Gray Media Inc (GTN.A) 2010 Q3 法說會逐字稿

Good day everyone and welcome to the Gray Television third quarter 2010 earnings release conference call. Today's call is being recorded. For opening remarks and introductions I'd like to turn the call over to Mr. Bob Prather. Please go ahead.

Thank you very much, Operator. Welcome, everybody, we're glad to have you here for our third quarter conference call. Hilton Howell, who is normally on these calls, will not be with us today is currently traveling. I believe he's in the air as we speak, so we continue on. Very pleased with our third quarter and our year to date. It has been a great year I think for virtually everybody in the TV business. A lot stronger than I think anybody would have anticipated, both from a local and national advertising and political. Our political, by the way, came in the all-time record $57.5 million breaking our old record of $53 million I think back in 2004 presidential year. So, very pleased with the political that came in late a lot of it. But, better late than never as I always say.

Great year for us politically and shows again the strength of our number one stations in most of our markets. Really I think, once again, we have the highest particle revenue percentage overall revenue of any group in the business. Our numbers look real good. Jim will go over the details, but I think we are here again at the very top of the industry and revenue growth and NOP growth so our margins are strong. We feel very good about the rest of the year. I think it is going to be strong fourth quarter for us and we look forward to you know, starting next year on a positive note.

This year as you know we are refinanced our debt early in the year. We got some paid down, a big chunk of our deferred stock. We got some governments that would allow us to lead to operate the business much more effectively going forward and since then, we have paid down $30 million of our debt. Hope to make another pay down before the end of the year, which I'm sure we will.

As we told you earlier, that is one of our primary goals to get our debt down and we will continue to report that this year and next year and the following years. To get our debt cash flow ratio at a much lower rate than it is now. But it's -- very pleased overall with national growth. I do know we have a lot of displacement in October and November obviously from political overall, but the core business remains very strong. Alltel has come back extremely well for all of us and probably everyone in the business. We continue that will be strong for every that don't fourth quarter. I've been saying for a while that there are three key elements to next year being a strong year. One was the change in the political climate, which I think we had last week as everybody recognize.

Number two, I think it's important to, psychologically, for the economy to keep the Bush tax cuts going forward for everybody. And third, I think a good Christmas. I think nobody yet knows what Christmas is going to look like but I think if we have a strong Christmas season people will feel good, merchants and consumers, going into 2011, which obviously is going to be a real critical year for all of us and business to see how we bounced back after there was no political, and no Olympics -- more normal off-year going forward. But very pleased overall with results.

We held our expenses in check extremely well. And we continue to do that and we continue to do that for 2011. We are holding our budget process open rates of the end of the year do so we can get more visibility going into next year. So, I think that is something we started doing the last two or three years and it's paying off. We are able to keep track of our budgets and budget much better by being closer to -- instead of trying to get the budgets than earlier in the year and then sitting on a static budget.

So, we are looking forward to 2011. We'll finish up this year strong which I think we will. We will be, you know, trying to get going on a very positive note for next year. At this point out like to turn over to Jim Ryan, our Chief Financial Officer, and let Jim go through some more detailed numbers and then we'll open it up for questions. Jim?

Thanks, Bob and good morning everybody. As Bob mentioned, we are very pleased with the third quarter results. Very strong with political revenue at $16 million in the quick add perspective. 2008 political in Q3 was $13.1 million. Going back to 2006 it was $10.6. As Bob already mentioned, and I'll will talk about in a minute, it certainly will be record-breaking political year for us.

Also the quarter we were very pleased with local being up 8% and national being up 12% as well. As described in the earnings release, I think in quite a bit of detail, but kind of highlighting categories that are up for the year, auto was up so 26%. But keep in mind in October or you know, I should say, in third quarter certainly a lot of that advertising for political was in the news slot that we have and certainly that is a prime spot as well for our core advertising including auto. So, we are very pleased to auto at a strong 26% with record-breaking political.

Virtually everything else was up as well could we even cycled past in the quarter on the communications category with the Alltel Verizon merger from last year and actually, Telco showed up about 11% as well, which we were glad to see a friendly cycle through. The only thing that really were down in the quarter were restaurants, fast food has been soft for us all year and I think soft for basically everybody in the business. Home improvement was down a little and legal was down about 2%. But all in all, very pleased with as many categories up and still showing the strength that we are seeing in the first and second quarter carrying through.

Operating expenses for TV were up about 8%. But the vast majority of that -- virtually all of that is either variable sales cost or incentive compensation given what will end up being very, very strong year and a record-breaking political year for us. We are very pleased that broadcast cash flow for the quarter was at $35.2 million and actually that is $2 million ahead of 2008 levels, which actually we take as a very encouraging sign for the overall tone of the business. We were very pleased to see that.

A couple of quick comments on year-to-date again, very strong political with local holding in at plus 8% and national plus 11%. Year-to-date auto is up 38%. All other categories are showing strong improvement as well. The only thing down in the year-to-date basis again is the restaurant category. And on the year to date basis the telecommunications category because of the Alltel Verizon merger from last year. Again broadcast cash flow for the nine months is about $87.4 million, which is slightly ahead of 2008 levels and again we are very pleased to see us pulling through and actually coming ahead of 2008.

A couple of quick comments on our guidance that we put out for fourth quarter. Obviously it will be a record amount of political in Q4 and setting an all-time record of $57.5 million, as Bob has mentioned. That does have a strong displacement effect on core local and national and we have seen that trend in prior years as well. We expect right now that our local will probably be flat in Q4 and national down a little. You go back to 2006, we saw a very similar trend, too, actually in that year in 2006 fourth quarter are local was down about 1% and the national was down about 8%.

Looking at November and December -- first of all our pacing a strong in both months in core national business be we are actually having a good November. December right now pace is looking fairly strong, although we think that some of that was just advanced buying around a massive amount of political we had in October and we expect that pace to come down a little bit. But still looking for a good December in core business and we may actually be a little conservative, as Bob said, if there's a strong Christmas retail season we may have the possibility of coming up on the upside a little bit.

Turning to the balance sheet quickly, at quarter-end our first lien leverage on our senior credit facility, as defined, was 5.1 times against the covenant of seven so very large amount of pushing there. Our overall cash position at the end of the quarter was about $20 million, and as Bob mentioned we have already paid down $30 million in pre-payments so far this year, with actually a $15 million pre-payment last week. We'll continue to look at the cash balances is to go through the rest of the year and there's probably an opportunity to do at least one more pre-payment before -- when we get to year-end.

CapEx for the quarter was about $4.4 million. We have been heavily pushing advancing our local HD and will continue to do that through fourth quarter and early next year as well as we respond to the marketplace and people at the local level really wanting their local news and syndicated programming in HD and we are pushing as fast as we can in our markets to roll that out. Program payments for the quarter were $3.9 million, that was just about consistent with amortization year-to-date, that is $11.6 million in payments and $11.4 in amortization. And, Bob, at this point, I'll just turn it back to you.

Thanks, Jim. Operator, at this point, we'd like to open it up for questions.

(Operator Instructions)

We'll go first to Bishop Cheen with Wells Fargo.

Hi, Bob. Hi Jim.

Hey Bishop, still the fastest fingers in town?

Yes. Okay. You continue to take down your debt. I know you've been through this before in the early part of the decade. At the rate you're going and the amount of political that will not be there next year even if the issue advertising is stronger than it's ever been in an off-year. How long do you think it's going to take you to get your leverage ratios where you want them? And remind us again where you do want them?

I like them under five, Bishop, on a consistent basis. Based on that, Jim could probably give you a better answer. Ideally, we'd like to pay some down in '11 and the other, ideally, $50 million range in '12. So, Jim, you might -- if you get down consistent into five, where would we need to be, I guess is the question. Obviously, depends on the cash flow growing, too. So, it would be both sides of the equation.

Yes, I think that is, Bishop, in large part the key question of just how quickly the cash flow continues to rebound from the depths of the recession. As Bob said, we probably have a modest ability to reduce debt in '11 given it's a classic off-year of the political cycle, and then a very strong opportunity to reduce it in '12.

If you're looking at it on in LH basis, which is where our senior facility is defined, you're probably running - - I mean, I think it's going to take you at least into '12, end of '12, and you would be -- could be somewhere in the five. I am not sure if you are still below five yet or not. I think there is definite progress that we can make both in absolute reduction of the dollar amount, as we've been showing this year by already making two payments voluntarily, and as we continue to ramp up the cash flows from the all-time low of '09.

I think we get feeling much more comfortable with the overall leverage picture of the company as we move through. We certainly -- we're pleased where we are today in the context of where we were a year ago. We are very pleased. I think we'll feel much better as we go through '11 and into '12 as to where we are in the overall picture.

Okay. Very helpful color. Thank you.

Thanks, Bishop.

We'll go next to Charles Abry with Oppenheimer.

Okay.

And it looks like Charles actually just disconnected.

(Operator Instructions)

We we'll go next to Marci Ryvicker with Wells Fargo.

Thanks, good morning.

Hey, Marci.

Just a question on the fourth quarter, how do your comps look for the fourth quarter by month? So, how did you do in October, November, and December of last year is the first question. And then secondly, how do you feel about Q1 today? I know you said that visibility is a little bit limited. But, we've heard from other operators at least a general feeling about how Q1 is.

Jim, you want to take that?

Marci, just to kind of give you a feel again, in October we had $30 million, call it $31 million of political within the month. So, that is a $1 million a day run-rate. That took core local and national, excluding the political, down by about $1.7 million compared to last year. So, we're obviously backfilling against that, the rest of the quarter.

November is actually, as I said, looking fairly well and actually well in core business. Local is up solid middle single digits, actually about 7% in the month. National looks like it's up about five. So, certainly we're coming back around from just a massive amount of displacement of political. And even in that one day of selling in November, we ended up with about $2 million of political just on the one day or, I guess, two days we actually had.

December is, I think, is where we're probably being very cautious right now because of visibility. Right now, we're thinking local pace will come in a little bit. For November of last year, we had on a relative basis a pretty strong national as things started to really pick up and rebound from the depths of the recession. So, we are being a little more cautious right now with December. In our December business core we've only got about, probably 60% to 70% of business written on books, business on books right now.

So, we've a ways to go, which is very normal to be at this point going into December. But definitely see November and December looking fairly good and backfilling from just the sheer amount of political we jammed through in October.

I guess I'm trying to figure out the month last year, did you see a big pop in December versus November and October in 2009? Or did November start to come in as well? Because I'm trying to figure out if December would sequentially be lower because there was such a big pop in December of last year.

I don't have those months last year immediately at my fingertips, Marci. But we certainly had a strong pop in fourth quarter of last year and my recollection is that it was somewhat sequential that a relative scale it kept getting sequentially better as we went through the quarter. And it really began picking up in November and December of last year versus October.

And of course our October last year had a relatively small amount of political in it. So you don't have the natural skewing of forcing core business last year from October into November and December. But I clearly remember that as we moved on week after week, especially as we got into November and December, it was definitely picking up.

Okay. And then how do you feel about Q1?

As Bob mentioned, we're still working on our budget. The amount of actual business booked is still very, very small. Again, completely normal at this time of the year looking into the first quarter of the next year. I think our -- the sense we're getting in talking to our managers on their budgets is it's -- there's a sense of, I still would call it cautious optimism for all of next year. It's certainly going to be a classic off-year for us.

So the comps, especially as we get farther in the year, will get much harder just because of the political dollars. And the other thing that will influence our core business, to a reasonable extent first quarter next year compared to first quarter this year, is we don't have Olympics, which was about $2.8 million and the Super Bowl is on Fox this year. Our Fox footprint is the smallest thing we have. So, the Super Bowl money will be substantially under last year as well. So, those are two fairly large ticket items that we have got to go against -- naturally go against in Q1 next year. But in general I would say that people are in -- right now have a relatively positive outlook for next year.

Great. Thank you so much.

Marci, I want to thank you for all the hard work you do analyzing the industry. You're kind of the guiding light of the broadcast world these days and we appreciate you keeping all of us on the corporate radar screen out there, the investment radar screen. I just want to thank you on behalf of Gray and the industry because I know you put in a lot of work and you are very thorough in all your research, of course, and we appreciate it.

Thank you so much and we will see this week at our conference.

Okay. Yes.

We'll go next to John Kornreich with Sandler Capital.

Just two quickies. I assume the political is a gross number, is that right?

No, that's net.

Wow, that is unbelievable.

Yes, it's nice.

That is just incredible. And secondly, did I miss any CapEx numbers for 2010, 2011?

No, we haven't discussed that yet, John. Jim, do you want to take that?

Yes, CapEx to date for -- through nine months, bear with me, John, I'm just trying to get to the right piece of paper. We've got about $10.5 million in. We had originally said we were targeting $15 million for the year. But with the very pleasant political that we had and then the record amount of cash that's bringing in October, and the need to accelerate the local deployment of local HD news and syndicated programming on our stations, we are accelerating that CapEx program. And we said in the queue that was filed a little earlier this morning that our expectation for fourth quarter may run somewhere between $8 million and $12 million.

And a large part -- that's all just again ramping up the local HD news in response to the marketplace. That request from our viewers started coming in very hard earlier in the year and we're trying to be responsive to that and make sure that we generally are the first one in the market and if not first, try to be a close second in those rollouts so that we don't get left behind.

And then 2011 CapEx I assume would be down?

Yes.

We're just continuing to look at that. The first part of '11 would probably still be a little on the heavy side as we try to finish out those HD roll outs as quickly as possible. The total for '11 still may be in the $15 million range.

Okay, thanks.

John, I thought you'd retired. I am glad to see you're still around.

No, I'm here.

All right. Well, that's good to hear.

Your quarter was a blowout. I don't know what you have to do to move the stock, the stock is actually down today.

That's crazy. If you can figure that -- you're the stock expert, so figure that out for us some time.

I know you have a lot of confidence in yourselves.

Yes.

Because you are back on the presentation --

Yes.

-- circuit again I see.

Yes, well once we put our -- I thought we ought to get out and tell the story again. It has been a very positive reception. So, we'll figure out a way to get that stock moving. I guess we just got to keep performing good and people will eventually catch up to it.

Okay, thanks.

Thanks, John.

We will take our next question from Barry Lucas with Gabelli and Company.

Thanks very much and good morning.

Hey, Barry.

Good to talk to you, Bob. Here's the answer or may be the answer. The guidance that you're providing, literally, the low single digit declines for core business in 4Q, is at variance with many of your peers. So, not to beat Marci's question to death too much, but how much of that is displacement? How much of that is increasingly tough comps versus 4Q a year ago and how much of that might be your natural caution and conservatism?

I would say we always try to be conservative in cost. We like to under promise and over deliver on our guidance. Jim, you can answer more on the displacement but I think the political, Barry, came in a lot later than even usual this year. They moved the money around now, as you know, a lot faster and these polls dictate almost on a daily basis where the money is going.

And it seemed to be that we were actually -- through the first six months of the year we were behind our own budgets on political and then, like I said, it just started taking off in September and October, and exploded to even numbers we did not think. I mean, we kind of secretly hoped to break our $53 record but not to shatter it like we did. So, there was more displacement than normal. I will tell you I had several managers tell me they literally could not find another spot if they wanted to.

Both NBC and CBS worked out a deal to give us some spots back that we could sell and we sold every one of those. We were trying to keep from just being wall-to-wall political. But it came in stronger than -- especially in markets like, Wisconsin, Florida, Nevada, Colorado, West Virginia. We just couldn't keep up with it. Jim, you got any other comment to make on that?

First of all, Barry, I certainly echo Bob's comments on the political. If you look at the waiting in the year of that 57.5%, about 60% happened in the last -- in Q4. So, again I think you've got an awful lot of displacement of at least $1.7 million of core business in October. We were down after having a good run rate all the way through September. And again national is -- both the national in November are healthy numbers on a run-rate. Again remembering that business is definitely picking up in November and December last year.

As I said before, I think where we may be conservative right now is in our December local number. I think after having been through the last couple of years, the managers may be a little less inclined to be aggressive than they might have been historically, which is not necessarily a bad thing. I'm not criticizing anybody, but I think we're still -- I think we have room to surprise on the upside in December if the retail season ends up being relatively strong.

Great, okay. Two more things if I may. Bob, I think you just mentioned earlier that you had written about 60% of the business for December and a very little portion for 1Q of '11, acknowledging that visibility has been very tough to come by. Is that closer to what we would have seen four, five, six years ago? Is the lack of visibility more normal?

Barry, I would think it has been constrained considerably. Visibility has continued to go down over the last five, six, seven years. It used to -- TV guys could lock their budgets in and all this for the next year and pretty much know they were going to be fairly close to hitting them and those days are long gone. We just started, I guess two years ago, moving our budget process back and now I think last year, we literally held it open until the first couple weeks of January because we were so unsure about what is going to be. And we were still, I think we were under budget -- we were over budget the first quarter by something like $6 million just to show you how we missed it. Things popping back as quick as they did. So, we're going to hold their budgets right until the end of the year to get an idea.

I think the political climate has a lot to do with next year. I think the tax cuts, psychologically, are extremely important to both the business side of the economy and the consumer. And I think all of that stuff plays into what first quarter is going to look like. But we like to be and I think we have been putting out guidance was seven, eight, or nine years and we have missed it one quarter. And we do it quarterly every year so we're going to be, as you mentioned, cautious and conservative and make sure we hit our numbers. So, we'll hold it open as long as possible and see what the first quarter is looking like. But the visibility is way, way down from what used to be.

And last are, and this is a good segway, when you think about 2011, one of the important areas, namely auto, what in your mind would make for a weaker auto advertising year in 2011?

I think there's only one thing, and I don't see it happening, but I think the same thing that really had the huge effect on auto end of '08 and into '09 was the financing. The banks and all the financing institutions were horrible trouble and they'll all just cracked down across the board on lending. Mike Jackson from AutoNation told me about halfway through last year that they were only getting about 50% of the people walk into the showroom qualified for any kind of financing they would accept. And the year before that it was something like 85%.

So, I think the banks loosened up this year because they realized that auto loans are usually pretty good loans and don't have any of the write-offs that subprime housing and that kind of stuff has had. I think as long as the banks don't crack down again on financing, I think there is huge pent-up demand. We still don't -- even with this year been a good year we still aren't selling enough cars just to replace the ones that vanish off the road from old age and wrecks, and stolen and all those kinds of things. So, I think there is huge demand for people who would like to buy a new car.

I think the auto companies are obviously in much better financial shape. I think their advertising is going to continue to be strong both for Ford, GM. GM is getting ready, obviously with their IPO, to be in a much better shape than they have ever been in the long, long time. So, I think you're going to see with the fact they've cut down a bunch of models, much more concentration on advertising on the ones they got left.

Right. Thanks very much, Bob.

Okay. Thanks, Barry.

We'll go next to Larry Schumacher with Oppenheimer.

Hi, Bob. Congratulations.

Hey, Larry. How are you doing? Thank you.

Amazing political season.

Yes. Yes.

What's the plan for next year now that that's gone?

What have you done for me lately? I think the key thing is we're going to be very close on expenses. We want to continue to do things where we automate and make sure we are being as efficient as possible in running our stations. As I mentioned earlier, I think the key to next year is both the political climate and the financing climate out there for auto. And I don't want to speculate on how that's going to be.

Just based on what you read in all of the national press and what you see, there's going to be tremendous pressure to keep those tax cuts in tact, for at least a couple years probably. And I think once that's done, if it gets done, I think it will be a big psychological lift for the market and the consumers. So, I'm cautiously optimistic, let's put it that way.

And a better question actually is, what's your implied cash flow growth for the fourth quarter and the year? And if you have, for next year?

Jim, do you want to speculate on that?

I think you can kind of look at it from the guidance which was issued in the earnings release. I mean, when you say cash flow, I guess there's a couple different ways to look at it. It could be the defined term and the credit facility or just a more generic. But in either case what it suggests is full year 2010 right now is tracking ahead of 2008, and in 2008 we did about $119 million. And we are somewhere in the mid-120s tracking right now on a full-year basis.

In '10, if you were to use the defined cash flow term of the senior facility and those trends would be not just similar if you are using, kind of just a broadcast cash flow number, or a "EBITDA" type number. We are pleased to see '10 breaking back up through to 2008 levels. I think for '11, it's too early to get into a lot of specifics. It's going to be a classic off-year for us.

In '07 we were in the 90, mid -- bear with me just a minute. We were about $98.5 million in 2007. Do we have something with maybe a 90 handle on it in 2011? That's probably not unreasonable to be thinking about. And of course, that's in putting it in perspective, that's against the all-time low of $71 million in the '09 recession.

So, we look at '11 as being a strong comeback on an off-year basis in relation to where we were in '09. And probably something at least somewhat reflective of where we were in '07. As Bob said, we are still in the midst of the budgeting process. So, it's a little too early to lock down.

But we are definitely feeling pretty good about where we think '11 could turn out and I think it would be fair to say, right now, our thoughts on '11 is it would be a somewhat higher than where our thinking was in March and April when we were doing our amendments and refinancing. So, again we like the trajectory. We just need to fine-tune the number over the next six to eight weeks.

Larry, I think, too, '11 is going to be a real kind of good year for our whole industry. I think its important for '11 to be a good year will be for the future in the growth of the television business. I think it's going to be a key indicator of what TV is going to look like over the next five years. Like I said, I'm cautiously optimistic that '11 is going to be better than we think it's going to be right now but I think it's going to be an important year for the whole industry. Very little political, no Olympics, a lot of the things we all count on in even numbered years aren't there obviously. Nobody wants to see a '09 again anytime soon and I don't think it's anywhere close to that. I think it's going to be an important year for everybody.

Okay. Terrific. Congratulations again.

Thanks, Barry.

Hopefully, there's another big election.

Me, too.

We will take a follow-up from Charles Abry with Oppenheimer.

Okay.

Bob, Jim, I apologize I got cut off last time.

We're sorry, Charles.

No problem. Congratulations on a strong quarter and it sounds like the fourth quarter is going to be a pretty good quarter. The way I feel about the political revenues is if you've got the revenue, take it, right? So, we may not repeat it --

Amen brother. As I always say, if it's there, take it.

It gives you more flexibility. It sounds like, hopefully, the national and local will pick up since they have decided not to compete with those political dollars for airtime. I know you guys have been managing the Young properties. From what I understand, you are doing a pretty good job.

As it comes out of Chapter 11, do you have an interest in purchasing some of the properties, and if you did would you do it with debt or would you do with equity? Because your stocks obviously very undervalued here in your situation is one that I don't know if it's sort of precludes you from doing that or if there's a way to do it and have you guys even thought about or if it's something you can discuss?

Charles, that's an interesting question. First of all, the bank group that controls you on that, I don't think is that they've made up their own mind what they want to do. We signed a three-year management agreement with us -- with them and I think they want to take a hard look at the end of the third year to decide whether they want to put it on the market or continue to hold it for a while. I think all of those issues are up in the air. Young's got overall a good group. Got some very strong stations, some aren't so good. But everybody's in that position.

I think we would obviously take a hard look at it again. A lot of it, how our debt's doing, how our stock, all of those things enter into the equation. So, I would say we would be interested but we would want to make sure that we did on a basis where we would ideally improve our balance sheet at the end of the day. We want to continue to work towards getting our balance sheet much stronger. So, I don't think we'd want to do anything that was all debt. So, obviously it would depend a lot at that point on what our equity is doing. Right now I think we are undervalued a good bit.

Hopefully, the market will recognize at some point that we are a well-managed company with good growth prospects going forward. That is a roundabout answer. But, that's about the best I can give. But the Young stations overall they have a good group of stations. Very similar market to us, I mean they remind us of our size markets, in most cases. They got a couple bigger markets. But overall, very similar sized markets and they have some very good stations in some of those markets.

And since you've been managing the properties, I would think you have a pretty good bird's eye view into --

We're learning more about them every day, yes. About the markets and the stations and the markets -- their position in the marketplace and we're -- it has been an interesting process so far.

How far along in that cycle are they before you think they actually start selling some properties? Do you have any idea?

Well, I think it was a three-year deal. I think we have got a year, year and a half to go, I guess it is. And again they may decide that they want to continue going, I think the bank groups will have to -- there are four or five financial institutions that own 70% of the stock. So, they have got to, a committee and I'm sure they will look at it at that point and see how the market looks and see how everything looks and decide whether they want to put it up for sale or not.

I do think they want to ideally sell it as a group, it's just an easier, cleaner deals. I think it's more efficient tax wise that way, too.

Thank you very much. And congratulations again on a strong quarter and look forward to seeing the fourth quarter.

Thanks, Charles. Appreciate it.

(Operator Instructions)

We will go next to Aaron Watts with Deutsche Bank.

Hey, guys.

Hey Aaron, how are you doing?

I'm all right. Few questions real quick, just on the Young topic we were discussing just now. Remind me, three year agreement from -- ? What was the start date

I believe it was, Jim correct me, I think it was August last year we signed the agreement.

Okay. That's good enough. And if those stations were to sell to another party, what are the terms of your agreement? Do you have any sort of cancellation award?

We get an -- I think we get an incentive payment if it's sold before the end of the agreement. It's a reasonable deal for us.

Okay. All right. And then, I apologize if I missed this, but just it sounds like you are cautiously optimistic on 2011. If I had to ask you, do you think core local and national advertising can grow in 2011?

Yes, I do.

You think it can?

Yes.

Okay. And then my last question and not a new topic. And I've asked you this before. But as you think about the space and consolidation that could potentially happen, I think there is a handful of reasons why that would be a good thing, what do you think it's going to take to kind of spur that on at this point? It feels like the capital markets have been open at least on the debt side. Do you think it's going to take private equity coming back to this space? Just curious on your latest and greatest thoughts there.

Aaron, I think there's a couple issues involved. One is virtually everybody in the industry refinanced their debt this year or late last year. Everybody, I think, feels like they're in -- they have a pretty good debt package right now. Once you start putting groups together, especially if you take the top five or six groups and think about putting them together, you're going to -- in most cases blow up both of those, both sides of the equation on the debt and just what kind of deal could you work with the banks on putting them together? Because you get -- I think everybody feels like their equity is probably undervalued right now and does anybody want to do a stock deal? I think there's just so many issues around those two things that I don't see anything happening.

If private equity came in and made an offer on somebody and it attracted attention that could change the game overnight. But I'm not sure what they're -- they are always looking, let's put it that way, and they are always interested to know and you never know what could happen. But I don't see any consolidation happening unless there's a way around the issue of how do you get a new debt package together if you put two big groups together. And where they can feel like they are not paying huge penalties to put the groups together from a debt standpoint.

That is a fair point. Okay. All right. Thanks for taking the questions.

Yes, Aaron. Thank you.

And we'll take a follow-up question from John Kornreich from Sandler Capital.

I have a couple of things. One quickie. Jim, you are reiterating the month of December broadcast revenue will be up. Is that correct?

Up compared to -- ?

A year ago. I think you said that local was running seven-ish and I forgot what you said about national.

That was November. November is up about 7% local and national is running about 5% or so. And in December core right now we're seeing, yes, probably up a little. And I think national is maybe the wild-card there in December a little bit. Again we're being very conservative with our view on December right now.

Okay. So, you're saying December is likely to be up but it's not 100% certainty, based on what you've seen so far?

Not 100%. And again I think we're being a little conservative there right now, deliberately erring to the conservative side. And keep in mind there was again $1.7 million in October between local and national, we were down October-to-October simply because of the $31 million of political we put through in October.

Okay.

So, that October displacement does have a strong impact on the entire quarter.

Okay. Let's talk about retrans a little bit. You are running an annual rate of a little over $18 million, $4.5 million a quarter. Do you have agreements now with all of the major distributors? I assume you do.

We do.

And when is the --

The majority of those would come up for renegotiation this time next year.

Which one?

The majority of those agreements. Both in number and dollars -- the majority of those agreements will come up for renegotiation this time next year.

So, next year is the year of sort of inflation increase in the $18 million, maybe $19 million, maybe $20 million, and then possibly --

You might see with a $20 million or a very low $20 million handle on it, based on, as you said, kind of normal cost increases built into the agreements. And then, beginning January '12 is our next opportunity, as most of those agreements cycle through their first three years, is our next big chance to step them up.

Okay. The negotiations at the end of next year are with most of your big ones, right?

Yes, virtually all of them, right.

Okay.

The MSOs, our satellite agreements are on a slightly different cycle date deliberately because we didn't want both satellite and MSOs all coming up in the same couple of months.

Just to refresh my memory, the interest rate on those bonds just issued is what?

10.5%.

10.5%. Okay. I am going to make a comment here about your stock.

Yes.

Your problem is not that the company is being so unduly lowly valued, because it isn't. The problem is there are eight multiples ahead of the common stockholders. That's the problem.

I know and that is why we have to get the debt down.

Yes. I think the message you have to deliver to get the stock up in the interim is to relay confidence that in on-years and off-years, you're going to generate a lot of free cash flow to get the debt down to a point where there is no sweat in refinancing that big bond issue.

John, that's exactly what we are trying to do. I think we definitely want to be paying down big chunks of debt this year, pay down some next year, and a big chunk of '12 for sure.

That is the problem basically -- I mean, by my number, if you take your guidance you're going to do close to $125 million of EBITDA this year. Let's just say, I'll throw out a number, you do $100 million next year, so the average is about $112 million. By my calculations in your table $870 million of debt and preferred net of cash. So, there's eight multiples ahead of the common shareholders. That's the problem.

We understand that, we understand that.

The market does, too.

That is our number one priority to get the debt down.

Yes. Okay, Bob, thanks again.

We appreciate it, John. Thanks, buddy.

Bye-bye.

Bye.

And we have no further questions at this time. I'll turn the conference back over to our speakers for any additional or closing comments.

Thank you, operator. I want to thank everybody for joining us today. We are very happy with our year so far. We look forward to a good, strong fourth quarter and look forward to talking to everybody after the first of next year. We'll have a good idea of what the year's looking like at that point. So, thank you, everybody. Goodbye.

Ladies and gentlemen, that does conclude today's conference call. We'd like to thank you all for your participation.