Sinclair Inc (SBGI) 2002 Q2 法說會逐字稿

OPERATOR Good afternoon, ladies and gentlemen. Welcome to the Sinclair Broadcast Group, Inc. second quarter 2002 earnings conference call. At this time all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference, please press star zero on your telephone key pad.

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. David Amy. Thank you, you may begin

Thank you, operator. In the room with me today are David Smith, president and CEO. And Lucy Rutishauser, treasurer and director of investor relations. Before we begin I would like to make our forward-looking statement and remind everybody redistribution of this call is prohibited without the written consent of the company.

Certain matters discussed may include forward-looking statements regarding, among other things, future operating results. Such statements are subject to a number of risks and uncertainties.

Actual results in the future could differ materially and adversely from those described in the forward-looking statements as a result of various important factors asset forth in the company's most recent report on form 10-K filed with the SEC on March 29, 2002. And as included in our second quarter earnings release.

The company under takes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances.

Before we review the actual results, I would like to point out that we discontinued operations accounting has been applied to the operating income of WTTV, our station in Indiana that we recently sold. This treatment is in accordance with GAAP and requires that we pull WTTV's operating results from each line item in our consolidated income statement for both 2001 and 2002. The income net of taxes is then reported on a single line item, discontinued operations.

As a result, our '01 and '02 numbers have been restated to reflect this accounting treatment. With that we return to our financial highlights for the second quarter and on a recorded basis our broadcast revenues were up 2.6 percent or $4.4 million for net broadcast revenues of $1.6 million. Increase was due to strength in the local markets, up 4.6 percent, excluding the political dollars and incremental political advertising dollars were 1.7 million.

Broadcast cash flow increased 3.4 percent or $2.6 million for a broadcast cash flow of 77.2 million.

This increase was due to a higher revenues and was partially offset by $1.9 million in higher film payments due to the new 2001 fall programs.

Our after tax cash flow per share was 41 cents, a decrease of 16.3 percent and 8 cents lower than last year, slightly above our public guidance of 37 to 39 cents.

The decline in after tax cash flow share was due primarily to higher film amortization and lower tax benefit that was offset partially by higher revenues and lower interest expense due to refinancing activities and declining rate environment.

Cash flow margins increased from 43.8 percent to 44.2 percent in the quarter due to the reasons I just discussed.

For 2002, we have adopted FAS number 142 accounting for good will and other intangible assets. Had we adopted FAS 142 for the second quarter of '01, the impact would have been to reduce our amortization of intangibles by $24.9 million or $17.3 million net of taxes.

For amortization of intangibles of 3 million.

This would have resulted in our reported basic loss per share from continuing operations to improve from 24 cents loss per share to a basic loss per share of 4 cents.

We missed the - I wanted to mention we missed our consensus estimate on earnings per share due to a 12-cent per share net of tax effect of a mark to market move, market on our hedge instruments. That was a result of a move of about 50 basis points on the long-term interest curve.

If it wasn't for us having to incur that mark to market, we would have exceeded the EPS estimates by about 2 cents per share.

Before I turn the call over to Lucy, I would like to express how proud we are of the job our company has done during these hard economic times. This is the tenth consecutive quarter we met or exceeded consensus estimates. Our ability to provide line item detail for broadcast when no other would. It says multitudes about our internal systems, credibility and knowledge about the business. I am confident in the accuracy of our financials as we have always insisted on the highest level of professionalism and ethics. I will have no problem in certifying the numbers that we submit for this quarter's Q.

With that, I turn this over to Lucy Rutishauser, our treasurer who will take you through the balance sheet.

Leverage was 6.66 times on adjusted EBITDA of $240.7 million. Adjusting for the sale of WTTV in Indiana which closed and funded last week and the proceeds of which were used to repay bank debt, leverage is currently 6.27 times well within any covenant requirement.

Leverage through the high tops was 7.44 times on adjusted EBITDA of $142.3 million. The difference being the cash flow from our Des Moines station from which the high top holders benefit. Cash on hand June 30 was $7.2 million.

On July 15, we refinanced our bank credit facility to take advantage of lower credit spreads, extend maturities and reduce amortization.

The new facility was reduced from 800 million in commitments to 600 million.

Pricing was dramatically reduced by up to 125 basis points of reflex in the market's comfort with our risk profile, relative performance compared to peers and stronger than other performing assets.

[Inaudible] was 375 million of 600 million maturities in 2009. The revolver has a bullet maturity in 2,008. This is a significant benefit to the company. If you recall in our prior bank deal, the revolver carried 100 to 150 million of amortization per year. Now that has gone away, allowing more of our free cash flow to go back into the company for future growth.

Finally, all covenants have been reset with the only significant change in covenant definition is that leverage and senior leverage are now net of cash. Now I would like to turn the call over to David Smith our president to discuss operating performance in the second quarter and our outlook for the third

Thanks, Lucy. Good evening, everybody. On a monthly basis second quarter times sales including political were down 2.2 in April, up 1.1 percent in May, and up 4.4 percent in June.

Local was up 5.3 percent, or up 4.6 percent excluding political, while national was down 1.8 percent or 3.4 percent excluding political.

Our local revenue mix increased to 58.7 percent versus 56.7 percent from last year.

Categories that were up in the quarter were services, which was up 12 percent, and auto, which was up 6.5 percent. Medical, which was up 11 percent, beer and wine was up 77 percent.

Other categories included fast food, down 16 percent and retail, down 8 percent.

Political was 2.3 million versus 600,000 in the second quarter last year. Our Fox and ABC stations were better performers. Our Fox affiliates were up 5.1 percent and our CBS stations were up 12.9 percent. NBC and ABC groups were up 1.3 percent each. WB stations were down 1.3 percent and UPN was down 4.5 percent, not surprising to us.

On our last call we discussed the buying habits of advertisers in times of economic downturn in that advertisers tend to place their money at the top ranked stations and work the dollars down through the marketplace over time.

Although these two affiliate groups were down, the performance was significantly better than the last quarter. A clear sign in our view that the ad market is now headed in the right direction and showing signs of some tightening.

For the third quarter outlook, July times sales are pacing up 4.7 percent. August is up 3.6 percent and September is peacing up 7 percent. These numbers include political, by the way.

Our Fox group is pacing up 7 percent. Our CBS stations are up 11 percent and NBC stations are up 20 percent.

ABC affiliate groups are up 3 percent, WB is pacing up 1 percent, while the UPN stations are flat.

The category continues to remain strong as financing deals in 2002 close out transactions are driving the dollars.

Fast food, telecom, department stores and movies are also showing signs of some strength.

In the third quarter, we expect to benefit from political and regaining the 5.4 million of revenues lost due to September 11 of last year.

Our outlook for the third quarter is for net broadcast revenues to be up 6.5 to seven and a half percent and for BCF to be up eleven to 13 percent.

This will imply an ATCF per share of somewhere between 32 cents and 33 cents a share.

Our full year basis and excluding WTTV from the 2001 and 2002 results, we are reconfirming our expectation for net broadcast revenues to be up in the low single to mid single digit percents and for the BCF to be up mid single digit percents. We are revising our full year ATCF per share from previous guidance of high single digit to low teen percent to our revised forecast of up low to mid 20 percents.

The upper division, revision is due to low interest costs from the refinancing activities and from receiving the proceeds on the sale of WTTV of approximately 60 days earlier than we previously forecasted.

And from a high current tax benefit, higher current tax benefit than previously expected.

That's a quick summary. Operator, with that we would like to open it up to questions. Please try to keep your question to only one, if possible. Thanks very much. 14:14:14

OPERATOR At this time we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone key pad. To remove your question from the queue, please press star two. For those using a speaker phone, pick up the hand set first.

The first case is Mr. Marcus with Deutsche Banc. First question?

ANALYST Could you talk about your CAPEX, how much of the CAPEX is digital and how much digital CAPEX is remaining? I will control myself with respect to the following questions.

We sent out 19 million on digital. That's year-to-date this year. That takes us to a total of 69 million. That leaves about 81 million left to go. That would be split about 31 million for the second half of this year, 50 million for next year.

OPERATOR Our next question comes from Mr. Sweeney with Credit Suisse First Boston. State your question.

ANALYST Mr. Sweeney? Wow. Good afternoon, everyone. David, I wonder if you can update us on your portfolio rationalization process? I know you had a successful transaction in Indiana. Give us a sense of your goals for this program. And, you know, I guess the marketplace we are in now, are there stations for you to really look at? Or is it more of pruning what you have? Give an answer on the market right now. Could you tell us what the status is of your portfolio rationalization?

Sure, Paul. The process that we started roughly a year ago in October/November is still underway. It is by no means shelfed. I think the practical issues that we face in terms of moving some of these assets is more regulatory related in some cases, and probably in most of the cases, than anything.

In other words, if you were to look at Sinclair's history in terms of creating structures and doing transactions, I would submit to you that there are essentially no players in the marketplace who have the same type of profile that we did when we were doing those things, as I remember, as LMAs.

If there were people who were comfortable with those types of structures, and I think we would likely have done other transactions in the recent past. But I think as evidenced by too many lawyers in the equation trying to cover themselves from the standpoint of what they perceive is some level of risk in terms of creating structures, they advised their clients accordingly to do nothing until the law is black and white. And disregard the fact that the rest of the universe is out there creating structures. Whether it's us creating structures or the next stars of the world or whomever.

I would tell you that the no process is by no means over. We remain actively engaged with any number of people. And we are kind of waiting in large part on the regulatory community to kind of, you know, do their thing.

Having said that, independent of the regulatory community, it is entirely possible - I can't tell you whether it's a 1 percent chance or 99 percent chance - it's likely that the U.S. Court of Appeals could throw out the entire eight voices issue and vacate the law, in which case we won't wait for regulatory relief. It will start right away.

We are still anxiously awaiting a response to our appeal of the Court's decision and would like to think that they are going to do the right thing here. That appeal has been on file now for roughly 30 days, and of course they only tell you what they want you to know. When they tell us, everybody will know.

So the process is still underway. There certainly are assets that we would - I think we are certainly better off in somebody else's hands because of the opportunity to create as soon as they are prepared to pay for them, of course, and pay an appropriate price.

So I think those issues, and the regulatory issues are kind of what the slow-up is right now. But just appreciate that by no means is it anywhere near over. We are not in a hurry and we will take our time and do these things appropriately.

OPERATOR Our next question is from Mr. Miller with Bear Stearns. Please state your question.

ANALYST Good afternoon. Could you compare the advertising environment in terms of the consistency that you are seeing in the ad categories in the third quarter? It seems to be that the top five or six categories are more consistently up or positive, at least trending in the right direction, than we've seen earlier in the year.

What does that mean when you look at fifth and sixth rank stations like you have in the WB and UPN stations? In a more buoyant market, would they start to reflect real growth? Do you think we're turning here? Do you think we would turn noticeably positive and what do you think of all the political dollars coming in will have on the UPN and WB stations as all the other things are crowded out?

Is that one question?

ANALYST How about, how is the ad environment? How is that?

I would say, victor, one of the things we don't see that we have seen clearly all of last year and somewhat to a lessening degree in the first quarter of this year, was the notion that advertisers would place buys at the beginning of a quarter and then cancel those buys 45 or 30 or 20 days or 50 days later.

We are not seeing that kind of horrendous behavior which created, obviously, huge instability and lack of certainty and vision, visibility in the marketplace. We don't see that kind of stuff today.

And what that clearly suggests is that the, as evidenced by today, the corner has been turned. Now the only issue is the rate of acceleration that gets behind it. Obviously the faster the rate of acceleration, the deeper the market gets bought for all the obvious reasons.

So I'm kind of hopeful at this point in time and to a greater degree more confident than the last quarter that certainly the last station in the marketplace is moving in the right direction. I think if you go back and look at the first quarter, second quarter of UPN and WB relative to what we think they might be in the third quarter represent significant up sides for those stations as a group.

It is starting a lot of it driven by just clearly a certain sector such as the movie business. Movies are all over the place right now, as you well know. There's a lot of money being spent to promote those things.

Car businesses are just giving money away. Manufacturers are giving money away. People are stepping up and taking advantage of it.

So I think there are lots of reasons to be optimistic, not the least of which is political, tightening the inventory up. When it tightens up, it flows faster to UPNs and WBs than it might otherwise. You have huge political elections going on like the State of Pennsylvania. Pick your marketplace where there is action going on. The WBs and the UPNs and the weaker Fox stations in some cases are certainly getting the benefit of the pressure and it's going to continue for, at the very least through the election.

Of course, political goes and we will return to a more normalized number. Everything I see now says that we have turned the corner. That's not to say that freak circumstances won't precipitate another dip. At this time there is no evidence of it, no evidence to suggest that it's out there.

I think one of the difficulties, one of the tragedies that exist in this space today is that the media as an industry is driving negativism in the marketplace. It is a disservice to our own industry. Gives you an example of how crazy we can be as an industry. We are getting more and more comfortable with what is going on in the marketplace.

Next question, operator?

OPERATOR Next question is from Mr. Van Hausen [phonetic] with Deutsche Banc. Please state your question.

ANALYST Thank you. With the pro form a leverage of around 63, do you have a leverage goal in terms of where you would like to be at in order to give you the maximum flexibility to turn around and make acquisitions?

And Lucy, I was wondering if you had some of the amortization schedule on the new term loan B.

Sure. The term loan B is minimal amortization. It begins to amortize the second quarter of 2004. It is 1 percent per year. .25 percent per quarter, beginning with the second quarter of '04.

So you know, you are talking on a yearly basis under $4 million a year. So all intents and purposes, it's really a bullet maturity in December of '09.

ANALYST Thank you. The leverage question?

I think the leverage question is always a variable in one's mind about what they are comfortable with. I would tell you the issue isn't so much what the leverage needs to be in order to go buy businesses. What I would tell you today is that the amount of capital needed to go buy businesses in our space is forever diminishing, because the New York, the Chicagos, the L.A.s, Bostons, for all intents and purposes those markets are closed forever. They will not likely be reopened again. The idea of spending $5 billion to get television stations in the top ten markets is a day gone ba by.

The opportunities today are in markets really 30, 40, 50, to 125. Frankly, you could enter those marketplaces and win businesses and consolidate for fractions of what you could go buy in New York for.

While there isn't any, you know, radical need to de leverage down to a three to one tomorrow, if that's where we end up, that's where we end up. It won't necessarily be driven by the need to spend a billion dollars to buy 300 television stations. That's not what the market is today. For a few hundred million dollars, depending on the markets, you can buy 30 television stations. Basically T up the opportunities to do structures that fit certain profiles. They are really almost two different issues.

So I can't sit here and honestly tell you that six or a 5.8 or 4.2 is the absolute number at which we say this is where we are going to drop to and stay forever. I would be foolish if I told you that.

Clearly it's going to go below where it is today. We will seek a level that makes us and everybody comfortable, and deal with it in that regard.

OPERATOR Our next question is from Mr. Wester field with UBS Warburg. Please state your question.

ANALYST Thanks. Good afternoon. David, some different places in the trade press it has been indicated that you would be interested in bidding at some of the spectrum auctions that take place, you might be interest inside bidding for them. I wonder if you would go into that in detail with respect to your balance sheet leverage. Thanks.

I think, Lee, we had originally looked at the spectrum option as a long-term opportunity to take advantage of a broad swathe of spectrum space and be able to apply to that spectrum space any transmission standard that we chose.

And what we really concluded after kind of T-ing ourselves up to get ready to play was that it probably in the grand scheme of things makes no sense to go play because, frankly, I am not sure in my lifetime there ever will be a meaningful business in that space.

The reason I say that is because of the uncertainty of the telecom. I know you appreciate this, and I'll just say it in simple terms. There was no option because of the deploreable conditions in the telecom space. So the fact that Sinclair broadcast may have wanted to go in and buy channel 63 to 68 is irrelevant. The government doesn't want us to have it. They would prefer that the telecoms get it.

Unfortunately, the telecoms are fading away like the sunset. And are using their political capabilities to delay the auctions. So I honestly think that while there is a few of us in the broadcast business who had looked at the space, I frankly, when we looked at the details in each one of our markets, I'll give you a wild example without mentioning any names. There are broadcasters in the markets where spectrum was to be auctioned that I can assure you have no intent to get off the channels that are to be auctioned.

And I can't imagine a scenario currently under which the government will go to a real large scale broadcaster and say you're moving off of channel 56 tomorrow or channel 62 or 53 or whatever it is, and by the way, these are not analog channels. These are digital channels that have been allocated that broadcaster are spending billions to build.

I can't imagine a scenario where they will conduct an auction, I will be a buyer and walk across the street and say please get off that channel so I can launch a business. They will laugh me out of the office.

In the grand scheme of things, I don't see any practical business there in the next five to ten years for a broadcaster, let alone a telephone company.

So we elected a few weeks ago to back out of the process once we were into it and started to bore down into the details of it. We are out of that space.

OPERATOR Our next question is from Mr. Kahn [phonetic] with Morgan Stanley.

ANALYST I have one question with two prongs. As you look at your visibility for the rest of the year and State in the release that you have a very good third quarter coming up, the first question is how much of that is due to the political advertising that we expecting this year? Second, can you highlight any regional differences? Whether it's large market or small?

I'll take the first part of that. We have about $4 million we are expecting in the third quarter.

With our makeup of Fox, WB, UPN, we will get a smaller share of the political ad dollars than the big three.

ANALYST That represents 2 percent of the growth that we have for guidance there? As far as small market? Mid market?

There is really nothing that we can say here that would discriminate between the different markets in regard to that particular pacing. It is really nothing that we can make that kind of a broad comment to you that would give you any help in that regard.

The thing you have to appreciate, Doug, you have certain marketplaces take - take the State of Illinois as an example. There's political campaigning going on. Within the State of Illinois, there's a lot of small markets. The 100th market may have an in flow of money and all the appropriate things happen, prices go up. You may not see that in a similar market 42 miles down the road in another state.

There are no absolutes in terms of is it a broad based recovery? Or is it just L.A., Chicago, New York, San Francisco? Is it driven by politics? It's fair to say there is a significantly greater comfort in the marketplace than there has been in the last year. Certainly the last nine to ten months.

11 months. And I think people are just simply coming back to the marketplace because they realize in the last ten or eleven months they have severely damaged by the fact they haven't advertised. That is the reality of the advertising business. If you don't advertise, your business goes down. There is a point at which they can only go down so far before they wake up and say: I have to start spending money regardless of what is going on out there.

So I think we are at that point. People are just saying: I've got to go. I can't go lower. I have to spend because there's a direct relationship between spending and revenue in our business. We are seeing that. That's a good thing.

OPERATOR Our next question is from Mr. Steiner [phonetic] with T.D. Securities. Please state your question.

ANALYST Thank you very much. If you could just refresh us on what your current covenant levels are in the new deal and the credit amount available in the new facilities?

Sure. Fixed charge coverage is set at 1.1 times, at all times. That was raised from 1.05. Senior leverage which used to be tied to a grid and would decline based on, based over time, is now fixed at 3.25 times at all times. As we mentioned on the last call, we are well below that covenant level.

Interest coverage, which was for this year 1.45 times is now 1.6 times, 1.7 times next year, 1.9 times in 2004 and 2005.

2.5 times in '06 and two and a half times thereafter.

Total leverage, which was eight and a half times, is now seven times in '02 and '03. Six and a half times in '04, six and a quarter times in '05, five and a half times in '06 and five and a quarter times thereafter.

And then as far as availability, under the - under our most restrictive bond which is the 9 percent, which has a six and a half times debt incurrence plus an additional basket, after the sale of Indy, we have about $93 million that we can draw under the bank deal plus about $20 million of cash, which is sitting up on the balance sheet. That gives us about $113 million of liquidity.

Under the bank deal, at the seven times we have 171 million of availability plus the 20 million. That would give us liquidity of about 191 million today.

OPERATOR Our next question is from Mr. Roseenstein with Goldman Sachs. Please state your question.

ANALYST Thank you. I think it was in the last quarterly conference call I had asked this question. If you could update it, it would be great.

I had asked about about the impact that you were seeing from your duopolies in the current environment at the time and the performance you were seeing was not materially different than the stand alone stations in terms of operating performance in terms of growth.

I was wondering if you can update us on what you are seeing currently in that regard. Thanks.

You know, I think that the question, if I understand it, is are we able to take the duopolies and improve our market share versus a single station? Are we seeing that strategy being executed?

We certainly have been able to benefit from our duopolies in that regard and have grown share disproportionately in markets where we have duopolies. The short-term reference over the last few quarters, we have not established many, you know, what you would call classic duopolies.

But we have invented, you might say, a new form of structure that we refer to as an out-sourcing agreement or joint sales agreement.

We now have four of those and they have, they are proving to be quite successful for us in terms of the, what they are bringing to the bottom line for those markets. Now, they are all small markets. You know, the dollars are not huge dollars relative to our broadcast cash flow. But from the standpoint of the percentage growth that we are seeing in those markets, they are well into the double digits. We are seeing some real success in those areas.

OPERATOR Our next question is from Mr. Meyers with Lehman Brothers. Please state your question.

ANALYST Thanks. Following up on Doug's earlier question with regard to political questions. Advertising came in at 2.3 percent of the quarter, under your guidance of. How many of your T.V. markets will have primaries? What is your full year political assumption?

Bill, we have for the third quarter, we have a lot of markets in primaries, but not necessarily all those dollars will flow down into the WB, UPN market or even in some cases a Fox market.

As far as some of the tighter races that we have, we've got North Carolina in third quarter, Ohio, Iowa, and Charleston, West Virginia, which will be the more heated ones for us.

As far as the second quarter number, the over performance there is, we did get some California money, issue money in which we were not expecting because, you know, they had their primary in the first quarter.

North Carolina, which moved their primary from the second to the third quarter, we still had some political money from North Carolina that came in. And then Pennsylvania we had more dollars than we were expecting there because that was, you know, a very heated race up there.

But basically in the second quarter we had about 80 percent of our political came from only seven markets.

For the second quarter, that quarter.

She didn't mention Illinois and Texas, two other states that have strong political dollars coming. Do you have the total political for the year?

Total political for the year will be somewhere about the 17 to $18 million range, which puts us consistent with what we did in 1998.

OPERATOR Our next question is from Mr. Harris with Bank of America. Please state your question.

ANALYST Good afternoon. A couple of years ago, a few years ago you announced the shift in your strategy moving away from a national focus on local. And stepped up spending. Local sales and local news, et cetera. Having witnessed in recent quarters a full bag, some of your local news efforts, can you update us on that strategy, how you might approach things going forward?

Sure, happy to. I think the - I'll give you one example of - and we really started a couple years ago in the context of local sales. We will do the news question last.

We started down a path a year or so ago, starting to become more concentrated on the local effort because, frankly, it's a very stable marketplace relative to Madison Avenue, if you will.

It requires a different mind set in terms of how to sell the product. And we kind of adopted a view that said we need to have more people, whatever additional infrastructure is necessary, which is relies on computers and sales efforts and things of that nature. And what we are finding is, honestly, that there is so much money out there in local marketplace that is to be, that can be converted to television, that if I get fractions of it, we will be in high clover for a long time because there is so much of it.

Just by example, I'll try to frame it for you. If you look at the Baltimore marketplace as an example, the local market, local advertising in the marketplace for television is approximately 80 to $100 million.

There is roughly three times that amount in direct mail that is spent in this marketplace. That is just direct mail. That's independent of all newspaper, all magazine, everything else that you might think of is an advertising medium.

This year, we have gone into and very late last year we went into a mode where we are approaching direct mail advertisers and moving them, attempting to move them to spot television/direct mail as a combo.

Our first effort into that venture is going to yield for us somewhere between six and $10 million, I would think, this year of revenue that has never been on television before.

So I would tell you that there are mind sets in different spaces that have to be changed and converted to a different way of thinking. That's an educational process. It is not going to happen overnight. But the good thing is, it's so big that if you did nothing other than focused on that for the next five years, it would be a wonderful thing. We certainly intend to do that. We see it as nothing other than a long-term up side for our business.

With regard to local news, we have a very simple view of news. If you can't make money with news as a stand alone separate business, then you shouldn't be in it. And you shouldn't be in it any more than if you buy a television show called Seinfeld or any other name you want to apply. If you can't make money with it, don't buy it.

In that regard, where we had news operations that were not profitable or breaking even or approaching breaking even, we shut them down.

Having said that it is our absolute intent within the next 18 months to offer to our television stations a news product with a completely different cost structure associated with it. We are about to roll that out in Flint, Michigan. We think we've kind of gotten away by virtue of what technology can do for us today to put in place a news operation in the local marketplace for one-third the normal cost. As I say, Flint will be our first market we are launching it in. Within the next 18 months approximately we fully expect to be in news in even our smallest markets.

So we see news as a great business if it's run properly, and it is run cost effectively and we certainly intend to do that. That's why we are going back into that business.

We recently as a Fox affiliate in Baltimore a little over a year ago launched a morning news and appreciate this because this is very significant - when you look at a Fox affiliate that historically used to do kids, now does anything from paid programming to some other form of junk and in a morning time period, a morning time period can be defined as seven to nine or six to nine. Appreciate that the local Fox affiliate is really the only station - I say the only. Not the Fox, but the Fox and UPN and WB, but not tied to the traditional networks are the only real businesses that have the opportunity to bring pure local news for the entire three-hour block.

When you look at ABC as an example, they take over your television station 7:00 o'clock to 9:00 o'clock. As a function of that, you get a couple of minutes an hour to put your local content on the air.

While that couple of minutes of local content is on the air, we can have two hours of local content on the air interjected with national or whatever we choose to put in there.

We learned very quickly that the news time is a significant revenue Social Security for us. And I'll give you some numbers. We talk about this in the context of retro presentations, if I can read off the slide here.

We lost the morning news in March of 2001. The revenue contribution from that time period went from 1 percent to over three and a half percent of the total.

We had a nine share in the 18-to-49 demo, which is the all important demo everybody buys, in the May 2000 book a year later from six to 7:00 a.m.

Our household rating was up 25 percent over the previous year. And appreciate, this is a brand new business for us, a brand new day part. I'll scale it for you against the NBC, CBS in the marketplace. Six to 7:00 a.m., our Fox affiliate was up 66 percent, NBC was up three, ABC down 22 and CBS 19, six to 7:00 a.m. Seven to 8:00 a.m., we were up 87 percent in terms of household ratings, the others were down. CBS was down 21.

From eight to 9:00 a.m. we were up 200 percent, everybody else was down anywhere five to 8 percent.

So we learned very quickly in one market by conducting a year test that there is nothing but a long-term huge up side opportunity for us to be in the news business in morning day parts. And once we are more comfortable with the model in Baltimore, it is reasonable to presume we are going to roll that out in other television stations around the country. Not only on the Foxes, but likely UPN and/or WBs as well, because it is essentially an untapped source of revenue for us.

Next question

OPERATOR Mr. Amy, there are no further questions at this time.

All right. Thanks very much, operator. Thanks very much, everybody, for participating. If there's anything we missed on line, feel free to give us a buzz off line. We are happy to have a conversation at any time. We appreciate your support. We'll talk to you in 14:49:11 90 days.