Sinclair Inc (SBGI) 2009 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Third Quarter 2009 Fisher Communications Incorporated Financial Results Conference Call. My name is Michelle, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to you host for today's call, Mr. Joe Lovejoy, Senior Vice President and Chief Financial Officer. Please proceed.

Thanks. Good afternoon, everyone. Before we get started, let me remind you that this call contains forward-looking statements relating to the development of the Company's operations, products and services, and anticipated future operating results. These forward-looking statements include information preceded by or that includes the words, believes, expects or similar expressions. These statements are based on current information and projections about future events, and are necessarily subject to a number of risks and uncertainties, and actual results may differ materially from expectations.

Factors that could cause actual results to differ materially from those expectations are described in our Annual Report on Form 10-K and quarterly reports on Form 10-Q, as filed periodically with the Securities and Exchange Commission. The Company undertakes no obligation to update publicly any forward-looking statements due to new information, events or circumstances after the date of this conference call or to reflect the occurrence of unanticipated events.

A webcast of this call is available on the Investor Relations portion of our website and will be archived in audio form on the website for a limited period.

With that, I'll turn the call over to Colleen Brown, our President and Chief Executive Officer.

Good afternoon. As usual, Joe and I will deliver some prepared remarks, and then we'll open it up for questions. By now I hope all of you've had a chance to review our third quarter press release, which was issued this morning. And in short, our near-term performance continues to be affected by the difficult economic environment. And as you may recall, we began to see signs of advertising weakness in the middle of last year. With a weakening economy, advertising revenue began to drop in 2008, as companies started cutting advertising spending to match the harsh economic realities. Over the past year, this downward trend has continued. As you know, we are operating in one of the deepest recessions since World War II, and the broadcast industry has been particularly hard hit given our reliance on advertising. Our results for the quarter continue to reflect the overall challenges facing the industry.

For the quarter, consolidated revenue was $34.5 million, loss from operations was $3.6 million, net loss for the quarter was $4 million or $0.46 a share, broadcasting net advertising revenue fell by 33% compared to the third quarter of 2008, and broadcasting direct operating costs were down by 26%. The sharp decline in the overall advertising revenue continues to be driven by weak consumer confidence and the ongoing reluctance of companies to expand their marketing budgets in the face of job losses, declining home values and weak consumer spending. Among our major television advertising categories for the quarter, automotive fell 31%, retail was down 26%, and professional services declined 4%.

Our third quarter financial results include a substantial charge related to the July 2 electrical fire at Fisher Plaza. I would like to make clear that we believe a significant portion of our incurred expenses will be covered under our insurance policies, and Joe will talk more about Fisher Plaza in a few minutes.

During the quarter, we successfully renegotiated a five-year agreement for KOMO and KATU's ABC affiliation. While we haven't commented on the amount of these rights or fees due to contractual terms, the amounts are immaterial to our financial results. In the quarter, we also finalized the retransmission agreements that we mentioned in our last call. This allowed us to record approximately $2 million in retrans consent fees attributable to the first half of the year in the third quarter. With nearly all of our key retrans agreements in place for the next several years, we are beginning to receive some measure of compensation for our valuable content.

As I've previously discussed with you, Fisher is using its competitive strengths to help navigate the powerful economic headwinds that we are working against in the industry. As always and particularly now during this economic cycle, it's more important than ever that we remain focused on the key operational and financial priorities that will make a difference. These include developing new sources of revenue, expanding the quality of our content, increasing our market share by aggressively pursuing every ad dollar, diligently managing our costs and diversifying our reach. For example, we have improved ratings substantially with the addition of key program decisions and our revenue share of core business has grown 140 basis points compared to the third quarter of 2008. While we are disappointed with the current marketplace, our ability to outperform our peers in many areas in this environment is something worth noting.

Historically, the broadcast sector is the best positioned to benefit when the economic recovery takes hold. We believe that television remains the most effective means of reaching the mass audience, and is the most effective means to drive results for advertisers. We are beginning to see several encouraging signs that give us optimism for next year. For example, sell-out levels have strengthened, and four of our top-10 categories are actually up over third quarter of 2008.

Before Joe discusses our third quarter results in more detail, I'd like to give you an update on our broadcast to broadband initiative. As you know, this is a rapidly growing part of our business and one that will help us achieve our strategic goal of diversifying our revenue base, while creating new advertising opportunities for our customers. Through this effort, we are creating market opportunities that were not available before. I'm pleased at Fisher's progress in this changing landscape with a drive toward new platforms to reach consumers on a personal scale at affordable rates to advertisers. We are leveraging our broadcast strength, namely our content and brand recognition, to super serve local consumers and advertisers through an array of emerging web-enabled channels. Underpinning our expansions into digital media is the core belief that local broadcasters play an integral role in the communities we serve. We provide the advertising vehicles that drive local commerce. We deliver trusted news and information to our audiences and we enable neighborhood voices, local voices to be heard.

Through Fisher Interactive Network or FIN, as we call it, we have invested in the tools and technology that we believe will transition us from a pure-play broadcaster to a more diversified media company. Today, FIN is a small part of our overall revenues, but we believe there is significant growth opportunities here, as we have begun to implement our broadcast to broadband initiative. This will allow us to both gain additional value for our content, benefiting from better discovery and the long tail and to diversify our revenue stream.

Through our collaboration with DataSphere's technology and their new LocalNet service, during the quarter we launched our first major program under this initiative, a network of 44 hyperlocal neighborhood websites in the Seattle market, which are linked to our KOMO-TV and radio operations. The site provides Puget Sound residents with the best source of information about the news and events in their local area, as well as enabling discussions and promoting neighborhood involvement. There is a clear desire for relevant neighborhood connections and these sites provide us a way to super-serve our community. For example, our traditional newscasts are only able to use a very small portion of the information that comes into our newsroom. With the development of our hyperlocal sites, we now have a tailored, scalable platform to distribute nearly all of the content gathered at the station level with very little extra effort or cost.

Additionally, the hyperlocal sites are creating advertising opportunities for small businesses, and that traditionally haven't been able to afford or scale on television and radio. We anticipate that this will allow us to capture a larger share of the entire local advertising pie at an appealing price point for the majority of advertisers with a targeted solution. In fact, we believe we are seeing early signs of fundamental success in this area.

During the quarter, our Internet advertising revenues increased overall -- the entire category increased overall by 3% over the same period in 2008, at a time when overall ad spending in the country declined 25%. In October, these hyperlocal sites and our new search initiative will represent approximately a quarter of all of our Internet advertising revenue.

We are encouraged by the initial performance of our hyperlocal and search initiatives. In the first few months of the operation, we have signed advertising contracts with over 600 new companies. During the last 30 days, these sites recorded over 0.5 million page views and over 300,000 visits. And in the last few weeks, we've rolled out 38 more hyperlocal sites in Oregon. They're linked to KATU and KVAL, our operations there. We expect to launch similar platforms in our remaining markets by the end of the year.

And in addition, with collaboration with the DataSphere company, we are actively marketing their technology and sales solutions to other broadcast companies looking to establish a hyperlocal program. These positive results demonstrate the potential of our digital strategy and underscore our enthusiasm for this emerging medium. In the coming quarters, we'll continue to update you on this exciting initiative.

And finally, I would like to briefly comment on the FCC's deliberations on broadband spectrum allocation. As the FCC reviews its options for providing more bandwidth for mobile devices, it is considering a number of options, including reallocating the existing spectrum. This week I met with several key members of the Obama administration to share my thoughts on this issue. Broadcasters play a vital communications role in this country and we simply cannot afford to let the FCC reallocate our spectrum to other mediums. We need the bandwidth to fulfill the promise to viewers and support our future growth plans, including the expansion of high-definition, multi-channels and mobile television. This is an important public policy issue and Fisher will remain engaged in this discussion.

And with that, I'm going to turn it back over to Joe.

Thank you. Well, as you've heard from Colleen, this continues to be a very difficult period for advertising-supported businesses, and our third quarter financial results reflect that. To help us maintain our market-leading position, we are taking aggressive steps to expand our value proposition, control costs and improve our operational and financial performance. We remain confident the actions we're taking today will make Fisher a stronger broadcast company when the economy does improve.

As Colleen mentioned, we issued our quarterly release of financial results this morning. We plan to file our Form 10-Q tomorrow. Those documents include in-depth information regarding our financial results, so please refer to those sources for additional information. Today, I will be discussing certain non-GAAP financial measures such as broadcast cash flow and EBITDA, definitions and reconciliations of both those terms can be found in our press release.

To summarize our third quarter results, consolidated revenue for the quarter was $34.5 million, a decrease of 18% from the third quarter of 2008. Loss from operations for the quarter was $3.6 million, compared to a loss from operations of $613,000 in the third quarter of 2008. This includes a $4 million charge related to the Fisher Plaza electrical fire in the third quarter 2009 figure. Net loss was $4 million or $0.46 per share for the third quarter of 2009. During the third quarter of 2008, net income was $29.8 million or $3.41 per share, primarily due to the $31.8 million after-tax gain on the sale of our Safeco shares. Excluding that after-tax gain, net loss in the third quarter of 2008 was $2.1 million or $0.24 per share. And consolidated EBITDA in the third quarter was $3.7 million, compared to $3.4 million during the same period in 2008. And as a reminder, EBITDA does exclude the Fisher Plaza fire expenses.

Now I'll turn to the financial results for our three business segments; TV, Radio and Fisher Plaza. Our Television segment reported a revenue decrease of 8% in the third quarter. This was a result of lower political spending and the ongoing decline in corporate advertising, partially offset by an increase in retransmission revenues. TV BCF was $3.6 million in the quarter, compared with $5.6 million in the third quarter of 2008. As Colleen noted earlier, we finalized several of our retransmission agreements in the third quarter, which resulted in third quarter retransmission revenues increasing nearly 500% year-over-year to $4.2 million. Excluding the $2 million in retransmission consent fees attributable to the first half of the year, retransmission revenues were $1.5 million in the quarter, a 200% increase over the comparable period in 2008.

Turning to Radio. Revenue decreased 49% from the third quarter of 2008 for Radio. However, it is important to keep in mind, as you may recall, that 2008 figures include revenue attributable to the broadcast of the Seattle Mariners baseball games. As you might recall, we began reporting Radio BCF with and without the effect of the Mariners contract last quarter. During the quarter, Radio BCF was positive at $1.2 million, compared with negative BCF of $237,000 in the same period of last year. This improvement was largely due to the termination of the Mariners contract. Excluding that contract, Radio BCF declined 48% from the third quarter of 2008, a result of a 21% decline in non-Mariners revenue.

In Fisher Plaza segment, which includes the operations of our 300,000-square foot mixed-use facility located near downtown Seattle, the facility includes two buildings and serves as home to our media properties in Seattle, our corporate offices and a variety of third-party tenants. In the third quarter, our Plaza segment reported revenues of $3.5 million, an increase of 5% over the same period in 2008. Loss from operations was $2.1 million, a decrease of $3.6 million from the third quarter in 2008. The loss was largely due to the $4 million of expenses related to the electrical fire. Excluding the expenses from the fire, the Plaza's income from operations was $1.8 million, an increase of 27% from the third quarter of 2008.

And as an update to the Plaza electrical fire, we just completed final remediation this week. As you may recall, the July 2 electrical fire contained within a garage level equipment room of the east building of Fisher Plaza disrupted city-supplied electrical service to that building. The building was powered with a combination of city utility service and on-site generators until late August, when full city utility service was restored to that building. Since that time, final build-out of the permanent utility infrastructure has been underway, and as I mentioned, that work was just completed this week. A third-party investigation concluded that the fire appears to have been caused by a malfunction of bus duct equipment manufactured by a third party. That equipment connected utility power from the city utility vault to our building's electrical infrastructure. Since the insurance companies are still investigating the incident, we have decided to record the remediation expenses as incurred, and similarly we will record the reimbursements from the insurance carriers as they're received. The Company has incurred approximately $6.8 million in remediation and equipment replacement costs related to the Plaza electrical fire, comprised of remediation expenses of $3.2 million, capital expenditures of $2.1 million, and a loss on fixed assets destroyed by the fire of $1.5 million.

During the third quarter of 2009, we recorded $725,000 of insurance reimbursements. We currently anticipate recording approximately $1 million to $2 million of additional remediation expenses and approximately $2 million to $3 million of additional CapEx in the fourth quarter of 2009 related to the Plaza fire. The Company's insurers have indicated that the event is covered occurrence under applicable insurance policies and they continue to investigate the incident, as I mentioned earlier. We currently expect that a significant portion of our incurred costs will be covered by the Company's insurance policies. However, the actual amount and timing of the reimbursement remains subject to the insurance company's investigation. We intend to vigorously assert all of the Company's claims related to the Plaza fire as necessary.

Now turning briefly to occupancy at Fisher Plaza. At the end of the third quarter, Fisher Plaza's occupancy was 96%, compared to 97% at the end of the third quarter of 2008. As part of our hyperlocal initiative, we recently integrated our Internet division with our existing Seattle media property operations, which resulted in an additional 4,400 square feet of space to lease and a slight decrease in the occupancy rate.

Now I'd like to discuss a couple of other key financial metrics and balance sheet items. Our trailing four-quarter operating cash flow, as defined by our senior notes indenture, was $12.9 million. The details of this calculation can be found on our website. Based on our total debt outstanding of $122.1 million at the end of the third quarter, our total debt to trailing four-quarter operating cash flow ratio was 9.5. The increase in our operating cash flow ratio was primarily related to the $4 million Plaza fire expenses incurred in the quarter. Under our senior notes indenture, as you might recall, because our trailing OCF ratio exceeds seven times, our future borrowing capacity is currently limited to an additional $40 million. In addition, we are currently limited to making no more than $10 million of restricted payment, as defined in the indenture, which includes dividends and stock repurchases. We ended the quarter with current assets of $98 million, which includes $49.5 million in cash and cash equivalents. Our balance sheet remains solid and continues to provide us the flexibility to support our strategic initiatives.

With that, I'll turn the call back to Colleen.

Thanks, Joe. Before we open the call for your questions, I'd like to close with a few final thoughts. In the few weeks, Fisher will celebrate its 100th year of operation, and over the past century one of the Company's hallmarks has been our ability to adapt our corporate strategy and reposition Fisher to take advantage of new opportunities. Changes in our DNA, and it's one of the things that gives me confidence in our ability to seize the opportunities being created by technological innovation and the changing advertiser behavior. We have embraced this new environment and are actively reshaping the Company for success in this new era. This means expanding Fisher's Interactive Network to better serve our audiences and capture the inherent growth opportunities in the rapidly developing social and digital media markets. We know that local media is critical to the fabric of our country and that is why we intend to leverage our broadcast strengths when it comes to building our digital portfolio.

As we move forward with our new content delivery platform, we recognize that consumers in large numbers still rely on television and radio for their news, information and entertainment. We've come a long way since our start as a flour milling company, and I'm confident that our strategic focus and direction will make a positive impact on the future.

And with that, we'll open the call for your questions. Operator?

(Operator Instructions). Your first question comes from the line of Bishop Cheen of Wells Fargo. Please proceed.

Hi, Colleen and Joe. Thank you for taking the question.

Hi, Bishop.

Hello.

I hope you guys are all right. First of all on the fire, we are very glad that it was not worse or tragic. I know it's expensive, but looking at the glass half full, we're certainly glad it wasn't worse.

Thank you for your thoughts on that, Bishop. We are too.

I'm sure you are, must have been a very scary event. All right. Let me focus on a few things. One, let me just work backwards, I think you talked a little bit about the one or two covenants that remain in the notes. And did you say that the basket restricts you to $10 million of either stock buybacks, dividends and/or bond buybacks?

No. The first two, the $10 million restriction is for what's entitled the restricted payments, which primarily are the stock repurchase or dividends. The notes repurchases are not part of that.

Right. And in fact, there's nothing that I am aware of other than price they're sitting there, certainly well above 90 that stops you from buying back the notes as exists in that bond covenant, is that correct?

Correct.

Okay. And you didn't buy any back in Q3?

That's correct.

Okay. And they are certainly in the call, but at the full premium. So let me go to retrans, not to retrans -- to operating cash flow. Certainly, I know it's very technical math, but it's quite a swing to go from 16.9 to 12.9 on the LTM basis in just one quarter. And certainly, from over 28 during the same year-over-year LTM period, down to let's say less than 13. How tough is it going to be to bring the operating cash flow up? And should I not even worry about that because going forward, now that the Safeco stock is gone, it still is the more normalized EBITDA metric.

That's correct. Now that Safeco is out of the calculation, it's really the interest income, which these days is not much -- is very close, EBITDA to OCF. I mean as you know, kind of answer your question on the rather significant drop, I mean this is such a high fixed operating leverage business that pretty significant declines in the revenue side lead to more significant declines on the EBITDA or operating cash flow. But fortunately, the same is true on the upswing as well. So as economy improves, we should see some nice improvements on the bottom lines of the P&L.

Right. And then two other things that are inherent to the Television business, one is retrans. And when I'm looking at that it sounds like it's kind of a $6 million or better run rate contractual business right now. And again, I'm not aware if you have some big chunky bookings yet to achieve that's going to fill that out near term. But am I in the ballpark, so to speak, when I look at it as a $6 million incremental?

Bishop, could you explain your $6 million incremental question? I'm not sure we're clear.

Well, I think you said in Q3 it was kind of run rate $1.5 million net of whatever, was really -- it may have been accounted for in Q3, but it was really for first-half contracts, right?

That's correct. That's correct.

So I think, Joe, you said $1.5 million net. I'm not sure -- I mean net of the $2 million that you're talking about. I'm not sure what else goes into the net. But if I take that by four quarters, it's kind of a $6 million incremental.

I understand the math. It's not quite that simple. There is going to be a -- it's going to be higher than that, let's put it that way.

Okay.

And then just multiply just the annualized $1.5 million, it will be higher than that.

All right. So I mean am I way off by a magnitude of two times or it's just somewhat higher than that?

Let's call it somewhat higher.

Okay. All right. That's good. And then political will come back, I say with conviction, I think you believe the same in 2010. And remind us again what did you do in political in 2008?

Hang on a second, Bishop. I can get to that quick number.

Okay. I thought it was four something.

I thought it was just about five, and I don't want to give you bad numbers.

Okay.

Let me look it up real quick.

All right.

While we're looking that up, Bishop, do have anything else?

Yes. So back to retrans.

Well, the third quarter was $4.8 million. Hey, Bishop, I'm just looking at $4.8 million in the third quarter of last year.

$4.8 million.

$4.8 million in Television.

Yes, and that wasn't $5 million for the year for political. Okay.

Did you ask about the quarter or the year, Bishop?

I'm sorry. $4.8 million for the quarter and for the year it had a $5 million handle on it for total political?

Well, it's going to be stronger than that.

Okay.

I thought you were asking for quarter. So let me pull the year.

Okay. And then on retrans, I neglect to ask, the key question there is, normally retrans is extremely high margin revenue. But given any new agreements you may have with ABC or any other program supplier. Do you get to keep the lion's share of the revenue from retrans going forward, when we talk about this better than $6 million kind of revenue?

Yes. Bishop, the way to think about that in our case, and it may not be the same for everybody, but in our case it was negotiated as a program right and treated as such, and is more in the category of program rights. As far as retrans goes, we were done with our retrans negotiations before we began the discussion with ABC.

Okay. As I look forward again, I'm just looking for what is going to keep increasing the EBITDA and the earnings? And certainly, the revenue is nice, but?

Yes, I think one thing that you're going to see is, on the next go-around, more involvement by the network and helping us to get our fair value. I think it's safe to say we were successful in communicating that the amounts that we've been able to gain so far in retransmission is reflective of the value we represent to the cable or the satellite folks. And it's been difficult to gain much more than what the exact fee is per sub. If the networks get involved, it is our hope that we'll get a more fair representation of what the value is being provided to these multiple video providers.

Okay. All right. That's something --

In answer to your question for the year?

Yes.

On political it's $23 million.

Sorry, one more time.

$23 million last year.

$23 million gross in political.

Yes, gross, including TV, Radio, etcetera.

Okay. TV and Radio. Okay. And the last question, I appreciate all of your time. At one point, I know the fire may have complicated things, at one point you were looking at monetizing Plaza as one of your strategic options. Where are you on thinking about that as an option for 2010?

The answer is, we're not really far along as it relates specifically your 2010 question. I mean the real estate market, as you know, as all markets are soft right now. Seattle commercial office space is no exception. So what we're focused on now is really improving the value of the asset. Again, as I mentioned in the discussion a few minutes earlier, we're doing things like consolidating space, bringing up space to lease out to third parties, and doing some other initiatives that really maximizes EBITDA and therefore valuation when the time comes where the market can appropriately value those sorts of initiatives.

Well, and Bishop, I just want to add something we look at on a pretty regular basis, but until we see the credit markets strengthen and there is a footing underneath some of the lending that just isn't happening right now. I don't think we'll give it a lot of time just because it is a time consumption issue. But when it does strengthen, it is something that we will look at very seriously.

Okay. That is very helpful. And I thank you for all the color.

You're welcome. And as always, it's a pleasure.

Thank you, ma'am.

Your next question comes from the line of Matt Swope of Broadpoint Capital. Please proceed.

Yes. Hi, guys. Colleen, could you go back to the agreement with ABC?

Sure.

I think you used the word immaterial as you described it. Can you say any more than that?

We really can't. Our agreement is such that if it's not material to our financials, we aren't to disclose the amount that we have negotiated. I can tell you that it's really pretty much like a program syndication negotiation that occurred and it behaved very similarly. And as a result, we agreed to an agreement that lasts through three years, and then with an addition of five years -- or an addition of two years, sorry, five years in total with the retransmission in the last two years. So no, there's no real clarity of numbers in the last two years. It's just an agreement that we'll go and work together to get retransmission fees. So in the first three years it's very much like a programming agreement.

I see. And then you struck it that way because of the way your MSO agreements?

Correct.

And then presumably you'll go back to negotiate together for those last two years?

Yes. We have the option of working together. And I think that that's a bonus to us. I think that's a benefit to our Company. And quite honestly, I think it's good for the business if the networks stand behind us and work with us rather than just stand on the sidelines.

It certainly makes sense that not only with the network, but maybe even with other affiliate groups, if you could group together that you have more leverage.

Yes.

Are there any antitrust issues around that?

Yes, there are, Matt. And that's why we have to be very cognizant of how we go about this and it is very much a lawyered up situation to make sure that we don't cross the line and do anything inappropriate. So where we can work together, we do. Where it is not a possibility, we don't.

I see. And then, Joe, just from an accounting perspective, the way we'll see this go through, your retrans revenue will look the way it has already, but there will be an extra cost somewhere in the programming cost line?

It's already there.

Yes, it's there already in the third quarter. But yes, you're right, it'll be basically treated as programming expense.

I see. Okay. And then just -- and Bishop was asking the question. I was having a hard time following the math. You said you did $4.2 million of retrans in the third quarter, and then in the press release it said something about $2.0 million that applied to the earlier two quarters. And then, but somehow from $4.2 million minus $2 million, we were ending up at $1.5 million? But what am I missing there? Maybe this goes to Bishop's question about how we think about annualizing the number as well.

I'm trying to see the $4.2 million.

Let me see, I thought that was the number that I had seen in the --

Are you thinking of the $4.2 million referenced in the press release --

Yes, you're right.

Which is tied to political spending?

No, I see what he's talking about. $4.2 million retransmission, $2 million attributable to the first half.

Right.

$2.2 million, let me -- I'm going to have to look into that a little more.

Okay. No problem. As Bishop was trying to do also, I think you're just trying to think about what the annual number can be as everything rolls in?

You know what, it says the total retransmission revenue increased $1.5 million. That wasn't the number.

Because we had some money booked last year.

Okay. So the right math to do would be the -- take the $4.2 million --

The $4.2 million minus the $2 million.

Okay, that's good.

It's $2.2 million, not $1.5 million, yes.

Okay. So maybe if I tried Bishop's question again, if I took the $2.2 million and annualized it.

That gets you more close.

Okay.

Yes.

Got it, okay. That makes a little more sense. And then, Colleen, you addressed the spectrum issue and we've heard this on a couple of the other peer calls as well. Is there any way that this could be an opportunity for you guys to monetize some of the six megahertz in each market that you're not using?

You mean, as far as selling it back?

Yes, as far as whatever way, whether the FCC ran an auction and gave you some of the proceeds or?

Matt, I think politically that's highly unlikely. I think that's a pipe dream. We didn't pay for it in the first place. I think the American public will have a real problem if we benefit from it. They consider it the public airwaves and that's just assuming that auctioning it off is a good idea. Remember, spectrum is finite and they're auctioning off finite public resources. So I think that politically it would be surprising to me if it goes forward. But it doesn't mean they won't try and it doesn't mean through the process that we won't inch forward with more pressure on us to utilize our spectrum. And of course, while we've been developing particularly the mobile television solution, I would hate to see us lose our flexibility to develop this spectrum.

That is the message I carried to Washington and had the ability and the opportunity to speak with many of the secretaries of various areas of the President's Cabinet, specifically to say, it's too soon. We just transferred from analog to digital June 12. We've only had five months. We've just got the standard in place. We gave up a third of our spectrum to make this all happen. There's 100 megahertz still yet to be maximized by the mobile folks. I think it's too soon, and we need time to develop this spectrum. And I think they heard. I think they listened. I know they listened and I think they heard, so.

Okay. Maybe I'll ask it a slightly different way. Do you think you can use the full 6 megahertz in each market?

Yes, I do.

Okay. That's great. Again, I think it was maybe partly driven by a Wall Street Journal article from last week that put this on people's radar and a study that I guess is being presented as they try to look for extra spectrum. And something that I think that was going to be presented in February.

Yes. There was a CEA study that was quoted in that article and of course that's the consumer electronics industry that did the study. And the only study they did was the portion that benefits those who might get the spectrum. They didn't do the portion that might lose the spectrum. And they didn't do how it would affect the local communities by driving commercial stations to a lower-class standard taking it away from the American public that they just convinced to spend billions on new technology by putting boxes and television sets into their homes. So I think that it was a pretty one-sided article.

Got it.

Not that I have an opinion.

Okay. Maybe on a slightly less controversial topic. On the bond buyback issue, as you guys think about the amount of cash you have in the balance sheet now and the amount of debt you still have outstanding, how do you think about buying back more bonds in the open market?

We constantly keep our eye out and look for opportunities. I mean we understand there's still a pretty attractive premium in terms of a discount from par in the marketplace. It is a little difficult, as you know, they're not the most liquid instruments in the market. So getting our hands on them is somewhat problematic. And then on the other side, we do keep a mindful eye on them, the cash balance to make sure that we're in good shape.

They're also not sold in small increments. So how they are sold is the challenge as well.

Right.

We keep our eye on it though.

Great. Okay. Well, thank you, guys. I appreciate it.

Thank you, Matt.

Thank you.

You have a follow-up question from the line of Bishop Cheen of Wells Fargo. Please proceed.

Thanks, Colleen. It was very articulate in your analysis of spectrum. I don't know how many more years I'll be doing this, but however many more quarters it is, I guarantee you we'll be talking about this.

Yes, yes. I agree with you, Bishop. Not that we want to see you go, but I think we will be talking.

No, I mean because they always come back and do this over and over again. And then you had Commissioner Copps feed the fire with the comment that he made.

Yes.

It's politics at its worst.

Yes.

And it's the government, big print. [Give us] a little print, take us away. But I agree with you, Colleen. It's everybody in an MTV world makes it sound like something is happening tomorrow.

Right.

-- ain't happening tomorrow, if at all. Here's my question. Auto, Joe, you gave it and I didn't like that there. Auto was down what percentage in the quarter? And do you have something as a percentage for the year-to-date as well?

Yes. Auto for the quarter is down 31% and it is in the 60% range for the year.

Okay. And I know you don't do pacing. So this is not a pacing question. But when you look at auto and you know that it is said to be finding legs again. Do you see it? Do you feel it? What does Q4 feel like for you?

Yes. I think that's a fair question. And you're right, we don't do forward-looking, but I can tell you that October was stronger. I can tell you that there's more inquiries than ever before in the last, I would say, 18 months. As you know, our markets tend to be strongly foreign, automotive, and that is a little bit different than what you might hear from the Chryslers or the GMs or the domestic automotive regarding their spending pattern.

There is a demand, there is a pent-up demand in getting the product has been some of the issue. As strange as it sounds because of the foreign base of our automotive, it's been very difficult to get cars in the market, because the number of cargo ships going back and forth are not bringing them in.

We're down about a half, 50% of cargo ships coming into the United States, which is where we get most of our cars in the foreign market. So as a result, they've got a long lead time on many of these backed up mix, I would say. And that's holding cost down and quite frankly holding down their spending. However, I've had several personal conversations with dealers, and as you know, my family has been in the dealership business for 30 years. I've seen indications of a great deal of interest of coming back on the air and it's just a matter of getting their feet under them in confidence of placing that schedule. But the inquiries for the avails continue. So specific numbers are good, better than they were a year ago.

Do you feel that firming not just in auto, but in general in your Radio and TV business, in your ad market business?

Yes, retail is interesting because it's shaping up to look like it's going to be a late season. But we've seen spending begin following Halloween for the holiday season. So it might be, as much as it's spread over two months versus really the six-week period, it might be that we see a lot of after-sale spending. But I'm not seeing quite the strengthening in cost per points I would like to see in the industry. And of course, as you know, part of the beauty of the last two months of the year is the strength in cost per points as we run out of inventory.

But I do think that personal services or the professional services category, which for us is kind of an ad hoc category of services, has seemingly strengthened. And that to me is a good sign that people are starting to spend in the services category again. So that's good. And then we have had some growth. Entertainment has grown, for example. Financial services has grown. Now financial services a year ago was nonexistent, so I think that that's been positive for us. Other than that, I think a general confidence is beginning to show itself, but I wouldn't go to the bank yet on it.

Yes. That's what we're hearing. I'm not sure what it is like in Seattle, but my impression is that the sell-through will start to come back before the cost per point comes back when --

Yes, that's true, very true. But once you see the cost per point starting to strengthen, you know you're on the right track. One other thing I will say is recent articles that have come out pretty universally that Seattle is one of the top-five markets that will rebound and Portland and Seattle top-10 markets that are the places to live. And that seems to be somewhat universal regardless of the publication. And we believe it's a very young, educated, dynamic area of the country, and we're seeing that strength hold us up a little bit.

I'm old enough to remember the campaigns where they said come visit, but please don't move here.

Yes.

That was 30 years ago. I know your family knows a thing or two about the auto business. So, Joe, this is for you, I'm betting we can get you a good deal on an Opel today.

Thanks. Just what I wanted.

Thank you.

So do you have any other questions, Bishop?

No, I think this is good and I'll loop back with you if I do. I appreciate it.

Okay. Thank you very much.

You have no further questions.

All right. Well, thank you, everybody, for listening and for tuning in today. And again, we're going to do everything we can to bringing the year as strongly as possible. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.