’ll talk more about our strategies going forward and put special emphasis on those key leverage points looking towards next year, we sure hope you can join us. And now, operator, we are ready to take questions.

Thank you. [Operator Instructions] our first question today comes from the line of Michael Kupinski with Noble Financial. Please go ahead.

First of all, congratulations on the merger and thank you for all of the additional details. Couple questions. You indicated that you had put some synergies into the pro forma numbers. I was wondering if you can provide a little bit more details on the amount and what's included both in the revenue and expenses and as such.

Sure. We had mentioned when we announced the deal that the total synergies were in the $35 million range and those are split about equally, between us and JMG. And in the adjusted combined numbers that we done we have included $10 million of that $16 million in the historic numbers. And we did that because as we really look carefully at how some of these retrans after acquired provisions kicked in, they were really in contracts that renewed in 2014 and therefore wouldn't have really been feathered back into the prior year, but remain synergies that we will be able to take the bank and they will be looking forward. So the general buckets of those synergies are retrans programming and general sort of overhead cost

Okay. And the expense guidance on the television side seems a little high, but probably reflects the increase in network reverse comp, I would imagine. How much of the increase in expenses is related to that and what are the other items that might be driving expense growth in the television side?

Hey, Mike; it's Brian. You are dead on. The majority of our expense increases are on the TV network fees that we're paying with our new agreement. In addition to that you know small increases on payroll and raises, we've got some extra cost this year, we didn’t own the Granite stations in the first half of last year. So we've got cost on production programming and employee cost there and in the first quarter expenses you would have seen some digital expense obviously moving forward that's going to move, but really the biggest bucket is the network payment.

And did I hear this right, Brian, that you said that $220 million in retransmission revenue in 2016?

Yes Mike that's correct.

So the Company anticipated that under the Comcast/Time Warner merger the increase would have been something closer to $25 million, if I recall. I think that if you looked at the illustrative metrics that you guys provided for 2015, it was looking like $165 million. Even if you adjust for 3 million Time Warner subscribers for the increase in retransmission revenue for 2015, it's far more than what was I think indicated in the illustrative metrics that you provide. Are you anticipating a higher per-subscriber fee or were there better-than-expected negotiations with other MVDs or what exactly - I guess I am just trying to draw the comparison, how are we getting to that much better-than-expected $220 million for 2016?

Yes, look I think I'll kick it over to Tim in a second, but I think there are a couple of things, obviously we went through a big round this year after we built the illustrative metrics and did very well on those negotiations, I think we now have a good feel for market value and as we look out the next two year some of those deals, our thinking of that is probably escalated. There is also some things in the after-acquired clauses on the Journal stations that get us to move some of their things to our deals a little bit sooner that are meaningful, so I think that's part of it as well. Tim anything else you wanted to add?

No that was it. so think about when we put those illustrative metrics together, it was really in the spring of 2014, the general environment has gotten better since then and so the number that we provided here is really a freshened view of where we are. And as Rich said, Michael, we are looking for a really nice increase in net retrans in 2016 as well in the 50% range.

Absolutely terrific. Okay, that's all I have. Thank you.

Thank you, Mike.

And our next question today comes for the line of Craig Huber representing Huber Research Partners. Please go ahead.

Say that for the synergies, the $35 million target here, that $10 million of that is in these pro forma numbers. You went back and just slotted in $10 million of that or did I mishear that?

Yes. That's correct. So when we announced the deal originally Craig, we talked about 35 between the two companies us and JMG. Those synergies will end up splitting about equally between the two businesses and some of the synergies as I said relate to some after-acquired provisions in contracts that came due in 2014 and as we really sharpened our pencil and put these adjusted combined metrics together by a quarter we didn’t feather those in the prior periods, but you know again real money that we will have and it will realize in the forward period. So we've included $10 million of the $16 million of those synergies in the historical adjusted combined numbers. We've finished our 2015 budget on a new Scripps basis and I'm very confident we're going to at least achieve all those synergies that we have laid out.

Did you feel that you have much upside on top of that number? I'm just trying to get a sense for you know and I've asked you this in the past. How conservative do you think that number is for you really?

I feel very comfortable getting it and I think there is a little bit we can do better than that. It’s sort of taking lots of opportunities to improve efficiencies all the time right and at some point it gets a little squishy as to what is a synergy and what’s not, we're always driving efficiencies throughout our organizations, I'm sure our costs will go down because of that whether we actually put it in the synergy box or not, I'm confident we’ll continue to drive savings.

Also, if I could just understand further, Brian, if you could just talk about your second-quarter TV core ad revenue outlook here. Just to give us some specifics there, how you think it is tracking. Is it up low single digits? Is it down low single digits? (multiple speakers)

Yes, hey Craig its Brian. You know I think our guidance is that we expect core business to be about flat in second quarter, we see some movement around in the categories a little bit as we reported services had a terrific first quarter and I see the same trend in that continuing in second quarter. Auto seems to be moving around a little bit from market-to-market as I said in the comments here, it’s trending down right now although we have an opportunity to write some points moving forward. Retail has improved that's the nice I think some of our other top categories travel and leisure, food services are kind of tracking like first quarter. So I think the things that we can control locally, the home improvements the services categories like that are having a lot of strength as we look at the quarter and I think some of the other more national oriented categories seem to kind of be on pace with first quarter, but moving around a little bit.

Do you feel, Brian, that second half of the year that your core ad revenues could actually be up just given the crowding-out effect of the political a year ago?

Yes, I mean I think that's certainly what we're expecting, we (ph) [loaded] a significant amount of money in political last year, so that will open up especially September, October and he beginning of November and I think we will be able to take advantage of that open inventory.

And lastly, Brian, if I could ask you your updated thoughts on your willingness to participate in the spectrum auction. How do you see the whole thing playing out?

As we've kind of said in the past we are spending a lot of time like I think many others are just kind of looking at all the Greenfield report and all the stuff that the FCC is putting out and as a publically traded company, I think we have our responsibility to look at value creation on a market-by-market basis and some of the prices or some of the opportunities to see long-term what’s the best way for us to create value for the company and for our shareholders. We are big advocates that we think that there is a really god opportunity for broadcasters if we can transition to a greater standard, the ATSC 3.0 will give us a lot more opportunity to create businesses and build businesses off of our spectrum footprint, but we're also kind of looking market-by-market and so. Look we've been in this since day one Craig as you know, I expect we are going to be in this for a long-haul, but as we've show in the past, we will look at our assets and see what’s the best value created for our owners and make decisions there. So, I don’t think a lot has changed since last time we talked.

Thank you.

Our next question today comes from the line of Tracy Young with Evercore. Please go ahead.

First quarter to talk about radio; I thought I would ask a question there. So your guidance is for radio to be flat. I think that's better than what we're seeing in the industry. Also, can you tell us how auto did for radio? Thanks.

Hey Tracy its Brian, I’ve got Steve ere in the room and so if I say something wrong, he will kick me or if he needs to add anything. Look I think we had a really good first quarter, as you saw we've outpaced many of our peers, I shouldn’t say we Journal did but our collection of assets and a lot of that was driven by auto very strong in first quarter and I think my comments indicated that its moderating a little bit, but I think a lot of our base is already laid in. A lot of our sports franchises, the Brewers and other things, are laid in, and so with all that base laid in we do feel like you know flat to the right number. Steve anything else you want to add there?

Hi Tracy, I won’t kick Brian on my first call here with my new Scripps friends, but Green Bay Packers in Q1 for us that's a big deal on the radio group and so that was certainly a driver for Q1 and Q2 Brian talked about some of the categories that are moderating a bit, on the other hand Brewers sales are meeting our expectations and then some. So we think the flat call is a reasonable place to be right now for Q2.

Okay, thanks. And when could we expect the integration of the stations to be complete on the TV side?

Hey Tracy its Brian, integrating stations take a long time, the structural part were well underway, there is day one integration, there is month one and then there is year one and beyond and so mission accomplished on day one and month one and now it’s about just from a technical standpoint getting them setup and making sure that our sales structures, our sales visions, our digital products are all aligned and so it’s going to take us a little bit of time especially on the digital front to bring in some of those products and we got some training on sales strategies and things like that. But I think you know really we always look at integration as a 12 month process and especially with this company’s focus on journalism and storytelling and really aligning our news organizations to really represent those communities, we think that takes a little bit of time and even some technology and training, but we're going to be working awful hard. As Rich said, we are very focused on 2016, we think 2016 is going to be a tremendous year and our ability to integrate the New Florida and Nevada and Wisconsin stations the additional station in Michigan where we know there will be great political, we have a tremendous urgency so we can take advantage of the political cycle next year with our new properties.

Okay. Thanks for the color.

We will go to the line of Lance Vitanza with Sterne, Agee. Please go ahead.

Thanks for taking the questions. A couple of housekeeping items and then one more substantive one. But on the housekeeping side, the $286 million of net debt, that's pro forma for the merger, the spin, the special dividend, and so forth?

That's correct.

Okay. And then could you give me the pro forma share count right now?

Sure, 84 million.

Okay and then on the more substantive side; on the regulatory side, Congress working on a rewrite of the Communications Act. It only happens every 20, 25 years. Do you see any prospects for easing some of these TV ownership restrictions that seem antiquated, to say the least?

You know Lance, hard to say, ii stopped betting on picking the winner of the sweet 16 and figuring out what the FCC was going to do a long time ago. We clearly believe that some new regulation as a result to ownership in all of media is something that needs to be addressed, a lot of this is really antiquated and doesn’t represent the way people are consuming media now and the opportunities to cover communities, but so I can’t handicap it, but obviously we are staying close to it and if there is an op for change and our company can benefit from that we will certainly be looking at it.

Are you doing anything on a proactive basis to try to influence the process or just waiting and seeing what happens?

Look we're involved in a lot of the organizations, I'm on the executive committee at the NAB, on some of the affiliate boards, been working with others, so I think we are working with much of the industry to try and put our industry in the best position possible.

Thanks so much.

Our next question today comes from the line of Barry Lucas with Gabelli & Company. Please go ahead.

Thanks and good morning. A couple of broadcast questions, Brian. One, what are you seeing in terms of regional variance as you look across the map with concentration in the Southwest, West, and Midwest? Any meaningful differences in pacings or categories? Any color you could provide there would be helpful.

Yes hey Barry. Local is strong across, so I don’t think I see any really variations by region on the local side. The national is where there is wild swings depending on market-by-market and we had some markets so nationally we are up and pretty healthy, we had other markets that - Detroit national was off over 20%, San Diego was of over 20% as well and we had other big markets like Tampa and Indy that were more than double digits decline. So those - as you can see I just touched on four stations that are all over the country, there is a not a consistency of region, it really is by market and we've really dug in hard to better understand what's going on there and so the go against with the Olympics, some of those larger markets had a big influence of Olympic dollars last year and so that kind of lowers the base a little bit for the market this year. Telecom moved around a lot last year, a couple of the big players in telecom came into markets, aggressive and they have kind of been lighter, this year I think some of it has to do with in media and telecom waiting to see what the FCC and the DOJ are going to approve, so they backed off a little bit this year. We also had over million bucks in first quarter last year in Obama Care money and Medicare money and so but that wasn’t evenly distributed across markets that was market specific and so in a market like Detroit there was a couple of million bucks of Obama Care money in the market. And so I think we've dug in, we are not seeing any significantly trend towards people moving to network, moving cable, moving to digital. We are seeing on occasion advertisers doing all those things just like we pulled from all of those things as well, but I would say it’s more of a market-by-market issue than it is a geographic issue Barry.

Okay, thanks for the color, Brian. And just the second area, Journal spoke many times about the advantages of having two platforms, two broadcast platforms in a market, radio and TV. Just wondering what your experience has been in the last weeks and months and how you feel about that and the prospect of trying to do more there.

Yes, I think that was as we got to know Journal and their strategy that was something that we got really comfortable with, I think we've talked to you and everyone else in the past about our desire to be deeper in the markets that we are in, obviously we've got massive commitments with big buildings and hundreds of employees and towers and licenses and all that kind of stuff and a lot of our digital strategy has been around how do we get deeper in a market, how do we extend our content further, how do we create more new advertising streams, obviously we've got thousands of advertiser relationships in everyone of the markets. And so I think as we start looking at the opportunity, we own three, four, five, six radio stations inside a market where we have TV as well as all of our digital, our mobile our social assets. I think it’s something that we continue to be optimistic about the opportunity, I have had the opportunity to visit all of the joint markets, I have seen the way they are integrating, there is a lot of support across each other, there is not a lot of opportunity in order to lift up the platform. Quite frankly we think there is a whole lot more and so our ability to bring in our digital assets and our digital strategies as well as I think we are going to be a lot more creative and a lot more local and for some of those things that really I expect to create value on the audience side as well as on the advertisers side in those joint markets.

Great. Thanks for the commentary. End of Q&A

[Operator Instructions] Nobody else is queuing up.

Okay thanks Tom. I just wanted to remind everybody about our Investor Day in New York at the Warwick next Wednesday send me an email if you need the details and hope to see you there. Thanks everyone.

Thanks.