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Media General (NYSE:MEG)

Q2 2012 Earnings Call

July 18, 2012 11:00 am ET

Executives

Lou Anne J. Nabhan - Vice President of Corporate Communications

Marshall N. Morton - Chief Executive Officer, President, Director and Member of Executive Committee

James F. Woodward - Chief Financial Officer and Vice President of Finance

Analysts

Barry L. Lucas - Gabelli & Company, Inc.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

Kevin J. Cohen - Imperial Capital, LLC, Research Division

Andrew Finkelstein - Barclays Capital, Research Division

Bishop Cheen - Wells Fargo Securities, LLC, Research Division

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2012 Media General Earnings Conference Call. My name is Anne, and I will be your coordinator for today's call. As a reminder, this conference is being recorded for replay purposes. [Operator Instructions] I would now like to turn the presentation over to your host for today's call, Lou Anne Nabhan, please proceed.

Lou Anne J. Nabhan

Thank you, Anne, and good morning, everyone. Welcome to Media General's conference call and webcast. Earlier today, we announced second quarter 2012 results. The press release has been posted on our website. A transcript of today's comments will be posted immediately following the call and a replay will also be available.

Our presentation today does contain forward-looking statements which are subject to various risks and uncertainties. They should be understood in the context of the company's publicly available reports filed with the SEC, including the section on risk factors. Media General's future performance could differ materially from its current expectations.

Our speakers today are Marshall Morton, President and Chief Executive Officer; and Jim Woodward, Vice President, Finance and Chief Financial Officer. Let me now turn the presentation over to Marshall.

Marshall N. Morton

Thank you, Lou Anne, and good morning, everyone. The second quarter 2012 was a monumental change for Media General as we transformed the company into a pure-play television broadcaster. We also refinanced our bank debt, which have been due in March of 2013 and extended its maturity to 2020.

On May 17, we announced the new financing arrangement with Berkshire Hathaway, which provided Media General with a $400 million term loan and a $45 million revolving credit line. On May 24, we closed on the new financing. The funding on the new term loan and an initial drawing of the revolving credit facility resulted in cash proceeds to the company of approximately $393 million. These proceeds were immediately used to fully repay all amounts outstanding under the existing credit facility, pay fees and expenses related to the financing and fund working capital requirements.

It probably goes without saying that we're extremely pleased to enter into a new financing partnership with Berkshire Hathaway, a highly respected organization in everyone's book. Our new term loan addresses our long-term capital needs and provides significant financial and operating flexibility.

In conjunction with the financing, Berkshire Hathaway received penny warrants for approximately 4.6 million Class A shares. We're pleased that they will also be a major equity shareholder.

Also on May 17, we announced the sale of virtually all of our newspapers to a subsidiary of Berkshire Hathaway, World Media Enterprises, for $142 million in cash, subject to normal adjustments. We completed this sale on June 25.

When we began exploring the sale of our newspapers, we initially expected multiple transactions. To have achieved the single significant transaction so soon accelerated our transformation to a pure-play TV broadcaster and freed up significant management time that would otherwise have been devoted to the completion of several transactions.

Tampa Tribune and its associated print properties were our only newspapers not included in the sale. We're in discussions with prospective buyers for our Tampa print properties and associated websites, and we believe the sale of these properties is probable, although we can't provide a definitive timetable today.

All Media General newspapers are shown in our financial presentation as discontinued operations as our Professional Communications Systems, a broadcast equipment company that ceased operations in the second quarter, and DealTaker.com, whose assets were sold to a private buyer for a nominal amount.

Let me now review our operating results for the second quarter of 2012, which reflect our performance as a pure-play television broadcaster with associated digital products and services. We're pleased to be focused on our higher-margin Broadcast television business with its attractive economic model fueled by revenue growth, including Political, retransmission and digital revenues. Our stations have done an excellent job capitalizing on the event-driven revenue opportunities of this year.

Operating income of $16.4 million compared with $6.2 million last year. Primary driver of the increase was 17% growth in total revenues, which were $84 million in the quarter. Core time sales, excluding Political, grew 4%. Spending by automotive advertisers, our largest category, increased 26.5% from last year. Other top 10 advertising categories that grew in the quarter were professional services, home improvement, medical and grocery. Top categories showing declines included restaurants, department stores, furniture, entertainment and telecommunications. Local time sales accounted for 2/3 of our core business and increased 4.4% in the second quarter. National time sales grew 3%.

Political revenues totaled $7.5 million compared with just under $600,000 last year. This quarter's Political revenues reflect the spending by both presidential campaigns, PACs, Super PACs, the Massachusetts senate race and congressional primaries in Virginia and South Carolina.

We have 6 stations in 4 key presidential ballot round states: Florida, Ohio, Virginia and North Carolina. We also anticipate highly contested level -- state-level races, including a gubernatorial race in North Carolina and senate races in Virginia, Florida, Ohio and Massachusetts. PAC and issue spending are difficult to be -- or expected to be significant as well, although these categories are difficult to forecast, but typically garner above market share of Political revenues as a result of advertisers seeking out our highly rated newscasts and other programming.

Based on the spending patterns we're seeing in our markets, we've increased our outlook for Political revenues for the full year 2012 to approximately $50 million.

Digital media advertising revenues in our TV station website and mobile platforms increased just under 19%, driven in particular by local advertising which grew 26%. Our Local digital audience continued robust growth, especially with the increased activity from mobile devices. Unique visitors for mobile devices quadrupled in the second quarter, while they were even with last year from desktops. Page views for mobile devices increased 80%.

Cable and satellite transmission fees in the second quarter increased 80% to $9.6 million this year -- this quarter compared with $5.4 million last year. Late in 2011, we renewed contracts reaching about 25% of the subscribers in our footprint, and we obtained fully competitive market rates. As a result of rate increases in the agreements renewed thus far, retransmission fees are expected to reach $32 million to $37 million compared with $21 million last year. We've extended our affiliation with MBC through July 27, while we finalize our renewal agreement. Our CBS agreements renew in 2015 and our only ABC affiliate renews in 2014.

Let me wrap up with key performance metrics for the second quarter. Broadcast cash flow increased to $30 million this year from $20 million last year. Broadcast cash flow margin in the current quarter was 37% compared with 29% last year. Enterprise EBITDA was $23 million compared with $14 million in the prior year. Enterprise EBITDA margin was 27% compared with 19% last year.

We're implementing strategies to increase margins for broadcast cash flow and enterprise EBITDA over time. At the market level, we're focused on ratings and share increases as well as expense management. At the corporate level, as we've said publicly, we're reducing corporate expense by 35% to 40%, and we plan to achieve the new run rate before the end of this year. Increased cash flow will support and accelerate our deleveraging plan, and we have good incentive to do so. Our new term loan agreement provides a step-down on the interest rate from 10.5% to 9% if leverage were to reach 3.5x.

Now I'll turn it over to Jim for additional perspective on certain expense items and on the balance sheet. Jim?

James F. Woodward

Thank you, Marshall. Corporate expense was about even with last year and did not reflect any of the 35% to 40% reduction we will be implementing in the third and fourth quarters. Total interest expense in the second quarter was $21.7 million, of which $3.4 million was noncash. The noncash interest expense reflected discounts related to the original issue, warrants and certain fees that are amortized over the life of the loan. Debt modification and extinguishment costs were $7.7 million, primarily due to the write-off of unamortized fees related to the former bank arrangement. We recorded an after-tax loss related to the divestiture of discontinued operations of $132 million in the second quarter.

Noncash tax expense related to continuing operations was $3.4 million compared with $2.6 million last year, and was related to the company's naked tax credit issue. Due to the sale of our discontinued operations, we expect our noncash tax expense to be approximately $6.8 million for the last 6 months of the year, which is down from $11.6 million as originally projected.

After completing the sale of the newspapers, debt refinancing and restructuring charges, we expect our net operating loss carryforward for tax purposes to be approximately $225 million to $250 million at the end of 2012. This NOL will be available to offset future taxable income for up to 20 years. Therefore, we do not anticipate paying any significant cash taxes for the foreseeable future and we'll have a 0 effective tax rate for cash flow purposes.

Capital spending in the second quarter was $2.7 million compared with $6 million last year and both periods include amounts for continuing and discontinued operations. For our Broadcast operations only, we expect capital spending for the full year will be $15 million.

Debt at the end of the second quarter was $652 million compared with $658 million at the end of the first quarter. We are using the net proceeds from the newspaper sale to further reduce debt. We have repaid $54 million of the Berkshire Hathaway term loan at par and $18 million on the revolver, bringing the total debt currently outstanding to $580 million and there's nothing drawn on the revolver.

On June 29, we commenced the cash tender offer to purchase up to $45 million all of our 11.75% senior secured notes. The tender offer is scheduled to expire on the 30th of this month. We expect to offer Berkshire Hathaway a repayment of any amount the bondholders elect not to take, which would be at par and with no prepayment penalty.

For the full year 2012, we expect the cash provided by operations will be used to make interest payments of $65 million, capital expenditures of $15 million and retirement plan contributions of $13 million.

As Marshall said, we are pleased with the overall parameters of our new financing arrangement. Our total interest cost will be higher, our new term loan provides increased financial and operating flexibility and an astute equity investor will be a major shareholder.

And now I'll turn it back over to Marshall.

Marshall N. Morton

Thanks, Jim. Let me provide our outlook on key revenue opportunities in the third quarter. The Summer Olympics in London will benefit our 8 NBC stations. We expect to be ahead of the $12.5 million we generated from the 2008 summer games.

This performance is particularly strong when you consider that the 4 stations that we purchased in 2006 from NBC Universal have the benefit of advertiser commitments that were tied to former network-negotiated packages, which reached at a normal conclusion after the 2008 games. These packages were worth about $1.5 million, and we've made up that amount with other business. In addition to revenue opportunity, we'll capitalize on ways to retain the new audiences the Olympics attract to our stations, including the use of mobile and social media strategies.

Broadcast pacings for the third quarter, including Political, are approximately 30% ahead of last year. Core pacings, excluding Political, are approximately 20% ahead of last year. The key categories driving the core growth are auto, entertainment, financial, media, professional services, grocery and travel.

The Republican convention in Tampa will provide us with unique opportunities for news coverage. We're providing event apps for mobile devices that help visitors find their way around town and that assist people with convention matters and logistics. We'll generate revenues on these apps through advertising sponsorships. Additional revenues will be generated by providing facilities and services to national and international organizations also covering the event.

The campaigns are placing greater focus on targeting voters through digital advertising. We're generating digital revenues on our news apps and on our websites. These sales showcase the value of our markets and brands. We'll continue to be positioned to garner a strong share of political campaign digital advertising revenues. Longer term, we'll be pushing hard on growing digital audience and revenues.

One of many advantages our newspaper heritage gives us is a sense of urgency in evaluating legacy platforms and focusing on new ones. We saw newspapers move toward digital but, as we all now appreciate, not fast enough. That experience provides a competitive advantage. We're pursuing new ways to sell digital products and new ways to build page views by adding efficiently new mobilized content, all with the aim of capturing the growth that is materializing on the digital side of our business.

In closing, let me underscore that we're very pleased with our heightened focus as a TV broadcaster. We got our start in the television business in 1955 when we put WFLA in Tampa on the air as an NBC affiliate. Today, WFLA, of course, is our largest station, operating in the 14th largest DMA in the United States. We operate premier stations in attractive markets. We have the diversity of network affiliations, including 8 NBC stations, 8 CBS, 1 ABC and 1 CW. Six of our stations operate in the top 40 U.S. markets. Our stations reach more than 1/3 of the TV household from the Southeast and more than 8% of U.S. TV households. We have a broadcast management team with significant depth of experience in the industry, and we're represented well on all the industry trade associations' affiliate boards and on the boards and consortiums that are driving innovations in the business such as Mobile DTV. All of these factors position Media General well for future success in the television broadcasting sector.

And now, we'll be pleased to take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Barry Lucas with Gabelli & Company.

Barry L. Lucas - Gabelli & Company, Inc.

Just a couple of housekeeping questions and then maybe something more strategic. Jim, you went through the debt post the refinancing. What is the cash balance or is that $580 million net?

James F. Woodward

That $580 million does not include the cash balance. And the cash at the end of the quarter was -- let me flip to my balance sheet.

Marshall N. Morton

Of course that's going to be pre-paydown.

James F. Woodward

Yes, that's going to be as a pre-paydowns. The cash is -- it was $16 million -- $17 million.

Marshall N. Morton

We can give you a more recent cash number, Barry, when we have it.

Barry L. Lucas - Gabelli & Company, Inc.

Okay. Then maybe while Jim is looking, the pension contribution is reduced and I expect that that's probably a result of the legislation that was enacted, or maybe you could just touch base on how that worked for you and what the ongoing cost is going to be for the unfunded. Any color you could give there would be helpful, Marshall.

Marshall N. Morton

Jim can give some added color. I'll say that $13 million does not reflect what we think will be a reduction in required funding. That law has just passed but the rates aren't completely promulgated yet, and we're talking with Mercer about what the number will be. So it will be something lower than the $13 million we mentioned. But at the moment, it's the most current number we've got. Jim, you have...

James F. Woodward

No, that's accurate. And Barry, the cash balance, we monitor that daily, the current cash balance is about $30 million.

Barry L. Lucas - Gabelli & Company, Inc.

Great, okay. And then more broadly, Marshall, you gave a great description of the company and the markets and position as a television broadcaster. I think there's some speculation that Newport or whatever the old clear channel stations are up for sale. Where do you fit in that orbit, buyer, seller? Where can Media General be in 3, 4, 5 years?

Marshall N. Morton

I don't see us a seller right now. Maybe as an exchanger if we find a way to step up markets or tighten up our focus in some way that's particularly progressive to us. We are managing a station for another company in one market and like that a lot. It's a good way to extend our reach in the marketplace particularly with respect to news and sales power without added capital. And I also see us pushing hard on the digital front where it doesn't take bricks and mortar to gain new market share. On buying stations, that's probably not going to happen very near term without something special accompanying it just because we'd rather get our debt profile back in shape as fast as we can.

Operator

And our next question comes from the line of Edward Atorino with Benchmark.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

I get a lot of calls about television and what's strong and what's not strong. And so if you mind sort of talking about what are the -- beside auto, any other categories stand out as being strong or weak?

Marshall N. Morton

Of course, political right now is dominating the landscape in such a huge way. And the Super PACs and PACs too are being particularly assertive on a punch back kind of basis. And as I've said in my written remarks, it's a bit difficult to forecast some of these things because frankly you don't know what one candidate is going to say from one day to the next and what that's going to generate in terms of the punch-back.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

Are you seeing any crowding out? As that -- between -- you're exactly, right between -- yes, but that -- there's a quick debate among analysts whether there is crowding out or not. I'm of the theory that there is, having been around forever. And other analysts just think business sucks. It's a little bit of a different point of view.

Marshall N. Morton

I don't -- well, we're not -- there's some crowding out, but our core business is up too. And so you got the 2 going in the right direction. We have added new shows in most of our markets within the last year, year-plus. We've added new shows in anticipation of the need for more inventory that's relevant to a political advertiser. That's benefited us, and it's not always the place where the grocery advertiser or the auto advertiser wants to be. So maybe we've helped that a little bit. Nonetheless, there's some crowding out in some of our markets.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

It's hard to put a number on it. Anyway, back to the categories. Auto, we know, is strong. Anything weak or strong that you figure as noteworthy?

James F. Woodward

I guess the noteworthy thing for me is that it's pretty evenly spread. There's not a -- auto is strong and it's improvement finishing over prior year and home improvement is up...

Marshall N. Morton

Telecommunications is soft.

James F. Woodward

Telecommunications soft. Medical is up.

Marshall N. Morton

Furniture is down.

James F. Woodward

And furniture is down.

Marshall N. Morton

I know there are some ups and some sounds. I mean we're pretty happy with pacings obviously. But what we really like, I mean, the things we're really seeing that are growing, home improvement's helpful in areas which talk to housing. I mean, there's others, some core stuff that's generating some decent strength.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

Are the Olympics -- presold the Olympics yet?

Marshall N. Morton

Yes.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

And so you're going to get -- that's a big number, what was it?

Marshall N. Morton

Well, it's $12.5 million at the last Summer Olympics, $12.5 million. And we're doing -- we expect to report numbers better than that.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

Yes, I would think so. I would think so. Regarding the digital. You kept some and the rest went with the newspapers, I guess.

Marshall N. Morton

The digital side was supported by the newspaper, the digital side went with the newspaper, because content is really the main draw that brings people there. One of the interesting things that we found as we've got more and more into the broadcast realm though, is that the mobile user, the mobile searcher for info, has a bias toward the broadcast website in his community to get his information. And I don't know that I can give you all the psychology of that. Some of it has to do with the video, some of it has to do with the very frequent updating mentality that resides in a broadcast operation newsroom. But as I mentioned in some of our numbers there, we're seeing big strength from the mobile user, and it's sort of year-to-year the same from the desktop user.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

Really? So mobile is happening?

Marshall N. Morton

Oh, yes. And we're not talking about mobile broadcast so much as mobile info searching.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

Oh, okay. Not much in the mobile broadcast side.

Marshall N. Morton

We've got 4 markets where we're doing mobile DTV. And that's a market that will continue to grow. And we're going to continue to devote ourselves to it as most major broadcasters are.

James F. Woodward

Ed, one more thing. When we were describing the categories a bit ago, it was targeted in the half of the second quarter. But the pacings for the third quarter, which are against prior year, we're pacing ahead of prior year in all categories.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

Really?

James F. Woodward

E Yes.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

Ex-Political?

James F. Woodward

Ex-Political, yes, we are. Because we were just -- the other was how we've kind of finished the quarter or how we did finish the quarter. But our pacings are ahead of prior year in all categories.

Marshall N. Morton

The core pacings, they're up 20%. That core pacings would be ex-Political, up 20% from last year.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

20%?

Marshall N. Morton

Yes.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

Wow, that's amazing.

Marshall N. Morton

Yes. Well, we got the right stations and we've got audiences that advertiser wants.

James F. Woodward

Add I would add to that, too. The sales training and the sale pressure that we have uniformly put into our business will pay dividends, especially as demand rises.

Operator

And our next question comes from the line of Kevin Cohen with Imperial Capital.

Kevin J. Cohen - Imperial Capital, LLC, Research Division

I guess first on the corporate expense front, the reductions there, should that be fully reflected by the end of the year? Did I hear that correctly, the sort of implicit $12.5 million of cost savings?

Marshall N. Morton

You did hear that right. And that's -- we're saying the annual run rate before by the end of the year will be -- will reflect all of that.

Kevin J. Cohen - Imperial Capital, LLC, Research Division

That's great. And then I guess in terms of the Tampa Tribune, while I know the company doesn't necessarily have any color to share in terms of the timing of the proceeds amount, are you able to share the run rate EBITDA of that entity in the second quarter?

Marshall N. Morton

We never put that out to my knowledge, Kevin. No, we never put that out.

Kevin J. Cohen - Imperial Capital, LLC, Research Division

Suffice it to say that it's still EBITDA-negative or is it becoming less EBITDA-negative, but still EBITDA-negative, or anything you could share just even in that regard?

Marshall N. Morton

Well, we could say that the Tampa market is improving. And you'll hear that from everybody from Chamber of Commerce to the governor down there, and that's true. And we are seeing it in all sorts of elements we're participating completely in that kind of improvement.

Kevin J. Cohen - Imperial Capital, LLC, Research Division

Great. And then I guess in terms of the debt, sort of a housekeeping item, I was just trying to bridge to the $580 million number, which I guess the press release said was a current number. Was that subsequent to quarter end? And I was just trying to bridge to that given there's $300 million of bonds and then implicitly about $346 million on the term loan, and there's nothing drawn on the revolver, if I heard that correctly. So I thought there might have been a delta of about $66 million in terms of the total debt of $580 million versus the $646 million that I add those 2 up to be, can you just help me clarify that?

James F. Woodward

Well, the $54 million was after close, after period close, so the balance sheet doesn't reflect that to $54 million paydown. And that the reconciliation of our debt would take us into a long and lengthy accounting lesson, which we're happy to follow up with you on. But the $300 million of bonds, for example, is not something that's on the balance sheet because you amortize that discount over time. But I think we can help you with the recon with a follow-up phone call.

Kevin J. Cohen - Imperial Capital, LLC, Research Division

So you're incorporating the original issue discount taken on the term loan, is that...

James F. Woodward

Yes. And that's the accounting rules. That's what's posted on the balance sheet, yes.

Kevin J. Cohen - Imperial Capital, LLC, Research Division

Right. But in terms of the pacing on the debt outstanding, just to be perfectly clear, it's $346 million face amount, i.e. the original $400 million less the $54 million paid down at par and then $300 million of bonds, and there's nothing on the revolver?

James F. Woodward

That's correct.

Kevin J. Cohen - Imperial Capital, LLC, Research Division

Okay, perfect. That's what I was looking for. And then lastly, in terms of the political guidance, any further potential upside to that, or do you feel you've got enough visibility to say that that's probably kind of where it shakes out at this point?

Marshall N. Morton

We don't have enough visibility to say that's where it shakes out. We feel good about the $50 million number I gave you. And remember, we started out, what, thinking $38 million to $40 million before the year started. And it is a way of -- we demonstrated in the first quarter an ability to pull in more than we've anticipated, and then the campaign is heated up since then, campaigns have heated up since then. And in our case, we've got a good senate race going on in Virginia as an example. North Carolina had not expected a thing with the governor not deciding to succeed herself or try to succeed herself. The Massachusetts senate race obviously speaks for itself when Barney Frank retired. So the things that have happened that if all played our way, down in Florida, Bill Nelson, Senator Nelson, has got a fight on his hands for his senate seat that wasn't really anticipated early on. All of these things are adding pluses to our political landscape. That accounts for some of the difference between our original $40 million and our current $50 million. And based on the money that they're raising, my guess is that $50 million is pretty solid.

Kevin J. Cohen - Imperial Capital, LLC, Research Division

And then last, I guess, I know the company in the past has spoken about potential duopoly opportunities, being of interest in the broadcasting arena, I guess. Where do you see the company's sort of positioned in terms of if there is likely industry consolidation to occur? Does a company have a role in that directly or perhaps indirectly watching from the sidelines? And are all the stations that you guys have at this point core in your view?

Marshall N. Morton

We're always open to the idea of consolidation. I think that makes sense. And so duopoly is a great way to get started there. Another thing is third-party services, which we did a lot of as publishers. And in the broadcast area, we do it internally, but we haven't done it so much outside other than the example I gave you in Augusta, Georgia. But we like the idea of centralized broadcast operations. For example, centralized traffic, both of which we do very effectively. Cost savings and quality increases are included there. Graphics, we do graphics for all of our stations centrally, again better quality, lower costs. And so we're looking at ways to spread that into third-party work and also to do more in the duopoly area.

Operator

And your next question comes from the line of Andrew Finkelstein with Barclays.

Andrew Finkelstein - Barclays Capital, Research Division

It's clearly a huge achievement on all the transactions you've completed to date, but just looking at now the fixed-charge base of the company in terms of interest, pensions, which could come down a bit and CapEx, and I was wondering how you were thinking of about the fixed-charge base particularly in an odd year when the political and the Olympics go away. It looks like it will be a little tighter to cash flow in the odd years.

Marshall N. Morton

It is tighter to cash flow in the odd years. We've done a good job over the years, not during the recession, but, say, prior to 2008, of filling a lot of the political and Olympics dollars with added products and new revenue streams. We're already working on that. That's a piece of offset. But I mean, we're not going to quarrel with you that in the TV business piece, particularly with 8 NBC stations which have such as an Olympic impact -- Olympics impact, that there is the odd even year deal. And we -- you work -- we worked through those years to make sure that we've got adequate ramp to go from one to the next.

Andrew Finkelstein - Barclays Capital, Research Division

Right. And so with the new interest rate on the credit agreement in particular, you're comfortable with the company's position as you look into '13.

Marshall N. Morton

Yes.

Operator

And our next question comes from the line of Bishop Cheen with Wells Fargo.

Bishop Cheen - Wells Fargo Securities, LLC, Research Division

So I've got some housekeeping, so we can all understand the story going forward, because it's a whole different story, and be on the same page with you. So let me just make this quick. The media cash flow versus the EBITDA, you mentioned $30 million of Broadcast cash flow. The math, which is not obvious, is you've just added back the corporate expense shown in your regional summary.

James F. Woodward

To get to the Broadcast cash flow?

Bishop Cheen - Wells Fargo Securities, LLC, Research Division

Yes. I'm just trying to get to the math.

James F. Woodward

You add back the -- yes, the corporate D&A to get to that, and subtract our ad services revenues.

Bishop Cheen - Wells Fargo Securities, LLC, Research Division

Okay. So look, let me just take Q2. There's $8.5 million of corporate expense. If I add that back to the stated EBITDA, I can get rounded to $30 million of -- to Broadcast cash flow. Is that basically what you're talking about?

James F. Woodward

Yes.

Bishop Cheen - Wells Fargo Securities, LLC, Research Division

Okay. All right, that would be helpful. I noticed in the 8-K that you filed June 25, for the pro forma for the full year, we don't have that. And if you have restated a definite pro forma of EBITDA or Broadcast cash flow for fiscal year 2011, I haven't seen it. I've got all the details of the revenue except -- not the important segments that we track, like local, national, political, retrans. I just have a lot of regional stuff. So if you have that, I can go over that with you offline or if you can direct me to where I might find that, it would be helpful.

James F. Woodward

We'll do that offline.

Bishop Cheen - Wells Fargo Securities, LLC, Research Division

Okay. All right, moving along. To the $30 million of Broadcast cash flow, that is just the TV segment or does that also include your digital line item, the non-TV segment digital, digital media?

James F. Woodward

We took out ad services out of that. So that does not include digital revenues that are not related to the Broadcast [indiscernible].

Bishop Cheen - Wells Fargo Securities, LLC, Research Division

Right. I guess what I'm looking at is in the cash flow stuff, the total cash flow and the total EBITDA, we really can't -- we don't have the numbers to figure out what the digital media's contribution is to that, do we? We just have digital media's revenue.

James F. Woodward

No you don't.

Bishop Cheen - Wells Fargo Securities, LLC, Research Division

Okay, all right. The Political, is that when you talk about $50 million, is that a net or a gross number you're talking about?

Marshall N. Morton

You mean that of agency fees?

Bishop Cheen - Wells Fargo Securities, LLC, Research Division

Well, there's dollars and then there's kind of the net dollars to match the net ad revenue. And I'm wondering, when you talk about $50 million, if you were thinking in terms of the gross dollars before commissions, et cetera.

James F. Woodward

Yes. It is gross.

Marshall N. Morton

Yes.

Bishop Cheen - Wells Fargo Securities, LLC, Research Division

Okay, all right. And then in your pacings, on the core, 20%, is that just the national and local advertising or do you have retrans included in those pacings as well?

James F. Woodward

It's just national and local.

Bishop Cheen - Wells Fargo Securities, LLC, Research Division

Okay. Moving over to dilution, the 4.6 million Berkshire penny warrants, that is not shown currently in the average, weighted average outstanding shares in the press release. Is that correct?

James F. Woodward

That is correct.

Bishop Cheen - Wells Fargo Securities, LLC, Research Division

All right. And then I think you went over what your expectations are for your cash items of the interest $65 million, $15 million CapEx, roughly $13 million on pension for 2012. If we're trying to do 2013, is that a good number for us to plug in for 2013? Or might things change a whole lot in 2013 in terms of your pension payments?

James F. Woodward

I think if you're just doing the modeling, that's as good as any number you're going to have now. I do expect there's numbers to change with the legislation that was recently passed. And that's -- the mechanics of that are analyzed and firmed up by Mercer. But we do expect a debt legislation to have a positive, meaning less cash contributions going into the pension plan, impact on us.

Bishop Cheen - Wells Fargo Securities, LLC, Research Division

Okay, this is great. Only 2 more questions. One on the balance sheet. I heard a lot of moving parts. Tell me if I have this right. The $54 million payment post June 30 would bring the secured bank debt down to $292 million before discount. Roughly $300 million of bonds would make it $592 million. And if I put a $12 million roughly discount in here, for the OID, I could get back to your $580 million balance sheet debt. Am I in the right ballpark when I do it that way?

Marshall N. Morton

I think verifying your math over a conference call is a little powerless for us, Bishop. If you just either fax that to us or give us a call afterwards, we'll walk through that.

Bishop Cheen - Wells Fargo Securities, LLC, Research Division

Okay, that will be helpful because I knowing there are moving parts. And then the last piece going forward is Tampa. I know that you're doing everything you can to land Tampa safely and advantageously to Media General. In the meantime, you need to do the cash support for Tampa. So as we go through the quarters to come, would that support then be reflected more in the cash balance that you show? I mean, do you need to support Tampa and the money has got to come from some place?

James F. Woodward

Right. Yes, it would. If Tampa is -- theoretically, if Tampa's cash flow-negative, then that's going to come out of the operating cash flow from other places.

Bishop Cheen - Wells Fargo Securities, LLC, Research Division

Okay. And that won't be reflected anywhere except maybe in the details. I don't know how you're going to show discontinued operations.

Marshall N. Morton

Well, it's held as a discontinued operation or an operation held for sale, so it's in a category of its own.

Bishop Cheen - Wells Fargo Securities, LLC, Research Division

Right. All I'm trying to do is just -- as we model forward, just any guesstimates about how it would impact your cash balance at any particular quarter. That's all. I would go over that with you offline as well.

James F. Woodward

Okay, that would be fine.

Operator

[Operator Instructions] Ladies and gentlemen, with no further questions, this concludes today's question-and-answer session. I would now like to turn the call back to Mr. Marshall Morton for closing remarks.

Marshall N. Morton

Thanks, Anne, and thank you, all for joining us for the call. The caliber of questions today was great and gave us a chance to expand on what we're talking about. Never hesitate to call us of course if you've got questions going forward.

We feel good, obviously, about the platform we're standing on today as broadcasters. I think the marketplace is in the mode and mood of wanting information on its own timetable. We can provide that effectively as a broadcaster. We've done it for years and now we can focus on that in its entirety. The landscape is changing. And as we mentioned in the course of the conversation, we learned a pretty deep lesson as publishers and that we have to stay in tune with the very changing consumer and changing marketplace. I think technology and our understanding of the markets give us the ability to do that. And so we look forward to talking with you in future sessions about what we're doing in that area.

Thanks again, have a good day.

Operator

Ladies and gentlemen, we thank you for your participation in today's conference. This concludes the presentation, and you may now disconnect. Have a good day.

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