Good day and welcome to the Gray Television's Third Quarter 2016 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Hilton Howell, Chairman, President and Chief Executive Officer. Please go ahead, sir..

Thank you, operator. Good morning. As the operator mentioned, I am Hilton Howell, the Chairman and CEO of Gray Television. Thank you for joining us this morning for our third quarter 2016 earnings call. As usual I am joined today by our Chief Financial Legal and Development Officer, Kevin Latek and our Chief Financial Officer, Jim Ryan.

We will begin this morning with a disclaimer that Kevin Latek will be providing.

Kevin?.

Thank you Hilton. Good morning everyone. Certain matters discussed on this call may include forward-looking statements regarding, among other things future operating results. Those 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 filed with the SEC and included in today’s earnings release. The company undertakes no obligation to update these forward-looking statements.

Gray uses its website as a key source of company information. The website address is www.gray.tv. We will post both an audio recording and a transcript of this call on our website. We also will post an updated investor deck to the website later today.

Included on the call will be a discussion of non-GAAP financial measures and in particular broadcast cash flow less corporate expenses, operating cash flow, free cash flow and certain leverage ratios.

These metrics are not meant to replace GAAP measurements but are provided as supplements to assist the public and their analysis and evaluation of our company. We include reconciliations in the non-GAAP to the GAAP measures in our financial statements that our available on our website. And I will turn the microphone to Hilton..

Thank you Kevin. First I want to note that since our last call, Richard Hare has joined our Board of Directors. Richard is the Senior Vice President and Chief Financial Officer of Carmike Cinemas. Carmike is a NASDAQ listed company and one of the nation’s largest motion picture exhibitors.

He brings more than 25% years of financial management experiences, and we are delighted to have him on our Board. We begin this call by reviewing our results for the third quarter and our guidance for the fourth quarter.

After Kevin and Jim provide additional color and detail on the bigger issues, I will address this morning’s other announcement of the new stock buyback program. We will fairly be fairly brief in our remarks today because we would want to provide as much time as possible for questions before many of you switch to next hours call at 10:00 AM.

Let me begin with the good news, first, as you saw in the release, we posted record levels of revenue and broadcast cash flow in the third quarter. Total revenue increased 35% and broadcast cash flow increased 60% compared to the third quarter of 2015.

On a combined historical basis which adjusts for the effect of acquisitions, we posted a 12% increase in total revenue and a 24% increase in broadcast cash flow compared with the third quarter of 2015. Equally noteworthy is that our broadcast operating expenses excluding network reverse comp fees actually decreased from the year earlier period.

We had saved about $10 million this year on national sales representative fees and our September refinancing should save about $12 million in interest payments annually over the next several years.

It is always difficult to preserve core revenue levels during the third and fourth quarters of a presidential year, due to displacement by the Olympic Games and especially by political advertising.

We are therefore pleased that we managed to maintain our core at essentially the same level as third quarter 2015, when we had very political revenue and no Olympic Games revenue.

This achievement is the result of aggressive efforts at the stations to maintain advertising levels and bring back a portion of the core advertising that moved to the sideline in anticipation of strong political displacement. The big news, of course is political or more correctly the lack thereof.

Everyone has read in the press and heard from our peers of the unprecedented challenges and unusual aspects of this year’s races.

As early as the beginning in September, our research still made us feel very comfortable, but the fund raising levels over the summer and historic issues at stake including control of the United State Senate, the Supreme Court would ensure that we would at least match our 2012 record level of pro forma political revenue of $144 million.

However, the situation deteriorated very quickly in mid-September, with several negative developments and a few position ones. When our visibility went to zero, we could not remain with our comfortable with our political guidance and we therefore communicated our honest assessment by withdrawing that guidance.

As Kevin will explain, how we are very disappointed in the results. We take comfort in the fact that our shortfall resulted in hiring from the lack of political money entering grazed markets rather than a failure of execution by our stations.

Now that the election is almost behind us, we see local and national advertisers seemingly sitting on the sidelines a bit more and a bit longer than usual this late in to an election quarter. We hope that the negativity and uncertainty can be reputed by what may be surprisingly more resilient underlying macroeconomic trends.

Kevin will now address the political environment in more depth, and Jim will provide more color on our financial results and guidance. As I mentioned, after they finish I will address the buyback announcement.

Kevin?.

Good morning. I begin with a question on everyone’s mind, what the heck happened? The answer is fairly straight forward; the money simply did not enter our market as expected. Candidates on both side of the Presidential contest this year spent far less that their 2012 predecessors.

In addition, neither political parties spend any significant money supporting their nominee with advertising, and many of the super packs skip the race entirely.

The lack of dollars and often the lack of a polling advantage resulted in far less presidential dollars entering traditional swing states like Virginia, Colorado, Wisconsin and Michigan and we own multiple stations in each of those states.

Historically, a presidential spending has been between 25% and 33% of our total, with roughly half spent by each side. Using the midpoint of that range our 2012 pro forma political revenue totaled 144 million.

History suggests that we should have booked about $21 million from each side in the presidential contest and about $102 million in non-presidential money this year. Instead our presidential spending total was 66% less than what history predicted.

The GAAP side was down tremendously, despite a long primary season with about 69% less spending that expected. Still the democratic presidential candidate and issue money were also down this year, with a total decrease of about 62% less spending than we would have expected.

We also expected down ballot races would make up for any shortfalls in the presidential races, with highly contentious senate races in places such as Colorado, Ohio, Illinois and Wisconsin. And especially considering their control of both the Senate and Supreme Court appeared to be in play.

Likewise, we expected expensive races for governor in places like Indiana, North Carolina and West Virginia, as well as continued healthy spending in the House, state and local races and potentially even some controversial and expensive ballot fight.

As you heard from some of our peers already, many if not most of the contentious senate and governor races seem to significantly cool off just as fourth quarter began. And even lower races did not bring out as much spending as expected.

In the end, aggregate political revenue from down-ballot races for us totaled about 30% less than the expected level. The decline to Gray’s swing state’s particularly hard, and we own multiple stations in most of historically purple states.

In particular, political revenue in 2016 fell by the largest percentages from 2012 levels in these traditional swing states. Colorado down 32%, Nebraska down 50%, Ohio and West Virginia where our stations broadcast in to both states down to 50%, Wisconsin down 62%, Michigan down 82% and Virginia down 91% from 2012.

For comparison sake, six senate races occurred in the forward going states in 2012, we had just three senate races in these states in 2016. The political report card is all bad news. To the contrary, we have been able to confirm that these revenue losses while unexpected and large were not the result of a failure in execution by our stations.

We subscribed to independent market audits conducted by a public accounting firm. These independent audit reports provides match [fed] data for 2016 and 2012 across 23 Gray market and reflect a cross section of large and small markets, as well as legacy and recently acquired markets. We believe this data is representative of our entire operations.

The reports reveal that the aggregate political ad market spends in these markets through the third quarter was $75.6 million in 2016, compared to$139.3 million in 2012. In other words, the political money coming in those markets declined by almost $64 million, which is a decrease of 45.8% from 2012.

However, our aggregate political revenue in these markets decreased by just 44.1%. Meaning that our political revenue was less than the amount by which a total market spending fell. Looking at this differently, the audit shows that we had an aggregate share of 41.1% of gross political ad market spend in these markets in 2012.

In 2016, we grew that share to 42.4%. In addition in 2016, we actually have four additional markets participating in the audit, and a 2016 market audit reveals two other noteworthy data points.

First, only 89% of Gray stations in the audited market achieved higher shares of their markets total political spending, than they get in non-political advertising revenue. Second, the 2016 market audit shows that we have nine markets that achieved gross political ad revenue shares exceeding 50%.

In other words, in nine of the 29 audit markets, the Gray station posted higher political revenue than every other station in this market combined. The independent data therefore confirms that Gray took in more than its fair share of total political revenue that actually made it in to our markets.

On the flip side, those markets that did have contentious races still saw a very strong political spending. In fact the Gray station with the highest political revenue in 2012 managed to beat that record this year.

Likewise a very competitive situation in another Gray market that previously has seen its share of competitive races bought in 2.5 times as much political revenue this year as it did in 2012, and 14 times as much political revenue as it saw in 2014.

We also saw more competitive races at the local level this year, which led to an increase of more than $9 million in local candidate initial spending. Consequently we view this year’s political revenue result as highly extraordinary and not a precursor of future elections.

We also believe that even in the tempest that was the 2016 political season, Gray strategy of owning and investing in top rated stations succeeded as we manage to capture a larger share of those political dollars that actually made it in to our market.

Finally, I want to remind you that we had a number of important retransmission renewals occurring at year-end this year covering 4.2 million subscribers, which is about 36% of our total base. We previously estimated that our pro forma gross and net retransmission revenues would grow by 17% in 2017 to $240 million and $120 million respectively.

We remain comfortable with these estimates at this time. Thank you for listening to all of this detail, I will now turn the call over to Jim Ryan..

Thank you Kevin. Good morning everyone. Our release provides a lot of information and the 10-Q is being filed today too that obviously has much more information, and Kevin has addressed the obviously question of what happened to the political. So I’ll keep my comments brief to a few other items.

First, regarding our national rep transition this year, Hilton already spoke of the expense savings we’ve achieved during the year. We’re often asked if the transition has negatively impacted our actual national revenue. Referring to the same market audits that Kevin referenced in his comments on political; the answer to that question is, no.

In the 29 markets that we have matched such audit data year-to-date Q3 ’16 to Q3 ’15 year-to-date, the audit show that our aggregate market share of national revenue was essentially the same year-over-year, and we think that’s a good run rate especially given political displacement in Q3.

With regard to our Olympic revenue, our NBC stations earned 8.2 million from the broadcast of the Olympics Games. We are very pleased with that result and it’s actually a little higher than we had expected.

But also as expected our ABC and CBS markets did see a definite shift in spending in those markets to the competing NBC stations and their markets.

That shift in conjunction with some degree of political displacement is slightly new to our core local and national revenue on the quarter, although as noted, our core revenue nonetheless held off is essentially flat year-over-year. Couple of quick comments on categories in Q3; auto was again slightly impacted to some extent with political.

But also we pointed out that we saw reduced spending from Florida in Q3 by $1 million as Detroit pulled back support money. The good news though is that Chevy picked up its spending by about 500,000, so we are pleased to see that.

And as we commented in our second quarter call, we still have ongoing non-returning business from several large insurance companies, state farm, American family, [AFLAC] that either are not spending in our markets this year or had significantly reduced their spend, and on a year-to-date basis that’s a tribute to about $3 million worth of spending.

Guidance for Q4 and the full year, first of all our guidance does not include any pending acquisitions such as Green Bay and Davenport. Our core local and national are being impacted as expected by political display spend in October and November.

December is currently pacing behind 2015; we think this may be in part due to the uncertainty around the election that will conclude this evening. To be honest, we do not think we will have a good read on how December core and national business will ultimately fall until later this month.

We believe our Q4 core local and national guidance especially the low-end of the range is conservative and the higher end of the range allows an improvement in business in December. Q4 auto is currently pacing down mid-single digits and to some extent that would be expected in a heavy political six week period of October and November.

December auto is also placing down and again we think this is a uncertainty factor at the local level and we are hoping that this will improve post-election day. As we noted in Q3, Ford spending from Detroit support money is pulling back in Q4 as well.

It will be about $1 million pullback, but again our Chevy business is up about half that amount at about 500,000 and we are pleased to see that.

A final note on full year guidance for revenue, as you can see from our year-to-date combined historical basis revenue results and our range of revenue for Q4, you can see that we’re on track for a revenue year on a combined historical basis in excess of 820 million.

That’s well in excess of the 753 million previous record set in 2014 on a combined historical basis. Turning briefly to debt leverage and free cash, as of September 30, our leverage ratio under our senior credit agreement netting all cash on hand was 5.27 times. Our total bad debt is [1.756] billion.

I will remind everybody that it is all long term debt with long term maturities. Our blended cash interest rate is 5.05% and the free financing that we did in September is saving us $12 million a year annually in cash interest expense.

As of today, we have approximately 290 million of cash on hand, which is well in excess of the 270 million we need to close the Green Bay and Davenport acquisitions that are still pending. We have updated our cash tax projections for the next couple of years based on our expected results for 2016.

First we expect to pay no more additional taxes for the rest of 2016. 2017 at present we expect to only pay a very immaterial amount of cash taxes and in 2018 we would expect cash taxes to approximate $30 million.

These revised expectations for ’17 and ’18 are significantly under our previous expectations and reflect in part the lower political revenue from this year and also the tax advantage we got from the loss on early extinguishment of debt associated with our refinancing in September.

Using conservative assumptions for organic growth over the next couple of years, including the closing of our pending acquisitions, as well as considering our current debt structure, it is not unreasonable to assume that Gray can generate before any share buybacks, well over $100 million of year-end free cash in an non-election year, and over $200 million of free cash in an election year.

I’ll now turn the call back to Hilton..

Thank you Jim. For the past several months and several earning calls, we have told you that we expected that our Board of Directors would take a hard look at restarting buybacks and/or dividends once we knew where our political revenue for the year and the results of the FCC spectrum auction stood.

Over the past several days, the Board obviously sped up this timeline considerably. This morning we announced that the Board of Directors has authorized a share repurchase program of up to $75 million over the next three years. One key impetus for this change in timing and the authorization is the continued deterioration in our stock price.

In August we told you that we were convinced that our shares were a bargain in light of our strong belief in our future, the quality of our stations and employees, our much stronger balance sheet and our lower cost of capital.

Regulatory considerations nevertheless made it difficult for insiders or for the company to enter the market and buy our stock prior to announcing our quarterly results. Since then, various factors especially the disappointing political results have put even more pressure on our sector and our company’s valuation.

We firmly believe that the negative use are misguided and fail to appreciate the growth drivers, the long term value in our business and in Gray Television specifically. On the positive side, from our perspective, these forces have opened up a buying opportunity.

With the announcement of this new share buyback program, we intend to walk the walk and not just talk the talk. At the same time, we remain relentlessly committed to lowering our leverage. As stated in the release, we will judiciously exercise our new authority to repurchase stock with a close eye on our total leverage.

Simply put, we anticipate that the total repurchases in any given year would range approximately between 10% and 20% of our free cash flow. We believe that we will struck an appropriate balance between our [policy] of reducing our leverage with the ability to take advantage of opportunities to buy back shares at attractive prices.

The size of the buyback program provides us with the flexibility we need to pursue buybacks at the appropriate time while still leaving significant free cash flow to de-lever over the next three years.

The FCC spectrum auction may or may not open new opportunities for greater growth through tax advantage acquisitions or to further reduce debt or to revisit capital return policies or some combination of these auctions.

If and when the auction results become known to the Board, it will consider whether further changes to our capital allocation qualities are warranted. In closing, we share your frustration with the volatility in price of Gray stock.

We’re always looking to the long term, but these daily moves are never less than settling, and we believe grossly overdone. We remain convinced that keeping our focus on growing the company for the long term will build and enhance shareholder value. We appreciate your faith, trust and patience as we continue to pursue these objectives.

So at this time operator, I would like to ask that you open the lines for questions..

[Operator Instructions] We’ll take our first question comes Aaron Watts with Deutsche Bank. Please go ahead. Your line is open..

Wanted to start with a clarifier, Jim could you just remind, what was 3Q core on a same station basis and what are you seeing for the fourth quarter?.

3Q was essentially on a core basis, it was essentially flat, it was down about $1 million in the aggregate and given the political that’s not necessarily unexpected. Q4 core we are seeing right now pacing down in mid-single digit territory..

And then as you speak with your local advertisers about their hesitation to be back in the market now, what are you hearing that’s different than prior election years and what gives you confidence that they are going to return to the table in the near term?.

This is anecdotal, but in part its people saying especially in markets in October where political fell short and we were trying to backfill. It was commentary along the lines as well. We’ve already made our plans during the political season, let’s get pass the Election Day and we can talk about it.

So we don’t get a profound sense that main street is gone negative in its sentiment. Right now our sense is that they are just waiting or paused. They are uncertain over the election and they are just waiting to see what happens tonight..

And then just one last one from me on capital structure and liquidity; with respect to the comments you just made on share repurchase versus debt paid on, how do I think about debt paid on being your highest priority and balancing that against using cash to buy back shares? Is there a certain leverage target you’d like to see hit before you really devote more money towards share repurchases? Just trying to triangulate those two different goals..

As Hilton said in his remarks and he said in the release, our targeted range in any year for a buyback would be 10% to 20% of our free cash generation. And you certainly can ask them hey what that might look like in ’17 and ’18 and its over two to three year period. Obviously there’s very substantial amount of free cash flow generation.

So I think that we’ll use that more as our guiding principle and our hard leverage target..

And next we’ll move to Marci Ryvicker with Wells Fargo. Please go ahead. Your line is open..

I want to make sure I understand some of the comments, because you said that the macro environment seems okay, yet there’s a pause.

So I understand that auto is down and insurance is down and people are positive, but Hilton what are you seeing more broadly based that will give us confidence that we’re not heading in to some sort of recession in local advertising at least for the next year?.

Marcy, I’ll just tell you, what I have heard everywhere I’ve gone, and again this is anecdotal. But I’ve heard it from fellow businessmen in all lines of business, I’ve heard it from our GMs and our stations across the board, I’ve heard for other individuals that run TV station businesses.

I’ve just heard it everywhere that this election unlike almost any other election in our prior history has put a large heavy blanket over everyone’s box, and so they simply haven’t made decisions about Q4 or 2017.

There is nothing that we know of objectively that is showing that 2017 is going to enter in to an ad based recession going forward, either for Q4 or for ’17.

Now, I know from our friends on Wall Street that some people talk about we’ll geez we’ve had seven years’ worth of growth if what you could say we have experienced in the last seven years was in fact growth.

It’s been very anemic and some people on the street have indicated, geez we’re facing a recession down the road because of the length of this expansion. My personal feeling is the expansion has no way near been as robust as previous expansions, and so the length with the anemic nature of our growth, I think does not foretell a recession.

So we do not see that. When I talk to our friends and associates that own and operate retail automobile stores, they’re still selling automobiles left and right. And so I have yet - there’s no factor that I have that I can sit here and tell you Marci, this is what really is causing a problem. But may be a quarter from now, maybe there will be that.

There’s nothing that way that I know right now. The one thing I have heard universally is that the acrimony underlying this whole advertising environment has been extraordinary, and that it has put people on pause. And we look at our political numbers and I look at it, and the way it boils down to me is you can’t get blood from a [Trump].

And that whole process, huge celebrity, in his ability to reach the public market so easily and proffering has just changed the way this whole election started. So I remain optimistic that the fourth quarter will be good and that 2017 will as well..

And I have an easy one, how much is insurance as a percent have grown out?.

Just a minute Marci, I’m going to look at that. We’ll look it up for you, I don’t have --..

And I’ll ask one more in the meantime, I know you just announced a share repurchase.

Historically you have been a dividend payer, so just curious if a dividend would come when you de-lever enough or if you’re just signing on a share repurchase over a dividend?.

No. As we de-lever more we absolutely intend to return to being a dividend payer. But right now we think the best use is to de-lever, and then to use our stock buyback program. We’ll have to wait and see in terms of timing if there should be any proceeds from the auction or none whatsoever. And that could change our entire balance sheet and our timing.

But when we return to paying a dividend, we want to be a consistent and permanent dividend player. And we still have issues Marci of opportunities to grow on the mergers and acquisition front. But they have to be things that we do that end up de-leveraging the company as well. So dividends are down the road but just not this quarter or this year..

Marci to answer your question, insurance is part of a broader category that we call financial, but the whole financial category for us is about 4% of our total core ad sales. And again with the insurance company, the three specific ones are down about 3 million that explains most of the down for the year, the entire financial category..

And next we’ll move to Kyle Evans with Stephens. Please go ahead. Your line is open..

A lot of focus on de-leveraging and debt pay down. I see that you announced to Fairbanks station acquisition. What did you see that made you want to go on and spend that money and what should we look for on the M&A front going forward? And then I’ve got a follow-up..

Hi Kyle, this is Kevin. We announced Fairbanks today it’s an $8 million acquisition. So however I think it may be our smallest acquisition since we got started in the last three years or gone close to it. The earnings release notes that the purchase price multiple of that is below 5.

So as you may know in Anchorage we have an extremely strong station KTUU, the NBC affiliate has already presented the local audience in news hour. It’s just a tremendous station, and we saw bringing Fairbanks in to the orbit of the Anchorage station would help our Anchorage station frankly.

So we saw that as a way to improve our standing in the state, improve our coverage of Fairbanks. We also have a bureau already in Juneau. We think making investments really in the Anchorage station by acquiring the Fairbank station was a good long term use for money, especially at the multiple that we really look to secure there..

So at one end of the spectrum you recently did share that it’s pretty sizeable, that’s just one of the smallest that you’ve done.

Looking forward in to first quarter next year the spectrum auction should we expect more small, cheap tuck-ins that fit your existing station footprint and are you committing with the lower leverage commentary today to not doing scale M&A, just curious there..

I would not ready anything in to Fairbanks. Fairbanks is a very small market. As a standalone, it would not have been interesting to us, except for the fact that we are in Anchorage. So I would not read in to that. The phone is not certainly ringing with any opportunities right now.

Everyone as we said are sitting on the sidelines until the election and the auction are over. Overall I’d say, Gray’s always said we would remain prudent in evaluating M&A and we would ensure every acquisition will be accretive and that’s not changed, nothing has changed that view.

I think when we consider acquisitions we’re certainly considering the impact of that acquisition or balance sheet. Stated differently, we will consider whether a potential acquisition is likely to contribute and long term strategy in a more meaningful way than simply buying back our stock or paying down our debt.

Those are pretty high hurdles for any acquisition to clear. This little Fairbanks one dead, I don’t really too many other opportunities like that out there certainly over the next several quarters..

And then could you please provide an update on your [retrance] subscriber cap.

The subscriber account is essentially what’s in the deck and has been in the deck for some time now. So let bear with me one second. End of this year we are renewing 4.2 million subs which is about 36%. End of next year we would renew 6.4 million subs which is about 55% of the total.

And then year-end 2018 we have about 1 million subs or up that’s about 9%..

And your overall sub count it used to be 11.6 million remember when it was still in the deck.

That number is what flat to flat?.

Still [11.6] - yeah, it’s flat at 7.6..

Next we’ll move to [David Seaver] with Wells Fargo. Please go ahead. Your line is open..

Wanted to go back to the capital allocation strategy here. Jim you kind of gave us the goal post for free cash flow of 100 million in a non-election and 200 million in an election year..

I said well over 100 in a non-election year and over 200 in an election year. So there’s room for the upside in the numbers I use, but go ahead..

Okay, fair enough.

But that’s the number we should be looking at when we are thinking about the 10%, 20% of buyback, correct?.

Yes..

Got it.

So any residual amount, should we just assume that you would pay down term loans with that cash flow?.

Yes. There’s no pre-payment penalty to do that. So as we accumulate free cash from time to time whether it’s as we move through ’17 we probably will be paying down term loan..

Got it. And then last quarter you gave us the two year average expectation on leverage 4.5 to 4.7.

Just curious there’s an update on where you knew that guide path in to ’17?.

That guide in the upper 4s was fully pro formant for the Green Bay and Davenport acquisitions. Obviously with the political very disappointing this year, that is going to move off and we will be in the fully pro formant in the Green Bay and Davenport acquisitions. We would expect 12/31/16 to be somewhere in the call it 575 zip code.

So about one term higher than we had initially planned on. That will drop down in the 5s, as we move through ’17, and we would be in the 4s by the time we get to the end of ’18..

And just from listening to the commentary, you took your fair share whatever dollars that were in your market. It implies that your ratings are probably holding up, just wondering if that’s a fair statement..

Yes, our ratings have been holding up. On a five year average our aggregate ratings have been within a couple of tenth of a point for the last five years. So the ratings are hold up, and again where the dollars were available we got our fair share or more of the political and our national share is basically consistent year-over-year.

So from a share standpoint, we’re pleased..

And just one housekeeping Jim. If you could just give us the LTM EBITDA on a pro forma basis, I thought the LQA in the press release, just wanted to help (inaudible)..

T12 LTM was 281.3..

And next we’ll move to Leo Kulp with RBC Capital Markets. Please go ahead. Your line is open..

Just a couple of questions on the political side, the presidential -- given its typically (inaudible) non-presidential, what makes you confident they are not (inaudible). And when you did your (inaudible) what were you seeing on the digital side, the political and to what extent. One last question, your target leverage for ’18 in low 4s or high level.

What sort of --..

I said we’d be in the 4s, I didn’t necessarily say low 4s..

What sort of political level spending are you expected to be first (inaudible)?.

Leo let me just start before Jim gets in to the specific numbers. We really think that 2016 truly is a black swan. I’ve talked to the head of at least four different ad agencies themselves, and what they are seeing is not a shift of money from television to other areas, but an absence of money being spent.

And they have seen it across the board and so we’re not seeing political advertising securely shifting elsewhere.

In fact what I’ve been told is despite there are proliferation of digital and many other avenues around which communications and advertisings can be disseminated that television is still the strongest way to communicate a message that’s target intended and gets to its audiences. So we see absolutely no sign of the secular shift away.

We think this is an unusual time period where larger backers of in particular the Republican Party have simply not shown up, and are not spending the money and then Trump because of his unique ability to generate not just free advertising, but his ability to communicate through Twitter and Facebook and then people picking up for ratings purposes, we think it’s a one-off.

And don’t expect anyone to be in the political process unless he wins tonight and runs again in (inaudible) in four years. That has that kind of face presence with the American public. So we don’t see anything secularly.

Would you just repeat one time for us what was the specific question on numbers?.

Your target leverage in the 4s by ’18, what sort of political level spending you continue to expect?.

We’d be expecting a good ’18, now remember ’18 a non-presidential year. It obviously will boil down to the mix of the senate races in that year. But my assumption are probably pretty conservative. Certainly we’d assuming going forward political is at better levels than we saw in ’16.

We had a couple of unique events in ’14 on a combined historical basis, so I would think we might not be hitting ’14 levels because of some spent out races that particular year. But certainly a very healthy political well over 100 million I would expect in ’18. But that’s two years out; we are not even past this year’s election yet.

But to say it differently, we’re not getting overly and we’re not getting extravagant in our political assumptions to make the leverage ratios look good. We are being a little bit conservative that far out and our leverage ratio still going in to the 4, makes us still very comfortable..

Leo, you also asked if what we’re seeing in spending is not - is potentially a sign of people not spending as much in political and I want to just go back to something I alluded to in my remarks. Where we had contentious races, we thought spending and we saw significant spending.

In the state that had a contentious senate race in ’12, they showed this contentious senate race; there they beat their number in ’12 significantly. Another state that had contentious senate race significantly had it where they were in ’12.

Wisconsin we have one of the small market there saw basically no spending and what was supposed to be a very y contentious race. And then as you may know the polls turned in favor of the Republican just in the last 10 days to two weeks. The money flowed in to Wisconsin.

In one small market we have in Wisconsin, they had $1 million in booking last year and almost nothing before that. So when the money comes in, when the race looks like its competitive, the money will come in. This is an accident of geography not a secular shift.

If you look at - again some of our peers had reported, they are reporting significant political revenue and they are identifying it as being based on particular senator races, very particular governors’ races that are leading to the high spending.

So we’re still seeing spending levels at or above what we would have seen in ’12, so long as the race is competitive and what we had here is just races that petered out. Colorado, Ohio being the most prominent examples.

So long as we have competitive races going forward and we don’t think the country is going to be any less united two years, four years from now than they are right now.

We expect there’ll be more contentious races in the future and therefore we expect that there will continue to significant amount of spending to try to influence the outcome of those races..

And next we’ll move to Dennis Leibowitz with Act II Partners. Please go ahead. Your line is open..

Two questions, first, you said that conservatively you thought you could generate 100 million in free cash flow in a non-election year and 200 on an election year.

That average is out to over $2 a share in free cash flow, and I wondered is that applicable, is that pro forma’s that are applicable to this period, ’16, ’17? And my second question is when can you buy stock back if you start today?.

I’ll take the first part of the question. Those comments on free cash flow in a non-election year are well over a 100 million and then over 200 million in an election year are forward-looking and they would be incorporating pending acquisitions closing. And so you’ve got one number how it averages.

I would suggest that its - the average cash flow per share even still being conservative is still significantly higher. So those are forward-looking over the next couple of years, what’s in our minds and what we are anticipating in a very generic way without getting too specific too far out is for these exact numbers..

We can’t unfortunately comment on the timing of any purchases that the company may have, but we do have the authority as granted by our Board of Directors and we will be using that in the future and in the near term..

And next we’ll move to Barry Lucas with Gabelli & Company. Please go ahead. Your line is open..

Thank you Hilton was pre-empting one of my quarterly questions on capital allocation. On higher level and maybe I’m putting on my [roast] tinted glasses here on the M&A market.

Given the disappointment in political spend this year and what potentially will be another disappointment on the spectrum auction, how do you think potential sellers might react who were probably on the sidelines waiting to cash the political checks and the big check from the FCC? Might that open up a few more opportunities in ’17 and beyond?.

We think that there’s going to be a number of opportunities that will present themselves in 2017, for a number of reasons including all that you mentioned..

And it appears we have no further questions at this time. I’ll turn the call back over for closing comments and remarks..

All right. Thank you. I want to thank all of you for your attention and for your thoughtful questions. I can’t tell you how proud we are of this company and what we’ve been able to beat and build and the men and women that are out in each of our markets that go to work every day.

We think this is one of the best businesses in the country, and one of the best most high grossing cash flow building businesses that’s out there.

And we’re working hard every day 365 days to build value, and that is what is our concentration is on and I can assure you the entire management team of this company will be redoubling our efforts to continue to do that. So thank you again for your time and we’ll be talking soon..

This does conclude today’s conference. You may disconnect at any time and have a great day..