E W Scripps Co (SSP) 2008 Q1 法說會逐字稿

Ladies and gentlemen, we would like to thank you for standing by, and welcome to the first quarter earnings reports for the E.W. Scripps Company teleconference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS). As a reminder, today's conference call is being recorded.

I would now like to turn the conference over to your host, Vice President of Investor Relations Mr. Tim Stautberg. Please go ahead, sir.

Good morning all, and thanks for joining us. We will start the conference call today with comments from Ken Lowe, our President and CEO, and Joe NeCastro, our Executive Vice President and Chief Financial Officer. We will keep our prepared remarks brief this morning, because we know you have a busy schedule. We promise to be done well within the hour.

Before we begin, let me introduce the other members of our senior management team who are here with us on the call. Joining us are Rich Boehne, Chief Operating Officer, John Lansing, President of Scripps Networks, Mark Contreras, Senior Vice President of Newspapers, Bill Peterson, Senior Vice President of our TV station group, and Lori Hickok, Vice President and Controller.

Let me remind you, if you prefer to listen in on the web, you can go to Scripps.com and click on the Shareholders link at the top of the page. An audio archive will be available on Scripps.com later today, and we will leave it there for a few weeks. Our discussion this morning will contain certain forward-looking statements, actual results may differ from those predicted. Some of those factors which may cause results to differ are set forth in our publicly filed documents, including our 2007 Form 10-K.

Now here is Ken.

Thank you, Tim. Good morning everyone, as always we appreciate you joining us. Scripps had a very solid quarter, thanks to strong operating performance at Scripps Networks, and improved results in our online comparison shopping services in the U.S. and U.K. Positive audience trends at HGTV and Food, combined with healthy pricing in the scatter advertising market, drove revenue and segment profit growth comfortably above expectations for the three-month period.

At Shopzilla, improvements we have made in the business have helped us better monetize the growing levels of user traffic that we have been able to generate, and in the U.K. increased energy switching activity and significantly lower operating costs, have restored uSwitch to profitability. All are very positive developments, as we near completion of the Company's separation by the end of next quarter.

At Scripps Networks, we are definitely hitting our stride. Prime time and total day viewership is up both at HGTV and Food. Smart, fresh programming of both brands is attracting younger and more engaged viewers. Our websites are holding fast to their positions as food and shelter category leaders, and we are launching or acquiring interactive businesses, that target the same categories that we own on TV.

At our newer networks, particularly DIY, are rapidly gaining scale and building engaged loyal audiences of their own. In short I would say we succeeded in creating plenty of momentum across the board at Scripps Networks. For example at HGTV, great shows like House Hunter and Designed to Sell continue to draw solid audiences, defying conventional wisdom that viewer interest in real estate would wain in the current economic environment.

Our annual HGTV Dream Home Giveaway was a hit again this year, drawing more than 41 million entries, and solidifying it's dominance as cable TV's single largest promotion. Incidentally, the Dream Home special this year was followed by the premier of Myles of Style, which is hosted by Kim Myles, who is the winner of last year's programming hit, HGTV Design Star. In fact, the third season of Design Star will be returning to the network in June.

At Food Network, prime time hits that are driving increased ratings and viewership, include new seasons of Diners, Drive-ins, and Dives, Ace of Cakes, and Ultimate Recipe Showdown. These are all younger skewing shows that in March, contributed to a 14% year-over-year increase in 18 to 34-year-old viewers, a demographic that is particularly appealing to our advertisers. Daytime and on weekends in the Food Network, we have strengthened our in the kitchen lineup, with some promising new series, including Down Home with the Neelys, and Rescue Chef with Danny Boone. Our Saturday morning viewership numbers are showing marked improvement, thanks to both of there new shows.

At DIY Network, our decision to accelerate investment in original programming last year is really paying off. Quality original shows like Blog Cabins, Sweat Equity, and Desperate Landscapes, are attracting new fans to the network. Prime time viewership during the first quarter was up a very strong 68% year-over-year, and total day viewership increased 41%.

On the web, foodnetwork.com continues to be the Internet's top food and cooking site, and now between it and Recipezaar, Scripps accounts for about 25% of the web's total traffic in the food category. Incidentally the day before Easter, we saw a 143% increase in traffic to the Food Network website, compared to last year, phenomenal.

As for interactive development at Scripps Networks, user traffic is ramping up at frontdoor.com, which is our new online real estate listing service, and on April 1, we launched a new green site called Ecolog.com, to engage media consumers and exchange of how-to ideas for sustainable living. Both sites are designed to deepen our competitive presence in the shelter category. Like I said, lots of momentum at our lifestyle networks, and cause for optimism at our interactive services.

And now let's turn to our local media businesses. Our newspapers and TV stations are truly in the throes of one of the industry's most challenging advertising environments, as many of you well know. Weakness in local advertising, particularly classifieds at our newspapers has persisted into 2008.

Our Newspaper group's exposure to struggling real estate markets in Florida and California have exacerbated the problem. At our TV stations, we did see some pickup in political advertising as expected, but the lack of Democratic primaries in Florida and Michigan left a lot of money on the table. Local advertising remains soft during the first quarter, with particular weakness in the automotive and retail categories.

On a very positive note, our ABC station in Phoenix won a Peabody Award for it's undercover expose last year of lapses in airport security, and in Knoxville, our newspaper, The News Sentinel, won a National Headliner Award, and the National Journalism Award for it's defense of Tennessee's open meetings laws. Despite the economic challenges, our imperative to serve our local markets, and be economically rewarded for our efforts has not changed.

With all of that, let me turn it over to Joe. He is going to talk about the Company's financial condition, and update you exactly where we are on our separation process. Joe?

Thanks, Ken. Good morning everyone. There is no need to go over all the numbers from the quarter since they are spelled out pretty clearly in the release. Suffice to say that the Company and it's shareholders continue to benefit from the growth story at Scripps Networks and some promising trends at Shopzilla and uSwitch.

Just briefly though, I do want to bring your attention to some items on the income statement that may bear a little further explanation. You will notice that depreciation and amortization was considerably lower year-over-year. That is due almost entirely to the write-down of goodwill and other intangible assets at uSwitch during the fourth quarter of 2007.

Next, interest expense was much lower compared with last year, because we are carrying less debt. By the end of the quarter our borrowings were down to about $474 million, compared with about 746 million at this time last year. By the end of 2007, we had reduced our total debt to around $505 million.

Looking at the provision for income taxes, the increase in our effective tax rate is due to positive adjustments we made during the first quarter of 2007. Those adjustments lowered our effective rate for that period, to an artificially low level of around 28%. The '07 rate also reflected the benefit of operating losses at uSwitch. The effective rate during the first quarter 2008 is closer to normal at around 32%.

One balance sheet item. We spent around $11 million during the quarter, to repurchase around 280,000 shares, at an average cost per share of $40.85. As for guidance, you have all the numbers in the press release, so I won't go over the entire list. One thing to note is that expense growth at the networks, the increase expected in the second quarter, reflects our planned investment in programming, which is a a somewhat front loaded. We still expect full year expense growth to be around 10%.

One other item that is not in the release is we are expecting minority interest to come in around $24 million in the second quarter. As we noted, all-in, we are looking for second quarter EPS to be in the $0.58 to $0.62 range. Just for reference, EPS in the second quarter of 2007 was $0.58. That range does not include an estimated 45 to $50 million in costs that we anticipate during the second quarter, that are related to separation. Most of that amount will be in the make hold premiums, we will be paying in order to retire the old bonds. The rest will be transaction related fees and expenses.

As for the separation, we are moving ahead right on schedule. We received a favorable private letter ruling from the IRS. Our bank financing for both companies is largely in place. And we have received comments this week from the SEC on the Company's Form 10 information statement. Comments were pretty much in-line with what we expected, and we see no significant delays based on our analysis of the issues raised in their review.

Finally, the management teams for both companies are falling into place nicely, and with Tim Stautberg's appointment as CFO at the E.W. Scripps Company, our functional teams are shaping up nicely. All-in, we are right on schedule to complete the separation by June 30th as planned.

With that, Operator, we are ready to take any questions.

(OPERATOR INSTRUCTIONS). Our first question in queue comes from the line of Alexia Quadrani of Bear Stearns. Please go ahead.

Thank you. Just a couple questions. First, the Cable Network side, the cable revenues came in stronger than expected in Q1, yet your guidance seems to be more tempered on the revenue side for Q2. Anything there besides just being more conservative in this market?

Good morning, this is John. The second quarter is shaping up pretty much the way the first quarter ended. Ratings continue to be very strong on HGTV and Food Network. And currently our guidance feels solid. But there is a lot of quarter left to go, and as you know it is important to keep the audience levels strong as they need to be, and as we progress, we can update the guidance but I feel very, very good about where we are right now.

And then on the cable side, you mentioned scatter being strong, as well as the ratings performance being the reason for the upside in the revenue. Could you give us a bit more detail on scatter how it is actually trending versus upfront pricing, and has that continued in the second quarter?

Actually it is very strong. For instance, on HGTV scatter pricing is up 25% over upfront pricing from last summer. Food Network even stronger. Food Network up 40% over upfront. And even when you look scatter to scatter, there is certainly a lot of strength in the marketplace. We are seeing 5% growth in pricing just in second quarter scatter, compared to last year's second quarter scatter. So the marketplace continues to be strong for us.

And just one more question. Newspaper side, then I will let someone else get in queue. The newspaper revenues obviously down, but down a lot less than I would have thought, given your high exposure to the very weak Florida market. I guess what would you attribute that to?

Alexia, this is Mark. You know, we are obviously still afflicted by the trends in Florida and California, 76% of our declined is from those two states. We have just kept a very strong focus on building out our local territories, and on strengthening our sales forces, and we just continue that focus.

I wish I could tell you that that was producing positive overall division results. It is not. But we still remain very focused on kind of the basics of blocking and tackling, and the guidance going forward for the year, reflects continuing softness, particularly in those two areas. Hope that is helpful.

Yes. Thank you very much.

Our next question in queue comes from the line of Peter Appert of Goldman Sachs. Please go ahead.

Thank you. Ken, the rebound in the interactive business is pretty impressive, so congratulations on that. The uSwitch business, is that back to profitability?

Well, Joe is currently overseeing those businesses, Peter. Let me have him respond to you.

Good morning, Peter. Yes indeed, they were profitable in the first quarter, and we expect them to be profitable for the year.

Can you give us a sense of the year-to-year revenue performance at uSwitch?

Had a very strong quarter, partly due, largely due to the fact that energy switching rebounded some. The large carriers implemented price increases, and the weather stayed colder there than expected, and I think the revenue actually performed very well. Remember, they we lapping against prior year in early '07, and halfway through that quarter was when the bottom dropped out on pricing there. So the revenue itself was flattish, up a little bit, expenses were way down, driving the results.

Okay. And are you getting any traction from other categories beyond energy at this point?

Primarily insurance, especially Auto insurance, was done very well. We have implemented some new lines including business energy, which is taking off quite nicely, and we are doing some what you would call private label work which is performing very well. So those three. Financial services as you might imagine are challenged because they have got the same, similar issues to ours in the states here, with respect to the credit crisis.

Thank you. And then on the Shopzilla business, can you give us any color on how you are seeing the competitive dynamics in that market these days, and also any color on the sort of the economics of the Shopzilla business, in terms of what is driving the margin improvement? Is it all basically just lower traffic acquisition costs?

Well, there are two questions in there. I would say competitively speaking, we are easily back at the top of the heap. In March, we were the top of the field. Well ahead of both Yahoo! shopping and shopping.com. As you know, that can change in a couple of months, but those are the top three. And then there is a pretty decent gap between them and the next group. So it is in some ways a three person race. I would say the dynamics are very favorable to us at this point.

There are not a lot of new entrants we had the issue last year, where a lot of money came in from big retailers, and kind of drove the efficiency out of that market, and that is difficult to compete in that, when you are trying to be rational in your bidding. The margin has expanded nicely there. Largely due to smarter key word acquisitions, and some enhancements we have made in our technology, that allowed us to acquire key words, kind of in the tails that still perform well for merchants, but are a much lower cost for us. But it is largely due to traffic acquisition. Headcount in that division first quarter this year versus first quarter last year is actually down some, so expenses are a little bit lower as well.

Thank you. Last thing, Ken, our friend Mr. Zell seems to be desperate to raise some cash, so higher probability something could happen with the food interest minority stake this year, you think?

Well, I think, Peter, you have heard us say many times, we have always had interest in acquiring that piece, whether it was pre-Zell or post-Zell, it is going to come down to a price that we think is reasonable, and yes, we remain interested in it, and continue to have a good relationship with our partner in the post-Zell era. We will have to see what happens.

Any current discussions going on?

We are kind of always in discussions because we are partners, but as far as active conversations about us taking that back in, no, nothing active at the moment.

Got it. Thank you.

Okay.

Our next question comes from the line of John Janedis of Wachovia. Please go ahead.

Hi, thank you. Couple of brief ones. As a follow-up to Peter's question, as we look at the 20 million or so EBITDA increase at the interactive division, can you give us more detail, in terms of the contribution between Shopzilla and uSwitch, and how does the increased switching affect your view on future cost cuts and/or positioning there? Thanks.

Let me dig out the relative, let's see, which one is this. I would say the largest chunk of it, John, probably 2/3 was uSwitch and the other 1/3 was Shopzilla. Let me double check that. Tim is saying, remember we are going from a money losing situation to a profitable situation in uSwitch.

And that is largely driven by cost. You remember the first quarter last year we had a very large ad campaign planned for uSwitch, which we did execute, and just as the bottom was dropping out in prices over there. Big problem in the first quarter which has been repaired. Trying to think, could you repeat the second question.

Does the improvement there on the switching front, maybe change your view, in terms of maybe future cost cuts, or even positioning there?

I think we are largely through what I would refer to as, significant cost reductions there. We are more about positioning the business. I think that the market has performed well. It has become a little more rational. We had a good, strong start to the year. We expect that to moderate some. But we do think that operating at this level will be profitable.

Now it is about how we position the company with merchants there, with vendors there, suppliers there, and the value proposition to customers. So we are looking at a number of opportunities to invest very modestly, but to position the business for some growth down the road. We feel pretty good about where we are right now.

So it sounds like then in terms of the verticals, you are comfortable where you are?

I think we are. We need to do a better job in some of them, there is not much we can do in financial services right now, but certainly in the insurance categories, and some new launches that we are looking at, we can do better.

Okay. And just one quickie as a follow-up. You guys mentioned weakness in auto and retail in the broadcast side and local. How does it look at the cable nets? I am assuming it is solid. Do you expect that to soften somewhat as the year progresses? Thank you.

Our categories are really all showing some strength honestly on the cable side, let me just flip to that page real quick. Our leading category as you might expect is the food category which is up 36%. But consumer products, even financial, retail and automotive are all up for us in the quarter.

On the broadcast side, it sounds like auto has been weakening a bit even from here. Are you guys seeing any of that yet, or no?

Yes, auto was down quite a bit. It was down around 14%. And of course we didn't have a great year last year, so that category remains very soft.

All right. Thanks.

Thanks, John.

Our next question in queue comes from the line of Barton Crockett of JPMorgan. Please go ahead.

Okay. Great. Thanks for taking the question. First, just at a very basic level on the guidance line you guys outperformed your guidance in the first quarter, particularly I think in the cable and the interactive segment. But you haven't really said in the press release, and I apologize if you missed it on the call, if you are reiterating or changing your full year guidance? Just wondering if you could kind of confirm what you are saying about the full year if anything at this point?

Talking about us we are not making any significant adjustment to our view of the full year at this point. I would say that is out of abundance of caution. There's a lot of the year to play out. As you know it is seasonal and can be difficult to predict. We feel good about where we are right now. We are thrilled with the first quarter performance.

We think some of that as I mentioned was due to market dynamics in the energy market in the U.K. and that is moderating some. I don't think that is going to mean significant weakness, but as far as giving me enough confidence to significantly raise the full year, I don't think we are there yet. But I would say if you had to lean in one direction, I certainly think we are in very good shape against the full year guidance that is out there right now.

Okay. And secondly, just on the affiliate revenues in the Cable Network segment, up 17% in the quarter, can you just update us, in your second quarter guidance what is kind of presumed in the affiliate side? Is there deceleration there? Is there some cycling of contracts that some the major networks that would be behind that, and how should we think about that as we go through the year?

No, there really is very little activity in terms of renewals this year. Next year there will be several renewals related to the Food Network. But no, this year really the only dynamic driving, major dynamic, the growth in penetration of digital.

Thanks.

Next question comes from the line of Craig Huber of Lehman Brothers. Please go ahead.

Yes, good morning. Just concerning your upcoming spin, wondering if you could update us on how much debt you are planning on leaving behind the newspapers and TV stations?

Yes, Craig. This is Joe. The plan right now is to leave around $50 million in debt on that division, on that company.

Okay. And then on the Cable Network side, how much do you think you were helped in the first quarter by the dislocation of broadcast side, with the writers strike, and then also going forward, do you think you are going to be hurt here for a while now that they are coming back on line with their operations?

That is a great question, Craig. I don't think it is a simple zero sum game that the writers strike had a definable effect per se. I think it is hard to escape the fact that the writers strike certainly brought more viewing to cable in general. But I believe it was really the combination of that, along with our investment in new programming, including Ken mentioned, Myles of Style on HGTV, and more investment in our more successful programming on Food Network including Diners, Drive-ins and Dives, and Ace of Cakes.

Those programs actually launched back in the fourth quarter. The ratings that they created at the time were highly successful against the new season when there was no writers strike, and so they carried through that period with a great deal of strength. If you recall, our fourth quarter was very strong, in terms of audience growth, and it carried right through into the first quarter. So I think the primary driver is the new investment in the new programming.

And marketing those programs, and then the writers strike helped I think bring an audience to sample our networks, which would be in my mind the reason that Food Network was able to post, for instance, an 18% improvement in adult 25 to 54 impressions in prime time. Interestingly, HGTV which was really relatively flat among 25 to 54 viewers in prime time, but was up 17% in 18 to 34-year-old viewers, which is an unusual and very, very positive dynamic for HGTV. So a combination of several things, but I believe the investment in programming being the primary driver.

Switching over to costs on the Cable Network side, you are talking about total costs up 15% here in the second quarter. Can you just give us some more clarity on why it is up so much? Are you just basically taking advantage of the strength you're seeing on the top line to invest back in your programming and marketing help you guys out over the next 12 to 18 months on the ratings front?

You nailed it. That is exactly what it is, investment in programming as I mentioned earlier. That investment appears to be paying off very well, and it met a very strong advertising marketplace. We feel like the relatively modest investment in programming in the front half of the year, came at just the right time when the marketplace was very strong.

And then in addition, what we didn't mention earlier in the prepared remarks is the investment in high definition programming. As you may know, both HGTV and Food launched as full simulcasts in High Definition at the end of March. We decided it was time to step up our production of High Definition, because of the timing of the general marketplace acceptance of High Definition. There's a bit of a cost there but we think it is money well spent.

Shouldn't investors, just your guidance historically you guys have been very conservative. I'd be very surprised if you had costs up 15% here in this quarter, yet your top line only grew. 10 to 12% Are you being overly conservative on the Cable Network revenue growth in the second quarter? Do you really think you re going to have down margins in the second quarter for Cable Networks?

Craig, it's Joe. We certainly could. But as we think about it as a full year, and sometimes even longer term, and if you look at the back half of the year you'll see very modest increases in expense, and so for the full year, we expect margins to stay roughly where they are. We could have a little bit of a decline in the second quarter but it is just because of the timing and the spend.

Great. Thank you.

Next question comes from the line of Brian Shipman of Jefferies. Please go ahead.

Thanks. Good morning. Couple questions on cable still. Another home and garden media company this week said the food category had been very strong in Q1, and dropped off significantly in the second quarter. Are you seeing this also? Is that factoring into your revenue guidance a bit?

With respect to costs a little bit more on the Cable Networks, you are implying single-digit expense growth in the second half. How flexible do you view that? I mean, if you continue to see revenue strength into the second half in cable, could we expect to see you push the accelerator on the expense side further into the second half as well? Thanks.

Okay, Brian. To answer your first question, we are not seeing any weakening in either the shelter or the food category. In fact, we are seeing the strength in the first quarter carrying through into the second quarter, in terms of advertiser demand and pricing in general.

Also, I will just again, the audience being maybe a better measurement of marketplace strength, the audience has grown on Food Network in the first quarter, the highest quarter in the history of the network in prime time, and total day on HGTV, the highest rating in the history of the network. Things appear to show some strength there.

In terms of costs, it really is a front loaded year. It is just that simple. We chose to front load our programming investments in the first and second quarter, in order to as I say, get an early jump on driving a full year of audience growth, and as we look to the back half, if we did have an abundance of revenue growth beyond our expectations, of course we may consider some other investment, perhaps in marketing. Because programming investments are a little bit more long-term. But sitting here today I don't anticipate that we will, I would looking out would tell you that the third and fourth quarters would be high to mid-single digit growth in expenses, and the full year would come in right around 10%.

Okay. Thank you.

We have a question from the line of Paul Ginocchio of Deutsche Bank. Please go ahead.

Yes, thank you. I don't know if you said already, but what was your programming cost growth in the first quarter for the Cable Networks? And what was the impact of the gain on the real estate on your EPS in the first quarter for Denver? Thanks.

Denver first or--

Okay, our programming costs were up 25% in the first quarter.

And Paul, this is Mark. I was 4.4 million for the gain of the --

That is for the for Scripps or for the D&A?

It is our share.

Okay. Thank you.

Our next question comes from the line of Edward Atorino of Benchmark. Please go ahead.

Is that gain pretax, Post tax, the 4.4 million?

Pretax.

Thanks. Regarding uSwitch, it sounds like that market is pretty volatile. Can you sort of discuss that issue? I mean, can that market change dramatically between now and June, if something happens? I mean it seems it went from a terrible market to a good market pretty quickly. You have got a pretty positive outlook. Can you talk about the dynamics of that business? Can it sort of disappear overnight, or fall apart?

Look, Ed, this is Joe NeCastro. We have a much better view of the market now than we have had, having had a little more experience and some scars in it. Is it a volatile market? I think any one individual product line can be volatile. We like the dynamics in the energy market now, better than we have before, we think.

Clearly there was some competitive repositioning by the majority supplier, or the old legacy monopoly supplier there where they were sort of re-establishing their brand, and doing things in the interactive space that they hadn't before. It has kind of realigned the competitors there. uSwitch still has the dominant market share in terms of switching in that business.

We are working to improve our relationship with British Gas, which frankly we have been picking on for some time. As they sort of, as the market became competitive and other competitors came in, it was, we played the role of trying to get people or help people to switch away from them. I think now it is a much more balanced market and people are switching in every direction, depending on the pricing, and the particular offers that are in place, and I like where we are right now, and I like our near term future.

I don't expect that the business would disappear on us, but there clearly could be some volatility in any one product line. We are still largely dependent on the energy business there. Part of what you see us doing is working hard to diversify some away from our dependence on that. But that said, it is a more volatile business than some of the other businesses we are in, and we watch it very closely and it can turn.

Is it hard for somebody decide I want to go in that business, one of the other people that went out, can they sort of come back in? Is it a difficult thing to go in and out of that business, if you are in this sort of competitive landscape?

No. I think most of the switching companies offer a variety of products and services. So there are not just, we are not the only energy switching company available to consumers. We have a long established reputation, and a brand name that is associated with energy, just like Money supermarket has one that is associated with financial products, and [Can fused] has one that is associated more with auto insurance. Our objective is to have a meaningfully-sized business away from energy as much as possible, but in the short term we still are dependent on it.

And in answer to your question about how easy is it to enter and exit this market, there are not significant barriers as there are in any interactive business, it is the barriers are much lower than any of the other businesses we have been in. That is just the nature of the beast. It is about positioning and about the value you provide to the suppliers, and the value that you provide to consumers. So it's a constant struggle, and you have to continue to invest in those businesses to make sure.

One more question. Have you guys discussed the cost structure? Is it big fixed costs? High variable costs?

It is not a very big fixed cost business. In fact, when it is performing well, it should be extremely high margin. We have got reasonable variable costs, and reasonably low fixed costs as well.

One last thing. You went over the numbers. What was the debt at the end of the quarter? I missed the number.

474 million.

Thanks a lot. Bye.

Our next question comes from the line of Michael Bresler of Alson Capital. Please go ahead.

Hi, just wanted to ask a question on the cable channels. I am curious what ratings are now being used and when ratings changes were made. It seems like there are lots of different wins win ones out there?

Are you asking which demographic categories are we quoting is that your question.

No, C3, day plus, switch, just alignment. Maybe you could point out which quarter these ratings changed over, and then when you are quoting these year-over-year comparisons, whether or not we can think about it like it is apples-to-apples. Thanks.

Yes, the short and simple and important to answer to that is yes, it is apples-to-apples. All of the ratings that we are quoting in terms, and the pricing improvements year-over-year are apples-to-apples, net of C3 adjustments.

Thank you.

And our next question is a follow-up from the line of Craig Huber of Lehman Brothers. Please go ahead.

Actually I am covered. Thank you.

(OPERATOR INSTRUCTIONS). And we have a question from the line of John Kornreich of Sandler. Please go ahead.

In the two big cable networks, are there any 'significant time periods' where you are not making the kind of progress that your investments would dictate that should happen so far?

Of course one of the time periods we have been focused on over the last year is Food Networks, in the kitchen time period, which are weekends in the mornings, Saturday and Sunday, and very happy to report progress in that area, after three quarters of some difficulty. For the first time in over a year, Saturday morning is up year-over-year, and the entire segment, Saturday and Sunday is up sequentially from the fourth quarter, and that is due to what you would expect.

It is due to the investment in programming I spoke of earlier, and finding some new and exciting young talent including the Neelys, an African-American couple out of Memphis, that have really come on strong, having some of the highest ratings we have ever seen on Saturday and Sunday morning. That is improving. That was an area of concern. Other than that, daytime is actually stronger on HGTV than it's very strong prime time. As I said earlier, prime time on Food Network is at an all-time record high.

There are no further questions in queue at this time. Panelists, please continue.

Thank you everyone for joining us. It is Tim Stautberg. If you have any further questions, you can call me at 513-977-3826. Thanks and have a great day.

Ladies and gentlemen, today's conference call will be available for replay from 12 p.m. Eastern Time today, until May 1st, 2008 Midnight of that day. You may access that conference by dialing 1-800-475-6701, and entering the access code 918379. If you happen to be dialing from an international location, please dial 320-365-3844, and entering the same access code 918379.

That does conclude our conference call. I would like to thank you for your participation. On behalf of today's panelists, and thank you for using AT&T. Have a good day. You may now disconnect.