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Executives

Vincent L. Sadusky – President & Chief Executive Officer

Richard J. Schmaeling – Senior Vice President & Chief Financial Officer

Analysts

Marci Ryvicker – Wells Fargo Securities, LLC

Barry L. Lucus – Gabelli & Company

Davis Hebert – Wells Fargo Securities, LLC

John Kornreich – JK Media

Dennis Leibowitz – Act II Partners

Sal Muoio – SM Investors

Avi Steiner – JPMorgan

Lin TV Corp. (TVL) NBC Joint Venture Transaction Conference Call February 13, 2013 10:30 AM ET

Operator

Good morning, ladies and gentlemen and welcome to the Lin TV Corp Conference Call and NBC Joint Venture Transaction. Today’s call is being recorded. Now, the company will read a brief legal statement.

Unidentified Company Representative

This conference call may include forward-looking statements that involve risks and uncertainties. Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, but are not limited to, those described in the company’s press release and filings made with the SEC, all of which are available in the Investor Relations section on the company’s website at linmedia.com and on the SEC’s website at sec.gov.

Many of these factors are beyond the company’s control and the company undertakes no obligation to publicly update or revise any forward-looking statements unless required by applicable law. The company will also file with the SEC, a proxy statement, regarding the proposed merger. Stockholders are urged to read the proxy statement and other documents related to the transaction, when they become available because they will contain important information. Investors will be able to obtain these documents in the company’s website and the SEC’s website or by contacting the company directly.

Please also note that the company and its Directors and Executive Officers may be deemed to be participants in the solicitation of proxies, when the proxies are solicited with respect to the proposed merger transaction. However, this communication is not a solicitation of a proxy from any security holder of the company. Investors may obtain information regarding the names, affiliations and interests of such individuals in the company’s filings.

At this time, I will turn the call over to the company’s President and CEO, Vince Sadusky. Vince?

Vincent L. Sadusky

Yeah, thanks Venice. Good morning and welcome to our NBC JV transaction conference call. I’ll begin by making a few opening remarks, and then I will hand it off to Rich Schmaeling, our Chief Financial Officer to take you through the details of the transaction.

I am very pleased that we are here today talking to you about the Comcast / GE Transaction that closed yesterday and the pending LLC Conversion transaction. These transactions will resolve once and for all the NBC JV guarantee and tax overhangs that created a cloud of uncertainty over our company for many years.

In addition, yesterday, we renewed our NBC affiliation agreements for all 7 television stations plus satellites that we own that are currently affiliated with NBC. The new agreements went into effect January 1, 2013 and expire January 1, 2017. We’ve been working very hard for a long time to resolve the JV and I’d like to spend just a moment of knowledge a number of people.

First, I would like to thank the teams in NBC and Comcast for pushing this transaction forward and for their continued support. I’d also like to thank many people like GE and GECC that over the years were willing to listen and entertain a number of different ideas for how we could unwind the joint venture. I’d also like to thank our hardworking and persistent LIN team and the great of professionals at Weil, Gotshal, and our advisers at Deutsche Bank. We won’t be here today without their commitment and their many important contributions.

I will now hand it over to Rich to take you through the details.

Richard J. Schmaeling

Thanks and good morning everyone. Yesterday in exchange for a $100 million payment to the NBC JV, which was used by JV to pay down the GECC Note to $715.5 million, LIN was released from its guarantee of the GECC Note. In addition, Comcast purchased the Note from GECC for $602 million and then GECC canceled the remaining Note balance of a $113.5 million.

As a result of this transaction, LIN will recognize a taxable gain of $715.5 million and we expect that about $142 million of this gain will be characterized as ordinary income and the remaining gain of about $773 million as capital gains. LIN intends to use its NOLs to shelter the ordinary income and an order to offset, in whole or in part the capital gains concurrent with the Comscast / GE transaction. LIN entered into an agreement to execute a transaction to convert into a partnership for tax purposes with the result that we expect to realize a built-in capital loss between LIN’s basis in the stock of its sub, LIN Television Corporation, and the fair market value of this stock as of the closing date of this transaction.

As further described in our press release the LLC Conversion is expected to generate sufficient capital losses to fully offset the recognized capital gains, if LIN’s stock price at the closing of the Conversion is less than or equal to approximately $10.75 per share. At closing prices greater than this amount up to approximately $12.20 per share, LIN will need to consume its remaining NOLs to offset the recognized capital gains. And at a closing price above $12.20, LIN will begin to incur cash taxes.

In our press release, you’ll find a sensitivity analysis that details the cash tax consequences for each dollar per share that our stock price at closing of the Conversion exceeds $12.20 per share. We expect to be able to complete the LLC Conversion within the next four to six months. This timing is largely dependent on how long it takes to complete the SEC review of the necessary registration statement and proxy materials and the time it takes to solicit and complete the formal vote and approval of our stockholders. At the closing of the Conversion, shares of LIN stock will convert into like shares representing limited liability company interests of LIN Media LLC on a one to one basis.

From a perspective of our stockholders, the Conversion will be a taxable event. Stockholders will recognize a gain or possibly a loss at the closing date of the Conversion as if they sold their LIN shares at the stock price used to complete this transaction. We believe that these tax consequences may cause some of our shareholders to sell a portion of their LIN shares to cover their expected income tax liability.

Subsequent to the closing of the Conversion, LIN Media LLC will be treated as a partnership for purposes of federal and state income taxes and, as a result, it will provide its shareholders with an annual K-1. As LIN Media LLC will merely be a holding company with the stock of LIN Television Corporation as its only asset, this K-1 won’t reflect any activity unless LIN Television Corporation makes a distribution to or has other activity with LIN Media LLC.

We will account for the Comcast / GE Transaction in the fourth quarter of 2012, by recording a charge related to the $100 million payment to the JV and by accounting for the related income tax effects including establishing a current income tax liability for $164 million. This liability is expected to be reversed in whole or in part upon the closing of the LLC Conversion transaction.

The sources of funds used to make the $100 million payment to the JV had to pay the transaction fees and expense of approximately $7 million was provided by a combination of cash on hand, a draw against our revolver, and a new incremental term loan B. This incremental facility is a five year, $60 million term loan, priced consistent with our repricing transaction in December, L plus 300, with a 1% floor. Pro forma for this transaction are leverage at the end of 2012 would have been 3.6 times.

I will now turn the call back to the operator for questions. Operator?

Question-and-Answer Session

Operator

Yes sir, thank you. (Operator Instructions) And our first question will come from Marci Ryvicker with Wells Fargo.

Marci Ryvicker – Wells Fargo Securities, LLC

First of all, congratulations, I know this is important to you and to your shareholders. I have a couple of questions. We’re trying to get through the details. That $164 million, is that the maximum capital gains liability tax that you would recognize, if your stock or let’s say, $18 or $19?

Vincent L. Sadusky

That’s right. So, that $164 million, as of 12/31/12, is net of all of our NOLs. And if our stock price at closing is $10.75 or less, we’ll reverse that $164 million and we’ll also reinstate some of the NOLs previously utilized to shelter the capital gain. But for whatever reason if our stock price runs up higher, we’ll pay the $164 million. In addition, you’ll see in the analysis, Marci, that we’d also start incurring added cash taxes because the recognized capital losses would be less as our stock price increases.

Marci Ryvicker – Wells Fargo Securities, LLC

Okay. And then, if your stock continues to rise, do you have to convert to an LLC, or can you choose, we’re going to be paying taxes anyway, can you choose to stay a C-Corp at that point in time? Or is this a done deal, set in stone?

Richard J. Schmaeling

Yeah. You’re thinking about, I think I might have misspoke earlier, the $573 million of capital gains that we’re going to recognize, I mean, that that unsheltered is $210 million, about $210 million of cash taxes. In order for us to kind of it’s actually run out of gas, did not generate the capital losses to shelter. Our stock price would have to run all the way up, pass $20. We think that’s not likely in the short-term horizon. And so we expect at closing that we’re going to generate very significant capital losses that will allow us to shelter the vast majority of perhaps fully the $573 million of capital gains we expect to recognize.

Marci Ryvicker – Wells Fargo Securities, LLC

Okay. And then the other question what is the risk of the Conversion not getting done? What may be the biggest obstacle here?

Vincent L. Sadusky

I think the only obstacle is time. So, we think that is going to take four to six months. The transaction does require a formal solicitation, and vote of our shareholders were highly confident, we’ll get that vote. And then the time to execute is depended upon how rapidly we get through the SEC review process. So, we think it takes four to six months. I think that’s the only risk that I worry about now was how long it takes to execute.

Marci Ryvicker – Wells Fargo Securities, LLC

Thank you.

Operator

(Operator Instructions) We’ll now move to Barry Lucus with Gabelli & Company.

Barry L. Lucus – Gabelli & Company

Thanks and good morning. Congratulations on lifting the cloud.

Vincent L. Sadusky

Yeah, thanks. Thanks Barry.

Barry L. Lucus – Gabelli & Company

We all appreciate it. Rich or Vince, any other approvals required for this, I mean, for example the IRS. How certain or how confident, and I am sure you’re fairly confident, but I haven’t seen a transaction like this. So I feel so little novel. What’s your confidence level on this?

Vincent L. Sadusky

Yeah, from a tax perspective, Barry, that we’re very confident. We’ll have assured level tax opinion from our outside tax counsel supporting our planned tax return positions. And so we also feel that the code sections implicated here are kind of known ground, this is not, this may be noble, of course, for the public company that’d be dealing what we are dealing, but these cash kind of transactions have happened before. So its not new tax that were kind of inventing here, it’s on a Greenfield. So we are confident in that and the IRS doesn’t have to approve the transaction, we’ll file it on our tax return and then we think the prospects of being challenged under audit are very low.

Barry L. Lucus – Gabelli & Company

Okay, it’s very helpful. Second item on the affiliation agreements, maybe early days, but can you at least address the issue of programming costs? And I am assuming that there is going to be reverse comp as part of the agreement.

Vincent L. Sadusky

Yeah, we can’t really comment on the economics of the deal other than disclosing the term vary, but as you know the industry is, the market has moved as retrans is moved significantly in the right direction. The competition back to the networks has increasingly become part of the affiliation agreements, as well. We can’t speak specifically to, but of course, all that’s kind of factored into the expense guidance and the revenue guidance we provide each year.

Barry L. Lucus – Gabelli & Company

Okay, and just a last area. How much this does this change, and we say your attitude you have been involved certainly in consolidation within the industry with the most recent transactions. But does this free you up more? As an example is it open the path for even further consolidation or opportunity?

Vincent L. Sadusky

It’s a good question. I mean as I think our answer is over the years have been pretty consistent. We look at all the deals that are available. We participate in fewer pretty protective of this, kind of, class of assets. We’ve created these very highly rated television stations. But it will make us if we do to make a decision to become more active in the television space. I think it will be helpful in that. We’re now kind of trading in line with our peers, whereas, for the most recent acquisition we did for example, the New Vision acquisition. It was only because of our superior projected synergies we had on the cost side, the revenue side, the retrans side that we were able to competitive and ultimately win the day with that group, most we’re not because we have traded at that discount to our peers, so very hard for us to have a transaction be necessarily accretive when you’re dealing with a multiple discount plus to your peers.

So, we’ll continue to look and I think we’ve kind of got a history. We only do deals that make sense. We do believe in the consolidation of the industry and we’ve seen it taking place. We think more of that will occur, going on into their future where a scale increasingly matters for maturing industry. But I don’t see our outlook changing other than from a cost discipline perspective. This may be a bit more helpful in that we are now, at least trading in line with our peers and given our superior digital assets, we believe at some point we should certainly trade it to premium.

Barry L. Lucus – Gabelli & Company

Well, after the Conversion tricks, I actually close and Transaction close in something?

Richard J. Schmaeling

Yeah, right.

Barry L. Lucus – Gabelli & Company

Okay, great. Thanks very, much and congratulations.

Richard J. Schmaeling

Thanks Barry.

Vincent L. Sadusky

Thank you.

Operator

We’ll now take our next question from Davis Hebert with Wells Fargo.

Davis Hebert – Wells Fargo Securities, LLC

Hi good morning and congrats, thanks for taking the questions. Just one the fixed income side, is there any bond covenant language that could get in the way, whether its merger substantially or all assets I. am not sure how this fix in that., Language but would you need to, as for a consent or is there anything there, but it worry about?

Vincent L. Sadusky

Yeah, thanks Davis. The answer is, no, the indentures, the anything that’s merging is LIN TV Corp. or top Holdco not LIN Television Corporation which is referred to indentures as part of the merger and consolidation of sales, sale of assets provision and so we’ve been through all of indentures. We’ve been through our credit document specifically permits this transaction and we don’t implicate any of the provisions in the indenture that could trip us up. We will have to change the guarantor in that. Today’s LIN TV Corp. tomorrow will be LIN Media LLC.

Davis Hebert – Well Fargo

Okay got it. And you gave a leverage number, and you said that was pro forma for what exactly?

Richard J. Schmaeling

Yeah, so the 3.6 as of 12/31/12 is pro forma for this transaction including the $100 million payment that we made to the joint venture.

Davis Hebert – Wells Fargo Securities, LLC

But does not clearly include any, I guess, adjustment on a tax, on a cash tax outlay, stock price.

Richard J. Schmaeling

No, no.

Davis Hebert – Wells Fargo Securities, LLC

Right...

Richard J. Schmaeling

That’s right.

Davis Hebert – Wells Fargo Securities, LLC

Okay. And then can you provide what cash on hand total debt was at year end?

Richard J. Schmaeling

I can. So at end of year, our net debt was about $844 million and cash was like $46 million.

Davis Hebert – Wells Fargo Securities, LLC

Okay, got it. And the repayment schedule on the new term loan B is like a typical 1% per year schedule.

Richard J. Schmaeling

Yeah, exactly, it is consistent with the existing term loan B and 1% amortization per year.

Davis Hebert – Wells Fargo Securities, LLC

Okay. And I am sorry just to clarify on I guess the maximum possible tax outlay. A lot of numbers has been thrown out; I just want to make sure I was clear on that. What’s the maximum amount I guess if your stock runs as you pointed out that you would have to pay in this situation?

Richard J. Schmaeling

Well, so if our stock runs, if our stock was above $20 per share, we would have no capital losses to shelter the capital gain, and so it would be a $164 million. Somebody answered that question earlier, if I confuse you Marci I apologize, so that the maximum cash tax liability is a $164 million. And I was thinking about it from a perspective of at closing, if our stock prices about $12.20, we start incurring cash taxes. So, you saw that reach above $12.20, it’s about $19, all the way up to potentially a $164 million of our stock price is in excess of $20.

Davis Hebert – Wells Fargo Securities, LLC

Okay. All right, all very helpful. Thanks again.

Richard J. Schmaeling

Thanks.

Operator

(Operator Instructions) We’ll now move to John Kornreich with JK Media.

John Kornreich – JK Media

Yeah, just a clarification, Rich. If your debt was $844 million, is that net of the cash?

Richard J. Schmaeling

Yes.

John Kornreich – JK Media

Okay. So then gross debt is about $890 million minus $45 million?

Richard J. Schmaeling

Yeah.

John Kornreich – JK Media

Okay. And the leverage ratio you gave was based on the net debt?

Richard J. Schmaeling

That’s right.

John Kornreich – JK Media

Okay. Final question unrelated; when you’re doing your year-end conference call?

Richard J. Schmaeling

Yeah, we haven’t scheduled it yet, John. We’re hoping it’s going to be around the end of February, first days of March. We’re in the midst of our audit right now.

John Kornreich – JK Media

Okay. And finally, Vince, given the complexity of this deal and the ingenuity, I vote for a big raise and bonus for Rich.

Vincent L. Sadusky

Yeah, both he and Denise did really a wonderful job. This has been, as I mentioned early on, it’s been a lot of attempts over the years and a lot of really smart ideas by of a lot of smarter advisors, and I think we were able to kind of bring this together only as a result of the willingness and cooperation of Comcast, and NBC, and GE, and Rich, really was the quarterback on this, had terrific tenacity in working this. So your point is well taken, John.

John Kornreich JK media

Thank you. It’s incredible.

Richard J. Schmaeling

Thank you, John.

John Kornreich JK media

Incredible job, Rich.

Richard J. Schmaeling

Thank you, John.

Vincent L. Sadusky

Thank you, John.

Operator

We will now move to Dennis Leibowitz with Act II Partners.

Dennis Leibowitz – Act II Partners

Hi, just a follow-up on Barry’s earlier question about the change in attitude. I was wondering in terms of return of capital, I mean, one of the reasons your stock had been lower was the lack of the dividend compared to the others share repurchases or whatever. So, does this change your attitude leverage targets or anything else in terms of return of capital priorities?

Vincent L. Sadusky

Yeah, I think when we think about dividend, we have mentioned, I guess a while back that as we reduced our leverage to get it into our target zone that we would gauge in both share repurchases and consider other shareholder friendly actions, given where the stock price was over the last year plus, up until probably the last 100 days, 110 days or so, we were engaged solely in share repurchases in terms of shareholder friendly action. And I think that’s going to turn out to be a pretty smart transaction for the buybacks, pretty smart for all our shareholders. Going forward, this transaction really adds only a half of internal leverage or so. So as we are projecting to be on or around our projected leverage levels, we will certainly take into consideration more shareholder friendly actions in terms of return in cash and dividend is certainly something that’s on our radar screen.

Dennis Leibowitz – Act II Partners

Thanks.

Operator

(Operator Instructions) We’ll now move to Alec Seranelli with SM Investors.

Sal Muoio – SM Investors

Hi, this is Sal Muoio. I just want to, structure is relatively sort of unique and I just wanted to understand sort of what the Board, if you could, I don’t know if you can do this, just summarize sort of the advantages, disadvantages of the kind of structure that’s on the table. Obviously you have a partnership, you can eliminate one layer of taxation and but from a LIN’s perspective and also from the perspective of shareholders, just what do you think the positives and negatives are of this sort of structure?

Vincent L. Sadusky

Yeah, I think well what’s important is that if you look at the $573 million of capital gains we’re recognizing unsheltered that’s about $210 million of cash tax cost. So the transaction allows us to avoid cash taxes again depend upon where our share price is at the closing of the transaction. And that’s significant of course. And once we’re a partnership, once we’re an LLC, from our perspective because LIN Media LLC’s only asset is its interest, its ownership of the stock of LIN Television Corporation. It’s not going to matter much to our shareholders. In that there likely won’t be any if perhaps a modest amount of income at the LIN Media LLC level that would be recognized by shareholders on K-1. So, if we declare a dividend, of course, and flow that dividend through, it’s going to be the same as if you were owning shares of LIN TV Corp’s common stock. So, we think in substance the different corporate form, once the market understands it is not going to have a meaningful difference between being a corporation.

Sal Muoio – SM Investors

Right, okay. All right, thank you.

Richard J. Schmaeling

Thank you.

Operator

We’ll now move to Avi Steiner with JPMorgan.

Avi Steiner – JPMorgan

Thanks. One quick question here. Can you remind us what Hicks Muse’s stake in the company is? I don’t know if you can tell us their basis. And does this pave the way or make it difficult for Hicks to exit their position? Thank you.

Richard J. Schmaeling

With regard to their basis, it wouldn’t be surprising to know that their basis is a little bit north of 20 bucks per share. So, this capital loss that exists within our structure, as a result that of the LBO back in 1998 and their basis per share is somewhat north of 20 bucks. And this capital loss is real. I mean, unfortunately there was real economic losses that have occurred during their ownership. And Vince…

Vincent L. Sadusky

Yeah, and with regard to their ability whether this enhances or decreases their ability to sell I mean of course only they can make that decision. But this overhang has been a contingent liability that’s been challenging to value. And so when you have something that’s hard to value, you have a tendency to kind of risk adjust to the conservative, especially over the last several years the way the markets have been. So I would think if anything, this would be a positive in terms of marketability.

Avi Steiner – JPMorgan

Fair enough. And I’m sorry if I missed it. Do you mention what their stake is fully diluted, if you can?

Richard J. Schmaeling

Yeah, it’s about 30 somewhat percent.

Avi Steiner – JPMorgan

Thanks a lot guys. I appreciate it.

Richard J. Schmaeling

Yeah.

Operator

And it appears there are no further questions. I’d like to turn the conference back over to Mr. Sadusky for any additional or closing remarks.

Vincent L. Sadusky

I will say it again, this was a long time coming appreciate the thoughtful questions from the folks on the phone, all of you have followed the company for a long time. We appreciate your interest and we’re very excited to remove this contingent liability once and for all and have the ability to be able to transact in a way that’s unencumbered by this guarantee overhang. So thank you all very much.

Richard J. Schmaeling

Hey, Avi this is back that Hicks Muse’s ownership is about 43% sorry.

Avi Steiner – JPMorgan

Okay.

Richard J. Schmaeling

Thank you.

Vincent L. Sadusky

Thank you.

Operator

And that does conclude today’s conference. We thank you for your participation.

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