Gray Media Inc (GTN.A) 2006 Q3 法說會逐字稿

Good morning, and welcome to the Gray Television's third quarter earnings release conference call. For opening remarks and introductions I'll turn the call over the Mr. Prather. Please go ahead, sir.

Thank you very much. I apologize for being a little late. We were having trouble with getting on the line with the operator, but welcome everybody. I'm not very happy with our third quarter numbers. I have always liked to under-promise and over-perform and this is the first time since we have been doing conference calls for about 10 years that we haven't hit or beat our guidance. And so I'm not happy. Even though our numbers look good on the surface, I'm not happy. I think there's two reasons for it. One, political has come in a lot later than ever in history, and has been a real moving around a political money, like nobody in the industry has ever seen before, with orders getting canceled in one state and added in another state. I think this may be something that is going to happen in the future.

I like to think there's still plenty of political dollars out there, and we wound up with about 42 million, which-- is a good year, but a lot-- we had $8 million in the month of November, which to me is-- is not good in the long run because that means there's not a whole lot of it that's incremental, it's just forcing out regular advertisers. So there could be-- I think the dollars are going to be there but I think there's a real change on how the money is spent, when it's spent, and how it's moved around, and I'm not sure -- going forward we're going to have to take a lot closer look on how we budget for political and how we do the political spending in the future.

The second thing in late August, September, we just got really surprised by a real drop off in business. There's no other way to describe it. I have never seen it like that before, especially fast-food, restaurant, telecommunication just disappeared almost. And nobody that I have talked has got any explanation. No manager, no national rep firm, nobody can explain what happened. But anyway it did, and I think we're going to wind up with a real good year, and I think we're going definitely be budgeting-- we're in the middle of our budget process right now to really, really keep a very tight rein on expenses next year.

We're planning to budget for overall expenses to be at a minimum, zero increase and most likely a decrease from this year. That's my goal and I'm going to make sure we work hard in the budget process to achieve that. I think we got -- I think 2007 is going to be a challenge for the industry. I still think our local business will be okay. I still think national, there was a challenge. I think national advertisers still hadn't made up their mind where they'd put their money and what they are going to do with their money, and I think we've got be prepared for national to have little or no growth again this coming year. But I think local will be strong and I think we'll do the right thing on holding our expenses, so we can wind up with a good year in 2007.

We have got our 30 digital channels up and running. I think we're going to be very pleased with those, going forward. And I think when 2009 rolls around and we go full digit we're going to have 30 duopolies, which we're going to be very, very happy with. We're going to use most of our free cash flow the rest of this year, and next year to pay down debt. We definitely want to get our debt to cash flow ratio down.

I think 2008 it will be down in the fours, but that's one of our goals. We're not looking at any acquisitions right now. Private market prices still remain very high. As you know public multiples are, is low as I have seen them in a long time. I mean there's a disconnect there, and here again I can't explain it, but that's the world we're living in. So we got to live in that world. But we going to be very careful how we spend our money and both expense wise and capital wise and next year. We're in the middle of a couple of hubbing projects, which I think are going to be very efficient for us going forward. But overall we're going to be really, really watching things for next year and making sure that if we tell you we're going to hit a number, we're going to hit a number. And I promise you, I want to go back to under-promising and over-performing.

But I think it's going to be an interesting year from the standpoint of, as I mentioned national. And I think national is, I said schizophrenic. I think nobody really knows what to do about it. I think it is going to come back. But I think it will still be another year or so before we really see any kind of growth in national going forward. And I think we've got to just budget for that eventuality and prepare in the meantime and operate in that environment. And that's what we intend to do.

We're very happy with our acquisitions we made last year, both the Notre Dame station and the Huntington station. Had a great year so far this year, and should finish up strong. And we feel very strong -- very good about our new digital channels as I mentioned earlier.

We have got, our bonds are callable for the first time in December. We're looking at all of our various alternatives. I would imagine right now, unless something unforeseen happens that we will either tender or call our bonds, and I think we have got to decide as far as what is the best way to refinance that debt, whether to issue new bonds or just going a different type financing package. But that's something we're looking at hard right now and will be over the next two or three weeks.

So those are the main things we're working on right now. At this point I'd like to turn it over to Jim Ryan. I'll let Jim go through and then we'll answer questions. Jim.

Thanks, Bob. Good afternoon, everyone. Let me start off by saying, we had a textual error in the guidance we issued this morning. It is my error and I'm solely responsible for it. And I sincerely apologize. We are publishing a correction as soon as possible. And it involves the comments about pro forma local and national revenue in the fourth quarter. What we should have written was that local would decrease approximately 2% and national expected to decrease approximately 7% on a pro forma basis, reflective of the very heavy political in October and the first week of November. I'll bring that up again a little farther in my comments. Again, I am sincerely sorry or the error and apologize for any temporary confusion we may have caused.

I'll focus the comments briefly on the pro forma. As Bob said, the political came in a little later than expected, concentrating in fourth quarter, which did leave us on the low side of guidance for political in Q3. And Bob has also mentioned the softness we saw especially in the restaurant category in the second half of Q3, which explains some of the revenue fluctuation that we hadn't anticipated.

Auto for the quarter was actually up slightly, about 2%, a few hundred thousand dollars. We had been down slightly at the end of Q2, and it's on a nine-month basis, down slightly about a percent or so but basically auto so far for us this year has held up pretty well. We were pleased with that.

Further on, again, on the political -- Florida, Texas, and Ohio in third quarter were slower than expected. Nevada, Nebraska and Indiana were better. Wisconsin was okay, and Michigan did very strong as it usually does. Our operating expenses for the quarter were up on a pro forma basis about 5%, but half of that is attributable to the costs of the digital channels we have been launching, and/or the incremental commission we have to pay our national rep on our political, so our core growth was about 2%, and we were -- actually I think we were slightly better than guidance on the expense side. So we're working hard on that front. Broadcast cash flow for the quarter was up about 24%, and the non-GAAP recs are both published in the release and are available on the website as well.

Turning the nine months, again, focusing on the pro forma, local was up about 4%; national, beginning to feel some of the effects of political was down 2. As I said earlier auto for the nine months was down about a percent but holding in fairly well-- and actually it upticked in third quarter. Political was about 17.2 for the quarter, and again, we have already talked about where it has been hot and not. And our expenses were up about 4, but again, about half of that overall increase reflects the digital channels and the commissions on the national or rather political as well.

Turning to the guidance for fourth quarter, again, there was an error in my text, and I apologize. When we talked about local and national expectations, pro forma for the fourth quarter, right now we think that local will be down about 2%, and national down about 7%, and that would reflect, again, the heavy and very late political as Bob said, 25 million for the quarter and fourth quarter about, basically 42 million for the year. And it was little over 8 million in the seven days of November.

I would like to stress that the high side of the guidance for fourth quarter at 100 million is high side. We would not, at this point expect to exceed that but we certainly think we are going to be in that range that we put in the guidance, and that range for revenues is 95 million to 100 million. But I don't want to create an expectation that we would over-deliver on the 100 million. We would love to have that problem, but right now I think 100 million is a pretty good quarter for us. Turning to the balance sheet very quickly, total debt was 856 million at the end of the quarter. Our trailing cash flow on a 12-month basis was at 117 million. 4.2 million of cash, so it would put net leverage at 728. It has been coming down from the high water mark of a little bit over eight just after we closed WNDU earlier in the year. And Bob has commented on our focus of using the majority of free cash flow for outright debt reductions throughout the rest of this year, '07 and into '08. Bob, at this point I'll turn it back over to you.

Okay. Thanks a lot, Jim. Operator, I would like to open it up for questions at this point.

Thank you. [OPERATOR INSTRUCTIONS] And our first question comes from Bishop Sheen from Wachovia Securities.

Hey, Robert.

Hey, Bishop, how are you?

Thanks for taking the call. Perk up, my man, it's quite a quarter. All right. I know that free cash flow was still supposed to count for something. So speaking of that, and since it makes sense to get rid of that 9.25 coupon in this kind of era and you have some ways to do it, why not take out the preferreds while you are at it too, since they have somewhat of a dilutive effect?

Yes, we're looking at that, Bishop. I don't think we have made a decision one way or another. But we are definitely looking at that as a possibility also.

Okay. One other bonus question, it's my favorite topic, it's the one I know you spend plenty of time looking at. How do you replace all that incredible political revenue? Every time -- I can't keep up because every time I make a guess of what your political was going to be for '06, I'm light.

Yes.

So that's the good news. The bad news is you want to replace as much as you can in '07. So what is your thinking?

Here again I think -- we have historically replaced about 50% of it. I hope we can do a little better than that this year, because I think we had more displacement this year because of the late nature of the political. 8 million came in the first week of November, for example. So I think as I've said we got to watch the expense side and do the best we can, especially on local to grow the revenue side.

Bishop, I also think we have some opportunity in '07. Of course, by the end of this year we essentially will have, either have or will have 30 duopolies running on our digital spectrum either My Network's or CW's or Fox's. Now certainly in their first full year they are going to be somewhat modest operations, but that is something going into '07 in the off-political year that we have never had before, and certainly from a revenue front it certainly will help. There are some costs associated with those, but we are running them very, very lean. So I certainly would hope that they do contribute, while maybe somewhat modestly in the first year, they will be contributing next year to the overall effort.

Okay. And then last, what we call retrans or subscriber or call it anything you want, what does that front look like for you on a cash and meaningful trade basis?

Bishop, very little right now. I think 2008 when most of ours come up again, we'll fight that battle again, but we basically chose this time around to get those second channels for our digital spectrum and fiber connections, things like that, which we felt was the way to go. I think very few people are getting any real cash, especially from the big operators, which -- and we have got a lot of big operators in a lot of our markets. So we felt like the way to go was to go after the second channels and fiber connections, that kind of thing.

Got it.

Bishop, I would add to that, of course we have a long-standing agreement with both satellite operators, it does provide for a cash component, and they are not yet even fully rolled out to all of our markets and they've been -- each one in their own way have been slowly gaining markets. But right now on an annualized basis, with the markets they are in, that's worth somewhere between -- in the aggregate somewhere between 1.5 million and 2. And I think there may be -- there's obviously some growth in that as more markets come on board. And so that has been in there. We have had that for a while, but it is what it -- it is 1.5 million or 2 million and it is growing over time.

That is helpful. Thank you, Jim. Thank you, Robert.

Thanks, Bishop.

And next you'll hear from Marci Ryvicker from Wachovia Securities.

Thanks. Jim, a couple of model questions. Can you tell us what the digital and internet revenue and expenses were in the quarter? And do you have any update for the full year '06 in terms of guidance and any thoughts for '07? And then, do you have how much CapEx related to digital television, and what cash taxes were? And then, a bigger-picture question for Jim or Bob. Did you see fast-food, telecom or restaurants come back in the fourth quarter at all?

Okay. I'll do the more detail first. Marci, I don't have quarter handy, but I can give you nine months to date.

Okay.

On our internet. Revenues in '06, nine months were 5.7. We would have BCF of 3.5. That's an over 60% margin. And SAZ just in the early phases of kind of ramping up in our internet program, so their revenues are trailing the expenses right now. But they are a great power house, I'm sure they'll come along. If you exclude SAZ and NDU in the nine month numbers, our internet revenues were up about -- internet revenues were up 19%, and the associated cash flow from that was up 20%. I don't really have -- I really don't have anything yet for '07 other than -- it would be fair to say there was a broad mandate or a broad request in the budgeting instructions for '07 to attempt to double internet revenues '06 to '07. Now, we're still early in our budgeting process, and we'll see where we go. But it's obviously growing very quickly, and we were certainly -- we are pushing people very hard to grow that revenue very fast.

From an expense standpoint, we would have relatively modest growth if any there. And we are going to be adding the ability to text message to cell phones at the first of the year, and we will be adding the ability to deliver video to cell phones as of the first of the year. Those both come with a small incremental cost, but that's about all the -- all of the year-over-year increase we have would be the expanded services to the cell phones.

The restaurant category for fourth quarter is hard to-- to tell right now. The only really significant data we have is on October, which has got a ton of political in it anyway you want to look at it. So it was-- restaurant was soft in October, but that would not necessarily be surprising because a lot of the core categories were making room for political in October, so it's too early to tell there. Was there a third detail question?

CapEx, how much was related to DTV and cash taxes.

Cash taxes were negligible. There was about 360,000 in the quarter. We paid less than 800,000 for the year. CapEx through the quarter in total was about 14.5 million, a million -- just under 2 million was HD for transmission facilities. And some of the penalty, old run-off, as that went down. The rest of it was mostly spent on launch -- gearing up for digital channels, and those roll outs.

Great. Thank you so much.

And next we'll hear from Victor Miller from Bear Stearns.

Good afternoon. Thank you for taking the question. Expense growth pro formed about 6% third quarter, guidance looks to be a bit higher in the fourth quarter. Could you talk a little bit about maybe what we're seeing there in terms of the guidance? And then secondly there was an interesting court case that happened recently with Sinclair and Mediacom and the courts seemed to be pretty sympathetic to the arguments of the TV broadcaster getting paid for their stations. David has got a lot of duopolies in a lot of these markets.

So it seems like it's a similar type of situation with your company. And I'm wondering how you are looking at retrans whether maybe the virtual stations are all you're going to -- are all you're expecting from retrans? And when you are going to be able to negotiate retrans -- when you next big opportunity to negotiate retrans is, and what you expect you could put up? Because I think Sinclair is looking to ultimately take 50 to $70 million of revenue from retrans by the time it finishes all of its contracts, it's a big chunk of new money for the TV business potentially. Thanks.

Victor, I'll go first on the expense number for the fourth quarter on a pro forma basis. Again, between the costs, the incremental costs on the digital channels, which we have ramped up rapidly this year, and the additional costs of the National Rep Commission on the political, about half or more of the overall increase is attributable to those two things. So real core is much more modest in the, I guess it's in the -- appears to be in the three to four range.

I'm hoping I'm a little high on that. I don't want to promise, but -- and also there would be a little bit of -- in certain stations where obviously they have done extremely well against their budgets this year, some incentive compensation kicks in. And so there would be -- some of that would be in that number as well. Bob, did you want to comment on the retrans or would you like me to --

No, go ahead.

Well, victor I think as we have talked about the last couple of calls, the bulk of our retrans is really at a 2008 window, and as Bob mentioned earlier, we're certainly looking at that. I have taken some interest -- I mean, I have noticed what Sinclair is doing a little bit. We certainly wish them well in their discussions and would be, nice to see someone make perhaps a breakthrough. And I certainly agree with you that as the window opens up for everybody in the industry and some may get there a little faster than others, but I think it opens up a significant source of new revenue hopefully for everybody over the next couple of years. And as Bob said we will be focusing hard on that as we get our chance.

Thank you. When is your chance, by the way?

2008, Victor mostly.

Okay. Thanks.

And next we'll go to Jim Harris of [inaudible] Partners.

Hi. Let's see, you made a comment that -- well, let's see first a question -- is the debt that you cited 850 some odd million that it's not including the preferred, is that correct?

That's correct. Whenever we talked about debt we don't talk about the preferred.

Okay. But preferred you would still consider an obligation ahead of the common?

Yes.

And I think that it was described that the ratio would be in the mid-fours by 2008, but that seems to me is not blending the off-years, is that correct? The non-political years?

I think to be that low at the end of '08, it would be fair to say you would be basing it off of the '08 political cycle. That's probably fair.

Is it more reasonable to maybe think of it in terms of maybe the two year cycle instead of just the peak every four-year political, presidential election cycle?

I think that's certainly not an unreasonable way to look at it, because the political cycle is definitely a very engrained two-year cycle.

And then I think the comment was made that you are going to use your free cash flow to pay down debt the rest of this year, next year, and into early part of '08. Why would you stop?

No, I just meant we are committed to reducing debt as quickly as possible. I didn't mean to cut it off as a certain point in time. It's kind of an open-ended until we get down to levels that we admit we're on the high side and we're committed to getting down. So until we get down to more of a lower range that we feel more comfortable with, we'll work on reducing debt.

Terrific. It seems to me you have got $18 a share of obligations ahead of the common equity. And so every dollar that you reduce of those obligations, of course accrues to the benefit of the owners, and so I hope you don't stop in '08, keep going. What is your main -- what do you consider your maintenance capital spending to be? Maybe once you are done with all the digital.

I think we have to take a very hard look at 2007 and 2008 with the last couple of years. First of all with the HD build out for the transmission facilities, we ran fairly high and then this year and late last year with our digital facilities, have run higher as well. Although I think the investment in the digital duopolies is certainly a good investment for the long term. We're still looking at our '07 budgets and then obviously we'll be looking to '08. But I think the CapEx numbers across the board has got to come down quite a little bit from the last couple of year's run rate, unless we can be very convinced that there's a significant payback in operating expenses that we can gain and therefore we should go ahead.

We told the stations for '07 to collectively in the aggregate to plan on not more than 5 million in a discretionary fund that they have use of. Anything over that we would focus on major corporate-wide initiatives to finish off some of the hubbing and other things that we think we can gain good efficiency with. I'm a -- if I have to stick my neck in the noose right now and come up with a number, I'd say 15 to 20 in total next year. I think we have to try very hard as we look at our budgets for '07 especially to come in at a pretty low number. So -- and that's something that we're actively looking at right now.

Okay. Thanks. And then if I may, last question for Mr. Prather, I think in recent calls, prior to this one, you thought maybe the broadcast cash flow could get to 160 million, which I guess was a level from -- pro forma from a few years ago. Do you amend that in any way now?

I don't remember 160 million, but -- Jim Harris: You used to point to a slide in your -- Jim Ryan: It would be the pro forma from '04 corporate overhead, Bob. So that was our all-time pro forma record. As you can tell from your guidance, I mean just running the math, our -- based on where our political came out and where we view things right now, the rough number for BCF, based on our guidance range for fourth quarter, would come out somewhere between 138 and 143, give or take a little on each side.

That's for this year?

Yes.

No, I think he talked about '08 as being a particularly -- Bob Prather: '08 yeah, I would expect to beat that number in '08, yes.

You would expect to beat the 160 in '08.

Oh, yes.

Okay. Terrific. Thanks and all the best.

Thank you.

And [Aaron Watch] from Deutsche Bank has our next question.

Afternoon guys.

Hello.

Love to hear the equity side climbing for debt pay down. So that's nice. Bob, I was hoping you could just elaborate a little bit on your comments on national advertising. What do you think is the main hang up now and why you think maybe a year out that hang up goes away to some extent and you see a recovery there.

I just think there's a lot of experimenting out on trying to figure out advertisers and advertising agencies thinking they've got to try all kind of forms of new media. I think a lot of them don't necessarily work. I mean when we talk about internet, for example, I mean $0.25 of every internet dollar goes to Google. A lot of that over $0.75 is wasted. A lot of it hasn't worked in a lot of cases. But I think nobody is going to get fired in an agency for having an internet strategy or mobile phone strategy and so any kind of new media strategy. So I think until this trend kind if, runs through itself, it's going to continue for a while. I don't see -- I think there's still enough mantra out there in the marketplace to keep trying new things that people are going to keep trying for a while.

Okay that makes sense. And then secondly, just in terms of your second stations, what's sort of the initial advertising response in our local markets to those second stations? Are people sort of eager to get on to those? Or is it still so fresh you don't have a firm handle on that?

A little of both. I think the key thing is, it's obviously a much cheaper rate that you're selling. So it's a different advertiser in most cases and a typical advertiser. If somebody that wants to get 100 spots for 15, 10, 15, $20 a spot or whatever a more of a cable type buy almost, and I think the key thing that we have done and where we have been successful, we kept our programming costs real low and we have gone out and really tried to get some attractive syndicated program along with the network stuff. And then we've tried do a lot of the local college sports and things like that on these programs, which has also been very successful for us, so.

And then in those markets where you have these second stations, you talked about how maybe in lieu of retrans compensation --

Yes.

You were getting carriage for these second stations. Would you say the penetration is fairly decent?

Yes, the penetration has been in the high 80s in most cases, where if you've got satellite also, which we do at some markets, but definitely it's probably in between 70 and 80 in most markets we're in. And most markets it's down to less than 10% of people that don't just have either satellite or cable and if they don't have a digital TV they can't get us over the air. But there again I think that's only 5 or 6% of the market at this point.

Okay. And you have talked about in the past how sort of the turnaround to get these second stations cash-flow positive, it's been a couple of months. Is that still sort of the right timeframe?

It has been, in most cases three to four months. Little bit harder, there was a couple of cases where the cable guys took advantage of the UPN going away to push us up onto the digital tier where we don't have as many people that have digital capabilities. So we have lost some viewers in some markets and it has hurt our revenue some. But we think it's worth waiting to 2009, we'll get these stations, they'll have three years under their belt then, and then they'll have 100% of the market.

Okay. And maybe one more sort of big-picture question for you if I may. Just curious our thoughts on some the press lately about Nielsen's new initiative to introduce commercial ratings. Do you think that works to your benefit? It ends up hurting you? I guess you could also compare it to how it treats cable networks when advertisers are thinking about where they want to put their dollar?

Yes. That's a tough question. I don't think anybody knows the answer to that. I'd hate to speculate. I really don't know. I don't -- in most cases I think we get undercounted in the marketplace with Nielsen. So I don't think it would hurt us. But here again, I don't -- Nielsen has obviously gotten a lot of push back especially from the big groups and has backed off this thing for a while. So I don't see it coming anytime soon, and I don't think it will hurt us when it comes.

Okay. Thanks a lot, guys.

Okay.

[OPERATOR INSTRUCTIONS] And next time we'll hear from Jim Goss of Barrington Research.

Hi, Bob. Hi, Jim.

Hey, Jim.

Several things. One, with regard to political, is the roughly $42 million number you talked about an all-in number or there is a chance that there are some dollars that weren't counted even though it's history now? One of the other competitors talked about an avalanche of political revenues at the end of the season this year.

Yes, we had that too, but Jim, I don't -- unless maybe there's a couple of run offs that we don't know anything about it, we might get a little bit of run. But we got 8 million in the week of November alone. So like I said, the bad news as far as I'm concerned about that is that you don't get as much incremental when it's that concentrated because you are just pushing out all of your other regular advertisers at that point.

Well, then in that regard, are there any crowded out dollars that you think will come back between now and year-end?

Well I certainly hope so. We think -- I think the, especially the domestic auto guys are going to be sitting on a lot of inventory that they want to move between now and the end of the year, hopefully. And so I hope they will come back strong. And as I mentioned the other, the fast-food and restaurant category, and telecom, we're not sure what is going on there.

And your comments about '08 imply a political bonanza that year -- Bob Prather: I think it's going to be off the chart, yeah. Now, on the duopoly area, in Charlottesville do you have a digital duopoly on top of a regular duopoly basically?

Yes. We actually have four networks there now. We have ABC, CBS, Fox and My Network.

Okay. If you take that $13.3 million number that was mentioned in your press release does that compare to any dollars a year ago? And just for modeling purposes, once you get to 30 digital duopolies, what do you expect the run rate of revenues for that collection of properties to be? And what has it been for this year?

I'm not sure if we know what -- I don't think we have actually tried to determine a run rate for -- once to 30, we all feel like they are up and running full speed. Jim, what is the run rate then for this year?

Well it's still a launch year for us. Let me try to answer it maybe slightly differently. We, in the third quarter -- actually third quarter wouldn't have them all up yet. We have more launches. In round numbers in fourth quarter '06, we're expecting that the digital second channels will contribute somewhere between 1.5 and $2 million, probably closer to the 1.5 than 2. And keep in mind some of these -- you have launches in September, some of them launched later in October just based on equipment deliveries and getting them in. We have actually got a few that haven't even launched yet that are still in process for a little later this year. So that's kind of a rough number based on a one quarter rollout scenario. So I think there's room, obviously room for growth next year.

Okay. Just one comment indicates the fourth quarter guidance for broadcasting revenues includes the impact of Gray's expanded channel which collectively accounts for approximately 13.3 million?

Jim, expanded channel, I realize it can get a little confusing, and if we weren't as clear as we could have been I will again apologize to people. But we have had a lot going on in the last year, and we've had some difficulty explaining it I guess. But what we called expanded channel in the release, really involves the cumulative impact of SAZ, NDU, Charlottesville, all the digital duopolies. So it encompasses much more than merely the digital duopolies.

Okay. I thought that was worth clarifying. And then the last thing. Are you getting any Verizon retransmission revenues? Do you have any agreements with them?

I don't think they are in any of our markets yet.

No? Okay. All right. Thanks very much.

Thanks, Jim.

[OPERATOR INSTRUCTIONS] And next you'll hear from Harvey Sandler from Sandler Capital Management.

Good afternoon.

Hi, Harvey.

The 138 to 143 cash flow, is that before overheads?

Yes, Harvey it would be. And again, if you kind of work from the guidance and do the math, what it would suggest is that after you deduct the overhead and of course I'm stripping out all of the non-cash comp stuff as well to get back to an operating cash flow number, consistent with how we do our non-GAAP recs, it would suggest somewhere between 125 and 130 for 2006.

Harvey Sandler: Okay. And what would be the corresponding free cash flow on that basis?

If you -- let me answer this to -- let me answer this one way at least. I think as I commented earlier, our run rate on CapEx this year, has been higher than normal because of, we saw the opportunity for the digital duopolies and went in that direction. If you try to normalize that to some extent, and take the, for the sake of example, take the 130 million high-side number, and subtract off cash interest, a little bit for cash taxes, and then kind of normalize the CapEx number a little bit to -- call it 25 million, which still may be on the high side, but just for sake of discussion, call it 25, then you end up with a free cash number in the 37 million range, I think is how the math would basically work out. Maybe 37 to 40, depending on how you wanted to figure cash taxes. And so that's about with 48.3 million shares out, that's what, about $0.77 a share, I guess.

Okay. Thank you.

Thanks, Harvey.

And our next question comes from John Kornreich from Sandler Capital.

Yes, hi.

Hi, John.

Jim, I'm very confused. You have a sheet here that says adjusted broadcast cash flow pro forma, nine months, $85,639,000. Is that broadcast cash flow for nine months? In the exercise, I don't even see where you have added back the corporate overhead.

No, Harvey that is --

John, yeah.

The $85 million number is operating cash flow.

Yes.

We call it, it's called -- on the chart it's adjusted broad -- it's after overhead.

Okay. And the overhead is running what about 15, 16 per annum.

No, that would be high even with the non-cash charges. The nine months broadcast cash flow number, which is published on our website, go to the non-GAAP recs and you can pull it up there, nine months pro forma broadcast cash flow is 95 million and change.

After adding back the overhead?

That's correct.

I understand. Okay. Next question: What were the revenues in the quarter, as little as they were, but I would like to know what they were, for Grand Junction and Albany?

Albany I don't have them immediately available, but Albany would --

Take a stab at it.

Pardon?

Take a stab at it.

Albany would be negligible in the quarter because we can -- keep in mind Albany we bought essentially for dirt cheap, we bought a broken UPN and have converted it to a CBS, and we just converted it over to CBS --

September in September.

In September. So I mean there's next to nothing there, but the good news is there's a lot of room to grow. John, we will be profitable this year for that station, and it's doing real well, and it's a going to be, I think the revenue is already running between 50 and $100,000 a month.

In Grand Junction?

No in Albany.

I understand, but what about Grand Junction, what is that revenue per quarter?

Jim, you got that in front of you? I don't have it in front of me.

It's like a million bucks?

Oh, yes, more than that.

So why isn't it in the pro forma numbers? I mean, you are telling us that the third quarter underlying local and national together was roughly flat, but you take out-- but there's a note here that you didn't pro forma for Grand Junction and if Grand Junction was 1.5 million--?

It was, Harvey, as far as overall pro forma and we just never deemed Grand Junction large enough to do a formal pro forma.

But its large enough to transform a flat quarter in revenue to minus 2.5%. How did -- excluding political how did Huntington Charleston do in the quarter?

It did well, and actually did -- while it was trailing a little bit in political for the third quarter, it actually finished strong and made its budget for the fourth quarter on political.

But excluding political, was it up?

Oh, yes.

Okay. How close to your budgeted OCF when you closed this deal do you think you'll actually come this year?

I think we're happy with where West Virginia is this year and where it's going.

So in other words you missed it.

Not much.

Okay. Okay. I think that's it. Just one commentary maybe -- I don't know maybe my eyes are doing this to, maybe other people on the call share my feelings, your press releases are a mess. They are a mess. And it's very hard to follow what is going on. You have like three different definitions of pro forma, and I mean, it looks like this quarter you even got confused. You got to simplify this --

That's a good point, John. We'll definitely look at that.

Okay. Thanks for your help.

Thank you.

[OPERATOR INSTRUCTIONS] And I'm showing we have no further questions at this time. At this time, I would like to turn it back to our speakers today for any closing or additional remarks.

I just want to thank everybody for joining us today. As I always say, you are welcome to call Jim or I personally if you've got any other questions. We'll look forward to talking to you on our year end call. Hopefully we're going to have a good November and December and finish up the year-end strong. I think we will. Thanks, everybody.

And that does conclude today's conference. We thank everyone for joining, and have a great day.