Sinclair Inc (SBGI) 2006 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Sinclair Broadcast Group Incorporated first quarter earnings release conference call. [OPERATOR INSTRUCTIONS]

It is now my pleasure to introduce your host, Mr. David Amy of Sinclair Broadcast Group. Thank you, Mr. Amy. You may begin.

Good morning, and thank you, Operator. In the room with me today are David Smith, President and CEO; Steve Marks, Chief Operating Officer of our Television Group; and Lucy Rutishauser, Vice-President, Corporate Finance and Treasurer.

Before we begin, Lucy will make our forward-looking statement disclaimer.

Thank you, Dave, and good morning everyone.

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 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 as set forth in the Company's most recent reports on forms 10Q and 10K as filed with the SEC and is included in our first quarter earnings release, which we furnished to the SEC on an 8K earlier this morning. The Company undertakes 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.

In accordance with Reg. FD, this call has been made available to the public along with a webcast of the call on our website. The webcast replay will be available until our next quarterly earnings release. Redistribution of this call is prohibited without the express written consent of the Company.

Included on the call will be a discussion of non-GAAP metrics, specifically, television broadcast cash flow, EBITDA, free cash flow, and leverage. These metrics are not meant to replace GAAP measurements but are provided as supplemental detail to assist the public in their analysis and evaluation of our company. A reconciliation of the non-GAAP metrics to the GAAP measures in our financial statements is provided on our website, www.SBGI.net under Investor Information. Please note that use of discontinued operations accounting treatment has been applied to all periods discussed as a result of the sales of our Kansas City, Sacramento, and Tri-Cities stations.

Before we go to the financial operating results, we wanted to share some highlights that have occurred since our last earnings call.

On February 8, we closed the final $1.4 million of the sale of WEMT, our Fox affiliate in Tri-Cities, and during the quarter we redefined our new central operations, which will now have the resources to increasing the amount of editorial and support content sent to our 18 stations that are locally producing news. We will also provide daily feeds of news content, coordinate coverage of major events, serve as a creative production hub for convergence, and provide internet and digital news solutions to improve the quality and competitiveness of our local news casts. In conjunction with this mission, we discontinued the news at the remaining eight stations that had been producing the news under the new central model and relaunched the local news programming through news shares in all but two of those markets. The net effect to our news cost line on an annualized basis is approximately $5 million in cost savings. Sinclair's extensive news franchise now consists of 31 stations, 18 of which are stand-alone productions and 13 of which are produced through news share arrangements.

On the affiliation front we renewed our affiliation agreements with the Fox network for all 19 of our Fox stations for another six years. We also entered into affiliation agreements with Ny Network TV for 17 stations which we believe offers a compelling economic model as well as creative programming for our affiliates. And we entered into affiliation agreements with the CW Television Network for nine stations, bringing the best programming of both the WB and UPN to those stations. We believe the combined financial impact of our affiliations with My Network and CW could be an additional $10 million of revenue per year, of which 3.5 million would occur this year.

On the retrans fee front, we assigned AT&T, and spent the quarter working with smaller MSOs in our markets. We are revising our expectations for this year's retrans fee up slightly from 25 million to about 25.3 million. This will be a number that we will update you as the year progresses and as our negotiations with other MSOs proceed.

On May 1, WBFF, our TV station in Baltimore, went live with WBFF DT 45-2, which is a subchannel, being our first multi -- digital channel to carry syndicated and other local programming.

Finally, 30 of our stations will carry the Tube Music Network on their digital channels, beginning this summer.

Now turning to the financial results: net broadcast revenues for the first quarter were $147.9 million, an increase of 2.4%, or $3.5 million higher than first quarter of '05, due to higher local revenues, revenues from new business initiatives, and retrans fee revenue, offset in part by lower national revenues due to a displacement from the Olympics, the Super Bowl moving from Fox to ABC, and weakness in the auto sector.

Reported revenues also exceeded our guidance by 2 million due to better than expected time sales. Television operating expenses in the quarter, defined as a station's production as the station SG&A expenses before barter and including stock based compensation, were $72.1 million, a decrease of 0.6% or $400,000 lower than first quarter of last year. The decline was due primarily to lower promotion, direct mail, and sales commission expenses offset by higher G&A expenses, news costs related to the shutdown of the new central operations, and the inclusion of stock-based compensation expense, which is now in accordance with the SEC and staff accounting bulletin No. 107, stock-base comp and non-cash expenses to be allocated to each respective cost line.

For 2006 the television expense forecast includes $1.4 million of stock based compensation expense for the year. You can find the '05 stock based compensation reallocation by quarter on our website.

Corporate overhead in the quarter was $5.8 million, an increase of 6.5% or 350,000 more than first quarter last year, due primarily to higher salaries.

Operating income in the quarter was $35.4 million, and an increase of $2.8 million from last year's results of $32.6 million, due primarily to the high revenues, lower station expenses, lower depreciation expense, higher operating income from nonbroadcast divisions offset by higher film amortization and corporate expense, interest expense. Net of interest income increased $300,000 in the quarter due to the conversion of the preferred stock to a convertible bond.

We also had $900,000 in net gains relating to the repurchase of our bonds in the open market. Lucy will discuss that further. And we had net gains from an equity investment totaling $6.1 million, and that was primarily due to return on a capital investment made with our Allegiance Capital, a small business investment company in which we have a limited partner interest.

During the first quarter we booked $1.1 million in tax benefits, primarily relating to a settlement regarding certain state tax returns related to discontinued operations in '99. We also booked a $1.8 million gain relating to the sale of the [license] assets of the Tri-Cities station. We had diluted income for common share in the first quarter of $0.13 as compared to $0.10 diluted income per share in the same period last year.

And television broadcast cash flow for the quarter, which is defined as net broadcast revenues plus barter revenues minus station production expenses, station SG&A, barter expenses, and program payments plus stock based compensation, was $50.8 million, an increase of $4.4 million over last year's BCF and $3.8 million more than guidance implied.

Our EBITDA, which is BCF less corporate expense and minus the loss or plus income from our other operating divisions plus stock based compensation, was $44.9 million, an increase of $4 million from the same period last year and, again, $3.7 million more than guidance implied.

The BCF margin on net broadcast revenues was 34.4% and EBITDA margins were 27.4% for the quarter.

We generated $14.3 million of free cash flow or $0.17 per share in the quarter, $4.4 million more than the first quarter last year and $8.5 million more than guidance implied.

So with that, Lucy will take you through the balance sheet and cash flow highlights.

Okay. Thanks again, Dave. Cash on hand at March 31 was $7.8 million. Debt on the balance sheet at quarter end was $1,460,300,000.

During the quarter we repurchased in the open market $8.6 million face value of our 6% convertible debentures and $8 million face value of the 8% senior subordinative bonds. There was $11.5 million drawn under the revolver, leaving approximately $163.5 million of the $175 million commitment available at quarter end, based on covenant capacity.

Leverage at the operating company as of March 31 was 5.18 times on a covenant of 7 times. Capital spending in the quarter was $4.7 million. However, during the quarter we sold $1.4 million of real estate assets.

Now Steve Marks will take you through our operating performance for the first quarter and our outlook for the second.

Thank you, Lucy. Good morning.

On a monthly basis, time sales, including political, were up 7% in January, flat in February due to the Super Bowl moving from Fox to ABC and the impact of the Olympics, and up 3% in March. For the quarter, local time sales were up 6.6% and national advanced 7.5%.

Categories that showed increases in the quarter were schools, services, telecommunications, fast food, and retail, while automotive was the only predominant category that was down, in part due to the displacement of revenues that was geared toward the Olympics.

Including political, our ABC stations were up 11.3%, in part due to having the Super Bowl, while our Fox stations were down 4.1% due to not having the Super Bowl this year. If you adjust for the Super Bowl, our Fox stations were up 2.5% on the strength of the network, which actually beat the Olympics head-to-head.

Our UPN stations were up 4% and our WB stations were flat.

Revenues generated through our new business initiatives were $6.9 million as compared to $5.5 million in the same period last year. Political revenues were $650,000 in the quarter versus about $150,000 this period last year.

With all but five markets reported and despite our stations not having the Olympics and the Super Bowl broadcast going from Fox to ABC, our station's market share decreases only slightly, going from 17.8% to 17.6%.

Turning to our second quarter outlook from a category perspective, we are currently seeing strength in services, schools, Telcom, home improvement, medical, and local dealer automotive. Entertainment and leisure, package goods, fast food, and financials are presently pacing down. We expect second quarter political dollars of $1.4 million.

From an affiliate standpoint, our ABC group is up 1%; our UPN stations are up 5%. Our Fox stations are currently pacing flat and our WBs are pacing down 3%.

Current pacings are down 1% in April, up 2.6% in May and flat in June. For the quarter, we are forecasting net broadcast revenues to be flat to plus two from last year's $163.1 million. However, adjusting for Rochester, which is now accounted for as a JSA, and the Tallahassee JSA, which was terminated in the first quarter, our guidance on same-station basis implies net broadcast revenues to be up 1.3% to plus 3.3%.

TV production and SG&A expenses are forecasted to be down approximately 1.6% off of a base of $73.4 million last year, with a large part of the savings driven by our news line.

For our other expensed items for the second quarter and full year, please refer to our earnings release which we issued this morning. And with that I would like to open it up to questions.

Thank you. Ladies and gentlemen, at this time we will be conducting a Q&A session. [OPERATOR INSTRUCTIONS] Our first question comes from Victor Miller with Bear Stearns. Please state your question.

Good morning. Steven, maybe you could help us a little bit on the math between I think your March release and now, where originally you thought you would be $8 million in the hole on the revenue. Now it looks like it's on an annualized basis plus 10 million, and why, also, expenses would be able to drop a bit.

And then secondly, David, the NAB just concluded last week a lot of talk about technology out on the floor. Could you bring us up to date on whether -- what you see for digital television? Why you've chosen to go the path you have gone, maybe talk about what you think about USDTV, those types of alternative uses of digital spectrum. Thanks.

Okay, Vic. As far as our revenue, obviously the strength of Fox and ABC is helping us out quite a bit and the ratings continue to grow. Shows like 24, American Idol, and Desperate Housewives and Lost, they're gaining in market shares year to year, and with the change and conversion of My Network and CW, with the increased inventory, specifically from My Network as well as getting back the 3:00 to 5:00 P.M. time period. In quite a few of our marketplaces we're anticipating, from September through December, a nice little increase with the increased inventories.

So I think the network affiliation switches will be a big benefit to this company and part of the revenue that you refer to will come from that element.

As far as the expense stuff that you are referring to, the refocus of our news operations is predominantly where we are picking up quite a bit of cash flow anticipated. We already have a lot of these new shares on the air and already meeting with quite a bit of success with them.

If I can add to that piece. Victor, if you recall back in January when the CW announcement came out and we put out that potential $8 million that we could be at risk, we had gone through in that press release and we said that that $8 million was premised off of if [way] market by market and at that time My Network TV had not been announced and that was saying which market would we be at risk of not having a CW with possibly becoming an independent. And where we would be at risk on the revenue side. And with that were expenses of having to go out and get additional programming. So that's where we had additional expenses, buying additional programming and promoting their stations, so you had higher expenses and then the lower revenues, the $8 million was coming from if we were at risk of losing affiliations in certain markets.

Since then, we had My Network TV come out, we were able to affiliate all those stations, get the inventory advantage for all those stations, and that's driving the revenues. We have been able to lock up the remaining stations with the CW. The impact now is that we are not at risk of losing $8 million, but now we have $10 million of potential. So we have an $18 million revenue swing. So when the market took us down back on January 24th by 16% on our stock price, we now have an $18 million revenue benefit that's out there. So I would expect the market today to give us back that 16% in our stock price plus the addition of the $10 million on the revenue side.

So, just want to be clear that what's going on here with all these affiliation swings today.

Victor, regarding the technology side of the equation, let me just mention a couple of things. The first is, we have chosen to do -- pretty much what we said we were going to do seven or eight years ago when we talked about the whole notion of being a multichannel provider. We're clearly moving in that direction by virtue of the announcement that we made recently with the Tube Network, the 24-hour music channel -- or music video channel, number one.

Number two, we are effectively using Baltimore as our first prototype to essentially start another television station in the marketplace. And I think that the interesting thing about that is that given that we have cable coverage and limited over-the-air coverage, we find people standing in line to sign up to become part of that deal. Not only from an advertiser perspective, but from a client perspective, paid programming type perspective on a localized basis.

So, as I say, Baltimore is our first test, and once we understand the model here a little bit better, we expect to be rolling it out in as many cities as we can, as fast as we can. And why are we doing that? Simply because we can make more money. Nothing more complicated than that.

I think the other thing that's really probably more fascinating than anything that's been going on in the business for the last seven or eight years is the very distinct possibility that there will be some modifications to the 8VSB standard that will provide us significantly better coverage in the marketplace on any kind of basis whatsoever. And I won't worry you with any kind of details now except to say that our desire a long time ago was to have as ubiquitous a platform as we possibly could, with the capability to talk to any device, anywhere, any time, and I think there is now a very real possibility that will happen in the near term. And the business models that can evolve off the back of that are too numerous to mention, certainly on this phone call.

But I think as we move closer with the technology, it will certainly warrant some further discussion on the part of the industry in general. And I think -- it wouldn't surprise me if the changes that are potentially out there won't be fully supported by the industry at this time because I think that we have seen what the potential effect is on our platform by virtue of cell phones and other PDA devices and things of that nature. So I'm cautiously optimistic that the future of over-the-air television by virtue of some modifications of the standards, is very, very bright, and we certainly intend to be in the middle of it, as you can imagine.

Thank you.

Our next question comes from Bishop Cheen with Wachovia Securities. Please state your question.

Good morning, David, David, Lucy, Steven. Thanks for taking the call.

So many other companies seem obsessed with buying back their stock and you're buying back your converts and your bonds, which is refreshingly different. Can you give us what your thinking is here?

Oh, yes. I would be happy to talk about that.

You know, it's a matter of just looking at what is the best economic result for the -- overall for the Company and for the shareholder is the way we are approaching it. We think that by going after those converts and by going after those bonds we can reduce our overall cost to capital. On the other hand, there is always that theory of what's your best investment in regards to buying back your stock and we really have looked at that from a historical standpoint and we've bought back over $100 million of our stock. So it's not to say we don't buy back our stock. We have and we have been opportunistic with that. But where the real value lies right now for us is to look in other areas and that's why we've moved in that direction.

And along with that we have a significant dividend policy that I think you are well aware of that right now we are at $0.40 a share and when you look at where the stock price is, that's a 5% return to you as a common shareholder.

So it's -- I think we have a strong way of providing a good return to our shareholders and to our bond and convert holders in that way. And plus, it lowers our cost to capital, which is a very good thing.

Thank you.

Our next question comes from Lee Westerfield with Harris Nesbitt. Please state your question.

Thank you very much and congratulations on the affiliation agreements, in a timely way.

I have a couple of detail questions, Lucy, and then David, the question I want to follow up on, your remarks about the 8VSB and potential to modify that engineering. I recognize that maybe a process with some work ahead of it, but how and when would we begin to see likelihood of even mobility, if there could be a change to the 8VSB standard?

Before you answer that, though, Lucy, the details I'm just looking for here, of what you did in the first quarter in terms of either deferred or current taxes, just to understand the tax makeup. And then specifically also, going forward to what extent the new affiliation agreements call for any changes in compensation payments over to the networks.

Okay, Lee, I really try to stay away from getting too specific about taxes, for obvious reasons. But the reality is we had significant gains in the sale that we talked about of our Sacramento station and our Kansas City and Tri-Cities stations last year. So they ate up quite a bit of our NOLs and we were able to shelter the gains on those sales with the NOLs so that was a significant benefit to the Company and in that regard, we still see, going forward, the generation of tax losses, primarily because of the goodwill amortization roles and the acquisitions we made back in the late '90s are still on the books, we're still amortizing those for tax purposes versus, as you know, on a GAAP basis there is no amortization or goodwill for GAAP. So you see that significant difference there between GAAP and tax accounting.

So we will continue to produce tax losses going forward and the question in all of our minds is just how long that will last and it's all a matter of projections and profitability assumptions and certainly it's very exciting to look at the prospects of the Company going forward in regard to the technologies that are coming available to us. And hopefully that will mean to us that those NOLs will be chewed up a lot quicker than we would suspect.

But given where we are, it's probably two to five years, two to four years, that kind of range, where we will still continue to be protected on a federal basis. So what you really see there from a tax exposure are state taxes at this point, and some AMT.

Lee, with regard to the technology side of the equation and the notion of portability, mobility, and other capabilities that may exist within the platform: The only thing I would guide you to is to watch and pay attention to the trades for the next four to five months because my guess is, as you will see starting to be discussed in the editorial columns and various engineering locales in these magazines, the kind of things that are potentially available and that have to kind of be worked through at the ATSC standards committee.

So I would -- without getting the cart before the horse, I would simply say, watch the trades, specifically the engineering magazines and probably Broadcasting and Cable to a lesser degree, because it's really a nontechnical magazine. It's more of a business issue magazine than it is technical and you will start to see that kind of stuff, the evolution of the standard, start to appear in the near term.

And, Lee, as far as the network comp, you know, our Fox agreement, we've never paid them, they've never paid us. However, it does have that inventory buy-back program and that's been many, many years now in place and that continues in the current agreement. So that's almost just a normal course of business now in that affiliation agreement.

Thank you.

[OPERATOR INSTRUCTIONS] Our next question comes from Bob Kricheff with Credit Suisse. Please state your question.

Hi. Three questions: on the potential additional $10 million in revenue, is that factoring in for an even political year or a non-even year or doesn't it really matter?

The second question I wanted to ask was regarding the Tube Music channel and also the Baltimore digital channel. What kind of carriage on satellite and cable do you guys kind of expect in those various markets for those channels by year end?

And lastly, David, you were talking about kind of get the best retirement return on capital when you use your free cash flow. Do you have any sense in your mind right now whether -- what percentage of your free cash flow would go to focus on debt reduction versus return to the equity holders through a dividend or buy-backs?

Let me do the easy part here, which is to say that the -- in Baltimore our agreements with Comcast give us the capability to be carried on all of the Comcast cable systems anywhere where we happen to have a television station. At this point in time we have no deals with either EchoStar or DirecTV because they have limited capacity, obviously, at least in today's world. That may change in the future, and if it does, then we would certainly hope to be part of that platform.

But for now, we will be over the air, and in Baltimore, as our first prototype, we will have complete coverage on Comcast, which is the more than dominant cable provider in this marketplace.

As far as the $10 million, Bob, there is no real political influence in that number at all. It's all based on prime time ratings and the 3:00 to 5:00 afternoon going to adults versus giving up -- so we gave up kids from 3:00 to 5:00, which is a really positive move for all of those stations to be able to go into adult programming. It provides not only improved revenue in that day part, but also improves audience flow into our access programming from 5:00 -- it's starting at 5:00 in the afternoon. So there is really no political revenues considered in that analysis.

And in terms of free cash flow and debt repayments, certainly we've set ourselves up so that we have -- right now our approach is to take free cash flows and pay down any outstanding bank debt that we might have in a revolver's standpoint, just to keep our costs down that way.

As far as our capital structure itself, we're looking at that and considering just the balance between how much fixed debt we have and how much bank debt we have. So we're real focussed on just how that has moved with the paydown of bank debt here with the sale of the stations that we talked about last year, it's brought our bank debt down to some very low levels. So we kind of have an imbalance in our capital debt structure right now so we are looking at that closely and trying to come up with the right strategy going forward as to how we want to have that structured. But one of our key thoughts there is just flexibility in terms of being able to do what we want to do and when we want to do it. So, you will be seeing more of that from us as the year progresses.

Another key point on the 10 million that shouldn't get lost on the call is that we pick up an affiliation in Las Vegas that we didn't have previously. Between our two deals with My Network and CW, we had an independent in Las Vegas, and Las Vegas is a huge growth market and now we've got both of our stations covered, with network affiliations there.

As well as Pensacola, Florida. We picked up an affiliation in Pensacola, too. So, none of this should get lost on the investment community, where we now have affiliations where we didn't previously.

Thank you. Our next question comes from Barton Crockett with J.P. Morgan. Please state your question.

Okay, great. Thank you very much.

It's great to see the revenue impact that you are seeing from the network affiliation and it's very interesting to hear about some of the new technology initiatives, but I was wondering about the trends in the core business which are kind of flattish to low single digit, excluding political, excluding all these other initiatives, it seems a bit lackluster, not only at your group but for the industry at large right now. And I'm just wondering what you attribute that to. Is it strictly just a situation where the auto makers are going through difficulties? Or is there any of this rotation that people talk about to other media playing a role. And then, is there any reason to think that that would change over on the core underlying basis over the next couple of quarters or even longer term, or should we just assume that this is the fundamental situation in TV stations and model accordingly and look, maybe, for more growth out of other initiatives? Thank you.

Let me kind of address that a little bit and everybody can kind of jump in on this.

I think what you are seeing today, certainly when you look at our local sales effort, it's outstanding relative to what's happening on a national basis. Our local sales effort and new business effort is what's driving the Company today and it's what we've always said was going to drive the Company years ago. If you've been following us for awhile then you would have heard us say years ago that we expect national business over time to decline.

And we expect a decline not only because of the normal things that happen over time, but more importantly because national players find it sometimes more efficient to go place their money in other media. Not withstanding cable and satellite, the fact of the matter is you have the Internet out there today that's taking money out of all other media. You see it coming out of the newspapers' pockets, you see it out of magazines, you see it out of everything. And I think the market is unstable at this point from the standpoint that nobody knows how much national business will be sucked out of all other media into places like the internet. But my sense is that once it finds that leveling off point, it will stabilize and then as the economy continues to move, I expect -- and I can't tell you what day or what year that's going to take place -- but my sense is it's got to take place because it can't go -- it's not going to go to zero.

So the issue is where is the floor and once you hit the floor, then at what rate does it grow again? My sense is we haven't seen the floor yet in terms of national business reaching it. And if you look at other media, if you look at the newspaper business as an example or the radio industry as an example, they are predominantly local businesses. Not what they used to be, but that's what they are now. And as we've said for years, we expect to move in the direction of looking more like a newspaper business from the standpoint of localism and the radio business from the standpoint of localism.

So I think if you just look at what our local performance is, you're going to have to look at that over time as what our standard of behavior is going to be. And we think it's quite outstanding relative to what other things are going on in the marketplace. So that's a view, at least my view for right now, as to what I think is going on.

Just to support what Dave just mentioned, in first quarter, keep in mind that this company had only one market, market size 109, that participated in the Olympics. We had seven less Super Bowls than we had last year from Fox going over to ABC with the Super Bowl, and we didn't have the Daytona 500 and our local effort in terms of first quarter, we increased our revenue share at cost to our company from 17.8% to 18.4%, which is an incredible figure when you think about going up against the Olympics, literally, in every market we're in and not having it.

And you take a look at the future, I think the new technology clearly speaks to the benefit of advertisers. They are going to be able to enhance their messages and that's a benefit for our business. We are in the business to sell product for our advertisers and the technology is going to allow us to do that. And as Dave mentioned, we've demonstrated over the last couple of years, our focus is on la local basis and the results that we've been achieving over the last couple of years, few companies can rival.

Thank you. Our next question comes from Aaron Watts from Deutsche Bank. Please state your question.

Hi. Good morning. I was just hoping you could comment a little bit on where your head is at with regards to the networks trying to branch out and explore different channels for distribution, whether it's the internet or iPods and things like that, and where, kind of, you stand with negotiating and getting a piece of those new revenue streams and where you think the industry is at and what path you are heading down in those negotiations.

I will take a shot at that.

I think the industry is more reacting to Wall Street's view of the world than it is the practical business world. I don't know that there is a whole lot of people that are going to watch the football game on a telephone any more than they're going to sit there and listen to stereo music on a telephone. But the fact of the matter is that the market, the media market, seems to be rushing into those delivery mediums for whatever they are worth. And at this point in time I think it's very early on to be able to define what they are worth.

Having said that, it wouldn't surprise me that once everybody figures out what, if any, value there is there, that they will eventually go back and rethink their original distribution plan and say, what do I need them for? I can do it myself.

So I think what -- I think all you are seeing right now is some probing of other delivery mediums to see if there is anything there. And I think that's a good thing because it means that we as an industry are experimenting with how to get our content into more places at the same time.

And ultimately, don't lose sight of the reality that it's about the content. It's always about the content in today's world. If there is 15 new delivery mediums, what do we care as long as our content is there. That's all we should be concerned about. If we could control the delivery medium and the devices, that certainly is not going to hurt us by any stretch of the imagination, but the reality is it's the content that people want. If we are the content provider, sooner or later you have to expect us to be in the pipeline to get our cut of the deal. I just think it's a bit too early to get our hands around that as yet, as people are still kind of testing it.

I was just going to say, as far as breaking that down, too, as far as repurposing and distribution, is two different issues. The repurposing side of it, you just have to take a look at history and see -- some of the efforts by the networks in the past have been to repurpose their programming in the same week or very shortly thereafter, and thinking they could -- and remember, the networks hold the majority of the inventory. So they look at it in some regards and say, okay, can we resell this inventory by repurposing and doing it quickly behind the initial airing of that show? And the history of that has been very spotty and unsuccessful in that regard. So that does not exist as a real threat to us as a network affiliates, where we should be too concerned about the networks trying to over-repurpose their programming and diluting our franchises.

Look, I have seen -- for all the conversation that has gone on out there, I have seen no evidence as yet or no reports from any rating service or anybody any place that said, everything that's been done to date has been a detriment. In fact, I've really seen the other side of it, which is I've seen a number of articles from people supposedly in the know that said it's been beneficial to exposing their content to people who wouldn't otherwise know about it. So that's a good thing.

So as I said, I think it's a bit early to really get our hands around it as an industry, what the primary effect of this is going to be, let alone any other effect. But as I said, stand by, because if there is money in it, since we are the content provider you have to expect us to be in it -- it's just a bit early.

Thank you. Our next question comes from Andrew Finkelstein with Lehman Brothers. Please state your question.

Hi. Good morning. Just a few questions.

First, I thought maybe we could get a little more color on the declines you mentioned in auto. First, is it more local? Or national? Does it explain that drop? Is it tied to the Super Bowl shift, et cetera?

And then on acquisitions, you guys have obviously been better sellers of stations, it seems, for a little while. Just wondering, your thought on where you see yourselves coming out on looking to make any new acquisitions in market or otherwise.

And then finally, is there any more savings coming from the news platform of scaling back News Central or going into any more news shares in some of your markets? Thanks.

In terms of the auto category, in first quarter, Dodge Chrysler Plymouth was down significantly, as was General Motors, and most of that was on a national level and a lot of it was anticipated as whatever dollars automotive had. Typically they're geared towards big ticket items. This year was special because of the Olympics, so that had, obviously, a direct effect against us because we don't have Olympic television stations and we also were short seven Super Bowls.

Interestingly enough, the category is turning around. In second quarter, Dodge Chrysler Plymouth is still down significantly, but every other major auto provider is actually up and spending for second quarter and we're pacing a little bit ahead of the game on that quarter -- category for second quarter, which is a very nice indication for us.

In terms of the new share stuff, most of the deals that we have done were just concluded. However, the few that are on the air right now are performing exceptional and I think the numbers that we provided with you are numbers that are real safe bets and I fully anticipate that those numbers will be achieved and possibly surpassed. So we are off to a real good start with our new [inaudible] partners.

As far as the M&A front, it's a very interesting process right now in terms of just what's available, what the values are, and certainly the disconnect between the public and private market, it seems to be growing wider and wider all the time. But clearly, as we see that the value of the technology is starting to really take hold here, over the next few years I think you are going to see more and more opportunities and especially if we get the dereg relief, the values of the stations within markets should be quite a turnaround. You can see right now the difficulties that -- where a lot of the smaller market stations are faced with and just from a standpoint of making money, the liquidity issues that they are facing in terms of dealing day to day.

So in that regard there is quite a bit of hidden value within our properties and within the whole broadcast TV sector as far as we are concerned. And trying to find the right deal is a bit of a challenge in that regard because there is quite a bit of competition for stations when they do come up for sale. You can just take a look at anything of any value at all. The NBC deal that Media General just announced, their acquisition of the four NBC stations, the multiples they're pinning are quite substantial. But within that analysis there is so much upside in terms of just the efficiencies they can create and the opportunities that will be available for them down the road.

I think just to kind of add on to that, the other thing to keep in mind is that Sinclair in the late '80s and through the '90s acquired a substantial number of assets, which is, I'm sure, not news to everybody. And I think that the unique thing about the position we are in today it that we are large relative in terms of our coverage relative to pretty much every other broadcaster out there. And I think there really isn't the motivation on our part to go buy assets unless there is clearly some huge synergies we had from it or some other technologic benefit that we can get from it if mass is the order of the day.

Let alone the economics of the deal, mass has its benefits in the bigger scheme of things. And I think if you were to add up the coverage of all of the other public companies out there, pick four, five, six different companies, you gross them all together, they're not as big as we are. So I can appreciate the necessity for those companies to try and figure out how to get more mass because there is clearly a -- greater opportunities with mass. So they have motivations to buy, economics aside, just to get mass. We don't. So we are not in a rush to go out and buy anything at all.

Having said that, if something becomes available we're certainly opportunistic like everybody else is, but we're not as highly motivated as some of those other smaller players have to be in order to get to our scale, which, frankly, they can't do under any circumstances I can fathom, where they could get up to where we are. So we're kind of lucky in that we are sitting kind of atop of the mountain with the NBCs, the ABCs, the Foxes, the Tribunes, and then us, and that's pretty much it in terms of real broad based broadcasters. It kind of falls off fairly quickly after that.

So I think we are content to stay where we are for now. If something beneficial comes available, we will certainly play for it. Otherwise, don't look for us to be an acquirer any time soon.

Thank you. There are no further questions at this time. I will now turn the conference back over to your hosts to conclude.

Thank you, everyone. Talk to you later.

This concludes today conference. Thank you all for your participation.