Sinclair Inc (SBGI) 2002 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. And welcome to the Sinclair Broadcast Group, Incorporated, fourth 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 zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Davis Amy. Thank you, Mr. Amy. You may begin.

Thank you, operator. In the room today with me are David Smith, president and C.E.O. and Lucy Rutishauer, our VP of corporate finance and treasurer. Before we begin, I would like to make our forward-looking statements and to remind everyone that redistribution of this call is prohibited without the written consent of the company.

Certain matters discussed on this call may include forward-looking statements regarding, among other things, future operating results. Such statements are subject to a number of risk and uncertainties. Actual results in the future could differ materially and adverse to those in the forward-looking statements. Various important factors are set forth in the company's recent report of the 10-Q filed with the SEC on March 29, 2002, and are included on our fourth quarter earnings release. The company undertakes no obligation to publicly release the result of any revision to these forward-looking statements that may be made to reflect any future events or circumstances. With that, let's turn to the financial highlights of the fourth quarter.

On a reported basis, net broadcast revenues were up 16.8 percent or 27.3 million per net broadcast revenues of 189.4 million. The increase was due to strength in the local markets, which were up 6.6 percent excluding political and national which was up 4.9 percent excluding political. The incremental political advertising dollars were $16.6 million. For the year, net broadcast revenues were up 7.5 percent or 46.7 million. Excluding political revenues, we were up 3.3 percent. Broadcast cash flow for the quarter increased 31.1 percent, or 21.7 million to 91.7 million. The increase was due primarily to the higher revenues netted by the incremental sales expenses associated with those revenues' higher promotional costs and a separate increase in our film payments. For the year cash flow was up 14.9 percent or 52.4 million. Our broadcast cash flow margins increased over 5-points from 43.1 percent to 48.4 percent in the quarter. That's due to the reasons I just discussed.

After tax cash flow, as the metric that we will probably be using less of under the new SEC rules, the after tax cash flow per share was up 71 cents, an increase of 255.5 percent or 51 cents higher than last year. The increase is the (inaudible) per share was due primarily to the higher revenues, lower film amortization, and if you recall last we wrote down some of our programming, our lowered interest expense as a result of our recent finance activities and the sale of our station in Indianapolis, WDTV and the overall lower interest rate environment. The higher current tax benefit resulted from our utilization of our NOL's and that was offset by an increase in operating expenses. For the year after tax flow per share was $1.68 an increase of 55.6 percent. Our free cash flow was $46 million in the quarter, and 106.1 million for the year. This is after capital expenditures of 22.2 million in the quarter and 62.9 million for the year.

We have now met or exceeded our expectations for the past 12 quarters or three years. And now for discussion of our coming changes. For 2002, we adopted FAS 142 accounting for goodwill and other intangible assets. Had we adopted FAS 142 for the second quarter the result would be to reduce our intangibles by 25.1 million, an amortization of intangibles of 4.4 million. This would have resulted in a reported basic loss per share from continuing operations to improve from a 55 percent loss per share to basic loss per share of 34 cents. Also, in accordance with FAS 142, we required for goodwill for -- based on impairment as of January 31, 2002. Our testing reflected non-market and software consulting company (Inaudible) were impaired by 532.8~C million on a pre-tax basis.

And remember all that testing was based on the results of 2001 which was one of the -- just a full year. As required under the accounting rules, the write down net of taxes has been recorded as a cumulative effect of change in the accounting principals in the first quarter of 2002. In the fourth quarter, we also reported an after tax extraordinary loss of 4.9 million which related to the write down of preferred financing costs associated with the early redemption of the company's 9 percent and 8.75 percent senior (ph) subordinated due in 2007. Now Lucy will take you through the balance sheet.

Thanks, Dave. Leverage improved significantly in the fourth quarter due to the higher free cash flow generated from operations, offset by $20 million of investments. Leverage net of cash is defined in the bank credit facility was 5.46 times on adjusted EBITDA of $271.2 million and was 6.16 times through the high tops on adjusted EBITDA of 272.8 million. Cash on hand was 5.3 million on December 31. Debt on the balance sheet as of December 31 was approximately $1,552,000,000. For those of you keeping score on the company's financing activities, the fourth quarter transactions alone should have kept you busy so I will try to take you through those changes quickly.

During the quarter we redeemed the $200 million, nine percent most and the $250 million 8.75 percent note and we also terminated the swapped that hedged those to issuance. The funded redemption, we added 125 million to our 8 percent notes at an effective yield of 7.91 percent and we added another 125 million to the same notes at an effective yield of 7.45 percent. We also added 125 million incremental term loan traunche to our senior bank credit facility and that is based as LIBOR plus two and a quarter, has the same amortization as the existing term loans that we put in place in July. The effect of these transactions was to lower our overall cost of debt by approximately 50 basis points.

Liquidity is measured under our revolver, December 31,with $173 million. In the quarter, we spent approximately $22 million in capital expenditures of which 17 million was for the digital roll out. In total we have paid approximately 100 million for the DTV roll out and estimate about 50 million remaining to be spent. Now I would like to turn the call over to David Smith to discuss our operating performance in the fourth quarter and our outlook for the first quarter and full year 2003.

Thank you, Lucy. On a monthly basis fourth quarter time sales excluding political were up 4.6 percent in October, 4.9 percent in November and up 12 percent in December. Local was up 6.6 percent or up 2.2 percent including political, while national was up 4.9 percent or up 12.9 percent including political. Our revenue -- our local revenue mix was 58.4 percent versus 58.1 percent last year. Categories that were up in the quarter were services, which was up 5.5 percent, auto up 10.6 percent, restaurants 9.4, home products up 13, movies up 26, retail up 4.2, and schools were up 19.4 percent.

Weaker categories included fast food, which was down 5.1 percent, and soft drinks, which was down 32.3 percent. Travel was down 4.7 percent and toys were down 23.7 percent. Political revenues in the fourth quarter alone exceeded our original expectations for the full year budget of approximately $15 million. Political revenues in the quarter were 17.8 million versus 1.2 million in the fourth quarter last year. For the year we have booked 28.3 million in political revenues representing an 8.8 percent growth rate or about 2.3 million more than what we booked doing the 2000 political season. Our affiliate groups were flat to up in the quarter. On a next political basis, our WB stations have the greatest gains, up 11.5 percent, followed by our Fox stations up 5.2. Our CBS stations grew 5 percent, the UPN stations were up around 6 percent, the ABC stations up .4 and our NBC's were flat. During the November sweeps, ratings on our stations in the key 18 to 49 demo in the 5 to midnight time period were up 3.6 points out performing the networks which were down 6.7 percent then prime time.

Turning to the first quarter 2003, January time sales were up 11 percent. This includes 1.2 million of Super Bowl revenues or three-points of growth. February's pacing up approximately 3 of percent. Last year in February, there was 1 million of Olympics and2.9 million of Super Bowl revenues. March is pacing up 15 but we don't necessarily expect that to hold throughout the quarter. All affiliate groups are facing up. Our WB group is posting good numbers, up 13 percent due to the good fall season and easier comps in the first half of the year. Same holds true for our UPN and ABC affiliates which are up 20 and 14 percent respectively, partly due to easier comps. Our fox group is pacing up 5 percent. Our CBS stations are pacing up 10 percent, and the NBC stations are pacing up 4 percent.

The auto, restaurants, financial, furniture and medical categories are showing -- while fast food and soft drinks still remain sluggish. Movies and retail are also showing some weakness. The outlook for the first quarter is for net broadcast revenues to be up 6.6 percent to 7.1 percent on144.5 million. Broadcast cash flows expected to be up.8 percent, 2 percent on 53.3 million. We expect to use 15 to16 million of free cash flow due to CapEx of 25 million and the expectation of having a current tax provision. This would imply a free cash flow per share loss of 18 to19 cents. On a full-year basis, net broadcast revenues are forked to be up 3 to 3.3 percent or 7.4 to 7.7 excluding political. Including in that assumption is our expectation to book at least 15 million in new revenues from direct mail conversions as well as some revenue growth as we expand our local news franchises.

Broadcast cash flow for the engineer forecasted to be down 3.1 percent to3.8 percent on higher promotional news, fringe benefit, DTV, rating service, and sales costs. CapEx for the year is expected to be approximately 92 million. Of that, 50 million is for DTV conversion, which will bring us in compliance with the roll out as scheduled. We are fairly SEC compliant today but will remain somewhat on (ph) dishes as to any additional DTV investments. 10 million is for general maintenance and repairs and $32 million for our news investments, which will significantly improve. Many of our stations' broadcasting abilities. In that regard our plan this year so to add additional news, day and --market convert five markets to our new news central format and add news in eight more markets. This month we added 11:00 p.m. news under our new news central format to our award-winning Baltimore Fox news station.

In March of this year, we expect to convert the 10:00 p.m. news in Raleigh, North Carolina and Rochester to our news central format. We expect to generate approximately 10 to13 million in free cash flow this year implying free cash flow per share of approximately 13 to 15 cents. And with that, operator, we're ready to take questions.

Thank you. At this time we will be conducting a question-and-answer session. To allow everyone the opportunity to ask a question, please limit your time to one question. If you would like to ask a question, please press star 1 on your telephone keypad. To remove your question from the queue, please press star 2. A confirmation tone will confirm your question is in the queue. It may be necessary to pick up your hand set before pressing the star keys. First question is from Tim Wallace with Banc of America securities. Please state your question.

Thank you very much. Your out look looks good. Do you have a view into April at this point? And second on the cost side, what ability to you do have to reduce costs if a war in Iraq actually causes a dislocation in advertising trend? Thanks.

As far as, Tim, as looking out into April, we provided first quarter guidance and total year guidance. Our total year guidance includes some of our considerations for what is taking place in the second quarter. But we're not being specific as to April, May, and June at this point. As far as the cost-cutting measures, we really have not put ourselves in a position to say we're going to make drastic cuts in any regard. You know, there's some talk about the possibility that if there is a -- if and when there's a war, there may be some cancellations that will occur by advertisers which, at this point, appear to be on a temporary basis. And that remains obviously -- that all remains to be seen how that plays out. And certainly, we run into some protracted issue as far as our advertising revenues then our income will have to seriously address those business issues.

Next question compress Victor Miller with Bear Stearns. Please state your question.

Thank you. Can you all address -- there's about 26 million more in costs expected in 2003 versus last year and $4 million in overhead. Can you help us break down what expectations you have in those cost increases? How much of it may be associated specifically with news central? What is the -- when do you think the news central effort that you're making actually leads to a break even to a positive cash flow impact for your company? Thanks.

Sure, Victor. That's no problem. Of that increase in expenses, you know, we have outlined a number of general areas. But specifically our promotion expense we expect to be up about $4 million and that relates primarily to the fact that we're providing a February sweeps promotion, whereas last year up against the Olympics, we -- you know, we held back on our promotion. Programming expenses are expected to be up about $2 million and that relates to, you know, that new fox arrangement that we had in place, and we talked about that, I think, in the last conference call, the difference between how the old contract was being amortized versus the new contract. News cost - we actually expect to see a slight increase in our news costs this year at the operating level.

You know, as we rule out all of these new operations. So that's -- that's a net effect of the cutbacks plus all of the additional ads that we have so that is up about $2 million. And sales, we have talked a lot about nontraditional revenue impetus and effort. And that along with just the higher cost of sales that, you know, we expect to see what the growth in our revenues that is about another 10 million.

And then toss in about $10 million for the digital television, the additional electric to run our digital television this year and that gets you pretty close to the number that you're looking for.

Next question is from Andrew Marcus with Deutsche Banc. Please state your question.

Thank you. I guess just to follow up, Victor also mentioned on the all end cost of launching news and then for my question, since it's a follow up of his, David gave you an opportunity to talk your predictions in the regulatory environment.

Well, the -- as far as the cost to launch the news, you know, there's different pieces and parts of that. And part of that is, you know, it's news central and Victor alluded to the increase in our overhead cost. So that is a good -- a good piece of that is being driven by our news central costs. We also mentioned that our capital spending for this year, we're putting ooh another$32 million into our news operations around the country.

Let me just expand on thank just a tad. We launched our first 11:00 news, and I'm not sure how many people do this in the country, but we had an interest in knowing what the degree of difficulty was in going head to head with a Fox affiliate, a UHF Fox affiliate against 3VHFstations in a typical market. Eight days ago we launched our 11:00 newscast here in Baltimore. On the first night out, with no promotion driving the show at all we beat the ABC affiliate in the marketplace by a huge amount. That was with a news lead in of against an ABC affiliate with its network lead in. For the last -- for two of the eight nights so far, with no effective promotion as of yet, that targets that specific time period we have beaten the ABC affiliate pretty badly. The rest of the six nights we're right up against them. And it's entirely possible we will overtake them on a rolling basis over the course of this year.

I can't sit here and tell you how really huge that is to think that a UHF television station in any market can go up against 3VHF stations and do as well as it did right out of the box. And it only bodies well for what our long-term view is in as many markets as we can this year and next. We will roll out such content. We really think the news program will be long-term, given our structure, will only produce huge margins for us. With regard to the regulatory environment, I don't really know any more than anybody else. My view of it is pretty the same as it always has been. The FCC is charting a course to, I think, clearly unwind the hamstring that has been going on in our space for as long as I have been in the business. I was a little bit surprised to see, after Michael Powell testified on the hill fairly shortly thereafter during an editorial, and I think it was in "USA Today", where he generally, I think, said that it's time for deregulation. At least that's the way I read it.

So I think what you're seeing out there is really nothing more than people are playing politics and we're going to get down to the short strokes here pretty shortly. And I think the administrative agency finds itself in the impossible situation of being told by the courts this is what you have to do, obviously because they just don't have a good track record there. So I'm still very optimistic that it's coming and it's getting close closer. Unfortunately, like the war every day, for the war everyday and us as an industry. I'm also, on a slightly different front, I know there's a lot of buzz in the industry about what broadcasters are doing relative to the cable industry and getting paid. And I'm starting to see, as I'm sure some of you folks are, I'm getting a number of E mails where I'm seeing publications and articles being written about broadcasters in small markets.

Some of the larger broadcasters in small markets are in conflict with local cable companies about their local television signal, and I think what that is really the beginning of is kind of the tip of the iceberg is what you may be starting to see, and of course I'm speculating here; the beginning of the broadcast industry starting to wind up against the cable industry to get what we're really due. And now is as good a time as any, because 2005 is just right around the corner, when the rules change with regard to our negotiating capability, with cable versus satellite. So I think there are a lot of things going on that are very good for us and we fully intend to play, as you can imagine the game.

Your next question comes from Bill Meyers with Lehman Brothers. Please state your question.

I think you said they should be 9 percent this year. (inaudible) large promotion and news source initiatives. Beyond 2003would you expect this trend to normalize?

Where would we expect the expenses to normalize?

Yes.

Well, part of that, Bill, we're seeing some cost pressure coming in from a number of areas, the assurance of health expenses that relate to our salaries plus we ended a salary freeze that was in place over 20 months, and that is coming into place relative to our overall expenses from year to year. So that's driving it as well. So normalized, probably three to 5 percent, in that kind of range.

Your next question comes from Leland Westerfield with UBS Warburg. Please state your question.

Thank you very much. I have several quick ones we can just work through them. The cost or perhaps the margins as you perceive them on the nontraditional revenue, the 15 to $20 million budget, what kind of cash flow do you anticipate out of that this year, and if there are startup losses on that, how does that figure into the seasonality. News cost to figure that for a moment. Did you say the capital investment would be 32 million? And what were the operational costs in to detail that, which markets are you focusing on for further roll out in the first half of the year?

Let me just take one or two pieces of that. The margin on the direct mail business is about -- around a70 percent margin in its current form. We think that is a reasonable constant over the long term. I think we probably haven't talked about this and I think this is certainly worth talking about. We are beginning to feel very comfortable with the direct mail space in this sense, that we have learned very successfully over the last year, and we have very high confidence that in the year 2003,the conversion rates on this space are going to be significant to us. And the important point in that to is that we only do it on a part time basis, if you will, based on the way we currently structure those types of transactions. We expect, over time, that we will fully be engaged in that space on a full-time basis, because we believe it offers so much long-term opportunity for us. And I think the long-term upside of that for our industry, let alone what it means for Sinclair is quite large, and I will give you two numbers to give you some sense of the space. I'm not telling anything out of school here.

For those of you who follow space, of the local television business is a $12 billion space across the country. The direct mail space is in excess of 44 billion. So when you extrapolate that and assuming it's reasonably linear across the question, that means the direct mail space in Baltimore is about three to four times what the local spot business is. We feel very comfortable at this point in time and highly confident as a result of our last year and a half's performance that we intend to be in that space and make significant end roads to it over the long-term. So we think that it's just a huge business opportunity for us and for the industry.

Your next question comes from Paul Sweeney with Credit Suisse First Boston. Please state your question.

Thanks very much. Good evening. I understand you're rolling out the news in new markets and adding newscasts to existing markets. I think we have a pretty good handle on the costs here. Give us sense of your timing to breakeven and, specifically, what kind of ratings we should be looking for in individual markets to kind of get you to that break-even? What kind of ratings and shares?

I would tell you that we expect to break even within the first year.

Yes, the first year being 2003. Although it's minimum, when totaling the total forecast that we provided to you today, we included both revenue and expense and the net BCF contribution, which is -- for the first year it's minimal. We look at this as an investment year. And with2004, with the political dollars coming in, really setting our self up for, you know, significant or political revenues next year. And from that standpoint, you know, to really start being specific as to dollars per market and which markets, when and how much, is beyond the scope of the call and something we would be reluctant to regard those kinds of specifics. In the conference call, it's going out to the public. But needless to say, we have given you the totals as far as the total number of markets we're looking to and the number of markets we're expending news into and the impact that will have should be quite significant to us going forward.

Let me just suggest a slight difference -- or another iteration of that; that we have sit said, I think, a number of different times that we would hope that the 2004political year will cover everything that we're doing to build out news, all of our new stations and upgrades in the stations that we're currently doing. The fact we will be in news in flint Michigan and you many other markets, we would like to think we have covered that cost. That gives you a sense of why we're -- we're anxious to get into the Tampa's (ph) in the world and on and on. Because there's going to be so much money in the New Year, 2004. We're optimistic about the space and what the margin is on it. At least it's a function for how we're building our models.

Next question is from Bishop Cheen with Wachovia Securities. Please state your question.

Good evening. It's a capital flow question. If you could just update on what your scheduled pay downs are, what your goal for pay downs are, and I'm not including whatever awaits (ph) the high tops. And if there's any significant debt that, because of the unwind up that swapped that would go away as stated by GAAP. I believe that swap portion is not counted in your bank leverage position. And, last, any capital outliers (ph) coming for spending acquisition completions?

Bishop, let me take the first part. I think what you're asking me to do is run through, sort of, what makes our debt at the end of the year. And I can give you that. $52 million on the revolver, $500 million term loans, $860 million of senior sub notes, about $24 million of swap, that's the fair-market value of those swaps, $4 million of the founder notes, 39 million of the non-recourse Cunningham debt, then there's about 4.4 million premium associated with the bonds that we did in the fourth quarter and about 73 million of capital leases and other. Those are all the balances that we had at year-end. The swap that runs through the income statement, that hedge is still out there. And, again, as we said in the press release, it's hard to predict what the forward curve is going to look like at any point in time but you should expect there will be gains and or losses which run through that line, which is starting which way, depending on where the former race would go. As far as our amortization, our amortization debt is pretty minimal. You're talking about $5 million a year. It revolves at maturity and the term loans do not begin to amortize until the second quarter of 2004 and then amortize at 1 percent per year.

Next question is from Jim Boyle with Wachovia.

David in your experience how much or how little have the auto advertisers ever pulled back budgets in anon-recession? And do you think if they annualized 2 million units less than they are now, would legal dealers or national manufactures blink first?

... I can't tell you what the automobile dealers are going to do in the event of a -- in an event that we expect is going to happen. But dig I could do would be speculation as best and I don't want to speculate for you. I guess the answer is I don't know.

Your next question comes from David Goldsmith with Buckingham Research. Please state your question.

Sure. I'm a political advertiser and it's a question that has been asked before often. Do you guys have any feel at all of how much of that advertising is incremental, how much that advertising is crowding out? And just by the way, any political spending this year in your numbers?

Yes, there is political spending in the'03-'04 forecast. I think we kind of gave that to you.

Yes, it's minimal. It's less than a million dollars that we have for 2003.

We now have follow-up questions. Your next question compresses Mr. Victor Miller with Bear Stearns.

Thanks for taking the follow up. Could you talk at a little bit about, David, the investment that you made in the auto dealership business in December and why you think that will make sense for your television group, because I guess you have over latching stations in Baltimore and you also have -- there's a dealership in Baltimore? Thank you.

Sure, Victor. We made the investment in the automobile space for a variety of reasons, number one, not the least of which is, it happens to be our largest single advertising cat Gore. As you all know all to well, I made an investment in the automobile space in 1996, and the rates of return that I got in that investment were quite substantial. And when my automobile business partner decided he wanted to go expand the enter prize, he was preparing to go to Wall Street to raise money and asked me if I had any further interest in the business. And I said, well, let me see if the folks at Sinclair do. They obviously did. Therefore, they made the investment. But I think our longer term view is one of there is what we expect to be a significant arbitrage between the public multiples and private multiples which we talked about at great length with everybody that has called in.

Clearly SUMA (ph), the name of the company we invested in, is right now I guess one of the top 20, 25 or so top auto dealerships in the country and it clearly has the potential to go public and we would like to see that happen because it provides us certainly with an exit vehicle and clearly, when we look at the space, unlike the broadcast business which consists of probably of 11 to 1200 stations as an entire industry, the vast majority of which are owned, simply means there are a limited number of long-term opportunities in the broadcast phase to get radically larger -- I mean you craft that to the automobile space where there are approximately 20,000 dealerships. We spec (ph) the vast majority of by will be an change of hands assuming capital is available in the future, along with the ability to buy those things at two to five times, it looks to us like pretty decent thing to do.

As a function of that, we did that. So we like the space. I have a distinct curiosity to try and understand what the relationship is between automobile advertisers and us in the marketplace. I'm curious find out long-term whether or not having us as an investor in the automobile dealership space means that I can go, along with my car partner, and have strategic investments with automobile manufactures on how they spend money in the marketplace, either in the form of direct mail or in the form of spot buys, news, promotions, things of that nature, which they all do. I think the advantage is us clearly in the marketplace, above everybody else, given the magnitude of the dollars that are spent in the marketplace. So I see books and books and books of reasons should to be in this space and I think that's why the outside director agreed and said I think this one make's great long-term business sense.

Next question comes from Mr. Weeks. Please ask your question.

Stephen couple of questions. First capital spending can you let us know where they will pend, there's X general and X the news expenses. I seem to recall it being in the 20 to 30 range in the 90s.

And additional part time testing.

I missed the roll out of what you said on the marketwise. If I understood you know correctly, David Smith, if you said that the monies you expect to reap in 2004 will entirely pay for all of your expenditures and news to date. Is that what I understood?

What I said is that I would like to think if we can get enough of our news running in 20004 and the existing programs that we have that the news central infrastructure that's being would be paid for hopefully by virtue of the 2004 election cycle. Then it just becomes an ongoing operating cost. And other news operations with which we're familiar, they're going to be significantly less.

Operator, he had another question there to start off there. It was on the overall capital spending and we had gone through that statement in detail, describing intimately the DTV payments this year of about 50 million and news of about 32 million and another 10 million in --and that's already loaded up this year. That's what we're saying, the regulations on DTV as far as what we have to do has been, as David said earlier, we are complain with the SEC and that is to have a to my knowledge they signal on the air but not at full program. Most broadcasters are opting for a low opinion houred (ph) solution to digital and that has kept our capital spending at a much lower rate.

When you have to bill out full power on your digital so we put the $50 million in the pot as a plan. That's as aggressive as we can be in that regard. And it would be unlikely, I would think, that we would spend our time in -- I think for planning purposes and budgeting purposes, it's appropriate to put it in there.

In the going forward past 2003 maintenance and repairs has a budget typically of on the 10 million a year.

I didn't finish David Goldsmith's answer to his question. He was asking about incremental on the political and just exactly what is it. I think generally here is a role of thumb. I'm taubting about a 50 percent incremental. There's to way to actually go in and see it is 20 percent or 30 percent or 80 percent. It's our (ph) way to try to measure where we are. But from our standpoint we have about 4 percent of political revenues in 2002. With the incremental we're seeing in our promotional effort, at about 15 million of incremental that gives (ph) a lot way to -- the complete dollars. Overall we're calling for that increase in 2003 of around 3 percent. And with ex-political, I think we said the number was about 7.4 percent counting political, so if that gives you some sense of what the political dollars mean.

Your next question comes from Mr. Westerfield. Please state your question

I think David -- I appreciate him stepping up and answering the question on the CapEx. If you can provide this detail, the operating cost of the news operations this year specifically, and when you're -- I think you referred to breaking even this year, did you mean at the end of the year or for the full year, in other words, no broadcast cash flow losses for you or turning the corner sometime late in the year.

Let me just frame that. There's multitude of definitions of break-even. Let me use one market as an example. We built an infrastructure down downstairs that is capable of seating, at our discretion, every city that we have television stations, let alone every city in the country because it's all satellite fed from here. We expect our station in flint, Michigan, although be it a very small profit, would break even this year. I think when you look at -- if you separate yourself from the notion that our flint station should break even this year if we do what we're supposed to do, then shift to the ongoing operating costs, not the initial capital cost to build out but the ongoing operating costs of what is defined as news central, then I think we have said a number of times, not on this call but in other calls or on occasions that the cost reductions at any number of stations, that we will execute this year as well as the consolidation and certain aspects of our news departments will cover our operational costs on an ongoing basis. And probably leave a significant margin on the other side of it. So efficiency is happening because the technology and it's certainly demonstratably (ph) worth a lot of money to us.

Next question is from Mr. Boyle. Please state your question.

Could you please give me your Q4 tax cash -- cash taxes and is your sellout any earlier or later in the last few months.

Q4 taxes? Well, you know, we're not a taxpayer generally speaking. We have some state taxes that we pay. We're looking to see a refund of -- north of about$34 million. About $34 million in refunds that we're hoping to see. March 15th is the filing date so I doubt if we will see it in the first quarter but there's a chance that we may. Operator?

Ladies and gentlemen, there are no further questions at this time.

Thanks very much everybody. If anyone missed anything or you need to get us online, feel free to be in touch.

This concludes today's teleconference. Thank you for your participation.