Sinclair Inc (SBGI) 2005 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third-quarter 2005 Fisher Communications, Inc. earnings conference call. My name is Nika (ph) and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's conference. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Ms. Colleen Brown, President and Chief Executive Officer. Please proceed, ma'am.

Thank you, Nika. Welcome to our third-quarter 2005 conference call. With me here at our Seattle offices is Rob Bateman, our Chief Financial Officer. Rob will provide you with a financial overview in a moment and we will both be available for questions later in the call.

Before we get to that, let me just add a few comments. I'm happy to be here; I'm looking forward to the work in front of us here at Fisher. We are also looking forward with optimism to the future, and we continue to focus on improving and sustaining our broadcasting business.

Let me now turn it over to Rob.

Thanks, Colleen.

Before we discuss our financial results, let me remind those of you joining us that comments made during our call today may include forward-looking statements. These statements may be identified by the use of forward-looking terminology such as anticipate, believe, continue, could, estimate, expect, intends, may, might, plan, potential, project, should or will, or the negatives thereof are comparable terminology. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These risks and uncertainties include those discussed in our quarterly report on Form 10-Q for the quarter ended June 30, 2005 filed in August, 2005 under the heading "Additional Factors That May Affect Our Business, Financial Condition, and Future Results". We plan to file our third-quarter 2005 Form 10-Q within the next few days with an updated listing of these factors. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements are made only as of today's date. We do not undertake any obligation to update any such statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments.

Now, with that taken care of, let's discuss our financial results. We issued our quarterly press release earlier today about an hour or so ago, and as I mentioned, we plan to file our Form 10-Q within the next few days. Those documents include a great deal of information regarding our financial results, so please refer to those sources for additional information.

Let me start off by briefly summarizing the sources of our revenue for the first nine months of 2005. Television accounted for 60% of total revenue; radio accounted for 35% of total revenue; and Fisher Plaza accounted for 5% of total revenue.

Going back to the television portion of our business, the 60% portion, and breaking that down just a little bit further, our two ABC-affiliated stations located in Seattle and Portland accounted for just under half of the Company's total year-to-date 2005 revenue. We also own and operate smaller market television stations in southern Oregon, Yakima and the Tri-Cities areas of Washington state and three market we serve in Idaho, Boise, Idaho Falls, and Lewiston.

Within the Radio segment, which account for 35% of total revenue, if you break that down a little bit more, Fisher Radio Seattle account for about 3/4 of radio revenue, or about 1/4 of total revenue. Remember that we have the radio broadcast rights for the Seattle Mariners baseball team and therefore, our radio revenue and expense is greatest during the baseball season, which means the second and third quarters of the year. We also own and operate 24 radio stations in Montana and eastern Washington.

When we consider the fluctuations in our broadcasting revenue as compared to the prior-year period, it is important to note that 2004 was a national election year and political campaigns began spending on broadcast advertising in certain of our markets toward the end of the first quarter of 2004. Though we began picking up some initiative-based advertising in Washington state near the end of the third quarter of 2005, the amounts are much lower in this odd-numbered year. We reported total revenue of 38.8 million in the third quarter of 2005, a reduction of 3.6% compared to 40.3 million in the third quarter of 2004. For the nine months ended September 30, 2005, we reported revenue of 109.9 million, a reduction of 1.5% compared to a 111.5 million in the comparable nine-month period in 2004. For both the three and nine-month period comparisons, broadcasting revenue was lower in 2005 due primarily to lower political advertising as compared to 2004. These declines were offset somewhat by higher revenue at Fisher Plaza as a result of increased occupancy levels.

In comparison to the nine months ended September of last year, year-to-date 2005 local broadcasting revenue increased at most of our stations, including the television and radio station group in our largest markets of Seattle and Portland. Excluding political revenue, year-to-date 2005 national broadcasting revenue increased at our ABC-affiliated stations and generally declined at our smaller market CBS-affiliated stations and at our radio stations.

The recent strength of ABC television programming has supported local and national advertising at our two largest television stations. In both Seattle and Portland, our television station outperformed the spot markets in the year-to-date nine-month comparisons of 2005 to 2004.

Our radio operations showed slightly lower revenue in the three and nine-month periods ended September 30, 2005 as compared to the same periods in 2004, primarily as a result of decreased national revenue, which was partially offset by generally increased local spot revenue. Radio revenue from the Seattle Mariners broadcast rights was lower in the three and nine-month periods ended September 30, 2005 as compared to the same periods in 2004, due in some degree to the on-field performance of the Seattle Mariners. The overall decrease in radio revenue in the 2005 periods was offset somewhat by KOMO AM's improved performance in the Seattle market, as well as higher revenue at KPOZ, our FM radio station in Seattle, and higher overall revenue at our smaller-market radio stations.

Total operating expenses decreased 3% to our 38 million, or to 38 million, in the three months ended September 30, 2005 as compared to the three-month period ended September 30, 2004. The decline in the third quarter of 2005 was due primarily to lower levels of depreciation as certain assets have become fully depreciated, as well as somewhat lower consulting and accounting expenses in the 2005 period, as the Company is in the second year of compliance with the internal control requirements of the Sarbanes-Oxley Act of 2002, and we've reduced certain consulting and accounting expenses.

Operating expenses increased 1% to 114.1 million in the year-to-date period ended September 30, 2005 compared to the year-to-date period ended September 30, 2004. The increase in 2005 was due primarily to certain increased syndicated television expenses, offset in part by lower levels of depreciation as certain assets have become fully depreciated.

As many of you know, the comparative 2004 operating results include gains and losses from derivative instruments related directly to prior corporate borrowing agreements. These borrowing agreements were refinanced in the second half of 2004 through a $150 million placement of senior notes. As a result of the refinancing, our debt structure was significantly simplified. Debt that was nearing maturity was extended to 2014 and we no longer have any derivative instruments outstanding. However, derivative instruments had a significant impact on our operating results in periods prior to 2005.

The Company reported a net loss of $790,000 in the third quarter of 2005 compared to a net loss of 5.2 million in the third quarter of 2004. For the nine months ended September 30, 2005, the Company reported a net loss of 6.9 million compared to a net loss of 16.5 million in the comparable period in 2004. As I mentioned, we had no derivative instruments during the first nine months of 2005. However, we had pretax loss on derivative instruments of 2.7 million, or 1.8 million after-tax, in the third quarter of 2004 and pretax losses on derivative instruments of 13.2 million, or 8.6 million after-tax, in the nine months ended September 30, 2004.

We finished the quarter with cash and short-term investments of 9.4 million. Our investment in Safeco stock was valued at 160.2 million as of September 30, 2005. We have no debt outstanding under our $20 million revolving line of credit and the full amount of the revolver remains available to us.

As we have done over the past few quarters, I'd like to take a few minutes and go over our operating cash flow as defined under our debt agreements. Based on a trailing four-quarter period ended September 30, 2005, we calculate our operating cash flow to be 22.3 million.

The information is derived primarily from our financial reports filed with the SEC. If you choose to perform the calculation yourself in the future, one way you might approach this is to start with the 2004 annual financial statements published an our Form 10-K, add relevant data from the nine months ended September 30, 2005 from the 10-Q that we plan to file within the next few days, and subtract relevant figures from the nine months ended September 30, 2004, also in the Form 10-Q.

Now, let me walk you through the summarized calculation. Net loss for the trailing four-quarter period -- and again this is the trailing four-quarter period ended in September of 2005 -- was 2.4 million. Subtract, in this case, the derivative gain from the fourth quarter of 2004 totaling 0.6 million. Again, we're picking up a trailing four-quarter period and we had a small gain in the fourth quarter of 2004, prior to terminating that derivative instrument. Excluding the effect of income taxes; in this case, that results in a reduction of 3.5 million, because we had a tax benefit in the trailing four-quarter period. Add back interest expense for the trailing four-quarter period in the amount of 13.7 million; add depreciation for the four-quarter period; that's 14.2 million; add back the net of non-cash program amortization over cash paid from programming; these amounts are found in our statements of cash flows. That results in 0.9 million add-back. If you add all those pieces together, you come up with the amount I mentioned previously, 22.3 million.

That concludes the prepared portion of our presentation today. At this time, Nika, if you would help us with the Q&A session.

Yes sir. (OPERATOR INSTRUCTIONS). Bishop Cheen of Wachovia.

Good morning to you. Good afternoon I guess to us on East Coast -- or (indiscernible) welcome, Colleen. We haven't had a chance to meet yet.

Thank you.

A couple of questions -- I guess we got as much as we're going to get on the operating cash flow. Rob, you're not going to break it out by nine months or three months, right, on this call?

No, but the information is really available out there because we pull it from the financial statements, so following that statement methodology, Bishop, you could come up with the number.

Right, I just have to wait a few days for the Q to be filed, right?

Yes, that's correct.

Okay. Moving on -- Plaza occupancy -- let me just (indiscernible) what I'm going to ask. I'm going to ask about how the occupancy is going at Plaza and also if you can quantify for us in any way the average rate or rental, because I know there's some discounting to get people to sign long-term leases. I'm going to ask about Seattle and Portland outperforming the market, if you could quantify its pacing versus what you think the market pacings were, if you could quantify that by how much you outperformed.

I'm going to ask about the current Q4 and any color you can give us on the pacings' strength, depth, weakness of your markets.

Is there anything you're not going to ask us, Bishop?

No! (LAUGHTER). That's it!

Well, let me field the first question, which is the Plaza. The difficulty with providing an average rate is that we have so many different components of occupancy at Fisher Plaza. That's what makes us unique. You know, we have 300,000 square feet of rentable space here. Part of that is in office; part of that is in datacenter space. Part of it is in what we call co-location space; and they are all at different rates. But the datacenter space also having what we call EIF -- Electrical Infrastructure Fee -- and so I can't give you a rate. We are very competitive with the market around here. The Seattle vacancy for office anyways runs at about 12%; we are at 10% right now, as of September 30. Here when the 10-Q comes out here in a couple of days, you'll have the segmental information and our revenues on Fisher Plaza for the nine-month period will show an increase of about $1 million from the same period in the prior year.

So I -- (multiple speakers).

That's very helpful.

That's the way that I would approach -- (multiple speakers).

No, that's very -- and again the total rentable square footage of Plaza is how much?

It's 300,000, and we take up about 40% of that as far as the Fisher entities. The fisher entities don't pay rent; we do pay for common area and maintenance expenses, but we don't pay rent to each other.

Talking about the pacings in Seattle and Portland and how television outperformed the market in Q3 I think you were talking about. Can you give us any quantification on that in terms of basis points or pacings?

As far as pacings, pacings of course relates to going forward. I can give you a little bit of color commentary on how we saw -- for the nine-month period the, markets in both Seattle and Portland, our two largest markets, were down in about the 10% range. Portland was down, oh geez, just over 10% and Seattle was down -- again, this is year-to-date -- and Seattle was down just under 10%. We outperformed the market, speaking of television here, in both of those.

We attribute that significantly, Bishop, to the performance of ABC television. Of course, with our two ABC affiliates making up nearly half of our total revenue, when ABC improves its performance, which it has done here of late, that certainly is helpful to us.

Okay so let me just push it one more knot. If the markets (indiscernible) 10% and with the absence of (indiscernible) you were down also in those markets, but can you bracket us for it, just give us sort of an approximate X?

Yes, we were down -- let me find it -- in the Seattle market, we were down just under 5%. In the Portland market, which again was -- well, the Portland market was down 10.6% and we were down just under 10%, so we did a little bit better in each one of those markets -- again, speaking television.

Okay, and you said you have 5% in Seattle and roughly under 10% in Portland?

Yes, as far as our actual spot --.

Right, okay. Then what else did I have? Did we cover it? Did I beat you guys up enough already?

Well, you said you wanted information on our fourth-quarter pacing and I guess the way that I would approach that, Bishop, is we hesitate to provide forward-looking information. We are seeing some inconsistent messages. Automotive of course is a big category for us and we are watching that very carefully. We just aren't to a point where we are seeing a lot of trending there at this point.

Okay, so it's tough to say. Then the last thing, political -- if, in a strong political year, you are somewhere between 10 and 15% of your revenue base is political, does that percentage work at all in an off-political year?

Well, you know that we don't break out political other than we provided, for 2004, that range that you just mentioned right there. Now, as I mentioned in my prepared remarks, we began seeing some initiative-based political advertising in the third quarter, but we're not going to provide specific information on how much that might be. It's really difficult to -- and I guess in answer to your question, no, that range may or may not apply. That range certainly worked for us in 2004, but that was with a lot of political dollars in the marketplace and it has been uncertain here in Washington. We really haven't picked up much of any politicals outside of Washington state.

Okay. All right, Rob, I do appreciate it. Colleen, (indiscernible).

Thank you, Bishop!

(OPERATOR INSTRUCTIONS). At this time, I'm showing no further questions.

Well, I guess that concludes our call for today. Thank you, everyone, for tuning in.

Once again, ladies and gentlemen, we thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.