Welcome to the Q1 2013 Media General Earnings Conference Call. My name is Leslie, and I will be your operator for today. [Operator Instructions] Please note that this conference is being recorded. I'll now turn the call over to Ms. Lou Anne Nabhan. Ms. Nabhan, you may begin.

Thank you, Leslie, and good morning, everyone. Welcome to Media General's First Quarter Conference Call and Webcast. Earlier today, we announced our first quarter 2013 results. Our press release is posted to our website. A transcript from the comments from today's call will be available immediately after the call, and a replay will be available early this afternoon. Today's presentation contains forward-looking statements, which are subject to various risks and uncertainties. They should be understood in the context of the company's publicly available reports which are filed with the SEC, including the section on risk factors. Media General's future performance could differ materially from its current expectations. Our speakers today are George Mahoney, President and Chief Executive Officer; and Jim Woodward, Vice President, Finance and Chief Financial Officer. Let me now turn the presentation over to George.

Thank you, Lou Anne, and good morning, everyone. I'll start with the summary of our first quarter results. Operating income in the first quarter was $5.8 million, a 28% increase compared with $4.5 million in the first quarter of 2012. This reflects a 35% reduction in corporate expense, and also a disciplined expense management by our stations. After becoming a pure-play broadcaster last year, one of the significant first steps we took was to reduce the size of a corporate structure that had been scaled to serve newspapers and television stations. We're pleased to reflect the full benefit of this reduction in today's first quarter results. Total revenues in the first quarter this year were $74 million, nearly even with last year. Excluding Political advertising, revenues in the first quarter increased 6% compared with last year. Political revenues last year were $6.2 million compared to $0.5 million this year. Comparatively, that was a lot of first quarter Political last year and it left us with a pretty big hill to climb for this year. This quarter's Political revenues were generated mainly from the lively congressional race in South Carolina's First Congressional District. Last year at this time, we were benefiting from presidential primary races in Florida, Ohio, South Carolina, Alabama and Mississippi. Later this year, we expect to also benefit from the Virginia gubernatorial race and from issues advertising across a number of our markets. We continue to expect the Political revenues for the full year 2013 will be approximately $5 million. Additionally, Super Bowl revenues on our CBS station this year of $1.2 million compared to $2.8 million last year when the game was aired on our larger NBC stations. It's noteworthy that our CBS stations did an outstanding job increasing Super Bowl revenues by 33% compared to the…

Thank you, George, and good morning. Since George covered revenues in detail, let me start with our expenses. Total operating cost in the first quarter of $68.2 million decreased 2.2% from the prior year, mainly due to the lower corporate expense George discussed. Referring to that corporate expense supplemental table provided in our press release, the first line in the table shows our corporate expense in Q1 was $4.3 million compared with $7.2 million in the prior year. This reduction reflected savings from downsizing our corporate staff and favorable benefit adjustments as a result of fewer employees. Station production expenses increased 6.5%, mainly due to an increase in NBC affiliate fees, while other station operating expenses were mostly flat to down. Station selling, general and administrative expenses increased 9.5% due to several factors, including raises, sales, incentive trip expenses, higher benefit costs, and additional revenue share expenses associated with the growth in Digital media revenues. Interest expense in the first quarter was $19.2 million compared with $15.2 million last year. Noncash tax expense was $3.3 million in the first quarter and was essentially flat even with last year. Tax expense continues to be noncash and related to our "naked credit" issue as previously discussed in our public filings. Our net operating loss carryforward for tax purposes was approximately $320 million at the end of the first quarter. This NOL will be available to offset future taxable income for up to 20 years. Therefore, we do not anticipate paying any significant cash taxes for the foreseeable future. Enterprise EBITDA in the first quarter was $11.8 million and was essentially even with the same period last year. Capital expenditures in the first quarter were $3.3 million compared with $1.5 million in the prior year. The current quarter spending was spread over all stations and was mainly for equipment upgrades and replacements, vehicles and building and set improvements. Reducing our cost of capital is a key objective for Media General. We continue to evaluate the options for refinancing at a lower interest rate, our 11.75% senior notes that are callable on or before February 2014. We will have the option of using any cash on the balance sheet at the time of the refinancing to reduce the total amount to be borrowed. Every 1% reduction in interest rate would yield interest expense savings of approximately $3 million, which would meaningfully increase our free cash flow. And now, I'll turn it back to George.

Thank you, Jim. To capitalize on the strength of big-screen TV, as well as the growth of new platforms, Media General has adopted an anytime, anywhere, any device approach to delivering our content. This enables us to grow our total audience. Our focus on the delivery of our content to consumers through multiple devices is not an or proposition, but rather an and commitment from us, meaning that people can follow us on whatever device is most convenient for them at any particular time. We also attract new customers, particularly on mobile devices and through social media platforms. That's why our focus is on Broadcast television and digital media. Lastly, we were delighted to learn that 6 of stations won a total of 15 Regional Edward R. Murrow awards, including 3 for Overall Excellence. And fully consistent with the finest, time-honored traditions of Media General, 5 of our stations won first place regional prizes for Excellence in Investigative Reporting. Initiatives and recognition like that keep television stations top of mind in their communities. That's good for the television industry. Needless to say, it's also great for us. All of this has shown you why Media General is a much stronger company with excellent future growth potential because of our new business model. We like our life as a broadcast and digital media company. And now, we'll be pleased to take your questions.

[Operator Instructions] First question comes from Davis Hebert.

Just want to touch on the Q1 performance on Local and National. You said excluding the Super Bowl, it was up what percentage again?

Up 1%.

Up 1%. Okay. And then on the Retrans front, I believe you've talked about guidance for 2013 of up around 50% for the year on the revenue side. My understanding is that did not include a couple of deals that expired this year. Could you maybe talk about that a little bit?

Happy to. We have our DISH negotiations ongoing now. DISH comes up, the contract comes up at the end of June for renewal. That's 1 million households or about 11% of our total. And then, later in the year, at the end of this year, 12/31, our Comcast agreement comes up. That's 1 million households, about 11% of total for us, and at the same time, Charter comes up. That's about 0.5 million households, so about 6% for us all at the end of the year. During the course of the year, and then ongoing, of course, small agreements come up all the time. And then after January, we start cycling into renegotiations with people that we talked about in prior calls. And so in a rising Retrans market, of course, we're really looking forward to those conversations.

And our next question comes from Barry Lucas.

George, a couple of items. Let's start with top line revenue performance seemed a little bit weaker than might have anticipated. Even yesterday, with Gannett's core up 2.5%, give or take, with the same negative Super Bowl switch, so where else is the weakness? How bad was Tampa? It almost looks like Tampa was down, if that's right. And have you seen any change as we go into April?

Well, I will say that there is a weak recovery in Tampa. It is hard to find signs that are strong in that marketplace. Plus, as we've said in the past, the NBC results in the first quarter in their sweeps did not help us at all, and that was particularly apparent in Tampa. But on that same subject, I'll note that because of our strong local news presence, we do tend to over index relative to other NBC stations. And we're pleased to see NBC focused on doing the very best job they can for the May sweeps. It made changes very recently, and we think that's a very positive sign, not just for Tampa, but for our 7 NBC stations. More generally, in the first quarter, we saw some local advertiser reticence probably attributable mostly to fiscal cliff kinds of things. But we did see things picking up generally as this -- as the first quarter rolled through. And so, that's why our cars number, the automobile number, actually picked up during the course of the quarter from what we thought it would be. I think we said it would be about 2%. It came in at 2.4%. So we like that strengthening during the course of the quarter, and we think that strengthening will continue for the reasons that I mentioned earlier in the call.

Okay. Let me just shift gears to one expense item, and that is the corporate line which you have thoroughly detailed in the press release. But correct me if I'm wrong here, but we were getting to a $20 million annualized corporate figure. So as I look through the individual line items in corporate, where might the pressure points be that you can further reduce that corporate expense?

Let me ask Jim Woodward to respond to that, Barry.

Well, the $20 million number is reflected in the court. If you look at that schedule, Barry, it's reflected in the corporate lines as corporate excluding depreciation amortization. And then we detailed like the other things that are included in that number on the face of the financial statements. But for other, we do expect some additional reductions in expenses, and they're going to come from -- we're decommissioning a building right now. And that building is for sale or lease, so we expect, as that process winds itself to conclusion, there'll be additional reductions there. Plus we're looking at systems and contracts, and some of the contracts just have to come to a natural end before they can be effectively renegotiated. So there's a couple of areas where we think that $4.3 million that you see there will go down.

Okay, last item and then I'll jump back into queue. But any order of magnitude you could put on the value of the building that will be up for sale?

No, I really don't have that number. Like I said, it's for sale or lease. We have had -- we did have an open house, and we had a lot of interest. Had a lot of folks come through.

[Operator Instructions] And your next question comes from Dennis Leibowitz.

Just a follow-up on Barry's question. I think the guidance you gave last month was for quarter to be 2%. Was the difference entirely Tampa, and can you talk about anything for the second quarter?

The difference was mostly Tampa, I will say that. And the second quarter looks actually like it continues on the same track that we were on with the first quarter. So strengthening, I mentioned auto that we see gathering steam, and we saw other things gathering steam during the course of the first quarter. Second quarter, obviously, is stronger for all media than the first quarter. So if you look at what our Broadcast cash flow did in Q1 of this year compared to Q1 of 2011, we like that number and we think it can continue or even improve slightly in the second quarter this year. And that's especially important to us, Dennis, because we think those kinds of results are the way we'll be judged by the market as we go out to refinance our debt at the end of this year or early first part of next year. So that's our main focus as we've said, and so we like this progress report and we like our prospects.

One other thing, if I could follow up. Will the increase in SG&A, which was 9.5%, be that high for the full year?

Jim, you want to try that?

The increase -- probably, because of what -- that was the result of, the -- that was the benefit cost, the salary increases. And so I would expect that to remain about consistent -- I would expect it to remain consistent throughout the year.

And our next question comes from John Cornidge [ph].

A couple of questions. On the corporate -- going back to corporate once again. Incentive comp, $2.2 million, is that the kind of number that will recur every quarter? Or was that an incentive compensation more related to 2012? But what is it related to?

That number will not be multiplied by 4, if that's what you're asking. That number is the executive or management bonuses, some sales bonuses that all retained to corporate and not reflected in the operating units numbers.

So they're more related to 2012's performance?

No, because those things are accrued in 2012. This is an accrual for what we expect to happen in 2013.

So why wouldn't we multiply by 4?

Because there are -- some of those items in there that are period expenses. For the executive bonuses, that's just straight up accrual. But there are other period expenses in there that wouldn't repeat.

Okay. Going back to station production expenses of 32% [ph] versus 30% [ph]. I think you said the increase was primarily related to reverse comp and the rest of the expenses were relatively flat, correct?

That's correct. So down.

So that suggests, correct me if I'm wrong, that reverse comp in the first quarter was basically $2 million versus 0 a year ago?

I think you're right.

It's ballpark.

That's fair.

Is that all NBC?

Yes, it is. The only place that we're paying right now, and that we'll pay it for quite some time.

You're right. And remind us when does CBS kick in at all? When does that contract expire?

Right, the first thing that we'll see is next summer, our 1 ABC station's affiliation agreement comes up. So that's the middle of next summer.

Where is that?

But the CB -- it's Augusta. And the CBS stations, of which we have 8, come up at the very end of 2014, but mostly into the first 4 months or so of 2015. So we won't see any increase in reverse comp until that ABC agreement gets negotiated. But then, that won't be very much in and so most of the retrans money will continue to drop the bottom line. We'll see this kind of experience again, we think, starting probably, first quarter of '15.

Okay. And you care to mention whether NBC was a 3- or 5-year agreement? When will it come up again?

It was '12 to '15, John. Through '15.

[Operator Instructions] We have a follow-up from Barry Lucas.

Just a couple of updates on the way you're spending the money. In terms of CapEx, any change there? I think, we were around, I want to say, $15 million, and that can -- you have any latitude or leeway that will bring that down a bit?

We think that's exactly where we'll come in for the year, Barry, so there's no change there.

Okay. And was there any pension contribution in the first quarter? And what would that total be? As I recall, that was kind of in the low single-digit range, but let me make sure?

It was $4.5 million, and we do not make a contribution in the first quarter. It's not due yet. Yes, we will be making the contribution by the end of the third quarter.

Great. Last item on Political, you got a little bit of benefit from the, I guess, the Mark Sanford debacle there in South Carolina. How big and how contested do you think the Virginia governor's race can be and is there some upside to that Political number for the year?

We're sticking with the $5 million number, but I'm glad that you asked. I am glad you're seeing some heat from that already. We're seeing some of it here, and we think the spending on that will probably start early to mid-summer here. So yes, we're looking forward to an exciting race in Virginia.

We have a follow-up question from John Cornidge [ph].

Very quickly. I think Dennis had also asked -- should we look for anything different in the second quarter, core revenue of 1%, because there's no Super Bowl to worry about. Is that what we're looking at or could it be a little bit better than that?

Could be a little better. As you know, it's real early in the quarter for us to get out too far but we do like the strengthening that we saw all the way through the first quarter. And the moderation there has to be on Tampa. We need to see pickup. But the encouraging thing there is NBC dealing with its schedule. And so that has a big impact for us in Tampa.

I don't know if you'd care to comment. Is Tampa as much as 20% of revenue?

No.

Less than that, okay.

At this time, I show no further questions. I'll turn the call back over to Mr. Mahoney.

Well, thank you, all, for your interest in Media General today. We have been pleased to talk with you. And I'll add that we've also been pleased to meet so many of you face-to-face, especially as we gotten out to industry conferences. We're very pleased here with our first quarter's progress report and with our prospects. And we hope you continue to tune into our calls and we think you'll like what you hear. Goodbye.

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