Gray Media Inc (GTN.A) 2008 Q2 法說會逐字稿

Welcome to the Gray Television's Second Quarter Earnings Release Conference Call. Just a reminder - today's conference is being recorded.

For opening remarks and introductions, I'd like to turn the call over to Mr. Prather. Please go ahead, sir.

Thank you very much, operator. I want to welcome everybody to our second quarter conference call. I know a lot of you know I like quotes of different kinds. I think the quote that fits us these days is the old Chinese proverb - "May you live in interesting times." I think we definitely are in some very interesting times. I think we're on the cusp of a new golden age of television, but it's painful getting there, it looks like. I think the economy definitely has affected everybody around the country and not just TV and radio and newspaper but most other industries. Obviously, our biggest advertiser, the auto industry, has been hit hard by the current economic crisis and $4-plus gas. I was just reading today that Toyota's products are down 28%, and they're expecting about that much decline for the year, which is really rare for them. General Motors announced a $15-billion loss for the quarter. National auto advertising, according to reports I've read, right now is down in TV around 26% overall. Fortunately, we're not down near that much. Here again I think that goes to the strength of our local franchise.

As most of you noticed, we're basically even with last year for the first six months in revenue. I think this is a tribute to the strength of the markets we're in and the strength of the political revenue that's coming in. And, also, our new media internet strategy continues to have great growth and strong profits, and we think this will continue in the future. I think it will become a more important part of our business as we go forward.

One of the things I'm looking forward to is more interactive TV. I think you're going to see, and we're experimenting with it now, where you will be able to be watching a TV program, see an ad you really like, click a button on your remote, and it will automatically DVR whatever you're watching and switch you right to a Website so you can look at a product, whether it's a new car or whatever it might be that you're interested in, and then go back and pick up where you left off on your TV program.

Also, to give you an example of the strength of our Websites, we're averaging over 50 million page views a month now. Even our mobile-- We had over 4 million page views in the month of May in our mobile and 1 million unique visitors. Here again I think this is a strength-- We've got mobile strength in all our markets. We're making a profit on mobile, and I think that will continue in the future.

Some other things that are going on right now-- I think we've got a huge opportunity ahead of us for retrans in the fourth quarter for beginning of next year. We've got about 4.5 million subscribers, I think, total that we pass, and we have about 60% of those up for retrans negotiation December 31. We're going to be very aggressive and very active in trying to maximize what we feel is rightfully compensation that we should be getting from cable operators and satellite operators. We recently made a deal with AT&T. They're coming into eight of our markets with TV services this year and next. We made a very favorable deal with them for retrans payments that we're very pleased with. We've made one deal earlier in the year with Cox Cable in four of our smaller markets that we think is fair for both sides and we're pleased with. So we think this is a big opportunity for us going forward in the next year that we're going to be working real hard on.

We're continuing to watch our expenses very carefully. Our expenses right now are basically flat with last year - down, actually, if you take out the commissions on political we've paid so far. It should be down for the year, other than commissions on political.

Political is coming in good. It was slower than 2004. But, looking back, you probably expected that because, as we moved forward, we had an incumbent president and the nominee for the democrats was picked very early. So they started advertising a lot earlier. But we feel very confident that we'll hit our political numbers that most people have us projected at for the year.

We're continuing to work hard on getting ready for the digital transition February of next year. I think this is going to be great for our whole industry. I think the sooner it happens the better. Basically, most of our capital this year has been spent on finalizing things for the digital transition, which, as I said, we'll be ready for February of next year.

We're continuing to work on trying to do more hubbing. We're hubbing all our traffic now. We're hubbing master control for many stations and trying to increase that as quick as we can. We're hubbing business management and accounting functions much better now, and we're continuing to increase that. So it's something we think is more efficient, number one, and we think, in the long run, we'll actually be giving a better service to our stations as we go forward.

I'd be remiss if I didn't mention the stock. I want to cry every time I look at it. I don't look very often, frankly, because it doesn't do me any good. I told you before, and I'll tell you again, most of my net worth is in the stock of this Company - not only in personal shares, but my 401(k) and my IRA, which I self direct, is virtually all Gray stock. So I'm drinking my own Kool-Aid, and, in the long run, I think it's going to pay off. Right now, it's very painful for all of us in the business.

I think all the TV stocks are down over 50%-plus from where they were a year ago. I think we've been painted with the "old media brush," which there's not much we can do about it except try to show Wall Street that they're wrong about future projections for growth in the television industry.

But I'm confident that the next few years are going to be very good for us. I think it's going to be painful as the economy continues to struggle. I wouldn't dare to predict how long that's going to last. But I do think that when the economy picks back up, we'll pick right back up with it and have some good growth ahead of us in the years ahead.

At this point, I'll turn it over to Jim Ryan to go into more detail on the financials. Then we'll open it up for questions after Jim. Jim, go ahead, please.

Thanks, Bob. Good morning, everybody. I'll keep my comments relatively brief.

As Bob mentioned, overall for the quarter, our revenues were just down slightly - 1%. Local was down 5%, and national was down 7%. It's similar to the trends many people have reported for the quarter. Political, though, was stronger than we had anticipated, ending at $5 million. We were pleased to see the strength, and an increase late in June. Our internet growth, as Bob had mentioned, was up 34% as well, and we were pleased with that.

As far as commenting on categories, clearly, as the rest of the industry has already mentioned, our auto was down. It was down about 8%. It still represents about 22% to 23% of our total business. Other categories that were down in the quarter were telco, furniture, appliance/electronic stores, and the big department discount stores. Our restaurant business for second quarter was basically flat.

On the positive side, entertainment was up a little bit. We've continued to show good growth in medical and other services. Financial services actually, for us, was up slightly. And the supermarket category has actually done very well for us this year after several years of poor performance.

On the expense side, as Bob mentioned, we were pleased that overall expenses were actually down 1% quarter over quarter. And we actually did a little bit better than we had thought we would on the expense side. The stations have been working very hard, as Bob indicated, on managing expenses and keeping things as tight as possible.

Turning to the six-month numbers, again, the trends are very similar. We were basically flat on a six-month-- actually, up, ever so slightly, a few hundred thousand dollars in revenue. On a six-month basis, our auto is down 6%, and our political for six months is at $8 million. Obviously, we expect good growth in political in Q3 and Q4.

Turning to some balance sheet items, total debt at the end of the quarter was at $855.5 million. And please recall also that we made an additional $23-million voluntary prepayment on the debt on July 15. So, if you wanted to pro forma the debt number, you could reduce it to $832.5 million.

Our last eight-quarter trailing operating cash flow as defined by our credit facility with $111.9 million, which gave us a leverage ratio under our credit facility of 7.45. If you pro forma for the additional $23-million payment, it would bring it down to about 7.24.

At the end of the quarter, we had 75 million of the newly issued Series D preferred stock outstanding. And, again, with the add-on issue we did early in July, that would bring the total issue up to 100 million.

CapEx for the quarter was $3.3 million and, for the six months, about $6.2 million. Again, we think the total CapEx for the entire year will be somewhere between $15 million and $20 million. We've been trying to backload some of the CapEx this year to better mesh the political dollars as they come in in the second half of the year.

Cash taxes for the quarter was about $156,000, and, on a six-month basis, we're between-- we're about $200,000 in cash taxes. I don't see any significant amount of cash taxes for the entire year. We'll end up paying less than $1 million for the entire year.

At this point, Bob, I'll turn it back to you.

All right. Thanks, Jim. Operator, at this time, if you'd open it up for questions, we'll take questions.

Certainly, sir. (Operator Instructions). And we'll take the first question from Marci Ryvicker of Wachovia.

I just wanted to know if you can comment on your digital stations. I don't know if you said that at the beginning of the call. It was hard to get on, so I apologize if I'm making you repeat it.

I didn't, but I will. Our Fox digital are doing extremely well, as you can imagine. Fox has had a very strong year overall. Our Fox stations are doing well. CW and MyNetwork not as good, mainly as we've talked about before. Probably more than any reason is just the channel placement. One of the things we're going to be working hard on in our retrans discussions is getting better channel placement for our digital channels. If you get put way up on a digital tier by the cable guys, it's just hard to get a lot of people to find your station. So I think, if we get good channel placement like we're hoping we will-- And we did get a real good channel placement with Cox on our station in Topeka, and it's already helped our revenue there. So that's something we'll be working toward.

Okay. And, then, in terms of your affiliation agreements, when are they up with each of the networks, and do you anticipate when you go to discuss the new contracts that they're going to ask for reverse compensation in terms of retransmission consent?

We've only got one station up for renewal at the end of the year, and that's our Huntington/Charleston, which is an NBC - one of the strongest NBCs in the country. We've had initial discussion with them. They are talking about trying to get some retrans if we get it. We're going to fight that pretty hard. We have no intention of giving any retrans money that we get to the networks. Most of our others are out about four years, aren't they, Jim?

The CBSs are out to 2014. The ABCs are out to 2013. And most of the NBCs are in 2012; there's another one that goes out, actually, as far as 2015.

Okay. And, then, on the NBC stations, can you talk about how it's been in terms of the Olympics? We heard from at least one of your peers that it's been a little bit difficult to sell.

Ours has actually come in pretty good, Marci. We're right now 3.5 million plus, which is a little bit better than the last Olympics in '04. So we're pleased with the Olympics. It's actually done better than we thought it would, probably. We're in some good markets for the Olympics, we think. I think there's a lot of controversy with China and all that that may have steered off some people, but, overall, we're pleased with it.

Great. Thank you so much.

We'll move to a question from [Richard Towle of R.T. Asset Management].

Congratulations, guys, on strong execution during very difficult times. I look at your results and then contrast and compare it to some of the other operators out there, and you guys are obviously doing the right things and putting a lot of thought and creativity behind your sales efforts. Those guys should be congratulated as well.

Well, thank you very much. We work pretty hard at it.

One question I have in regards to retransmission. Do you have any estimates in regards to, per sub, what the rate is going to be?

That's a tough-- Obviously, we have to sign these confidentiality-- I would tell you, I would be disappointed if we're not-- Overall, in the-- Well, let me just put it this way. I think the guys have done a good job out there. Sinclair and Nexstar and some of these guys are-- I think most of their deals are somewhere-- From what I'm hearing, and I haven't talked to anybody specifically but just pieced it together-- mid 20s. I think that's a goal that we all should be working toward, probably.

Okay. Another question in regards-- A couple of months ago, you made some comments in regard to cellular initiatives and mobile broadcasting. Has anything--?

We're a member of the Mobile Coalition. They're working on-- They're doing testing right now on the actual technological side of things. I think it's going real good. And I think they'll have some standards in place by February of next year. I think the key thing, as I've mentioned before, is what is the economic model going to be there at the end of the day? Is it going to be a subscription model? Is it going to be a model like in Japan, where they've got 20 million-plus people that can watch live TV, but it's an advertising model. I personally think it's going to wind up an advertising model.

But the key questions are going to be how the networks get compensated, how does CNN, how does AP - all the syndicators. When you're showing your picture, it's just all your local stuff; it's everybody's. So I think there's a fair amount of economic technical questions that have to be answered. But I think there's a big future ahead of it. As I said, in other countries, it's working extremely well. People have shown that, if it's available, they like it. As I said, I think in Japan, you have to buy a special device, and they've got over 20 million people watching live TV in Japan. I think this is something that could be a big growth area for us in the years ahead.

Yes, especially given the local content. You would think it would be pretty popular.

I agree 100%.

One last question in regards to that-- actually, in regards to NBC. Have other broadcasters run into-- I don't want to say problems, but--

I'm sure they're not picking on us. I'm sure that other people that have stations up for affiliation renewal are hearing the same thing we heard. I think they're being very unrealistic in their demands. As I said, I think, fortunately, our Huntington/Charleston station is one of the strongest NBCs in the country. We just don't feel like it's warranted. We think we bring more to them than they bring to us, frankly. We've got a huge local audience, and our ratings are much, much higher than their overall ratings. They should be happy to be with us.

I was almost wondering-- Why would they, given the fact that their execution on their broadcast network is pitiful--?

They have a word to describe that. It's called arrogance.

All right. Well, I didn't want to say that.

I hate to say it, but, I mean, that's been my impression of dealing with them.

Well, I'm an owner too of the stock. I'm not selling it any time soon.

I appreciate that. I think it's a great buy right now. Like I said, my partner and I have continued to buy stock, and we will continue to buy. I think, like I said, our whole industry has been hammered much more than it has deserved.

Yes. Definitely a diamond in the rough. All right. Thank you very much, sir.

We'll move on to Jim Harris of Bislett Partners.

Two questions, if I may. The first-- I think Nexstar has talked about 2009 capital spending for them of $10 million or less. I wondered why your capital spending would be any different than that in '09.

In '09, I don't think it will. I think we'll be in that range or lower.

Does that imply that in 2010, you'd be higher?

Not necessarily. I think we need to take it one year at a time, Jim, especially with these economic conditions. I think the main thing we need to be looking at-- We recently hired a Vice President of Technology. And my charge to him was to figure out a way for us to spend capital more efficiently and make sure when we are spending money on capital that it's also labor saving or ways to do things more efficiently. Workflow especially, I think, in most TV stations is pretty poor and causes a lot of inefficiency. This guy's a proven commodity. He's designed stations that are fully digital, very modern, very automated, very network oriented, very [file-based]. I think we've got to move toward that.

But we're going to watch our capital spending very closely. I think local HD is important for us in a lot of our very competitive markets. More and more people are going there. We've even had local HD in a couple of our smallest markets, which has surprised me, from a competitor. But I think we're going to be watching the capital dollars very close over the next couple of years.

Can you fit the HD that you have to do to remain competitive into the $10-million budget, or that would push it up some more?

We definitely can. Yes.

A second question. I noticed that the Robinsons that are on the board of directors of the life insurance company they have that's public took-- I think they reduced their compensation to zero. It's not a ton of money, but they're making probably $1 million a year at Gray. I wondered if they considered-- Have they considered reducing their compensation from Gray in the same way that they have from their public insurance company?

That has not been discussed, Jim. No. I'm not sure what the total is, but Mack has been a great counsel to me over the years. He's one of the most successful, smartest businessmen in America. And, frankly, his overall counsel has been very valuable to me and to Gray over the years. I think he earns whatever we pay him.

Okay. Thanks a million.

We'll next go to [Oscar Olivas] with Wells Capital Management.

Hello, this is Steve Pfeiffer calling here. My question for you are two of them. One is - How are you in compliance with your debt covenants on your bank line?

I'll let Jim Ryan answer than, and then we can answer the second one.

At the end of the quarter, we were at $745 million against a covenant threshold of $775 million. As I mentioned, if you pro forma for the additional voluntary payment we made in July on the term loan, it would pro forma to about 7.24.

So pro forma for the debt paydown, you're at 7.24?

Yes.

Okay. And does that covenant step down?

Yes. It steps down to 7.25 at December 31. And, given the paydowns we've made to date, plus our expectations for the balance of the year in operations and political, we're very comfortable with the cushions we see going forward on the covenant.

Okay. Can you give me some general idea as to how much EBITDA you would need to have in order to stay in compliance with that new 7.25 test?

To be honest, I haven't reverse engineered that number.

I can't remember how your test is. Is on the eight-quarter rolling number, or is it on a four-quarter number?

It's a trailing, eight-quarter number. We see substantial room between covenant and actual by the end of the year. Without trying to get into specifics, I think, on a trailing, eight-quarter basis, we would be well into the sixes, which would equate in a T-12 type calculation to be someplace well into the fives.

Okay. And can you give me an idea as to further step-downs beyond December 31? I think, if you're correct that you'll be in compliance at the end of the year, I assume that they'll continue stepping down.

It's step down at the end of '09 to 7. And then, at the end of 2010, it steps down to 6.5, and that's the last step.

Okay.

Again, all of that is on a trailing, eight-quarter basis. We're one of the few TV companies out there that has the eight-quarter calculation. So you just need to keep that in mind.

Yes. Okay. The second question I had for you is on the retrans agreements. Can you tell me approximately how many subs are up for retrans agreements and over what time frames?

As I mentioned, we've got roughly 4.5 million subs total, I think, and we've got about 60% of them coming up December 31 of this year and about another, I think, 30% at the end of next year.

That's it. Thank you very much.

We also have-- Just to add on to Bob's comment on cable subs, we also have our agreement with EchoStar Dish coming up for renewal at the end of this year as well. And we're already in discussions with them on a renewal.

And the EchoStar Dish was not in the 60% of the subs? You were talking about cable numbers before. Correct?

Right. Yes, cable.

Okay. And EchoStar Dish on some of the other subscribers we've seen on their-- I'm trying to get a guidance as to-- Are people seeing generally increases or decreases in the retrans that they're getting from EchoStar Dish?

This is anecdotal, but most of what I'm hearing is-- We're getting increases. I think people are getting increases overall.

Okay. Thank you.

We'll move on to Jim Goss with Barrington Research.

Actually, one first off. For the Olympics, you mentioned something like a $3.5 million revenue figure. Where are you plugging that into in your revenue contribution breakdown? Is that in local and national, or are you putting it in programming and other?

Jim it would be a mix between the local and the national, just depending on what client ordered it.

Okay. So that might affect those comps a little bit in the third quarter, too, then.

Right.

Secondly, with the impending switch to digital, are you seeing any movement on the part of the TV viewers in your area to sign up for cable or some other form of delivery in anticipation of the digital switch? And will this make a difference to you from your standpoint with your digital stations?

That's a good question, Jim. I have not heard any comments from any of our GMs regarding that. I don't-- In all the national numbers, we don't see any-- If anything, you see cable subscribers going down. I'm not sure. I think any of the people that don't have cable or satellite are probably looking more toward getting a box, especially if they can qualify to get the government assistance on it. And most of those people are probably going to rather spend the $40 or whatever - $50 - to buy the converter box than to sign up for cable if they aren't not already signed up with it.

I think there's still a big battle going on between cable, satellite, and the phone companies, with the Verizon's FiOS and AT&T coming in. As I said, we don't-- Right now, we don't have FiOS to any of our markets. We do have AT&T coming in eight of our markets this year and next year. So it will be interesting to see what kind of penetration they get against the cable and the satellite over the next year or so.

Given that you're in smaller and mid-sized markets, do you see a somewhat larger proportion of individuals not taking cable or satellite to (inaudible)?

I think our markets are pretty much the national average. I think the national average on cable is around 67% or 68%. I think our average is pretty much the same thing. I think satellite's in the 15%, 20%, or 25% range. Here again, I think ours is pretty much-- I think we mirror pretty much the national overall ratios.

Okay. And have you been revising the programming on your digital stations as you've gained more experience with it, perhaps introducing more traffic and weather type reports or something else that you might not have been doing originally?

I think the main thing we're pushing, and I encourage all our managers, is more local content. I think we're doing a better job on the high school level and on the college level on-- But consider the non-traditional-- In other words, we're trying to look for sports that the colleges have good audiences in but may not be a sport there would ordinarily be on TV.

I think we're seeing more of that. I think I mentioned before the classic example of the women's volleyball team out of the University of Nebraska in our Lincoln station. We were televising most of their matches. They were number one in the country and doing great. And they became so popular, they wound up-- ESPN and [BesTV] stole a bunch of the games, so we wound up only getting a couple of games by the end of the year.

But that kind of thing. We're looking for more like that where it's a real-- Just to give you an example, the women's volleyball had sold out a 10,000-seat arena over 100 straight times in Lincoln, so it's very, very popular out in that area. And it's something we're looking for in some of these other university towns around.

All right. And, finally, political trends. I know it was a little bit of a late start because of the long-running democratic primary. But what have you noticed about trends lately that might give you encouragement that you'll get more of that back in the third and fourth quarters?

We've seen it pick up a lot since Obama looks like the nominee, obviously. I think both sides now are concentrating on the battleground states. We're seeing real good in Colorado, Nevada, Wisconsin. Florida is still a little bit of an enigma. We're seeing Obama money there but still not much McCain money, which has kind of surprised us. But Virginia is another state, which, traditionally, we got no money in, and we're seeing Obama and McCain money there. So I think it's going to come down, Jim, to the old battleground states plus some new battleground states. I think Virginia is going to be one. I think Colorado probably even more so than it's been in the past, and maybe a couple of others may pop up along there.

The one thing I've noticed about political-- They're a lot smarter about moving money around at the last minute, especially as you get closer to the election.

Another thing that's interesting, the 527s had that court ruling where they used to-- They couldn't advertise within 30 days of the election. That was thrown out. And I think we're seeing their money coming in later. I think they're going to be advertising. They used to advertise. We had a lot of MoveOn.org and Swift Boat money in February and March in '04, and we're seeing virtually none of that yet. I think they're going to all wait and throw in their money in the last 30 days a lot more than they were able to in the past.

All right. Well, thanks very much.

We'll next move to JPMorgan's Tracy Young.

Two questions. The first question, and I may have missed this-- Did you mention how much of your retrans is cash?

Well, we want it all to be cash. That's our goal.

During the next quarter?

Tracy, anything that we report on the retrans line-- Anything to date we've reported on the retrans line is pure cash. And I would expect that to continue going into the future as well. So whatever number we're showing in our breakout that we started at the first of the year, that's a real cash number.

Got it. And are your digital stations profitable now?

Yes. In the quarter and in the six months, they were profitable a little bit - not significant. But it was certainly a definite improvement from the modest losses we were running last year. So we're very encouraged that, even in a fairly tough economic climate, we've actually moved into profitability.

Okay. And then, finally, Bob, you mentioned the hubbing of the stations. Have you seen any expense reductions, or is there anything you're expecting to see?

Yes. I think, if you look at our traffic, for example, we centralized all our traffic over the last year in four hubs. Based on our old numbers, we think we're saving about $1 million a year there, probably. I think the other one's the master control. We've only got about six, seven, or eight stations where we're marching in master control. We want to get that going as fast as we can. We've got a relatively inexpensive way to do that, and it takes a little longer to implement. So we're moving forward there. I think we'll save a good bit of money there.

And then we clearly are going to save some money-- We basically are reducing our number of business managers from 30 down to 8 or 9, I guess it is. And so we're going to see savings in all those areas.

Okay. Great. Thank you.

We'll move to [Scott Vandenbosch].

Previously, you had mentioned that you expect to generate about $50 million in EBITDA for the year and that you were going to use that to repay debt. And I was wondering, in light of the preferred issuance if you still plan to do that.

Your number is a wrong number. We should be in the neighborhood of $150 million. You said $50 million.

Oh, okay. I thought you mentioned that number in the past. Maybe I had that wrong.

I think that we definitely want to reduce debt by the end of the year.

Let me clarify. I think the $50 million number was maybe--

Free cash flow.

-- an approximate free cash flow number.

Okay. That's probably what it was. Yes.

That's correct.

We definitely want to use all that money to either pay down debt or redeem preferred, one or the other. So we definitely-- Whatever free cash flow we get, we're going to use the vast majority of it to improve our balance sheet.

And you said that would likely happen at the end of the year?

Right.

Okay. Thank you.

We'll next go to Brian Broadbent of Highland Capital.

Nice job. A couple of questions. First, you talked about the new head of technology. I'm just curious as to how long you think it's going to take you to get 100% file based and how much CapEx is going to be required for that.

That's a good question, Brian. How long, I wouldn't venture to guess. As mentioned, I think we're going to be going slower over the next couple of years until we see how this economy's going.

I do think, though, that there are some things we can be doing, and [Jim Ochon], our technology guy, is looking into some ways, even where we're doing some automation-type stuff that we can do some-- going file based a little quicker than we thought and, actually, cheaper than we thought. He's going around visiting all our stations right now. I think he's been to 18 so far. So he's got about 12 more to go. And, when he gets through with that, he's going to sit down and write up a report of where he thinks we stand as far as the technology issues in each stations, where we ought to look to prioritizing our expenses going forward, and where we need to be looking to-- We want to be much more efficient in how we spend capital going forward. I think we've done a good job in the past, but I think we can do better. And that's what his goal is going to be - to figure out a way to do better.

As far as the financing of it, ideally, in a normal real estate market, which we're not in right now, we've got some pretty valuable real estate with some real old buildings on it. Ideally, if we could sell that real estate for much more than the cost of building a new building and new equipment, that would be the way to go. And that's what we would concentrate on first. As I said, we've got probably at least 12 or maybe 15 stations where the real estate is much more valuable than what you ought be sitting with a TV station on. Here again, all that's going to depend on how the economy is looking and how our overall balance sheet is looking. Our first priority is going to be to make sure we get our debt down and make sure we, going forward, are in a much better position if we have another slowdown.

Excellent. And a second question on AT&T coming into your markets. I'm curious-- like total TV households and total percentage of the footprint that covers.

They're coming in some of our bigger markets, Brian. I haven't figured that up. That's something we probably ought to do. But they're coming into Wichita. They're coming into Knoxville and Reno. I'm trying to think. I believe Madison, Lansing. There's eight markets. Seven of them they're coming in this year and one next year. And they're going full blast. I mean, they've been very aggressive getting the retrans deal done and wanting to get started. I think, in Reno, I think they're supposed to be trying to be up and running this month, as a matter of fact.

The list is Reno, Wichita, South Bend, Madison, Topeka, Lansing, and Knoxville.

And do they typically put a good advertising budget behind that?

I don't know, Brian, but they better. That's the only way they're going to get established. So I hope they (inaudible).

I don't know if you get paid by it or you give them some barter.

We didn't do any barter at all. We made a deal with them for retrans, cash, and then anything they wanted to [buy on] would be on top of that as far as advertising. But if they're smart, they need to advertise, especially with us. So I think most of the markets-- In all the markets they're coming in, we've got very strong stations there.

My only concern, frankly, with the telephone guys is how good of merchandising marketers are they. I think they've had monopoly situations for so long; you wonder if they really know how to market against competition. But I guess we're going to find out. And I think FiOS-- Verizon evidently has done a good job. And AT&T is a little behind that. But maybe they'll want to catch up, hopefully, starting in our markets. But they seem to be very aggressive wanting to get started. Let's put it that way.

And, then, on your political guidance, through the third quarter, you have $22 million total, kind of based on the midpoint of your guidance. And you've thrown out a number of $60 million before. So does that--? Are you still comfortable with that $60-million number? That implies a pretty--

Based on past history, Brian, if you go back to '06 and '04, we were at 55% or 60%-plus in the fourth quarter. As I said, I think we started out a little slower this time because of the fact-- It's the first time, I guess, in 40 or 50 years when they've had a primary season go with the democrats as long as it did and no clear-cut candidate. So I think we're very comfortable with that number through the end of the year.

Also, Brian, I'd comment that the political numbers we put in the guidance-- We hopefully are being a little cautious in the numbers we gave out and, at the end of the day, similar to second quarter, the actual numbers that come in would end up being a little bit better. But, again, we wanted to be a little cautious and not overpromise too much.

Got it. And just so I understand correctly, when I go back and look at '06 at the new soft money rule, there's very little soft money in the-- looking back historically in the fourth quarter because the 30-day cutoff?

Right. Exactly. It was done, virtually.

Actually, to give a little more color on the soft money, we saw-- It was kind of interesting. In Colorado a couple of weeks ago, soft money did come in. And the interesting this is that they did-- It was kind of surprising that they actually scheduled out a reasonable amount of the order into fourth quarter. So, again, that kind of leads us to what, as Bob said, is the thought that the soft money may be targeting later in the cycle this time around because they have the ability to.

Okay. Great. Thanks a lot.

We'll move on to [Linda Cairn] of Credit Suisse.

I'm sorry if I missed this at the beginning of the call. Could you just talk a little bit more about your third-quarter guidance for local, like flat year over year? Is that because of the Olympics revenue coming in, so fourth quarter local we could, given the economy, maybe see some weakness?

Certainly, the Olympics is helping our third quarter, both locally and a little bit nationally as well, on NBCs anyway. I think that does help the local. Overall, I think it is helping our view of where local will be in third quarter. Fourth quarter-- I think it's a little too early to have a strong view on how things are going to look, although I think it's probably fair to say that the overall economic conditions probably won't have changed a lot between now and fourth quarter.

All right. Did you say how many households were in the eight markets - the AT&T markets?

Unfortunately, I don't have it right now. But, as we keep going through, I'll quick try to add them up and toss out a number.

Okay. And just one other question on the retrans. Of the 60% that are up for renewal at the end of the year, which cable companies are those primarily that you're negotiating with?

It's everybody. We're dealing with most of the big guys - Comcast, Time Warner, Charter and those guys, and, I think, Mediacom. It will be most of the big MSOs and then several hundred small, local-type--

Okay. I didn't know if there was one that made up a bigger percentage.

Comcast, being the biggest one, I think, is the bigger percentage. But I think it's-- I want to say maybe 1 million subs. Jim, does that sound right?

For Comcast?

Yes.

That, off the top of my head, sounds about right. But, to be honest, I don't have that number in front of me. I'm just going by recollection.

That's all. I guess, if you don't have that AT&T number, we can do it offline.

Okay.

We'll go back to Richard Towle of R.T. Asset Management.

Just one quick question on the autos. Did you say it was down 8%?

Yes. It was down about 8% in the quarter and down about-- On a year-to-date basis, it was down about 6.5% or 7%.

And is there any-- Were the US dealers weaker than the foreign dealers or just weak across the board?

I think the US is probably a little weaker. But it's weak across the board. As I mentioned, even Toyota's been down, which is very unusual. I just saw some interesting things that the Manheim Index, which is an index that kind of follows the car industry, is down 4.4% in the month. And it's the ninth consecutive month of year-to-year declines. SUV is down 26%. Large pickups are down 24%. Compact cars are up 16%. I think that's all directly related to $4-plus gas.

One of the things I think that's a positive that's going to come out of all this is, you know, the carmakers have got to advertise if they want to sell these new compact cars with gas mileage, they've got to advertise what kind of miles you can get. I think it's going-- They're busy trying to retool and trying to change some of these plants around from some of the bigger SUVs and pickups to smaller cars. Well, they've got to advertise to let people know what they've got. So I feel like they'll be coming back in the market pretty strong advertising. They're all in a bad situation.

I don't know if you saw it. GM announced today they're asking all their ad agencies to take a discount on what they charge on their business. But we don't plan to give any discounts. I think our local dealers continue to spend more money than the national guys do. I think that's why we've been fortunate. We've got a strong local position in most of our markets. We haven't seen the kind of declines that-- As I mentioned, national auto spend on TV is down something like 26% overall, I think. So, as you can see, we're only down about 7% or 8%. So I feel pretty good about-- And I think that's going to bounce back, as I said, between now and the end of the year.

And would you say that the weak dealers that cut their purchase to zero--? Are they all out of the market, or is there some more of that?

I think you're going to see some shake out of dealers. I think it's going on right now, and I think that will continue. Both Chrysler and Ford have announced they want to cut the number of dealers. And I think they're in the process of doing that around the country.

But the strong dealers-- We've got a lot of car dealers that have been on our air every single week since the day we went on the air in a lot of our markets. And I think those kind of guys-- They know the value of TV advertisement. I know they sold a lot of cars over the years, and they're not going to quit advertising. And, frankly, if weaker dealers go out of business, the strong guys will be able to spend more to get more business.

Okay. Thank you very much.

(Operator Instructions). And, gentlemen, it appears there are no further questions in the queue at this point.

Okay. Well, thank you, operator. I want to thank everybody for joining us today. We're going to be working hard to make third quarter hopefully better than the first two. I think the political is going to definitely help there. And, also, with the Olympic money coming in starting at the end of this week, I think we're looking forward to a lot better third quarter. I think the economy may be actually improving a little bit going forward. So we're looking forward to having a better third quarter and a better fourth quarter.

As I always tell you, Jim and I answer our own phones. We're easy to find. If you have any other questions or comments, don't hesitate to call us any time. And we'll look forward to talking to you again at the end of the third quarter. Thank you, operator.

Thank you. That does conclude today's conference call. Thank you all for joining us, and have a wonderful day.