Good morning. And welcome to the Q1 2014 Media General Incorporated Earnings Conference Call. My name is John, and I’ll be your operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. Please note that the conference is being recorded.

And I will now turn the call over to Lou Anne Nabhan. Lou Anne, you may now begin..

Thank you, John, and good morning, everyone. Welcome to Media General's first quarter 2014 conference call and webcast. Earlier today, we announced our first quarter 2014 results. The press release is on our website. A transcript of the comments from today’s call will be posted immediately after the call and a replay also will be available.

Today’s presentation contains forward-looking statements, which are subject to various risks and uncertainties. They should be understood in the context of the company’s publicly available reports filed with the SEC, including the section on Risk Factors. Media General’s future performance could differ materially from its current expectations.

Our speakers today are George Mahoney, President and Chief Executive Officer; and Jim Woodward, Senior Vice President, Finance and Chief Financial Officer. I’ll now turn the presentation over to George..

Thank you, Lou Anne, and good morning, everyone, and thank you for tuning in. Today we report on the first full quarter for the combined Media General and Young Broadcasting, which merged on November 12th last year. I’m going to compare first quarter 2014 results to the first quarter of 2013 as adjusted for the combined company.

Net operating revenue increased 16% to $144 million and it reflects growth in all of our revenue categories. We did very well with the Sochi Winter Olympics on our 9 NBC stations and with the NCAA basketball tournament on our 12 CBS stations. Political revenues also were very strong in the quarter at $4.4 million.

We benefited in particular from the just-completed special election in Florida’s 13th congressional district near Tampa. It was considered by many to be a bellwether for the fall. The Associated Press reported that a total of $11 million was spent on the race, as the Democrats tried very hard to win this long-held Republican district.

Retransmission revenues in the first quarter increased nearly 50% and digital revenues rose an impressive 33%. Operating income, excluding merger-related expenses in the current quarter increased 87% from last year. Broadcast cash flow increased 38% to $45.9 million, compared to $33.3 million in the first quarter of 2013.

Our broadcast cash flow margin was 32%, up from 27% last year. EBITDA nearly doubled to $39.3 million, compared with $23.2 million last year. In addition to higher revenues in the quarter, we benefited from the financing synergies we realized when we merged with Young.

The new credit facility that became effective with the completion of the merger enabled us to lower annualized combined cash interest costs from $75 million to $39 million. Interest expense in the first quarter was just under $10 million, compared with a combined $21.4 million last year.

As promised, the merger is enabling Media General to generate strong free cash flow. We’ve repaid $36 million of debt so far this year. Additionally, as we’ve continued our Young-merger integration efforts, we’ve identified further significant cost savings. We’re announcing today an additional $10 million of operating synergies.

This is on top of everything we have identified previously. These significant new savings will come principally from restructuring corporate and shared services functions. Approximately 45 positions are involved. We began implementing the restructuring last week and it will be completed before the end of this year.

We’ll realize the full impact in 2015 and our integration efforts continue and we expect to find and announce more 2014 synergies.

As we progress in our tenure as a pure-play broadcaster and as we combine with other successful broadcasting companies, we’re deepening our understanding of industry best practices and we’re incorporating them rapidly into our business model.

The basic tenet is to be as thin as possible at the corporate level and to focus increasingly at the local station level closer to the customer, so that we can be nimble and even more responsive to our communities. This approach will contribute to increased margins.

Before turning the presentation over to Jim Woodward, I want to provide some additional detail on our 2014 revenue accomplishments to date and our opportunities for the balance of this year. As I mentioned, we got off to a great start in Q1 with the Sochi Winter Olympics.

Our NBC station has generated $11.6 million from the Games, nearly a 50% increase from the 2010 Winter Olympics, when these same stations generated $7.8 million of revenues.

Particularly with an eye to the just-completed congressional race in Florida’s 13th district and the seven battleground states where we have stations, we expect a strong political performance this year. We all know the Republicans want to reclaim the Senate. Four of the open Senate seat races nationally are in states where we have stations.

These open seats are Saxby Chambliss’ seat in Georgia, Tom Harkin’s in Iowa, Carl Levin’s in Michigan and Tim Johnson’s in South Dakota. In our markets, we also have key races to unseat Mary Landrieu in Louisiana, Kay Hagan in North Carolina, Mark Warner in Virginia and Lamar Alexander in Tennessee.

Both Senate seats in South Carolina are up for re-election. And we have three stations in that state. And of course, the gubernatorial races are expected to be very competitive in Florida, Iowa, Michigan, Ohio, Rhode Island, South Dakota and Wisconsin.

Media General historically has benefited because of our stations’ strategic locations in political battleground states. Our position is enhanced with the addition of Young’s stations. We think that’s worth noting as we enter the hot part of this political year.

I also want to recognize our stations’ continuing success in providing their communities with excellent news and information. Two of our stations have won Emmy awards so far this year and not all the Emmy competitions have concluded. Last week, the Regional Edward R. Murrow awards were announced, and 10 Media General stations won a total of 19 Murrows.

We’ve also fared very well this year in the awards and competitions sponsored by the Associated Press, by state broadcaster associations, by others that celebrate excellent journalism. Local is our business and it’s also our heritage. Therefore, it’s gratifying to see our stations performing so well and being recognized for their great work.

It’s how we form bonds with our communities so that among other things, we’re top of mind when there is news or information that people need to know. And to connect the dots, the awards I’ve mentioned are exactly the types of things that drive audience, ratings and revenue. And now let’s hear from Jim..

Thank you, George and good morning. Let me first note that as I explained on our last earnings call, the Young merger was accounted for as a reverse acquisition. Consequently the GAAP financials in our press release this morning include only Young operating results for 2013 first quarter.

Also in the press release, we included 2013 Supplemental Combined Company Information. This Supplemental Combined Company Information simply adds the results of legacy Media General and legacy Young together without any adjustments. My comments are going to compare the 2014 first quarter to the 2013 supplemental combined results.

I’m going to recap a bit of what George reported and I’ll add further details on the quarter as well. Net operating revenue of $124 million in 2013 increased to $144 million in ‘14 or 16% and reflected growth in all revenue categories, local and gross time sales, political time sales, retransmission revenue and digital.

In the first quarter, local gross time sales increased 5.9% to $76.4 million and national gross time sales increased 1.8% to $34.1 million. Core growth included significant increases in several advertising categories, such as 20% in automotive and 50% in telecommunications, as well as healthy increases in healthcare and entertainment.

Political gross time sales were $4.4 million, compared to $879,000 last year. Retransmission revenues increased about 50% to $34 million and digital revenue increased 33% to $5.4 million.

Total operating costs were $124.7 million, which included $4.8 million of merger-related expenses, and depreciation and amortization was higher by $5.7 million in the current quarter due to the effects of the purchase accounting resulting from the Young merger. Excluding those two amounts, total operating costs increased by less than 3%.

Expense growth also included higher network compensation and increases for salaries and benefits. Corporate and other expense of $10.1 million decreased 35% to $6.6 million in the first quarter of 2014, the result of lower stock-based compensation due to the change in the company’s stock price and lower legacy benefit costs.

As George reported, we’ve identified $10 million of annualized cost savings from restructuring corporate and the shared services functions. While we will realize savings in 2014 from the restructuring, the full impact on a run rate basis will not be until 2015.

Of the $10 million, approximately half is in corporate expense and the balance is in station operating expense. Capital expenditures in the first quarter were $2.5 million and were mostly for HD news sets, equipment upgrades and replacements, building improvements and vehicles.

Capital expenditures for the full year are still expected to be $41 million, as we complete the build-out of HD at our stations and an investment in enhancing our news gathering and production capabilities.

Total debt outstanding decreased to $881.4 million on March 31, 2014, compared with $917 million on December 31, 2013, reflecting consolidated debt repayments of $35.6 million.

Retirement and postretirement plans liabilities decreased to $107.7 million on March 31, 2014, compared with $155.3 million on December 31, 2013, reflecting a $45 million cash contribution to the company’s pension plan in early 2014.

Net leverage as of March 31, 2014, as defined in our credit agreement, was 4.23 times, based on adjusted pro forma trailing 8-quarter average EBITDA of $206.5 million. And, now I’ll turn it back to George..

Thank you, Jim. I would like to provide one update and then close with some comments on our merger with LIN Media. After that, we’ll move to Q&A. You will recall we’d determined earlier this year to move our KRON television station in San Francisco to some vacant space in the KGO building, also in the city.

And so we listed the present KRON space for sale. I am happy to report that the real estate market in San Francisco is very hot, and we’ve signed a contract to sell the KRON property even more quickly than we’d thought, and at a better price than we’d imagined.

I’m working under some confidentiality restrictions here, but it’s fair to say that we’ll close with the undisclosed buyer in an all-cash transaction on May 5, and that we’ll be receiving substantially more than the $20 million price at which we’d marketed the property.

And the gain from the transaction is sheltered by our NOLs, so all of this affords a second quarter opportunity to pay down debt at an accelerated level.

I should add that we expect to physically move KRON’s operations to the KGO space in the fourth quarter this year, and the terms of the sale allow us to remain in our present space on Van Ness, rent-free, until that time. Now, on LIN.

We’ve said consistently that we would be an acquirer in our industry’s continuing consolidation, and that is indeed the case. Our merger with LIN will create the second largest company in the United States focused solely on local TV. Our combined revenues are more than $1.2 billion.

The LIN merger will add even more geographic and network diversity and economies of scale. Our presence in political battleground states also increases, with the addition of stations in Iowa, Michigan, Ohio, Virginia and Wisconsin. I explained earlier why that’s especially important.

As with Young, Media General and LIN have very similar cultures and a core focus on providing excellent local content. We both provide top-rated local news, and we both also produce a number of successful local lifestyle programs. Our prospects for digital media growth are particularly exciting.

Together we have $150 million of pro forma digital revenues, and our combined Digital Media business will be the largest and most diversified in the industry. A major advantage of the merger is the ability to scale LIN’s Digital offerings across Media General’s local markets and together also grow the national footprint for the business.

The Media General-Young merger was a game changer for both companies. Our merger with LIN also will be transformational for our company. It is a terrific, blockbuster transaction. Most importantly, stockholders -- for stockholders, the transaction will be immediately accretive to free cash flow per share.

The LIN merger is expected to close in early 2015. It has been approved by the Media General and LIN Board of Directors. It remains subject to the approval of shareholders of both companies and to regulatory approvals. As we’ve said previously, we expect to swap or sell certain stations in overlap markets to address regulatory considerations.

And now we will be pleased to take your questions..

(Operator Instructions) And we do have a question from Barry Lucas from Gabelli & Company. Please go ahead..

Great. Thanks very much. Good morning, George..

Good morning, Barry.

How are you?.

I’m well. Thanks. Okay.

So if you are bumping up the synergy totaled for the combined company by $10 million what -- just refresh my memory we were going from what to what then?.

We announced $15 million before. We first made the announcement on the Young transaction. We had $15 million of synergies for financing and $15 million of synergies on the operational side. And as you remember, the financing synergies went immediately to $29 million. So the operating synergies that were $15 million are now totaling $25 million..

Great. So we are north of $15 million and it seems to me, your body language says that there could be some additional benefits that flow..

That’s right. In fact, I stated that and I think we will find them, yes..

Okay. And on the political front, I think most everyone has been fairly cautious about ’12, although looks like it’s going to be fairly robust ’14 less than ’12 and probably more than ’10.

I think the combined was in ’12, was it about a $113 million, was that kind about right?.

I think it does, yeah..

So given your comments and what we saw in ’13 CD in Florida, would you care to handicap what the gap might be between the presidential year and the non-presidential year?.

I think we will stay with where we were. But all signs are positive here. So the Florida race was an unexpected bonus for us and the Democrat message obviously didn’t work. So they need to refine things and spend some more money at least in our view in order to carry anything else.

And then on top of that, the McCutchen decision that came down recently listing the spending caps for individual, I think also contributes. Some people think that it means there will be more money in the race. Some people think that means it will be -- money will be shifted around. But in all events, they are positive signs for us.

So as we look at is what I said at the hot part of the season for political, we are feeling better and better all the time and we are pleased that we’ve got the Young stations with us, particularly those in the upper good list..

Great. Just two more brief ones.

I don’t know if you had an opportunity to look at the transcripts from the Aereo case and I was hoping if you had to elicit some color or comments?.

Look, I’m pleased with the way the Aereo argument went. All broadcasters have thought that Aereo are really a bunch of pirates and they are taking revenue that everybody else pays for and they thought for some reason that they could come up with a jury-rigged mechanism that will allow them to escape.

And I think what they are finding is that there are people that are taking a really close look at that. And so as you look at the way the Justice has question them, I don’t think that anybody believes that what they had is anything other than a Rube Goldberg kind of a mechanism.

So we are heartened by that .We are heartened by the kind of the copyright questions that came up during the case as well and the Justice’s appreciation for the copyright laws. It was terrific that Justice Department came in on the side of broadcasters.

All in all Barry, I don’t want to try to count noses in the Supreme Court, but we sure came away from that argument feeling better than we had. And we were feeling pretty good when we walked into it because of all the mega-support that we’ve gotten and the filings that have come in.

So we think Aereo went fine and we are looking for decision as you know by the end of June or very first part of July..

Great. Last item from me has to do with the approval process and that seems to have ground to a halt.

Have you gotten any comment or feel at all from the Commission about what it's going to take to get the deal done? Because some of your peers who are in line ahead of you sound to be a little bit frustrated with the way the process is moving along?.

Well, first of all, we are in touch with the FCC all the time as you can imagine. It’s very important and they understand that it is very important to us. And so we’re in pretty close touch with what’s going on there. I think that there is a little bit of a shake out that needs to occur as people get some processing guidance from the FCC.

We had a rule that came out or the announcement on processing guidelines that came out before we made the announcement with LIN. We actually thought that helped us and gave us some definition about the things that you are looking for. Then the order came out on March 31. The order was announced on March 31.

And we are feeling like there is certainly a path through the FCC. So I understand that some people are frustrated. There are some people that have been there for now really a whole year waiting for the FCC to kind of tell them what it was going to take and what it was not going to take.

But in advantage for us is that those people are ahead of us and it’s nice for them to be able to do a little time hearing for us. So we are feeling okay about it..

Great. Thanks very much, George..

Sure Barry..

Our next question is from Matthew Dodson from JWest. Please go ahead..

Yeah.

Can you, kind of, talk a little bit about the pacings coming out of the quarter and what you are seeing for Q2?.

Matthew, we’re not going to go into pacing and that’s just per Media General policy. But I will say this, if you looked at car sales and how they did in the first quarter to pull this out, you saw a car sales top pretty nicely in the second half of March. Cars for us are about 27% of our revenue. So when they are feeling good, we are feeling great.

And at the moment that all looks very solid. So we are pleased with the way that shaping up. And then as I mentioned in my comments, we are also really pleased with the political cycles and the political atmosphere right now. For a broadcaster, it’s exactly the kind of thing you want to be able to see.

And so every couple of weeks any way brings some new developments for us that give us that feeling that 2014 is going to be a nice political year for Media General..

Okay. Thank you..

Sure..

Our next question is from Sachin Shah from Albert Fried. Please go ahead..

Hi. Good morning. Just want to get an update on the regulatory approval on the HSR side and the FCC.

Is there -- you've made the filings, can you just give us an update on that? And then when you expect potentially the preliminary proxy and the export to be filed?.

Yes, so on the regulatory side first, we haven’t filed yet. And we are hoping to do like as I said in prior calls, as we are hoping to provide the FCC with some solutions. And so I’m going in with some answers for them.

And so that's what we are working on now, same thing on the Hart-Scott side, so that clock has not started on the -- for the Justice Department FTC. So as I’ve said, feeling okay about that process, we allowed ourselves a lot of time.

And when we made the announcement, we said that we expect this transaction to close in the first quarter of ’15 and we think that is still an appropriate way to look. And so that’s the sort of current, if you will, guidance on what we expect for the closing of this transaction.

The S-4, which you also mentioned about, should be filed in a next couple of weeks. So, I think that’s probably a fair way to look at..

Okay. Is it correct to understand that you are not in a rush to make these spot regulatory filings because of complex nature of the transaction of the asset that you, I guess presumably know that you may have to divest.

So you’re almost creating a pretty packaged situation or filing where you’re putting them in front of them to let them know that this is what we’re doing in addition to merging, is that?.

Yeah. That’s was actually quite well stated, thank you. I appreciate it. So, we’re in contact all the time with both Justice FTC group on the HSR side and also with the FCC, so they understand where we are.

That gives us the chance the talk with them and it gives us the chance to develop some answers before we actually go in and the Justice Department start clock and if the FCC begin that process..

Okay. So -- fair enough. I don’t want to press you too much further but the point is after you do that, it seems like you would be in an extremely beneficial position to move forward with the transaction rather than having to go back and forth, which is typically the case for many of this kind of transactions.

Is that kind of your -- you are basically spending the time upfront rather than back ended.

Is that fair?.

Yeah. It is fair and what we’re trying to do is accomplish exactly that sort of thing. I don’t want to comment on the success, obviously that we may or may not have with those regulatory agencies. But the plan is to go in with solutions, not just issues..

Excellent. Thank you, guys..

Sure..

(Operator Instructions).

We’ll give just a couple of more seconds here to somebody else that’s interested but a bit shy. All right. Well, listen. Thank you all very much for tuning in. As you can tell, we are delighted with these results. These are exciting times for Media General.

And we very much appreciate your tuning into our company and we look forward to bringing you further updates as the year progresses. Thank you very much. Goodbye..

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