Good morning, ladies and gentlemen and welcome to the Media General Inc. Earnings Call for the First Quarter ended March 31, 2015. Today's call is being recorded. Now the company will read a brief legal statement..

Good morning. This morning, the company announced its first quarter 2015 results. The press release along with the supplemental data can be found on the company's website at www.mediageneral.com. When available a full transcript along with the replay of today's call will also be posted on the company's website.

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 sections in those reports concerning risk factors.

Media General's future performance could differ materially from its current expectations. The company undertakes no obligation to update these forward-looking statements.

Today's speakers will be the company's President and CEO; Vince Sadusky, who will provide a high level overview of our results and achievements and Jim Woodward, the company's Chief Financial Officer, who will discuss our financial results and guidance. They will take your questions after their prepared remarks.

And now I'll hand the call over to Vince..

Thank you, Andy. Good morning everyone, and welcome to our earnings call. 2015 is off to a terrific start and I’m very proud of everything we’ve accomplished in just one quarter since the merger of our predecessor companies. We continue to make great progress on our integration plans.

We’re on target to achieve our first year run rate synergies we completed a successful secondary equity offering that provide shareholders greater liquidity and we delivered record first quarter results. On a same asset basis net revenues increased 3% year-over-year to $297 million.

We achieved these results despite the absence of Olympic and political ad revenues, which were included in the first quarter of 2014. Adjusted EBITDA on a same asset basis exceeded our guidance range increasing 7% year-over-year to $72 million.

Our growth is significant given the tough comps I just mentioned, which included Olympics -- Olympic ad revenue. The increase in adjusted EBITDA came largely from pay TV subscriber fees and our focus on managing expenses.

Even with the important investments we’re making in our business we’re committed to leveraging our scale and operating as efficiently as possible. Higher pay TV subscriber fees were a key driver of our revenue gains.

During the quarter we reached new agreements with the number of pay TV providers 28% of our subscribers were up for renewal in 2015 or have already been renewed and about 60% in 2016 with the majority of our broadcast network affiliate agreements locked down for several years.

In addition of those reasons, I believe our significant scale and highly rated content positioned us very well to achieve continued and sustainable retransmission of fee growth.

Media General has an unrivaled suite of integrated marketing solutions for every screen on the national, regional, and local level as well as unique original content for every screen. Last week we unveiled our new connected screen strategy at the 2015 Digital Content New Fronts in New York City.

We were the only company in the broadcast space to present and promote our full owned and operated offerings to the nations top agencies and brands. Under the LIN digital banner, we showcased new original content from BiteSizeTV and Federated Media and demonstrated the benefits of buying from a truly connected screen media Company.

During our successful New Front presentation, which we are in the process of packaging up for our sales teams, we announced an agreement with FOX Television stations to broadcast BiteSizeTV's entertainment news and variety show, Hollywood Today Live.

BiteSize developed Hollywood Today Live in the digital world, tested it on TV, and beginning in September it will air on FOX's O&O's and Media General's TV stations in several markets New York, Los Angeles, Chicago, and San Francisco. This is a innovative programming model that is fueling out content initiatives driving new partnership opportunities.

One of our major strategic operating initiatives is to capitalize on ways grow ratings and revenue in our largest move the needle markets. We've brought a new leadership, relaunched our brands, and implemented our next gen newsroom and investigative news strategies. We are pleased with our results so far.

More than half of our high priority stations showed growth across their newscast with adults 25 to 54 during the February sweep period compared to prior year. In the same ratings period, 61% of all of our television stations were ranked number one or number two in their local markets, which is an increase of 17% year-over-year.

We believe efforts are paying off, but there is still as plenty of room for upside. And I want to take a minute to congratulate our TV stations for winning numerous Edward R. Murrows and other awards that recognize the superior journalism we deliver on all screens 24/7 to our local communities.

Given our proven operating strategy connected screen marketing solutions premium news and entertainment content, and potential spectrum value, I believe Media General is one of the best positioned companies for growth and success in our space. And now I’ll turn it over to Jim who will discuss our financial results and guidance..

Thank you, Vince and good morning everyone. Before I begin, I would like to draw your attention to the explanation of GAAP results in our press release. To summarize, our first quarter 2014 GAAP results include legacy Media General’s operating results only.

And do not reflect operating results for the former LIN stations and any of the acquired stations but they do include the results of the Media General divested stations.

In order to help you make more meaningful comparisons, we provided supplemental combined Company financial information on our investor relation page of our web site, MediaGeneral.com.

As adjusted amounts for Q1 2014 reflects the results of Media General plus the results of Lin Media the stations acquired in 2015 including ABC in Harrisburg, My TV in Tampa, and FOX's and CW in Colorado Springs. Plus to the extent not reflected in LIN's results, the results of the various digital properties acquired by LIN Media in 2014.

The as-adjusted amounts were then adjusted for the stations sold as part LIN Media/Media General merger, the change in affiliation from a CBS to a CW in Indianapolis, and the disposition of Nami.

The supplemental information provided does not purport to be indicative of what would have happened had the merger actually occurred at the beginning of the quarter, nor is it nor is it indicative of the results which may occur in the future.

We believe that the same asset basis provide a more transparent and complete foundation in which to compare our current operating results.

So my comments today are going to focus on the combined Company using the information provided in the supplemental combined Company financial information that is available on the investor relations page of our website. Let me begin. During the first quarter, net revenues were $297 million up 3% from $287 million in the prior year.

Pay-TV subscriber fees were a driver of the increase and helped to offset the absence of Olympic and political revenues. Diving a little deeper into revenues, net local revenues, which include net local advertising revenues and pay-TV subscriber fees, increased 10% during the first quarter to $207 million compared to a $188 million in the prior year.

Net national revenues decreased 4% to $49 million compared to $51 million in the first quarter of 2014. Combined political revenues were $1 million during the first quarter compared to $5 million in the prior year. Starting in Q1 of 2015 we’re reporting our digital revenues on a combined or consolidated basis.

Digital revenues include, but the Lin digital company and the digital revenues from our TV station websites. Digital revenues in the first quarter decreased 7% to $30 million compared to the prior year. Our digital revenues were impacted by the loss of some key sales people during the quarter.

There is aggressive competition in the marketplace to recruit top digital sellers. We recognize the issue early and we have implemented a vigorous recruiting and on-boarding strategy. In the past six weeks alone we’ve hired two sales managers and four account executives. We remain focused on building the top sales force in the industry.

Moving to the categories, automotive ad advertising, our largest category, decreased 4% in the first quarter compared to the prior year and represented 25% advertising sales. However, if you remove the impact of the first quarter Olympics in automotive it was up for the year.

Major categories that showed year-over-year improvements in Q1 included furniture, services, home improvement and financial. Total operating and SG&A expenses for the quarter, which exclude amortization of program rights, corporate expenses, stock based compensation, and D&A, increased 6% year-over-year or by $11 million to $206 million.

The growth and operating in SG&A expenses was driven largely by higher programming fees paid to networks. If you exclude those programming fees, operating and SG&A expenses were down 4%. BCF in the first quarter was $78 million compared $80 million in the first quarter of 2014.

Corporate cash expenses for the quarter, excluding stock based compensation and merger related expenses, were $9 million compared to $14 million in the prior year. Adjusted EBITDA in the first quarter was $72 million compared to $67 million in the prior year.

Adjusted EBITDA included gains from the relocation of Spectrum at our Lansing, Michigan Austin, Texas stations. Excluding those gains adjusted EBITDA would have been $69 million. Capital expenditures for the quarter were $7 million and cash taxes were about $2 million.

Before I turn to debt and our guidance, I want to follow-up on Vince’s comments regarding synergies. We’re making very good progress on our integration plans remain comfortable that on a run rate basis we’ll realize about half of the $70 million of synergies by the end of 2015. Turning to Media General’s debt and key credit metrics.

In March 31, 2015 we had unrestricted cash on hand of $58 million and no borrowings under our $150 million revolving credit facility. Our net debt was $2.33 billion. During the quarter we repaid $36 million of debt. A consolidated leverage at quarter end has defined under our senior credit facility was 5.3 times.

The restricted cash at the qualified intermediary of $120 million is not included in the calculation. Including this cash, our leverage would be five times. Our credit agreements do not contain a maintenance covenants our revolver does contain a maintenance covenants as revolver borrowings exceed $45 million.

Focusing on the outlook for the second quarter.

We expect net revenues to be up 1% to 4% compared to net revenues of $318 million on a same asset basis in the second quarter of 2014 for expenses we expected direct operating and SG&A will increase in the range of 8% to 9% compared to expenses of $201 million in Q2 of 2014 driven largely by the growth and programming fees paid to the networks.

Excluding the programming fees to networks direct operating an SG&A expenses will remain relatively flat compared to the prior year. We expect corporate expenses excluding stock based compensation to be between $10 million and $11 million. And during the second quarter we expect to pay approximately $2 million in cash taxes.

Given our significant NRO balance we continue to expect that we would not need to pay any significant cash taxes. And now I’ll turn it back to the operator for Q&A.

Thank you. [Operator Instructions] We go first to Marci Ryvicker of Wells Fargo..

Thanks. Focusing on the second quarter guide, first with revenue, can you talk about the underlying trends in core advertising? Just based on the numbers it seems to have decelerated. We've heard that from a couple of your peers, so just curious what's going on there? And then secondly, there was a big expense beat in the first quarter.

It looks like expenses were pushed into the second quarter. So any color on if there is a timing issue would be great. Thanks..

Okay, yeah great I’ll go ahead and take the revenue question let Jim take expenses. So with regard to revenue we’re seeing the second quarter pace up slightly and the pace for June is improving over May for core television.

From a category perspective, auto the leading category is pacing slightly up as well for the quarter couple of other good categories, and services area, and home improvement are really leading the way.

With regard to how the advertising environment feels as you’ve heard others report choppiness some folks reporting pacing up a bit, some were reporting down a bit. The ad markets have been have certainly been mixed in our markets.

But fortunately we’ve had good success coming out of the gate with our ratings scenario in our February sweeps allowing us to pickup incremental share. We believe, in the first quarter, based on market audits and our projections as we're halfway through the second quarter..

On the expense side, Marci, we were a couple of things to get to your question is I don’t believe we pushed expenses into the other quarter there are couple of things that helped us there. We had a SESAC refund. I think some others had mentioned that and that flowed through our expenses. That was about $2.5 million.

We just did a better job managing our expenses our expenses out of the gate I mean we – it was important to us to start the year off on a strong basis. And while we have planned certain expenditures and what not we managed those tightly and our operators deserve a tremendous amount of credit for accomplishing that..

Yeah I’d say we’d also give our operators credit for our synergy plan we’re ahead of our internal plan on our synergy saves..

Okay. And I just have one additional question. In the press release you talked about the $120 million of restricted cash from the sale of WJAR. This is with a qualified intermediary for use in a possible acquisition transaction.

Can you just explain that a little bit?.

Yeah, let me do it. So we put the proceeds from WJAR in a qualified intermediary and hopes that we would find a similar asset to apply them to but that expires on June 19, so we weren’t successful in finding the quality asset to apply those proceeds to.

So that QI cash comes back to us June 19 it will no longer be in Q2 it won’t be less that is qualified intermediary cash, but it’s restricted cash at this point..

Okay. Is that what you are using for the buy back? Didn't you announce a buy back as that would….

Yeah we did announce the buy back and coincidently the number was the same, but yes we’re going to use that other cash to be opportunistic to return some capital to shareholders..

Got it. Thank you very much..

Thank you. We’ll go next to James Dix of Wedbush Securities..

Good morning, guys. Three things. I guess the first two on advertising and the second just a little on the merger synergies.

Just going back to the first quarter, how did core advertising shape up versus what you were seeing you and your guidance? I think you talked about if you excluded some non-comparable items at one point core advertising was pacing up somewhere around the 4% to 5% range.

Just wondering how that finished and what you thought were there any of the key reasons for any variances one way or the other? And then, second, just now that we are looking at digital all on a combined basis, I was curious as to roughly how much of that revenue comes from sales, what you would consider video advertising? I am trying to get a little bit better sense now that the business is combined, as to what industry benchmarks what we should be looking at to gauge its growth? I know you gave some color at the Investor Day.

But I'm curious how much of that you think is coming from sales of online video, whether it’s a really strong demand.

Then the last one, on merger synergies, any further granularity you can give on just how the timing of the merger synergies are going to flow in this year? I know you are moving up towards a run rate, which you gave previously, but I was curious whether you had any more color as to how it's going to flow in 2Q, 3Q, 4Q. Thanks..

Okay so on the first question yeah on core for the first quarter yeah especially taking out the impact of Olympics. We were up about 3.5% for the first quarter. The second question regarding video. Video number was pretty significant it was actually it’s now turning into the most significant category for us. It is kind of supplanting display.

So really the selling effort and the kind of the packaging of our digital products is changing pretty significantly. And then I’ll let Jim handle the synergy questions..

Yeah, on the synergies I think it James, it was the flow that as we still expect the bulk of that first year synergies to come in the second half of the year. And that’s due to just a time to transition processes and people and establish new processes is that so.

But we did have some early success with that I don’t see why that would continue not continue, because that’s a focus. One of the things that we can do to help improve a year is capture those synergies sooner and get them flowing through the P&L.

But we I’m still very comfortable that we’ll hit our target at the back half of those in the first year and with the drive to do better..

Great. Thanks very much..

Thank you. We’ll go next to Barry Lucas of Gabelli & Company..

Thanks and good morning. Two broad areas, Vince, if you could, please. If you could touch on some of the weaker categories, both 1Q and 2Q.

You gave us the highs or the goods, so maybe we could get some of the other ones? And regional variances in your markets to the extent that you see some significant differences again for what took place in 1Q and what you are seeing in the second quarter? And I'll throw out the second question as well, which is more broadly focused on Spectrum, which would be any kind of update you can provide on auction participation? You were kind enough to provide a fair amount of detail during the investor presentation.

Yesterday Sinclair talked extensively about the new broadcast standard and maybe you could address that as well.

So, I will just hold on and listen to the commentary?.

Okay sure, thanks Barry. So first of with regard to categories what we saw in the first quarter I think I’ve mentioned the up categories the categories that struggle were really around medical. We had good quarter first quarter of last year and that has a tendency to kind of ebb and flow based upon services and products being and produced.

Furniture’s always been an important category to us and that was flattish for us. Restaurants is a category that and really for the most part been in decline since the recession with the lot of chains going national. And that continued to be a decline category as well.

And then I think I may have forgotten to mention home improvement in addition to services has been an increasing category fairly steadily over the last several years and that category was the strong category for us in the first quarter. In the second quarter we’re seeing similar trends.

Restaurants are a bit better, furniture is a bit worse, services continues to be strong and home improvement continues to be a strong category.

With regard to the regional variances in the categories that are kind of a little bit – or the geographies that have trended a little bit worse and mind you, we are not seeing wild fluctuations from market to market like we did a few years ago where we saw certain markets doing very well and other markets really tailing off significantly.

We’re seeing like the markets in New England for example New Haven, Providence being softer markets. And the same thing for the Pacific Northwest as well San Francisco and Portland. And the stronger markets we are really seeing Texas and the south.

So fairly kind of logical kind of following the economic activity I think on Main Street in those particular markets. The next question you had was around the auction update. I’m not sure we really have an update from Investor Day other than we're -- I guess I would characterize it, we are in the number crunching stage right now.

We’re working our market by market analysis and looking at likely option participants and potential value running several different gain theory models. Again as we described we’re very bullish on the new broadcast standard and have been very involved with representation on the ATSC as well as on the NAV board.

We do believe that our tall tower technology with essentially a different software package is something that could provide us and should provide us I think a long-term opportunity to deliver more than one single primary channel.

And as we discussed on Investor Day each company has their own perspective on how to play that either let that be somebody else’s business by exiting the business and receiving a windfall or not exiting the core business finding somebody to effectively buddy up with to continue transmission of their primary service and receive option proceeds as a possibility or continue on with a core business being what it is a very good cash flow and have the optionality and work towards participating in the future of the industry and potential ancillary services.

So I think for us we’re in the doing our homework stage now throughout this period into December, but we’ve been very actively involved and are quite supportive of a new broadcast standards..

Thanks Vince..

Thank you..

Thank you. We’ll go next to Tracy Young of Evercore..

Yes, hi. I appreciate the color on the advertising. I just have a couple of clarifications. In first quarter you had other revenue of $9 million.

Is that included in your Q2 net broadcast revenue and what is that?.

Yeah that isn’t included in there it’s tower leases production some production revenue..

Okay.

And then in terms of your guidance, your revenue guidance, what is your guidance implying for core for Q2?.

It implies a core advertising in Q2 should be up slightly low single..

Okay. And then in terms of -- go ahead..

No that’s fine I was just saying the pace is improving in June over May..

Okay. Thank you.

Then in your corporate expense, did you mention a SESAC refund or why was that lower than what you expect for Q2?.

Why is that lower than what I expect for Q2 in the SESAC refund, SESAC refund is not a...

What is that?.

It’s about $2.5 million..

What was the refund? What is the SESAC?.

I’m sorry Tracy what was that..

Just I'm asking what that refund is?.

About it was about $2.5 million..

Okay. Nevermind.

And then in terms of your guidance for operating expense, again you had mentioned that station operating was down 4% in the quarter, in first quarter, what is implied for your guidance for Q2?.

On the same basis if we if you exclude the programming fees to the networks we expect that to be about flat..

Flat, okay. Perfect. Thank you so much..

Thank you. We’ll go next to Aaron Watts of Deutsche Bank..

Yeah and before we take Aaron’s question I’ll just jump in I think Tracy you were also asking this kind of nature of the SESAC refund. So that is a music licensing fees that we and the industry pay for the right to air music associated with our various programs the network programs or local news syndicated shows.

We’ve got representation on the industry alliance one of our folks internally has been on the Board of that initiative for many, many years and we the industry we took SESAC to court regarding we think methodology and practices that were unfair to us based upon what our actual usage was.

It was a multi-year process that resulted in way court deciding on a settlement in favor of broadcasters and reducing our collective rates going forward and changing the formula. So go ahead Aaron..

Great. Just a couple for me. Vince, on the kind of cadence from first quarter to second quarter in core advertising, you guys have some unique perspective now with your digital presence and obviously the station side.

But is it your sense that it's just advertising dollars leaving the market and a pull back generally? Or do you think there is shifting going on from television to other media outlets just give us your thoughts on that?.

Yeah, I truly believe that it’s kind of a bit of a lazy advertising environment if you look at a bunch of the digital there’s not there many public companies, but if you look at the digital companies that are public. Their results were their growth were kind of at or lower than what they historically been as well.

So I think I really believe it’s the ad environment is kind of lackluster at the moment it’s impacting all businesses all advertising businesses.

A litmus test for us is always auto with roughly 25% of our ad revenue coming in through the auto guys that that number that 25% of total broadcast advertising revenue has remained consistent it’s remained consistent in the first quarter and it looks to be consistent in the second quarter. So I really believe that that is a situation here.

Digital continues to grow but a lot of the money is when you look at it from a macro basis seem to continue to come from other outlets. So you’ll continue to have share shift I think that will take place between other outlets and digital certainly continues to outpace traditional medias growth.

But I really think the key driver has been lower advertising across the board..

That's helpful. One for Jim real quick. Jim, you've emphasized your desire in the past to get the leverage down at the Company. And I'm just curious your current thoughts on that just given that you have introduced a share repurchase plan. You do have a bunch of cash coming in, you're looking at acquisition opportunities.

Just where paying down debt and deleveraging falls into that kind of mix and remind us maybe your targets you are hoping to hit on leverage in some given timeframe? Thanks..

Yeah all of those things I think it starts with the confidence in our cash flows we’re confident in our cash flows. And we believe that it’s not an or statement it’s an and statement that we all in candy lever the company.

But we can also be opportunistic if some shareholder returns through a share buyback program you’re right to point out the $120 million coming back to us the operating cash flows we have. So the goal is there’s the goal which to do both and that goal and that belief stems from the confidence that we have in our operating cash flows..

Okay.

Any kind of update on where you would like to see leverage maybe a year out or two years out?.

Year out if you think about 2016 been a strong as it is and I think leverage will continue to go down as I pointed out it’s five times now with including the QI cash. So a specific goal to 3.5 or 4 something with the 4 it sounds nice but like I said we’re going to be opportunistic in doing both for our debt holders and our shareholders..

Okay. And one last one for Vince.

Just with your comments on the Spectrum auction and the backdrop, as you think about the M&A pipeline, do you feel like you and your peers are kind of on hold with looking at more substantive acquisition opportunities, because of that looming Spectrum auction? Or do you think that you can still move forward with an opportunity if it arose ahead of that?.

Yeah, I really believe the latter I think there is the capability to move forward I don’t think the auction is an impairment to kind of like combinations or acquisitions there. There maybe some pockets and some groups that are clearly focused on the auction as their opportunity for shareholder return.

But I’d say the majority of our peers are full service television stations and are pretty content with the cash flow that gets driven from the core business and don’t have plans to tender in the auction..

All right. Great. Thanks, guys..

Thank you. [Operator Instructions] Moving next to John Huh of Wells Fargo..

Hey, guys, most of my questions have been answered. Just one for me. Vince, did you say that you are seeing strength in Texas? We have been hearing different things from some of the other guys and is that, because you are in Austin and not in Houston? Thanks..

Yeah I think that’s exactly right Texas is a – has a really diverse economy obviously Houston and San Antonio, Dallas to Austin. So Austin is remains one of the hot growth markets in the country and we’re fortunate we’ve got a station there that we’ve done a lot of work on over the years it’s got great momentum..

Okay, perfect. Thank you..

Thank you. We’ll go next to Dan Kurnos of The Benchmark Company..

Great. Thanks for taking my question. Just one, maybe for Vince here it's maybe to address the M&A question from a different perspective given your unique situation with the digital assets.

Just curious if you are looking to maybe add something either in the video space understanding that valuations are pretty hot right now? Or if there are ways that you guys might look to evolve your digital properties through M&A? Thanks..

Yeah I think what we’ve built was really highlighted last week in the Digital New Front and obviously it wasn’t an investor focused, but if you get chance you can pull down the video and there’s plenty clips on it. I think it really put us on the map and really explain kind of the connected screen of video strategy that we have.

In the digital world we’re still relatively small player. And so I think we’d like to build on the momentum of what we’ve created through primarily partnerships really partnering with others in our space that have unique assets and then other digital companies.

As far as the purchases go our acquisition history has been one of really looking for relatively inexpensive opportunities meaning you have very large multiples of revenue or op income that these companies or gross margin that these companies are selling for. And obviously it’s not it’s just feels like that’s too expensive and too much at risk.

So we’ve looked at companies that are willing to kind of have their financial partners exist they’ve been in there for sometime.

Companies that have consumed more cash than originally projected, but we feel that they’ve a very good product suite that can actually fit into our ecosystem and we can drive synergies either to our national sales force or other content or digital marketing assets.

And then we have the founders and the folks that are involved have essentially their equity return at risk by participating in the business and having a deferred payout.

So we continue to look for those we’ve mentioned in the past we look at an awful lot of digital properties and really proceed through the diligence process with very few that meet our criteria.

But I do believe with our new found scale and what we’ve got in digital it’s important for us to continue to look for ways to enhance that either by ourselves or by partnering with others..

Great. Thanks for the color..

Okay..

Thank you. With no further questions I’d like to turn the conference back over to management for any additional or closing remarks..

Okay, well thank you all for your interest..

Thank you for your participation that does conclude today’s conference..