Salem Media Group Inc (SALM) 2008 Q3 法說會逐字稿

Good afternoon.

My name is Michelle, and I will be your conference operator today.

At this time, I would like to welcome everyone to the Salem Communications third quarter 2008 earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question and answer session.

(OPERATOR INSTRUCTIONS) Thank you.

Mr.

Masyr, you may begin your conference.

Welcome, and thank you for joining us today for Salem Communications' third quarter 2008 earnings call.

As a reminder, if you get disconnected at any time you can dial into 973-582-2717 or listen from our website at www.salem.cc.

I'm joined today by our Chief Executive Officer Edward Atsinger and our Division President of Non-Broadcast Media David Evans.

We'll begin in just a moment with our prepared remarks.

Once we're done, the conference call operator will come back online to instruct you on how to submit questions.

Please be advised statements made on this call that relate to future plans, events, financial results, prospects, or performance are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those anticipated as a result of certain risks and uncertainties including but not limited to market acceptance of Salem's radio formats; competition in the radio broadcast, internet, and publishing industries; and new technologies, adverse economic conditions, and other risks and uncertainties detailed from time to time in Salem's reports on Forms 10-K, 10-Q, 8-K, and other filings filed with or furnished to the Securities and Exchange Commission.

Listeners are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof.

Salem undertakes no obligation to update or revise any forward-looking statements to reflect new information, changed circumstances or unanticipated events.

This conference call also contains non-GAAP financial measures within the meaning of Regulation G, specifically station operating income, EBITDA, and adjusted EBITDA.

In conforming with Reg G, information required to accompany the disclosure of non-GAAP financial measures including a reconciliation of such non-GAAP financial measures included in this conference call to the most directly comparable financial measures prepared in accordance with GAAP is available on the Investor Relations portion of the company's website at www.salem.cc as part of the current report on Form 8-K and earnings release issued by Salem earlier today.

I'd now like to turn the call over to Edward Atsinger.

Thank you, Evan.

Thank you all for joining our third quarter 2008 earnings call.

Let me start by focusing on the current economic situation in terms of the challenges that it presents to the radio industry in general and to Salem specifically.

As you know, the third quarter was very difficult for the radio business.

According to the RAD, total industry spot revenue fell more than 9% for Q3.

In comparison, Salem's total revenue decreased 4%.

We face the same challenges as our general market radio counterparts for the advertising dollars and that business declined 11% for us.

But our block programming business again demonstrated its resiliency with a decline of only 2% and our non-broadcast businesses grew 17%.

Our major energy has been directed toward minimizing the impact of these revenue declines on our EBITDA by identifying and implementing appropriate cost cutting measures as well as pursuing a number of asset sales.

Since our last call, we signed an agreement to sell WRVI-FM in Louisville, Kentucky for $3 million to WAY-FM, an organization which operates non-commercial contemporary Christian music stations around the country.

We expect this transaction as well as the sale of WRFD-AM in Columbus, Ohio which we announced earlier for $4 million to close in the fourth quarter.

Both of those should close some time in the fourth quarter.

We are actively engaged in pursuing opportunities to sell additional assets in our portfolio, and we expect to announce further asset sales in the coming weeks.

In the area of cost containment, a number of things have taken place.

These included eliminating the President and COO position.

We brought out Eric Halvorson back to join the company in July of 2007.

He has been with the company off and on since 1985 including serving on our Board.

He was brought back to develop a plan to downsize and implement some strategic restructuring, consistent with the new economic environment.

He accomplished much of what we brought him into do.

Ultimately he identified his own position as one that could be eliminated, including his Board position, as further cost reduction measures, and we have implemented those.

Last week we eliminated four senior management positions and reorganized the responsibilities among the remaining management team members.

Given the current economic realities we believe these responsibilities will be managed as effectively as they were in the past and without any negative impact.

These Senior Management reductions are in addition to other staff layoffs that have been made over the past year.

We've now reduced our annual payroll by more than $7 million.

We've also instituted freezes in hiring and salary increases, the elimination of all non-essential capital expenditures and further reductions in marketing expenses, and there are other areas of reduction that we will continue to pursue.

The major purpose of these expense reductions and asset sales has been to position the company to avoid having to seek an amendment to our bank credit agreement.

Our bank leverage ratio will decrease from 6.75 to 5.75 on March 31, 2009.

It is our intention to reach that date with our actual leverage ratio adequately beneath this covenant requirement.

We think we've taken the steps necessary to achieve this.

We think we've got a good plan, though obviously given the volatile economic conditions, if there is extreme further deterioration in the economy, it could make this more challenging.

We will continue to proactively discuss the situation with our bank group as we have in the past, such as if an amendment should prove to be necessary, we will have the support of lenders behind us.

At this point, I'll turn the call over to Evan for a discussion of our third quarter results and to provide fourth quarter guidance.

Thanks, Ed.

For the third quarter, our total revenue decreased 4% to $54.4 million and adjusted EBITDA decreased 14% to $12.7 million.

Net broadcast revenue decreased 7% to $47.4 million and station operating income decreased 13% to $16.4 million.

We have 41 of our stations that are programmed in our foundational Christian teaching and talk format and these stations contributed about 42% of our total revenue.

Our block programming revenue, which accounts for 66% of the revenue on these stations, decreased 2% on a same station basis.

Same station net broadcast revenue for these stations was down 9%.

We're continuing to see weakness in national and local spot advertising, most notably from the loss of revenue in the financial services and related categories in automotive.

Our 12 contemporary Christian music stations decreased 13% for the quarter and contributed 18% of our total revenue.

We're seeing same issues this quarter as we had mentioned last quarter.

National spot revenue declined 20% while local spot revenue was down 12%.

KLTY in Dallas was hit particularly hard with a 37% shortfall in its national spot revenue.

As you know, our music station has to generate more revenue from general market radio advertisers as compared to our talk stations.

As a result, this format has seen greater revenue declines than our other formats, particularly in national business.

Our News Talk platform, which consists of 24, stations had a 3% decline in same station revenue.

Overall, these stations contributed 13% of our total revenue.

As we discussed in our last call we added WNYM-AM in New York to this format in August and thus far we are pleased with its initial results.

In September, we rolled out our Spanish Christian teaching and talk format in Omaha, Nebraska.

We continue to be impressed with the results of this format in the six markets where we now operate.

Revenue on these stations was approximately $650,000 for the quarter which was well above prior year.

Looking at our broadcast results overall on a same station basis, net broadcast revenue decreased 7% and SOI was down 12%.

Same station block programming revenue declined 2% to $17.1 million.

Same station local advertising revenue was down 13% to $18.3 million.

Same station national spot and network advertising revenue was down 3% to $6.7 million.

Other revenue, which includes infomercial revenue, increased 2% on a same station basis to $3.4 million.

Our same station results include revenue from 81 of our radio stations in our network, representing 96% of our net broadcasting revenue.

We once again had another strong performance from our publishing and internet operations.

For the quarter, non-broadcast revenue increased 17% to $7.1 million, or 13% of our total revenue.

Revenue from our internet businesses grew 25% while our publishing business grew 9%.

Our non-broadcast business generated operating income of $600,000 for the quarter as compared to operating income of $400,000 in the prior year.

These results were impacted by the start up losses associated with the launch of our Townhall Magazine in January of this year.

During the quarter, we had asked members of our senior management to consider voluntarily surrendering stock options that were significantly underwater.

As a result of surrendering of options that were unvested, we recognized an additional $1.6 million in stock based compensation expense during the quarter.

Additionally, we tested for impairment the FCC licenses in certain Markets during the third quarter.

In connection with this review, we recognized an impairment of $20.3 million associated with the FCC licenses in our Cleveland market.

As usual, we conduct our annual test of all of our FCC licenses during the fourth quarter.

As of September 30 of 2008, we had net debt outstanding of $335.8 million.

We were in compliance with the covenants of our credit facilities and our bond indenture.

Our credit facility leverage ratio was 6.07 versus a compliance covenant of 6.75, and our bond leverage ratio was 6.14 versus a compliance covenant of 7.

For the fourth quarter of 2008 we're projecting total revenue to decrease in the high single digit range over fourth quarter 2007 total revenue of $58.5 million and we also projecting operating expenses to decline in the mid single digits as compared to fourth quarter 2007 operating expenses of $49.5 million.

This concludes our prepared remarks and we would now like to open the call for questions.

Operator?

(OPERATOR INSTRUCTIONS) Your first question comes from the line of Lee Westerfield with BMO Capital.

Hello, Lee?

We don't hear you.

Gentlemen, can you hear me now?

Yes.

Sorry, I think I had it on mute, so good evening.

Ed, clearly we're seeing unprecedented times in the advertising environment and these are very difficult things to budget for.

What I want to ask is this -- you recognize and you highlighted in your comments that you have a step down in your debt covenants at the end of I believe it is March 31 next year and then another in the future.

You've already set the stage with some cost reduction programs.

What I want to ask is really two questions.

Number one, Ed, if you could help me and the audience understand what the legacy, what the cost reduction comparatively would look like if just carried straightforward from the fourth quarter into the first quarter how that compares with the first quarter of 2008, so we can model out at least as far as March 31 on a cost basis, assuming no further actions than you already planned for the fourth quarter this year.

And then the second question further relates to this upcoming season of renewals in your block programming and what we, I know at this stage about 1.5 months in advance the process -- but what we might anticipate in terms of block programming, looking into that stable revenue stream as it gets renewed late this year?

Let me deal with the block program and Evan can address your question regarding the sort of pro forma back the fourth quarter reductions that you're talking about -- and that may be a bit complicated and I don't know, Evan can decide, but we may have to get back to you with a more comprehensive answer on that.

We have noticed, and we've commented on this in our past couple of calls, some weakness on I would say maybe a half dozen of the block programmers that are among the 35 or 40 national ministries that we deal with pretty consistently, about a half dozen that began to have some difficulties.

I think some of them were fairly unique to these organizations.

For example, in one case, the speaker and the leader of the organization died.

In another case, the speaker had died four years ago and the program carried on fairly well for a while, but then there were some additional, they began to be some fallout.

There were other unique circumstances that uniquely associated with I'm going to say four or five of these organizations, and the 2% decline that we've experienced can be largely attributed to those organizations, and that pattern actually began two, three, maybe four quarters ago, at least two or three.

The renewals, it's still early timing for those but so far they are going reasonably well.

I think in this environment it will be unlikely that we will look for much in the way of increases, but the goal will be to maintain so the block doesn't decline, and I think based upon what we know about the principal partners we have, they all seem to be in pretty good shape.

Obviously fourth quarter is a big time for them and we'll see how that progresses.

By the end of fourth quarter, that could change or there could be some more pressure on those organizations.

But at this point, I feel pretty good about block renewals.

I'm not going to be, I don't think it's going to be an aggressive attempt to increase obviously in this environment.

That's understandable.

And Evan if it's a short answer, I don't want to burden the conference call with a lot of detail if it's a long answer, but if it's a short answer as far as pro forma and cost, great.

If not, we could talk offline.

Really the best way to look at next quarter's cost projections are the fact that we're projecting a mid single digit decline in our cost -- that's taking into account the staff reductions, the reductions in marketing that we have already instituted that we expect to continue into the next quarter.

Okay.

Thank you.

Gentlemen, thank you very much.

Thanks.

Your next question comes from the line of Jim Goss of Barrington Research.

Hi.

I have a couple questions.

One related to the $1.6 million stock based comp expense, the voluntary giveback you mentioned -- how does that work exactly?

And if it was underwater, what does the charge relate to or how exactly does that get calculated?

The accounting rules essentially when you grant a stock option you have to use a Black-Scholes model to come up with an intrinsic value for each option granted and you recognize that expense over the vesting period of these options.

So regardless of the future performance of the stock price, whether they go underwater or they are in the money, you're still recognizing the same expense.

In this situation we had unvested options that still had value to be amortized over the remaining vesting periods, but those options given back we were required to recognize the expense associated with those unvested options.

And Jim, just for a little clarification on that, it was actually, I was probably the principal mover there since I had the largest number by far of options, underwater options, and in fact I don't think I've ever exercised one.

But in any event, they were way out of the money, and our stock option plan initially was established with a certain number of options over the years since we've been a public company, the comp committee had pretty much dispensed those and there was very little left in the stock option pool.

So that in the event they would grant any in the future if it was justified, it may be, it may not be, who knows, but the problem was they simply had no capacity.

And I'm sitting with others and the management team were sitting with large numbers of options that were so far underwater that it just didn't seem to make any sense.

And we voluntarily, most of us voluntarily surrendered those with no strings attached, no understanding it's going to mean anything.

The only motivation would be to recharge the stock option tool so that the comp committee at least has the flexibility as conditions develop, but if they want to, if there's a need to grant options to anybody for any purpose, they at least have some that they can grant.

Okay, and to the extent you do it at this stage, there isn't necessarily an advantage to the company because it really wasn't a threat of dilution for a long time anyway.

And they weren't of value to you or the others, but if new options were granted, it would be based more on the stock price that is currently in existence.

Well, granting options that are so out of the money that they're meaningless is an exercise in futility.

The board, the comp committee may well decide there's no event in the foreseeable future that justifies it.

Before they had so little capacity they didn't have that option.

They at least have the option now because I think the pool has been recharged by a substantial number of options, should conditions develop.

And there are all sorts of circumstances that develop where the comp committee may want to look at options for a variety of purposes.

That's their call, and we'll see.

Where did that show up on the income statement?

Where should I be looking for that?

A majority of that charge fit corporate expenses.

Part of it hit broadcast and a small part hit non-broadcast, but the predominance of the $1.6 million will be in corporate expenses.

Okay, and that's why you gave guidance that was separate from that and tied to last year's corporate expense levels?

Correct.

And other media revenues actually declined by 2% or 3% this quarter which hasn't been a commonplace event.

I wonder if you could talk about that and maybe Dave might comment on if there are other areas of a non-radio nature, that he plans to be getting into.

The other media revenues year to year for Q3 '08 compared to Q3 '07 were up 17%.

There is some seasonality in our non-broadcast business from Q2 to Q3, so you may see a modest decline from Q2 to Q3.

We have three magazine publishing titles that are published six times a year, so there are two issues released in the second quarter, but only one issue released in the third quarter.

So in our non-broadcast business you will always see stronger Q2 and Q4 and weaker Q1 and Q3.

That is simply the seasonality of the magazine publishing business, nothing more.

So the best measure of performance is the year to year comparison and we're up 17%, we're up 25% on the internet side of things.

We had substantial growth in page views at our conservative opinion website, Townhall.Com.

That page view growth pretty much started kicking in at the time the Democrat Convention and it went crazy with the announcement of Sarah Palin as the VP nominee and with the Republican Convention, so that drove our internet performance in the third quarter.

We also saw very strong performance from Xulon Press, our Christian print on demand book publishing business.

Okay.

I think that's it for the moment then.

Thank you.

Your next question comes from the line of Bishop Cheen with Wachovia.

Hi, Ed and Evan and David.

I think that's you there, isn't it?

It is.

Can you guys hear me?

Yes, we can.

Try and keep this brief.

I know it's a long week.

So let me talk here on the balance sheet.

It's $335.8 million net.

Net of what?

Cash?

Correct.

How much?

Very little cash.

Yes, I know you guys generally have very little.

$184,000.

Okay.

I like it.

So we have this maturity, and you correct me if I'm wrong, we have the revolver maturing come end of March?

Correct.

And I was just looking to see how large, it's not a large revolver.

I thought the last I looked at it, it was around $60 million?

It's a $52.5 million revolver.

There have been some commitment reductions.

We owe $0 on the revolver, however.

Right, okay.

And then no other big maturities until 2010 when you ring the bell.

I mean, that's the big bulge in the pipeline, so the next big event for you guys obviously is the step down and to avoid having to negotiate for waivers because nobody knows -- you stop me if I'm wrong here -- nobody quite knows what the mood the banks are, is, and how it may change and what it's going to be like to be at the front of the line or the back of the line because the line seems to be forming.

And if I have said anything that does not represent what you are looking at, please let me know.

Your analysis I think is fairly accurate and our stance is to try to not get in that line.

I hear you.

All right, and you've got, I'm just trying to get a full assessment.

By Q4 you're going to have roughly $7 million in and you've got the pending acquisitions what do we have?

$4 million pending to go out on the last acquisition that is pending?

Roughly $7 million of cash inflow and $4 million that you're waiting to pay on the last acquisition?

We have, the only real pending acquisition --

Oh, I'm sorry.

It's $27 million.

It's $27 million.

And we have paid that money already.

It's just, it has an FCC issue to get it transferred to us.

Oh, so that's already reflected in the 9/30 balance sheet or is that an October or November?

That was in the 9/30 balance sheet.

Okay, great.

So it's really just $7 million -- ?

So $7 million coming in.

Right.

And everything else is -- it's up to us in our modeling, but you've given us the guidance.

The last thing I just want to focus on is the covenant EBITDA to the actual EBITDA.

I mean, right now when we do the math, if we just do the straight math, it looks like your leverage is more like 6.5 times, not 6.1 times.

Is there anything changing short-term that is going to tighten up the covenant carve out versus the actual leverage?

Because I believe the carve out, and correct me if I'm wrong, both in the bond and slightly different ratio in the credit facility has to do with start up expenses on a trailing 18 month period or something?

Bishop, we're allowed to exclude from cash flow any losses or basically the cash flow associated with a station that we acquired and launched, reformatted into one of our key formats.

Right.

And we are also able to exclude 50% of the debt associated with that acquisition, so that's your primary difference between call it actual or GAAP EBITDA as compared to what we have in our leverage ratio calculation.

Right, so that change is not necessarily going away any time soon, because you always have something that you're launching or starting.

Correct, yes.

The biggest station in there right now is the Miami acquisition that we bought, WAMD, and it will close the early part of this year for about $12 million.

So you've got a $6 million delta just in debt alone.

Right.

Okay.

And I guess the other thing that -- it's a side bar, I keep asking everybody, your internet, it's just fabulous because you want to stay in shape and it's a real tool but is there EBITDA or cash flow coming out of the internet?

I know about the top line growth, but are you seeing contribution to your earnings from your internet?

Yes, the non-broadcast division had profits of about $600,000 in third quarter.

The profits would have been higher than that except in January '08 we launched our Townhall Magazine so we had some start up losses for that title in the third quarter.

So yes, our internet business was pretty profitable and showed some solid growth from Q3 a year ago, both on revenue and --

That $600,000 is the non-broadcast division which has both our publishing, old radio publishing assets and then internet based assets; correct?

That's correct, yes.

Okay, so but you're saying that rest assured that part of that $600,000 in Q3 and whatever is going to be the run rate for the year, that the internet is actually contributing cash flow?

Yes.

Evan might have the precise breakdown in front of him, in which case he's going to interrupt me.

Of that $600,000 the magazine publishing business in Q3 lost a little money because of that Townhall Magazine start up I mentioned.

The print on demand book publishing business I would say made a couple of hundred thousand dollars in the third quarter, and the balance would have been the profit of our internet division, so that would probably be $300,000 to $400,000 of profit off the top of my head.

Evan might correct those numbers.

Pretty much dead on on those numbers.

Okay, well that is helpful because I've got to tell you, not everybody can talk about real cash flow coming out of their internet business.

They can go on forever about page views.

All right, so you're not different from anybody else in that you're fighting some very tough headwinds.

Maybe you're doing a little bit better because of your certainly more than diversified business mix, but it is tough out there, and there's nothing that I've heard you say that makes me think you see anything different for '09 or whatever visibility we have, and it is tough.

It's going to be tough.

Well that's certainly true.

We obviously model the future as far as we can with as much visibility as we can.

We look at our pacing, but it is true that with the volatility that's out there in so many sectors and the overall economy, you don't know how -- even if your models are conservative and cushioned, you're not really -- these days it's difficult to know whether they will play out that way.

You try to get as close as you can.

We feel that we've got a very good handle on fourth quarter.

First quarter becomes a little more opaque, but we have got a lot of ways forward.

We've got options and different paths that we can go and we're very focused and we're going to do all that we can and have a degree of confidence that we'll be able to do it to get to these various key dates so that we're in compliance with the reasonable and adequate cushion.

So we'll have to see how it plays out -- as you say it's difficult and it's volatile, and we're functioning and focused with those realities in mind.

Yes, well you've given us a very good handle on it.

I guess the last question on this inquisition is going back to the revolver, that revolver, the reducing revolver, I call it a reducing revolver for lack of a better term, I think it is a classic one -- that goes away as it matures.

So if you want some sort of revolving facility, come April, would you have anything that you can still draw on?

At this point, we would not, other than a $5 million daily overdraft swing line.

Right, $5 million.

What we're hoping to do through, to get to 5.75 is going to require these asset sales that we've talked about.

We want to start keeping cash on our balance sheet probably in lieu of extending a revolver, which would probably be costly in today's environment with respect to upfront fees, rather than just sit with some cash on our balance sheet.

So it's going to be a less frisky Salem going forward, less acquisitions, and you're just going to try and get all of the assets that you have to perform the best and get to the other side of whatever this dislocation is.

That's a good way to put it and I don't think there are any acquisitions in our immediate future.

But unless they're painless and unless somebody comes to us with a deal we can't refuse where you don't pay for 10 years or something but no, I don't see that.

Careful what you wish for, Edward.

We've all been through those deals we can't refuse.

Well, I think there's not much that we can't refuse these days and look, we're focused, we're not interested, we would like to avoid having to amend the bank agreement even in a minor way and that seems to be in the best interest of our company, our shareholders, the cost of even these amendments -- even on reasonable terms, it's just something that we want to focus, continue to focus on delevering.

And we don't want to have to spend unnecessary money if we can avoid it to get us to a proper level of delevering.

And then when we have to, we will then try to refi the debt on terms that are good for the company and good for shareholders.

Sounds like a plan.

So your job, I hope, is to have a very good weekend and I thank you for giving us a good beat on Salem.

Thanks Bishop.

Your next question comes from the line of Aaron Watts with Deutsche Bank.

Hi, guys, good afternoon.

Hi, Aaron.

Most of my questions are taken care of at this point.

Just one I had for the third quarter, how much cash did you actually have come in from some of the asset sales you had done?

Third quarter?

Yes.

I'm trying to think of what closed.

I'm trying to think to.

Wasn't Milwaukee, that was second quarter?

I don't know if anything closed during the third quarter.

We did collect some money from one of our sales that we had earlier in the year.

KTEK had a deferred note -- two notes, one being short-term, one being long term.

So we did get $1.75 million from that, but I'm not sure if we closed anything else during the third quarter.

Okay, so the revolver that you paid down, that was predominantly from free cash flow you generated?

That's correct.

Okay.

And then I think you mentioned that you're continuing to work on selling some more stations, and the buyers of these stations -- obviously the size isn't huge in terms of dollar amount, but your buyers are able to line up financing even in these tough credit times?

Well, the ones that we're talking to are, yes.

The ones that we have dialogued with, we're only pursuing opportunities that we think are doable.

What's your sense out there?

I'm just curious in terms of a demand standpoint.

If financing was a little more available, is it your sense that the list of buyers would be substantially longer?

Is there still a demand out there and a desire to own radio stations, and there's been a lot of noise with competition from whether it's online or satellite radio or people listening to iPods.

What's your sense on that?

Well, first of all, if you focus on the acquisitions that we've announced in recent quarters, go back to Milwaukee, focus on this WAY-FM in Louisville, WRFD in Columbus -- the entities that we have done business with are all non-commercial operators who are primarily listener supported.

Now, the good news for the whole industry in my view is that the consumption of radio seems to be alive and well as much as it ever has been.

What the real challenge is has been a contraction in advertising dollars, first because some of it fled to online advertising that had not been a competitor some 10 years ago.

Each year it's the online advertising piece of the advertising pie has grown at the expense of traditional media.

And then of course with the economic downturn and the collapse in the financial sectors and the mortgage, radio stations that are dependent upon those advertising categories that our advertisers supported have suffered greatly, and as the economy contracts and we move into a recession that's going to be the continuing challenge.

That certainly impacts non-commercial radio but not as severely.

The product's being consumed by listeners and being supported directly by listeners.

This is one reason why our block programming is resilient, because at the end of the day, the organizations that buy time from us also derive their support from their listeners, and so in a sense it's indirectly listener supported or really in a sense directly listener supported.

The only reason I mention that is it does suggest that the business is still a good business, and the consumption of radio, the consumers are there trying to figure out -- maybe an adjusted business model is the challenge for the industry going forward, and I think everybody is focused on non- traditional revenue and other ways to monetize it.

So there is demand for properties with those who have a business model that still works and there are those as always who see that this time will pass and this business is still being utilized by consumers, and will take advantage of very low prices to position themselves maybe to extract a good business in the future.

That's the best I can give you -- my crystal ball as I look at the situation in the future.

No, that's good to hear.

It's easy to pile on when we're hopefully at a trough in the cyclical cycle, right?

The last thing I just wanted to ask you, and I know this probably isn't a popular question as you're talking with the banks.

But what flexibility do you have to use free cash flow or even your revolver to perhaps be out there and buy back bonds, which are trading at a substantial discount to PAR value and obviously that might be or would be a deleveraging type proposition?

Unfortunately, our credit facility precludes us from doing that.

I'd love to amend that and deleverage that way; however, now is not a time to go back to the bank group and ask for anything.

So even free cash flow, it's locked up as a bank.

Correct.

Okay.

All right, guys, thank you.

Your next question comes from the line of Jim Goss of Barrington Research.

Another question about the block programming, Ed.

Maybe you were alluding to this before but the decline was more related to the mix element and now the full slate of block programming relative to some prior quarters; is that correct?

Yes, I think what we try to do constantly is take the temperature of that business, those various businesses, to see how they're doing -- and it's like all things, you have to do analysis, you don't have an unlimited amount of data.

But the well established organizations that we've done business with for a long time are doing quite well from all that I can gather -- there were a handful for a variety of unique reasons have stumbled and had some problems.

I mentioned some of the situations.

But there's no question that if the economy continues to turn down and this recession is long and deep, I think it will have some impact on block programmers' ability to, I mean their donations will be impacted.

Usually they are, sometimes in some circumstances it helps them, but in most cases they are going to be like other enterprises.

They are going to, everybody has got a little financial pressure and their listeners will have that same pressure.

So I suppose there will be more pressure on them, but the ones that are well established seem to be doing -- navigating through this pretty well, and so that's the best I can give you, Jim.

I was thinking historically though there were almost more than you could use on your A-list stations, enough to at one point almost get a second station in some markets.

Has it dried up a lot more than that since that time or are there no new interested parties in taking some of those half hour slots?

Well it's a little more complicated.

You also have preferred day parts, so you may have some demand out there for say morning day parts and not so much for late afternoon, and you might have a number of people line up that would like to have those day parts that they don't want another one.

And therefore, you've got multiple demand, you may have an avail at a certain day part that those particular parties are not interested in.

That may become a matter of negotiations at some point, it may become making it more attractive.

I think that what has happened over the years is that as the quality of these programs continues to improve and they continue to provide compelling content for their audiences and listeners become increasingly discriminating in who they want to support -- those organizations that stay up, that stay current, that are evolving in terms of the pace of their audience -- they continue to do well, they continue to be in good demand.

And they do it very well, maybe much better than even they did in the past.

But those that are weaker or not as sophisticated or whose content is not quite as compelling, I think it's a little more challenging environment for them.

So in past years you might have seen in certain markets you might see two, three, four stations that might be dabbling with block programming.

Today, it's probably fewer, probably that phenomenon doesn't exist quite as it did maybe 15 to 20 years ago.

It's a very slow moving target and it's difficult to get too specific about trends.

Okay.

Do your conservative news talk stations have any expected impact from the resolution of the election or do you think that's a non-event, you're talking about whatever you're talking about in any given time?

Well, I'm not quite sure what you mean.

Are you talking about new regulatory burdens?

No, I guess I'm just thinking of the outcome of the election as it might affect the content of your stations.

Well, I would tell you that as far as the news talk stations go, they always have a spike in election years, so Dave for example, mentioned the Townhall.Com, the page views were very correlated with political events -- particularly of say the Palin decision, but we have seen a growth in those.

We've seen as Evan mentioned, the revenues in the news talk was the least in terms of declines and I just -- look, I just did an interesting little swing through about five or six markets.

We promoted events with our talent in Denver on Monday last Monday a week ago and we had 3,000 people show up and just one week promotion, we flew on to Minneapolis and had 3,000 people fill up their concert center and went from there to Cleveland in which we had about 1,500 which was the capacity of the event.

Those formats are alive and well and they are getting a good response.

Frankly, in some cases what's interesting is that I remember some organizations are -- some of the more conservative organizations say they built brand new headquarters and they've expanded their operation and they refer to it as the house that Bill Clinton built.

And in some cases when you're the loyal opposition and challenged by all sorts of what you perceive to be incorrect policy and which may be even alarming policy, it does seem, it seems to get the P-1s more active than ever.

So I feel good about that format.

It continues to grow, a PPM seems to help our numbers.

We seem to do better with PPM than diary in some cases where that's a factor.

And last thing, are you willing to give any scope to the station sale ambitions you might have in terms of total dollars you're considering?

Well, I'm not quite sure what you mean.

In terms of the amount of station sales you hope to pursue over the next three or six or 12 months, raising cash to help the balance sheet.

Well, look.

You have an open mind and you explore all opportunities.

It's a tough environment as we commented on earlier, there are -- there is some demand and there are situations that are always attractive and we're going to pursue anything that's in the best interest of our shareholders and our company and the goals we have of delevering.

But -- so I can't really quantify it.

I do expect that we'll produce some good accretive asset sales in the coming weeks.

And we'll announce those and we'll give you the specifics as soon as we're in a position to do that.

Thanks a lot.

At this time there are no further questions.

Well, thank you all for joining us the call and we'll look forward to visiting with you again in three months.

Thank you, operator.

This does conclude today's conference call.

You may now disconnect.