Gray Media Inc (GTN.A) 2008 Q4 法說會逐字稿

Good day, everyone, and welcome to the Gray Television's fourth quarter 2008 earnings release conference call. Today's call is being recorded. Today's presenters will be Hilton Howell, Bob Prather, and Jim Ryan.

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

Thank you very much, operator. I want to welcome everyone to our year-end conference call, and I will turn it over at this point to Hilton Howell for some opening remarks. Hilton?

Thank you very much, Bob. And I want to thank everyone that is here on this conference call for taking the time to listen to us and to what I think is some fairly good news in a difficult environment. A difficult environment for the broadcast business, for the advertising market, and as everybody knows, for the U.S. economy as a whole. And we wanted to apprize all of you to some the decisions that we have made it in light of that difficult environment.

Our Company is not a chicken little company. And we don't have a chicken little management team. But considering the difficult environment that is in place in 2009, we're going to be focusing on job number one, which is operating our television stations, delivering the news to our markets, to improving our income statement. And then very importantly, to solidifying our balance sheet. So out of an abundance of caution we've made a lot of tough decisions that we want to bring you guys up to date on.

The first issue that I'd like to touch base on is that our Board of Directors in the fourth quarter and for '09 has suspended our common stock dividend and that leads to a savings of about $5.8 million in cash during this upcoming year. Second, the executive team of Gray Television has voluntarily eliminated executive bonuses for 2008, and we have frozen the salaries of virtually all of our senior management team. The third issue that we need to discuss, and this was a particularly difficult decision for everyone in the Company, but we made the decision with the Board's backing to suspend the 401K match in the fourth quarter for our employees. Both in terms of common stock matching because of where our stock is currently trading, or in cash. And I do want to say that in that regard in particular, I hope personally very, very much that the Company will be able to make that up to our employees as soon as this environment has improved a bit.

And then I'd kind of like to brag a little bit on Bob Prather and Jim Ryan because -- and not just them, our whole management team because I think that the Company has actually been ahead of the curve. We are not in a situation looking into 2009 where we're looking to make great numbers of salary cuts in terms of our total number of employees and what we can do to kind of skinny down in a difficult environment. We were ahead of the curve, and in 2008 we wrung about $15 million of expenses out of the operating costs of the Company. And the Company is down about 170 full-time employees as we begin 2009. So we will have the benefits of those cost savings for the entire year.

We also have some pretty positive news in terms of top-line growth. Bob will cover this in a great deal more detail and questions I'm sure will come out about it. But our retransmission consent is going to generate revenue between $15 million and $16 million in 2009. Which by my recollection is more money than the Company ever got on a consolidated basis from network compensation at any point, and we're very excited about that. And most importantly, Gray was fully in compliance with all of the FCC regulations. But after checking with all of our markets and making certain that the public was served appropriately, we have completed the conversion to high-definition television in 26 of our stations which has gone absolutely beautifully. And Bob can cover that with a great deal more detail and color. But all of us here at Gray Television feel that after literally years and decades of expenditures and tens of millions of dollars of those investments, we're finally beginning to usher in what we think is going to be a new golden age of television. And it's been greeted by our viewing public and our markets in a very, very positive way. And so I just wanted to bring my brief comments to a close, thank you for attending the -- this conference. And turn it back over to Bob.

Thanks, I appreciate it. First of all, I -- I would like to concentrate on good news today. I know all of you have been -- all you have to do is pick up a newspaper or watch any of the news shows on TV to hear a lot of bad news. I actually think we've got a bit of good news. First of all, we wound up with the best numbers for the year out of anybody in the business which I think is the strength two of things.

It's the strength of our management, our GMs in the field that really have done a great job. And two, it's the strength of the markets and our strategy of being -- we're in 17 major university towns and eight state capitals, which I think probably are fairing better than most other communities in this kind of economic slump we're in right now. But, being down is no fun. And bragging about it is no fun. I quoted my friend back in 2001, when we were down that year when all the broadcasts were town. And I told Mario we looked like we had the best numbers of anybody in the business. He said, Yes, it's like bragging about being the tallest midget in town. But we are proud that our strategy of picking good markets and picking number-one stations, in most cases as you remember we've got 24 number-one stations out of our total 36. All of the others are number two. Some of them are close to number one. I think that's the first bit of good news.

Number two, as Hilton mentioned, we've cut over $15 million out of our expenses really last year. We went on the budget cycle early and decided that we really needed to make some cuts. Our managers do d a great job of identifying where they could cut without really cutting into the meat of our business. Which is our local news operations. And we've not touched any newscast anywhere and continued to provide the best news in our markets of any group out there, I believe. We also were very proud, by the end of the year we had made deals with principals of all our cable operators. And we're bringing in over $13 million of new rate trends money effective January 1, all the contracts aren't totally signed yet. But we do have written agreements in principle with all these operators, both big and small. And we hope to have the contracts wrapped up in the next couple of weeks.

But this retrans money will continue as we have a total now of over $16 million a year. That will grow to over $18 million by the end of the third year. Then we hope to be able to re-up and we think this will be a continuing source of revenue in the future for us. We're very proud of the fact -- and here again, I think the strength of our stations allowed us to really come out with a very strong per-subscriber number in our markets. And I feel very good about that. And I think we will continue to grow.

The third area where I think we'll continue to grow is our new media strategy. Our websites continue to grow, they continue to be very profitable. They're actually on a margin basis more profitable than most of our TV stations. Our mobile strategy especially is paying off. We've got $1 million -- I think $1.5 million plus of mobile revenue now. We're doing about seven million page views a month and 1.5 million unique visitors a month on mobile phones. I think the big thing coming for next year is live mobile TV. As most of you know we're in the OMBC coalition of a lot of broadcast groups. And live TV is right around the corner, over 20 million people have live TV available in Japan now free. I think you'll be seeing this coming in America next year. The technology is here now. It's just getting through all the -- the various things to go through on the legal side of things to make sure that we can provide this to our customers. Here again, I think this is going to be a big benefit for us.

As Hilton mentioned we converted 26 of our stations on February 17, or soon after that to digital. I'm very happy to say it's gone extremely smooth. Much smoother than we thought. We decided up front that what we were going to do is use the phrase one customer at a time. We literally set up phone banks in every station. We had all our management team committed to take all the calls that came in, and literally deal one customer at a time. We spent from as little as a minute to as much as 45 minutes with people walking them through what they need to do. And even offered to come to their home if they really had problem. I would say we got a total of less than 5,000 calls for all 26 stations over a two or three-day period. 90% of those calls were just how do I turn this box on. Most people who got that had gotten a converter box. We walked them through how to set it up, how to scan the channels and get it working right. We've been extremely successful.

The interesting thing that came out, out of those calls, we have two channel 6s. We have a channel 6 in Tallahassee and most of you may not know this, but channel 6 is the only TV channel where you can also get on 87.7 on your radio dial. You can get our TV broadcast on radio. We probably had a total of 2,000 calls of people saying, hat happened to my radio or on your TV station? We're working on a way where we can replace that. We're not sure technically if we can be able to work it hopefully. Because those people obviously people have been listening to our news and our programming and either going to work or coming home most likely. And we would like to continue that if we can. But channel 6 is not a good channel for digital, and we've made the choice to move to a digital channel. So we're right now we're not able to provide that radio broadcast for people. But it's something we are working on.

I'm very excited about digital, as I mentioned. I've been saying that for I guess five years. A voice in the wilderness, I think it's going to be a big business for television going forward both for viewers, for us as broadcasters, and for advertisers. I think full HDTV is going to be a -- a huge product improvement over what we've had in the past. And I think once people are really exposed to it they're going to agree, and it's going to become even stronger as we go ahead.

I want to mention one thing. Another piece of good news. Business seems to be getting better. We watch our numbers very closely week by week. And for four weeks in a row, we've actually had to up our forecast on Friday afternoon based on what our managers see coming in the pipeline in the weeks ahead. And we feel very good about that. Also, I've talked to our national rep firm, and they see the same thing on the national side. Telecom is really doing good right now. Auto is actually picking up a little bit, although that's still the key for everything. GM's down 80%. They've been the biggest advertiser in the country for years as far as auto. So -- and basically two-thirds of the auto advertising nationally is domestic. And those are the ones been hurt the most as you know.

The financials obviously are way down, and that's been a bad sector. But fast food is up, and packaged goods is up, doing real well. So those areas that seem to be -- and if auto turns around a little bit. It's going to have a big boost for all of us, the TV business and the auto -- the dealers out there need it bad, too. So I think you're going to see, a pickup later on in the year especially once the domestic GM and Chrysler figure out what they're going to do going forward. Whether it's going to be a bankruptcy with the government financing, or continued government financing. I think that obviously the government is committed to keep these companies in business. I'm not sure if that's the right thing but that's what looks like it's going ahead. General Motors especially is important to our economy and obviously important to all of us in the TV business. So I hope it will continue.

I heard a talk last week by Mike Jackson, who is President of Auto Nation. He said right now the country is running about an $8 million a year auto clip down from $16 million clip last year. He said you can literally see the dropoff passing on September 15, right after the Lehman bankruptcy. He said literally the banks will shut their doors the next day. He said the big problem they've got is that they normally used to get 90% of people qualify for a loan. They now get 50%. And I'm hearing that from local dealers also. The big problem is not traffic but financing.

But look, we are determined as Hilton mentioned to watch our P's and Q's around here. We're watching every expense. We're looking at ways to continue to get more efficient. Looking for m automation ideas that will help us going forward. More creative ways to make sure we're being as efficient as we can. And this is something we're constantly working on. Constantly looking at new equipment, new -- new ways that we can run this business more efficiently going forward. At this point I'd like to turn it over Jim Ryan. And Jim can go through some detail numbers then we'll open it up for questions. So Jim, take it away.

Thanks, Bob. Good morning, everyone. I'll keep my comments relatively brief because I think a lot of the detail is already in the release itself. Fourth-quarter total net revenues, we're very pleased that we're up 12% year over year. That was certainly done on the strength of the political and as you know, we tend to be a very strong political performer. And for the total year, political ended up being the second-best year on record for the Company.

Our local and fourth-quarter -- core local excluding political was down 17%, and national was down 24. But that is better than the national averages I've seen, TV view was reporting that local was down 25% and national down 27%. The auto category in fourth quarter was down significantly as just -- as literally everyone else has reported. It was down about 34%. And about 14% of our total revenues. Now there would be some natural displacement with political and auto but certainly auto's been challenged. We're pleased that our broadcast operating expenses came in 2% under last year the fourth quarter. And again, that reflects the expense reductions that we had started to put into place as 2008 went along. And I'll have another comment or two on that in a moment.

Similarly for the full year, again, up 6% in total net revenue which we are pleased with on the strength of our political, political came in at 48.5 million. Local was down 7%, and national was down 12%. But again, well ahead of the national averages reported by TVB with local being down 12%, and national being down 15%.

In the '08 full-year numbers, as we've mentioned before, we did have the benefit of about $3.4 million of summer Olympics. The Super Bowl for 2008 early in the year was only about $130,000 for us because it was only on our six Fox channels. In comparison to both '07 and '09's Super Bowl, each coming in at about 750,000. Of course, '07 was on the CBS channels. And '09 was on our 10 NBCs. Auto was down about 17% for the year, about 19% of our total revenues. Again, we are very pleased looking at the expense lines that we were able to bring in our total '08 operating expenses flat to '07.

During the course of '08, we reduced our staffing by approximately 172 persons or about 7%. That translates into as we roll into 2009, that will translate into a full $5 million worth of savings and payroll and related expenses for the Company during 2009.

Moving ahead to guidance for a minute, we put the high range of guidance at $60 million. I will say that if the numbers that we saw on Friday hold for the rest of this month, we would expect to be at the high end of the guidance range in, again, as Bob had indicated -- over the last few weeks we had seen the numbers each week pick up a little bit which has been encouraging. For the full year of 2009 in operating expenses, we expect a $15 million reduction at least against '08. We are going to continue to evaluate our operating expenses as we continue to go through 2009. We think there is probably some more selective staff reductions that we can achieve without -- without hurting operations. And we'll, as Bob said, be continuing to look very hard at any other operating efficiencies. Again, trying to position ourselves to be as efficient as possible.

A couple of quick comments on operating cash flow for the quarter. Again, with the strength of political our operating cash flow, was up 33% year over year. And for the full year it was up 22%. Operating cash flow on a 12-month basis is coming in at 118.1. If you were to use the definition in our senior credit facility which is on an average last eight-quarter basis, that calculated number comes in at about 108.6. Under the credit agreement, our leverage test would compute to be approximately 7.15 at the end of the year. Debt outstanding at the end of the year was $800.4 million. We had $30.6 million of cash on hand. And we were -- within covenant for end of year. So at this point, Bob, I'll turn the -- it back over to you.

Thanks, Jim. One thing I wanted to mention that Jim pointed out at the end. We obviously know that our balance sheet's very important important to all of us and to all you investors. We are keeping a very close eye on our balance sheet issues. We want to pay down our debt as quick as we can with our free cash flow. We are limiting our -- our capital expenditures to just absolute emergency and expenditures related to digital conversion which we've been mandated to do, which we have done already. But we plan to keep those expenses as low as we can and continue to operate our business. But our balance sheet's extremely important to us as far as getting it -- getting our debt-to-cash flow ratio down. And hopefully like I said, as the year goes on, as business gets better, we'll generate extra cash flow. We'll be sure to use it paying down debt. Operator, at this time I'd like to turn over to you for questions.

Thank you. (Operator Instructions) We'll go to Marci Ryvicker with Wachovia-Wells Fargo first, go ahead.

Good morning. I have a couple of questions. The first, you mentioned CapEx. Do you have a formal outlook for 2009?

Our outlook, Marci, is like I say we're planning to spend basically no new money except for digital conversion expenses which some of it was done last year, and we're paying this year. And emergency where we -- it would damage our own air product, things like that. We've got a couple of things in progress that here again started last year regarding automation. There again, we think it will enable us to actually operate more efficiently with less people going forward. But we're -- we are not planning to let anybody have any real capital expenditure budget other than emergency right now.

You have a target number? Zero?

Because like I said what the emergency's going to be.

Okay. Okay. Can you just talk about the expense savings that occurs when you transition from analog to digital?

I think the main thing obviously is power. We think that Jim -- I like to be aggressive on this, but I think it's going to be a total couple of million dollars a year of savings both from power and from having -- not having two transmitters go in the other maintenance expenses, engineering costs, things like that. I think it should be $2 million a year plus.

The last question. There's been a lot of talk on the networks potentially bypassing the affiliate stations and going straight to the telco, satellite, and cable distributors. Just want to know what your thoughts are there?

Marci, I -- I'm not sure -- I hear that all the time. I talk to networks briefly. They don't ever say that to me. Of course, they might not want to say that to me either. But I will tell you this -- the networks have a great deal with the affiliate operation like it is now. They are not really paying any comp anymore. They're getting a lot of key including primetime programming from us free basically. And they're getting their -- the commercial managed during the hour to sell for themselves. And they're coming -- 100% of the country. I don't care what they go to, they're going to miss 8% to 10% of the country if they don't get all of the cable guys and all the satellite and all the phone company guys and all the broadband, whatever they want signed up. And there's no guarantee that any of those are going to let them have it free either for that matter. So I think they've got a great deal with the affiliate situation like it is now. We're not paying comp anymore basically, and I think it would be very shortsighted of them to try to go around the affiliates.

The other thing, in our case, and you've seen our numbers before in our presentation with ABC, NBC, and CBS, we outindexed them 30% to 50% in most of our markets. We're bringing viewers to them, not vice-versa. I think here again their news is important to them, their primetime is important to them. Their morning show, evening show, we bring viewers to them and not the other way around. So here again, in our case specifically, I think it would be very shortsighted. The third thing is I think most of our agreements are NBC's going out to the end of 2011. I think CBS is '12 or '13. All of them a couple more years to go that really no change is going to be made between now and then anyway. I think as an industry, the broadcast network relationship has worked great for a long time. And I don't see a reason why it shouldn't continue to work great in the future.

All right. Thank you.

Thanks, Marci.

We'll take our next question from Larry Haverty with GAMCO.

Hi.

How you doing?

Good. I was just curious as to whether you expect in your auto business any improvement once this Telf securitization thing gets underway, which I gather is Thursday.

I think we will, Larry. And I've talked -- as I said, I've talked to our national rep firm earlier today. And he definitely thinks that's going to happen. We're actually seeing some pickup in auto right now for the rest this month and into next month. So I think these guys, that inventory stacks up pretty fast when they're making cars, they got to get rid of them somehow. The best way in the world to let people know that they've got cars for sale is to advertise on TV. And once again, I think the strength of us being strong, number one in so many of our markets, if they're cutting back anywhere, I think they're they're cutting back on the weaker stations in the markets and trying to get as many eyeballs as we can. Obviously we're betting on it picking up. Just because I think it's going to be good for them. As it is for us. But everything I hear and what I'm seeing, like I said, in the last three or four weeks, is it seems to be gradually picking up. It's not blooming. And I think they've still got to get financing in line somehow.

Well, that's what this does.

Yes. I know and the Telf if the Telf really works I think it will be a tremendous boon for the auto guys. I've talked to a good friend of mine in Atlanta who has got six dealerships. He says his volume of people coming through is only down 10% or 15%. But his sales volume is down 60% because he said they can't get anybody qualified.

Hopefully this helps things.

Oh, I agree. Hopefully it will.

Thanks, Bob.

Thanks.

We'll take the next question from Jim Harris with [Goodlight Partners].

Hi, good morning.

Hey, Jim.

You referenced -- a couple of questions just about the debt. You referenced in the comments on the senior credit facility seeking waivers or amendments for certain periods for the debt beginning March it 1 of '09. And I -- March 31, of '09. And I was under the impression that the main covenant to be concerned with was the 12/31/09 step down to seven times on that defined basis. Can you say what you were referring to there?

Yes. Jim, you want to take that one?

Jim, we have initiated some preliminary discussions as we indicated in the release regarding seeking some covenant relief as we go forward. I would prefer not to get into a lot of detail right now simply because the conversations are at the initial stages. And we would like to be able to come back later and speak more authoritatively with everyone. Given we were at 7.15 at the end of the year against a 7.25 covenant, and given that even from our own guidance the year-over-year -- the Q1 '09 is -- we certainly think we're showing among the best results for Q1, or indicating some of the best results for Q1, it certainly would be under '07 levels. And because the covenant calculation is done on a trailing eight-quarter basis, certainly that creates some degree of pressure and uncertainty as we get -- as we head towards the end of first quarter, let alone the rest of the year. So we're trying to be prudent and opening up the dialogue now to address the issues as necessary.

Okay. Thanks. And then the second question -- do you have some thoughts on what the depreciation and amortization charge is going to be for 2009?

Yes. Just a minute and I can -- approximately $30 million at depreciation and about $0.5 million of amortization.

Okay. Thanks. And then would you say your capital spending would be over $5 million for the year?

Jim, probably. But I'd say 80% of that is going to be what we're paying for from last year from the digital. We had a deal with our vendors to basically pay 12 months after installation. So most of that's money we spent last year regarding the final digital conversion issues.

Okay. Thanks.

Thank you very much, Jim.

Our next question will come from Larry Schumacher with Oppenheimer.

Hi, guys. Just on the -- on the decline in national and local, could you give some color on the Q4 and full-year decline relative to peers.

Jim, you want to take that one?

Based on what I've seen from other public reporters, I certainly think that our -- unfortunately we are talking about declines. But fortunately, I think our declines are among the lowest in the industry and put us at the very top of the performance levels for the peer group. We were down seven in local. I, -- again, most other reporters were down more than that in -- same with national. We were down in full year about 11%, 12%. And again, the reporters I've seen were indicating more than that, as well. So certainly on a relative basis, we think both fourth quarter and full-year '08, plus what little limited commentary anybody had for first-quarter '09. Again, we think while it's a challenging environment overall, we think we are holding up at the very top of the industry on a relative basis.

Larry, any other questions? He must have hang up I guess.

We'll move on to [Jiang Wu] with BNP Paribas.

Hi, Bob, hi, Jim. My question is regarding the preferred stock. You mentioned in the press release that the January 15, cash interest payment was unfunded. I just want to confirm whether or not that was the first -- that was the only cash interest payment that was unfunded?

Yes, it was. It was -- and as a function of the -- of the preferred if -- yes. We did not fund the fourth quarter due in January. And that was the first nonfunding.

Thank you.

We'll take the next question from Ethan McAfee with Ramsey Asset Management.

Hi, guys. I just had two quick questions. Just for clarification, you said the operating expenses for 2009 were going to be down 1-5, $15 million or $50 million?

1-5.

Okay. Perfect. Second, on the calculations for the covenant, you said that as of last quarter it was about 7.15, and I just want to make sure I do my math right. Using your guidance for the next quarter, it comes up somewhere around 7.4? Is that correct?

Absent some -- some paydown of the debt balance by the end of the quarter, that would probably be not unreasonable math.

And the covenant steps I think it was misquoted earlier to 7.25? Is that correct, by December, 2009?

No. It's at 7 at the end of the quarter.

7 at the end of the quarter. So based on--?

I'm sorry. Let me be clear. It's 7.25 the first three quarters of -- of '09 it steps to 7 at the last quarter of '09. I may have misunderstood what you asked.

Okay got you. So that's one of the reasons why you are trying to go back and redo the covenants because based on your guidance you'd be in violation of those covenants?

That may be the case. Again, it would depend on if you could somehow reduce the debt balance prior to the end of the quarter.

Okay. Got you. By doing something like more preferred stock or some type of equity raise or something along those lines?

It -- I mean, again, I -- if the debt balance doesn't come down, you're correct that it -- it looks problematic.

Got you. Well, thanks very much.

Next question is from [Barry Lucas] with Gabelli & Company.

Thank you. Good morning, Bob.

Hey, Barry.

Like you to play a little bits of devil's advocate here. If you're generating on the order of $15 million of retrans fees in '09, why wouldn't your -- retrans fees in '09, why wouldn't your wireless fee be worth any -- why would they be worth any less to mobile providers?

I'm not sure I understand what you mean. Why couldn't we charge mobile providers?

No. I know the business model isn't formed yet. But the economic value of the mobile sig -- why should the value of the mobile signal be worth any less than it is to multichannel video providers?

That's a good question. I think, Barry, here's the problem. It's what the OMBC is facing right now. If there is a charge model, there's a bunch of -- there's a bunch of fingers trying to get in that pie. First of all you've got the phone carriers themselves. Second, you've got the networks. Third, you've got the syndicators. Fourth, you've got people like CNN, AP news. All those guys going to want a piece of the action and nobody's quite figured out yet if it's a paid model how you get all that divided up. Especially all around the country.

Japan as I mentioned has been very successful with a free model where they basically charge advertising. One of the things they found out is because of the -- the mobile is so measurable, they know exactly how many people have been watching, how long, so forth. So there's a -- there's an easy measurement there which somebody like Nielsen or anybody in the management business could pick up pretty quick and say, okay, we've got 200,000 mobile devices in this market, and ex number of hours a day watching. It's a pretty measurable thing for an advertiser to see. And I think it's an audience that they're looking for. I think most of the mobile customers are younger and -- and in that demographic and all the advertisers are going after these days. So I think from an advertising moment if there's a way to work a paid medium on it I think that's something we're all looking at, nobody would turn that down I can assure you. And it's a constant topic of conversation of every OMBC meeting.

Great. Thank you, Bob.

Thanks, Barry.

Next question will come from Mack Fuller with (inaudible).

Thank you, it's Mack from (inaudible) Capital. Good morning, and could you just state whether you see any movement in share in any of your markets for your stations?

Based on our ratings in November, I'd say we had probably one of the best ratings period we've ever had overall. Which I guess means we're picking up share in a lot of cases. I think in a -- in a tough economic climate like this, being a number-one station has its advantages. I think our news continues to attract better viewing and the ratings have been real good of late. I mean, they're always good but they've been better in the last couple of ratings periods. So, that's one of my goals on the advertising side is to sell our strength. I mean, I think in a -- I'm an optimist by nature, and I want -- I want our managers and salespeople to be optimistic. One of the things that I've been encouraging them is to go out in these markets and sell the strength of our signal, the strength of -- we got 16 stations been number one 50 straight years or more. Those are the kind of things that people can kind of hold on to in the economy where they're scared by everything else. We want to be a constant in those people's lives. And be there to represent their interest in the community they live in. And I think we do an excellent job of that. We've been very fortunate to have long-term GMs in most of our markets. And we've got 10 GMs that were born and raised in the market where there's GMs. So they really know those markets and what -- what people are looking for in those markets. So I -- I think, building from a position of strength is a great place to be in an economic climate like this.

Got you. Got you. And in terms of the network programming, are -- sometimes the papers deface our reporting of people skipping watching it live going to the Internet on who or what have you. Are you seeing that--?

I think they're Nielsens and that hurts us and I'll tell you why. I think most of those people would not have seen that show anyway. So if they DVR or TiVo it and watch it later, I think they get the jist of their commercials in most cases when they're skipping through. If they skip through. And I think especially for these series that have ongoing stories to them, I think if people miss two or three weeks in a row, they lose interest in the series. Where if they can go back and watch them on the Hooloo or TV.com or anywhere else, on TiVo or DVR at home. I think it keeps them interested in our program. So I don't think it's been a threat to us going forward at all. I think it's up to us to make sure we let advertisers know. And I think the advertisers are studying it pretty carefully, that while there is some ad skip, the basic business is -- is not hurt by this in the long run. And I think actually, like I said, more people are probably watching TV because of this.

And to the extent you have some people who might go to the Internet and watch TV, does that impact your news viewership at all?

Here again, I don't -- I don't think so. I mean, I think our news -- we are actually streaming our news on some of our websites. And I've encouraged our managers to look at doing that in virtually all our websites. It gets expensive, but I think in the long run, we're -- we should be probably streaming most of our major newscasts on our own websites. And making sure that people -- that's what you know -- I mean it's the thing where the (inaudible) revenue coming from local news. It's very profitable for us. We want to make sure that that's -- that we retain that leadership in these markets we're in. That's our number-one goal day in and day out. Is make sure we maintain the news leadership in the markets we're in.

Excellent. Thank you.

Thank you.

Our next question will come from [Sean Ferot] with Deutsche Bank.

Thanks for the call. Just had a broader based question, I think my questions on the credit facility were answered on how you guys were approaching. But just had a bigger picture question about how you guys are thinking about managing this Company given that, cash flow after interest is probably going to be pretty low this year. And potentially in years going forward a lot lower than obviously you guys had generated in the past, just given the environment. How you guys are thinking about dealing with, clearly a potential covenant default here and if you think of working through a covenant, a covenant renegotiation with the banks is going to be a more fulsome solution and you think you guys can manage the Company going forward the way that you want to with just the covenant waver or if you guys are looking for something a little bit more flexibility going forward?

I think all of us in the broadcast world today are faced with leverage issues when you've got a declining economy that is affecting everybody out there. And broadcasters historically have had higher leverage than most other business because we've been so -- very profitable business and a very growing business for a long time. And as you well know, these -- these covenants start ratcheting down and you're not growing, it catches up with everybody pretty quick. We think if we do work out an amendment, it will be -- give us plenty of room to operate in the next year ahead. We think -- I think 2010 is going to be a good year political to be back. Number one, the Olympics, winter Olympics will be back. We've got some good things going.

And I think the economy -- they've got to solve these issues with the banks on the financing. The whole country cannot continue to go without banks being able to lend money or without people being able -- to have decent credit being able to buy cars. I'll give an example. We've got a -- a furniture dealer in one of our small markets, has been a great customer for 50 years. He told our manager recently that -- that his financing source had said he cannot sell, they won't take any paper of anybody less than 720 credit score. Well, that's 90% of the country basically. And he said he can't survive on that. He's out looking for financing. They've all overreacted, banks and financial institutions have created a lot of these problems themselves. Regardless they've overreacted now and are demanding unreasonable terms for credit for people for buying cars, houses, furniture. Just virtually anything. As I mentioned, Mike Jackson at Auto Nation said they only qualify certain people walk in the doors now to buy a car. And the leasing business is virtually gone for the car business.

So I think we -- we're going to operate our Company as tight as we can from the expense side. I'm proud of the fact we've always had the highest margins in the industry. We've got the lowest overhead as a percentage of revenue. And we can continue do that. And I think, we're going to be one of the survivors coming out this thing on the other end. Going forward, I think we've got to reinvent the way we operate our business. I think we've got to be much more automated. We've got to be much more efficient using equipment. I think we've got to figure out ways with new technology with the Internet, the smaller cameras, all these things where we actually operate and gather news much more efficiently, much cheaper than we do now. I think we've generated video which we're doing some of. And I think we'll do more and more both on the Internet and even on TV. There are a lot of people out there that have cameras, have video that come across great stories. And they -- they like to hand them to you for free. And we like to take them if it's good -- good video. So I think you're going to see more and more of that.

And I think we've got to be agile and very -- we have to change the way we do things to keep up with the technology changes going on. And I think we're -- we're going to be the beneficiary of huge technology improvements in -- in all broadcast equipment, everything is going more digital, digital equipment is cheaper. It's easier to maintain. There's less moving parts. It takes less engineering, all the things that we've spent a lot of money on in the past. I think it's smaller so you don't need as big of buildings. All of those things are going to accrue to our benefit going forward.

Do you think, understanding that the shift will likely occur and you will be leading a lot of those for the industry. Do you think you can make those shifts with the balance sheet? Clearly the balance sheet--?

I think we've got to -- we've got to generate free cash flow to pay down debt. I mean, I think we all are in that position and I think we will. Next year the political year and Olympic year we should generate some real good cash flow next year. And we'll be using virtually every penny of it to pay down debt.

Okay. Thanks, guys.

Thank you.

At this time we have one question remaining in the queue. (Operator Instructions) We will now move to [Stephen Carboni] with GE Capital. Go ahead.

Hi, guys. Just a couple of questions on mobile TV. When and how long do you think that this becomes robust or viable kind of business for the industry and do you foresee any -- is there any additional CapEx spend around that? And also, what kind of content do you see yourselves sending? Is it -- is it just your newscast or would it become some of the station content?

The way -- the way it's worked in Japan is they virtually -- it's live TV just like you'd watch for whatever time of day you tune to one of our channels, it would be whatever's on at that time during the day. And it's worked very successfully in Japan. There is some capital to be done, but it's not that big for the market. There's some antenna type things that you've got to make some adjustments on. It's not very big. And I think live mobile will be a factor pretty strong, I would say within the next 24 months in America.

One thing that's also very few people realize that the auto manufacturers, and this was confirmed by Mike Jackson, the President of Auto Nation, said last week that he thinks that virtually every car in America over the next couple of years is going to have a -- a screen built into the car. And especially in the back where both DVDs can be played and live TV can be accessed. So I think you are just going to see tremendous explosion. As you well know, all the devices coming out now, the new Blackberry, iPhone, whatever you want to get, there's a hundred different devices out there. They all realize that they need to make these things where they can receive live, mobile TV. I think it's going to be a big growth area. More and more people are going mobile. There's less land lines every day. People are not even, young people especially aren't getting land line phones anymore. It's the mobile society that we live in, and I think people want to be able to -- and they're willing to watch on a little three or four-inch screen as you know. And I think especially young people are used to that right now with YouTube. And it's a fast-growing area for our business in the next few years. I think it's something very measurable that we can sell to advertisers.

Got you. One other follow-up question is your agreements with the content providers now, will that cover mobile TV, or the new agreement--?

It does as long we're not charging for it. I think once you start charging, you're getting into the different area. And I think that's where as I mentioned earlier, there's a lot of fingers wanting to get in the pie at that point. Virtually everybody that provides programming to us would want a piece of the action. I mean deservedly so. I'm not saying they shouldn't get it. But I'm just saying that we've been historically free entertainment and in an advertising-based medium. And I frankly think we've done a good job of that. I think with the measurement of mobile being so -- so accurate, I think it's something that we can sell as an additional -- we can sell to advertisers, hey, we've got X number of people watching X minutes a day on mobile devices in this market. You ought to be getting on -- making sure you're being a part of that.

Okay. Okay. Thank you.

Thanks a lot.

And at this time we have no further questions in the queue. I'll now turn things over to Mr. Prather with any additional or closing remarks.

Thanks very much. I appreciate everybody's attendance today. As I told you before we're committed to make sure we operate this Company as efficiently and as -- in this kind of climate. We do that any time. I think in this climate we're even more careful every day about it. As I always say at the end of every call, we're easy to find. We answer our own phones. You can call us any time if you got any further questions or comments. We'll look forward to talking to you at the end of the first-quarter call. Thank you, everybody.

And once again, this does conclude today's conference call. Thank you for joining us, and have a great day.