Ladies and gentlemen, thank you for standing by. Welcome to The E.W. Scripps Company Fourth 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 our host, Mr. Tim King. Please go ahead.

Thanks, Brad. Good morning, everybody, and thanks for joining us on this recap of The E.W. Scripps Company's fourth quarter results. We're going to switch things up a little bit this morning by starting with Rich Boehne, our President and CEO, who will provide some context for the fourth quarter as a prelude to a promising 2012 after a year of dramatically reshaping our operations. Then, Tim Wesolowski, our CFO and Treasurer will provide a deeper dive into the quarter. When we open up the lines for your questions, we'll be joined by Brian Lawlor, who runs the TV division; Tim Stautberg, who runs the newspaper division; and Doug Lyons, our Corporate Controller. The commentary you'll hear from our executives this morning may contain certain forward-looking statements and actual results for future periods may differ from those predicted. You can read more about some of the factors that may cause results to differ from what you're about to hear by referring to the Form 10-K. As a reminder, you can always go to scripps.com for more information. If you click on our Investor Relations link at the top of the page, you can access today's release and financial tables, as well as a streaming audio replay of this call. I will have it up there later this afternoon and it'll run through March 7. Having said that, here is Rich Boehne to begin today's discussion.

Good morning, everyone. Thanks for joining us. Now, the fourth quarter was a nice launching pad for the attractive opportunities we see ahead now in 2012. As you saw in the release, revenues came in a bit better than guidance and excluding a couple of non-recurring items, expenses were down as promised. Let me right upfront, though, apologize for all the complicating factors in our 2011 results. As the old saying goes, you don't want to watch the sausage being made but the eventual outcome is very good. That's the story of 2011 and 2012 here at Scripps. We got a lot of ugly work out of the way last year in 2011, setting ourselves up for what we believe will be a very successful future. We entered this year, 2012, a very different, newly restaged company with stronger growth prospects and improving results from our current businesses. We ended last year by expanding our television footprint, adding a total of 9 additional TV stations concentrated in 3 of America's very best media markets: Indianapolis, Denver and San Diego. That was an opportunistic deal for the McGraw-Hill stations at a very attractive price, plus it moves our cash flow mix more toward TV and digital. Now that's not to say we don't like or believe in the economic opportunities offered by printed media, we do. But a heavier reliance on electronic delivery platforms gives us the opportunities to grow while we're revamping the business model for printed newspapers. Now led by Tim Stautberg, the newspaper division is moving rapidly to simplify its business and focus on the most attractive audiences, products and revenue categories. While expanding our TV footprint and restructuring the newspapers under new leadership, we also moved in 2011 to dramatically step up our launch of new digital…

Good morning. Our fourth quarter can best be summarized in a way I'd like to repeat every quarter, strong increases in local television advertising and improving revenue trend at our newspapers and lower consolidated costs and expenses when you exclude acquisition and restructuring charges. Our consolidated revenues reflect the saw-tooth nature of a company with so much political opportunity in even-numbered years. Our reported revenue was $197 million, down about 10.5% from the year ago period, but the record-breaking performance for political advertising in 2010 masked the strength of our underlying business. Excluding political dollars from both 2011 and 2010 numbers, our consolidated revenues actually would have risen slightly, led by double-digit growth in TV, which I'll talk more about in a minute. Our expense line requires some explanation this quarter. We reported charges that lowered the operating income in the quarter but will improve our performance over the long run. Those included almost $3 million of charges relating to the acquisition of the 9 TV stations from McGraw-Hill and about $3.5 million for restructuring charges. The latter figure represents our ongoing efforts to simplify the newspaper business model, as well as a reduction in force in the newspaper division that occurred in December. Through attrition, not filling certain open positions and the separation from the company of about 130 employees, we eliminated roughly 160 positions in the fourth quarter. It was a difficult decision but a necessary one, given the continuing operating challenges in the newspaper industry. Excluding these acquisition and restructuring charges, our costs and expenses fell about 2% to $174 million. That reflects good expense discipline when you consider that we accrued $7.5 million in incentive awards in the fourth quarter that had not been part of our guidance in November. Let me walk you through this…

[Operator Instructions] Our first question today comes from Alexia Quadrani from JPMorgan.

This is Townsend Buckles for Alexia with a few questions. First, your strength in core TV advertising that you saw in Q4 and now at start of the year appears to be a nice out-performance versus your peers, some of which you've talked about some softness in January. Can you talk about where you've seen some of these stronger gains by category, as well as geography, if you are seeing differences there?

Townsend, it's Brian. We had a pretty good quarter as you just mentioned related to our core business, and much of that was in some of our top categories. Services was our top category, followed by auto, retail, food services and travel and leisure. And all 5 of our top categories showed year-to-year growth. Significant double-digit growth in services, auto and food services -- I know you guys typically look for auto. Auto was plus 25% in the quarter for us wrapping up what turned out to be a heck of a year of consistent double-digit growth. And service is another key category for us, which includes a lot related to the legal category, the medical category, home improvement and investment category, that was up 24% -- 23%. So pretty good growth in our core categories. As it relates to just -- geography, Midwest probably performed better for us as a whole than some of our other regions. Our top spot market, so excluding political just in terms of core growth was Cleveland up over 10% year-to-year. Detroit was up almost 7%. We saw growth in Cincinnati. Tulsa performed very well as well, and West Palm did pretty well in Florida.

I appreciate the detail. That's very helpful. How did the Super Bowl factor into your Q1 guidance at all?

We had 3 mid-market size NBC affiliates, so less than $1 million of revenue.

Okay. And looking for the full year and the slowdown in core TV revenue that sort of implied in your guidance, is that just conservatism against tougher comps? Or is that something you're seeing in the marketplace?

We're not seeing it in the marketplace. I think we feel good about the guidance we provided. We are expecting a pretty active political season. And so to some degree, there'll be a displacement factor that would impact our local and national spot business.

That make sense. And just turning to the newspaper side, can you give a sense of where you guys are with your restructuring efforts? I know Tim is hard at work there, and it looks like you're expecting cost to come down faster than revenue in Q1. Do you expect margin improvement for the year in the revenues scenario that you've outlined here?

Townsend, we do expect some margin improvement for the year, but in terms of the restructuring, a lot of the realignment that we've done with the Scripps 3.0 plan has taken place. Realigning our business is functionally getting all of the incentives properly structured. There's just a lot involved there, transitioning from a culture that is very decentralized and autonomous with publisher dominion to one that's functionally aligned. We've done a lot of that work. And so now, 2012 is really the year to focus on selling and generating great content. The last piece that we're working on and we're rolling it out this year is a transition from 13 different revenue systems, both circulation and advertising systems onto a common platform. And so we're rolling that out across our markets in 2012 and probably into 2013. So that's the last piece. But other than that, everybody is focused on what they need to do from a sales standpoint. And we have made all of our publishers, chief revenue officers, which you're probably seeing a lot of across the industry, but their sole focus is on generating circulation and advertising sales and commercial printing and alternate distribution revenue in their local markets. And we think bending the trend as it were is going to be a key to success for us in our local markets.

And we could see some stronger margin performance in the back half of the year as some of these other initiatives work through?

Yes, I hope so, but I want to be careful. We're not talking about the return of the Halcyon days here. We're just talking about generating, if we can, increased segment profit out of this portfolio of newspapers. That's the key for us.

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

I was just wondering in terms of the development, how has that been going for the lead in programming to your news given the prospect that you will not renew some of your popular syndicated programming later this fall? Are those plans underway now or any update from that?

Michael, it's Brian. Yes, we've been working on this project for 2 years. It was probably 2 1/2 years ago that we made the decision to cancel our agreement with Wheel and Jeopardy! in 7 of our markets, and the development process started at that point. It's been incredibly active over the last 2 years, and I'm really comfortable with the products that we have in development that we'll launch September of this year. I do want to clarify one thing. You said that these are shows that would be used as lead-ins to our news. It's actually not the case in most markets. Wheel and Jeopardy! especially in the East Coast markets run in the 7 to 8 p.m. time period, so we'd actually be coming out of the news and serve as lead-ins to our prime time programming. In the mid West where prime runs 7 to 10. We have about half hour of programming that leads in to prime, and so one of our 2 shows -- we are developing 2 new shows for those time periods. One may run as an early news lead-in, and one may run out of news into prime time.

That's even a better opportunity. So in terms of the recent ratings, I was wondering if you can give us an update on that as well. And then as that relates to the McGraw-Hill stations, which I know have been lagging a little bit. And then if you can just -- given the fact that you've kind of out-performed on political in the last quarter, I was wondering if you can update your thoughts on what your opportunities might be on political? It seems like your guidance is still a little light given the prospect for heightened political activity this year.

Let me start with the last point on political. We had a respectable first quarter. Florida, Michigan and Ohio -- I'm sorry, Florida, Michigan have done well with their primaries. But there's still a lot -- it's the volatility as it relates to ultimately identifying what are going to be the key swing states, how funded are the super packs. I think there's a giant question around just how long the primary season goes. And then ultimately, at what point are the 2 candidates identified where kind of the war chests get open? It's our feeling that the longer the primary season goes on, states in specific primaries will benefit, but everyone else kind of, for the most part, sits on the sidelines and waits. And to some degree, dollars that could be spent ultimately may not be spent. So I think the guidance we've said all along is that we expect to surpass our 2008 presidential cycle, which was about $42 million, and I think we feel we continue to believe that's the case. But there's a lot of volatility in the process. We'll be watching this Tuesday very closely. I think this Tuesday will clearly define for us where the process will go related to Super Tuesday and beyond. And so there's different variables that can really affect what the next quarter looks like based on what we see coming out of this coming Tuesday. As it relates to the McGraw-Hill stations, our new 4 television stations -- now that we've gotten in there, we're, I don't know, less than 60 days of operating those television stations. As Tim said in his opening comments, we're probably more excited now about the opportunity than even when we bid and acquired the stations. They're exactly what we thought, no surprises as we've gotten in and begun the integration process. And we're very much on track in terms of pulling their best practices out so that we can scale them across our group and maybe looking at their operations to see what some of our systems and best practices can be scaled into their group. And so I think -- look, the first half of this year, there probably won't be a significant monetary upside as we work into the processes but long-term, we continue to feel very good about the value of the investment that we've made there.

Okay. And in terms about your ratings on your legacy stations, can you give us an update on what that has done in the last quarter?

Yes, we're in the middle of the February sweep now. We're 3 weeks in. We have one week to go. We're very pleased with our news tracking, which is of course the thing we can control the most. It's been nice to see a little bit of a bounce back on NBC. The Voice being in prime time and scaled across a couple of nights has provided a bigger audience than maybe we've seen in the past. So I think our stations, in terms of ratings, are performing well in the first quarter as we had hoped. And, obviously, we spend a lot of time here focusing on quality journalism and making sure that the news products that we put on air are serving our communities, and I think that investment will continue and it will continue to build strong brands that'll create value in 2012 and beyond.

And the NBC stations I know are mid-market, but how significant will the Olympics be for that station group?

It'll be as significant as it has been in the past. Again, mid-market equates to $2 million less than $5 million across the 3 stations. So I guess in the big scale of things, probably, not overly material, but a couple of million dollars certainly helps move the needle a bit.

And then Gannett recently formalized the move towards a pay-for-content model with this substantial increase in subscriptions, prices and so forth? I know that you have not formalized your digital initiatives in the newspapers at this point, but do you have some comments on the general plan Gannett had? And how that puts into your thoughts? And what you might be testing in some of your markets at this point?

Mike, it's Rich. Yes, and again, we're looking at plans for not just TV markets -- not just newspaper markets, but also in our TV markets as well. Let me have Tim start and talk about what he's doing in the newspaper markets then I'll come back for just a second.

Sure. What Gannett mentioned on their -- during their Analyst Day is in keeping with where we're heading as well. Now, I think, may be there'll be some differences with respect to how metering is handled, and I think a lot of newspapers are kind of experimenting with that right now to optimize the user experience and the audience and a whole lot of other variables. We have a test going on right now in Memphis where we do have a pay wall, meter pay wall up, smartphone and tablet applications up and running, priced, so we're learning a lot from that, but we're also paying close attention to the experiences of other newspaper companies. But like Gannett and like others, we are encouraged by the opportunity to begin to generate more revenue from our consumer-facing business and frankly, circulation revenue has been a fairly stable revenue stream for us. And like Gannett, we see that as an opportunity to grow and support our journalism in our local markets. Likely by bundling with home delivery, full access across the digital platforms and then doing some strategic pricing around digital only. But I think the time is now, given all of the technology advances and consumer behavior that's changed over the past couple of years with respect to their approach to paying for content, the time is right to do this. And it's our intention to get this up and running, get the platforms up and running across our newspaper group by the third quarter, certainly by the end of this year, rolling out a similar strategy to Gannett's.

Michael, it's Rich again. If you stand back, I think we kind of think this debate over paid versus free is kind of misguided. There should be services that are free, and there should be services that are paid. And if you can build high-quality products that people are paying for, that's what you should do. We are already pretty deep into the paid. We launched a lot of paid apps in December, as I said, for the holiday season. Again, those cut across newspaper and TV markets. We're as aggressive in our TV markets as we are in our newspaper markets, and we see a very good future there.

We do have a question from the line of Barry Lucas with Gabelli & Company.

Maybe just 2. If we could start with Brian. We had some legislation in place, so moving forward on spectrum, clearly, with the purchase of the McGraw-Hill stations, Scripps is not a seller, respectfully you don't appear to be a seller in any auction down the road. But how comfortable are you with the provisions, the hold harmless provisions? And what might you think is the FCC's plan B since because nobody seems to be a seller?

Well, I can't speak to what -- Barry, it's Brian. I can't speak to what the FCC's plan B is, but what I can tell you is that we're not a seller. We're -- we've been in communities for 30, 40, 50 years serving those communities and with network-affiliated television stations and strong news brands, and we expect to be in those same communities and maybe some others for another 30, 40, 50 years. And so that's the foundation of who our company is, so I don't see this new regulation changing our course at all. As it relates to our comfort zone with the language of the bill and the protections that are in there, I think what's in there is the best case scenario for broadcasters. I think it was inevitable that there was going to be an auction offered. Obviously, government needs the money. The FCC wants some spectrum. They'll get some spectrum, I don't know how much and that's their issue to work out. But ultimately, the protections for our ability continue to serve our entire service areas. The protections on the northern border were a huge issue to us having television stations in Cleveland and Detroit and the fact that we'll be held harmless if we choose not to sell, the reality is that if we have to move any of our channel positions that will be made full on those expenses, I think are all things that were important to us. We're pleased to see that everyone of those was within the bill. And so ultimately, I think it was probably the best of a situation that we preferred probably didn't happen, but I think everyone gets what they want and we stay in business, and we stay very focused on the communities we're in.

Great. And maybe sneak one in for Rich and Tim. You closed the year in very good financial shape even after the purchase of the MHB stations. This should be a very good year for free cash flow generation with the help of political advertising on Brian's stations. It -- I don't know. If you could drill down a little bit, but maybe just really identify the priorities for the use of cash when you've got a modest buyback program, so it's about reinstituting the dividend or what have you?

Barry, it's Rich. Let me sort of walk you through. I guess, let's say 4 buckets for how we would use cash. First is as we just talked about, we're investing in and building digital businesses and we're doing that against business plan that we think have a good return. That's not at this point looking like it's going to consume an enormous amount of capital, but we do want to continue to invest on the digital businesses. Secondly, we want to expand our business in markets where we already have valuable franchises, especially in our TV markets where we might have an opportunity to pick up a second station or create partnerships or just in some way, build out and take advantage of the scale and the brand we already have. As you said, we'll -- we think our shares are a good deal. We tend to go after them. And then also, now, we can pay down a little bit of debt and do that at the same time. I don't know if I would put those in any specific order because it always depends on what we think is -- offers the best return. But those are probably the 4 big buckets and then obviously, we always, at every board meeting, talk about dividends. Tim, you want to add anything?

No, I think that's good. So we've got, as you know, about $24 million left on our share repurchase plan and I think it's quite likely that we'll be completing that program in 2012.

We did well on our share repurchase last year based on where the stock's trading today.

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

I apologize, I just -- I got in the call late. Can you talk about your cost expectation for newspapers after the first quarter, the remainder of the year here? I mean, given this extra digital investments, you said it would be small, but I'm just wondering if you think you'll still be down roughly mid-single digits the remaining part of the year.

Craig, it's Tim Stautberg. I'd say that's probably a fair estimate of the way that we've approached 2012. We made some very difficult decisions in the fourth quarter to position ourselves for at least stability if not growth in segment profit from the group for 2012. So I think that ease up good control over expenses the balance of the year for the newspaper division, and a lot of the digital efforts, I don't know that they're going to amount to sizable expense hits to the newspaper group, back half of the year.

And I have a similar question on the TV side for costs after the first quarter here, adjusting for the McGraw-Hill stations. What are you currently budgeting your cash costs and the percentage change year-over-year, please?

Craig, it's Brian. I think consistent with first quarter, we're looking at probably being down low-single digits through the year.

Okay, that's good to hear. Because, obviously, that's a big opportunity for you guys in the cost front, both segments here, particularly versus your peers and stuff. Another nitpick question if I could. On -- you might have covered this. On the newsprint side, what's the percent change in the quarter for consumption versus the average price percent change?

Yes, I think both consumption and price were pretty flat. Price up just a little bit. Consumption -- now, we're doing a fair amount of commercial printing work, too. So Craig, that's factored into the consumption side. But frankly, we're -- I think we're flat with both.

And so for the year, what are you assuming on -- for newsprint prices, flattish versus the year ago?

For 2012, I think that would be the expectation, maybe a little bit higher, depending upon how the back end of the year goes. The big question mark is -- well, clearly, that capacity issues and suppliers and their own financial situation but then energy prices, which is a big wildcard that we just don't know -- the balance of the year, what oil prices are going to do, and that's a big input into the cost for the newsprint providers.

We do have a question from the line of Dennis Leibowitz from Act II Partners.

Your guidance for newspapers for the year indicates a decline of 3.4%, something like that, which is pretty much what you had in the fourth quarter. Is that conservative or does that imply basically no improvement in the pace from what you're experiencing?

Dennis, it's Tim Stautberg. We are approaching 2012 conservatively. We've been through since 2007 many, many difficult years. So we want to be very, very cautious in the way that we approach and plan our spending against the opportunities in our local markets. We still are challenged by advertising decisions made by the larger major retailers, not only with their run-of-press display advertising in our paper but also their preprints. And that's the big unknown is to what extent they continue to reduce their newspaper budgets. We can control local advertisers in terms of the energy and effort we spend meeting with them and proposing schedules both in print and on digital, but a lot of the major retailers, their decisions are made in faraway places. So I think that's the big caution for us for the balance of the year.

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

Was wondering if you could give us any sort of insight in terms of quantifying both the investment and the return that you're looking for in these digital investments. In particular, just kind of looking at the digital lines in each segment, it looks like newspapers are basically digital's tracking with local ad spend and digital is only a little bit better in television, how do you think or how much are you investing in these? And kind of what's the return hurdle? And how can we kind of track that going forward?

Sure, it's Rich. So what you're looking at today also is sort of steady-state and you're looking mostly in the rearview mirror as opposed to looking ahead. And so what we've done is combined all of our resources across the company into one organization. So on the cost side, going into this, we also picked up a lot of advantages of scale and consolidation, so we're reallocating a fair amount of expense that will help us increase that revenue line we think nicely without having to put a lot of additional capital and put a lot of new resources into the P&L. So I think going forward, what you're going to see is a lot of investment in new products that we'll try to track for you at least by example, by product and give you an idea of how we're doing. The hurdle is pretty easy. We want to show a return on investment that is accretive to the value of the company. So we'd be looking for a pretty strong return every time we put incremental capital into building digital products. Like I said, we've just put the organization together. We launched a lot of new products at the end of the year. As we head on through this year, we'll begin to provide I think a lot more clarity for you and help you track along with us. But we're looking for a strong return. This is not a hobby or a misguided adventure. We think it's a very important development if we're going to continue to serve and take good cash flow out of these markets.

[Operator Instructions] And we do have a question from the line of Howard Rosencrans with Value Advisory.

Regarding your buyback, just trying to understand how you're addressing it. I believe you indicated that the average cost on the 51 you've done was 8 and a little, is that what you said?

I believe that's right, yes.

And Q4 was 7 and change, is there sort of a number you have on your mind in terms of stock price as to where you would not be as aggressive? Or what are the metrics you're using? How are you measuring your return? Are you looking out a couple of years and saying, okay, we'll be generating X when McGraw-Hill properties are really kicking, we'll get a return on newspaper, how are you looking at your -- at what sort of number you might be paying for your stock?

Sure, Howard. So we look at these on a couple of different basis and that's really kind of the most important one is we look out at our cash flows for both our existing properties, as well as the recent McGraw-Hill acquisition. Look at them out over the next 4 years based on where we think the businesses are going to go, and then really look at a DCF basis and see what we think the value of the shares are. And we've been active in buying the shares, because we think that there's a gap between what we think they're worth and where the market is. And so we'll continue to do that as long as we've got authorization from the board. As I mentioned, we got about $25 million left, and as long as we believe that there's still a good investment opportunity for us.

Okay. And the second question is regarding the TV stations, both the TV stations that you have and the acquired stations. Just give me a quickie answer on one thing but then follow up with the balance. I'm not exactly clear on where the ratings are of the stations. If I'm not mistaken, and please correct me, you're pretty much running last or near last in most of your markets, I mean, obviously, suggesting there is plenty of room on the upside, although maybe I'm mistaken on where you stand on a ratings standpoint both of the legacy stations and the McGraw-Hill, but I'm trying to understand, do you expect that over time, these stations will move to being #1 in the market, #2 in the market, #3 in the market? Just in terms of a global sense sort of investment you feel like you need whether you need sort of an outsized investment to sort of get there and whether one day you envision these stations will be -- will sort of get the margins that competitors get, is that a sort of 3-, 4-year goal? I mean, your stations are, I don't know, 15, 20, low 20s sort of margin than most of the industry? The good operators with good stations can run 30-plus, do you need to really be a Fox station to get there? Anyway, whatever color you can provide.

Howard, it's Brian Lawlor. Let me begin by just speaking to our ratings position in each of our markets. We're not last in all or anywhere close to all of our markets. We have several #1 television stations. I think we have 3 #1 television stations of our legacy television stations. Most of our others are #2 and 3 in their market. I think almost all, maybe with an exception of 1 or 2, are in the top 3 in competitive position in their market with several strong #1s and several very competitive #2s. So we do run good television stations. As it would relate to the newly acquired television stations in Denver, San Diego, Indianapolis and at Bakersfield, these are basically about #3 to #4 in their markets. In 1 or 2 cases, they actually are #2 in news. I think we have huge upside with them. As it relates to A, ratings improvement, we do think that there's an opportunity to increase the exposure of the brand, attach a loyal audience with some investment we'll make and be able to realize a return on those investments. But also as it relates to margins, this is something that since the split of the company, 2 1/2, almost 3 years ago, we've been focused on trying to build our margins. We have a slight disadvantage as it relates to retransmission opportunity because some of our rights still sit with SNI. But I think we've proven over the last 3 years that as those rights come up that we are negotiating very aggressive rates at or above market value. And so you've clearly seen those returns. Those returns will continue consistently for a period of time. The decisions we've made in programming are, A, because we think we can do it…

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

All right. I'd like to thank everyone for their interest this morning. Brad, thank you for your help, and go ahead and begin your wrap up.

Thank you, sir. And, ladies and gentlemen, this conference will be available for replay today after 11 a.m. Eastern, through midnight March 3. You may access the AT&T teleconference replay system at anytime by dialing 1 (800) 475-6701, entering the access code 233993. International participants may dial (320) 365-3844. That does conclude your conference for today. Thank you for your participation and for using the AT&T executive teleconference service. You may now disconnect.