Nexstar Media Group Inc (NXST) 2010 Q3 法說會逐字稿

Good day and welcome to the Nexstar Broadcasting Group's 2010 third-quarter conference call. Today's call is being recorded. At this time, I would like to turn the conference over to your host Nexstar President and CEO Perry Sook. Please go ahead.

Thank you, Nicki, and good morning, everyone. Before we begin, I just want to remind everyone that all statements and comments made by 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 21a 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 this conference call are made only as of the date of today's call. We'll also be discussing non-GAAP financial information on this call and in compliance with Reg G, reconciliations of non-GAAP financial information to GAAP measurements are included in our press release issued earlier this morning.

So good morning, everyone, and thank you joining us to review Nexstar's 2010 third-quarter operating results. Tom Carter, our Chief Financial Officer, is here with me this morning and after our brief remarkes, we will open the call to your Q&A.

In 2010 Nexstar has consistently posted record quarterly financial results. The third quarter was no exception.

Our television ad revenue strength combined with growth from every other element of our revenue quadruple play drove a 21.1% increase in third-quarter net revenue. And our constant focus on expense management delivered great operating leverage and higher margins with our third-quarter BCF, broadcast cash flow, increasing 54.5%, EBITDA up 65.2% and free cash flow rising 91.3%.

Nexstar generated third-quarter net revenue of $73.1 million, as I mentioned, the 21.1% rise from the year ago period with the increase being broad-based and illustrated by strong growth in local, national, political, retrans and e-MEDIA revenues as well as growing management services revenue. Core local and national revenue increased for a fourth consecutive quarter.

Local advertising, our largest revenue source, grew at a higher rate in the third quarter than in the second quarter 2010 despite tougher prior-year comps for Q3 of 2009. During the third quarter we generated a 12% year-over-year increase in aggregate local and national revenue, a 22.8% rise in television ad revenue inclusive of political advertising and the Company's third-quarter gross television ad revenue of $64.3 million including approximately $6.7 million of political ad revenue as the Nexstar stations are leaders in garnering significant shares of the political ad spend in our markets based on the strength primarily of our local news programming.

Nexstar's ability to capitalize on the automotive advertising rebounded extended into the third quarter. Auto category revenue was up 33% on a year-over-year basis and it reached the highest quarterly dollar level so far in 2010. Completing Nexstar core television revenue growth is the new value we're creating through the further expansion of our quadruple play of revenue drivers which include traditional media, subscription-based revenue or retrans, mobile and e-MEDIA revenue and station management agreements.

In the aggregate, third-quarter retransmission, e-MEDIA and management fee revenue rose 23.9% to $12 million for the quarter and these higher-margin revenue streams accounted for 16.5% of our third-quarter revenue. With diversified sources of growing revenue and a constant Companywide focus on expense management, we have strong operating leverage in our business model that is driving significant year-over-year cash flow and margin growth.

The combination of the strong increase in operating income adjusted for one-time charges and the reduction in capital expenditures led Nexstar's 2010 third-quarter free cash flow to rise 91.3% to $10.1 million. Consistent with the progress made during his tenure as our CFO, Tom and his team have continued to reduce debt in Q3 and he will review those specifics in just a moment.

But first let me review some other quarterly highlights. Third-quarter retransmission fee revenue were above those of Q1 and Q2 and we reached a quarterly record level of $7.7 million. That's a year over year increase of 22.5% in retransmission fee revenue.

Q3 e-MEDIA revenue came in at $3.6 million and that surpassed last year's third quarter by 20.6%. That marked the 16th consecutive quarter of growth for Nexstar's community Web portal strategy and e-MEDIA revenue. We are having good early success with our mobile applications as well from both a utilization and a sponsorship standpoint.

The combination of the third quarter $800,000 fee revenue from our management services agreement came from the Four Points Media Group. It's important to note that in addition to the $500,000 quarterly base management fee revenue, we accrued incentive compensation of $300,000 in Q3 as the Four Points Group reached the 2010 full year broadcast cash flow threshold for our agreement in the first nine months of the year.

In addition, all of the Bcf generated in Q4 will generate additional incentive fees to Nexstar which we expect to be multiples of the incremental $300,000 we generated in Q3. Nexstar generated $3.9 million in new local direct advertising in Q3 of 2010 representing 9.4% of our local billing and we improved this metric by over 20% relative to new business development in Q3 of 2009.

Last month, Nexstar expanded our informational and educational campaign, 101 Reasons that TV Advertising Works which we first launched last October. This innovative on-air initiative reflects our commitment to developing new means of highlighting the advantages and value of local television and its role as the most effective advertising medium for local businesses. With TV usage at record levels, Nexstar stations are more effective than ever in illustrating the benefits of local television as the most effective advertising platform for companies to connect with local customers.

The nearly sevenfold rise in third-quarter political revenue to $6.8 million reflects strong issue, party and PAC spending as well as Senate race spending in Illinois, Missouri, New York, Pennsylvania and Arkansas and of course gubernatorial, congressional as well as state and local race spending. Our gross political revenue has grown over sevenfold in the year to date period through September 30 to approximately $16.7 million year to date.

We're seeing record-setting Q4 activity in political revenue. As such, our fourth quarter alone, we expect to fully generate political revenue more than 30% greater than the $16.7 million booked in the year-to-date nine-month period. In total, we expect 2010 full-year political revenue to exceed the 2008 level of $32.9 million by over 19%.

Now to look at some category data, Nexstar was up in 14 of our top 20 advertising categories in Q3. Eight of those categories produced double-digit increases over the comps in 2009.

These categories generated an 11% overall increase in billing over the prior year led by the 33% year-over-year increase in automotive related advertising. Those auto gains were across the board from local dealers, corporate and dealer group spending and this is now the fifth consecutive quarter of improvements in this category.

Just as in the first half of 2010, auto represented about 20% of our Q3 core television billing. The category strength remains broad-based with increases from both domestic and foreign brands, local dealers as well as dealer groups.

Now Tom will provide further detail on our financials and debt reduction and after which I will come back and talk briefly about our outlook before we open the call to questions. Tom?

Good morning. Thanks, Perry. I will review and reiterate some of the key Q3 line items on the Company's income statement and balance sheet.

Again net revenues were up 21.9% to $73.1 million with core revenue, our local and national ad spend, up 12% to $56.7 million from $50.6 million the previous year. The components of that were local revenue being up 11.8% to $41.7 million and national revenue being up 12.7% to $15 million.

Political revenue as Perry mentioned earlier was strong at $6.7 million for the quarter and retrans and e-MEDIA revenues both continued to show 20% plus revenue growth quarter over previous year's quarter with retrans up 22.5% to $7.7 million and e-MEDIA revenues up 20.6% to $3.6 million.

On the profitability side, broadcast cash flow increased 54.5% to $28.8 million. Adjusted EBITDA was $24.1 million, up 65.2%, and free cash flow for the quarter was $10.1 million, up 90% plus over the prior year's period.

Nexstar's third-quarter 2010 corporate expenses totaled $4.7 million inclusive of $312,000 of non-cash option expense. This compares to $4 million in the year ago period of which $377,000 was non-cash option expense.

As with previous quarters, the year-over-year increase relates primarily to the bonus accruals in 2010 not present in 2009. Our control of fixed and variable costs continues to bring leverage to our financial model.

Station direct operating expenses which consist primarily of news, engineering and programming, selling and G&A expenses net of trade were $37.1 million for the three months ending September 30, 2010 compared to $35.1 million for the same period in 2009, an increase of $2 million or 5.7%.

Approximately 70% of the total dollar increase in our station operating expenses was attributable to higher variable costs, primarily commissions, related to the significant rise in national, local political revenues. In addition, property taxes increased about $300,000 during the quarter due to higher property values. Absent these non-fixed-cost expense increases, station direct operating expenses would have been up only 1.4% on a same-store basis.

As Perry mentioned at the outset of the call, we remain actively engaged in de-leveraging the balance sheet and during the quarter, Nexstar further reduced total debt as we redeemed the $5.3 million balance of the outstanding 13.5% senior subordinated payment in kind notes which were originally due -- which were to be due in 2014 and made subsequent open market purchases at a discount of $4.7 million of the 7% PIK notes and $900,000 of the outstanding 7% cash paid notes.

All of this follows the repurchase in the first half of 2010 or approximately $2 million of the 7% PIKs and $3 million of the 13% subordinated notes in the open market and the repurchase through a cash tender offer of $34.3 million of the 13% notes with a portion of the proceeds of the April financing. I'll now review the capital structure and key balance sheet items as of September 30.

We have made significant progress in addressing some of the most expensive pieces of our capital structure and in all, we have reduced debt by almost $25 million in the first nine months of the year. Total leverage at September 30 was 6.6 times, down from 7.5 times at June 30 and this was versus the total permitted leverage covenant under the credit agreement of 8.75 times.

First lien leverage was one time, down from 1.2 times at June 30 and again versus a covenant of 2.5 times. Reflecting the purchases, the tender offer and the financings in 2010, our outstanding debt consisted of the following.

Approximately $99.8 million outstanding under the term loan, there's nothing outstanding under the revolver. The second lien debt, the bottoms there have accrued to $317.2 million. And again, those are semi-annual interest payments, the first of which was made on October 15.

And then the other debt remaining is the 7% cash pay bonds at $46.2 million, the 7% PIK bonds, which again go cash pay on January 15 of 2011 and $132.8 million and $50 million outstanding under the 11 3/8 senior subordinated debt. The total debt was $646 million and our cash balance at 9/30 was approximately $17.8 million.

Total interest expense in the third quarter of 2010 was $14.3 million compared to $8.7 million for the same period in 2009. Cash interest expense for the quarter was 11.1 versus 4.7 in the same period of '09.

Our CapEx of $3.2 million compares with $4.9 million in the third quarter of last year. Year to date net CapEx was $11.4 million and we project total CapEx for the year to come in at approximately $13 million.

Overall, we have successfully managed the top line, our fixed and variable costs and the balance sheet for cash and remain focused on further actions that can enhance shareholder value and we plan to deploy the record free cash flow in the second half of 2010 to further reduce our debt. That concludes the financial review for the call and I'll turn it back over to Perry for some closing remarks and then the Q&A.

Thank you, Tom. We have clearly and consistently demonstrated that our uniquely diversified business model is yielding strong year-over-year revenue, margin and cash flow growth. The fourth quarter promises to be even more impressive based on our current core pacings, visibility on our subscription-based revenue stream and a truly enormous level of political advertise spendings at our stations.

We obviously today after the election have pretty good visibility on political for Q4 which will be north of $22 million which will put our total for the year north of $39 million in political ad revenue. Given our model, our Q4 cash flows will again grow disproportionate to the topline growth resulting in substantial free cash flow growth as well as creating further ability for us to de-lever.

Nexstar has generated $30 million or more than $1.00 per share of free cash flow in the first nine months of this year and with anticipated fourth-quarter revenue increases and a continued watchful eye on expenses and improving our operating efficiencies, in the period ending December 31, Nexstar will generate the highest quarterly annual free cash flow in the Company's history.

Thanks for joining us this morning. And now let's get to your Q&A to address your specific areas of interest. I'll turn the call back over to Nikki.

(Operator Instructions) Bishop Cheen, Wells Fargo.

Thank you for taking the questions and, Tom, thank you for putting the balance sheet in the press release. That is very helpful.

We aim to please.

Yes you do. So as we're ready halfway through -- almost halfway through Q4, were there any big chunky changes to the balance sheet? Were you able to -- or did you take out any of your different issues through market purchases etc.?

Essentially the balance sheet is today as it was at September 30.

Okay, so, yes, you have been focused like a laser on it and knocking those ratios down, which I'm sure is good for everybody. But as you get into 2011, good news, bad news.

The good news is political might be a record for you if it's $39 million plus. The bad news relative to that is geewhiz, how do you replace it all?

I know you're doing a lot with new media to replace it and developing new business. But what you do in 2011 to avoid the [high data] of inherent leverage spikes from lower cash flow without political?

Well you're right, it is good news/bad news and we will have to try and replace $30 million plus of political in 2011. The good news is retrans and e-MEDIA continue their trajectory of 20-ish area percent growth on a quarter-over-quarter and a year-over-year basis.

Early returns -- and I'll let Perry speak more to this -- for Q1 are good. I don't think you're going to see the same kind of year-over-year growth that we saw 2010 over 2009 that you are going to see 2011 over 2010 but we have a -- we and all broadcasters have the problem about replacing political revenue in an odd numbered year.

That is not news to anybody. I think the key for us is keeping our expenses as low as possible and I reiterated, our operating expenses were up 5.7% but our fixed expenses were up 1.4%. What you're going to see next year is commissions come back down as the topline comes down. That's the unfortunate reality of our business when we have so much political.

So I think it's about expense control, it's about free cash flow management. It's about our CapEx. I think we have a fighting chance to have a nominal to a flat total revenue year next year but you're right, we do have $30 million, perhaps $30 million plus of political we have to replace.

It sounds like it is quarter by quarter kind of gauge on how you are doing on that. That is fair enough. Let me pass it on. I may circle back for a big picture question from Perry. Thanks.

Jim Boyle, Gilford Securities.

If possible, could you give us a feel for how your month by month bookings to date for Q4 look so far?

It's double-digit pacing over the prior year and that is obviously inclusive of political in October and a couple of days in November. But we also have total revenue double-digit pacing increases for November and December, obviously December with the complete absence of political revenue at this point.

Just a note on political, it was a record year for us, Jim. North of $39 million, it's a 19% increase on political over 2008 and a 45% increase over 2006 the last midyear election that we had.

I think the interesting thing to note is that we did have political revenue in 2009 of just shy $6 million. I would expect it would be that much or more as we head toward the 2012 presidential election year.

But Tom is right, the net replacement is approximately $30 million which will be mitigated some by the continued growth in core revenues which we project will be a mid-single-digit amount next year. Pacings for the first quarter would indicate double-digit pacing over the prior year on core revenue.

It's obviously at this point a small sample size, but we think there will be core revenue growth in the odd numbered year and as Tom mentioned, double-digit growth in e-MEDIA, retrans which will help to backfill the political difference between an odd and even year.

The press release notes the top ad category. Auto had quite the surge. What about the other top-five core advertising category growth in Q3?

Sure, automotive was plus 33, Jim. Our second category, fast food, was plus two. Again, paid programming for us which is long-form infomercials, down by design about 10%.

But then you have the other categories that were up double-digit growth were radio cable newspaper up 47%, telecom plus 22, state lottery advertising was plus 11, home repair plus 12, insurance plus 12, grocery stores plus 25. And attorneys were plus 9.

So from our standpoint, 70% of our tracked categories were up over the prior year. And you will remember, the comps started to get tougher as the business started to turn in September of last year which obviously was inclusive of Q3 of '09.

Okay, in a nonpolitical year next year, you spoke about the topline. Presuming a sluggish economy, something that certainly you can't control, do you have any sort of margin expectations that you're going to shoot for?

We typically operate at a high 30% EBITDA, approaching 40% EBITDA margin in a typical even number of year and you can probably take half -- four or five points off of that -- half a dozen points off of that in an odd numbered year.

Our total operating expenses will be down next year because of the variable expense. Non-variable expenses will be up 1%.

So on an all-in basis, operating expenses will be down, CapEx too this year to next year will be virtually flat at somewhere in the $12 million, $13 million range. So we will play very well within ourselves and as Tom says, there is a fighting chance if the core revenue growth is more than a mid single digit, there is a fighting chance that net revenue could be flat next year.

We're not guiding to that nor forecasting that at this point. We don't have enough visibility. But I can tell you that the early returns on Q1 of 2011 are double-digit pacing growth in each month of the year over core revenue in 2010. And that's good news but as I said, it's a small sample size at this point.

Final question. Since you were probably the most high-profile pioneer in retransmission consent in the past years, do you believe that the current retransmission consent back and forth is broken like the other side says?

Since I was one of 3 million subscribers that was just held hostage by two very large media companies that didn't seem to budge or care about us 3 million as high-profile programming disappeared for two plus weeks, do you think the FCC or Congress is going to get involved or do you think this just happened between two very stubborn folks?

Well I obviously can't comment on Fox or Cablevision. I can tell that of our 213 retransmission agreements, we have successfully reached consensus and signed agreements for renewals last year, this year, with all but a dozen of those and those are agreements we are negotiating with now with no outages.

But I think again from my perspective, Congress created this act in 1992 and it was the Fair Competition Act where we were given the opportunity to negotiate for retrans and I think Congress intended it to be a free-market negotiation. And I think if anything, last night's election said loudly to me that the American people are expressing a strong preference for less government intervention and less government invasion into their professional and personal lives.

So I don't think the system is broken. There are always alternatives when one provider and one distributor can't get along and I think it will continue to be a free-market negotiation.

There may be some high-profile spats from time to time. But I think that -- I saw a recent research piece that more people were denied access to cable due to power outages than due to retransmission consent issues disputes in the last five years.

So while anything that happens on Long Island is going to be big news, I do think that those kinds of disputes resulting in service interruption are probably the exception more than the rule. But again, as we said in 2005, if we don't feel that we're being dealt with fairly, then there should be no presumption of continued carriage of the signal absence an agreement.

Aaron Watts, Deutsche Bank.

Perry, I'm trying to figure out where you fall on the political spectrum after that last answer. But anyway --.

I think in the vast majority, how about that?

Fair enough. One follow-up on your comments about your outlook. It sounds like you're cautiously optimistic on the demand for your core advertising.

Can you just talk a little bit about pricing? I imagine you probably had some advertisers come in when you lowered your prices through the recession. How are you hanging on to those advertisers on the local level?

Are you finding them to be sticky? And once political goes away, do you think you're going to be able to hold up pricing, maybe not to where it's been for the last couple months, but still to a reasonable degree?

Well, Aaron, as you know, it's purely a math equation. We are like the airlines. Those planes go in the air every day and the seats are either sold or they go empty.

We actually have some advertisers that shied away in October from advertising. They didn't want to compete for the finite amount of inventory we have with all of the political candidates and issue ads that we had on the air.

Our three regional vice presidents have conducted their fourth-quarter forecast meetings, bottoms up forecasting with every one of our 33 markets in which we control the revenue picture. And I can tell you that we heard on more than one occasion of money that's on the sidelines that is waiting to post-election -- and the interesting thing, this election was literally a week earlier in the quarter than the 2008 election.

So there were a full eight weeks of business to be done here post-election for the fourth quarter and we've heard particularly from some fast food accounts and some others that they were holding off on October and actually have budgets to be released in November and December. But I think obviously for us, local is our focus, the fact that despite $6.7 million of political revenue, $6.8 million in the third quarter, we were able to increase our local revenues by 12% and that is a combination of new business development, pricing, flexibility and bringing ideas to advertisers that help them move their business forward and I see no reason for that calculus to change going forward.

And then you also talked about how your commission expense is likely to come down in 2011. On the fixed side, do you have any changes or benefit over the next year or two with regard to your programming expenses? Any sort of expensive contracts you signed up in the past that are going to roll off, maybe what that looks like?

Well, we do have a contract in I think nine Nexstar markets with a lady by the name of Oprah Winfrey and that expires in September of 2011. That's approximately 25% of our entire programming expense line and that will be replaced by and large with local programming.

So there will be a portion, a fraction of that license fee that will be reinvested into the news budget to create local news or information type programming in those time periods by and large. The bulk of those license fees will be put into our pocket as savings and go to the bottom line.

Marci Ryvicker, Wells Fargo.

The first one is just regarding political. It feels like it came later, but not later. So do you get a sense that the crowd-out effect in the fourth quarter in general is just greater than it normally is? I know there's been a rule of thumb that political has displaced 50% of traditional advertising, but do you think that that 50% could be higher?

Well it's a double-edged sword. I think from our perspective, demand was so high, so obviously then rates were high. I think the actual dollar displacement was probably less -- at least the way we tracked it -- in the month of October.

We did over $20 million in political business in the month of October and our displacement of core advertising revenue was less than 50%; in fact, substantially less. now I think the good news is we think those dollars can roll into November and December since the election was so early in the month of November with little disruption.

But obviously when rates go from $300 to $3200 because of political demand and Good Morning America in Erie, Pennsylvania, there are going to be local advertisers that are going to say I'll wait until all that's over and then I will come back and talk to you.

Okay and then the other question I have is just on the retail category. It's been spotty across the board for most media. How has retail been for you and do you see that being a category of upside for next year?

Well we look at retail a number of different ways. Furniture for us was basically flat. But department and retail stores was plus four for us and then a [service various] which includes some retail elements was plus 27 in the quarter.

So we do not see -- it's a category that quite honestly this year has been a pleasant surprise that we've seen growth in every quarter of the first three so far this year and expect that with holiday spending now, expecting to be up versus last year. There will be advertising out there to try and capture market share of that, so we think for us, our retail spending will continue to be up over the prior year in fourth quarter.

Jonathan Levine, Jefferies.

A lot of my questions have been answered. Just wanted to touch on just kind of your thoughts on potentially a refinancing for the 7% and how you're thinking about that in the near term.

Well, I'm not focused on the 7%. We have the $50 million of the 11 3/8. I think we've been pretty consistent in addressing the highest coupon parts of our capital structure. So that is probably -- obviously that also has a nearer-term maturity, so that's probably the first thing on our hit list and that's where we can get a good bang for our buck.

As it relates to the sevens, clearly the market is very robust right now, but we enjoy the 7% coupon. It's a 2014 maturity. We will have after our Q3 and will increase that substantially after our Q4 substantial free cash flow that we can use to pay down debt. We will have substantial free cash flows between now and 2014 to address any maturity issues as it relates to the seven, but right now, we're focused on the 11 3/8.

And then just in regards to your RP basket, what is the availability at this point as of Q3?

Well I don't -- I haven't filed my compliance certificate, so I can't tell you what that is. I know that we have a marginal amount, a nominal amount remaining from Q2 and our Q3 RP basket will approximate our free cash flow that we reported in the financial statement. But there's more. There's a finer point to that in terms of the definition.

John Kornreich, Sandler Capital.

I just have a few small questions. On retrans, you're annualizing $30 million now. Could it be $35 million next year based on your negotiations and settlements?

Short answer is yes, John.

You mentioned that the fourth quarter free cash flow will be an all-time high. Can you refresh what the previous high was?

I will have to get back to you specifically on that, but I want to say it was the $20 million area. I'll have to get you the specific number.

So your free cash flow this year is going to be roughly in the area of $50 million. It's 30 now and you're going to -- you said you'll beat the 20?

Yes, it will start with a 5.

Okay, excellent. I may have missed this, you December-only ad revenue will you have confidence be up?

Right now it's pacing double digits ahead of December of '09 and so our projection is that it will continue to be up and will be up through the end of the year.

Management fees, I missed your comment on that for the fourth quarter because there will be incentive fees in there in the fourth. Does that mean that the total management fees in the fourth quarter could be double or triple the $800,000 of the third quarter?

Again, the short answer is yes. The longer answer is we have a dollar amount threshold which we have to meet in order to start to accrue a management fee. We met that through the first nine months.

You mean a management fee bonus?

Management fee bonus, right. So all of the broadcast cash flow of the Four Points group in Q4 is subject to a management fee -- subject to your bonus or incentive fee in addition to our $500,000 a quarter base fee.

500 a quarter -- how did you get 800 in the third quarter?

500 base and 300 incentive.

I thought all the incentives was in the fourth quarter, okay.

No, so that's really the point is we have already started accruing the incentive fee in the third quarter and all of the fourth quarter broadcast cash flow is subject to that incentive fee.

So your management fees for the whole year could be approaching $4 million?

They will be I would say that or greater.

Wonderful. That's it. Thanks a lot.

Edward Atorino, Benchmark Capital.

That was sort of answered -- Marci sort of answered it, so I'll pass. Thanks.

Mark Rose, RBC Capital Markets.

Thanks for taking my question. My question has to do with the 11 3/8 which you said you are focused on. Looking at the cash flow and from what I can tell with the covenants -- and I am still diving through other documents, but is there anything that prevents you from issuing opco debt or doing an add-on to retire the -- or to pay down the 11 3/8 currently or do you need to wait for certain covenant hurdles?

We need to wait for certain covenant hurdles, some of which will potentially expire or be met when we file our Q3 financial statements. Others are still lingering out there. So it's a pretty complex needle that needs to be threaded. But we think we have a path to it in the not-too-distant future.

Can you outline what stays outstanding? I think I understand what you've exceeded when you file your numbers.

Clearly the relevant indentures are the 7% PIK and the 7% cash pay and those two do have some differences between the two.

Okay, all right, we will take a better look then. So essentially you think by end of fourth quarter, you could be beyond all those current hurdles, plus with your cash flow (multiple speakers)

The only fine point, when we report our fourth quarter, obviously we have to -- fourth-quarter results but we obviously have to be able to report those results.

Right. If you "meet potential expectations" here, also too you'll have a substantial amount of cash. You might even be able to just do it with cash.

Right but also keep in mind that at some point it becomes a dollar-denominated equation because you could -- those 11 3/8 become callable at par on April 1. So I'm not in any hurry to pay a big premium above that, understanding what we can do in the not-too-distant future.

Bishop Cheen, Wells Fargo.

As threatened -- Perry, I always thought you were as good as Juan Williams for punditry and big picture comments. You proved some of that already today.

I'm not going to offer you a $2 million contract, but I am going to ask you for free to -- you already gave us your view on retrans. Can you give us what your view post election is on the broadband plan, net neutrality and ownership regulations?

I think that there are priorities in the Congress that are probably way ahead in the batting order like determining what the income tax and tax rate situations are going to be less than 60 days from today. From my perspective, again I think this election was a mandate for less government intrusion, smaller government, less spending.

And so I think that those increasing government regulatory fingers on the scale if you will is not in the political zeitgeist right now nor is it in the national will to accomplish those things. We think in terms of the broadband plan, I am still -- the looming shortage is based on statistics promulgated by the broadband industry and I'm not sure those have been held up for inspection just yet.

I think that when we talk to legislators -- and I was just with Senator Orin Hatch last week and we had the discussion about maybe we need to do a full spectrum inventory of all spectrum, look at device efficiency, everything from my PDA to my broadcast tower, and then let's develop a cogent and comprehensive national broadband plan rather than just picking at and nibbling at pieces around the edges. I think that that's the sense I got even before the election of where the Congress was headed, that let's not ready, fire, aim here. Let's take a more comprehensive look.

I think that takes time. But in the meantime, I think broadcasters are deploying more and more content to mobile devices. The results of the open mobile video coalition test in Washington, DC show that local broadcast news was the preferred programming on those mobile devices. So we have the preferred programming on that screen.

I think that we have an opportunity with mobile to develop a business that may dwarf everything that we're doing now. I think that your PDA is rapidly becoming your wallet and if it also becomes your mobile television screen, I think television broadcasting then is at the preeminent place in the food chain in terms of delivering value to advertisers which is how we get paid, but also to consumers.

So I think that the market is rapidly working through to find market-based solutions that don't really require the government's thumb on the scale. So that's I guess a political commentary but also a little forecast on what I see as the free call option right now embedded in all of our stocks which is the mineral rights which is our spectrum and I think that the market is moving toward monetization of those mineral rights and it's just a matter of time.

Alright, fair enough. You know I'm going to pin you next time too, so it's going to be an ongoing series.

I'll look forward to it.

Thanks, Perry. Thank you, Tom.

Andrew Finkelstein, Barclays Capital.

Just wanted to ask about visibility, Perry. It was probably destroyed in the heart of the recession. It seems like buys -- maybe you are getting orders earlier.

Can you tell us where we are in terms of maybe looking back to 2007 today in terms of the timing of buys coming in and are clients willing to talk about their -- let's say their budgets roughly or [more] concretely for 2011, where we are sort of on that spectrum?

I would say that I think our visibility is probably back to a more routine level like it was in 2007 and 2008. The anomaly was 2009 and I judge that really by when our regional vice presidents go into the field to do their quarterly forecast meetings.

In 2009 we were doing them kind of at the end of the first month of the current quarter because we just had no visibility beyond that to develop a quarterly revenue forecast. We are now doing them as we have traditionally in the last month of the quarter prior.

So that equates to about six weeks better visibility than we had last year and that's about routine. I think that again I'm looking at first quarter and we've got double-digit pacing in January, February and March again with a small sample size in terms of business on the books.

But pacing against those comps positively obviously would indicate that there is business that has moved that is on the books earlier than it was prior. So I think that it's becoming fairly back to a more normalized business cycle for us which would be probably six to eight weeks visibility in front of the current quarter.

I guess that's the point, we've sort of come back to a more normalized visibility cycle. Looking into the first quarter, how much looks organic versus sort of just a sort of timing adjustment?

Hard to say. I could tell you in fourth quarter we see more advertisers, we have more accounts on air and they're spending bigger budgets. So it's more advertisers, bigger budgets. And again obviously that drives -- that will drive rate.

And again, we've got double-digit pace in November and December on our core ad revenue and that is on the other side of political. So you know, the rest of fourth quarter looks a lot like third quarter quite frankly. If you exclude the political tsunami, that money is already in the bank.

One more question, something that no one has really talked about in a while just given the strength of the rebound. But competition in the local media marketplace from either local cable or other media, how do you think TV is holding up and do you think there are any changes now or sort of moving into 2011?

It is obvious to me and I think it is a definite trend that local television is gaining share. If you just look at the results through the first half of this year, local television broadcast was up roughly 20% on its core revenue excluding political where you look at -- the networks in the upfront last year were up high single digits.

You talk to radio operators and depending on whether they are in large markets or small markets, it's somewhere between low to mid single digits increases and I don't even know if that's particularly sustainable. Local cable reporting kind of again on a much smaller sample size, in the first half of the year, up kind of high single digits.

And on their ad reported spend, newspapers down, directories down, outdoor down. Obviously if you do the math, local television is taking an increasing share of the marketplace and we see that in our local markets where our local revenue on the core side is growing and we see a lot of that money coming directly from newspapers and our online revenue is growing and a lot of the growth there is coming straight out of the local directory business and that is by design.

But I see -- I heard a lot of advertisers in 2009 said that they cut their ad budgets but they're spending a higher percent of what they have left on television because they knew that that works and every one of our salespeople has a memo from me in their briefcase saying our challenge and our opportunity is to maintain that share of mind and that share of wallet as the economy continues to improve. And I think we have been successful in doing that so far in 2010.

Great, thanks.

I'm showing no further questions at this time.

Thank you very much, everyone, for joining us this morning. We very much look forward to sharing our fourth-quarter results and our record fourth-quarter free cash flow story with you early in the new year. Thanks again.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the conference. You may now disconnect. Everyone have a wonderful day.