Sinclair Broadcast Group's CEO Discusses Q4 2013 Results - Earnings Call Transcript

| About: Sinclair Broadcast (SBGI)

Sinclair Broadcast Group Inc. (NASDAQ:SBGI)

Q4 2013 Earnings Conference Call

February 12, 2014 9:30 am ET

Executives

David D. Smith - President and Chief Executive Officer

David B. Amy - Executive Vice President and Chief Financial Officer

Steven M. Marks - Vice President and Chief Operating Officer, Sinclair Television Group

Lucy A. Rutishauser - Senior Vice President, Corporate Finance & Treasurer

Analysts

Alexia Quadrani - JPMorgan

Marci Ryvicker - Wells Fargo

Aaron Watts - Deutsche Bank

David Bank – RBC Capital

Tracy Young - Evercore

Davis Hebert - Wells Fargo

Lance Vitanza - CRT Capital

James Dix - Wedbush

Howard Rosencrans - Value Advisory

Barry Lucas - Gabelli & Company

Avi Steiner - JPMorgan

Dennis Leibowitz - Act II Partners

Operator

Greetings, and welcome to the Sinclair Broadcast Group Fourth Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. David Amy, Executive Vice President and Chief Financial Officer. Thank you, Mr. Amy. You may begin.

David B. Amy

Thank you, operator, and good morning, everyone. Participating on the call today with me are David Smith, President and CEO; Steve Marks, Chief Operating Officer of Sinclair Television Group; and Lucy Rutishauser, Senior Vice President, Corporate Finance and Treasurer; and Steve Pruett, another Chief Officer of our Chesapeake Television Group. Before we begin, Lucy will make our forward-looking statement disclaimer.

Lucy A. Rutishauser

Thank you, Dave. Good morning, everyone. Certain matters discussed on this call may include forward-looking statements regarding, among other things, future operating results. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ from those described in the forward-looking statements as a result of various important factors. Such factors have been set forth in the Company's most recent reports on Forms 10-Q, 10-K and 8-K as filed with the SEC and included in our fourth quarter earnings release. The Company undertakes no obligation to update these forward-looking statements. The Company uses its website as a key source of Company information, which can be accessed at www.sbgi.net.

In accordance with Regulation FD, this call is being made available to the public. A webcast replay will be available on our website later today and will remain available until our next quarterly earnings release. Redistribution of this call is prohibited without the expressed written consent of the Company. Included on the call will be a discussion of non-GAAP financial measures, specifically television broadcast cash flow, EBITDA, free cash flow and leverage. These metrics are not meant to replace GAAP measurements but are provided as supplemental detail to assist the public in their analysis and valuation of our Company. A reconciliation of the non-GAAP financial measures to the GAAP measures in our financial statements is provided on our website under Investor Information, Reports & Filings.

David B. Amy

Thank you, Lucy. This was a solid quarter for the Company, but before we go through the results, let me review some of the activities that have taken place since our last earnings call. On October 1, we closed on the purchase of KDBC, the CBS affiliate in El Paso, Texas for $21.4 million. On October 31, we closed on the purchase of the non-license assets of WPFO, the FOX affiliate in Portland, Maine for $13.6 million and entered into an agreement to provide sales and other services. On November 21, we closed on the purchase of the non-license assets of KRNV, the NBC affiliate in Reno, Nevada and KENV, a simulcast in the Salt Lake City DMA, for $26 million and entered into an agreement to provide sales and other services to the stations.

On November 22, we closed on the acquisition of the 18 Barrington television stations for $370 million and entered into agreements to operate or provide sales and other services to another six stations. As part of that transaction, we sold our FOX station, WSYT, and assigned our local marketing agreement and purchase option on WNYS, the MyNetwork affiliate, both in Syracuse, New York to Bristlecone Broadcasting. In additions, we sold our FOX affiliate, WYZZ, in Peoria, Illinois to Cunningham Broadcasting Corporation. The total purchase price for the sales of the stations was $37 million less working capital adjustments.

This week, we entered into an agreement in principal for a $500,000 investment, purchasing Series A Preferred Units of Timeline Labs, and anticipate utilizing their products on 15 of our news-producing stations. Timeline specializes in proprietary tools that discover, measure, and display trending social content in real time in such a way as to allow these items to be incorporated into live newscasts and shows.

Now turning to our results, net broadcast revenues for the fourth quarter were $382.3 million, an increase of 33.2% or $95.2 million higher than fourth quarter 2012 and higher than our guidance as the Barrington acquisition closed a week earlier than forecasted. Same-station net broadcast revenues, excluding $128.4 million from the acquisitions, were up 7.7% when excluding $54.1 million in 2012 political revenues. Including political, same-station revenues were down 11.6% and within our Q4 guidance. Growth not only came from the acquisition but also from our three core primary revenue sources, core time sales, retransmission fees, and digital interactive.

On a full-year basis, net broadcast revenues were a record breaking $1,217.5 million, up 32.3%. Excluding the acquisitions on a same-station basis, with 2013 being an odd year with the absence of political, net broadcast revenues were down 2.2%. On a pro forma basis, assuming all closed and pending station acquisitions and stations sales are in our results for the full year 2013, our net broadcast revenues for 2013 including synergies would have been approximately $1.8 billion.

Television operating expenses in the fourth quarter, defined as station production and station SG&A expenses before barter, were $198.4 million, up 62.3% or $76.1 million from fourth quarter last year. Excluding $72 million related to the acquisitions and $1 million of stock-based compensation, same-station expenses were up $3.5 million or 2.9%. The increase versus last year was due primarily to higher reverse retransmission fees and compensation expense, offset in part by lower cost of sales commissioned. On a full-year basis, TV operating expenses on a same-station basis were up 8.2% also due to higher reverse retrans fees and compensation.

Corporate overhead in the quarter was $14.3 million, up $6.1 million versus the same period last year. $1.9 million of the increase relates to one-time acquisition costs. The remainder is due to increased staffing resulting in higher salaries and benefits, $2.3 million, and other expenses related to the acquisition of 63 television stations during the year. Corporate overhead for the full year was up 57.9% for the reasons just described.

Television broadcast cash flow, or BCF, in the quarter was $165.8 million, up $15.9 million or 10.6% from last year's fourth quarter BCF. The broadcast cash flow margin on net broadcast revenues for the quarter was 43.4%. The acquisitions contributed $54.9 million of BCF in the quarter. For the year, BCF was $507.7 million, an increase of 17.1% or $74.3 million.

EBITDA was $155.2 million in the quarter, up $10.3 million or 7.1% higher than the same period last year. The EBITDA margin on total revenues was 36.3% for the quarter. For the year, EBITDA was $470.8 million, an increase of 14.2% or $58.5 million. On a pro forma basis, assuming all closed and pending acquisitions and sales were in our results for the full year 2013, our EBITDA for the year would have been approximately $692 million.

Net interest expense for the quarter was $39.8 million, up $3.4 million versus fourth quarter last year. The increase was due primarily to acquisition financing. Our weighted average cost of debt for the Company is approximately 5.3% with our highest cost coming from an outstanding $237.5 million of 8.375% senior unsecured notes which are callable later this year. Included in the results are one-time items related to the refinancing and sales of the Syracuse stations.

In the fourth quarter, we recognized a loss on extinguishment of debt of $43.1 million related to the call of $500 million of 9.25% senior secured second lien notes due 2017 and a gain of $1 million on the conversion of $5.4 million 3% convertible senior notes due 2027. We also recognized a $3.3 million loss on the sale of our FOX station in Syracuse, the sale of which was required as part of the Barrington transaction.

Diluted earnings per share on 100.2 million in weighted average common shares was $0.02 in the quarter. Excluding the $42.1 million loss on extinguishment of debt, we would have had diluted earnings per share of $0.29 as compared to $0.72 in the same period last year. For the year, diluted EPS was $0.78, and $1.18 excluding $58.2 million losses on extinguishment of debt. The acquisitions net of their financing cost contributed $0.14 of diluted EPS in the quarter and $0.27 for the year.

We generated $101.1 million of free cash flow in the quarter, of which $14.8 million was distributed to shareholders. For the full year 2013, we generated $263.4 million of free cash flow and distributed $56.8 million to shareholders. Over the past year, we converted 55.9% of our EBITDA into free cash. We produced an 8.5% after-tax free cash flow yield on our market cap and paid a 1.7% annualized dividend yield based on our year-end closing price of $35.73.

On a pro forma basis for all closed and announced transactions, our current expectation for 2014-2015 blended free cash flow is approximately $420 million. This is slightly lower than our previous expectation due to higher CapEx and cash taxes than we previously indicated.

So now with that, Lucy will take you through the balance sheet and cash flow highlights.

Lucy A. Rutishauser

Thank you, Dave. So we had a lot of financing activity take place in the fourth quarter, so let me try to walk you through it. In October, we closed on a private offering of $350 million senior unsecured notes due 2021 which were priced at 100% of their par value and bear interest at a rate of 6.375%. The net proceeds from the notes along with bank debt was used to redeem in full the $500 million par value of the 9.25% senior secured second lien notes due 2017.

As Dave mentioned, we recognized a $43.1 million loss in the fourth quarter on the redemption of the notes which included a $25 million make whole premium and a write-off of the unamortized financing cost and original issue discount. The redemption of the 9.25% notes with lower cost debt will result in an increase of about $0.11 of after-tax free cash flow per share on an annualized basis.

In October, we drew the $445 million of incremental term loan A that was raised in May of this past year and that was used to fund the November closing of the Barrington station and other fourth quarter acquisitions. In October, we raised $450 million of incremental term loans consisting of $250 million of term B loans maturing 2020 and $200 million delayed draw term loan A maturing 2018, and that has not been drawn yet. We also obtained an additional $57.5 million of capacity under our revolving credit agreement maturing 2018. The term B loans were used in combination with the $350 million 6.375% notes to redeem the 9.25% notes.

In October, holders of our outstanding $5.4 million original principal value of 3% convertible senior notes due 2027 were converted by the holders and settled for approximately $10.5 million in cash pursuant to the indenture. In the fourth quarter, we recorded a gain of approximately $1 million on the settlement of the notes.

At December 31, total debt was $3,034 million. Included in that amount was $88.5 million of non-recourse nonguaranteed VIE and non-wholly owned subsidiary debt that we are required to consolidate on our books. We ended the quarter with $280.1 million of cash on hand and have available the full $157.5 million under the revolving commitment and the $200 million undrawn term loan A, so approximately $600 million of liquidity before our 2014 free cash flow generation.

Capital expenditures in the fourth quarter were $16.6 million. For the year CapEx was $45.4 million. As Dave mentioned, our 2014 CapEx forecast is higher than previously indicated and is now expected to be approximately $69 million. Of this almost $20 million relates to Barrington and once we closed those stations and had the opportunity to get in them and evaluate the condition of the facilities, we found that the stations were in need of more investments than originally anticipated.

Our 2014 forecast also includes $7 million related to the continuing development of HD news and master control upgrades and our midsized markets such as Oklahoma City, and $9 million towards consolidating studio and building operations in markets like San Antonio and El Paso. Cash programming payments in the fourth quarter were $23 million and $89.5 million for the year. For 2014, we are forecasting programming payments of $92.7 million.

Of the $263.4 million in free cash flow generated in 2013 and after $21.6 million in taxes, $59 million was used to pay down debt, $56.8 million was paid in dividends to the shareholders and the remainder was used for working capital and station acquisitions. Total net leverage to the holding company at quarter end was 4.61 times and this excludes the VIE and nonrecourse nonguaranteed debt and is net of cash. The first lien indebtedness ratio was 1.75 times on a covenant of 3.75 times. The total indebtedness ratio through the television operating company was 4.69 times on a covenant of 7, and interest coverage was 3.6 times on a covenant of 1.15 times.

Assuming all announced transactions, including the Allbritton and New Age stations plus expected synergies, our 2012-2013 pro forma total net leverage was approximately 4.8 times on a blended two year basis. For 2014, we expect total net leverage for the 12 month period to be approximately 3.75 times and with all pending transactions to be approximately 4.55 times.

Steve Marks will now take you through our operating performance.

Steven M. Marks

Thank you, Lucy, and good morning, everybody. For the fourth quarter on a same-station basis, total net broadcast revenues excluding political were up 7.7%. Political revenues were only $6.7 million as compared to $54.1 million in the fourth quarter of 2012. On a same-station basis excluding political revenues, local net broadcast revenues were up 10.8%. Local revenues represented 78% of our total broadcast revenues for the quarter. Including our newly acquired stations, local broadcast revenues for the fourth quarter were up 58.1% including political, and 64.4% excluding political.

National broadcast revenue representing approximately 22% of our broadcast revenues, on a same-station basis excluding political were down 3.1% due to accounts shifting to local. Including our newly acquired stations and the impact of political, national broadcast revenues were down 14.2%.

On a same station basis, the automotive category was up 5.4% in the quarter. Our fastest growing categories in addition to automotive are services, medical, grocery, entertainment and home products. Retail, direct response, telecommunications and restaurants were soft. For the year, automotive which represented 25.1% of our same-station time sales, was up 6.9%.

Turning to our outlook, for the first quarter of 2014 we are expecting net broadcast revenues to be approximately $366.8 million to $371.2 million, up 45% to 46.8% as compared to first quarter of 2013. This assumes $4.2 million of political versus $0.9 million in the same period last year. Excluding the acquisitions, same station net broadcast revenues are expected to be up 1.8% to 3.6% and up 0.9% to 2.6% when excluding political. While these numbers are decent, the severe weather, of course the East Coast, Northeast, Midwest and now the Northwest as well as the Southeast has slowed advertising spending in many of our markets.

On the positive, February is benefiting from $8.2 million of incremental Super Bowl revenue which aired on our 31 FOX affiliates as compared to the $2.5 million last year when it aired on our 11 CBS television stations. As the number three NBC affiliate group in the country, we are also pacing for an additional $3.6 million of Olympic revenues which is a revenue stream that we never participated in before but are now able to as a result of the acquisitions. This is important in understanding the tendency of the Olympics as there is distortion of revenue being placed on NBC stations during that term and so much so that the February Nielsen book by many will be discounted in value by advertisers.

As no surprise those categories dependent on, store traffic such as retail, fast food and restaurants as well as direct response are expected to be weaker in the first quarter as a result of the severe weather through the first five weeks of the quarter. Same station automotive spending is expected to be up mid-single-digit percent. Other categories expected to do well are services, particularly the insurance segment, medical and media.

For the year, net broadcast revenues are expected to be approximately $1.675 billion to $1.695 billion, up 37.6% and 39.2% when compared to 2013, including approximately $122.5 million of political revenues which as we previously guided is flat to 2010 same station levels. Same station net broadcast revenues excluding political are expected to be up 1.5% to 3.2%. These estimates do not include Allbritton or New Age which are still pending.

David will now take you through the remaining forecast.

David B. Amy

Thanks Steve. On the expense side, we are forecasting TV production and SG&A expenses in the first quarter to be approximately $217 million including $2.4 million of trade expense which was previously forecasted to a larger extent. On a same station basis, expenses are expected to be up 8% in the first quarter and 8.6% for the year. Excluding reverse retrans, expenses are forecasted to be up 4.8% in the quarter and 6.1% for the year on higher compensation, health insurance plus additional staffing for the expansion of news in 11 of our markets, five of which are JSA markets, and we do not include any benefit for increased revenues in the first quarter for those expansions.

We expect EBITDA in the first quarter to be approximately $120.2 million to $124.1 million, an increase of 25.3% to 29.9%. For the year, EBITDA is expected to be $672.6 million to $690.6 million, an increase of 42.9% to 46.7% compared to 2013. Including all pending transactions for the full year, pro forma EBITDA would be approximately $785 million to $805 million. Based on our guidance, free cash flow in the quarter is expected to be in the high $60 million range and $380 million to $390 million for the year on a reported basis.

So with that, I would like to open it up for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Alexia Quadrani from JPMorgan. Please proceed with your question.

Alexia Quadrani - JPMorgan

Just a couple of questions. First off, if you could comment if the FCC decides to unwind the JSAs, I guess what your options are from there? And then just a follow-up question on your commentary about auto, if you could give us a sense of how auto is pacing maybe ex the Super Bowl benefit?

David B. Amy

As far as the first part of your question, there's a lot of discussion in terms of rumors going on about what the FCC is anticipating or proposing regarding JSAs. As far as what we have reported, we have about 20% of our revenue that has been reported as coming in from our JSA relationships, and from our point of view they are important relationships and we don't at this point have a position that would based on, there's no role in it to describe to us what their expectations are. So it would just be a hypothetical discussion but we do not anticipate any kind of loss of value in that regard. On the auto, Steve, maybe you could?

Steven M. Marks

Sure Dave. I think the automotive category is very encouraging for us in the first quarter given the weather circumstances. As we said in our script, the pace is mid single digits and that is right on top of where we finished fourth quarter actually. So when you take into account the severe weather conditions in the first quarter, I think it's very encouraging that we continue to pace at mid-single digit form in the auto category which is so critical and I think you could expect that category to continue to flourish. Given the weather conditions in the first quarter, I think it's pretty impressive pace [indiscernible] in that category.

Alexia Quadrani - JPMorgan

Okay, thank you. And just a follow-up if I may about the growing cash balance there, if M&A continue to take a bit of a pause, would you I guess maybe you can update us on the priority use of cash, would you consider a special dividend?

David B. Amy

We're holding off, we just announced a $0.15 this morning and what we would intend to do normally, I guess in normal circumstance is to increase that dividend over time but for now of course we are holding off cash going for the acquisitions as you mentioned. Don't expect to see any delay in terms or cancellation in terms of our acquisitions, so we fully intend to be closing on the Allbritton and the New Age deals here later on either in the second quarter. So don't know that we would be reflecting on or considering a special dividend at all but what I think we will see as we build our free cash flows is that over time that $0.15 per share should start to increase, and what the Board likes to do is provide clarity and consistency for the market as far as what our dividends can be expected.

Operator

Our next question comes from Marci Ryvicker with Wells Fargo. Please proceed with your question.

Marci Ryvicker - Wells Fargo

I have a couple. First question is, probably for you Dave, but Q1 guide came in pretty light, I think $20 million less in EBITDA, $10 million lighter in revenue, $10 million heavier in expenses, yet when we look apples-to-apples on your full year guide, it's in line. So I guess the market is having trouble reconciling this. We don't know what happened, what's going on in Q1 on either of those lines and then how do we get comfortable and how are you comfortable with your full year guide for both revenue and expenses?

Lucy A. Rutishauser

So let me take Q1 here, so you have a couple of things happening. One as Steve mentioned is the weather related that hounded us from January and the first two weeks here in February. So you have that happening on the revenue side. On the expense side, when you back out the reverse retrans, we're talking about just under 5% expense growth but remember we have a couple of things happening there. One is the higher sales commission on the higher revenue in the first quarter and that's going to drive the expenses. The other thing is we have the news expansion. So we talked about 11 news expansions for the year, six of those are going to hit in the first quarter, and as Dave mentioned, you are not going to see the corresponding revenue come in from those.

So when you back out sales commissions, you back out the news expansions, you are really talking more 2% to 3% core expense growth, and you are going to have that news expansion take place throughout the year. Those are coming in this year, that will be a new expense. So we gave you of full-year guidance. We recognized that the modeling is complex with all the acquisitions. So we are trying to help see the market get some transparency here. This is our first time to ever even provide a full year revenue guidance. We feel comfortable with what we have put out there, otherwise we wouldn't put a number out. So the only thing that will impact that would be the closing of New Age and Allbritton which are not in those numbers at this point.

Marci Ryvicker - Wells Fargo

The one thing you guys have not talked about for the first time is core time sales, either in the fourth quarter or the first quarter. Can you give us color on core time sales, either including or excluding political for both?

Lucy A. Rutishauser

Yes, for fourth quarter the core time sales, those were up in the fourth quarter including and excluding political. For the first quarter, the core is pacing slightly down, and again that's really attributable to the weather event.

Marci Ryvicker - Wells Fargo

So the fourth quarter which is up, low singles, mid singles, any quantification?

Lucy A. Rutishauser

We'd be looking out more like the low single-digits.

Marci Ryvicker - Wells Fargo

Okay. And have you had any communication from the FCC regarding Allbritton and New Age, are they talking about unwinding any of the JSAs or SSAs in those two acquisitions?

David B. Amy

We have not heard anything to that effect at all.

Marci Ryvicker - Wells Fargo

And you still, I think you still believe it will close sometime in Q2, is that what you said, Dave?

David B. Amy

That's what we anticipate. The pacing item that we are involved in right now just getting through some, a set amount with the DoJ here and that's pretty much coming to a close. So we would expect the – it should still be in the second quarter.

Marci Ryvicker - Wells Fargo

And then the last question I have, any thoughts about share repurchase authorization given where your stock price is right now? I know you have these pending deals but is that something that you would consider just given what your [indiscernible] at this point?

Lucy A. Rutishauser

I think Dave talked about we are committed to the dividend and growing that but I think when you start to look at where the analyst target prices are on the Company, being averaging in the low $40, you are talking about a 30% – over a 30% discount on the stock right now which is a huge overreaction to the JSA conversation that's taking place. So we can't ignore that. That is a lot of real value that investors are leaving on the table. So we do need to seriously start looking at potentially buying shares and we do have an authorization that's out there for just over $100 million that we could use.

Operator

Our next question comes from Aaron Watts with Deutsche Bank. Please proceed with your question.

Aaron Watts - Deutsche Bank

Just one question on some of the operating performance variance between the bigger markets and maybe some of the smaller markets you kind of segmented out and maybe that ties to another question which is just a little more detail on what you're seeing in the differences between the local ad time and the national ad time?

Steven M. Marks

I think local is pacing strongly than national right now. There have been some account shifts but that takes place year in and year out. I think national quite frankly started a little bit late in 2014, with the holidays go in December getting Madison Avenue an excuse to pretty much take an extra week off. It's just one of those calendar events that took place and essentially quite frankly we made the national business for first quarter 2014 for all intensive purposes a 12 week quarter instead of a 13 week quarter, and I think that's part of the reason why national is a little bit softer for the first quarter 2014.

I would say though because of again – and you guys are living it for those on the East Coast – the weather has been absolutely brutal and advertisers on national level as well as the local level are rearranging their dollars, holding onto it, until the weather changes and we just did not had a break on the weather. So I do believe national is off to a little bit of a slower start just because the way the calendar fell and our local business has been pretty big.

Aaron Watts - Deutsche Bank

Okay, and just on the weather issues that you had, are you really seeing some differentiation in the markets you have that haven't had the severe weather versus the ones that have, is there a pretty big variance there?

Steven M. Marks

Yes, I think when you look at out on the West Coast in our Texas stations, we're hitting a home run in Seattle, we're hitting a home run – neutral run in San Antonio which is our biggest billing market and has the greatest fortune of having both the Olympics and the Super Bowl in San Antonio right now, and again it's critical for us because it is our biggest billing market. So where we are not having weather events, we are doing very well.

Aaron Watts - Deutsche Bank

Okay, thanks a lot.

Operator

Our next question comes from David Bank with RBC Capital. Please proceed with your question.

David Bank – RBC Capital

Two questions, the first is could you comment on your reaction to the NFL on Thursday package from CBS and what you think it does for potential revenues and is it in your guidance, does it represent potential upside, is it cannibalized potentially – did it cannibalized other revenues? The second question is I guess more for David Smith just technically, can you talk about what you anticipate for Timeline throughout potential standard change for ACSC, like where do you think we are in this process and what has to happen at this point?

Steven M. Marks

As far as the football question, any time you could get football on your air waves, it's a benefit to do so. So we are excited to have these official games on a CBS station. We have some outstanding CBS property. So typically with football as well as most other events, it doesn't necessarily mean that the markets are going to garner more cash. What will happen in these scenarios is that the CBS station will steal revenue shares from their competition in the marketplace by having the benefit of these [eight] (ph) additional games. So you could expect CBS stations to grow revenue share and clearly we anticipate that. I don't believe because of the lateness of this pull, getting the CBS station [indiscernible] with these [eight] (ph) additional games.

David Bank – RBC Capital

And I guess on the plus side though, do you think you lose share – like I'm trying to figure out on a net basis if this is additive or neutral or is it negative?

Steven M. Marks

I think from a revenue share basis, again the markets not necessarily going to grow, so the market stays the same and we have better programming, we are going to steal revenue share from our competition in these individual marketplaces where we have CBS.

David D. Smith

Dave, I think the answer to the last part of the question is we're probably a couple of years out. I think you're going to see in the near-term probably an effort to move in the direction of starting to create a prototype of what we would characterize kind of a final sign for a standard, probably in some degrees in some conjunction with the ACSC possibly. If not, it will be done independently of the ACSC, at some point of time probably in the future merge back into the ACSC. But I think we are of the view now it's time to get going I think at the technology side or down to at least paper, so that it's buildable. My sense, my broader sense is that there is a broad, a wide sense of support now in the industry of the world I think to some degree to break [indiscernible], in this country to recognize the necessity, the absolute necessity of affordability and being able to talk to every device in the marketplace for all the obvious reasons, and I think while it's slow and oftentimes painful process, if we get people to the conclusion that we need to be able to compete with our old platforms, it nevertheless is happening and our view is we'll get this done.

Operator

Our next question comes from Tracy Young with Evercore. Please proceed with your question.

Tracy Young - Evercore

I have a couple of clarification questions. First, is there any way you can give us the core decline in January on a reported basis? Also your guidance for first quarter 2014, you gave acquisition revenues of $109.3 million, how much of that was closures related that you did in the fourth quarter? And then lastly, you gave free cash flow guidance of $420 million, are those just related to the stations you closed? Thank you.

Lucy A. Rutishauser

Okay, so a lot of questions there, Tracy. I think the acquisition number, I think we'll probably have to do off-line because I don't have that here with me. The $420 million for the free cash flow, so that was a blended 2014-2015 pro forma number for all closed and announced acquisitions.

Tracy Young - Evercore

Okay, and lastly, can you provide for declines for January?

David B. Amy

I don't have that.

Lucy A. Rutishauser

No, not at this point, Tracy.

Operator

Our next question comes from Davis Hebert with Wells Fargo. Please proceed with your question.

Davis Hebert - Wells Fargo

First question is on political. You gave full year expectations for 2014, just curious if you could provide an apples-to-apples number for 2012?

Lucy A. Rutishauser

Give us a second here, Davis.

Davis Hebert - Wells Fargo

Sure, and in the meantime I was just curious about your thoughts around political revenues this year and how that might compare?

Steven M. Marks

There are so many markets, it's hard to avoid the hot races. So we're going to be [indiscernible] for a lot of strategic markets for us, Florida, Michigan, Iowa right on down the road. We've already started to see dollars pouring in from Texas, they have a primary going on in March. So we are very fortunate there's been a number of articles written about our Company, how strategically placed we are for political in 2014. So we put our guidance out there and in first-quarter we are right on top of our numbers in terms of political. So that's one category that clearly is going well as the year starts for 2014. I think it's going to be a great year for us in political as the year goes forward.

Lucy A. Rutishauser

So Davis, to your question and let me just clarify a couple of things. So, on an as-reported basis for 2014 for everything that we currently have closed, we estimate at a $122 million in the political and that would have been flat to 2010. On a pro forma basis, that number with Allbritton and New Age would be more like $140 million. For 2012, just for what we have closed, the number would have been $190 million. Pro forma there for Allbritton and New Age, the number would be more like $225 million.

Davis Hebert - Wells Fargo

Okay, got it. And my next question is around the account shift from I think it was national to local, just curious what drives that, I mean is it some internal definition or maybe if you could provide a little more color there?

Steven M. Marks

A couple of retail accounts that were fairly significant for national bases that went local. And again, I downplay it because these account shifts happen all the time. Really at the end of the day we look at the bottom line. I don't think either category, whether it would be local or national, is a cause for concern. I think like I said I think we also had a pretty good start given the weather conditions and the fact that national started a little bit late this year. I clearly think that we're off to a good start and our revenue shares, when the audits come out in the first quarter will reflect that. Our performance in the first quarter is exceptional in terms of revenue share.

Davis Hebert - Wells Fargo

Okay, that's helpful, thank you. And last question is just on the balance sheet, just wanted to confirm you guys still need the funding for Allbritton and is that sort of the only moving part at this point?

Lucy A. Rutishauser

Yes, so when you think about the liquidity that we have, Davis, that we talked about, we have the 200 million delayed draw, we have just under $300 million of cash on hand plus the revolver available to us, Allbritton and New Age combined is about $1.1 billion that we need to fund. So you are talking of $500 million to $600 million that we would still need to raise in the marketplace to fund all that.

Davis Hebert - Wells Fargo

Okay, perfect. Thank you.

Operator

Our next question comes from Lance Vitanza with CRT Capital. Please proceed with your question.

Lance Vitanza - CRT Capital

First I just wanted to clarify, the EBITDA guidance for 2014 that you called out earlier in the call, I think you said $672.6 million to $690.6 million, is that right, I just wanted to get a sense to make sure I know what's in that guidance with respect to the pending acquisitions?

Lucy A. Rutishauser

So Allbritton and New Age are not in any of our 2014 guidance.

Lance Vitanza - CRT Capital

Okay, is it possible to provide some sort of ballpark on how much EBITDA goes to acquisitions would contribute on a pro forma basis as far as acquisitions closed Jan 1?

Lucy A. Rutishauser

Yes, you are probably looking at about $300 million on the revenue side if we had them for a full year and on the EBITDA side, I would say in the low $100 million area.

Lance Vitanza - CRT Capital

$100 million to $110 million, that kind of range?

Lucy A. Rutishauser

Yes.

Lance Vitanza - CRT Capital

Okay, great. And then the other question I had is on Aereo, obviously a lot of talk about that with the oral arguments scheduled for April now and I'm wondering if that's held, what kind of options do you see for both the networks and the affiliates and have you given any thought to the financial ramifications of that case?

David B. Amy

I'm just going to say if that's up for [sale] (ph), it would probably move towards further issues regarding the intellectual property discussion or cases so that it would take a bit longer get through. I think I'm not sure how long it would take to go through intellectual-property challenge and copy authorizations that are not being discussed or focused on at the moment, so that would be another round.

And as far as where we're heading in regards to some of the network conversations and how they relate to [indiscernible] local affiliates, there is I think what I keep seeing in fact is a lot of confusion from the marketplace or from the trades in regards to what would that mean [indiscernible] ultimately Aereo model out there and there is a lot of complexity that would go, that come into play regarding the [NBPDs] (ph) and how they would be able to or if they would be able to adopt an Aereo model, that in and of itself would require a significant amount of legal work in terms of courts trying to figure out just what does that mean in terms of the obligation to a program supplier than [NBPD] (ph) versus having an Aereo type model attached to it.

So now you are talking now years and years before that would probably get settled or worked through if it ever did and now we're in this hypothetical field or area in terms of what could come out of all this. It's difficult to say but I think the point of it all is that there is no intention that plays out that the networks would abandon their affiliates over an Aereo model. The truth of the matter is that the amount of support that we provided as affiliates to the network programming is significant especially with the amount of local programming that we provide either through news production or through syndicated products that we purchase and build around the network programming.

So you can see that from market to market throughout the country as far as what the definition is as far as a strong affiliate, in some markets the CBS station is stronger, is the strongest station, in some markets the ABC or the NBC might be the strongest station in the marketplace and that all has to do with just the historical branding legacy of the station and it demonstrates the importance of local branding to the networks and to their viewing. So I know that's a long answer in regards to just what's going on with Aereo and the confusion that's out there, and I don't know if that helps clarify it at all but…

Lance Vitanza - CRT Capital

Thanks. If I could just ask one more question and I was wondering about pricing trends in the syndication market, I imagine the unit cost up a fair amount and I'm wondering if you could provide any color there, and then specifically what if anything you are doing to offset or manage what I imagine are pretty substantial escalating costs?

Steven M. Marks

Actually our costs are within control right now which continue to get leveraged by getting more stations. We expect two things to happen. Number one, we're going to target shows that are the best shows in the marketplace that we may not have on our air and we are going to go after those shows. And in addition to that, when you take a look at the markets that we are in, we have programs all of course are line of the best that money can buy, our stations are fortified from top to bottom and we have leverage right now in terms of buying. So I expect the program cost to continue to be under control. So as this company presents itself, syndication prices will only increase if we decide to go after a show that one of our competitors don't have. When somebody is introducing a new show to the marketplace, I think we have tremendous leverage. So I believe that expense item will continue to be under control as each year goes forward.

Operator

Our next question comes from James Dix with Wedbush. Please proceed with your question.

James Dix - Wedbush

Just a couple of things. In terms of the first quarter outlook, it seems like the impact of the weather on auto has not been as great as on some of the other categories which you called out, maybe some of that is due to Super Bowl but I was just curious if that was the case and why – if so, why? And then second, just following up on, David, the color you gave on the share revenue coming from JSAs, do you have a rough share what your EBITDA is coming from JSAs and SSAs similar to that number and then do you have any estimate as to that same number or that same percentage for the Allbritton deal in particular?

Steven M. Marks

Give me the first part of that question again.

James Dix - Wedbush

Sure. It seems like with the auto pacing up in the first quarter mid single digits, so it's been less effected by severe weather than some of the other categories which you called out like restaurants et cetera, so A., is that true, and B., why do you think that is?

Steven M. Marks

So interestingly enough and again positioning how well we're doing actually in the first quarter, we have 18 categories that are pacing up right now, and typically in any given quarter we range between 15 to 17 categories. As far as automotive, what's very encouraging about automotive is that if you take a look at where we finished in fourth quarter which was mid single digits and then you take a look at where we're pacing right now in the first quarter which again is mid-single digits, it's hard to quantify exactly what cost the weather has had on the automotive industry and what's encouraging is that we know we had a weather event that's been consistent for six weeks now, but yet the category is pacing almost identical to a non-weather event in fourth quarter.

So that would lead me to believe that the category continues to be strong and leads for optimism throughout the course of the year that this critical category will continue to grow at a relatively decent pace for us. So I think all things given in the first quarter that category in particular is very encouraging given the fact that there is a weather event. So it's hard to quantify exactly what effect it had but clearly it had some effect, there's no question about that.

Lucy A. Rutishauser

James, I'll take the second question. I realize that our public filing include revenues for the LMAs and the JSAs and that many people have tried to use those numbers to attempt to calculate an associated BCF. The problem is when you do that, it's difficult to separate the expenses because the stations put them together. So what may appear to be 20% of revenues doesn't translate to 20% of the BCF, it's actually something much less because if you think about it, the reason for the JSA is because the license you need to leverage the expertise and scale of the larger station to help their own profitability.

So if you were to separate these stations, I would expect that much of the expense would be incurred on the license fee side and therefore our BCF impact would be less. So, when you consider however that the stock is down year-to-date 20%, again I think shows the market's overreaction to all of this because they've not only taken the stock down by more than the BCF percentage but they have assumed that the broadcasters don't react to any potential rule changes, and quite frankly that's just absurd.

James Dix - Wedbush

Right. Just as a ballpark would you say that the BCF impact would be like 5% on 20%, I mean that order of magnitude less just because of the dynamic you just laid out?

David B. Amy

I don't know how we get to that number. To get you some satisfaction with the calculation, it's something that you can just look at it and say, here's an answer to your question. I mean we can look at it from a standpoint of saying, here's 20% of the revenue margins on the JSAs are going to be better typically because of the fact that they are now sharing services together so that creates an efficiency, so the margin ties in at 20% for the average margin that you would see within our Company. Probably that's a fair statement but to try to take that and separate that and avoid [indiscernible] we're heading doesn't really work out. So I don't know that we can give you any satisfaction in terms of giving, providing an answer.

James Dix - Wedbush

Okay. And then just on Allbritton, if there were no sidecar agreements involved in that, any rough sense as to what the impact would be in terms of just like your free cash flow expectations?

David D. Smith

Allbritton is primarily build around the DC station, the Little Rock station and those are just the powerhouses that are within the group, so everything else is as good as they are and it's pretty secondary from that standpoint. So there is early work around that or if we have to work around that, it's all speculation. I think they would be minimal in terms of the overall evaluation.

James Dix - Wedbush

Okay, very helpful. Thank you.

Operator

Our next question comes from Howard Rosencrans with Value Advisory. Please proceed with your question.

Howard Rosencrans - Value Advisory

Just wanted to confirm a couple of numbers. So when did 2014-2015 average number for FCF assuming all contemplated acquisitions are consummated is $420 million and the EBITDA number is $800 million, and more substantively, why don't you tell us what the outlook, how much of your base, subscriber base is resetting with retrans and what the outlook is for retrans and reverse retrans?

Lucy A. Rutishauser

Howard, I'll go ahead and take that one. So this year we had just really one contract that comes up and that's Charter on April 1 but when you think about here over the next two years and through the first part of 2016, 100% of our contracts come up for renewal.

Howard Rosencrans - Value Advisory

And your reverse, what comes up on that front, can you give us any sense of what your expectations are [indiscernible] being sort of following suit, [indiscernible] you said a precedent with the CBS Time Warner?

Lucy A. Rutishauser

That was a CBS Time Warner precedent not a Sinclair precedent, but what I would tell you is, the reverse is tied to the affiliation agreement. So we are pretty much locked in on those. Our next affiliation agreement is ABC which comes up August of 15 and then we have our NBC beginning of 2016, FOX at the end of 2017 and CBS at the end of 2018. So we have clarity for the next several years on what the reverse task is from the network.

Howard Rosencrans - Value Advisory

I recognize that the Time Warner CBS was not yours per se, I'm just trying to get an understanding if you believe that that is the bogie per se that is established to the market in terms of retrans now or what your thoughts are in that regard?

Lucy A. Rutishauser

I don't know why it wouldn't be, right. So they have gone in and they have set the next market value, but remember even if it's $2, that is still below the current, where the current value should be, and that's $2 that if the trades are correct, the CBS gets by the end of year $5 but $2 today even is still below what the market should be getting.

Operator

Our next question comes from Barry Lucas with Gabelli & Company. Please proceed with your question.

Barry Lucas - Gabelli & Company

Steve, maybe you could just clarify an issue around Affordable Care and/or political advertising, is that – are those dollars going towards political or you called out the insurance being a fairly strong category that kind of find its way into the insurance or financial?

Steven M. Marks

The Affordable Care is going under political and the insurance goes under spot.

Barry Lucas - Gabelli & Company

Okay, so your outlook for political advertising given the relative spending for Affordable Care was I think relatively modest, so what would your assumption be there?

Steven M. Marks

I think so far because of the problems that they've had and continue to have, the spending has not been [down] (ph), but it has been interesting on the insurance side actually where the spending has been quite a bit better than the government spending right now by a wide margin actually. So I do expect as you get a little bit further in the year if they get their act together that perhaps the government spending increases but there was a lot of buzz about it from second quarter forward of 2013 and I think because of all the problems they had, it didn't materialized to be as big as we had hoped it would be. That doesn't mean that that can't flow, some more money can't be spent on their behalf, but so far a decent amount of money is being spent on the insurance companies.

Barry Lucas - Gabelli & Company

Great, thanks. Just coming back to Aereo and beating that horse to death, I think you have a case heard in Salt Lake and just wondering if, A., what your thoughts are there on the particular case to the extent you can provide them, and what a decision there, what impact a decision there could have at the Supreme Court level if any?

David D. Smith

I think the Supreme Court is going to be resolved here. I read something the other day that the oral arguments are momentarily. So I think any litigation we've got going on at Salt Lake will be probably [indiscernible] will be alluded by virtue of what the Supreme Court does.

Operator

Our next question comes from Avi Steiner with JPMorgan. Please proceed with your question.

Avi Steiner - JPMorgan

Thanks for going so overtime guys, one last one for me. I think you mentioned the share buyback capacity of $100 million or authorization, excuse me. Can you talk about what your flexibility to buy back shares are under your covenants and what will you have for increased dividend payments if and when that's contemplated?

David B. Amy

We have plenty of cash sitting on our balance sheet and as far as any share buyback authorization that's put in place, it can always be changed and increased depending on what the market does and how we run to react to it. So we have pretty good flexibility in that regard to whatever we want to do and need to do. And where the leverage is coming from, it's from the acquisitions.

So I think what little bit of an overhang right now is just a lot of market uncertainty but from what we're hearing about from the regulators in what's taking so long, et cetera, so that will break through once we get through that terms of the regulation and the approvals and [indiscernible] closing, I think that bodes well for everyone that's in the Sinclair and I don't know that we'll have that kind of a concern going forward as far as worrying about stock buyback. So the block would be if that doesn't happen, and we see the leverage increase as we make those acquisitions, so we have to take that into consideration as to how aggressive we want to be.

Of course the question we always get is, what in the world do we do with all the free cash flow that we generate. So I mean that would be pretty clear to answer for you and for everyone else as the market continues to remain I guess concerned or nervous about what's coming and doesn't really come back. Like Lucy was saying earlier, when you have the analysts thought that our target prices are in the $40s and we are trading now in the high $20s, so that discount is really just an enormous opportunity for the Company as well to invest and get a return on that.

Avi Steiner - JPMorgan

Thank you for all that, but just to confirm, your flexibility under your debt agreements are well in excess of $100 million?

Lucy A. Rutishauser

Yes, so Avi, there's a couple of restricted payment baskets with dividends and share repurchases fall under. There is $200 million basket, there's another $300 million basket and just under the covenant sensitivity, we could access. Now I would say that as we have discussed in the past, we are always sensitive to the rating agency, so we would not look to lever the Company up to a point where we would be at risk for a potential downgrade.

Avi Steiner - JPMorgan

Excellent, that's what I wanted to hear. Thank you very much.

Operator

Our last question is going to come from Dennis Leibowitz with Act II Partners. Please proceed with your question.

Dennis Leibowitz - Act II Partners

I'm just wondering when you were talking about 20% of revenue from JSAs, I wanted to clarify that that's just JSAs because as I understand that the supposed proposals do not include shared services agreement? And secondly, again rumour, but the proposed rules would allow you to keep them and so only 15% of the time, I was just wondering how much of the time do you sell now?

Lucy A. Rutishauser

So I'll take the first part of that, so what you see in our public filings that 20 some percent is actually JSA/SSA and LMAs. So the LMAs aren't even part of any of this speculation that's out there but so it would be something a lot less than even the number in the public filings that would be associated with JSA.

Dennis Leibowitz - Act II Partners

So can you say what JSAs alone would be?

Lucy A. Rutishauser

You are probably looking at for the JSAs probably about 10% of that number.

Dennis Leibowitz - Act II Partners

How much of their time do you sell?

David B. Amy

Right now we sell under the joint sales agreement and we sell all the time. There are some minor things, so again it wouldn't be worth [indiscernible] the minor pieces that we and JSA partners sell.

Operator

At this time, I would like to turn the call back over to management for closing comments.

David B. Amy

Thank you, everybody. That ends our fourth quarter and year-end conference call.

Steven M. Marks

Thanks everyone.

Operator

This concludes today's teleconference. Thank you for your participation. You may disconnect your lines at this time.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!