Gray Media Inc (GTN.A) 2003 Q3 法說會逐字稿

Please be advised that this conference call is being recorded. Good afternoon and welcome to the third-quarter 2003 earnings results conference call for November 12, 2003. Please also be advised that the conference will be available in playback approximately one hour after the conference call ends at 1-888-509-0081. That is 1-888-509-0081.

Your host for today will be Bob Prather, President of Gray Television. Mr. Prather, please go ahead, sir.

Thank you very much, Jason. Welcome, everyone, to our Gray Television third-quarter conference call.

We were pleased to announce earlier today that we beat the high end of our guidance for the third quarter. We feel very good about our results for the third quarter and are really looking forward to a good fourth quarter and finishing up the year with a strong year -- not quite as good as last year's election year but we feel very good overall about our year.

We have been very, very pleased with the acquisitions that we made last year. They are fully integrated. They're operating seamlessly as part of Gray. I feel like they are all 100 percent on board as far as the way are operating them and feel very good about our management team and we have integrated all the operations.

As a matter-of-fact, on September 11th, ironically, of this year, Moody's raised its Gray Television ratings from a BA3 to BA2 in recognition of the Company's smooth integration of Benedek and expectations of the balance sheet strengthening through the course of the next 12 to 18 months. So we're very happy that Moody's recognized that we did what we say we were going to do on our acquisition of Benedek. I think we're a good bit ahead of schedule of what we thought.

A couple of things we've been working on -- obviously, HDTV -- we are in the final processes of finishing up. We have 26 stations broadcasting on HD right now. Our 27th will be going on by the end of the month. Then we will have two more that will either be later in this year or early next year. The two that we are a little late on both had channel -- one had a channel change and one we moved a tower where we had to (indiscernible) to locate in a different area. But we've got approval from the FCC so both of those should be completed by the end of first quarter at the latest, so we'll have all of the physical part of our HD done at that point. And we will be -- we've still got about another year's worth of payments because we have a good payment schedule and it stretched out for twelve months after installation. So we will be paying some of the tab next year on the balance of the HD conversions.

One other thing we mentioned earlier in the year that we have made a deal with both Dish and Direct TV to bring local signals into our market on satellite. Right now, we've got I think it's nine stations up that are broadcasting local on Dish and eight on Direct and we've got 12 pretty well committed for next year, so we'll have the bulk of our stations having Direct local on satellite within the next six to eight months and hopefully have all of our markets on by some time in the end of next year or early the following year. We think this is going to be very helpful with us, especially with our long strong local news presence in most of the markets we're in. So we feel very good about that.

Most of our managers I've talked to in recent days feel very good about the fourth quarter and the rest of the year. I think, overall, we -- everybody feels like the economy is picking up. There is a better feeling out there about the economy, which is always -- I think people have got to start feeling better before they start spending money. But I think most of all of our stations are looking forward to a (inaudible) for the rest of the year and obviously a very strong year next year.

Reno is continuing to be one of our real stellar performers, is on track to have a great year this year and looking forward to even more growth next year, so we're very pleased that.

One thing, we think there's going to be a lot of advertising. You've probably seen a lot of articles about it but this telephone number portability law that goes into effect November 24th -- there's going to be a tremendous amount of advertising by both your landline people and your cell phone people all trying to get -- to convince people to switch or either keep the number, they can keep where they are, o switch to another carrier. We are already seeing this in some of the markets -- orders coming in for advertising there. We think this is going to be a boom category for us in the near future.

Also obviously, we had some good political. Jim Ryan will go into a little more of that in little -- even this year. We're looking forward to a big, big year next year with the presidential election and a good many of the Congressional Senate races. But overall, I think the feeling is very good. As I said, all of our managers are pretty well are feeling very optimistic about the markets they are in and about what we're looking forward to at the end of this year and into next year.

At this point, I'm going to turn it over to Jim Ryan, our Chief Financial Officer, and let him go into more of the numbers in detail and then we will open it up for questions after Jim's gone through his presentation. Jim?

Thanks, Bob. Good afternoon, everybody. Just a reminder, as I said at our last call at Q2, the format of our release has been redesigned to comply with REG G, so it removes all non-GAAP terms. You'll be able to find some of the traditional non-GAAP disclosures on our Web site at GrayTVInc.com.

As I know, in this call, we will be talking a little bit about media cash flow and adjusted media cash flow, which is what we used to call operating cash flow before REG G came along. That information, if it's not already posted on our Web site, will be posted before the afternoon is out.

As Bob said, we had a good quarter. We are very pleased with the way the year has tracked and has basically been tracking to our internal projections all year long.

As we talk about both the three-month and the nine-month numbers, I'm going to focus my comments on comparisons to the pro forma, which gives us effect to the acquisitions we made in 2002. In keeping with the off-year cycle of the political, a lot of the year-to-year comparison -- certainly on the revenue side -- is heavily skewed by political comparisons.

Overall, we are very pleased in Q3. Revenue was down slightly 3 percent but we are, in broadcast, down about 4. But when you peel back to the next layer, our local revenue and our national revenue, excluding political, local was up 6 percent in television and national was up 4 percent for the quarter. We were very pleased with those growth rates.

As Bob mentioned, all year long, we've been getting a little bit more political this off-year than we had expected with some strong state races in both Kentucky and Mississippi. We ended up with about 1.1 million of political in the third quarter 2003. That certainly is quite a ways away from the 6.5 million of political we had in 2002. Again, we are very, very pleased with the underlying growth rates in the basic local and national business.

Our expenses in the quarter were down about 3 percent. Broadcasting expenses were down about 3 percent. As we have said all year long, before the year is out, we expect broadcast expenses to be slightly underneath 2002 levels, so we're pleased with the direction that is going as well.

Our Publishing unit did well for the quarter. Revenue was up slightly. At the retail revenue at the newspapers, it was up 5 percent, which we think was a pretty healthy number and we were pleased to see that.

On a nine-month basis, again, our overall revenues was only down 1 percent compared to '02. The growth rate in television of the basic local and national business is about where we had expected all year long.

On a nine-month basis, local, excluding political, was up 4 percent and the national was up 4 percent as well. Again, we had a fairly strong comparison going into last year's political and television. In '02, there was about 10.3 million of political. This year, with the help of those strong races in Kentucky and Mississippi, we were able to do about 3.4 million.

Also keep in mind, as we said in our earlier call this year, that we had about two point -- in 2002, the seven NBC stations would have had about 10.2 million of Olympic revenue that we're going against as well.

Broadcast expenses on a year-to-date basis are -- again, that's tracking away. We want it and we're very pleased with that.

Publishing revenues up about a percent and again, retail, on a nine-month basis in publishing -- the retail revenues were up 5 percent as well. So again, we are very pleased with the way the year has shaped up so far.

Looking ahead to the fourth quarter, as Bob mentioned, we're feeling pretty good about that as well. Let me talk about sales pacing that we are seeing so far for the fourth quarter. All of these numbers that I'm about to quote are as of last Friday and they are gross dollars, not net. But for fourth quarter, the pacing -- the business on books as of last Friday -- excluding political, the pace was up 7 percent. We were very pleased to see that. We have about 88 percent of our internal budget in the House. Again, we're pleased with that.

Our pacing -- breaking it down between local and national for the entire quarter, local is up about 7 percent and pace national is up slightly more at 8 percent. The pace for October is very strong when you exclude the political. That is not surprising. Obviously, we had an awful lot of inventory last year devoted to political last October, which we're filling in this year with local and national business. So we expected see a strong pace.

But for the month of October, it looks like local and national, excluding political, was up about 16 percent. Local up about 15 and national up stronger at 19 percent but it's also often the national advertisers that get bumped out first in the heavy political scenes. We're very pleased to see a strong pace like that but it's not surprising either.

November -- the middle month of the quarter, just like the middle month of the previous three quarters, is tracking lighter. The overall quarter, right now, is pacing -- local and national is pacing up 2 percent. Local is up about 1; national is up about 4.

But December is looking a little bit stronger. December, overall, is pacing currently up 3 percent and our local is up currently 6 percent. National right now is about flat but that may pick up a little bit as we move through the next few weeks.

Political for the fourth quarter -- again, because of the state races in Kentucky and Mississippi, we think we will pick up, on a net basis, about 1.9 million of political in the fourth quarter of this year. That compares to 15.1 last year. But overall, for 2003, we will end up with about 5.4 million of political, which is actually very good for an off year and we're pleased to see that.

A couple of quick comments on balance sheet and liquidity type items -- total debt at the end of the quarter was at 655.9. We had 10.2 million in cash. Leverage would be at 573 at the end of the quarter, which is actually the same -- unchanged from the beginning of the year. We still have 40 million of Preferred Stock outstanding. Our total shares outstanding presently are 49.6 million; that's 43.8 million of our common and 5.8 million of our Class A stock.

Capital Expenditures for the quarter, on a cash basis, were proximately 8.4 million. We spent, in cash, about 2.5 million for DTV and we had non-DTV of about 5.9 million. But again, let me point out that of that 5.9, as we mentioned in our Q2 call, 1.8 of that is for the purchase of land and tower in Florida where we plan to relocate our Tallahassee station to somewhere next year, and also about 750,000 of leasehold improvements as we were able to move our Gwinnett paper into a new facility midsummer. We're very pleased about both of those transactions.

Year-to-date Capital Expenditures in cash is about 16 million -- was about 6 million so far in DTV -- and 10 million for everything else. Cash taxes to a couple of states amounted to about 200,000 for the quarter. On year-to-date basis, we have about 1.4 million of cash taxes on the state level. Then on the federal level -- and I don't really expect to see much of a change in that number for the rest of the year. Non-cash contributions to the 401(k) plan for the quarter were about 333,000. On a year-to-date basis, that's about 1.5 million non-cash contributions to the 401(k) plan.

Program payments for the quarter are virtually the same as our program amortization. The payments were 2.8 million. Amortization was 2.9. On a year-to-date basis, our program payments are 8.2 million versus an amortization number of 8.4 million.

We issued extensive guidance for fourth quarter in the release. We feel very good about that guidance. Full-year capital expenditures really have not changed very much from the guidance we issued at the end of the second quarter. It looks like it will be about 23.5 million and we said before that it would be about 23 million. Keep in mind that 23.5 includes the tower and land purchase in Florida as well as the leasehold improvements for the Gwinnett paper.

DTV for the whole year -- we're currently anticipating being about 11 million in cash. About 8.5 million will be payable in cash next year. Then, as Bob said, there's probably two installations that (indiscernible) actually take place until next year, which means we will have a relatively small amount that trails out into 2005, and that's probably somewhere between 1 and 2 million -- not a very big number.

As I mentioned before, I expect task cash taxes for the states to be about 1.4 million for the year -- no federal taxes. Our program payments and our program amortization, for on a full-year basis, will be about 11.3 million and our non-cash contributions to the 401(k) plan on a full-year basis will be about $2 million as well.

I know that many of you will ask the question, and a couple of you have already either called or e-mailed, so let me get out a couple of more numbers that I'm sure everybody is interested in.

Media cash flow, which is a non-GAAP term and it's available on the Web site -- media cash flow for the quarter was at 28.8 million. That compares to a $29.8 million pro forma number for last year. Again, given the off-year in the political cycle, we're very pleased with those results.

Year-to-date media cash flow was at 82.4 and that compares to an 82.5 million pro forma number from last year.

Adjusted media cash flow, which just means the media cash flow less the corporate overhead on a trailing twelve-month basis as of the end of the quarter, pro forma was tracking at about 112.7 million. Again, our leverage, net of cash on hand, is about 573. We're very pleased with where that is currently.

As we've talked many times already this year in our earlier calls, given the cycle we're moving into in 2004 with the political year and the significant amounts of cash that the Company will be generating, we see leverage going down rapidly during the course of 2004.

Bob, at this point, I will turn it back to you.

Thanks very much, Jim. Jason, at this point, let's open it up for calls and to the listeners.

Thank you very much, Mr. Prater. We will now begin the question-and-answer session. (Caller Instructions). Bishop Sheen.

Just a couple of housekeeping things -- Jim, I think you're pretty good about this, but all the political that you spoke about for the dollars was already in net?

Yes.

Okay. Then, could you give us the pro forma Q4 -- the key numbers for Q4, 2002?

Sure. That's -- (multiple speakers).

Because I'm trying to remember if that was a clean Q4. Were there any acquisitions that came in the middle of Q4 last year?

All of our acquisitions last year were in Q4. I will be happy to give you those numbers. Also available -- there is a complete pro forma of 2002 by quarter and year-to-date -- (multiple speakers).

On the Web site?

It is on our Web site. Go to the earnings release for Q4 here and it's Page 14. and it's all laid out. I will be happy to quick recap it. Pro forma total revenues Q4 last year were 89 million. Media cash flow was 39.2 million. That includes everything -- broadcasting, publishing and paging. A quick breakdown -- broadcast pro forma Q4 '02 was 75.4 in revenue; publishing was 11.6; paging, 2.1.

Please keep in mind that we had about 15.1 million of political revenues in Q4 '02.

Right, okay. Real good. Then one other just macro -- you know, we've been on so many calls we are going dizzy -- but once again, the pacings or what you're seeing in your market seems to be stronger than others in terms of these pacings that you just gave us.

We're in good markets, Bishop.

(laughter). My two questions -- one, are you markets helping you with this tide, or are you just whipping the market left and right?

Two, if it's both you and the markets, what's going on in there? What's in the water that makes you guys so strong?

Bishop, I think that we've -- I think one of our constant themes is that we think we are in good markets -- the demographics we think (inaudible) all these university towns and state capitals tend to be ahead of the national average. I think our managers have done a real good job of going after -- I think, our local business, overall, has stayed stronger than most places -- and national, frankly, has been up and down. Some markets, it's real good; other markets, it's been fairly weak. Knoxville is a very good example. It had a very poor national year. They've done very well locally but we've got some other markets where, nationally, they are a real good. But overall, we feel like we are in very good towns that have good growth prospects ahead of them. And we try to maximize what we can get out of those towns.

Lastly, how would you characterize the visibility? Are your buys still coming late? Do you feel this is normal or less visibility? What do you think?

I think they are still later than they used to be. I think they're getting a little better but I think it's still not like it was five years ago. I think everybody has a tendency to hold their cards a little bit closer to the desk.

You know, for example, auto has been really good this year, but a lot of the stuff -- it's been up about over 5 percent overall for the year but you know, it can hit you -- it can -- all of a sudden, you get a buyer right at the last minute that winds up making your month for you. So, we've seen a fair amount a that around different markets. I think it's still -- I don't think anybody's got a crystal ball. It's a lot more opaque than it used to be. Let's put it that way.

That's a good work for it. Thank you, Robert.

Drew Marcus.

A couple of questions -- I guess, first, on your deal with the satellite guys, are you getting any retransmission fees?

Yes.

Yes? Do you want to give us bigger than a breadbox?

You know, we can't. We've got a confidentiality agreement but it's, you know, it's some nice little income coming in and I think it will get better in the years ahead. As I mentioned, we are only in about nine of our markets right now with the local, with EchoStar and eight with Dish -- I mean with direct -- but looking to have probably 21, 22 next year and then have the balance some time in the following year. I think it will be a decent little income in the years ahead. I think as more and more people realize they can get local programming on satellite, I think satellite is going to continue to be a force to be reckoned with by the cable people.

I think cable, right now, the only thing they have got to sell is broadband probably. I think people are just wanting plain old TV probably are leaning toward satellite if they can get the local broadcast. But I think cable obviously has some advantages with broadband and within (indiscernible) listen to 90 percent of their advertisement, that's about all they advertise anymore.

If you do get the 21 markets, if you -- I can do it, but can you do it for me? Have you calculated how many subscribers that would be in satellite?

We have not yet. They furnish us each month with, you know, how many subscribers they've got hooked up on the local. What they do in most of them are charging extra for local. I think most places is something like 4.95 per month they are charging to get the local stations. I don't have a number there -- estimate driven -- because like I said, we don't know until we see exactly how many people get signed up for it as they start (indiscernible) local stations in.

Do you know how many subs you have right now?

I do not.

Okay. The second -- will there be any more share buybacks like you did earlier this year?

We don't plan on any.

Third, when do you think you'll be a taxpayer?

I will let Jim answer that. I think Jim is saying six or seven. Jim, isn't that right?

Drew, if you assume a static case model, no further M&A activity and do nothing but pay down debt, we become probably partially federal in '06, '07 range. But keep in mind, because of the acquisitions we made last year -- because of the equity issuances we made last year, some of our loss carry-forwards are subject to annual limitations, which means that we don't fully exhaust the federal loss carry-forwards we have until -- again, on a static case model -- sometime between 2010 and maybe 2012. So, it ramps in really more around '08 time-frame.

Okay. Then finally, based on my calculations and your guidance, your debt leverage probably peaks at the end of next quarter and then starts to trail down, obviously, as we hit the -- (multiple speakers) -- given year.

That's also the natural cycle going into a good political year.

Exactly, so by my calculations here, let's say your leverage peaks out at about 6-4 (ph), which is comfortably below your 6-9 (indiscernible) -- (multiple speakers)?

Are you throwing in the preferred?

I thought that was excluding the preferred?

Okay. That's how we count it. My guess is your EBITDA, or your OCF number may be a little below. I think we're going to be right around six-ish.

Okay, and then your -- (Multiple Speakers).

(Multiple Speakers) -- there is a ton of headroom on the senior facility.

It is a 6-9? That's the covenant, right?

Yes, so there's --.

Either my number or yours, you are still below?

Amply below, yes.

Victor Miller.

A couple of questions -- first of all, you had, I guess, pro forma expense declines about 3 percent in the quarter; it's been flat for the year. What should we expect in terms of 2004, considering you're still integrating Benedek Stations?

Secondly, on the CapEx, Jim, could you just remind us, if we're at 23.5 for 2003, how much do we ramp down in the next two years? Because as you run through the CapEx line (inaudible) own line, how much does that ramp down during the next two years?

Then also, Jim, is there any piece of debt or anything on the balance sheet that you would like to work on as a CFO, looking for incremental free cash flow next year as rate environment still remain attractive and your debt leverage comes down?

Jim, do you want to answer those?

Yes. First of all, Victor, as far as CapEx goes next year, again, we would probably add 8, 8.5 of DTV next year. What we're finding and what's actually creeped in a little bit to our CapEx -- regular CapEx number this year, as we said before, we have -- in paying the DTV the last few years, we've been trying to hold off and hold down some other things. I think what we're seeing, especially as we move through the second after next year, is that some of that is beginning to catch up to us a little bit. So it would not surprise me next year if we are playing a little bit of catch up on the regular stuff. So, maybe we're talking 15 or so in total, because if I go 8 and then -- you know, if I will probably need to put in some a little bit (sic) extra in the regular just to play catch-up a little.

Now, the other thing that will be doing next year if those plans haven't fully materialized yet is we would very much like to relocate our Tallahassee station to the land we purchased this year and construct a new facility that would, on a long-term basis, allow us to get out of a fairly expensive operating lease there. So, we are still studying that as well.

So, the simple answer is probably 15 but if we build the building, it might go up a little bit more. But if we do do -- build the building, we will probably try to hold some of the other stuff back a little bit to balance the equations.

Your question on expenses for next year -- in total, we're still finalizing our '04 budgets. I think the -- first of all, Bob has indicated again to all the managers for next year, as he has the last several years, that he is looking for a zero dollar increase in the aggregate. I think, if we don't bring it in at a zero dollar increase, we're talking relatively small increases. In the worst-case percent or a couple of percent on the worst side. Actually, the preliminary budgets are looking pretty good. So, I don't expect much real expense growth next year in the Company.

I imagine a lot of that, Jim, is just related to the variable side of a better stream?

Some of it is. I mean, obviously, you've got -- as local sales go up, obviously, commission levels go up and. In a few instances, we are not really adding to staff at all generally, but in one or two instances, we're adding an AE here or there; in one or two other instances, a person or two to a news department but no real big changes there. But yes, in a good year, your local sales ramp up, the commission levels ramp up there too to some extent.

Also the thing that I will point out that we do -- historically have always done -- and we are maybe a little different than most people in the industry -- is that the dollars we pay to our national sales reps -- the (indiscernible), the blairs, (ph) the telereps of the world -- we charge that as an operating expense in our P&L. So, when next year, we go against bit political numbers and most of that political goes through national rep firms and they all take their commission on it as it passes through their hand, that's an operating expense for us. Most people net debt against revenue; we have traditionally not. So that puts a little bit even higher hurdle on us next year. As we try to manage to zero, we have to overcome that as well.

So bottom line, we're in good shape on expenses. As we talked before, our programming costs, our major programming costs are locked in for the next -- until '08. While it goes down a little and then goes up a little on our major programming costs, at the end of the day, we're basically not going to pay anything more for our main -- (technical difficulty) -- product in the last year as we are paying today. So I think that we have done a good job locking in fixed costs over an extended period of time.

How about the balance sheet? Anything you want to work on there?

Well, I think, if I understood your question, maybe phrasing it a little bit differently -- I mean, obviously, we've got a good senior facility. We've flexed down our pricing on our senior facility this year already. It's probably -- unless overall rates on senior facilities go down a whole lot more, which I would be surprised at, it would probably be tough to push that any father. I think we took advantage of -- there was a window and we were able to take good advantage of that window this year.

I think we are several years away yet from our call date -- our first call date on our subnotes. I would say in all honesty right now, I have not seen a compelling tender scenario to bring those in -- nothing that made sense on a -- even on a net present value, let alone several other issues. So, we've got a good structure in place. It's flexible. We're in pretty good shape, so unless we catch a good break somewhere in a rate environment that makes it really a compelling story for us to do something, I think we're probably inclined to sit tight, watch for a good opportunity if one comes along but be careful that we don't start doing a lot of over-engineering.

Thanks very much.

Victor, I might mention that, on the expense side of things, I'm very proud of our managers because for three years in a row, I have asked them to basically have a zero expense increase and they have pretty hit it. At the same time, they have been able to give raises to people and do the right thing by our employees. But they just manage smarter and by attrition, we have gradually learned to operate these stations with less people. We're asking for the same thing for '04 and I think we will be able to get it. We're just trying to kind of use the old Japanese kaisan (ph) -- get a little better every year at little things, not any dramatic things but just do a lot of little things better all the time. I think our managers have done a great job of managing our expenses and I feel good that we're going to continue doing that in the future.

As Jim mentioned, we just renegotiated with King World on 18 of our stations to basically lock-in our pricing there through 2008, so we feel pretty good about we know where our programming costs are going to be and we're trying to figure out a way to get a little better every year.

Victor Miller; Thanks a lot.

Peter Hollman.

I am new to the Company. (indiscernible). I just wanted ask you a couple of detailed questions. Can you tell me what the relevant metrics, cash flow revenue, etc. were for same-stations on a quarterly and nine-month basis? Could you also describe -- unless you think it's too long a discussion -- what you're sort of going forward business plan is (indiscernible) acquisitions, whether they are dilutive our nondilutive plans to reduce debt to a certain leverage level and if you anticipate additional acquisitions in the next 6 to 12 months?

I will answer the second part and I'll let Jim answer the first part.

I will say I have always characterized our acquisition philosophy as opportunistic. We have pretty strict criteria on the kind of stations we like to buy and like to own. We like to say that we like to look at a lot of different deals because we learn something when we look. But we're very choosy about the ones we go after. We're been fortunate to buy some very good stations at what we consider very good prices. We will continue that philosophy, going forward. Like I said, we're always looking but we're very, very, very picky about what we buy, so -- (multiple speakers).

But you don't do dilutive? You don't do dilutive acquisitions? You expect to be accretive in the first -- (multiple speakers)?

We normally like to be accretive, yes. So far, in most cases -- although I will say that -- like I said, if markets came along that we felt we were -- had better growth prospects than what we normally have, it would depend on the deal in the market but generally, we like to have accretive deals and we've been fortunate to have most of those in the past. We are going to be pretty selective. Like I said, if you look at most our stations, they all pretty well fit our criteria to a tee and we're going to keep it that; we're not going to venture out into areas that we're not familiar with. So we think we've got a good formula and we will continue along that line.

It sounds like a plan.

We think so. So far, it has worked. I will let Jim mention the cash flow figures to you.

When you say same-station, do you want the ones historically held for the full 12 months of '02 and '03?

However you characterize it. I mean, you look at new stations and then you look at sort of historic. Some people say nine-month and some say twelve-month. Some people say calendar year. It's just whatever your definition is.

Well, in the text of the release, we do make some comments on both on a revenue and an operating expense basis of the stations we would have historically held all through 2002 and all through 2003, so you've got kind of a historic comparison to historic comparison.

If you go and look on a pure pro forma and pro forma '02 or all the acquisitions, then our television revenues were up. I'm sorry. Our television revenue for the quarter was down about 4 percent going into last year's political cycle. On a nine-month basis, it was only down about 1 percent.

Media cash flow would be -- for broadcasting for the quarter was about -- on a pure pro forma -- (technical difficulty) -- for all acquisitions in 2002. We ended up, for the quarter, at about 25.1 million versus 25.9 last year. On a year-to-date basis, we are at flat to last year at 71.5 million.

Then the better economic environment -- is it your expectation that you can grow cash flow at mid singles or low doubles?

Yes. Certainly, going into next year with, I think, a strong -- I mean, it's a political season; it should be strong. Plus, our CBS stations will lead off in January with the Super Bowl and our NBC stations will have Summer Olympics in July our August. I would expect growth next year very solid just because of the nature of the year.

Jim Boyle.

Good afternoon. How much of a Q1 inventory is placed to date at this point?

Jim, I couldn't give you a specific answer on that. I would have to go find out. I mean, quite honestly, when we pull our pacing reports corporately, we only look out three months at a time, so I'm only really looking at the -- at best, looking at January. I think that's a backdoor answer to say we don't consider enough out there for February and March to be worth looking at yet.

Okay. Are there any amortizing categories currently that are either just surprisingly strong or surprisingly weak?

That's a good one. Jim, you know, I guess surprisingly strong agriculture and entertainment -- very, very strong. Surprisingly weak department stores and discount stores. That would probably be -- and supermarkets -- automotive is up good. Communications is up good. Medical, dental is up. Restaurants is up a little bit. Furniture is up real good. We track -- of about 25 categories, we track our top 10 pretty closely every month. We've got about six categories up pretty good and four that are down. The down are not down much except, as I mentioned, the one that's -- the department discount stores are all more than usual. But overall, we feel good about -- as I said, most of our managers feel very good about our business right now.

Has there been any change in the length of ad schedules being placed?

I think they're probably shorter than they used to be.

Shorter than one or two years ago, or shorter than a few months ago?

Than one or two years ago, back before 2001. There are shorter now than they were back then. But I think, as I said, I think if -- and (indiscernible) talked to just about all of the managers in the last few days. Most of them feel very good about the business the rest of the year and into next year right now. I would say they their optimism has increased every quarter.

Okay. Finally, Jim, what is the local-national split right now?

It's roughly, on a pure local-national split, it's close to a 70-30 in favor of local. I would have to pull the number and quick-look for you. That really has not changed, Jim, over time for us.

Thank you.

Paul Sweeney.

Good afternoon. Couple of questions just following up on the last as you talked about, obviously, your focus on the local business. Can you talk about -- in your markets, your (indiscernible) markets, if you are seeing any incremental or unusual, I guess, increasing competition from the local cable connects? That has certainly been an issue of discussion amongst investors as they look at the local advertising landscape these days.

Second, just now that the digital television upgrade is essentially through for you guys, how do you think about any kind of business plans or business models that you can drive off of that? Do you think there's any incremental revenue that you can be driven off of your enhanced plans? Thanks.

The answer to the second part first -- I sure hope so. We've got a lot of money sunk into digital HD technology. I think there's going to be -- I'm not sure anyone has got the formula yet but there's a lot of creative people out there trying to figure out ways to take advantage of multicasting in the use of the spectrums. I think, as the spectrum -- as compression technology becomes more and more sophisticated, you're going to see -- you know, being able to get more use out of this spectrum. But right this minute, I don't have a business plan; I don't know anybody that does. But I'm fully confident that we are going to be able to find some additional sources of revenue, going forward, once HD and digital becomes the dominant media for the television business. I think it's still down the road a little bit. So, I'm optimistic but I don't know how long it's going to take.

The first part of your question was --?

Just kind of local cable.

I think local cable -- I think cable has been very, very aggressive selling spots. I'm not sure they've heard us. We felt as much as maybe radio and maybe newspapers. They sell really cheap spots. They try to target niche advertising. We're still the best in broad media and advertising, I think. We're conscious of them; we're constantly -- (technical difficulty) -- ways to compete with their sales pitch. I think cable has done a good job of actually overselling what they have got sell and I think it's incumbent upon TV stations to do a better job selling against them on the national level.

One of our rep firms has done a real good job educating our user-word advertisers in markets where they feel like cable is getting too big a percentage of the dollars related to their ratings. I think, here again, it's up to us to take those kind of things and go out and educate people to say, hey, look, here's what you're getting for your dollar and here's what we give you for the dollar.

I think all of us in the TV business have got to be very aware that there's more and more forms of competition out there everyday and we cannot take for granted that we're going to get our share of the dollar. We have got to be out there fighting for those dollars. I think it's one of the things that we emphasize to our managers and our people constantly because, for a long time, it was TV pretty well had a free reign an with cable and other things, the Internet and all the other things out there, we have got to be smarter about how we sell our product.

Thanks very much.

Sean Budsin (ph).

Good afternoon. Nice job. The question I had was regarding -- well two of them, really. I think the first question on the call was kind of about how you are outperforming your peers. Specifically -- and I know you talked broadly about how -- I think your markets and the state capitals are helping. But is there anything specifically on the national side that you're doing that you think differently? I think you are -- now that almost all of the care plays have reported, most of the ones we cover, their national, excluding political, was down year-over-year. Yours was up I think about 4 percent, which certainly is the highest that we've seen. So I'm kind of wondering what's going on there? If you have any ideas as to why you're performing so well?

Secondly, when I look back in the pro formas from, say, '01 to '02, your local business, excluding political, was up in that odd to even year period. I know '01 was a terrible year, but is it reasonable to think that your local, excluding political revenue, could be up next year from this year? Thanks.

I think the answer to that is yes, hopefully. You know, the big problem you have is just depending on how strong the political is and the oversupply in demand. What happens is they want to be around our news products and they are willing to pay a raise to get guaranteed times in our premium news products, so sometimes they are just able to squeeze out local. But we feel good about what local looks like next year.

As far as your question -- here again, I wish I had a magic wand to tell you exactly why our national -- like I said, national has really been kind of a mixed bag for us. In some markets, it's been very strong; in others, it's been flat to down. As I mentioned, I think Knoxville is probably down more than any other market nationally. But once again, I think it's a tribute to the markets were in. In a lot of cases, we're in some very active markets that year-in any year-out national advertisers like to be in those kind of towns because of the demographics of those kind of towns. I think that, here again, he combination of that and the strength of our local news product in most of these towns -- hopefully, we've got a little competitive advantage over other people.

As I say, I think I give our rep firms a pat on the back. I think they've done a good job of getting as much national business for us as they could get out there. I've always said, the one thing about national that -- I like local better than national because I think we control our investment better. You know, there are some guy sitting there on Madison Avenue with computers and demographic studies and charts and one day, (inaudible) guy just walks and just says, well, I'm going to pull all the advertising out of Warsaw (ph), Wisconsin and take it to Boise, Idaho. There's not much we can do about that. I don't care how good a salesman you are or how good a market we thin we are in.

So, we're a little bit at the mercy of marketeers up in New York and Chicago and other places -- you know, are studying things strictly on a very computer oriented basis that may have nothing to do with the particular markets we're in. But overall, we feel very good about the strength of our markets.

Great. Nice quarter, guys.

Mark Navy (ph).

A lot of questions have been answered already, but I have two. You were talking before about number portability, Bob. You were talking how it's going to be a big deal. Just out of curiosity, within your top 10 categories, where does telecom fit on your TV stations within the category group?

Also, with your sales managers, are they saying it's a December event, or is it going to be more aggressively pushed in the first quarter of 2004? I have a follow-up question.

We're already starting to see it in December on several (indiscernible) I talk to. As far as what we call communications, they are in our top five. They are probably about fifth overall -- fifth or six category, what we call communications; that's all phones, cell phones, pagers, anything else that might be advertising through those things.

I think you're going to -- like I said, this is really a sea change for that business. One of the things that cell phone people have always been very, very guarded about is holding onto those numbers because a lot of people are just reluctant to change providers because they don't want to change numbers.

I think you're just going to see a tremendous amount of hold-on advertising and contrast advertising, both. I think you're going to see a lot of incentive things out there to get people to switch and I think you're going to see a lot of counter incentive to stay where you are. So I think this category could really be a lot bigger than anybody thinks next year, just because it's a total change for this business that they've never had to face before and it's not going to be good for their business, frankly. It will be good for us and other people but it definitely won't be good for their business, in the short-term anyway.

Great. The other thing is, Bob, let me hear your thoughts on the dividend and your dividend -- how often do you -- are you expecting to raise it, (inaudible) you have a time frame -- okay, every six quarters?

We will look at it. We're looking at every quarter, Mark. I think, with the new tax laws, there's obviously some incentive. We've been very conscious of keeping our debt to cash flow ratio and those kinds of things in order and trying to get debt paid down. While I think it's something -- like I said, I think our Board will review our dividend policy every quarter, going forward, just by a quarter-by-quarter basis and looking out a year ahead, how we feel about the cash flow and our obligations. We should have a huge free cash flow next year and that's obviously one consideration we might look at is, given -- paying back some of the dividend. But it's something that is definitely farther on the radar screen than it was before the new tax law went into effect.

Great, thanks for much.

Sheree Chew (ph).

My questions have actually been answered. Thank you.

Brett Felcoph (ph).

Jim, I didn't hear you before about the CapEx. Is it 15 plus 8.5, or the 8.5 is in the 15?

The 8.5 is in the 15 with a caveat that if we go ahead with that building product next year, the 15 might creep up a little higher, but we need to finish flushing that out as we complete our budgets for '04.

I got you. The interest build next year is in the low 40s?

Yes. You know, the senior 375 million is LIBOR 2.25 and the subnotes are 9.25.

Okay. Bob, are you -- I know you guys are very opportunistic. You sell at the right price or buy at the right price. The print properties -- when they trade, get gargantuan multiples -- I know there is a tax issue there but in a deregulated world, if a TV station swap for those properties came along in a right market -- I guess the question is, are you wedded to those properties?

Here again, we are very happy with the newspapers we own. We're very happy with the management team that's running them. They've had excellent growth over the last two years and we think they will continue to have good growth in the years ahead.

I would say never say never to any kind of thing but I think it would have to be a very compelling deal for us to try to do anything there. Because like I said, they are such good properties and here we, frankly -- if we could find the right acquisition, especially if it was a one paper type deal that fit our criteria. We've looked at a few in the past and as you said, they go for prices we have not been willing to pay but sometime you are able to find one that you know is a good deal that you're able to buy at a reasonable price. So we're always looking in that area too but I think you've summed it up real early; the tax -- for us to just sell the papers would make no sense because we would have a pretty big tax bill to pay and then what would we do with the money except pay down pretty low interest rate debt. We would wind up giving up a lot of cash flow, in effect, that way. We are very happy. Like I said, they are on track to have a good year this year, like they've had the last few years and are budgeting for a good year next year.

You know, if there was a right deal came along in the newspaper business to buy or sell, we're always looking but I wouldn't see anything happening any time in the near future there as far as any kind of sale (inaudible).

Adam Spielman, please go ahead.

I have a question on acquisitions. NextStar (ph) is out looking at doing an IPO and they've obviously been very inquisitive. I am just wondering, do you guys -- have you looked at the -- or did you look at the most recent property they have purchased? Do you view them as kind of competing in markets smaller than you, or are you guys kind of converging onto the same markets in the TV landscape?

We did not look at properties they bought. Terry Soaks (ph) is a very good operator and runs a good operation. They are in somewhat different markets than we are and you know, I think, here again, we have been very fortunate. I don't think we bought -- out of 29 stations, I don't think we bought but two properties that were actually part of an auction process. To go further than that, I think about 12 of our 29 stations have only had one owner besides us. We bought it from the family that put it on the air.

So, we spent a lot of time looking at getting to know people, letting them know we're out there and we have been very fortunate to do a lot of negotiated deals where we really weren't competing and got the first look on deals where we weren't competing with other buyers. We hope to continue that in the future. We like to buy those kinds of properties and we like to keep our eyes open for opportunities like that when they come along. But they are good operators and I'm sure that there will be deals out there down the road that both of us will be looking at.

So you don't feel any pressure in that there's a land grab going on amongst, for example, next door is a consolidator -- some other financial buyers -- you feel like you want to stay consistent and try to buy properties out of auctions?

No, no because here again, we went from 1999 until 2002 and made no acquisition and then we did both the Benedek deal and Reno all in 2002 and made great deals. Those deals - we couldn't have found better deals and we got them at very attractive prices. So, it paid for us to sit on the sideline during that period. I frankly -- you know, there haven't been a whole lot available in the marketplace over last 12 months. The Freedom stuff -- I wasn't sure it was ever going to really be available as a TV package.

There was a group called AMCO (ph), which I think had a couple of deals; I'm not sure what has happened to it lately. Like I said, we're pretty particular about what kind of stations we want to buy and we're happy to keep running what we've got if we can't find stations that fit our criteria.

A quick, final question for Jim -- Jim, I'm just working in between the new technology here. Media cash flows -- I'm looking on your reconciliation -- it's just -- (multiple speakers)?

The same term we've always used.

Right. Then EBITDA to adjusted media cash flow should just be the difference between the amortization and the cash payments. Is that correct?

No. The only difference between media cash flow and adjusted media cash flow is the -- in arriving at adjusted media cash flow, we have deducted corporate overhead.

Adjusted media cash flow is exactly what we used to call, for years and years, operating cash flow but we had to change our terminology midyear.

Then moving from adjusted media cash flow to, you know, if you wanted to do EBITDA off the income statement, is the old difference there the timing difference with the program rights amortization and the cash payments?

There is that difference, which -- in our case -- is insignificant. The other major piece of that is the non-cash contributions to the 401(k) plan.

I got you; that's getting stuck into the EBITDA. Okay, great. Thank you.

(Caller Instructions). Mr. Prather, there are no further questions at this time, sir.

Thank you very much, Jason. I want to thank everyone for participating with us today. We are looking forward to talking to you again on our year-end fourth-quarter call. I promise you we will be here trying to make sure we do the right thing day in and day out. As I mention every time, Jim and I answer on the phone -- we're either fine (sic). So if you've got any other questions or comments, don't hesitate to call. Thank you, everybody. Good-bye.

This concludes today's conference call. Please disconnect your lines. Thank you for your participation.