Nexstar Media Group Inc (NXST) 2009 Q2 法說會逐字稿

Good day, and welcome to NEXSTAR Broadcasting Group's 2009 second quarter conference call. Today's call is being recorded. All statements and comments made by the management during this conference other than statements of historical fact may be deemed forward-looking statements within the meaning of Section 21 of the Securities Act of 1933 and Section 21-A of the Securities and Exchange Act of 1934 The company's future financial conditions and results of operations as well as forward-looking statements are subject to change. The forward-looking statements and comments made during the conference call are made only as of the date of today's conference call.

Management will also be discussing non-GAAP information during this call in compliance with regulation G, reconciliations of this non-GAAP information to GAAP measures are included in today's news announcement. The company does not undertake any obligation up to date forward-looking statements reflective of changes and circumstances.

At this time, I would like to turn the conference over to your host, NEXSTAR's President and CEO, Perry Sook. Please go ahead. Thank you Linda, and good morning everyone. Thank you very much for joining us to discuss NEXSTAR's 2009 second quarter operating results. First order of business I would like to introduce Tom Carter, our Chief Financial Officer, who is here with me on the call this morning. For those of you who didn't see our release last month, Tom recently joined NEXSTAR as Chief Financial Officer following nearly two decades as a Senior Investment Banker at BMA in the media and telecommunication sector. Tom was our lead banker for nearly 13 years. The Board and I are very confident that Tom's perspectives on the industry and the company as well as his extensive industry and financial community relationships will be a great fit for NEXSTAR. Tom and I are focused on further expanding the revenue base, margin enhancement, managing leverage and optimizing our capital structure so NEXSTAR can continue to grow.

With that being said, let's get right to the results for the quarter and then I will be happy to open the floor for your questions. During the second quarter 2009 our multi-platform content distribution strategy and revenue diversification initiatives led to another quarter of industry bleeding revenue results. In addition, the deleveraging and expense management plans which were reviewed on the last call were evident in Q2 with lower SG&A, lower total interest expense, lower cash interest expense as well as a total leverage ratio of 5.6 times, at June 30. Our total second quarter net revenue amounted to $62.2 million, a 12% decline from NEXSTAR's record second quarter revenue in the year ago period of $70.6 million. The lower net revenue reflects the overall downturn in advertising spending due to the impact of the current economic recession as well as $2.8 million or 77% reduction in political spending in this non-election year. Notwithstanding the current environment, our strategy to build complementary high margin revenue streams is serving us very well as we continue to record significant growth and retransmission consent and e-media revenues during the period as well as initial recognition of management fee revenue from our managed stations group. In total, revenue from these sources increased to $11.4 million in the 2009 second quarter. That's a 56% rise over what we did in the same period last year.

As noted a moment ago, our repurchases at significant discounts to face value of a total of approximately $36.3 million of our outstanding notes including $27.8 million of the cash paying 11 3/8% securities and approximately $8.5 million of the 7% senior subordinated notes combined with our first quarter exchange of the $143.6 million, 7% senior sub notes due 2014 for the $142.3 million new 7% senior sub pick notes due 2014 enabled the company to reduce total interest expense by approximately 18%, and cash interest expense by about 52%, compared to the same period last year. In addition to these deleveraging efforts, NEXSTAR's controlling or operating costs. During the second quarter NEXSTAR benefited from on going expense management initiatives including regional consolidation of certain back office functions and as a result, second quarter SG&A expenses declined by about 4.2%, even as we integrated the operations of WCWJ in Jacksonville, Florida, and KARZ in Little Rock, Arkansas into the operating results.

Before I turn the call over to Tom for a review of our financials, let me run through some of our other second quarter highlights. Our second quarter retransmission consent revenues of $7.9 million, exceeded the second quarter '08 levels of $4.7 million by 68%. Earlier this year we announced our new multiyear retransmission consent agreements which are expected to generate more than $75 million in revenue over the life of these agreements with more than 33% of that revenue to be realized this year. With $14.5 million of retrans revenue booked for the first half of 2009, I think you can see we are well on our way to exceeding our goal. Our second quarter e-media revenues came in at $3.0 million surpassing last year's second quarter by 15%. Importantly in June, the Company recorded its highest e-media revenue month in our operating history at a little over $1 million in e-media revenue in the last month of second quarter. In addition during the quarter, we recorded approximately $0.5 million of management fee revenue from our March agreement to provide services for the seven Four Points media stations. In addition we also recorded full quarter's contribution from KARZ which was acquired in late January and a partial quarter benefit of our ownership of WCWJ which we closed on on May 1. Both of these were accretive and deleveraging additions to our station base.

Our new to television local direct billings totaled $3.72 million for the second quarter, that was an increase both over first quarter of $2.9 million as well as over second quarter 2008 of $3.68 million. Our sales teams deserve special recognition for their perseverance and creativity in this current environment as they are making many, many more sales calls to write business. We are consistently able to increase new local direct billing which is another way the company is mitigating the impact of this challenging environment. During the quarter, automotive spending comprised approximately 15.4%, of our core advertising. It was 22% in the second quarter of 2008. Factory and dealer group spending was the weakest led by the decline in spending from the big four auto makers. However, total automotive ad spend in second quarter as well as the dealer group spending in second quarter did improve on a sequential basis from Q1 2009 suggesting to us that we may have tested the bottom in terms of absolute dollar spend.

Broadcast cash flow totaled $20.1 million in the second quarter, 2009, down 29% from second quarter 2008. Adjusted EBITDA came in at $16.4 million, down 34% from the second quarter of 2008. Free cash flow was $5 million, compared with $11.1 million in the comparable period of 2008. The 2009 free cash flow number includes approximately $6.2 million of CapEx, which basically represents the majority of our remaining capital commitment for the digital television conversion. Let me turn the call over to Tom Carter to provide further detail on our financials after which I'll come back and run through some recent development and the strategies we are taking to weather this environment. Tom Carter.

Thanks Perry and good morning everyone. I would like to review some of the key second quarter line items on the income statement and balance sheet. On the P&L side total gross revenues for Q2, '09 were $68.7 million versus $79.2 million in the previous year, a decrease of 13.3%. Net revenue for second quarter was $62.2 million, versus $70.6 million, down 12%, from the previous year.

SG&A expenses as I think Perry mentioned earlier, were $17.5 million, down 4.2%, compared to second quarter of '08, which was $18.3 million. Total operating expenses were also down, from $54.5 million in the previous year to $53.1 million in second quarter '09 representing decrease of 2.6%. Broadcast cash flow for the most recent ended quarter was $20.1 million, versus $28.3 million in the previous year second quarter, a decrease of 29%. Adjusted EBITDA, as Perry mentioned, was $16.4 million for second quarter '09, versus $24.8 million for second quarter '08, down 33.9%. On the revenue side, gross local revenues were $40.2 million versus $45.7 million the previous year, down 12%. Gross national revenues for second quarter '09 were $12.2 million versus $17.8 million the previous year, a decrease of 31.5%. Political revenues for second quarter '09 were $800,000 versus $3.6 million in second quarter, 2008. Down almost 78%.

E-media revenues, as Perry mentioned, were up 15.4%, to $3 million for the quarter versus $2.6 million in second quarter '08. Total retrans revenues were $7.9 million for the most recently ended quarter versus $4.7 million in the same quarter the previous year, an increase of 68.1%. Management fee revenues from the Four Points contract were recorded at $0.5 million in second quarter 2009, there were no such revenues in second quarter 2008. Trade in barter, revenues were flat for the quarter and 2009 at $4.6 million versus the previous year. In the second quarter the company recorded income from operations of $9 million compared to $16.2 million in the year ago period. Overall, NEXSTAR's second quarter 2009 corporate overhead costs totaled $3.7 million, in line with $3.6 million in the year ago period. Second quarter corporate overhead included $300,000 of non-cash employee stock option expense.

Turning to the balance sheet, NEXSTAR's outstanding debt as of June 30th, 2009 consisted of $408.4 million of bank debt divided amongst the outstanding term loans of $323.4 million, and the revolver outstanding of $85 million. The 7% senior sub debt, the cash pay portion, totaled $46.9 million. Senior sub debt pick securities totaled $127.7 million, and that is picked through January 15th of 2011. The 11 3/8 senior sub debt outstanding balance totaled $50 million, and the 12% senior sub debt pick instrument was $39.8 million, and again, that's a pick security through January 15th, 2010.

Total outstanding debt amounted to $672.8 million. And net debt when you netted out cash balances of $14.3 million was $658.5 million. This amount compares with $646.3 million of outstanding net debt at 12/31/08. However, our outstanding debt for measuring covenant compliance was $491 million since the pick securities are excluded for that purpose. NEXSTAR's total leverage at June 30th, 2009 was 5.6 times, compared to a covenant of 6.5 times, and our senior leverage covenant was 4.47 times versus a covenant of 4.50 times. Total interest expense in the quarter -- in the second quarter 2009 was $8.9 million, compared to $10.8 million for the same period in 2008. Cash interest expense for the quarter was $5 million, compared to $10.5 million for the same period in 2008. Cash interest expense for the first half of 2009 was $13.2 million, down from $20.6 million in 2008. NEXSTAR's second quarter CapEx of $6.2 million compares with $3.7 million in the second quarter last year and represents again the majority of remaining spending required for digital television conversions. That concludes the financial review for the call, I will now turn it back over to Perry for additional remarks before the q-and-a.

Thanks very much, Tom. Great job. We believe today's report highlights the ability of our company to operate effectively and deliver superior results in this extremely challenging environment. And we believe this discipline and focus has positioned the company to benefit well when advertising demand improves. We have a very solid operating and personnel structure in place to quickly benefit from a rebound in advertising spend. We are not waiting for that to come to us. Our sales effort has always emphasized and rewarded secure business with local advertisers, new advertisers, and this has proven to be an excellent complement to the growing retrans e-media and management agreement revenue streams. Our retrans revenue growing year-over-year and on a quarterly sequential basis and this trend is expected to continue through 2010 with the just completed agreement with Time Warner Cable and renewals of a handful of other agreements that expired year end, all contributing to the sequential growth.

Turning to the e-media side while we are fairly unique in continuing to report year-over-year growth in this revenue stream, we are also confident in achieving continued double digit growth from our e-media revenue platform. We're launching additional local sales modules and partnerships to drive our continued and sustained revenue growth from this platform. We are not seeing trends of a deeper decline in traditional ad spend but at the same time, we are not seeing sustained improvement either. We believe this is an indication most likely that core ad spend in our markets is finding a bottom from which we can expect to see gains. There has been incrementally positive news of late on the housing front, on the employment front and with consumer confidence levels. And, since our last call, both Chrysler and GM have emerged from bankruptcies and we've seen very encouraging comments from the new chairman of General Motors, that a revitalized advertising program as a key to GM's recovery. We've seen higher than expected political ad spending for the first two quarters of this off political year and we expect to accelerate that in the back half of 2009 into 2010 as the debate on the issues particularly health care takes to the air.

We already have a [vere] request pending in the Texas governor's race and we expect to see activity ramp up as we approach this and other March 2010 primary dates. Quick update on the Four Points Management Services agreement whereby we began managing the seven station group back in March. We've already made excellent headway in leveraging NEXSTARs vendor agreements and operating discipline, in with the Four Point stations. This is proving to be a win-win structure for both NEXSTAR and Four Points and we will look to expand the activity with other station groups as opportunities present themselves.

We positively positioned NEXSTAR to weather this environment and we take an aggressive approach by leveraging our traditional television broadcasting operating model into a multi-tiered model of high margin operations. We fully expect our on going approach to actively managing our station portfolio, our balance sheet, our capital structure, and practicing prudent expense management as well as creating and developing new opportunities, collectively will allow us to prosper as the economy and ad markets rebound and as we benefit again next year from a substantial political revenue component. Thanks again for joining us this morning and now let's get to your q-and-a to address your specific areas of interest. I'll turn the call back to Linda.

(Operator Instructions) Our first question comes from the line of Bishop Cheen with Wells Fargo. Please go ahead.

Hi, Thank you for taking the question. Welcome, Tom, nice to hear you on the call. Perry, congratulations, you were named broadcaster of the year by Broadcasting Cable Magazine was it?

Yes it was, thank you very much Bishop.

I'm sure the cash award was humongous. All right. So here is my first question. All of the directional stuff is cooking, you're managing your balance sheet, the one big challenge continues to be that senior leverage covenant. You're right up against it now. We knew it was going to be tight. So you want to give us color on how you work around that $4.5 million covenant because you've certainly managed the other ones.

I will answer that. Or try and at least give you color around it Bishop. We monitor our covenants continuously and closely, obviously I get that. That's the environment that I have come from. We are very focused on compliance. We have several initiatives that are available to us or in the works that could aid us in generating liquidity and/or provide deleveraging.

We continually re-evaluate expenses at the station in the corporate level as well as any balance sheet actions that we could take to address any situation going forward. So we've got a number of things that we are evaluating that we are contemplating and trying to determine if and when it would be appropriate to do any and all of those actions and I can't get into specifics with regard to what they are but believe me we are very focused on it.

Okay. That's helpful. I would imagine with your background you are focused on it. Just one quick follow up. You're certainly trying to cook the media and the retrans and get it moving at the right slope, can you give us color on cost cuts if there is more to go for your fixed cost cuts, if you've pretty much achieved everything you can, whatever you can tell us about the other side of your P&L.

Sure, Bishop. As you heard in the results we reported a contraction in operating expenses versus the prior year, even given affect for the two acquisitions. We will see in the back half of the year, also the second quarter results included several hundred thousand dollars related to acquisition costs and restructuring costs for some of the consolidation work that we did in 2009 second quarter. We will see the benefit in the back end of the year, we have gone back again to ask our station managers and with Tom's arrival we are taking a hard look here at the corporate side of things and we expect in the back half of the year in addition to the programs already in place, there will be an additional seven figure cost savings that will come in to play as we obviously have to operate in the environment in which we've been given here. So we -- there will be additional expense savings measures implemented beyond what's been announced what's been talked about and the corporate team and the station manager are fully participatory in that process and it's going on in real time.

Just to recap Q2, I think you quantified with 4.2%, reduction in SG&A. Correct?

That is correct, yes.

Okay. All right, that's very helpful, thank you.

Next question comes from the line of Jonathan Levine of Jefferies.]

I wanted to follow up have you guys spoken with your bank debt holders at this point?

Not at this point. There has not been a need to as we are in compliance. Obviously that would be one of the arrows in the quiver here that we are evaluating in addition to other opportunities both internal and external for the company to strengthen the balance sheet.

Let me add to that, we talk to our lenders all the time about a lot of different things, but that specific subject, we have not talked in depth, just generally about what the market is doing, what the market is looking for.

Okay. I guess if you could talk a little bit on the top line in more detail in terms of the trends that you are seeing, on both the local and national level. Local looked like the decline accelerated verses the first quarter and then similar also for national. If you could talk in terms of the monthly trend, what you are really seeing in July as well.

Well, July looks a lot like second quarter did in terms of the revenue results as I look at our top ten categories the only one showing a positive comp to the prior year in the second quarter was attorneys, maybe some symmetry to that. Our automotive spending as I said was 15% of our core billing down from about 22% in the prior year. But the positive sign is if you look at the absolute dollar spent in the auto category versus Q1 the dollars were up and the dollars spent by the individual dealers versus Q1, the dollars were up. So we think it is most likely we tested the bottom there.

If you look at non-top ten categories which make up better than 33% of our revenue some of the months showing positive trends, are grocery stores and schools and instruction, lottery, lawn and garden, optical, jewelry stores and retirement homes are categories showing growth. I don't believe there has been a substantial change in the macro trends. We have not seen an acceleration in the rate of decline, some of this is seasonal. But by the same token we are not seeing a sustained substantial improvement either. We are for the remainder of this year kind of bumping along the bottom of the ocean.

Year-over-year decline through the second quarter does those look similar to what you are going to be experiencing in the third quarter?

In terms of core revenue, is that your question?

Yes.

I actually think that the core revenue decline will flatten out in the back half of the year as we -- as an industry and certainly NEXSTAR had core revenue declines in the back half of last year. The political piece will come increasingly into play obviously as that revenue was primarily third and fourth quarter directed in 2008. But we've begun to look at this kind of on a two year trend and versus 2007, and it looks like the kind of the ocean floor is in absolute dollars is about a 20% decline over the 2007 core revenue levels which would indicate a less decline in Q3 and a much less decline in the core base to get to those levels in Q4.

Okay. Thank you.

Our next question comes from the line of [Steven Garsanty with Tricadia ] Please go ahead.

Hey guys, thanks for taking my call. A couple of quick questions, first regard to the corporate expense I know you guys had a couple of one time pieces last quarter but it looks like trajectory [you had outlined] is continuing to go up despite you take out the stock based comp. Wondered if you could talk about a little bit and how to think about that line item going forward.

The reason for the increase was primarily professional fees related to the acquisition that closed in the second quarter, but the trajectory of that number is definitely absent the one time items is the arrows pointed down and not up.

That ties to your quarter over quarter legal fees increasing largest with comp up is that correct.

That is correct

With regard to the numbers you've been talking abut with the incremental $100 million of revenue that's going to be in place for 2010, I wanted to know if you could talk about the different pieces of that revenue in greater detail in terms of what we are going to see in 2010. You said the $75 million will be in place with retrans, $25 million in place for '09, although you did say in the call better projected than that. Wanted to get a sense of what that $100 million is. If you look at kind of the political revenue that you did in 06. Take a haircut to that. I'm coming to well over $100 million of incremental revenue between retrans, the e- media, Four Points agreement and whatever assumption you want to apply to political spend.

Well, there are contracted increases in retrans and there are agreements that will impact 2010 that have not yet been renegotiated in 2009. Political will be a substantial component. I think a number in the neighborhood of equal to or greater than our 2008 because of the preponderance of state races, senate races governors' races that happen to fall into our footprint. Continued double digit growth from e-media revenue, and both incentive fees and management fees from our managed station, practice can cumulatively add to that $100 million number in 2010.

Looking at the Credit Suisse slide that you gave for your presentation in June. Is it safe to say that that $75 million of retrans will be fully integrated into your 2010 P&L.

I think the $75 million was of the contracts that were renewed in 2008, their total contract value was $75 million, and that we said we would see a third of that in 2009, and, obviously with the better than almost $14.5 million in the first half of the year we think that was a conservative statement to make at that time. So, you can use that base for '08 and look at incremental increases in 2009 as well as the value of the new contracts and it will guide you to a number in the 30s.

Okay. With respect to the composition of that revenue have you been pushing for a higher cash component than the 80/20 you spoke to in the last call or is that going to stay pretty consistent going forward?

Hard to say with the -- agreements yet to be negotiated if you look at the composition of our retrans revenue right now in 2009, it is a little better than 80% cash payments and a little less than 20% ad spend. We would expect that trend to continue if not the buy as to increase towards the straight cash compensation.

Thanks so much.

Our next question comes from the line of Barry Lucas with Gabelli and Co.

Good morning Perry, how are you?

Hey.

Just not to beat the retrans to death but clearly the network owners have been making some noise about getting their mitts on some of that money so maybe you could address that issue and how you intend to hang on to it.

Sure. Well I can tell you there has been some noise but there really hasn't been any substantive discussions. Look we pay most of the networks some level of support for NCAA basketball, NFL football, Olympics, supporting the news gathering organizations so I think it's all about how much we agree to contribute and the tension is that they want more we want to pay less, discussions been going on since 1995 basically. We negotiated for this revenue, it's on the strength of our local stations. In Strasburg, Pennsylvania there are three NBC affiliates on the local cable system. We are being paid to be carried there.

So to me the value is obviously in our local programming every bit as much if not substantially more than whatever network programming we carry. I am very interested in having discussions with the networks about partnerships of things we can do together and share in the revenue. But, just coming with your hand out is not a business proposition I'm interested in at all. We have been successful in negotiating for this revenue, and I think we will be successful in keeping it. I think that the value proposition that we have talked to the networks about and others have as well is let's find ways that we could do things together and share in that revenue but we don't see this as a zero sum gain.

That's helpful. One final question on political. First was the-- you didn't see a lot of money in Texas in the Presidential race just the way that broke. Bush wasn't spending, neither was Obama, now you got a what looks like to be is a hot governor's race. And is there going to be a separate senate race, is that the way it's going to work now? Is that actually incremental so that could provide enough juice to get beyond the $33 million or whatever you reported in '08?

Well it's dependant -- I'm not intimately familiar with all of the laws of Texas politics, but, if Senator Hutchinson resigns to run against the incumbent governor in the Republican primary, which she has indicated she plans to do-- and by the way we have a [vere] request already from Governor Perry for rate quotes in some of our markets in Texas for a primary in March of next year, so we expect that this the primary will shape up to be quite the Donnybrook. I think that the governor has it the right to appoint a senator for the unexpired portion of the term. I know there is a movement in Congress because of what happened in Illinois to require that those be special elections held immediately, but nonetheless we expect that the governor's race and particularly the primary portion of it will accelerate political ad spend in the state of Texas even into the fourth quarter of '09 as well as a substantial component for the March primary in 2010.

You add onto that the governor being turned out in Pennsylvania-- the Arlen Specter both primary contests and potentially general elections contests to remain or retain his senate seat as well as the elections in Illinois and in New York and we think that the 2010 political picture for us potentially the stars are all aligned there, it could be a record year for the company in its history.

Great thanks for the color.

Thank you, Barry.

(Operator Instructions). Next question is from John Kornreich with Sandler Capital.] Please go ahead.

Hi, I have a few questions. When CapEx going forward starting with the Q3, what is the sustainable annualized CapEx that we're looking at that you did $9 million plus in the first half, can you keep it down under $10 million annualized going forward?

John, it will be kind of depending on the project or the ability to reduce expenses with the technology investment. The normalized run rate would be somewhere between $10 million and $12 million, going forward, we will probably end up this year at a number in the $14 million to $15 million range, but obviously the bulk of that has been spent in 2009.

So if I look at your interest expense, which annualizes out at $45 million, I know it's not all cash, but there is a cost to having debt whether it's cash or not, You have $45 million of interest expense annualized CapEx call it 12. There's $57 million, throw in $15 million for corporate overhead, if I'm doing the numbers right in order to generate cash flow you got to have BCF going forward of over $70 million to cover the overhead of 15, interest expense of 45 and CapEx of 12.

I think that's a good math.

This year you -- I expect you should generate some free cash flow, correct?

Yes, we already have this year so far.

Your definition of free cash flow excludes picking interest right?

Yes.

Okay. An interesting exercise which I guess demonstrates the obvious pressure on margins if you assume that 80% of the retrans is cash, take that out of Q2 BCF just to look at advertising margins you would be left with $14 million of advertising BCF, on $57 million of advertising revenue. Taking out the same $6 million of cash retrans. So that's a 25%, 26% margin, in what is normally the best quarter of the year. Do you kind of view margins now at the bottom? And they can get back in to the mid to high 30s eventually.

Yes I shudder to think what most companies balance sheet would look like or P&Ls would look like without retrans, but I think again that's the important thing is that the business continues to evolve. We used to have network comp and that has now for all intensive purposes gone away, but for our company retrans is three times what network comps ever was, if we can use our existing businesses to leverage into other lines of business then we are doing our job. We still view this as a business that is a 30 plus margin business in an odd year and a 40 margin business in a good political year.

We think we can still attain those numbers. I'm looking at the P&L for our e-media efforts in the first half of the year, and e-media business ran at 45% margin during the first six months of this year. And, I'll point out that obviously is ahead of the margin of the station group as a whole. So I think the important thing is we continue to attempt to be aggressive and opportunistic and evolve the business model to maintain those margins and ultimately deliver what you want which would be growth year-over-year.

What did Jacksonville and Little Rock add to Q2 revenue? Net revenue?

About 2 points.

Two points. Okay. So when you have -- I think Tom mentioned that local was down 12 and national was down 32. You weight that 70/30, that's 17% decline in core advertising and so therefore 17 might be more like 19.

Well you have to look at it on a net revenue basis because there is a lot more components that go in to that. Generally the contribution of those two stations on a GAAP basis was two points versus the prior year

Okay, Okay. Couple of questions on Four Points. Is the management -- first, what was the revenue of this company in '08?

You know, John, it's a private company. I don't know I can really disclose that.

You give us what's a rough estimate to what the annual management fee might be, couple million a year?

It's a -- I think we've been public about this, it's a $2 million base management fee and we have an opportunity to earn incentive compensation delivering BCF above a certain level.

Okay. I was going to ask you that. If eventually this group of stations were sold, would you get a piece of the increment?

Again above a certain sales price we would participate, yes.

Finally. I'm embarrassed to ask this, I don't know anything about Four Points, where are their stations, what are their affiliations?

Sure. The primary stations are CW affiliates in Providence, Rhode Island, and in West Palm Beach, Florida, and CBS affiliates in Salt Lake City, Utah and in Austin, Texas.

Four stations.

There are a total of seven because there are digital multi-cast in each of the markets-- well, in most of the markets, all markets except for Providence. There is an independent station in Salt Lake City, there is soon to be a Telemundo affiliate in Austin, Texas, and there are a My Network and TBS tec digital multi-cast, all contributing revenue streams in West Palm Beach, Florida.

Okay. Last question, are you still technically allowed to buy in public debt?

Buy in public debt? We have used our restricted payment basket for this year, which is $10 million. That's the -- the debt retirement we talked about earlier in the call that was the mechanism used to do that. That resets January 1, but unless we are below five times on a total leverage basis, we are restricted to that $10 million basket.

Okay Thanks a lot, Perry.

Thanks John.

Our next question is a follow-up question from the line of Bishop Cheen with Wells Fargo. Please go ahead.

Thank you. Okay. Just three quickies. Tom, welcome to Texas where I'm sure you can be chilling out all summer.

Tom was born and raised here, he is no stranger to Texas.

That's right.

Okay. You guys are having a heck of a summer. The retrans, I know it gets a little loosey goosey because it's projections you are talking about 2010, and then you give presentations where you talk about all the incremental revenue, I'm trying to carve it out a little bit here, I think you said the retrans as you get in to 2010, should have a 30 handle on it. I don't mean to short you. And I'm not trying to pin you down I'm trying to get within the stadium, within the ballpark of what this is here.

That's correct.

Okay. That's the right ZIP code. Somewhere in the 30s as you get all these contracts in place. Then so political, I mean you guys not too shabby really despite a little disappointment in Texas. Last year was tickling $33 million. of political revenue. And with all the stuff going on in the races in Texas, you think it can equal that or top it in 2010?

Yeah I'm trying not to give guidance but I think I would make that assumption based on what we see right now.

Okay. So now we've got somewhere between 65-70, and then the missing piece to that hundred million kind of number and I don't think there has to be a 2010 kind of number, but the rest is kind of this new business development and e-media.

That is correct.

Okay So when we talk about incremental revenue, granted with different margins attached to it, retrans being the highest margin kind of revenue and then the new business probably the lowest margin revenue. But that's where we are talking about giving to the magic kind of 100 incremental new revenue, correct? Between -- as the business -- I think you said evolves, which is a great way to put it -- between retrans, e-media, new business, and political which is every two years.

Bishop the basic components of those building blocks would be the incremental political revenue, retrans in total, e-media in total then our station management agreements.

And the station management agreements I'm sorry.

And that's -- we expect that in 2010, and in 2009 there will be an incentive compensation component on top of the base management fee and we expect continued double digit growth from e-media platform as we continue to give our sales teams more new things to sell.

Right. Difficult for us on the upside to really quantify that because we really don't have enough to go on yet. We got to see what up the side is and the slope of the direction and all that good stuff. We just know what the 2 million base right now.

Yes Bishop I want to clarify the political revenue would be incremental, the growth in retrans e-media would be incremental. But, I think what was said someone picked up on was that the total revenue from political retrans e-media and station management could equal-- could be in the $100 million neighborhood. But to be clear not all of that would be incremental to this year.

Right, yet the total is that triple digit number but obviously when you budget you're always looking at incrementals. So, again, just so I don't misstate it. That $100 million plus is not necessarily incremental but a total contribution?

That is correct.

And then, that was the tough question and then the last question, when you say cash interest term is that cash cash out the door, or is that the cash component of the GAAP interest as opposed to the total interest which has the pick component.

It's the cash component of total interest.

Okay so that's the [cash] and not actually cash expenditure for interest which is usually a supplemental disclosure in your Q's and K's?

Correct.

Okay. That is great, that's the end of my grand inquisition. Thank you.

Thanks Bishop.

Mr. Sook, I will now turn the call back to you, please go ahead.

Thank you even for joining us, we look forward to gathering in three months time to report on Q3 results, and at that point hopefully to give visibility on the end of the year. Thanks again.

Ladies and gentlemen, it does conclude the conference call for today. Thank you for your participation