E W Scripps Co (SSP) 2008 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the E.W. Scripps Company third quarter earnings report. 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 is being recorded.

I would like to turn the conference over to the host for today, Mr. Tim King. Please go ahead.

Thank you Jeremy. Good morning, everybody. Thanks for joining us for the first analyst call of the new E.W. Scripps Company, that excludes the businesses of Scripps Networks Interactive that were spun off at the conclusion of the second quarter. As we mentioned in this morning's press release, those businesses now will be listed in our financial statements as Discontinued Operations.

In just a moment will begin with about 20 minutes of prepared remarks, before opening up the lines for your questions. Let me first tell you who is with us here in Cincinnati today. Rich Boehne, the President and Chief Executive Officer, and Tim Stautberg, the Senior Vice President and Chief Financial Officer, will speak in just a few minutes. And then joining us for the Q&A portion of the call are Mark Contreras, the Senior Vice President of Newspapers, Bill Peterson, the Senior Vice President of our Television division, Brian Lawler, whom you may have seen in a press release yesterday will succeed Bill starting January 1st, and Doug Lyons, the Vice President and Controller.

Just a couple of quick housekeeping items, If you could not stick with us for the duration of the call this morning, up can access a streaming audio replay by going to Scripps.com, and clicking on the Investor Relations link at the top of the page. We will put it up there later this afternoon, and we will leave it there for a few weeks. You also can use that link by the way, to find today's press release and the quarterly financials.

As always, our discussion this morning may contain certain forward-looking statements, and actual results may differ from those predicted. You can check Page 3 of the 2007 Form 10-K, to read some of the factors that may cause some of the factors that may cause results to differ from what you are about to hear.

With that, I will turn t it over the Rich Boehne.

Thanks, Tim. And thanks to all of you on the phone this morning for your interest in Scripps. I am going to take just a couple minutes to give you a little bit of background, and then Tim will talk and walk you through the numbers. These are certainly unusual times for our industry, and for the broader economy upon which we depend.

Times when the list of unknowns seem a whole lot longer than the list of what is known for sure about the operating environment over the next few years. You who are listening to the call have a hard job, trying to pick businesses and companies and management teams, that have both the assets and the judgment necessary, to create real economic value for owners.

I would like to assure you that we here at Scripps understand that our investors have handed us their wallets, trusting that we will at some point hand them back, fatter than when we got them, yielding a reasonable return. We understand that that is what we are paid to do, and we fully embrace that challenge.

That's why our #1 goal short-term, and I really do believe it is short-term is to protect the good health of this enterprise, so that we are among the media companies best positioned to take advantage of opportunities presented by the digital transformation of our businesses. And as has been the case during similar times in our country's economic history, the financially strong will have the best opportunity to create real value for shareholders over the next few years. That is why behind all of the noise in our third quarter results, is a very healthy Company, built upon solid media businesses, and attractive local markets.

With those assets and a healthy balance sheet, we are able to focus on expanding our audience and revenue shares in our current TV and newspaper markets, investing prudently and modestly where there is an opportunity for a good return on investment, even in these very tough times. For those with the resources, the best time to make hay often is when the sky is dark, when small and creative investments can be planted, and ready to flourish when the sun returns. Despite the relative health of our Company and it's low debt balance sheet, we decided in recent days to take some additional steps toward ensuring that we have financial flexibility during this period of economic uncertainty.

As discussed in the press release, we are completing today a 10% headcount reduction in our Newspaper division. These cuts were made in conjunction with extensive long-term planning by our local managers. We also have frozen salaries for every senior manager at the corporate headquarters, and after a very difficult deliberation we decided to suspend our quarterly dividend.

These moves along with other expense reductions will allow us to further reduce our already modest debt, and spend more of our time looking ahead with the entrepreneurial creativity and energy that has enabled Scripps to thrive and build value for more than 130 years.

Now I also acknowledge that we owe you a quarterly update on our progress, so here is Tim to walk you through the numbers. Then I will be back before we take questions.

Thanks, Rich and good morning, everyone. We typically don't spend much time on these calls going over the figures in the press release. But there were a number of unusual items in the results we reported today, so I would like to spend a moment on third quarter financials. There is still a fair amount of noise in the financial results owing to the spinoff of Scripps Networks Interactive on July 1st, so it is probably better to start at the segment level.

At our Newspapers, all advertising categories declined by double-digit percentage. Within Classified, automotive was off 28% during the quarter, real estate, 36%, and help wanted down 46% from last year. Online advertising fell by about $1 million, or 12%, largely due to the sharp declines in the online ads that are tied to print classified. Online advertising that is independent of classified upsells, what we call pure-play, continued to increase by a double-digit percentage. This is an encouraging trend but we recognize that it is still on a relatively small base at this time.

For the quarter, total newspaper revenues declined by 17% compared with the prior year period. On the expense side, our newspaper expenses were down 7% in the quarter, a combination of lower compensation and benefits costs, caused by lower employee count, and favorable adjustments for healthcare and disability claims and lower newsprint expense. The price of newsprint, as all of you know, was significantly higher than in the third quarter of 2007, but we mitigated that increase through reduced consumption.

One bright spot in the Newspaper division is our participation in the Yahoo! consortium. We were a charter member of this revenue sharing partnership, and have seen our share of local online ad dollars grow, through the initial efforts involving Hot Shots!. The greatest potential may be in the ad serving network that launched recently.

With this feature of the Yahoo! relationship we now can slice and dice the local audience data for our newspapers and Yahoo!, in such a way that we can offer advertisers a message to reach highly motivated consumers in a specific demographic, such as say, women between the ages of 25 and 54, who recently have performed online research on new tennis rackets. Now that is an audience a sporting goods shop wants to talk to, and now we can help them reach it. Our paper in Knoxville went live in the network on September 17th, and we have a rollout plan that will include the rest of our daily newspapers by February.

Turning to our Television division, revenues rose 5% to nearly $77 million, both local and national were down, particularly the automotive category, as manufacturers and dealers pulled back, when it became apparent consumers would have difficulty getting car loans during the credit crunch. But political came in at $10 million, enough to boost total ad revenue above last year. That $10 million is lower than we had hoped to report.

If there is one thing we have learned in the 2004 and 2006 election cycles, it is that political spending is unpredictable. No one would have guessed a year ago that the DNC would have prevented Barack Obama and Hillary Clinton from spending money during the primaries in Michigan and Florida, where we have three very influential stations, and the GOP Chair in Lansing, Michigan may have been the only person more disappointed than Bill Peterson, when John McCain announced that he was pulling out of that state during the third quarter.

Having said that, there are always factors beyond our control during election years. But by taking full advantage of the factors we can control, we are satisfied that we took more than our fair share of the political ad dollars that were available in our local markets, generally speaking, due to the strength of our news product. Our expenses at the stations were essentially flat compared with last year. There was a slight increase in employee costs, as we continued our drive to build online resources for long-term success, and that increase was offset by the same favorable adjustment to healthcare and disability claims, that I mentioned in the Newspaper discussion.

Turning to the consolidated income statement, Scripps reported an operating loss of $13 million in the third quarter. That loss included $22 million in separation related expenses, that carried into the third quarter, with a $20 million non-cash charge for the modification of pre-existing stock option awards after the spinoff of Scripps Scripps Networks Interactive.

Now below the operating line, you will find another noncash charge of $25 million, to further write-down the value of of our investment in Denver JOA, During the second quarter, we wrote down the value of all the goodwill in our Newspaper division, and $95 million in the book value of our investment in the Denver JOA, and our Colorado newspaper partnership. The third quarter write-down of our investment in Denver contributed to our reporting a loss from continuing operations of $21 million.

Looking ahead, you will notice that we are less specific in our guidance than we have been in the past. This is a recognition that the market turmoil of this autumn, had led to such fast-moving and unpredictable changes in the habits of consumers and advertisers, that forecasting fourth quarter economic activity with precision is extremely difficult. The best we can say at this point that is the revenue and expense trends we saw in the third quarter are continuing into the fourth.

Political advertising at our TV stations came fast and furious in the first 34 days of the fourth quarter, reaching about $25 million, but the underlying trends in local and national television advertising will likely remain difficult. Corporate expenses are expected to be about $10 million in the fourth quarter. While I am on corporate expenses, let me quickly mention a development that was not in the release.

Our corporate expense line is very similar to that of other companies of our size in our industry, but we believe it is too high. From consolidating functions to striving for greater operating efficiencies, we are turning over every rock to find savings. We haven't finished budgets for 2009, but Rich mentioned that senior managers here at corporate headquarters, will be subject to a pay freeze next year. Taking it a step further, Rich asked the Board to cut his base salary next year. The Board agreed to his request, and reduced Rich's pay by 10% for 2009.

Just a few more numbers to review. As of September 30th, our net debt was about $44 million, reflecting our initial drawdown of about $60 million from our $200 million revolver, and cash on hand at the end of the quarter of roughly $16 million. Capital expenditures in the third quarter were approximately $20 million, the full year figure will be in the neighborhood of $90 million this year, before dropping to about $65 million next year. The big ticket items in there are the continuing digital build-out at several TV stations, which should wrap up in February, and the construction or completion of a new newspaper facility that will serve the affluent and fast-growing markets of Naples and Bonita Springs, Florida. For 2010 and beyond, the maintenance level for capital expenditures should be be about $25 million a year.

There were two announcements today that you don't normally see in our earnings releases. The first, of course involved the dividend. As you know, the separation of the SNI businesses on July 1st, led our management team and Board, to thoughtfully consider the appropriate capital structure for the Company, and our priorities for the free cash flow generated by the business. Based on the information we had in early August, our Board of Directors authorized a quarterly dividend of $0.15 per share, in keeping with our philosophy to return 50% of free cash flow to our shareholders, in the form of dividends over the long-term.

Since then, the ensuing turmoil in the financial markets and it's immediate effect on our add-supported businesses, required significant adjustments to our forecasts for 2009 and 2010. Out of an abundance of caution, and in an effort to increase our financial flexibility during this unprecedented period of uncertainty, the Scripps Board decided to suspend the dividend.

The thinking is that we are one of the industry's healthiest companies, thanks to our strong balance sheet, and we have a record of taking advantage of opportunities that help our shareholders. This very difficult decision will ensure that we don't miss any opportunities to strengthen our businesses, particularly while we are racing our local competitors to build share online.

On October 15th, the Company completed a share repurchase program that was authorized by the Board in early August, with the goal of absorbing expected dilution from the Company's equity compensation plans. We have repurchased 1.1 million shares at a total cost of $7.6 million. But given our focus on increasing the financial flexibility of the Company, the use of free cash flow to repurchase shares is not a current priority.

With that, let me turn it back over to Rich for some concluding remarks.

Thanks, Tim. Before we take questions, just a couple of final thoughts. Scripps today is a healthy, low debt, well funded enterprise, because we have always focused on the long-term, and been willing to make difficult decisions. Although done quietly and carefully, Mark Contreras and the managers of the newspaper division have reduced total headcount there by about 24% over three years, while at the same time protecting content and ad sales efforts, and shifting resources to the growing Internet side of the business.

The reduction of 400 coworkers completed this quarter, coupled with suspension of the dividend, are the kinds of hard decisions we are willing to make in these uncertain economic times, to ensure that over the long term we are able to be the owner of growing, local media businesses powered by an expanding base of talented professionals, who are dedicated to serving media consumers, and increasing the economic value of this enterprise.

Thank you so much for your partnership and support. Jeremy, we are now ready to take questions.

Thank you. (OPERATOR INSTRUCTIONS). We will first go to the line of John Janedis from Wachovia. Please go ahead.

Thank you. Good morning, guys. Couple of questions. First, it looks like TV is going to have another tough year in '09, and I am assuming you don't have the kind of flexibility on cost that you have had on the Newspaper side, but could you maybe talk about some of the options there?

You are right, this is Bill Peterson, John. You are right, we don't have flexibility when it comes to programming expense, and of course the other big chunk of our expense is people. And we are whenever possible looking at ways of reducing our population. We are not doing it through major reductions in forces. We are doing it mostly through attrition, and eliminating some positions as we are able to automate, or change the work flow.

Our real focus in 2009 is really building market share. We are focused on emerging from this recession with more market share than we entered it, because that's the only way that we are going to get a payday from this.

Bill, does that mean you will be taking that from other local media, or from other television stations?

From other television stations. But other local media as well.

Okay. And maybe I am not sure if this is for Rich or for Tim or even for Mark. Can you give us an update on Denver? Even with the significant cost cuts, it looks like you are seeing a lot of pressure there on cash flow. Is there some sort of option B for you there?

I am not sure what you mean by option B.

I mean, I am not sure what the option would be. Maybe dissolve that relationship or end the JOA, or I am not sure what you could do, or maybe close down one of the papers, or maybe more consolidation or something?

None of those would be real easy options. Denver, it is a Joint Operating Agreement structure. Denver is going through some of the same pains that many large markets are going through. The good news is, Denver is a good market for the long-term. The local management team there that runs the JOA has been very, very good on the cost cutting side. We have a very good ad sales staff in place today. And we will just have to see how it works through.

But over the long-term, we look at that market like we would look at any other market, and be willing to make whatever sort of rational decisions are required, to ensure that it is healthy and provides a return to it's owners.

When you look at that market, relative to your other markets, is it performing in line or above or below?

I will let Mark answer that.

John, it is a Metro market, and what is affecting them is what's affecting a lot of Metro markets, which is primarily classified advertising in all three categories, auto, real estate, and help wanted. So it's not out of the ordinary when you look at other similarly sized markets.

Thanks a lot, guys.

Thanks, John.

Next question will come from the line of Alexia Quadrani, JPMorgan.

Thank you, a couple of questions. First on the newspaper side, the circulation revenues fell more than what we were expecting. Could you give us a bit more color behind that there? Was there some discounting? Was there some voluntary pullbacks in certain areas? Or was it just the overall weakness in the markets?

We are doing a lot on the circulation side. Obviously, we are facing some challenges with volume, but if you looked into the third and fourth quarter this year, and into the future, we are doing some things with circulation rates that are going to result, we think net/net in circulation increases. You will also see in the next couple months, we are going to be moving to a relationship that is direct, it is an office bill situation, which is a different relationship with our carriers than a buy-sell. So you will be seeing circulation revenue pop up, but you will also see corresponding expense. We have got kind of mish-mash of systems today, but you will see us going to one unified way that we relate to our subscribers, and how that is treated financially. Long story short, there is a lot of noise in that number in the third quarter and the fourth quarter.

It will continue to be under pressure in Q4 but hopefully in '09 you are suggesting it should get a little bit better?

Some stabilization.

On the TV side, I think Tim you mentioned that you were seeing, you are expecting $25 million in political in Q4. Did I hear that right? And what are pacings in the fourth quarter?

Alexia, it is Tim. What I mentioned was, the election having occurred Tuesday, we had a snapshot of what political revenue, our stations had been able to generate. It was $25 million. We wanted to make sure that that information was shared with everybody.

However, the underlying business is such that the overall trend for the quarter is likely to reflect the trend we saw in the third quarter. A big slug of political advertising, but underlying weakness in a lot of the other categories. We hope to be positive in the fourth quarter in terms of total when we are done, but a lot will depend upon how the retail and automotive categories perform. Is that fair to say, Bill?

Yes. In a way you have to kind of wait for the dust to settle, because there were some advertisers who were displaced, and there were some other advertisers who just decided to avoid the fray. And we are waiting now to see who comes back. So we don't really have a strong sense of what we are dealing with, except for the fact that we know that there is weakness in the major categories like automotive and retail. And we believe that that will, we have seen those signs that would indicate that that is going to change.

Okay. And just back on newspapers real quick. Was the newspaper advertising growth throughout the third quarter, was it pretty even, in the three months, or was there significant falloff in September?

Alexia, this is Mark. It was pretty evenly spread, maybe a point or two more negative in September, but on a month to month basis, we have got a calendar that has different numbers of Sundays, and so forth, so it is better to look at it on a quarterly basis. But we didn't see any dramatic trends, say August through September, for example.

Okay. Thank you very much.

We will go next to the line of David Clark from Deutsche Bank. Please go ahead.

Thank you, good morning. Tim, could you just talk a bit about the funded status of your pension plans. I think you were underfunded by about $70 million at the end of 2007. I am not sure how that's split up between the two companies, but given the fall in equity values this year, do you think you will need to make a meaningful cash contribution in 2009?

Sure, Dave. You may have been looking at a projected benefit obligation versus the value of our plan assets, as opposed to the accumulated benefit obligation. The accumulated is what we owe folks through the end of the period. The projected, clearly what we expect those folks to earn in the ensuing years. So we were well-funded relative to the accumulated benefit obligation that we had at the end of 2007.

Okay.

However, as everyone knows, the equity market declines throughout the year, and especially what occurred in September and October, because we have a mix of plan assets that are both fixed incomes and equities, we along with everybody else saw our portfolios shrink, and so we are working with our actuaries, we are taking a look at the forecasts for what that means from an expense standpoint, and a funding standpoint over the next several years. So we are no different than a lot of other folks.

We expect our pension expense, assuming that there is no recovery in the markets between now and the end of the year, pension expense, which I think this year was running at about $15 million, will likely double next year. And our funding requirements, which we were projecting to be near zero over the next several years, if we don't see a recovery in the markets, we will likely have to fund $10 million next year, and then that will probably grow to $30 million in the outyears of 2010 and '11, as we start to try and make up that deficit. So I hope that is helpful.

Okay. Very helpful. Yes. And then I guess for Rich and Bill, could you refresh my memory where you are, in terms of retrans agreements, when do your major agreements come up for renewal, what agreements have been renewed recently?

Sure, I will give you a little bit of background. Remember, those were agreements, many of them were put together prior to the separation of the two companies, and some of the big ones are in place, and have some years to run on them. But we do have some coming up that will provide opportunity. I will let Bill talk about those.

Yes, we have around 800,000 subs coming up for negotiation. But they are all really tiny systems, so it is a lot of mom and pops, and a lot of small ones coming up. The really larger ones, because they were negotiated by Scripps Networks go out quite a ways. Charter goes out to 2011. DirectTV goes out to 2016. So some of the big ones we won't be dealing with for quite a while.

Okay. Great. Just one other quick one. What percentage of advertising I guess on both the TV and newspaper sides comes from direct to consumer drug advertising for you guys? Just ballpark?

It is Brian. On the television side, it is a pretty low number, less than single digits.

Yes, they generally use network.

Okay. Great. Appreciate it. Thank you.

Thanks, David.

Mark is looking for that. We will come back to you.

We will dig it up for you, David.

Okay. Great. Thanks.

We will go next to the line of Craig Huber from Barclays. Please go ahead.

Good morning. Thank you. A few questions. First one, I have never seen this before in your press release, you are talking about self insured healthcare and disability claims, a favorable impact on that $3 million in the current quarter in newspapers, about another $1.2 million in TV. I guess it adds roughly $0.05 to the EPS in the quarter. Was that one-time in nature, or should we expect that going forward?

Craig, it is Tim. That is something that on a quarterly basis, we are always looking at our experience of what claims, again we are self-insured on the medical and disability side, so we are always looking, we have a reserve established, and we are always looking at how claims come in, and we adjust that on a quarterly basis.

Many quarters, it is just noise that is too small to really worry about. But as the size of the Company and the profitability of the segments has declined, especially this third quarter, that adjustment, which frankly is real savings, right? I mean, we have done a good job on the safety side with our folks, from a healthcare standpoint we are doing a lot of wellness programs, on the disability side we have seen some improvement there.

So they are real savings. But because they are just adjustments to an accrual, we just wanted to highlight those for folks. I don't know that that will continue every quarter to have those adjustments, unless our experience continues to be strong.

Okay. Great. And then secondly, just thinking out to 2009, could you just review for us what you are expecting to happen to your newspaper rates, how you are going to charge for that in the new year across the categories?

This is Mark.

For retail, for national, classified and general, can you give us a sense of what you expect to be able to do for your advertising rates next year.

Are you talking about print or online?

I am sorry, print.

What we have done historically and will continue to do, is a market by market review by category, and the reason that we do it market by market, Craig, is because in some markets we may be the sole primary media operator there, and it gives us additional room to drive rates. In others, where we are more competitive, we have got to take a different point of view.

So I can't give you an across the board answer that we are going to raise rates X percent across every market. I can tell you that so far this year, our CPMs have held up reasonably well, for the third quarter, for example, in local, our CPMs year-over-year are up 0.5%. Total classified CPMs are down 2%, and national is down 2%.

So we do keep a very close eye on how our rates are performing. But I can't give you an across the board view, other than we do spend a focused amount of time on it, and we do it on a market by market basis. I hope that is helpful.

Are there going to be some markets though, that you expect to cut your advertise rates for a half a page, quarter page ad, or what have you, or even a 2 or 3-line classified ad?

Possibly. We are holding up decently in volume, we are not going to do that. The game there is a market by market game, based on the paper's competitive position.

But that being said, in the past we have been focused only on trying to find places that we can drive rates. In some categories of classified, for example, private party, we have entertained and are doing free, but the market clearly is much more competitive than it has been, and we are going to look at both ways to increase, and ways to decrease to build share. But again, the mechanics there are a market by market analysis.

Okay. Switching over to TV, please, can you help us just I guess along the lines of what Alexia was asking here, post the election, what are your TV pacings for the month of November? Do you you have that?

Yes, it is Brian. Our pacing post-election is off year to year, but I think as Bill pointed out and it is an important point, there are a lot of our traditional advertisers who stay away from September and October, knowing that there is a high risk of displacement, and they are just now getting back into the game, so I think that it's a little premature to make a final determination on what the quarter is going to look like. Right now, we are pacing off, but we have seen some activity, starting to generate and some of those pop up this week post-election.

TV pacings, you should I would assume just have a snapshot post the election of the remaining days in November? Or are you just not willing to maybe perhaps give them out?

This is Tim. We have never historically given specific pacings. What we will say is the pacings support our quarterly view that I shared earlier in my remarks.

Okay. And then one last thing, if I could, back on TV. Excluding political, can you just give us the revenue contribution from each of your Top 3 TV advertising categories, you mentioned auto and retail, but just what the percent breakdown is for each as a percent of the whole, maybe for the last quarter, excluding political, however you you want to do it, or year-to-date? I don't know if you have that data in front of you.

I do. Automotive, this year is representing about 20% of our spending. That is our #2 category. Services is our top category and that is a couple points above that. And then our third category is retail, and that is in the mid-teens.

Do you have the next two below that, please?

Four and five. Yes, four would be food services, and then the fifth category is travel and leisure.

What do those represent, and I will let you go.

Let's see. Food services is probably around less than 10%, and travel and leisure in that same category.

Great. Thank you very much.

The next question will come from the line of [Pujar Poonawalla] from Fox Hill Capital. Please go ahead.

This is [Karim Abay] from Fox Hill. How are you?

Very good.

Good to talk to you you again.

I have a question I think which, I mean with the secular decline in classified and I know the economy is getting weaker and weaker, can you explain to us, how we can replace the classified revenue going forward? I think everybody knows on the call for every dollar lost, it is almost $0.80 on EBITDA. I don't think this category is getting any better.

Sure. This is Mark Contreras.

Hey, Mark.

The reality is that there is a combination of both secular and cyclical declines going on, but to the extent that they are secular, we are banking that we are going to build our presence in those three categories, auto, employment and real estate, interactively. And when you look at the direction of our interactive businesses in those categories, depending on the category, we are performing much better.

One great example is the Yahoo! consortium. Tim mentioned earlier that just in the month of October, we were able to develop a brand-new set of capabilities in services advertisers that we never have had, and we are going to roll those out between now and February.

But for the very first time our local sales forces, which are the largest in each of the markets that we operate in, are going to be able to offer an advertiser the ability not just to reach a mass audience, but to target very specifically people who are interested in buying their products and services, and that comes to us in a much higher CPM, than we would necessarily get by producing a mass offering to an advertiser. So this is not going to be a one year fix. When you look at the underlying trajectory of our audiences though, I am frankly very encouraged.

Our Internet audiences our uniques were up in the quarter 60%. We are keeping our eyes focused on building out that audience, because as we develop other products to offer, and different business models to offer, we think we are going to be able to continue to create value for our shareholders by providing those services. But it is going to be at a much different package that we have been able to deliver previously, and there is going to be decline, and some breakage along the way, compared to our model three or four years ago.

Understood. One last question. Could you update us a little bit about your CapEx program going into '09?

Yes, it is Tim. Roughly, $65 million for next year, about 50 of that is going to be to complete the construction of the Naples facility. And then the balance is I guess probably roughly 10 or so is television, or a little more, and then some projects here and there. But we are going to be very tight-fisted on any discretionary capital clearly, during the coming year.

I would add that in Naples, we do have a 10-acre parcel where we currently are operating the Naples newspaper, that will be available for sale, once we move out to the new location. We are not sure the timing of when we would be selling that parcel, but that will bring in some cash to the Company. But that is likely to be a 2010 event or beyond. But we want to make sure that there is a healthy market to sell into.

This is Rich. Let me give you a little bit more background on Naples, especially for those of you who might be new to the story and reading about it, or listening to Tim's comments. In Southwest Florida, we have an excellent local media business, that has been expanding across all platforms. We got to the point where we were having to turn away advertising, and not able to produce the products that the market demanded.

On top of that, we expanded north toward Fort Myers, into an area that we think will represent a very good-sized Florida city over time. We launched products there both in print and online, daily, weekly, and across the board. And that is an example of the market where we think we are more than just the incumbent. We have an absolute very good opportunity to build value over time.

Unfortunately, we had to make that investment during a difficult time in the economic cycle. But we are confident that again, Southwest Florida is a place where we will build a lot of value, and return a lot of cash to our owners over the long term.

Okay. Thank you.

(OPERATOR INSTRUCTIONS). We will go next to the line of Barry Lucas from Gabelli and Company. Please go ahead.

Thank you, good morning. Christian Science Monitor is going almost 100% online. What thoughts have you given to moving delivery and distribution to online product, and might you try that in some of the small markets, the way you currently print papers?

Barry, this is Mark. Wholesale online probably not in the near-term, but I will tell you that we are experimenting in most of our markets now with our NIE products, Newspapers In Education, and many of our papers have shut down the paper delivery of that, and delivered that content to schools electronically. It is a very favorable economic relationship, that we hope to expand to other areas.

We also signed a deal with Kindle with the Amazon folks about a month or so ago. To tell you the truth, we don't see it as a panacea, but it is a foot in the door in that arena, and we are in discussions with a variety of people on a regular basis, to experiment with alternative distribution platforms.

Clearly there are emerging various options for us that will give us the ability to deliver our content to a greater extent electronically, as we continue to face pressure on the printed delivery model.

Thank you.

We will go next to the line of Ross Levin, Arbiter Partners. Please go ahead.

With respect to the share repurchase, I notice that you exhausted your Board authorization. At what time might that be revisited by the Board, and what is management's view of repurchases going forward?

Yes, Ross, this is Tim. I would say that in the near term, and near term I would say would be the next 6 to 12 months, we are going to be focusing all of our efforts on our operating businesses, as my remarks projected to everybody, we want to stay in the strongest possible position from a balance sheet standpoint, increasing our financial flexibility through this period, so that we can make investments if the situation arises, either through the P&L, or through modest acquisitions.

Again, I am not suggesting any major moves there, but during this period, repurchasing shares, suspending the dividend, we are not likely to be repurchasing shares in the near term, but it will be a subject of every quarterly Board meeting that we have, and I would expect that a year from now, as we are looking into 2010, and have maybe a better window into hopefully the other side of this cycle, we might entertain that as a thoughtful use of cash and investment for our shareholders. But in the near term, that is just not a high priority.

I guess has something sort of changed between now and October 15th? Because it seemed like between October 1st and October 15th you were fairly aggressive with stock. Stock is down a bit, and I don't expect you to change your decisions, or sort of react to every single day's trading.

But with stock down and it being 15 days later, have you sort of seen something from the bottom up, in terms of your operating results, that sort of changed your view of what your discretionary cash flow might be over 2009, or was it just sort of you wanted to get through the authorization at a relative, at the price it was then, and that was always the plan, and there was no intention of further purchases?

Yes, it is more mechanical. We repurchased shares under a 10-B-51 trading plan, and we had a Board meeting in early August, authorizing us to go ahead and repurchase the balance of the authorization before the end of the year. We put in a 60-day program that ran from August 15th through October 15th, and we didn't interrupt it. That is all there was.

When was the Board meeting again?

In early August. Early August we had a Board meeting. That was the Board meeting where we established the $0.15 dividend. Before the market turmoil, I think before the outlook for many, many industries, clearly not the least of which, Newspapers is much lower. And those are the changes that are affecting our decision on how to allocate free cash flow.

Thank you. That clarifies it entirely.

All right.

We will go next to the line of Gary Linhoff, Iron Works Capital. Please go ahead.

Good morning. Tim, can you help me out on the income statement, the equity in earnings of JOAs of $1.9 million, is Denver up in the cost of expenses, or help me understand the difference between that line and the operating losses, the $3 million in the segment profit?

Sure, Gary. Trying to get to the different pieces. There is a footnote. Footnote 3 in the income statement, details how you get from the equity in earnings of JOA and newspaper partnerships, down to the contribution of segment profit. I think the answer to your question is probably in that Footnote.

Okay.

And if not, maybe after the call we will iron it out.

Okay. Great. When do you expect the 10-Q will be available?

Monday.

Great. Okay.

That was Doug Lyons. He hard at work wrapping that up. The real challenge, I have to complement Doug and the finance team, that we have assembled after the spinoff, but there is a lot of work to be done to pull apart the Scripps Networks Interactive, and E.W. Scripps, especially on the tax provisions and looking back historically, so a lot of work behind the scenes, and we will have that filed on Monday.

Great. Thanks very much.

We have a follow-up question from Craig Huber. Please go ahead.

Yes, hi, it is a few nit-pick things. If I heard you right I thought you said $10 million corporate expense would be in the fourth quarter. If I heard that right, is there anything one-time in nature in there?

This is Tim. Yes, we have a number of projects that we are working on to lower our expenses frankly, so if there is some one-time stuff, it could be $0.5 million here or there for some projects, that maybe spilled over.

We are looking at frankly outsourcing our payroll and benefits administration from an in-house service to ADP. That will be effective January 1st. But there are probably some fourth quarter costs there. So our goal is to get our run rate down for corporate towards $35 million on an annual basis, and then drive it further than that if we can.

Okay. Then also on the tax rate, if you adjust for these two large one-time items in the quarter, like your tax rate in the third quarter is like 15 or 16%. Is that just simple catch-up from the first half of the year, as you would have to book the taxes for your Company as it stands now, or is there something else going on there? Doug Lyons is going to handle that one.

Our run rate that we expect for the full year based on current income levels is about 40% tax rate.

Adjusting for all these various one-time items, you are saying?

Adjusting out the one-time items, applied to normal income about 40%.

Okay. Can you give us more detail if you would on this 10% headcount reduction in Newspapers. Is it cuts the across the board, or what areas are you focusing on?

Craig, this is Mark. It really is across the board. I guess there were two areas that we were very careful not to diminish. That is the folks creating local news stories and local sales pressure. But beyond that, we went market by market, had extensive discussions with the local management teams, and primarily what you saw were reductions in areas that didn't directly touch a reader, or didn't directly touch an advertiser.

There are a variety of projects going on too, to rationalize and centralize some functions. For example, we announced in October that we were going to discontinue printing in our San Angelo paper and move that printing to Abilene January 1st. There is a whole handful of projects ongoing, that will result in further expense declines.

But it really was a market by market look at what the opportunities were, with kind of a consistent theme, making sure that we were able to still be the dominant local news provider, and be the strongest local sales force. Hope that helps.

Okay. Great. Thank you.

Thanks, Craig.

At this time, there are no further questions in queue.

Yes, thanks, Jeremy. Before we sign off actually I think Mark had an answer to an earlier question from Dave.

Dave, I am going to approximate the question on the direct drug business. Our total national is about 6% of our total ad revenue. There is an all other category that we track which is about 40% of that. So the drug is embedded within that. It is probably 2%, maybe of our total ad revenue, and I just wanted to try to approximate that for you. It is going to be somewhere between 1 and 3% of of our total ad revenue that came from direct drug.

All right. Jeremy, that will wrap us up. We appreciate the help.

Thank you.

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