Greetings, and welcome to the Sinclair Broadcast Group Fourth Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Amy, Executive Vice President and Chief Financial Officer for Sinclair Broadcast Group. Thank you, sir. Please go ahead.

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

Thank you, David. Good morning, everyone. Certain matters discussed on this call may include forward-looking statements regarding, among other things, future operating results. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ from those described in the forward-looking statements as a result of various important factors. Such factors have been set forth in the company's most recent reports on Forms 10-Q, 10-K and 8-K, as filed with the SEC and included in our fourth quarter earnings release. Our earnings release was furnished to the SEC on an 8-K earlier this morning. The company undertakes no obligation to update these forward-looking statements. The company uses its website as a key source of company information, which can be accessed at www.sbgi.net. In accordance with Reg FD, this call is being made available to the public. A webcast replay will be available on our website later today and will remain available until our next quarterly earnings release. Redistribution of this call is prohibited without the expressed written consent of the company. Included on the call will be a discussion of non-GAAP financial measures, specifically television broadcast cash flow, EBITDA, free cash flow and leverage. These metrics are not meant to replace GAAP measurements, but are provided as supplemental details to assist the public in their analysis and valuation of our company. A reconciliation of the non-GAAP financial measures to the GAAP measures in our financial statements is provided on our website under Investor Information, Reports & Filings. And before I turn it back to Dave, we want to congratulate the World Champion Super Bowl winners, the Baltimore Ravens. Being headquartered here in Maryland, we are extremely proud of our home team and all they accomplished this year.

Well, thanks, Lucy, and I'm sure Joe Flacco will be by shortly to give you a hug. Before we go through the results, a lot has taken place since our last earnings report. So let me go through some of the highlights with you. In the beginning of December, we closed on a previously announced acquisition of the 6 Newport stations, which adds 3 multi-station markets to our portfolio. At the same time, we also announced and closed on the acquisition of the non-license assets of Newport's ABC affiliate, WHAM, in Rochester, New York for $54 million or an approximate 7x buyers' multiple on the odd/even year EBITDA. After synergies, because we own the Fox station in the market, we are providing services to WHAM pursuant to a JSA shared service agreement. In early December, we also closed on the previously announced acquisition of the non-license assets of KBTV, the Fox affiliate in Beaumont, Texas, which we are providing services to pursuant to a JSA shared service agreement as we own the CBS affiliate, which we acquired in the Freedom transaction. On December 31, we closed on the non-license asset for 3 stations in the Springfield/Champaign/Decatur, Illinois market owned by GoCom Media. The amount paid was $25.6 million or an approximate 7.3x multiple on the odd/even year EBITDA after synergies. The stations consist of a Fox, a Fox satellite station and a CW, all of which we are providing services to pursuant to a JSA shared service agreement as we own the ABC in Springfield and the ABC in Champaign. We also entered into an agreement to sell WLWC, the CW affiliate in the Providence, Rhode Island/New Bedford, Massachusetts market that we bought from Four Points last year. The station is being sold for $13.8 million for over a 10x…

Thank you, Dave. Total debt at December 31 was $2,273,400,000. Included in that amount was $68.3 million of the nonrecourse VIE debt that we're required to consolidate on our books. We ended the quarter with $22.9 million of cash on hand and $48 million drawn under the revolver. Capital expenditures in the fourth quarter were $13.9 million and $43.9 million for the year. For 2013, we are forecasting $39 million in CapEx. And post-2013, we would expect about a run rate of about $25 million to $30 million per year in CapEx. Cash programming payments in the fourth quarter were $17.5 million and $69 million for the full year. For 2013, we are estimating film payments at $85 million. And post-2013, we would expect film payments based on our current portfolio of stations to be in the mid-$80 million range. Of the $213.4 million of free cash flow generated in 2012, $45 million was used to pay down debt, $123.9 million was paid to shareholders in the form of the quarterly and special dividends and the remainder was used for working capital and station acquisitions. Total net leverage through the holding company at quarter end was 4.25x. This excludes the VIE and nonrecourse debt and is net of cash. The first lien indebtedness ratio was 1.87x on a covenant of 3.75. The total indebtedness ratio through the television operating company was 4.27x on a covenant of 7. And interest coverage was 3.54x on a covenant of 1.25x. Based on our current guidance and our station portfolio, we would expect total net leverage through the holding company to be in the low 5x by year-end 2013. Now, Steve Marks will take you through the operating performance.

Thank you, Lucy. Good morning, everybody. As Dave mentioned, net broadcast revenues in the fourth quarter were $287.1 million, which reflects a 4.6% growth on a same station basis, excluding political. Political revenues in the quarter were a record $54.1 million and $96.9 million for the year. To appreciate just how big this category was, we booked in the last 5 weeks of the election about as much as we did for all of the 2008's election year. Our station management did an impressive job managing their rates and inventory during this period on a pro forma basis. Assuming all stations we acquired in 2012 have been in for a full 12 months, political for the year would have been $125.7 million. Including our new station acquisitions, local broadcast revenues were up 33.7% in the fourth quarter. While on a same station basis, local net broadcast revenues were down 2% when excluding political. Including the acquisitions, national broadcast revenues were up 58.8% in the quarter, while on a same station basis, national net broadcast revenues were up 1.5% when excluding political. On a same station basis, the automotive category was up 6.4% in the quarter, and we also saw growth in the direct response category. Services, schools, pharmaceuticals and restaurants were down primarily due to the amount of political that was booked. For the year, the automotive category was up 9.2%. Now turning to our outlook. For our first quarter of 2013, we are expecting net broadcast revenues to be approximately $251.9 million to $254.9 million, up 32% to 33.5% as compared to first quarter 2012. This assumes $400,000 of political versus $3.6 million in the same period last year. Also included in the first quarter was $2.5 million of incremental Super Bowl revenue, which aired on our 11 CBS…

[Operator Instructions] First question comes from Aaron Watts with Deutsche Bank.

So it sounds like advertising is holding up pretty well heading -- to set off 2013. I was curious if any of the indecision in Washington is causing some of your advertisers to kind of pull back on budgets at all or have any hesitancy? It doesn't sound like it, but maybe you can talk to that and if there's a difference between some -- if that's more a national concern than a local concern. Just your thoughts there.

I think that was a lot of hype when the government was trying to fix all the economic woes and the time line that was involved in that. It got a lot of press obviously. And all I can tell you from our standpoint, we're hitting numbers that we anticipated and then some. We're off to a terrific start. Super Bowl was more than we anticipated with the 11 CBS stations that we have and enjoyed and we knew we were to get off to a good start with that, and follow that this Sunday with the GRAMMYs, 2 huge events. And obviously, as our company grows, we went from 2 CBS stations to 11 CBS stations. So we were banking on a big first quarter. And right now, it's coming in better than we expected. So I think what we're looking at in terms of advertising and the temperature out there, we're actually building, and you would expect us to build in February given the Super Bowls that we had, but we're also looking at a very nice March pace right now. So we're actually, as we get further into the quarter and January is done, we continue to build in the quarter and the advertising spot is looking pretty good for us, actually.

That's good to hear. And then just one question on political. Obviously, a monster year in 2012. Any reason we should think about 2013 differently as we compare it back to 2011 or other nonelection years? Is 2013, you think, going to see some growth over kind of prior odd years or is it going to be more in line still?

I think that's the wild card and I think it's a great question. And if I was a betting man, I would think that it will beat 2011. We anticipate that it will. It's just a question of how much. So it's one of those things that you don't -- it's hard to pinpoint because you don't know when the dollars are going to come and what the issues may be. But as we've gone through the last handful of years, if history keeps on trending way it has, we should anticipate growth in that category in 2013 over 2011.

And Aaron, if I can just add, just so that everybody can get their models on a same station pro forma basis here. For all the stations that we've acquired so far, if we had them all in 2011, we would have done about $14 million of political revenues in 2011.

Great, that's helpful. And last question for me, maybe for David. I've asked you guys this before, but hearing more chatter -- a little more chatter that the FCC is kind of looking at attribution rules as it pertains to JSAs or virtual duopolies. Just curious, your latest kind of thoughts on that, if you think it gets real traction in Washington and how that could impact Sinclair.

I think if we knew the answer to that, we'd be a betting people. But we just -- it's hard to predict what the FCC's going to do. I think if -- I think our view has always been it's hard to contemplate legislation in today's world based on an NPRM that was published in 2004. And what I mean by that is if, from 2004 to 2012, the competitive world has changed so dramatically with the advent of just all the technologies that are out there, we don't think it's even remotely fair to contemplate SSAs or JSAs or any structures of any kind causing them to be attributable given what the landscape is today. It just seems way out of date to me. And we said that in our filings at the FCC, that you need to go back and revisit what the competitive marketplace is today because it is not what it was a year ago and it certainly isn't what it was 12 years ago or 8 years ago.

Our next question comes from Marci Ryvicker with Wells Fargo.

I have 2 questions. Lucy, you mentioned the $14 million, I think, of political for pro forma 2011. But given the acquisition of GoCom that was mentioned in today's release, can you give us some more pro forma information for 2011, maybe revenue and EBITDA to help us with a more comprehensive part of our model? And then, the second question is related to Q1 guidance. I don't know if this is for Steve or for Lucy, but can you reconcile the increase in same station revenue? And then the decline in same station EBITDA, is the decline driven by the reverse comp contracts with CBS and maybe Fox?

Okay. So let me do the first one here, Marci. So for 2011, and this would include all the stations, including the GoCom stations and the Rochester station. So net broadcast revenues, if we had all these stations in 2011 with synergies, it would have been $962 million of revenue and EBITDA would have been $416 million. Now -- so as you look at your models from 2011 versus 2013, just know that you're going to have 2 years' worth of growth in the core business, in auto and in net retrans that will be the primary differences there as you grow your numbers for '13.

On the decline in same station, there's a combination there. You're looking at a number that includes political when you look at the decline in EBITDA, so that loss of political, as well as the higher reverse retrans fees. Now on the reality of retrans is that -- and that is actually going to be positive for us and so that's driving our expenses up. But the net reverse retrans, or retrans overall with the reverse retrans, is actually a net positive to us so -- and saying that as far as why is the EBITDA down, it's really not -- I shouldn't have said it that way. It's describing more of why the expenses are up for the retrans expense. But net-net, it's a positive, so it's primarily going to be in the political revenues that are down.

Yes, and the other part, too, Marci, is our expenses are fully loaded. So as Steve mentioned, we assumed more operating at full staff and capacity. We assumed that all the stations earned their full bonus potential. And then, of course, we have our normal compensation increases for the whole company that did come in play on Jan 1. So again, we have fully loaded. And we had the same thing last year when we came into 2012. We fully loaded all of our expenses for the guidance that we gave. But the reality is, we came in a lot less than what those numbers were.

The next question comes from Alexia Quadrani with JPMorgan. Nadia Lovell - JP Morgan Chase & Co, Research Division: This is Nadia Lovell in for Alexia. Just want to clarify a couple of things. Can you remind us if any of the newly acquired stations have affiliate agreements expiring this year or early next year?

I'm sorry, you were asking about the affiliation agreements? Nadia Lovell - JP Morgan Chase & Co, Research Division: Right. So your 2 CBS, legacy CBS, expired at the end of December. I'm just trying to get a sense of the newly acquired stations, like when their affiliate agreements expire as I think about reverse comps.

Yes, they're all in the 3 and 4 years out period. And we were assigned those contracts pretty much as they were with the -- from the sellers whether it's Four Points or Freedom or Newport. We took on their affiliation agreements and we're under their watch. So some of them have reverse retrans. Some of them have reverse retrans starting a couple, 3 years down the road. But no, there's -- they're all about 3 years out from '13. Nadia Lovell - JP Morgan Chase & Co, Research Division: Okay. And then besides -- I think you have DIRECTV coming up in terms of retrans agreement expiring in February. Is there anything else that's on the horizon?

No. Nadia Lovell - JP Morgan Chase & Co, Research Division: Okay. And then just as a clarification. For your legacy -- for your newly acquired stations, have all of them been rolled onto your legacy retrans agreements?

Yes. Nadia Lovell - JP Morgan Chase & Co, Research Division: Okay. And then just one last question on M&A. Clearly, there are a lot of station groups currently in the market. And as was mentioned earlier, you still have an appetite for M&A. If you had been operator that seems to favor duopoly, I'm just wondering, do you have a preference when we think about M&A from a duopoly standpoint? Are there any holes in your portfolio from a geographic or affiliation standpoint?

That's a very complex question that you just asked. So I guess the answer would have to be, in a sense, yes. Wherever we -- our philosophy has been to look towards acquiring big 4 stations and adding on to where we have an existing property. So if you take a look at the Newport deal that we had talked about, how we added 3 markets that, combined with our existing markets, so Cincinnati, San Antonio and Mobile/Pensacola. Cincinnati, we picked up a CBS. Mobile/Pensacola, an NBC, as well as in San Antonio. So those are the type of combinations that we're working towards and have been successful so far in achieving that and we'll continue to look for those opportunities. As I said during the script there that there's opportunities that we think will be coming to market or will come to us in one shape or form and we'll continue to be aggressive if and when they come up. So far, these combinations are still in the early stages, but we're only now beginning to talk to you about the fruits that we expect to earn from them. So yes, we see quite a bit of benefit or opportunity there, and we'll see how successful we'll be as time passes. Nadia Lovell - JP Morgan Chase & Co, Research Division: Just one last question. How much additional leverage can you add to acquire additional stations?

Well, typically, what we're able to accomplish here is a seller multiple versus a buyer multiple. And if you take a look at just the deals from the past couple of years, seller multiples are typically 8.5x to 9.5x, maybe even up to 10x. And what we've been able to accomplish is to bring those in and use our synergies to bring the buyer multiple down to sometimes the low 6s, mid-6s. So from a leverage standpoint, there really is not a significant amount of leverage that we put onto our balance sheet. When we talked about what you would expect to see us do in '12 and just in terms of from the beginning of the year, where our leverage was, to the end of the year even after the acquisitions or how our leverage ended, and if you take a look at our balance sheet with all that we acquired, we put very little stress at all on our capability to make additional acquisitions. We're virtually in as good a shape today as we go into '13 in regards to our buying power as we were over a year ago.

Our next question comes from Doug Arthur with Evercore.

This is Tracy Young in for Doug. I have one question in terms of the percentage of auto for the fourth quarter. You mentioned that's going to be up mid-single digits. I was wondering if you could talk about any other categories in just the quarter in general for the first quarter.

Yes, actually, I was looking at it this morning and I could tell you that it's the first time -- we track about 30 categories religiously, and we have about 17 of the 30 right now as we speak that are pacing plus. I haven't seen that in quite some time. So the automotive category is obviously the driver. It makes up roughly about 20% of our revenues, but we have other significant categories that are enjoying pluses as well as evidenced by the 17 that I'm talking about. Telecommunications is up. Direct response is up. It's a pretty healthy first quarter for us with a host of categories that have been in plus side for the first time in quite some time. And I think that bodes very well for the industry in general and we're certainly taking advantage of that in first quarter.

Great. And just a question on your retrans, if you can answer this. Can you give us any sense, just broadly, of the escalators in your contracts, just a percentage of growth?

No.

Thank you, Tracy. Just to kind of on the auto. In our script there, we had about a 9% estimated growth in '13. And a report came out this morning that's surveying all the dealerships across the country. And the average, they're much more bullish and positive toward car sales than what we gave you. They're averaging more in the 10% to 15% growth range in terms of auto for '13. So that was good to see, relative to the position we were taking.

Our next question comes from a Davis Hebert with Wells Fargo Securities.

I just want to ask -- touch on the M&A environment again. You mentioned seller multiples and buyer multiples. Would you say the fair way to look at that would be the '13 and '14, to your average, that kind of, the way the market is looking at it at this point?

Yes, that's a fair point, is to take a look at the averages. That's how it's pretty much valued, you take an odd and even year. So as we enter '13, it will -- that would be trailing '12 or in plus '13. Or as we get further into '13, it might start moving to a projected '13 and '14. But you're right, it's -- those are averages of an odd/even year when we talk about our multiples.

Okay. I just didn't know -- in looking at M&A opportunities, were you sort of discounting the 2012 trailing cash flow given the significant political -- I guess it's a little early to say what's going to happen in '14.

Well, you have to if you're really talking about breaking it down from a standpoint of 2012, and the devil is in the details. And as you get into some markets in terms of due diligence, some of the 2012 political numbers that we've seen are just off the charts for some of the markets and stations we've seen where it's clear that it's best to look at it as a onetime-only event. And we do have to discount at times to kind of bring that back to reality in regards to reality being you're probably not going to see that kind of money again for many, many years and maybe -- but yes, we have to be careful in that regard.

Okay. That's fair. And then congrats on the Mediacom deal. I know it's nice to put that behind you. Can you disclose how many households that deal covers for Sinclair?

Probably around 1 million.

Yes, I think it's about 1 million households.

A million households, okay.

It's a round number.

Okay, fair enough. And not necessarily specific to Mediacom, but where are you seeing the links of these agreements with the distributors these days?

Three-plus years, typically.

Three-plus years?

Yes.

Has that changed in the past cycles?

No, it's been pretty much consistent.

[Operator Instructions] Our next question comes from Andrew Finkelstein with Barclays.

A few questions. First, could you talk about, in the expense guidance, just what do you think the underlying business expenses are growing if you sort of took out of the reverse retrans from the picture? I mean, how do you think about macro, even if you could just give us an area? Is it low single digit? What's the core business expense doing?

Well, that probably would be fair. I'm not going to give you too much detail, so you can back into a specific number on the reverse retrans. But I think it's probably a fair way to think about it. We are looking and hubbing [ph] and creating efficiencies where we can to minimize the expense growth. So that is the technologies that are -- have become available to the industry have really improved our ability to consolidate our operations and to minimize our cost growth. In our case, we're doing that as well as we're really taking on and looking towards our local news operations as a primary opportunity and driver for our local revenue. And where we see weaknesses in our news operations and strengths for that matter, we're trying to build on that. And so we have really gone through our business and prioritized our opportunities in that regard. So that's a little bit more of an expense driver in our case that I'm not sure you'll see with other broadcasters.

Okay. So a little more investment maybe this year than in the past?

Yes.

Okay. And then taking it a little further, on the reverse, I was wondering what percentage of the stations, maybe on a revenue basis or number, are you guys already paying the reverse? And I'm trying to get to is there a point where we sort of lap where the expenses are new and then the growth would slow as you get -- as you anniversary the start of those payments?

I'm not quite sure if I understand your question. But I think what you're trying to get to is how is the reverse retrans coming into play versus where it was, but there had been a concern, I guess, in -- go ahead.

What percentage of the overall stations are in paying reverse at this time, ballpark?

It's hard to give you just off the top of our head a percentage. But you have the blend of big 4 and CWs and MyNetwork, so we're a little bit different in that regard in terms of our CWs and MyNetworks and just how some of those reverse payments work for those particular affiliates.

We have to hire a mathematician from MIT to write an algorithm that would answer that question in 14 pages or less.

I don't know, David. I think you know the answers. I don't believe you. All right, I'll try another one. I noticed the programming line is going to be up a little bit this year. You gave us the breakout of the amount due to acquisitions. It does seem like there's some -- it's going to be up a little bit more. I mean, you've kept it so low for a long time. Anything new on the programming expense side?

We reloaded with Modern Family coming on this fall. And then you have Arsenio Hall also making a comeback that will be on this fall. We bought both of those programs in the majority of our resume of stations, so whatever increase you're seeing is probably attributable mostly to Modern Family, but also to a few other shows as well.

Yes, and Andrew, I just want to point out after 2013, we're really expecting the film payments to hold in that mid-$80 million range.

Okay. And then just looking at the growth in the quarter -- in the fourth quarter and then in the first, I guess, on the local side, I think revenues, it says we're down 2% on a same station basis. Ballpark, what's the decline on the core local time sales? I think you've given us that in the past. Is it mid-single digit or high single digit if you exclude retrans?

I think, really, when you take a look at our fourth quarter, in particular we talked about the crowding out factor. We just couldn't get out of the way of the money on the political side and some of our biggest cash flowing and revenue producing market sell, it's tough to pinpoint exactly where we would have been had we not enjoyed all the success that we had. So it's one of those things that you just can't come up with a real number. I think the real sign is how we're performing now in first quarter now that we're getting back to some normalcy in terms of the spot business. And as I just mentioned, with the previous calls, it's the first time I've seen a majority of the categories pacing positive. And as long as I could remember, I said we track 30 different categories and we're pacing plus on 17 of them right now and that has not been the case for a long, long time.

Right, I was going to actually ask Steve. So excluding retrans, the first quarter net broadcast revenues or time sales, local, nationals, is that positive also?

Yes.

Okay. I see retrans is overall still bringing that growth higher. It's growing faster than advertising. Or should I not assume that?

I think that's probably safe to assume.

Our next question comes from John Kornreich with J.K. Media.

Yes, Lucy, just a couple of quick numbers because it went by so fast. I don't know if I have them correctly. The pro forma '12 revenue was a little over $1.1 billion, correct?

Correct.

And what was the comment you made about total through the holding company leverage? For what, for when, and I missed that altogether.

Sure. So we ended 2012 through the holding company at 4.25x and we're expecting, based on current guidance and our current station portfolio mix and 2013 through the holding company, and again this is net of cash, net of the nonrecourse debt, to be in the low 5x. And the increase there is really due to the absence of the political impact in '13.

And this is the end of...

'13.

'13. So if we simply took something like $2.1 billion of year-end debt and divide it by 5.2x, we get an idea of where the EBITDA will turn out?

That would be the math.

Okay. And finally, what was the number -- you gave some number at 500-and-something million of, I think, EBITDA. What was that?

Right. So 2012 pro forma EBITDA, if we go into all the stations for the full year, would have been $511 million of EBITDA.

EBITDA, okay. Are you going to be at DB, by the way?

Yes.

Our next question comes from Doug Arthur with Evercore.

Yes, I just sort of have a 50,000-foot question. How do you think consolidation in the industry is impacting retransmission and reverse negotiations, i.e., if you are smaller station group in today's market, do you gain -- do those stations gain significant benefit in the negotiation bargaining table by being a part of a larger group? That's sort of the gist the question.

I don't think it hurts. I think the reality is a real television station stands on its own in every market it lives in. I guess that's the reality of the world we live in. If you have a really powerful television station and run a great business that the public demands, that's all the negotiating leverage you need.

The next question comes from Edward Atorino with Benchmark.

Just a follow-up, I just want to double check. Core growth for the 1Q '13 ex-retrans, ex-digital, ex-stuff?

We didn't provide that number, Ed. We only give net broadcast revenue breakdown.

Okay. What was that again?

For Q1...

3 to 5, right?

What is it?

Plus 3 to 5?

Excluding the acquisitions on a same station net broadcast revenue and excluding political, we're looking at 3.4% to 5% up.

There are no further questions at this time. I'll turn the conference back to management for closing remarks.

Okay. Well, thank you, everyone. This concludes our fourth quarter conference call for 2013. We look forward to all the prospects that that'll bring. And then we thank you for participating on the call today. If anyone has any questions, please feel free to contact us.

Thank you. This concludes today's conference. All parties may disconnect. Have a great day.