Gray Media Inc (GTN) 2011 Q2 法說會逐字稿

Good day, everyone, and welcome to the Gray Television Second Quarter 2011 Earnings Release Conference. Today's call is being recorded. At this time, I'd like to turn things over to Mr. Hilton Howell. Please go ahead, sir.

Thank you, Operator, and good afternoon, everyone. Welcome to the second quarter and 6-month review of Gray TV's financial performance. Thank you for joining us on this sort of infamous day for our country and our markets. We appreciate your interest very, very much. As usual, I will begin with just a few brief comments, followed by Bob Prather, our President and Chief Operating Officer, who will add more color to this quarter's performance and then to Jim Ryan, our Chief Financial Officer, who will follow with a brief discussion of our financial information and more information on the release we let go this morning.

We are happy with our results this quarter and think it speaks well for the TV assets of Gray Television, as well as the resiliency of the broadcast television industry as a whole. Our total revenue for the quarter advanced by 1% to $76.2 million from $75.6 million in Q2 2010 and exceeded our initial estimates for the quarter this year as well. The increase was driven primarily by increases in local advertising and internet advertising which rose 4% or $1.9 million and 56% or $1.7 million, respectfully. These gains were offset by expected decreases in political advertising during this off-year cycle and national advertising, which decreased by 59%, or $3.3 million, and 3%, or $400,000, respectfully.

Of our 5 largest advertising categories; automotive, restaurants, medical, communications, and furniture and appliances, only automotive decreased and that by only 1%. Restaurants increased by 7%, medical increased by 16%, communications increased by 10%, and furniture and appliances increased by 5%. We attribute the decrease in automotive advertising to the effects of the Japanese tsunami and the impacts it has had on the supply chain worldwide. As a consequence, we are cautiously optimistic that this will reverse itself out in the third quarter.

For the 6 months, total revenue was essentially flat, decreasing by just $200,000 to $145.9 million; also driven by a decrease of political and national revenue and no Olympic-related advertising this year. Whereas in 2010, we received approximately $2.8 million Olympic advertising revenue on our NBC-affiliated stations. Furthermore, the Super Bowl is broadcast on Fox this year and our 1 primary Fox-affiliate station and 4 Fox-affiliated secondary digital channels generated just $200,000 of ad revenue this quarter, compared to last year when the Super Bowl was broadcast on CBS and our 17 CBS-affiliated primary channels generated close to $1 million in Super Bowl revenue. When you consider the magnitude of these 2 items alone close to $3.8 million, we are very pleased with our performance this year. While there is a great deal of discussion of a second dip recession and no one can predict what will happen in our markets after this unprecedented downgrade of the sovereign debt of the United States by Standard & Poor's, we have seen no evidence yet of an advertising pullback in our local markets. Consequently, we remain optimistic about the balance of the year from all that we know so far. I also want to quickly address the number of station groups that have recently come on the market.

While we at Gray believe that the broadcast business needs to continue to consolidate and in time, we will continue to be one of those consolidators, we currently remain committed to improving our balance sheet, decreasing our debt, and improving our shareholders' equity. With that, I will bring my comments to a close and turn it over to Bob for more color on this quarter. Bob? Bob?

I'm sorry. I apologize. I should welcome everybody. Thanks, Hilton. On a day like today in the market, I guess the thing for everybody to do is keep looking straight ahead and know things are going to get better. This debt issue downgrade is obviously serious for our country, but we've got to focus on what we can control and we can control what's going on at Gray Television, which we plan to keep working on everyday. As I mentioned at our last meeting, our focus over the last 1.5 years has been to get our local HD news going as quickly as possible on all our stations. I'm happy to say we currently have 18 of our 30 markets with full local HD news. We should have a couple more finished by the end of the year, probably 4 more and then have maybe 8 of our small markets left that we will hopefully complete next year. I think people are finding HD to be a great product. More and more people are watching HD sets. They demand that local HD news and if you have a competitor in a market that has local HD news and you don't have it, you'll feel it quick.

We continue to monitor expenses. We feel like we've got a very good handle on our expenses. We think we will be down by the end of the year from last year, with our expenses and we plan to continue to try to keep our expenses. I think right now expenses are running at a level less than they were in 2007, and we want to keep this trend going. We're looking at other ways, we're looking at doing more with what's called backpack journalism, using less live trucks, less sat trucks. This is a very inexpensive way to use the internet and use HD technology that we are testing in several markets. Seems to be working real well.

We've developed some hot spots which will help spread the market size that we can use these units in, but I feel very good about this. We're looking at other efforts to continue hubbing things that we can do that are back office that doesn't affect the viewer at all. Frankly, they don't know or care where the product's coming from as long as there's a great product on the screen. So, this is something we're continuing to look at as a way to keep our expenses low. I know 2 big areas everybody wants to know about is retran, both from the cable side of things and the network.

I'll address cable first. We've got roughly 45% of our subscribers up this year, at the end of December, December 31, we'll be actively negotiating in the fourth quarter with the various cable operators and we've got over 200 cable systems overall. We've got a lot of small systems, some of our more rural markets, so we'll be actively negotiating fourth quarter to get new deals worked out with the cable operators. On the other side of the coin, the networks, I'm sure you've been following Fox, and their it efforts to -- and they were pretty successful, they virtually got every single operator in the country to go along with their demands, other than Nexstar. Nexstar is still in negotiations on several of their markets, but they have lost a few of their Fox markets. So I think this is something we will continue to monitor. We've been told off the record that the other networks, ABC has already made deals, although this is for the good news, our NBC deals are up next year. We've got 10 stations. Our ABC, we've got 8 stations that are up December 31, 2013 and then our 17 CBS stations are up December 31, 2014, so we've got some time to see what's going on in the marketplace, see what the other major groups out there are doing and obviously, the good news is we've got time.

The bad news is, once the market's kind of set, it's hard to be an outlier from what other people have agreed to in the market. But I think it's something we'll continue to monitor very closely. There was a great article -- I don't know if you most of you saw in the New York Times today about ad money reliably goes to television is the title of it and Les Moonves is quoted as saying that they continue to think advertising is going to remain strong. Second half of the year, I would say we're going to be cautious. I'm not sure -- it looks like third quarter, we're very good about hitting our guidance. I feel like we will. Fourth quarter is so far away at this point, I think it would be foolish for us to be trying to guess what fourth quarter's going to be.

But this year, so far, has been a very good year. As Hilton mentioned, most of our categories are up and even auto, which people are the scared people, that 1% and I would say the auto would clearly be up if it hadn't been for the tsunami in Japan earlier in the year that curtailed the production of most of the Japanese car models. So I think car business could be good in third and fourth quarter, we'll see. On the merger and acquisition front, interesting times. The Young deal, we've heard, has been called off. They're not selling. They're not for sale right now. The Freedom deal, I would use the term is on hold, I think right now. Not sure there's any buyers out there that are making any offers on Freedom at this point.

McGraw-Hill, an interesting group, does not fit our profile at all. They're bigger markets, they're number 3 stations, probably got some good upside from expense side, but they would not fit our profile. Our number one focus this year and next year and the foreseeable future is going to be paying down debt. We want to get our debt to cash flow ratio in line with the rest of the industry and I'd even like it for it to be better, but that's our number one goal around here, other than continuing our news dominance. I always tell our managers every day when you wake up, if you're number one in the market, I want you to stay number one and get stronger and if you're not number one, we try for number one. We just feel like, as long as we put great news products on the air, we're going to be the dominant factor in these local markets.

We think that makes us technology-proof in the long run, because people want local news, especially in the size towns we're in. I think local is much more important than a city like Atlanta or in bigger cities like Boston, New York, Chicago. Those cities are so massive and so spread out there's almost no such thing as local news. But in our size towns, our local news is a vital part of these communities. I think it will continue to be.

The other one I didn't mention, Nexstar is for sale. It's a group almost as big as we are, they have a good track record. I don't know -- they've had a long time financial sponsor that may just be deciding it's time to do something else for money. That's the only speculation I got, but I have no idea what will happen on the Nexstar deal. At this point, I'd like to turn it over to Jim Ryan to go through some more specific numbers, then we'll open it up for questions. Jim?

Thanks, Bob. I'm going to keep my comments relatively brief. As both Bob and Hilton mentioned, we were pleased with second quarter revenues and they've already commented a little bit on the categories. Actually in second quarter, aside from auto, the only down categories we showed were financial insurance category and then the supermarkets. So we're pleased to see the depth of the categories increasing in second quarter. Then on the 6-month basis, as both Bob and Hilton commented, auto is still up about 1% year over year, and the only categories that are still down are again, financial and insurance, which kind of makes sense with the housing prices still working its way through supermarkets. Then entertainment a little bit, very slightly down, but that's probably more of a timing issue on movie releases.

Turning a little bit to the balance sheet, at June 30, cash on hand was $3.5 million. Our total debt was $830.4 million. Our trailing 8-quarter operating cash flow, as defined in the senior credit agreement, was $110.7 million, which placed our first lien leverage ratio under the senior credit agreement at 7.14%, versus the covenant of 6.75%. So there's ample headroom there. On a T12 basis, at the end of the quarter, our leverage to T12 operating cash flow would've been about 6.25%. The preferred stock at the end of the quarter, including the accumulated dividend, was at $56.8 million and of that number, $39.3 million is the actual liquidation value of the preferred. The remainder is the accrued dividends.

Briefly, our third quarter guidance, we're pleased that the aggregate of our local, our internet and our national combined, we're expecting to be up 2% to 3%, with local and Internet leading the way and we expect some continuing softness in national. We were exceedingly pleased with the strength of the internet growth, both in Q2 and Q3, and see that continuing for the rest of the year, as we talked about on the second-quarter call. We have 3 major cross-company initiatives this year on the internet front. One is to roll out a internet-vertical site on the local level dedicated to mom and families issues that we've branded ourselves and we've developed ourselves as Moms Everyday. We've partnered with WorldNow to roll out several of their internet verticals, including medical or home improvement or legal, and we also are rolling out our own white branded mobile couponing initiatives this year, too. On all 3 of those, we're somewhere between 50% and two-thirds of the way through our deployment this year, and all of our markets will be fully deployed by the end of the year. We're expecting very strong growth in internet the remainder of this year and then obviously continuing strong growth next year as we get the benefit of a full-year deployment and of a full 12 months next year after the deployment year this year.

Political, we were pleased in second quarter was certainly stronger than we expected. Our record in an off-year, actually was set in 2009, was just shy of $10 million. It's a little early to tell yet whether we'll beat or exceed that record for this year, but certainly based on the strength of the first half of the year and our expectations for Q3, I'd say that we are certainly getting into striking distance of tying or setting a new all-time off-year political record. Certainly, with the budget compromise that was passed recently, there is at least a potential late this year for, we think, some political money on the remaining budgets we based that will be coming up, what appears to be, in December. Again, while we can't guarantee anything, we're cautiously optimistic that late this year there'll be some additional political we wouldn't have expected. At this point, I'll turn it back to Bob.

Thanks, Jim. Operator, at this time we'll open up for questions.

(Operator Instructions) Bishop Cheen, Wells Fargo.

Let me ask you sort of an odd one-off question. If we were going to talk about buybacks normally, we might be talking about your stock. But given the beating that the fixed income high-yield debt has been taking in this correction, do you have any capacity to take in some of your higher coupon bonds? I know you've been focused on that much higher cost of capital preferred, but I just was wondering about your thoughts about arbitraging your balance sheet.

Well, a couple things, Bishop. One thing is our bonds are selling at a pretty good premium, that's the first thing, which is good and news and bad news if you're trying to buy them in, obviously. But on the other side of the coin, we've only got $10 million right now of restricted payment availability. If we were trying to buy some stuff in, we'd probably be trying to buy some of the preferred in, which we're looking at. So, I think that would be more prudent for us to be looking at that preferred we got on the balance sheet that we'd love to get rid of.

Right. That certainly is a higher cost of capital. All right. And then, last question and I'll move it along. You always have a certain amount of conviction when you look forward and you talk about the year. Given the uncertainty that our markets have gone through in the last 10 days, certainly, on the financial side, has that rocked your world in terms of your conviction and your visibility and what you see on the revenue side?

That's a good question. I would say you'd have to be Rip van Winkle for it not to have woken you up. But I think this thing, probably since the Congressional fighting took several months, I think everybody started kind of getting immune to the fact that we were going to have maybe some kind of debt downgrade and some kind of debt issues. I will tell you we've talked to a good many investors, Jim and I both in the last few weeks, and they all use the word very cautious right now. That would be the word I would be using, very cautious. Like I said, I think third quarter is starting out exactly like second quarter. We were kind of slow in the first month, picked up good in the second month and picked up good in the third month.

I'm hoping we'll have the same result. Fourth quarter, right now, seems like a mile away. But we're going to keep our head down and keep going straight ahead. We're have some mighty good local markets with strong economies that hadn't been affected by as much by all this stuff as some of your bigger markets. I think that's an advantage for us and I think we're just -- we got to -- you know the old saying, stick to our knitting. So overall, though I feel pretty good.

Okay. Thank you for all the color.

Marci Ryvicker, Wells Fargo.

Can you talk about the current pace of auto in the third quarter? I know it was down 1% in the second quarter. And just as it relates to your Q3 guidance, are you incorporating any sort of auto recovery or is your guidance just mirroring what you're pacing today?

The guidance is mirror of what the pace is showing today. There's always -- there's anecdotal evidence we've heard that the Japanese manufacturers are stepping up inventory for late third quarter. We've heard a couple of GM comments that their local dealers are saying they're being placed on notice they'll get significantly more inventory late in the quarter. But we're not betting on that yet. We're going to wait and see if it really develops into a reality, and then deal with it, so we're really talking about current pace.

The current pace of auto, is running -- actually right now, a little bit ahead of low, single-digit ahead. But there's still quite a ways to go in the quarter, so I'm not trying to be negative here, I'm just saying that there's a ways to go. It's a little positive by a few percentage points, and we'll see -- we're hoping -- not hoping, but expecting at least that will hold up as we move through the quarter. If we get gravy in September, we'll be happy to deal with it.

In terms of other ad categories, it seemed like as companies reported the most recent reports have been a little bit worse than the earlier reports in terms of guidance and pacing, so it feels like other ad categories have decelerated from Q2 to Q3. Some that I focused on our restaurants and media and communications. Can you comment on the ad categories outside of auto?

I think that in a general sense, that's correct. If it's not an actual deceleration, I think it is everybody is having a sense of caution, and I think some of that sense of caution is producing some choppiness in how business is coming in. I think the visibility has tightened up on a relative scale this quarter, compared to last quarter. It's kind of still tough with only basically one month in to see how the whole quarter's going to shake out but I think it'd be fair to say that up and down the line, there is a little bit more sense of caution going into the end of Q3 than there was in Q2.

Okay. Then my last question, you did mention I think, Bob, that 45% of your re-trans contracts come up for renewal. Any thoughts on the incremental dollar amount that you're going to bring in, in 2012?

Marci, I wouldn't want to give away our negotiation strategy right now, but we feel like we deserve a significant increase. As I mentioned before, in talking to these cable guys, one of the things we point out, we've got, I want to say at least one-third of our markets where our local news ratings are more than all the cable channels in all those markets ratings combined. We are a valuable resource for these cable operators, and it's up to us to show them how valuable we are to them, and I think in the long run, we'll be able to negotiate some favorable increases. We certainly think so.

Anyway, I wouldn't want to give away any other information than that. But we'll be out there hustling in the fourth quarter, to get these deals done by the end of the year. We're very successful, we're going to use the same strategy we did a couple years ago, which worked very well. We actually have our regional Vice Presidents actually involved in the negotiations and they know the markets, they know the operators in the markets, so it's worked real good for us.

Thank you so much.

(Operator Instructions) Aaron Watts, Deutsche Bank.

Jim, one quick one for you, just to clarify, your payment for program broadcast rights line item that you used to calculate cash flow, looks like after being pretty steady for a while, it's a stepped up around $1 million. Can you just tell me what was going on there?

That was just a timing difference for the entire year. I think it's going to still shake out around $15 million.

Okay. So no big shift there?

No.

Perfect. Also, just so I'm clear in terms of your guidance, the gap between the local and the national performance, is that a mainly national auto? Is it just tougher comps for national? What's driving that gap right now?

It's definitely national auto, for one thing. In general, it would be national in broad-based, remember national is very price sensitive and when, on a relative scale, things are a little bit softer, we're not going to chase the national business quite as hard because we can do very, very well with the local business. Also, as far as percentages go, you've got to remember that it's getting to be an increasingly smaller percentage of the overall, so any kind of fluctuations starts driving the percentages one way or another to a larger degree than the local.

Okay. That's helpful. Then maybe one more on re-trans, and really thinking about your affiliation agreements as well, Bob, what you were saying before. You were able to reach an agreement with FOX, and I know the idea of becoming independent probably isn't the most appealing. So, would you characterize these agreements you're reaching, not just with FOX but in general, these new affiliation agreements as still being pretty good moneymaking opportunities for you when you think about re-trans? Or are you thinking having to give so much back now that re-trans has really leveled out to more of a less positive proposition for you?

Aaron, that's a good question. We're not far enough into it yet. I could tell you, our goal is to keep what we've got now and add to it in our negotiations, both on the cable side and the network side. The FOX deal, we've got basically 4 digital FOXs in small markets, we do real well with them. We think we made a reasonable deal with FOX on that. That's the only network we've had any negotiations with at this point, so my goal, though, is to keep what we've got and frankly, add to it. I think to do that, obviously, we've got to negotiate some increases from the cable guys and as I mentioned, I think we're in a good position to convince them they need to be paying us more.

I'm cautiously -- I use the word cautious again, but I'm cautiously optimistic that we can keep the re-trans we've got and add to it in the coming years. As I said, really the good news for us is we've got 2 years with ABC and 3 years with CBS before we even have to start talking to them. The NBC thing will be more current as its coming up next year, so we'll get a good idea at point. We've been told recently by NBC that they probably are not ready to do any kind of joint negotiating until sometime late in '12. So, that would -- again, even then, there's so many question marks. I'm willing to listen to anything and try things, but I just think it's going to be very difficult to get enough mass to make that work. I think it'll be interesting to see what kind of proposal they come up with, if they do come up with a proposal at some point. But I'm optimistic we can maintain the re-trans and it be a continued source of revenue for us in the future.

Okay. And then last one for me and I don't think you're going to have -- you won't have the firm answer here, but just curious your thoughts. You've been doing this for 1 or 2 years now and you've gone through the ups and downs in the market, you've seen good and bad. We have bad news right now, in general. In your experience, what's the lag time between hearing the type of news we've been hearing over the past couple of weeks and maybe specifically this week and last and when you're going to start to get a reaction from your advertisers? When you're going to start to see cancellations and that nervousness turn to actionable pullback?

Usually you see the national guys first, because their deals are out longer. So, if they're looking at putting ads in, in November, December for Christmas they may be scaling some of those back in the near future if they feel like they need to. Our local guys are pretty steady, in most cases, and I think here, again, I think all of them are cautious. I think all of them are waiting until the last minute to do things. We've got a pretty good roster of advertising out there, Aaron. They've been, literally, on our air every week for 50 plus years in a lot of our markets. You know, local guys that -- they watch what's going on around the world, but day in and day out, the customer traffic coming in and out of their store is more important to them than what's happening in New York or Washington. We'd see it national first and then probably, if there is going to be an effect, we'd see the local later in the year some time.

Okay. Thanks a lot, guys.

Barry Lucas, Gabelli and Company.

Not to beat the guidance to death too much more, but what do you have squirreled in their for political in the third quarter to get to low, mid-teens total revenue decline?

Barry, the political number right now, we're saying [3.6 to 3.9] is the guidance range we put out for Q3. Right now, if I had to guess, I'm saying we're closer to the 3.9 than the 3.6. And like I said, that puts us not a slam dunk, but certainly beginning to get us in definite striking distance of being able to either tie or break off your political record of '10 by the time we get to the end of the year. The Wisconsin recall elections are going on right now, and this week and next week for our markets, but we still have the Nevada special election, the Kentucky Governor's race, which is a standard election for this year, as well as the -- also the off-race in West Virginia. So, we do have some things that we'll add as third and fourth quarter go on. Plus, as I said, depending on how things transpire in Washington, as the year progresses, there could be a possibility of issue money coming out on budget debate issues late in the year.

That's helpful. And that was again, $16 million a year ago or so?

$16 million a year ago, yes. And remember, last year's political was an all-time on-year record for us at $58 million.

Okay. As long as I've got you, Jim, given the comments about debt reduction and trying to knock out those preferreds, sure, it's hard right now, but how do you view any opportunities for refinancing?

Well, as we said the last couple of calls, I think we need to look at that on a relatively opportunistic basis. As you can see from the technical amendment we got at the senior facility, we now have an ability to address that better, if the credit markets give us a good opportunity. And I think it's a case of just being patient and seeing when and if that opportunity presents itself.

Good. Last here for me, maybe Bob, if you could, maybe touch on the whole spectrum of reclamation issue and anything that may or may not have come out of the debt reduction proposals that could affect Congress or somebody trying to raise money to pay down the deficit?

Yes. I think that's still up in the air, Barry. Nobody seems to know exactly how that would affect. I think Congress is obviously looking for ways to raise money without it looking like it's taxes, but I think the--. One good thing is we've got 40 digital channels on the air now, more than any other group. They're profitable, we're doing real well with them, we've got some extra space available for mobile -- live mobile, if that comes about which we're hoping it will. So, I think we can go before Congress anytime and say, hey, we're using the spectrum exactly like you want us to use it. I think there's going to be people in some of these markets that have poor performing TV stations.

At some point, it may be cheaper for them to actually go sell their spectrum, but I think it'll be voluntary and I think when that happens, there may be some people who want to sell. But I think we use ours very well and we want to continue to grow our digital footprint. I think we've got a lot more local programming we're looking at trying to do, especially in the high school sports area, and even local programming that we're producing ourselves. News shows or live shows or outdoor shows, we're looking at various things right now that might make sense for us. I think we're kind of immune to whatever is going on in Congress from that standpoint and I don't think they can ever take it away from us, what we've got. But it wouldn't surprise me to see where other people could sell some of their spectrum at some point in the future.

I wish we could all be immune to what goes on in Congress.

Oh, yes, nice.

Thanks, Bob.

Julie Gray, Columbia Management.

I was wondering if you could flesh out a little bit for us whether or not in your state capital cities that you're in, whether or not government cutbacks have begun to affect the local economies at all?

Not that we've seen, and frankly, most of the states we're in, we've seen very few cutbacks on the state government level. Here again, I think we're in some pretty good states that hadn't been as hard hit with debt problems and problems where they've really got issues on maintaining their solvency. A state like Wisconsin, obviously has been in the news, but that state is in pretty good financial shape overall. States like that, that we're in, Georgia's had their problems but overall we're strong, we've got a very strong credit rating. Georgia's always had a reputation of being a well-managed state, and I think most of the states we're in are in that category. I was surprised to see, for example, even there are states like Kentucky's got $29 billion of unfunded pension liability which I was kind of surprised to see. But compare that Illinois, with $140 billion some, you realize there's some states out there with some serious problems, but it has not really affected us at this point that we can tell.

Okay. Kind of a related question then, how big of a category is government advertising for you?

It's not very big. It doesn't show up on our -- it's not something we look at enough to show up on our radar when we look at our major categories.

It's not a top 20 category?

I would be surprised. I don't think so, no.

Okay. Thank you.

Stephen Pfeiffer, Wells Capital Management.

I was having some questions about -- I was going through your disclosure on here about your network renewals with FOX as that one expired in June, just a couple -- a month ago. I noticed that you have NBC coming up in January. Have you begun negotiations with NBC?

No. We're probably talking to them in the fourth quarter.

Okay. How long did the negotiations --?

The networks normally approach us first, and like I said, we're frankly trying to wait as long as we can to see if we -- we're keeping our eyes and ears pretty close to the market, seeing what other people are doing at this point. I think it's something that, like I said, we're going to keeping a very, very close eye on in the next month or two, and we'll be talking to NBC in September, early September most likely.

I see all your MyNetwork televisions are going to be up and expire in the next couple of months. Any comment on that?

We have a very good relationship with them and haven't had a bit of problem as far as the economic terms we've got with them, and our digital channel has been very profitable and growing, so we want to consider continue both the CW and the MyNetworks like we've got them now.

What line item on your income statement would I see that expense show up in?

Expense for what?

For fees paid to FOX or fees paid to NBC or anything along those lines?

Jim, where would that show up?

There's a modest amount and it's running actually as a program expense, so it would show up in the TV broadcast line. It's not netted against revenue.

Okay. Right now, based on the FOX situation and NBC is there anything you're not predicting -- we shouldn't be scheduling any guidance for a higher expense on that line item because of those contract negotiations?

Right. Nothing would start -- like NBC would start sometime after January next year. And so we would --

FOX -- the FOX for this year and next year really was a de minimis impact and not very large. That may grow in a little future, but again, because FOX only involves 5 digital channels, it's still a tiny part of the overall number.

Okay. Also, I'm sorry, the last question I had on here, your actual broadcast license for a bunch of TV stations have been out for over 5 years. Any idea when that actually gets done or gets renewed?

The commission has been sitting on those renewal applications, not only ours but across the industry, and they all come back to the indecency complaints and fines that were issues years and years ago. They're still winding their way through the courts, and we don't expect that the commission will actually finally proceed with the ordinary renewals of, whether it's ours or anybody else in the business until the courts make the final decisions on those indecency fines. For instance, the Janet Jackson wardrobe malfunction and there was another one associated with the NBC program, Without a Trace, that's not even on the air anymore.

Okay. Are there any fees associated with that renewal that we should expect to show up at some point or --

No. A renewal in the ordinary course is really just very small amount of cost to process the application. There's nothing big there.

Okay. Thank you.

We'll take a Follow-up from Bishop Cheen.

Just one housekeeping, the capacity and outstanding of the revolver today?

We have full capacity. Nothing is drawn on the revolver. We have a full $40 million available, and we currently have draw rights for the full $40 million as well.

Okay. Thank you, Jim.

(Operator Instructions) Gentlemen, we appear to have no further questions. I'll turn the conference back to you for closing remarks.

Thank you very much, Operator. I want to thank everybody for joining in today. As we always tell you, we're easy to find, we answer our own phones, so if you've got any follow-up at any time, don't hesitate to call. Thank you, everybody and we look forward to being back with you on our third quarter conference call later in the year. Thanks, everybody.

That concludes today's conference. Thank you all for joining us.