Aug 12, 2009
Executives
Perry Sook – President and CEO Matt Devine – COO Thomas Carter – CFO
Analysts
Bishop Cheen – Wells Fargo Jonathan Levine – Jefferies & Co. Steven [Grossante] – Tricadia Barry Lucas – Gabelli and Company John Kornreich – Sandler Capital
Operator
Welcome to Nexstar Broadcasting Group’s 2009 second quarter conference call. Today's call is being recorded.
All statements and comments made by management during this conference, other than statements of historical fact, may be deemed forward-looking statements within the meaning of Section 21 of the Securities Act of 1933 and Section 21-A of the Securities and Exchange Act of 1934. The company's future financial conditions and results of operations, as well as forward-looking statements are subject to change.
The forward-looking statements and comments made during the conference call are made only as of the date of today's conference call. Management will also be discussing non-GAAP information during this call.
In compliance with Regulation-G, reconciliations of this non-GAAP information to GAAP measurements are included in today's news announcement. The company does not undertake any obligation to update forward-looking statements reflective of changes of circumstances.
At this time, I would like to turn the conference over to your host, Nexstar President and CEO, Perry Sook. Please go ahead.
Perry Sook
Thank you and good morning everyone. Thank you very much for joining us to discuss Nexstar’s 2009 second quarter operating results.
The first order of business, I would like to introduce Tom Carter, our Chief Financial Officer, who is here with me on the call this morning. For those of you that didn’t see our release last month, Tom recently joined Nexstar as Chief Financial Officer following nearly two decades as a Senior Investment Banker of B of A in the media and telecommunications sectors and Tom was our lead banker for nearly 13 years.
The board and I are very confident that Tom’s perspective on the industry and the company as well as his extensive industry and community relationships will be a great fit for Nexstar. Tom and I are focused on further expanding the revenue base, margin enhancement, managing leverage and optimizing our capital structure so that Nexstar can continue to grow.
With that being said let’s get right to the results for the quarter and then I will be happy to open the floor for your questions. During the second quarter of 2009 our multiplatform content distribution strategy and revenue diversification initiatives led to another quarter of industry leading revenue results.
In addition, the de-leveraging and expense management plans reviewed on the last call were evident in Q2 with lower SG&A, lower total interest expense, lower cash interest expense as well as a total leverage ratio of 5.6 times at June 30. Our total second quarter net revenue amounted to $62.2 million, a 12% decline from Nexstar’s record second quarter revenue in the year-ago period of $70.6 million.
The lower net revenue reflects the overall downturn in advertising spending due to the impact of the current economic recession as well as $2.8 million or 77% reduction in political spending in this non-election year. Notwithstanding the current environment, our strategy to build complementary high margin revenue streams is serving us very well as we continue to record significant growth in retransmission consent ad e-media revenues during the period as well as the initial recognition of management fee revenue from our managed stations group.
In total, revenues from these sources increased to $11.4 million in the 2009 second quarter. That is a 66% rise over what we did in the same period last year.
As noted a moment ago, our repurchases at significant discounts to face value of a total of approximately $36.3 million of our outstanding notes including $27.8 million of the cash paying 11-3/8% securities and approximately $8.5 million of the 7% senior subordinated notes combined with our first quarter exchange of the $143.6 million 7% senior sub notes due 2014 for the $142.3 million new 7% senior sub pick notes due 2014, enabled the company to reduce total interest expense by approximately 18% and cash interest expense by about 52% compared to the same period last year. In addition to these de-leveraging efforts, Nexstar is controlling our operating costs.
During the second quarter Nexstar benefited from ongoing expense management initiatives including the regional consolidation of certain back office functions and as a result second quarter SG&A expenses declined by about 4.2% even as we integrated the operations of WCWJ in Jacksonville, Florida and KARZ in Little Rock, Arkansas into our operating results. Before I turn the call over to Tom for a review of our financials, let me run through some of our other Q2 highlights.
Our second quarter retransmission consent revenues of $7.9 million exceeded the Q2 2008 levels of $4.7 million by 68%. Earlier this year we announced or new multi-year retransmission consent agreements which are expected to generate more than $75 million in revenue over the life of these agreements with more than 1/3 of that revenue to be realized this year.
With $14.5 million of retrans revenue now booked for the first half of 2009, I think you can see we are well on our way to exceeding our goal. Our Q2 e-media revenues came in at $3.0 million surpassing last year’s second quarter by 15%.
Importantly, in June the company reported its highest e-media revenue month in its history at a little over $1 million in e-media revenue in the last month of second quarter. In addition, during the quarter we recorded approximately $500,000 of management fee revenue from our March agreement to provide services for the seven Four Points media stations.
In addition, we also recorded a full quarter contribution from KARZ which was acquired in late January and a partial quarter benefit of our ownership of WCWJ which we closed on May 1. Both of these were accretive and de-leveraging additions to our station base.
Our new to television local direct billings totaled $3.72 million for the second quarter. That was an increase over our first quarter of $2.9 million as well as over second quarter 2008 of $3.68 million.
Our sales teams deserve special recognition for their perseverance and creativity in this current environment as they are making many, many more sales calls to write more business. We are consistently able to increase our new local direct billing which is another way the company is mitigating the impact of this challenging environment.
During the quarter automotive spending comprised approximately 15.4% of our core advertising. It was 22% in the second quarter of 2008.
Factory and dealer group spending was the weakest led by the decline in spending from the big four auto makers. However, total automotive ad spend in the second quarter as well as the dealer group spending in the second quarter did improve on a sequential basis from Q1 2009 suggesting to us that we may have tested the bottom in terms of absolute dollar spend.
Broadcast cash flow totaled $20.1 million in the second quarter of 2009 down 29% from second quarter of 2008. Adjusted EBITDA came in at $16.4 million down 34% from the second quarter of 2008.
Our free cash flow was $5 million compared with $11.1 million in the comparable period of 2008. The 2009 free cash flow number includes approximately $6.2 million of CapEx which basically represents the majority of our remaining capital commitment for the digital television conversion.
Let me now turn the call over to Tom Carter to provide further detail on our financials after which I will come back and run through some recent developments and the strategies we are taking to weather this environment. Tom Carter?
Thomas Carter
Thanks Perry. Good morning everybody.
I would like to review some of the key Q2 line items on the company’s income statement and balance sheet. On the P&L side total gross revenues for Q2 2009 were $68.7 million versus $79.2 million in the previous year, a decrease of 13.3%.
Net revenue for Q2 was $62.2 million versus $70.6 million, down 12% from the previous year. SG&A expenses, as I think Perry mentioned earlier, were $17.5 million down 4.2% compared to Q2 2008 which was $18.3 million.
Total operating expenses were also down from $54.5 million in the previous year to $53.1 million in Q2 2009 representing a decrease of 2.6%. Broadcast cash flow for the most recent ended quarter was $20.1 million versus $28.3 million in the previous year second quarter, a decrease of 29% and adjusted EBITDA, as Perry mentioned, was $16.4 million for Q2 2009 versus $24.8 million for Q2 2008, down 33.9%.
On the revenue side gross local revenues were $40.2 million versus $45.7 million the previous year, down 12%. Gross national revenues for Q2 2009 were $12.2 million versus $17.8 million the previous year, a decrease of 31.5%.
Political revenues for Q2 2009 were $800,000 versus $3.6 million in Q2 2008, down almost 78%. E-media revenue as Perry mentioned were up 15.4% to $3 million for the quarter versus $2.6 million in Q2 2008 and total retrans revenues were $7.9 million for the most recently ended quarter versus $4.7 million in the same quarter the previous year, an increase of 68.1%.
Management fee revenues from the Four Points contract were recorded at $500,000 in Q2 2009 and there were no such revenues in Q2 2008. Trade and barter revenues were flat for the quarter in 2009 at $4.6 million versus the previous year.
In the second quarter the company recorded income from operations of $9 million compared to $16.2 million in the year-ago period. Overall, Nexstar’s second quarter 2009 corporate overhead costs totaled $3.7 million in line with $3.6 million in the year-ago period.
Second quarter corporate overhead included $300,000 of non-cash employee stock option expense. Turning to the balance sheet, Nexstar’s outstanding debt as of June 30, 2009 consisted of $408,400,000 of bank debt divided amongst the outstanding term loans of $323.4 million and the revolver outstanding of $85 million.
The 7% senior sub debts, the cash pay portion, totaled $46.9 million. The senior sub debt pick securities totaled $127.7 million and that is pick through January 15, 2011.
The 11-3/8 senior sub debt outstanding balance totaled $50 million and the 12% senior sub debt pick instrument was $39.8 million and again that is a pick security through January 15, 2010. Total outstanding debt amounted to $672.8 million and net debt when you net out cash balances of $14.3 million was $658.5 million.
This amount compares with $646,300,000 of outstanding net debt at 12/31/08. However, our outstanding debt for measuring covenant compliance was $491 million since the pick securities are excluded for that purpose.
Nexstar’s total leverage at June 30, 2009 was 5.6 times compared to a covenant of 6.5 times and our senior leverage covenant was 4.47 times versus a covenant of 4.50 times. Total interest expense in the second quarter of 2009 was $8.9 million compared to $10.8 million for the same period in 2008.
Cash interest expense for the quarter was $5 million compared to $10.5 million for the same period in 2008. Cash interest expense for the first half of 2009 was $13.2 million, down from $20.6 million in 2008.
Nexstar’s Q2 CapEx of $6.2 million compares with $3.7 million in the second quarter last year and represents again the majority of the remaining spending required for additional television conversions. That concludes the financial review for the call.
I will now turn it back over to Perry for some additional remarks before the Q&A.
Perry Cook
Thanks very much Tom. Great job.
We believe today’s report highlights the ability of our company to operate effectively and deliver superior results in this extremely challenging environment and we believe this discipline and focus has positioned the company to benefit well when advertising demand improves. We have a very solid operating and personnel structure in place to quickly benefit from a rebound in advertising spend but we are not waiting for that to come to us.
Our sales effort has always emphasized and awarded securing business with local advertisers, new advertisers and this has proven to be an excellent complement to our growing retrans, e-media and management agreement revenue streams. Our retrans revenue running year-over-year and on a quarterly sequential basis and this trend is expected to continue through 2010 with the just completed agreement with Time Warner Cable and renewals of a handful of other agreements that expire at year-end, all contributing to this sequential growth.
Turning to the e-media side, we are fairly unique in continuing to report year-over-year growth in this revenue stream. We are also confident in achieving continued double digit revenue growth from our e-media revenue platform.
We are launching additional local sales modules and partnerships to drive our continued and sustained revenue growth in this platform. We are not seeing trends of a deeper decline in traditional ad spend but at the same time we are not seeing sustained improvement either.
We believe this is an indication most likely that the core ad spend in our markets is finding a bottom from which we can now expect to see gains. There has been incrementally more positive news of late on the housing front, on the employment front and with consumer confidence levels and since our last call both Chrysler and GM have emerged from their bankruptcies and we have seen very encouraging comments from the new Chairman of General Motors that a revitalized advertising program is a key to GM’s recovery.
We have seen higher than expected political ad spending for the first two quarters of this off political year and we expect to accelerate that in the back half of 2009 into 2010 as the debate on the issues, particularly healthcare, takes to the air. We already have avail request pending in the Texas governor’s race and we expect to see activity ramp up as we approach this and other March 2010 primary dates.
A quick update on the Four Points management services agreement whereby we began managing this seven station group back in March. We have already made excellent headway in leveraging Nexstar’s vendor agreements and operating discipline in with the Four Points stations.
This is proving to be a win/win structure for both Nexstar and Four Points and we will look to expand this activity with other station groups as opportunities present themselves. We positively positioned Nexstar to weather this environment and we have taken aggressive approach by leveraging our traditional television broadcasting operating model into a multi-tiered model of high margin operations.
We fully expect that our ongoing approach to actively managing our station portfolio, our balance sheet, our capital structure and practicing prudent expense management as well as creating and developing new opportunities collectively will allow us to prosper as the economy and the ad markets rebound and as we benefit again next year from a substantial political revenue component. Thanks again for joining us this morning and now let’s get to your Q&A to address your specific areas of interest.
I will turn it back over to the operator.
Operator
(Operator Instructions) The first question comes from the line of Bishop Cheen – Wachovia.
Bishop Cheen – Wachovia
Welcome Tom. Nice to hear you on the call.
Perry congratulations, I think you were named “Broadcaster of the Year” by Broadcasting Magazine, was it?
Perry Cook
Yes it was. Thank you very much Bishop.
Bishop Cheen – Wachovia
I’m sure the cash award was enormous. All the directional stuff is cooking.
You are managing your balance sheet. The one big challenge continues to be that senior leverage covenant.
You are right up against it now. We knew it was going to be tight.
Do you want to give us color on how you work around that 4.5 covenant because you have certainly managed the other ones.
Thomas Carter
I will answer that or at least try to give some color around it. We monitor our covenants continuously and closely.
Obviously I get that. That is the environment I come from.
We are very focused on compliance. We have several initiatives that are available to us or are in the works that could aid us in generating liquidity to provide de-leveraging.
We continually re-evaluate expenses at the station and the corporate level as well as any balance sheet actions that we could take to address any situation going forward. So we have a number of things we are evaluating that we are contemplating that we are trying to determine if and when it would be appropriate to do any and all of those actions.
I can’t get into specifics with regard to what they are but believe me we are very focused on it.
Bishop Cheen – Wachovia
I would imagine with your background you are focused on it. One quick follow-up, you are certainly trying to put e-media and the retrans and get it, moving at a light slope.
Can you give us color on cost cuts? Is there more to go for your fixed cost cuts, if you have pretty much achieved everything you can?
Whatever you can tell us about the other side of your P&L.
Perry Cook
As you heard in the results we reported today, contraction in operating expenses versus the prior year even given effect for the two acquisitions. We will see in the back half of the year, and also the second quarter results included several hundred thousand dollars related to acquisition costs or restructuring costs for some of the consolidation work that we did in the 2009 second quarter.
We will see the benefit of that in the back half of the year but we have gone back again to ask our station managers and with Tom’s arrival we are taking a hard look here at the corporate side of things and we expect in the back half of the year in addition to the programs already in place there will be an additional seven figure cost savings that will come into play as we obviously have to operate in the environment which we have been given here. So there will be additional expense savings and measures implemented beyond what has been announced, what has been talked about and the corporate team and the station manager are fully participatory in that process.
It is going on in real time.
Bishop Cheen – Wachovia
Just to recap, Q2 I think you quantified with 4.2% reduction in SG&A. Correct?
Perry Cook
That is correct.
Operator
The next question comes from the line of Jonathan Levine – Jefferies & Co.
Jonathan Levine – Jefferies & Co.
I just wanted to follow up, have you spoken with your bank debt holders at this point?
Perry Cook
Not at this point. There has not been a need to as we are in compliance.
Obviously that would be one of the arrows in the quiver here that we are evaluating in addition to other opportunities both internal and external of the company to strengthen the balance sheet.
Thomas Carter
Let me just add to that. We talk to our lenders all the time about a lot of different things but that specific subject we have not talked in depth.
Just generally about what the market is doing and what the market is looking for.
Jonathan Levine – Jefferies & Co.
If you could talk a little bit on the top line and give a little more detail on the trends you are seeing on both the local and national level. Local looks like the decline accelerated versus the first quarter.
Similar also for national. If you could talk a little bit in terms of monthly trends and what you are seeing in July as well.
Perry Cook
July looks a lot like the second quarter did in terms of the revenue results as I look at our top end categories. The only one showing positive comps for the prior year in the quarter was attorneys.
There may be some symmetry to that. Our automotive spending, as I said, was septic.
15% of our core billing down from about 22% in the prior year. The positive sign there is if you look at the absolute dollars spent in the auto category versus Q1 the dollars were up and the dollars spent by individual dealers versus Q1 the dollars were up.
So we think it is most likely we have tested the bottom there. If you look at our non-top 10 categories which make up better than 1/3 of our revenue, some of the ones showing positive trends are grocery stores, schools, instruction, lottery, lawn and garden, optical, jewelry stores and retirement homes are our categories that are showing growth.
I don’t believe there has been a substantial change in the macro trends. We have not seen an acceleration in the rate of decline.
Some of this is seasonal. On the same token, we are not seeing a sustained, substantial improvement either.
So I think we are for the remainder of this year kind of at the bottom of the ocean.
Jonathan Levine – Jefferies & Co.
So the year-over-year declines for second quarter were similar to what you are going to be experiencing in the third quarter?
Perry Cook
In terms of core revenue? Is that your question?
Jonathan Levine – Jefferies & Co.
Yes.
Perry Cook
I actually think the core revenue decline will flatten out in the back half of the year as we as an industry and certainly as Nexstar heads core revenue declines in the back half of last year. The political piece will come increasingly into play obviously as that revenue was primarily third and fourth quarter directed in 2008.
We have begun to look at this kind of on a 2-year trend versus 2007 and it looks like the ocean floor in absolute dollars is about a 20% decline over the 2007 core revenue levels which would indicate a less decline in the third quarter and a much less decline in the core base to get to those levels in Q4.
Operator
The next question comes from the line of Steven [Grossante] – Tricadia.
Steven [Grossante] – Tricadia
First, with regard to the corporate expense, I know you had a couple of one-time pieces last quarter. It looks like the trajectory of that line item is continuing to go up despite you take out the stock based comp.
I wonder if you could talk about that a bit and how we should think about that line item going forward.
Perry Cook
The reason for the increase was primarily professional fees related to the acquisition that closed in the second quarter but the trajectory of that number is definitely absent the one-time line items the arrow is pointed down and not up.
Steven [Grossante] – Tricadia
That kind of ties to your quarter-over-quarter legal fees increasing? The large component was [inaudible] is that correct?
Perry Cook
That is correct.
Steven [Grossante] – Tricadia
With regard to the numbers you have been talking about with the incremental $100 million of revenue that is going to be in place for 2010, I wanted to know if you could talk a little bit about the different pieces of that revenue in greater detail in terms of what we are going to see in play. I know you said the $75 million will be in place with $25 million in place for 2009 although you did say it would be a little better than that.
I was just wondering what exactly gives you that $100 million. If you just look at the political revenue you did in 2006, take a haircut to that, I am coming to well over $100 million in incremental revenue between retrans, e-media, the Four Points agreement and then whatever assumption you want to apply to political spend.
Perry Cook
Well, there are contracted increases in retrans and there are agreements that will impact 2010 and renegotiated in 2009. Political will be a substantial component.
I think a number in the neighborhood equal to or greater than our 2008 because of the preponderance of state races; senator races and governor races that happen to fall into our footprint. Again, continued growth from e-media revenue and both incentive fees and management fees from our stations in practice and cumulatively add to that number in 2010.
Steven [Grossante] – Tricadia
So again just looking at the Credit Suisse slide that you gave for your presentation in June, is it safe to say that $75 million of retrans will be fully integrated into your 2010 P&L?
Perry Cook
Well, I think the $75 million the contracts that were renewed in 2008 their total contract value was $75 million and that we said we would see 1/3 of that in 2009 and obviously with better than $14.5 million in the first half of the year we think that was a conservative statement to make at that time. You can use that base for 2008 and then look at incremental increases in 2009 as well as the value of the new contracts and it will guide you to a number in the 30’s.
Steven [Grossante] – Tricadia
With respect to the composition of that revenue, you have been pushing for a higher cash component than the 80/20 you spoke to in the last call? Or is that consistent going forward?
Perry Cook
Hard to say with the agreements that have yet to be negotiated but if you look at the composition of our retrans revenue right now in 2009 it is a little better than 80% cash payments and a little less than 20% ad spend. We would expect that trend to continue if not the bias increasing more towards a straight cash compensation.
Operator
The next question comes from the line of Barry Lucas – Gabelli and Company
Barry Lucas – Gabelli and Company
Not to beat the retrans to death but clearly the network owners have been making some noise about getting in on some of that money. Maybe you could address that issue and how you intend to hang onto it?
Perry Cook
I can tell you there has been some noise but there really hasn’t been any substantive discussions. We pay most of the networks some level of support for NCAA basketball, NFL football, the Olympics and supporting the news gathering organizations.
I think it is all about how much we can all agree to contribute and the tension is they want more. We want to pay less.
Those discussions have been going on since 1995 basically. We negotiated for this revenue.
It is on the strength of our local stations. In Strasburg, Pennsylvania there are three NBC affiliates on the local cable system.
We are being paid to be carried there. So to me the value is obviously in our local programming, every bit as much if not substantially more than whatever network programming we carry.
I am very interested in having discussions with the networks about partnerships on things we can do together and share in the revenue. Just coming with your hand out is not really a business proposition that I am interested in at all.
So we have been successful in negotiating for this revenue and I think we will be successful in keeping it. I think the value proposition that we have talked to the networks about and I think others have as well is let’s find ways we can do things together and share in that revenue.
But we don’t see this as a zero sum game.
Barry Lucas – Gabelli and Company
One final question on political. You didn’t see a lot of money in Texas and the Presidential race just the way that broke; Bush wasn’t spending and neither was Obama.
Now you have got what looks like a very hot Governor’s race. Is there going to be a separate Senate race?
Is that the way it works now is that is actually incremental so that could provide enough juice to get beyond the $33 million or whatever you reported in 2008?
Perry Cook
Well, it is dependent and I am not intimately familiar with all the laws of Texas politics but if Senator Hutchinson resigns to run against the incumbent Governor in the Republican primary which she has indicated she plans to do, by the way we have a avail requests already from Governor Perry for rate quotes in some of our markets in Texas for a primary in March of next year. We expect the primary will shape up to be quite [inaudible].
I think the Governor has the right to appoint a senator for the unexpired portion of the term. I know there is a movement in Congress because of what happened in Illinois to require that those be special elections held immediately.
Nonetheless, we expect that the Governor’s race and particularly the primary portion of it will accelerate political ad spend in the state of Texas even into the fourth quarter of 2009 as well as a substantial component for the March primary in 2010. If you add on to that the governor being termed out in Pennsylvania, Arlen Specter both primary contest and potentially general election contest to remain or retain his senate seat as well as the elections in Illinois and New York and we think the 2010 political picture for us potentially the stars are all aligned there and it could be a record year for the company in its history.
Operator
The next question comes from the line of John Kornreich – Sandler Capital
John Kornreich – Sandler Capital
On CapEx going forward starting with the third quarter what is the sustainable annualized CapEx that we are looking at? You did 9+ in the first half.
Can you keep it down under $10 million annualized going forward?
Perry Cook
It will be kind of dependent upon the project or the ability to reduce expenses with the technology investment. The normalized run rate would be somewhere between $10-12 million going forward.
We will probably end up this year at a number in the $14-15 million range but obviously the bulk of that has already been spent in 2009.
John Kornreich – Sandler Capital
If I look at your interest expense which annualizes out at $45 million, I know it is not all cash but there is a cost to having debt whether it is cash or not, you have $45 million of interest expense annualized. CapEx call it $12 million which brings it to $57 million.
Throw in $15 million for corporate overhead, if I am doing the numbers right in order to generate free cash flow you have got to have BCF going forward of over $70 million just to cover the overhead of $15 million, the interest expense of $45 million and the CapEx of $12 million.
Perry Cook
I think that is a good map.
John Kornreich – Sandler Capital
This year you should generate some free cash flow, correct?
Perry Cook
Yes. We already have this year so far.
John Kornreich – Sandler Capital
But your definition of free cash flow was picking interest, right?
Perry Cook
Yes.
John Kornreich – Sandler Capital
An interesting exercise which I guess demonstrates the obvious pressure on margins, if you assume 80% of the retrans is cash and take that out of the second quarter BCF just to look at advertising margins you would be left with $14 million of advertising BCF on $57 million of advertising revenue taking out the same $6 million of cash retrans. That is a 25-26% margin on what is normally the best quarter of the year.
Do you kind of view margins now at the bottom and they can get back into the mid to high 30’s eventually?
Perry Cook
Yes, I shudder to think what most company’s balance sheets would look like or P&L would look like without retrans. Again, I think that is the important thing that the business continues to evolve.
We used to have network comps and now for all intensive purposes that has gone away. So for our company retrans is three times what network comp ever was?
I think if we can use our existing business to leverage into other lines of business then we are doing our job. We still view this as a business that is a 30+ margin business in an odd year and a 40+ margin business in a good political year.
We think we can still attain those numbers. I’m looking at the P&L for our e-media efforts in the first half of the year and our e-media ran at a 45% margin during the first six months of this year and I will point out that is ahead of the station group as a whole.
I think the important thing is we continue to be aggressive and opportunistic and evolve the business model to maintain those margins and ultimately deliver what you want which is growth year-over-year.
John Kornreich – Sandler Capital
What did Jacksonville and Little Rock add to second quarter revenue? Net revenue?
Perry Cook
About two points.
John Kornreich – Sandler Capital
So when you have, I think Tom mentioned, local was down 12 and national was down 32 and you weight that 70/30, a 17% decline in core advertising and therefore 17 might be more like 19?
Perry Cook
You would have to look at it on a net revenue basis because there are a lot more components that go into that. Generally the contribution of those two stations on a GAAP basis was two points versus the prior year.
John Kornreich – Sandler Capital
On Four Points, what was the revenue of this company in 2008?
Perry Cook
It is a private company and I don’t know I should really disclose that.
John Kornreich – Sandler Capital
What is the rough estimate as to what the annual management fee might be? A couple of million a year?
Perry Cook
I think we have been public about this, it is a $2 million base management fee and we have the opportunity to earn incentive compensation delivering BCF above a certain level.
John Kornreich – Sandler Capital
If eventually this group of stations was sold would you get a piece of the increment?
Perry Cook
Again, above a certain sales price we would participate. Yes.
John Kornreich – Sandler Capital
Finally, I am embarrassed to ask this, I don’t know anything about Four Points. Where are their stations and what are their affiliations?
Perry Cook
Sure, their primary stations are CW affiliates in Providence, Rhode Island and in West Palm Beach, Florida and CBS affiliates in Salt Lake City, Utah and Austin, Texas.
John Kornreich – Sandler Capital
Four stations?
Perry Cook
There are a total of seven because there are digital multicasts in each of the markets, or most of the markets; all markets except for Providence. There is an independent station in Salt Lake City, soon to be a Telemundo affiliate in Austin, Texas and there are a My Network and TBS [cast] digital multicast all of which bring revenue streams in West Palm Beach, Florida.
John Kornreich – Sandler Capital
Are you still technically allowed to buy in public debt?
Perry Cook
Buy in public debt? We have used our restricted payment basket for this year which is $10 million.
That is the debt retirement we talked about earlier in the call. That was the mechanism used to do that.
That resets January 1 but unless we are below the 5 times total leverage basis we are restricted to that $10 million basket.
Operator
The next question comes from the line of Bishop Cheen – Wells Fargo
Bishop Cheen – Wells Fargo
The retrans, I know it gets a little loosey goosey because it is projections and you are talking about 2010 and then you give presentations where you talk about all new incremental revenue, but I’m just trying to carve it out a little bit here. I think you said retrans as you get into 2010 should have a 30 handle on it.
I don’t mean to short you and I’m not trying to pin you down, I’m just trying to get within the stadium, within the ballpark of what this is here.
Perry Cook
That is correct.
Bishop Cheen – Wells Fargo
So that is the right zip code, somewhere in the 30’s as you get all these contracts in place. So political, you were not too shabby really despite a little discipline in Texas, last year was a pickling $33 million of political revenue and with all the stuff going on with the races in Texas do you think you can equal that or top it in 2010?
Perry Cook
I’m trying not to give guidance but I think I would make that assumption based on what we see right now.
Bishop Cheen – Wells Fargo
So now we have somewhere between 65-70 and the missing piece to that $100 million kind of number, and I don’t think that has to be a 2010 kind of number but the rest is kind of new business development and e-media?
Perry Cook
That is correct.
Bishop Cheen – Wells Fargo
Okay. So when we talk about incremental revenue, granted with different margins attached to it; retrans being the highest margin kind of revenue, and the new business probably the lowest margin of revenue.
That is where we are talking about getting to this magic kind of $100 incremental new revenue correct? As business, I think you said evolves which is a great way to put it, between retrans, e-media, new business and political which is every two years.
Perry Cook
The basic components of those building blocks would be the incremental political revenue, retrans in total, e-media in total and then our station management agreements. We expect in 2010 and in 2009 there will be an incentive compensation component on top of the base management fee and we expect to continue double digit growth from our e-media platform as we continue to give our sales teams more new things to sell.
Bishop Cheen – Wells Fargo
It is difficult for us on the outside to really quantify that because we really don’t have enough to go on yet and we have to see what the upside is and the slope of the direction and that kind of stuff. We just know it is a $2 million base right now.
Perry Cook
I just want to clarify; the political revenue would be incremental. The growth in retrans would be incremental.
I think what was said that someone picked up on was that the total revenue from political, retrans, e-media and station management agreements could be in that $100 million neighborhood. Again, to be clear not all of that would be incremental to this year.
Bishop Cheen – Wells Fargo
Right, if the total is that triple digit number but obviously when you look at your budget you are always looking at incremental. Again, just so I don’t misstate it, that $100 million plus is not necessarily incremental but a total contribution.
Perry Cook
That is correct.
Bishop Cheen – Wells Fargo
That was the tough question. When you say cash interest, Tom, is that cash at the door or is that the cash component of the GAAP interest as opposed to the total interest which has the pick component?
Thomas Carter
It is the cash component of total interest.
Bishop Cheen – Wells Fargo
So that is the cash and not actually cash expenditure for interest which is usually a supplemental disclosure in your Q’s and K’s?
Thomas Carter
Correct.
Operator
Mr. Cook, I will now turn the call back to you.
Please go ahead.
Perry Cook
Well thank you everyone for joining us. We look forward to gathering again in three month’s time to report on our Q3 results.
At that point hopefully we will give you some visibility on the end of the year. Thanks again.
Operator
Ladies and gentlemen that does conclude the conference call for today. We thank you for your participation.