Gray Media Inc (GTN.A) 2004 Q2 法說會逐字稿

Good morning and welcome to the Gray Television second-quarter earnings conference call for August 6, 2004. Your host for today's call will be Mr. Bob Prather. Mr. Prather, please go ahead.

Thank you very much, operator. I want to welcome everybody to our second-quarter earnings call. We're very pleased with our results for the second quarter. We are on track for 2004 to be a record year for Gray Television, which we are very proud of. I think it's a tribute to our managers in all properties.

Also I think it is a reaffirmation of our strategy of strong stations and strong newspapers with a very dominant local focus in the marketplaces we are in. And very good markets in most cases, where the demographics are good, the growth is good, the economies are good, virtually every single market we are in presently. So we feel very good about what we're seeing.

We had local, excluding political, up 11 percent the first 6 months, we are very proud of. Local is roughly 70 percent of our revenue, and we want --as we have mentioned before -- we would like to get that to 75 in the years ahead. Looks like political is going to be in the 25 to 30 million range this year for us. Where the estimates are right now, EBITDA in the 130, 140 million range, which we feel comfortable with. We are very pleased our free cash flow is looking like it's going to be a good bit in excess of $1 per share.

Some of the things we have accomplished during the quarter -- we refinanced our 8-year banknotes. We dropped our rate from 2.25 over LIBOR to 1.75, with LIBOR right now at roughly 1.7 for the 3-month LIBOR; we are paying about 3.45 percent for our 8-year banknotes, which is pretty cheap money in anybody's game. We have got about 375 million of notes right now.

We have got ParkerVision, which is a new news automation system, presently being installed in 3 of our stations. We like to stick our toe in and make sure these things work right and do what they say there are going to do. If this looks as promising as we think it is from an efficiency and automation standpoint, we hope to put this in some more stations in the years coming ahead. But we feel very good about that.

Our Charlottesville construction is on track. We plan to be on the air next week as a matter of fact, August 15. We actually have a CBS affiliation and an ABC affiliation in Charlottesville. We have a low-power ABC station and a full power CBS which we are going to be operating out of the same facility in Charlottesville, and we are very pleased with the progress there. We got FCC approval. As I say we've got our tower up, our transmitter, and we are presently building our studios out right now in Charlottesville. We think that market looks even better the more we look at it. So we're very, very proud of what is going on in Charlottesville.

Another thing that is interesting in the market right now, CBS seems to be on a roll more than ever. In the last rating period, they had 8 out of 10 of the top 10 shows, which looks like dominance from the old days of CBS. So we're very happy to have 16 CBS stations and feel very good about CBS.

I think NBC is going to be having some changes because of losing some of their key programs over the last couple of years. But I think they've got good management. I think ABC seems to be -- with their new management in their television group -- seems to be making some progress. We like strong networks in all 3 of our different networks. We also just recently signed a new 10-year agreement with ABC on our 7 ABC stations that we feel is very good deal for us. So we're happy with all that.

Earlier in the year, we announced that our Board had approved a stock buyback of up to 2 million shares. We haven't bought any shares yet, but we think at current prices we're going to be looking pretty hard at hopefully doing a stock buyback plan in the second half of the year and try to buy in some shares at these prices. We feel like the TV industry is getting hammered pretty hard right now. Unjustifiably, but it is still is.

Jim is going to go into more detail about 2004. I would like to talk a little bit about 2005, which is going to be a challenge for all of us. We are already planning for it. Just to give you an example, let's compare 2002 to 2003. In 2003, excluding political, local grew 5 percent; national grew 4 percent. Political decreased from 25.3 million to 5.7 million. So, in that year, however, due to local and national growth total broadcast revenue only declined 4 percent. So, we feel very good. We kept our operating expenses flat between 2002-2003. We also eliminated some Benedict (ph) overhead during that time.

Right now, we're definitely going to be at the best for our managers -- and they have already been told this -- our budgets are going to be a zero expense increase for 2005; and potentially we will even have some cuts in our overall corporate spending for 2005. So I think -- and we are looking real hard at making sure we are doing all the right things we can do to increase our efficiency and our productivity in our operations.

To sum it up, our media cash flow declined about 6 percent in 2003 from 2002. We hope to do that much or better in 2005, frankly. Like I said, we're planning ahead further this time even than we were. But we think 2005 is going to be a good year for us, and that we are expecting local and national to be in mid single digits.

Also, we are on a real campaign right now in our organization with the Internet growth, and we're really tying our Internet websites in with our television dominant local news franchises. We're trying to extend our brand into the Internet. We want it to be the source of news for people especially during the daytime when people are at work.

We have had 2 things we have added to our websites this year, which are very, very good operations for us. One is a desktop alert that has weather, news, sports alerts that come on and flash on your computer, and you can go straight to our website in see what is going on. We also are putting video streaming on all of our websites as we speak and hope to have it rolled out completely on all our stations in the next 60 days.

We think both of these are excellent revenue sources for us. Just to give an example on our Internet, what we call Internet-related revenue, through 6 months, a little over $3 million of Internet-related revenue. We're expecting about close to 7 million for the year total. As I said, we're just now rolling out the video streaming, and we have not totally sold all our desktop alert units in all our markets. So we think our Internet growth is going to be very, very good next year, and all our managers are committed to this.

As I said, we look at this is an extension of our brand, our local news brand, more than anything. We want to make sure that people consider us the news source in the communities they live. I think this is going to be important for us in the years ahead, so we're looking forward to that. At this point, I would like to turn it over to Jim Ryan. Jim is going to go through the numbers in more detail, and then we will open it up for questions. So Jim?

Thanks, Bob. Good morning, everybody. As Bob said, we're very, very pleased with second-quarter results and also very comfortable with our third-quarter guidance and how the second half of the year appears to be shaping up. Let me make a few quick comments about second quarter and then I will talk about the first half briefly as well.

Total revenue was up 10 percent. We were very pleased that our broadcast revenue was up 12 percent. Obviously, political has played a big part in broadcast revenue so far this year. But again just like in first quarter, we saw very strong growth in our local revenue, excluding all of our political. Local excluding political was up 9 percent. We were very, very pleased to see that; and as Bob mentioned before, that local spot sales number accounts for about 70 percent of our total spot sales. So we're delighted to see very strong broad-based growth across multiple categories. So, very solid local growth.

Again, political was strong in second quarter. We have seen heavy spending in the key battleground states of Wisconsin where we have 3 stations; Florida where we have 2 stations; Michigan has seen a lot, we have 1 station in Lansing; and actually Parkersburg, West Virginia, because it sits right on the Ohio line actually was one of the largest recipients of political dollars in the second quarter, and it happens to be our smallest station. So it's been a strong political year, and no sign of the political slowing up.

Publishing showed some growth as well. Overall operating expenses were up about 3 percent, which was in line with our expectations for the quarter. The total year expectation on expenses is somewhere between 3.5 and 4, and some of that is national sales rep commissions paid to the national rep agencies for all the political dollars; that kind of spikes by our expense line a little bit in political years.

On 6 months, again, we were very pleased at the growth we saw. Overall revenue was up 12 percent. Local on a 6-month basis is up a very, very healthy 11 percent. Again as I said before, it is broad-based, multiple categories, the type of growth you like to see. Strong political; for the 6 months it was at 9 million. In comparison, 2.3 million in 2003. And if we go back to the last general election year in 2002, on a pro forma basis for all of our acquisitions, we only had 3.8 million in the first 6 months of '02. So, obviously political has been very heavy as widely written about too so far this year.

Turning ahead a little bit to the third quarter, let me comment on where we see our current pacing. Again pacing is quarters booked to date, and we see third quarter shaping up very, very well. These pacing numbers are excluding all the political. We do not count political when we talk about our general pacing numbers. Overall for the quarter, current pace is up 8 percent, and these are as of last Friday's numbers.

We're at 84 percent of budget. And as you laid out the months of the quarter, you can see we are benefiting very strongly in August because of the Olympics. July is currently up 4. August is up a very healthy plus 10, with local up plus 12 so far for August; and obviously that is Olympics driven. We're expecting somewhere between 2.5 and $3 million of revenue associated with the Olympics. Then currently September is pacing plus 12; but I would expect that to trail off as we get closer to September. I think right now what we are seeing is local buyers trying to get in a little bit ahead of some of the big political rush and lockdown a little inventory for themselves.

Our political is continuing to track strongly. Our July looks like our political came in about $2 million, which would be about 3.5 times more than we budgeted for July. Now, I am not saying that the whole quarter is going to come in 3.5 times ahead of budget; but certainly it's been a strong trend and political has been very strong. As you can see in our guidance, we're suggesting on the high side political may be about $9 million for the quarter. That would compare to, if you go to 2002, on a pro forma basis we only had 6.5 million in the third quarter. So again we're expecting a good political season, Q3 as well as Q4.

A couple of quick comments on the balance sheet. Total debt at the end of the quarter at June 30 was 655.9 million. That is unchanged since the beginning of the year. If you wanted to calculate a leverage, we had $31.8 million of cash; a leverage ratio net of the cash on the balance sheet would put us at about 5.24 times. Very comfortable. As we have said all along the leverage will come down dramatically as the year goes on, and it is already down from just over 6 times at the end of 2003. We certainly will be well into the 4s by the end of 2004.

CapEx year-to-date is 15.8 million. Of that number, 8 million was for digital and the remainder is your routine CapEx. Our program payments 6 months year-to-date were 5.4 million; and the program amortization was 5.5. So our payments and amortization on the programming side are virtually identical.

A couple of quick comments again on our guidance for third quarter. We feel pretty good about it. Total broadcast revenue based on, first of all, continuing strong growth in local as well as the political cycle, we're expecting to be plus 18 to 20 percent over last year. We have already said we expect a strong political in third quarter. Obviously, that will translate into very strong EBITDA or media cash flow growth, whatever metric you want to look at, in the upper 30 to 40 percent range. So we're looking forward to a very good third quarter and also expect that the year will finish strongly in the fourth quarter as well. At this point, I will turn it back to Bob.

Thanks Jim. Operator, we would like to open it up for questions now, please.

(OPERATOR INSTRUCTIONS) Victor Miller.

Could I ask a few questions? First of all could you just tell us what is happening in your local markets? We have had these kind of tepid auto numbers, tepid retail numbers, tepid job numbers. But your local markets are just really performing quite well, and I am wondering what is driving it.

Secondly, Jim, would I be right in saying that if we took out kind of the revenue -- the expense increases associated with the revenue increases -- that kind of the core expense growth for the TV side was only about a half a percent or so for the quarter?

Lastly, on the political side, is it true -- it seems that this year that political advertising is getting as targeted as I've ever seen it. There are certain cities now within the battleground states that seem to be being emphasized over others, because they are considered to be more in play. Obviously, your political numbers might suggest that is the case. I just wondered if you are seeing that? Thanks.

I will answer the first and third; I will Jim answer the second. Most of our markets, we are just seeing real good growth in virtually all our categories. We're not seeing the kind of tepid growth you're talking about. I am not sure, but I can tell you most of our managers pretty well feel good across the board as far as the way advertising spending is going. So, we just -- auto has been good for us, it is tracking good for the year. And most of our other major categories that have been -- are continuing pretty much the same pace.

On the political, I think it is getting more and more targeted. I think frankly you're going to seeing they're getting more sophisticated every year about how they target where the money is going to be spent, because they all realize the importance of these electoral votes after the 2000 election. So I think you're going to see more of that in the future.

There again that is a little bit of luck. If you have got towns where they target you, you're going to get more than your fair share. And if you got a town where they are -- I will give you a good example of both cases. Up in Wisconsin, we're just getting great money in Eau Claire and places. And then Parkersburg, West Virginia. And in Rockford, Illinois, we're getting almost nothing because Illinois has got pretty well declared a Democratic state and there's no real strong political races in the state. So there is a case where Rockford is in the wrong place at the wrong time; those other cities are in the right place at the right time. Jim, do you want to answer the expense?

Victor, I am not sure if you factor out the incremental, the pure (ph) incremental due to the revenue growth, which would be as I said national sales commissions, especially on the political; incremental sales commission on our local. Obviously there would be some bonus money in there too for people achieving or overachieving goals.

I won't go so far as to say it would take us all the way back to one-half of 1 percent of pure growth. It probably is a little bit bigger than that, but certainly those incremental factors probably account for I would say maybe roughly half of the overall growth rate you're seeing.

Thank you very much.

Jim Boyle.

Basic question. Are you noticing any change in your advertising rates or inventory placement timing in Q3?

Q3?

Versus earlier in the year?

Okay. Jim, you want to get that?

I think in general, rates are moving up as best as the local stations in the individual markets can. Certainly where political is strong that allows you to do that easier than where political is not as strong. That just is a natural fact. But certainly I would think rates are moving up through Q3.

As far as -- I think the second question was basically amount of inventory available, and there wouldn't be any significant changes there. Our inventory tends to be pretty fixed and not easily expandable or contractible like other broadcast media may be.

Actually Jim, I meant -- is inventory sellout any earlier, or the same, or later than normal?

I would say it is about the same. We're already into the cycle; but it's been the same first quarter and second quarter as well. The political is coming maddeningly late. You get an order -- it's not uncommon to get orders today to start Monday in political. That has been consistent first and second quarter. That is continuing in third quarter as well. So, no, I would say it is about the same.

Could you also just -- we can see the number of stations that are NBC, CBS, ABC. But roughly what is the revenue share of each of your affiliate groups?

The 2 NBC and CBS is about 85 percent. That's the easy way to look at. I think CBS is roughly 50 plus and NBC is 30 plus.

Jim, you mentioned you have 84 percent of budget booked. What does that typically mean at this time in the quarter?

That means we're very confident of nailing budget, and certain locations certainly have an opportunity to exceed budget.

Finally, on the inventory front, you have probably heard that Clear Channel, that big radio group, is addressing too much clutter. What is the typical commercial unit load in your news programming and in your non-news programming? Has that changed all that much in the last 3 or 4 years?

The second half of the answer is no. It has not changed very much at all, especially in our news product. We tend to be pretty strict about not carving -- not taking out of editorial content to manage short-term sales goals. It tends to be a pretty fixed amount. I am not saying we wouldn't -- we don't never -- or never do that, but it is certainly very much the exception and not a rule.

Jim, to be honest, off the top of my head, I don't know if I can tell you the exact number of minutes in a standard 30-minute newscast we have. It is probably about 20; I want to say about 22 minutes of content and the rest is commercial load.

Thank you.

Drew Marcus.

It's Naveen Asarma (ph) sitting in for Drew. I have 2 quick questions. What is the revenue impact from Charlottesville? Is that included in your third-quarter guidance? Then, on your Internet initiative, where you think revenues could go next year? Thanks.

On Charlottesville, first of all Charlottesville will limit (ph) -- it is going to be our literally our smallest market, so the revenue impact is negligible, especially as a startup facility. So, it really doesn't have an impact one way or the other in the guidance we have issued. Nor does in the short-term -- nor does the associated cash flows either. It will be pretty much falling out and rounding in the overall Company. But we think it is just a terrific market, and has an opportunity to grow into a great station that can produce several million dollars of cash flow a few years down the road. So it's a great opportunity for us.

On the Internet side, what we have seen this year, the last year, is that the Internet-related revenues have doubled. As Bob mentioned, a lot of the things like the desktop alert or especially the video streaming that literally is just being launched now, we won't even have full-year impact of that until next year. I think we could see very strong growth in that area next year as well. I would like to think we could double it; I am not sure yet. But it is certainly very, very strong growth. Especially the video streaming I think opens up a whole new opportunity for us.

We had a companywide meeting on that last week, and quite frankly we're not big on companywide meetings. But the managers were very excited about it, could clearly see the potential, and I think they all went home thinking that the video streaming could be a nice moneymaker for them next year. So they're excited to get it launched.

Again, as Bob had said, the Internet-related year-to-date this year is about 3 million, which is about double from last year. Of that 3 million, a million of that is what we would consider pure Internet, which is that it doesn't have any associated TV spot sales with it. Then the other 2 million is the associated spot sales that are co-joined and deeply ingrained with Internet initiatives we're doing. So, it has doubled since last year, and I think the growth next year is going to be very, very strong in this area as well.

Great. Thanks.

Sean Barton (ph).

Very nice numbers, and the guidance is excellent, particularly compared to the peers. So nice job. A couple of questions. I suppose the first one is, do you have available in front of you the performance of the CBS versus the NBC and ABC stations? I was just wondering how different the performance is there.

Secondly, are you taking a look at the Pegasus station in Gainesville? I think most of Pegasus's TV stations are not top 3; but I think their Gainesville one is a CBS. I was just wondering if that might be interesting for you? Thanks.

On the first question, as far as we really haven't compared the different -- how the network stations are performing against each other. Mainly because, like I said, a lot of that depends on the market, how strong the market is. If we've got a strong market with a strong ABC, we're going to do real good. If we've got a strong market with a real good CBS, we may be doing even better right now.

But in general, we don't really do those kind comparisons that much, because we kind of feel like the differences between the networks kind of even themselves out over a long period of time, which we have shown on most of our investor presentations.

As far as the Pegasus station, have not looked at any Pegasus. I am familiar with that market. It is a 2-station market. ABC there is a dominant station, but I don't really know if they are up for sale or not, so I really haven't looked at it.

Okay. Thanks.

Lorraine Manini (ph) .

This is (inaudible) sitting in for Lorraine. Just a quick question, follow-up on your Internet. What are the expenses related to the 7 million revenue that you expect to receive this year?

The second question is, could you talk about more on the national weakness? Is any specific category that you have seen? Or have you seen any improvement in 3Q and 2-half?

Jim, do you want to get that?

Yes, the expenses on that revenue are relatively small. Obviously if it involves a time sale, there would be a standard local commission to the account executive; but that is like all of our other times sales. In the actual more pure Internet side, our expenses for this year supporting all of that will be about $1 million, maybe a little bit more.

So, we are generating free cash out of those operations, and more to come next year. We have always taken the approach of being very conservative in what we were going to spend. We wanted good sites, but we have always been very conservative and cautious about spending a lot of money there. I think that has paid off for us, that for a very low investment we are now getting a very strong return; and that return will grow next year. Your second question was on categories?

On national weakness.

The national weakness? To be honest, I don't have a good reason for that. Our national has been a little bit all over. We did see it weaken in May and June. It was down about 5 percent in comparison to last year. But, you look at July and it currently is pacing plus 5 percent. So, I really do not have a good explanation for why national seemed to trail off a little bit.

It was very, very strong and first quarter, and maybe a little bit of just averaging as the year went on. Again I'm encouraged to see July at plus 5 percent.

What about 3Q in general? Is it pacing up?

On national?

Yes.

Yes.

Thank you.

Lawrence Goldstein.

LJGoldstein@Bloomberg.net. Don't you ever sign on to your Bloomberg e-mail?

I don't have a Bloomberg e-mail.

Oh, for crying out loud.

Where have you been?

914-833-0875.

All right.

Listen, I heard you start out with talking about stock buybacks. This company ain't had a year of declining fully diluted shares outstanding since about 1884 or something like that. By the way, since 19 -- since you got in I guess, the stock ain't been at this price except briefly in 2000, when it was at the year's low just below 10. So for crying out loud, what the hell you waiting for?

We're in a blackout period thanks to good old Sarbanes-Oxley, Larry. Our lawyers have told us that we cannot -- directors, officers, and even the company unless it is a very strict plan that you're on -- cannot buy stock from the end of a quarter until 2 days after we announce earnings.

Okay. So?

(multiple speakers) the market 6 months out of the year based on that (inaudible).

So, that period is going to begin in a couple of days. Next week.

We will be talking to brokers.

Why don't you do a Dutch tender?

Hadn't thought of that. Don't know. Something to think about.

Think about? Hell, it's something to do. All right. I will talk to you later if you give me a buzz.

I will call you, Larry. I appreciate (multiple speakers). Thank you.

Jim Goss.

That is a tough act to follow.

He is a good guy.

Several questions. One, you mentioned the political dollars this year versus a year ago and the year before that. It is no surprise that you are a lot ahead this year; but there were actually a not insignificant number of dollars last year. I was wondering where they came from, and are you seeing more political dollars in some of the supposed off years?

Secondly, you talked about expenses in '05 with some cuts possible. I was wondering what areas might offer potential? Are they more on the programming side, because you have greater negotiating leverage with the bigger station base? Or is it on the people side?

On the Internet area, usually in the larger markets the major newspaper will tend to dominate the news presence; and the broadcasters usually fighting for the number 2 and 3 spots. Do you perceive that to be different in the smaller and midsize markets and there to be a greater opportunity for the broadcasters to take the lead there?

That is a good question. On that question, I definitely think that we have got an opportunity to cut in the news -- I think newspapers have been pretty dominant in the Internet side on the revenue, especially. I think this video streaming is going to give us a leg up. That is really, really going to help us gain some ground, especially we are in some pretty strong collegiate markets where the Internet is even used heavier than in some other markets. So here again, you got a pretty strong demographic base in a lot of those towns, and we feel very good about that.

The question about the expense, I think it is going to come more than anything from productivity increases. We are trying to find more ways to automate different functions. Our programming costs, just so you will know, are the lowest in the industry right now. We've got the lowest programming costs as a percentage of revenue of any company in the business. So I would like to say we can get a little lower, but we're happy where we are. We just signed a new deal taking us through 2008 with King World (ph), which basically locks in our costs there through 2008; so we feel very good about our programming costs.

We just like to use the Japanese-style of just getting a little better every year at a lot of different things. We try to constantly tweak what we are doing, ask a lot of questions about how can we do this better, how can we do it? We're doing a fair amount of consolidation within geographic clusters regarding different functions, which we have been very successful doing. Our business manager function, some of our national sales functions, things like that where we can utilize close geographic clusters.

So those are the kinds of things we will be concentrating on, and our goal like I said -- zero is to be the highest next year. Hopefully we can maybe even have some cuts if we work real hard at it, which we are going to try to do. I missed one question.

The first one related to the fact that you actually did have some dollars last year.

Political. We had about a little over 5.5 million last year. Kentucky has an off year governors race. And then secondly we got lucky, the person that was elected Governor of Kentucky was a congressman, so his congressional seat came open, and it happened to be in the Lexington area, so there was a hot congressional race, an off year congressional race to fill that seat. So we got some luck there. Then Mississippi had an off year governors election, which was pretty hotly contested and won by a Republican. That is where most of the political came from last year.

So it's more of an aberration.

We have pretty much -- we have off year races. But I would say the luck in the added amount we got was the congressional race in Kentucky.

Okay. Thank you.

Jim Boyle.

I just wanted to ask for an update on two things. One, you mentioned you signed an ABC deal. What if any network comp was in there? Second, any new audience trends in your two largest markets, Knoxville, Wichita, where you just happen not to be number 1?

I will answer the second question first. We are definitely making good progress in Knoxville and Wichita. Wichita we found a situation, Jim, we put a new manager in there, that there were 40,000 cable subscribers in the Wichita market area that were not on our cable systems for some reason. They were on the Kansas City ABC station.

We have a campaign in progress to get all of those shifted over to our station where they are supposed to be. We hope to have that finished up by the end of September, and hopefully we will be adding between 35 and 40,000 cable subscribers were we had zero ratings before. So we think we are going to be pretty much jump up to a number 2. We have got a new News Director there, a new news operation that is looking real good. So I feel good about Wichita.

I think the big problem in Wichita has been the economy there. They have had about 9 or 10 percent unemployment because of the aircraft industry. Although Boeing just announced that they have got a major campaign on to rehire engineers and production workers, and they're going to build a lot of that 7E7 aircraft in the Wichita plant there. So, I feel better about the economy perking back up in Wichita.

In Knoxville, they are doing good. The Knoxville market -- we are the number 3 billing station there; but we were up 6.7 percent from last year, and last year. And I think we are going to have another jump this year. We're number 2 overall there. We're basically tied for number 2 in news in several of the newscasts. Knoxville is the size market that basically a 1-point rating in the news is about $1 million more revenue for us. So we think we have got a huge upside in Knoxville; and we think it is going to be one of our best markets.

ABC, all I can say is we are very happy with the deal we struck with ABC.

You can't even say whether it's none or some?

I would rather -- I think I had better not. But we're very happy with the deal; let's put it that way.

Okay. Thank you.

We are pleasantly surprised with our deal. Thank you.

Harvey Sandler.

Congratulations on a real good quarter, and it looks like a real good third quarter. My question has to do with the digital conversion. Where are you in that? What do you expect ongoing capital expenditures to be over the next few years?

Harvey, all of our stations are now broadcasting in digital except for Panama City, which is still in-process. But everything else is up. That would also exclude Charlottesville as well for the immediate time being. We have already spent this year -- and keep in mind this is cash and it is delayed from payment. We had 12 months to pay after installation at no interest, so it was a good deal. We have paid about 8 million in cash this year on a digital conversion. We probably have got 1 million or so left to go this year.

We have said before that because this year has been so strong and continuing to be so strong, we would probably step up our overall capital expenditures to probably by the end of the year around 25 million, in part because as we paid a lot of the digital over the past few years we have been holding off on some other things. So we are taking advantage of a very robust political season to play a little catch-up admittedly.

I think next year, obviously, the political won't be there. We will need to scale back accordingly. If I had to guess right now, I would say 15 million doesn't strike me as being unreasonable for next year. Then I think '06, we would look at maybe that number, maybe a little bit more if it ends up being another record-setting year like it might very well be. And you might see us flip-flop a little bit, step up a little in a political year, step back in the off year. But next year especially, right now I would think around 15 ought to be a pretty reasonable number.

Thank you.

There no further questions in the queue.

Okay. I want to thank everybody for joining in today. We appreciate your support very much. I always end the call by saying Jim and I are easy to find, and you are welcome to call either one of us any time. We look forward to talking to you again at the end of our third-quarter call. Thanks very much, everybody.

Ladies and gentlemen, this does conclude your conference call for today. Thank you for your participation and please disconnect your lines.