Welcome to Gray Television's Fourth Quarter 2015 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Hilton Howell, President and Chief Executive Officer. Please go ahead, sir..

Thank you, operator. Good afternoon, everyone. Welcome to the fourth quarter and year end 2015 earnings call of Gray Television. It was a year of great achievement and record financial results for our Company. For both the quarter and year-end, Gray proudly reported record revenue, record earnings and record broadcast and free cash flow.

For the quarter and year-end, Gray achieved revenue of $169.5 million and $597.4 million respectively. Also for the quarter, our broadcast cash flow was $0.40 per share and for the year $1.36 per share or $67.8 million and $224.5 million respectively. Net income was $0.21 per share for the quarter $0.57 per share for the year.

I would also like to remind you that this year's results contain a special charge relating to our termination of our national sales agreements of approximately $6.1 million. But we expect to save in 2016 and each year thereafter between $8 million and $9 million of recurring savings from this change.

As we reflect on 2015, we added significantly to our portfolio of market leading stations. Specifically to remind you, we acquired KOSA TV, the dominant number one CBS affiliate in Midland, Odessa, Texas; KNBT, the CBS and KSVT the FOX in Twin Falls Idaho, a similarly dominant station.

We acquired the FOX affiliation in Wausau, Wisconsin which we re-christened WZAW and which now broadcasts with our CBS affiliate WSAW in that market. We acquired WAGM the CBS and FOX affiliate in Presque Isle, Maine, a completely dominant market and station.

We acquired KVTV, the CBS affiliate in Laredo, Texas which is now broadcasting with all of our other affiliated broadcasts in the Laredo Texas, market. We added KCRG the political powerhouse ABC affiliate in Cedar Rapids, Iowa. And we announced and had closed last week on the purchase of the broadcast assets of Schurz Communications.

After giving effect to the required divestitures and swaps that we entered into, Gray has just added KWCH, the CW affiliate and KSCW, the CW affiliate in Wichita, Kansas. Known locally at [indiscernible], it is the top ranked and highest grossing station in Wichita.

We added last week WDBJ the CBS affiliate in Roanoke, Lynchburg, Virginia our third Virginia station, a similarly dominant number one ranked and highest grossing station in Lynchburg, Roanoke, Virginia. We added KYTV an ABC affiliate and KCZ the CW affiliate in Springfield, Missouri.

Known locally as KY3, it is the number one ranked and highest grossing station in that market. We also acquired WAGT the NBC and CW affiliate in Augusta, Georgia which will broadcast alongside our WRDW CBS affiliate in Augusta. We moved on and acquired KTUU the NBC affiliate in Anchorage, Alaska.

KTUU is the number one ranked and highest grossing station in Anchorage and in fact it is the most watched and highest grossing television station in the entire state of Alaska. We also have KYES, the MYTV affiliate pending FCC approval in Anchorage. We also acquired KOTA the ABC affiliate in Rapid City, South Dakota.

KOTA is the number one ranked and highest grossing station in the market and will broadcast alongside our KEVN FOX in Cedar Rap or Rapid City. Through swaps we also closed on WBXX the CW affiliate in Knoxville, Tennessee which will broadcast alongside our WDLT CBS affiliate in Knoxville.

And finally we now own WLUC, the NBC and FOX affiliate in Marquette, Michigan. WLUC was formerly a part of Sinclaire broadcast group and is the number one ranked and highest grossing station in Marquette.

We swapped KAKE in Wichita for WBXX in Knoxville plus $11 million in cash and we swapped Schurz's WSBT in South Bend where we currently own WNDU the NBC affiliate to acquire WLUC in Marquette.

We also added four new affiliations in Madison, Wisconsin, the CW in Madison, Wisconsin, the CW in Fargo, North Dakota, the CW in Alexandria, Louisiana and the CW in Laredo, Texas, expanding our affiliation with the CW network to 23 markets making Gray the second largest CW affiliate group in the nation.

I would like to publicly welcome all of these fantastic television stations, employees, viewers and communities to the Gray Television corporate family.

Gray now owns dominant market leading TV stations in 50 markets and broadcasts approximately 180 separate program streams including 35 CBS stations, 26 NBC stations, 19 ABC stations, 13 FOX stations and 23 CW stations. Gray was also named TVNewsCheck Station Group of the Year for 2016, a recognition that we're quite proud of.

While 2015 was truly a year of great achievement, it's had its share of sorrows as our long-time Chairman, Dr. Billy Mayher, recently passed away. He was a strong and steady supporter of Gray and our strategic vision. He will be missed. With that, I will turn the call over to Jim Ryan.

Jim?.

Thank you, Hilton. Good afternoon, everybody. I'm going to keep my comments brief, because I think most of the information's pretty well laid out in the Earnings Release and our 10-K will be filed this afternoon as well. I'm going to focus my comments on the combined historical which gives effect to all of the acquisitions we completed in 2015.

The combined historical in the Earnings Release, however, would not give effect to the Schurz transaction and related transactions, since those are 2016 events. But in fourth quarter we were very pleased with our overall results in revenue. Our local was up about 7%. On a combined basis, local and national was up 5%. We were very pleased with that.

Retransmission was very strong as we had expected all year and have certainly been talking about along the way.

We were also pleased that our broadcast expenses were tightly managed and actually if you back out the increase in reverse comp associated with the very strong retransmission revenue growth in the quarter, our actual core expenses were down about $2 million. So we were very, very pleased with that.

On a full year basis, again, we've with been very happy with our results. Our local is up 6%, combined local and national up 4%. We had record setting political on a combined historical basis in 2015 at $17.7 million. And certainly KCRG was a very strong performer as expected for us in that combined historical political number.

As we had talked about in our third quarter call, we did terminate our national rep agreements and gone to a direct service model with our stations. We did have in the year a $6.3 million OTO charge that we announced in third quarter.

But even if you exclude that charge as well as the increase in reverse comp, again, our core expenses are actually down year-over-year and we're very pleased at that. During the quarter as well as the year, we saw good growth in auto, medical, communications, furniture.

In general, most of our categories were up, both on a year-to-date basis and the quarter. Turning briefly to the balance sheet. We had $1.2 million of debt at the end of the quarter. Our leverage ratio as defined in our Senior Credit Facility, was at 5.1 times on a trailing eight quarter basis and so we were pleased with that.

It was coming in right where we expected. And as we have said consistently, with the Schurz transaction closing last week, our pro forma leverage now is at 5.5 times, exactly where we expected it to be.

We had $97 million of cash on hand at the end of the year and we think we're in a very good position with both the cash and the free cash flow that we'll generate during the course of this year to have the ability to work on our debt balances, especially late in the year when the bulk of the political in 2016 will be coming in.

At this point I'll turn the call over to Kevin for his comments..

Thank you, Jim. 2015 as you all know is a transformative year for Gray. In just the first nine months of the year as you know we entered into and closed six separate transactions adding seven television stations in five markets around the country. In September we announced - take the national sales in house [Technical Difficulty].

Two weeks after that of course we announced the Schurz transaction. Two weeks after that we announced that we had completed a very quick auction of the stations with overlap markets that allowed us to swap stations with Lockwood and Sinclair that we had been attempting to acquire frankly for some time.

Two weeks after that we announced we completed a second very quick auction that resulted in divestiture of all the Schurz radio stations.

Through the fourth quarter of 2015 and the first two months of this year we have focused intently on obtaining regulatory approval for the Schurz acquisition - transaction ensuring smooth integration in the transition of stations into the Gray family as well as preparing for and executing the transition - sales - local stations.

You wonder how do we top all this in 2016. Our M&A activity last year resulted from the confluence of several factors including our equity raise last spring as well as - Gray's. Nevertheless, no transactions are imminent at this time. And we do not expect significant activity - 2016.

It appears to us that broadcasters generally are focused on the FCCs Spectrum Auction - as well as a truly interesting and potentially quite lucrative election season. One lesson from last year, however, is that we cannot predict when the phone might ring next with potential acquisition opportunities.

Over the past 28 months Gray has been transformed into a Company with significant scale, high quality portfolio, excellent financial results and a much stronger balance sheet.

As a result we do not feel a desperate need to acquire more television stations now since we - we will continue to maintain the same acquisition criteria that has served Gray well not just for the past 28 months but the past 20 plus years.

Specifically we will only pursue opportunities to you acquire number one or strong number two ranked station that fit our - and values. And only then if the acquisition can be completed under reasonable terms and immediately accretive to our shareholders. Beyond acquisitions the FFC Spectrum Auction will be a big theme this year.

The FCC; however, has indicated a strong interest in only a few of our 90 stations. We will focus considerable time, energy and attention on the auction over the next few months. Locally many of our stations are already spending a good amount of down time filling orders from campaigns, interest groups and of course super pacs.

Most of the air time in the media, I want to remind you that there are also a number of contested statewide elections across our markets, especially in the U.S. Senate.

We operate in most presidential swing states and many other contested markets and again we operate the number one or number two ranked television stations in every one of those markets. Finally, 2016 is a transition for us with regard to national sales.

As you heard from Jim and Hilton, we terminated our national sales reps from nearly all of our legacy stations on January 1 of this year. And we add today that we have also terminated the rep contracts from the newly acquired stations that we closed on this month.

In a fourth quarter our leadership team and a lot of our station managers met personally with nearly all of the national agencies and advertisers. They also planned extensively for a smooth transition from national sales and rep agencies to Gray both operationally and technologically.

Due in part to the extensive planning the transition has gone very smoothly. Our stations are now interacting directly with their buyers. We have received uniformly positive feedback from our stations and the buyers. At this point we believe we made an excellent decision.

While 2015 was a transformative and busy year for Gray we certainly expect 2016 will be equally exciting and we look forward to the opportunities before us. With that I'll turn the call back to Hilton..

Thank you, Kevin. Operator, if we could open up the line for any questions..

[Operator Instructions]. We'll take our first question from Aaron Watts with Deutsche Bank..

Couple questions from me. Wanted to ask about the advertising environment. It seems like you had he local at least slow down a little bit as you moved from 4Q into 1Q. Maybe you could talk about what you're seeing on that marketplace..

We're generally pleased with what we're seeing so far this year. The rate is a little slower as you said from Q4 into Q1.

But keeping in mind that I guess GDP just came out this morning at plus 1 and we're showing local at probably closer to plus 3, we're not dissatisfied with that and as we just came off of a general manager meeting earlier this week and I'd say the tone was good.

What we did see in the quarter is that January, both local and nationally started a little slow and then things picked up in February and March. And that sometimes will happen in January, just takes a little while for people to get over the holidays and get back to work..

As you look at the national side, recognizing you're going through a transition there with how you're approaching it can you talk about some of the dynamics there, what's weighing on national more than what you're seeing on the local side..

You've got to keep in mind first of all the national number is pretty small. Even if it's down a little you're literally only talking about a couple hundred thousand dollars difference or few hundred thousand dollars difference. Fluctuations like that in national are going to come and go quarter to quarter.

It has absolutely nothing to do with our transition as Kevin mentioned. Our direct serve model is going very well and actually many agencies have commented about how well pleased they have been so far with that transition. So we're not going to worry too much about national. The thing we're going to really look at and focus on is the local..

And then one last one from me. It's a bit bigger picture and I've run this past your peer as well.

But with the financial markets choppy, concerns around the economy, if things were to take a turn for the worse I'm curious how you think about your current mix of business and your footprint versus where Gray was back in 2008, 2009 and that time frame and your ability to sustain a pullback in the economy in advertising and Jim maybe tied to that I know debt leverage levels got uncomfortably high through the last downturn.

How does that leave you thinking about your leverage now and where you'd like to take it over the next maybe year or two..

We're very comfortable with our leverage right now at 5.5 closed all-in with Schurz and as we've commented publicly a couple of times that will go down lower by the end of this year significantly lower into the fours if you assume we take all the free cash flow we generate this year and pay down debt.

As far as footprint positioning of the Company now versus call it 2008, 2009, 2007, I would point everybody to slide 22 in our investor presentation that's posted. It's the one that's labeled February 2016, that's our retransmission slide.

And in 2016 on a net basis we have over $100 million of net retrans revenue flowing to the bottom line and in 2008 obviously it was a very, very different Company and didn't have nearly the size of the footprint. But we only had $3 million in 2008. So we've got $100 million of net additional cash flow now than we had had before.

That makes me very, very comfortable with the he positioning of the Company, even if the macro economy pulls back for a little while got..

Okay, just one Claire fire on that, you're going to generate a lot of free cash flow this year.

To the extent you don't have acquisition opportunities, is deleveraging going to occur not only through growth in the business also real actual principal debt paydown?.

Absent M&A activity, I would expect a that, yes..

Next from Wells Fargo we have Marci Ryvicker..

Couple questions, Jim. Political came in a bit better in the fourth quarter relative to the guidance and then it looks like it's decelerating into Q1 looking at the Q1 guide. Can you just talk about maybe a timing difference and how we should think about Q1 maybe for the rest of the year so we get our model sort of settled out..

Of course we're always a little conservative on political quarter to quarter, simply because it's nearly impossible to accurately he predict as we've discussed many times. But in general the roughly $8 million of political for Q1 is tracking basically right at our expectations for Q1.

If anything, we were pleasantly surprised in January in the Cedar Rapids it actually did better than we had expected. So that $8 million number right now is basically right where we thought. Our historically our political revenue in every cycle through 2014, half of our political revenue or more has always shown up in the fourth quarter.

So even if some of that shifts earlier this time around, it's still a lot and we aren't anticipating seeing massive amounts of political until probably call it late August, call it September through election day. And that would be typical of every pattern we've seen over the last 20 years..

And then can you just clarify the savings from. Is it the full $8 million to $9 million or is it the $8 million to $9 million minus the charge that we kind of put on a number on going forward..

On a go forward basis it would exclude the charge, 8 to 9 and that would be conservative because it would also - that number would not have considered the savings we'll also get with the Schurz stations as well..

Okay.

And then just want to clarify, the combined historical numbers for the first quarter, that 180 to 184, whatever it was, that does not include Schurz?.

That would in the guidance section for Q1 combined historical as you said the revenue on the high side at 184 and there's a companion expense number we called out as well. He's those do include Schurz on a full quarter basis.

And as a side note, we're still collecting final 2015 data from our counterparties in all of those transactions and we will be publishing updated fully pro forma 2015 information in the coming weeks once we've gotten all the data in and have been able to digest it organize it and republish it. That's definitely on our to do list.

We still have missing some pieces to complete that..

Next we'll hear from Leo cope with RBC Capital Markets..

Just a couple.

First, on the 1Q2016 political outlook, how is that pacing versus the pro forma 1Q 2012 results?.

I don't have 1Q 2012 pro forma but I can tell you that the $8 million actual is at least double what our historical number was in 2012..

And then your digital revenues were down this year or last year, 2015.

Should we expect growth to return this year?.

Yes, we would expect growth in digital this year..

And then final one, when you think about your political budget and the political spending, how are you thinking about the impact of - impact on spending if Trump gets the Republican nomination?.

We think regardless of who the nominees are on either side at the end of the day it is going to be a record shattering year political for the entire industry and it will be a record breaking year for us as well.

We have said consistently that in 2012 we did $143 million pro forma of political and we do think at the end of the day when it's all said and done it's going to be larger than that number, by how much we're not going to venture that guess.

We're not that smart to be able to guess it accurately but we do think it will be a record year for us and everybody else in the business. Let me just add the question on the effect of Donald Trump seems to be the question of the week.

I think from our perspective he as we read it, we're definitely not political experts but it does seem to us that one thing Donald Trump does not like to do is lose. It you appears if he is the nominee we would expect that we will see campaign spending like we would with any other candidate who is intent on not losing. One other issue to keep in mind.

We have a lot of very important and very tight Senate races that are coming up as well and with the unfortunate death of justice. Are going to be very, very well-funded. We see a lot of political throughout the whole course of the cycle..

[Operator Instructions] Next we'll hear from Jim Goss with Barrington Research..

Jim, I'm looking at this page 22 slide that you mentioned about retrans and one thing you've been assuming is sort of a half and half in terms of retrans and reverse comp and I'm wondering if you think or expect or are already feeling pressures from the notion that the networks will want more, that they won't be satisfied with half and half..

Kevin can weigh in on that but I'll start by saying everybody should look at page 21 of our presentation as well. We have all of our affiliation agreements for all practical purposes out on long term basis to 2018, 2019, in some cases out to 2020 or later.

So we I think over the next several years well into 2019, we're extremely well positioned and very comfortable with that approximate 50/50 split..

I'll us just add. I know you've heard this from us before. We used to keep 100% of our retrans revenue as recently as 2011 and our gross and our net was $20 million. Today we're looking at roughly $100 million of net, $200 million in gross.

If the percentage continues to change and the networks continue to provide us good programming and our net is still growing we're not really seeing what the problem is. We're still he depositing more net dollars in our bank account year in and year out than we did previously.

So we will gladly take a 50% share of $200 million rather than 100% share of $20 million and I think the same is you true as we go forward as well. The market is going off to continue to change and evolve on both the retrans purchase side and retrans sales side..

Okay.

And these agreements through 2019 and 2020 all address that split as well, so anything beyond that is in future years?.

All of our network affiliation agreements have the programming fees stated in them. So we know - that's how we can provide the guidance on retrans as we have in slide 22. The fees will clearly change as we renew each network affiliation agreement just as they have since the beginning..

One other follow-up to the leverage issue.

While you are comfortable at the 5 to 5.5 times to get into the 4s would you be less aggressive would you say in considering other M&A until you do pull back a little bit on the leverage issue, just for those reasons?.

Kevin, you want to take that?.

I think the words that we've used from time to time And right now this is a period in which frankly we're being more patient than we were last year just simply because there's not much out there.

If we don't see any particularly good opportunities over the next couple months I think our Board will evaluate our use of cash differently than they would have evidence Val waited the use of our cash a year ago. At this point we're kind of in a wait and see period.

We've got to get probably through at least the first couple rounds of the auction before some folks start contemplating their future and we also expect the election is going to keep a lot of folks on the sidelines as well.

I don't think our Board is ready to make any decisions and right now we just don't have anything sort of in the near term for the Board to consider..

Next from Singular Research we'll hear from Robert [indiscernible]..

I'm a little bit new to the story. I believe during your comments, Kevin, some of that broke up, at least on my end so pardon if any of this has been covered already. First - just two questions. First question relates to your acquisition trajectory in light of this looking to be maybe somewhat of a - shall we say a consolidation, large acquisition.

The question I have is how many more targets are there out there in terms of the Schurz story and at what point would you expect to be in a position to be looking at that? And the other thing, trying to think about how I would metric out your so-called organic growth during your pretty active acquirer, so what metrics are best to look at for that? Thank you..

I'll take the first question. I'll let Tim take the second. On the first question, you're right, because of consolidation there's a lot fewer targets today than they were five years ago or even three years ago. And our criteria sets a fairly high bar.

As we look out there are many fewer group owners of television stations but there are still enough we think quality assets of out there owned by typically multigenerational folks, multigenerational owners with one or two or three or four stations, very small number of groups and frankly if we put all the targets on a spreadsheet and totaled up the likely purchase price, it's far more than we could ever afford.

So we think there's plenty of good opportunities for us to continue doing what we have been doing. It's just not all going to happen this year. It's a multiyear process to continue to grow the portfolio with the right kinds of stations at the right prices.

Jim, did you want to take the second question?.

As far as metrics, what I would point you to is what we call combined historical results where we're taking the acquisition - the predecessor's operating results and combining it with our own historical results to get a better apples-to-apples comparison.

So I think if you look at those metrics that we publish pretty consistently when we're acquisitive you'll be able to track our core - what would be core growth even though we're being acquisitive..

And our next question comes from Davis Hebert with Wells Fargo..

Wonder if you focus on the expense side for a minute. Talk about you how your fixed and variable costs are looking for 2016.

Kind of a follow-up for that is now that Gray has reached a larger level of scale relative historically speaking, are you seeing other cost opportunities aside from just negotiating leverage, something like syndication, programming costs or any other expense reduction opportunities from that perspective..

Let me take the first part of that question, Davis. Our biggest single component cost is our payroll and benefits and now with the Schurz closing we're at approximately 3500 employees. Our stations generally are staffed pretty efficiently, especially our historical stations.

I'm not saying that there isn't always room for improvement in staffing, but there's not tremendous amount of opportunity there because we've already done a very good job of automation and improving workflows, etcetera.

So I would say that a reasonable amount of our costs, even if most people consider payroll as variable, that a reasonable amount of our costs tend to be fixed. We've done an excellent job historically in managing those.

Absent the natural increase in reverse compensation to the networks that's going to flow with the increase in the gross retrans, we would expect our main core expenses to grow at relatively modest rates year to year.

We're talking low single digit and a lot of that would be impact of just normal inflation, cost of living increases to the employee base..

And then if I could try and drill down a little more on the digital growth. You said you're expecting positive trajectory this year. Is that secular growth or is that your sales force is more equipped to sell it in packages with spot TV? Maybe just kind of--.

It's a little bit of both. We had said 2015 was a little bit of a regrouping year for us after several years of very strong growth.

What everyone needs to keep in mind when we talk about digital revenue is that that is all organic advertising, whether it's digital banner or preroll or sponsorship or whatever, but that's all organic advertising to our local markets. We do not have any digital services businesses. So as I said at the outset, it's a little bit of both.

It's part secular growth there. It's part just digging in and the sales staff is working harder to sell it in the local market..

Okay. Maybe just a follow-up on that. I think you guys have talked about numerous head fakes in the mobile space for local TV. Feels like mobile's just getting more powerful in terms of ad spending.

Do you feel like that is still an opportunity for the sector overall?.

Yes, I mean, the bulk of our traffic in our local market is all mobile now and that's certainly showing up as part of the whole mix. But yes, we definitely see mobile has got a lot of promise as we go into the future..

Next we'll hear from Kyle Evans with Stephens..

Most of mine have been answered already.

But Jim, could you help us think about when we should start looking at modeling for cost synergies on the Schurz side?.

We have always taken an approach in an acquisition that we - while we have cost synergies, we work our way into that over the course of about the first year. In our as reported numbers you're not going to see a whole lot of that in Q1. It will start to pick up in Q2.

And then it's a little more in Q3 and a little bit more and more than that in Q4 and kind of wrap it up in early next year given that we closed in February this year. We've always taken that approach. We've never been a Company that's gone in on day one and created a lot of negative headlines in a he local community.

We would much rather take our time, work through some things where we know we can bring efficiencies and do it in a right, smart way that's not only good for the station but good for the local community as well and in some cases it's fog be we're going to be installing equipment and workflows.

Now that we're closed we can start that planning and start that ordering but things like that take can be a multi-week to a multi-month lead time to work your way into it..

Next from Singular Research we'll hear from Jim Maron [ph]..

I'm the other analyst along with Robert [indiscernible] covering the Company. Perhaps it was touched on but I just wanted to maybe hear some clarification in regards to your priority on bringing down the debt.

Is there any mention or any color as far as potential restructuring of the debt in order to lower the borrowing cost if at all possible or any other type of financing options that you guys are exploring to he reduce your cost?.

We have first of all pretty low cost debt to begin with. Our bonds are at 7.5. They are in their first call period. Our second call period starts in October and we have said that we will be thoughtful about that especially as we get to the second call period and what opportunities may present themselves in the broader market.

Certainly right now in the bond market it would not be a good time to rush into anything. Our senior debt prices I think actually we're very pleased with that our $425 million incremental that we did to finance the Schurz acquisition last week prices L350 with a 75 point floor.

So that's all in a pretty low cost piece of paper and our existing $556 million term loan, the base term loan actually prices at currently now with Schurz closed because of a little bump-up for favored nations clauses in that agreement it's still pricing at L319 basically so it's again, pretty - 75.4 floor.

So we’re actually quite pleased with our overall cost of debt right now and as we've said before we'll be thoughtful about the bonds as we get later into the year..

[Operator Instructions]. Next we'll hear from David Atterbury with Whetstone Capital.

I guess my first question I wanted to ask is can you comment on what trends you've seen over time, over the last three to five years with respect to your big four affiliate subscriber counts?.

They have been on a historical station basis, because obviously the stations we've you acquired it's harder to get ahold of the records but we went back and looked on the historical stations and over the last several years that sub count has been very consistent..

And then if I'm looking at slide 22, can you refresh my memory, Jim, on what subscribers you have coming up for renewals on your retransmission agreements and what rates are baked into that 2017 estimate number?.

At the end of this year we've got about 4.2 million subs up out of our call it 11.6 million sub base. About 6.4 million subs coming up at the end of 2017 going into 2018 and then we just did a million at the end of last year going into this year, so that million will cycle again at the end of 2018.

Our rates that we're using for 2017 are generally rates that we contracted either at the end of 2014, going into 2015 or the end of 2015 going into 2016.

So they are probably by the time we get to the end of 2017, they're certainly going to be conservative but we stuck with what we know other people are already paying us rather than trying to guess to where the market is going to move at the end of 2017..

Our next question comes from [indiscernible]..

Actually the prior caller kind of asked my question but I just want to make sure I understand. So obviously the slide 22 has the numbers have gone up since you first put this out a year ago and that's a combination of more subs from the acquisitions but also the underlying rates have gone up.

Just for example, I think it's like $1.72 baked into the 2017.

That's reflecting the rates that you've signed, you signed at the end of 2015 or I'm sorry the end of 2014, the end of 2015 and where those - where that kind of book of business if you will be at the end of 2017 under those existing contracts?.

That's correct. We didn't say our two year forward rate under contract X is a certain amount and then said oh, it's going to increase by another 10% by the time we get there. That's exactly what we you saw at the end of - between 2015 and - end of 2014, going into 2015 and then the end of 2015 going into 2016. We certainly saw rates move back up again.

We're only baking - we're only estimating based on our current block of business and whatever the business rates, stated business rate for 2017 currently is..

And the same thing, so 2016 is basically assuming whatever - there's no - whatever goes with the subs coming up at the end of 2016 you're just assuming they renew at wherever the 2015 or the 2014 signings end up at the end of 2016..

Whatever, yes again, we're looking at our existing block of business and similar sized and using those existing contract rates to forecast forward..

Gentlemen, we have no further questions..

All right. Well, thank you everyone for joining on the call. We certainly appreciate it and we look forward to talking to you again when we announce our first quarter results. Thank you..

That concludes today's conference. We appreciate your participation..