E W Scripps Co (SSP) 2009 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the third quarter earnings report. At this time, all participants in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given to you at that time. (Operator Instructions) As a reminder, today's conference call is being recorded.

I would now like to turn the conference over to Mr. Tim King. Please go ahead.

Thank you very much, Operator, and good morning, everybody. Thanks for joining us for this call. In just a minute, Rich Boehne, the President and Chief Executive Officer, will give a brief strategic overview of the business, and then he'll be followed by Tim Stautberg, the Senior Vice President and Chief Financial Officer, who will discuss the third quarter financial and operational highlights. He'll also cover some non-operating data for you as usual. Then, of course, we'll open up the lines for your questions. Joining us for that portion of the call are the executives who run our local businesses. That would be Mark Contreras, Senior Vice President of Newspapers, and Brian Lawlor, the Senior Vice President of Television.

Now, the commentary you'll hear from our executives this morning may contain certain forward-looking statements, and actual results for future periods may differ from those predicted. You can go to page 11 of the 2008 Form 10-K to read some of the factors that may cause results to differ from what you're about to hear. If for some reason you can't stick with us for the duration of the call, you can access a streaming audio replay by going to Scripps.com and clicking on the Investor Relations link at the top of the page. It'll be active later this afternoon, and we'll leave it there for a few weeks. As always, you can use that link to find today's press release and the quarterly financials as well.

So with that, I'll turn it right over to Rich.

Good morning, and everybody on the call, thanks for joining us. As we've done during previous calls, I'm going to take a few minutes to look beyond the numbers and tell what you we're doing, and why we believe our decisions are in the best interest to the owners of the Company.

It's awfully easy in challenging times to fill a conference call with data, forgetting that nearly all data points that flow from companies are -- preceded by decisions. For the record, we believe our data compares well with our industry peers. Ad revenues in TV and newspapers are down, although there has been some sequential improvement, especially in television. Also down are expenses; in some categories, we've matched or more than matched the corresponding decline in revenue. In other categories we've chosen, we've made decisions to maintain or even increase our levels of spending.

So here's some of the key decisions we've made that resulted in the pages of data you have had in the long-term strategy that we believe creates a compelling value opportunity for our owners. First and most important, we've decided that local news and information provided by TV stations and newspapers should be approached as a consumer product. And consumers faced with many choices will flee, unless we deliver compelling quality, and value. That decision in the third quarter resulted in the protection of journalism positions in our newsrooms, and in some cases direct investment in the quality of our content. The television stations, for example, are deep into a large scale training program aimed at increasing the quantity and quality of local content we offer on air and on the web. This program would be an easy expense to cut, given the current weakness in revenues; but with so many of our competitors pulling back on product, we decided to push ahead and invest in audience gains while the opportunity is available. If we don't deliver quality local content, audience eyeballs will go elsewhere and advertisers will follow. It's just not that complicated.

Second, we've decided that market penetration on the advertising side is vital for long-term success. We aim to help our partners sell more products and more services on more and more effective media platforms. As a result, despite the challenging economic environment, we continue to support and build new revenue streams. In the third quarter, for example, we announced plans to restructure the entire ad and circulation revenue organizations at the newspapers. When finished, the two functions will be merged into one greatly streamlined and far more metrics-driven organization. Through this effort, we believe we can both improve our revenue lines and provide better returns on investment for our advertisers. Again, not an easy undertaking in the midst of a deep recession, but vitally important if newspapers are to emerge from this period with a compelling business model. The ad and circulation reorganization is part of a larger project that we call Scripps 3.0, and is going to affect nearly every aspect of our business in the newspaper markets. Mark Contreras can give you a fuller update in a few minutes.

The third long-term decision we've made is financial flexibility will be a key strategic asset post-recession. As a result, we finalized new and attractive banking agreements in the third quarter, reduced our debt to a level that's below our available cash, and we continue to reduce expenses where possible to improve our free cash flow and increase our options for value creation in the future. Even when the economy recovers, we believe this financial discipline will benefit Scripps for many years to come.

The fourth decision we made is to protect our commitment to public service, and to invest in public service during these difficult times, which we believe will pay dividends for many years to come. In the third quarter, for example, that decision resulted in Scripps using its valuable air time to provide platforms in our TV markets for critical discussions about elections, public health and employment. And across the Scripps newspapers and TV stations, we invested to uncover costly problems in public health and care for the elderly. Every good company provides some level of public service. The difference is, here at Scripps it's a key strategy.

The final decision we've made, particularly in recent weeks, is to regain a more outward focus. By that, I mean we're in a position now to look ahead and focus more on those decisions that can drive value post-recession, like establishing sustainable value for quality content, refining business models on new platforms such as mobile, and looking for opportunities to expand our audiences and revenue streams in the good markets where we already do business.

Now don't get me wrong, the past six quarters have required lots of hand-to-hand combat, and the broad economic issues we face are still daunting. But the decisions we've made along the way now position Scripps to devote equal energy to approaching the opportunities in a still very dynamic media business.

That's a look at the decisions we've made that are driving our data. Now here's CFO Tim Stautberg to talk more about the quarter.

Thanks, Rich, and good morning, everyone.

As you know by now, our revenue in the third quarter was $186 million, down 19% from the year ago quarter but in line with our peers. The only good news in that number is the fact that the rate of decline is lower than the 23% we reported in the second quarter. As you'll hear in a few minutes, we exercised good discipline with respect to expenses during the quarter, but not enough to fully offset the declines on the top line. Our loss from continuing operations net of taxes was $0.07 per share, compared with a net loss of $0.06 per share a year ago. Business was tough at our TV stations, but it improved over the course of the quarter. Revenue was down 22%, which was modestly better than the 24% year-over-year decline in the second quarter. Remember the third quarter of 2008 included more than $13 million in political and Olympic advertising, so being down 22% given the tough comps and this year's economy was no small feat.

We noted on our second quarter call that -- with you that we had been revising our weekly forecasts upward every week for seven or eight weeks in a row. I'm glad to say that trend continued into the third quarter. Now we're a long way from seeing a return to pre-recession spending levels, but we're clearly starting to see signs of life from the advertisers in our markets. We benefited from Uncle Sam's decision to help Americans trade in their gas guzzlers, but the automotive category was showing improvement even outside the window of the Cash for Clunkers program. Automotive advertising was down 40% for the quarter and down 32% in September, which may not sound too exciting, but you'll recall that the category was down more than 50% in the second quarter. September was also relatively good for other categories of local advertising. Services were down just 2.4%. Retail advertising was actually up 6% in the month.

You've heard us talk in the past about the importance of developing business from customers who are new to TV, or who have not advertised on our stations for the past 12 months. We believe there is great upside in pursuing these opportunities. Revenue from new business grew more than 23% in the quarter to $6.4 million, and is up more than 10% year-to-date. September was the best month of the year for this category, with new business revenue jumping 24% to dollar levels that are more than 50% higher than a year ago. Advertising on our web and mobile platforms continues to show consistent growth at our television stations, up double digits every quarter this year.

On the expense side, you've heard us talk in the past about the decision made a few years ago to increase our investment in syndicated programming in key markets to build audiences for our profitable local news programming. For example, the recent addition of Dr. Oz in five of our markets hurts our expense comparisons, but is resulting in ratings growth in each of those stations. We're committed to reducing our programming costs, as these agreements expire in the coming years. But today, they still weigh heavily on our expense line. The double digit increase in programming expenses in the quarter was more than offset by belt tightening in every other facet of our TV operations, for a total decrease in costs of 5.4% compared to the prior year period. You back out the increase in programming costs, and the rest of our expenses were down 9.4%. Segment profit for the TV stations came in at about $3 million for the quarter. That's a far cry from $17 million in the election year of 2008, but it's nice to remain in the black after the segment loss we reported in the first quarter of this year.

Turning to our newspaper group, our story is pretty similar to what you've been hearing from our peers. Revenues were down, but not quite as sharply as in recent quarters. All of our advertising categories were down by double digits, with classified continuing to bleed the most. It was down 36%, just a few points better than in the second quarter. Within classified, help wanted was down 63%. Automotive was down 40%, and real estate was down 44%. Online advertising fell by 20%, which is slightly better than in the second quarter. As usual, the drop is attributable to the fact that about half of our online advertising is tied to print classified sales. Online advertising that is independent of classified upsells, what we call pure play advertising, continued to grow impressively, rising 38% during the quarter, and it's up 29% year-to-date. Total ad revenue dropped 22% -- or excuse me, dropped 27% at our newspapers, but circulation revenue actually increased nearly 3% to $27 million, limiting the total revenue decline for the quarter to 20%.

Segment expenses in our newspaper group declined 20% in the quarter; included in that figure is a 15% decline in employee costs that would have been 19% excluding some favorable adjustments in the year ago quarter. That 19% decline in employee costs coincides with the percentage reduction in full-time equivalent employees working in our newspaper division in the third quarter versus a year ago.

News print expenses were down about 50% from last year's third quarter; about two-thirds of the savings were generated by price decline, and one-third driven by volume declines. We've enjoyed this respite from last year's high prices but, like our peers, we see the price per ton moving north again in the coming months, although the price in the fourth quarter of this year will not be as high as those we saw in the fourth quarter of 2008.

Segment profit from our newspaper division was $11 million during the quarter, down from $14 million a year ago. You may have noticed that I didn't say newspapers managed solely by Scripps. We won't need that clarifying language anymore, because we no longer report current results for the segment called JOAs and newspaper partnerships. The results for the Rocky Mountain News have been moved to discontinued operations for all periods presented, after we divested our interest in the Denver newspaper agency during the third quarter. At the same time, we transferred our partnership interest in Prairie Mountain Publishing to our former partner in Colorado, Media News Group.

Rounding out our operational discussion, United Media's revenue stayed flat at $22 million in the third quarter. A majority of this business comes from the licensing of characters for use in consumer apparel and merchandise; so the worldwide economic challenges, particularly in Asia, have affected our licensing revenues tied to consumer spending. In response, the management team at United Media did a great job trimming employee compensation and other costs, boosting segment profit to $3.2 million in the third quarter compared with $1.5 million in the year ago period.

Turning now to our financial condition, we talked a bit on our second quarter call about our amended credit agreement, but since it was technically a third quarter event, and because it is a significant development that enhances our financial flexibility, let me revisit some of the details. We reduced the size of the original facility from $200 million to $150 million, and provided the bank group with a security interest in substantially all of our assets. Our current pricing under the revolver is LIBOR plus 300 basis points, which we think is pretty good considering the current conditions in the credit markets. The amount we can borrow under the facility is limited by a borrowing-based formula related to the value of eligible collateral. We took this action proactively in order to preserve our financial flexibility, and move away from an earnings-based leverage covenant that would have restricted our access to capital when we might have needed it the most.

Fortunately, we haven't needed the capital. In fact, I think the news in today's release that distinguishes Scripps from our peers is the further reduction of our already modest debt level. During the quarter, we used a Federal tax refund of more than $28 million, and some cash on hand, to reduce our long-term debt to $29 million, while we had cash and marketable securities of more than $31 million on our books at the end of the quarter. Capital expenditures in the third quarter were approximately $16 million, bringing the nine-month figure to $40 million, which is down from $62 million last year. Most of those figures reflect the construction of a newspaper facility in Naples, Florida, which is now complete and fully functional. The full-year capital expenditure figure is projected to come in around $45 million this year. For 2010 and beyond, the maintenance level of capital expenditures should be around $20 million to $25 million a year, although we'll only spend what's necessary and affordable.

Corporate and shared service expenses in the quarter was about $8 million, consistent with what we projected on last quarter's conference call. Last year's figure of $6.5 million benefited from a favorable adjustment to our reserve for self-insured worker's compensation claims, and income generated from Scripps Networks Interactive for transition services rendered under our agreement with them. These two items totaled [$22.2 million] dollars.

Looking ahead to the fourth quarter, we believe the advertising expense trends we experienced in the third quarter will continue. Newspaper ad revenue declines are moderating slightly, and local and national TV revenues have shown gradual sequential improvement. Comparisons for the TV station group will be difficult, given the $26 million in political ad revenues we generated during the fourth quarter of 2008.

That rounds out the snapshot of the quarter and a brief look ahead. Before I finish, let me remind you that when we were on our pre-separation road show last year, we told you that 2009 would be a difficult slog. It has certainly been that and more. Everyone in the room, and our leadership teams in the field, have spent the past year making difficult decisions under trying circumstances. Burt every decision we've made has been a calculated effort to strengthen the the long-term fortunes of a company that has survived and thrived through the ravages of many economic cycles, and the introduction of numerous new technologies.

With less than two months to go until we can turn the calendar to 2010, there are reasons to be sober. The national economy is still far from healthy, and the ways our customers are consuming news are still changing rapidly. But the economy does appear to have begun its long, slow return from the depths of the recession. Our revenue trends are gradually moving in the right direction. Our balance sheet will help us weather the lingering short-term uncertainties, and we remain confident in our abilities to position Scripps for leadership in the next season of local media. All in all, 2009 will end with more reasons for optimism than when it began.

With that, let's open up the lines for your questions.

Thank you.

(Operator Instructions)

We will go to the line of Alexia Quadrani. Please go ahead.

A couple of questions. First, can you give us a bit more color on the auto category? You mentioned obviously the lessening of the decline, particularly in September. Is there any way you could give us a sense how much the dealership closings have hurt the business, versus how much of a pickup you're seeing in the existing dealerships that are left?

Go ahead, Brian.

Hey, Alexia, it's Brian. As we stated, our automotive was down 40% in third quarter, and we did see a progressive build through the quarter, which ended 32% in September. I don't think that we've seen much of an impact on the dealerships that are closing. Those have been traditionally lower performing dealerships that have had limited-to-no marketing budgets, and so we really haven't seen any impact.

I would tell you that we are seeing some momentum. As we looked at October, there were a couple of factory domestic groups that increased their spending year-to-year. Our individual dealer spending year-to-year in October was flat. And in fact, although our automotive category was still down, the factory domestic, which was one of the subcategories within that, was actually up in October. So while we've still got a way to go for the entire auto category to be positive, these are the first promising signs that we've seen in a while.

Alexia, this is Mark on the newspaper side. In the third quarter, we improved about 2 percentage points. Most of that, though, in our markets was the result of the Cash for Clunkers program, and one bit of color on both the dealership question and on the mix, in our case, about a year ago we looked at the number of dealers that we did business with in the third quarter of last year, and '08 to '07 was down about 15%. I think that -- we haven't updated that number but I think if we went back it would be down, you know, another 5 to 10 percentage points, just the dealers that are no longer in business.

The second point there is if you look at the mix between print and online, print is down, you know in the neighborhood of 40%; online, though, is down in the neighborhood of 20%, and so there's about a 20-point gap between print and online, and we think we'll see some continuing robust growth in the online side in auto when the economy breaks.

Staying on the classified, the print classified business for a second. Could you give us your longer-term view in terms of how much of the classified business do you think, you know, may come back? I should say which segment within classified ads is auto, but which segment may come back in a healthier economy? Which segment do you think in terms of print may not see any really bounce back, because the money's moving elsewhere, even in a better market?

Just generally, employment continues to be kind of the most ravaged. I think in terms of its bounce back, while growth in employment will help the overall economy, we're not banking that help wanted in print is going to experience large pockets of growth. Real estate, though, we do have a bit more confidence in, and at this point other classifieds, which are primarily foreclosures and legal notices, are holding up relatively firmly in this environment, and I see that continuing to gain some strength, at least in the short term. Automotive, I still think we'll see this gap in performance between print and online, with continued decline in print but some reasonable stability if not some growth on the online side. Hope that's helpful.

No, that's very helpful. Then, just two other quick questions, if I may. One, is there any signs of stabilization, either broadcast or print, just in the Florida market? And then last question is just do you have an estimate on the broadcast side of what political is in the fourth quarter this year?

Why don't you touch on Florida, Mark, then I can answer --

Sure. Geographically for us, if you look first quarter to third quarter, Florida has gotten sequentially -- has slid two percentage points. If you looked at other geographies that we operate in, Tennessee has actually improved four to five points, California's down three points, so it's actually slid the worst, but Texas for us in general has held up relatively well, and is actually up five points if you take Q1 to Q3.

Alexia, it's Brian. As it relates to Florida, we also saw improvement in both of our Florida markets. In the Tampa market, the third quarter audit had the entire TV market performing seven points better than its first nine-month year-to-date average, so that was really positive. Then the West Palm market improved four points over its year-to-date average, which would include that performance. So I think we clearly are seeing a bit of a recovery there, and will be looking to that trend to hopefully continue in the fourth quarter. As it relates to political in the fourth quarter, $2.4 million is what we're looking at.

Thank you very much.

Thank you. (Operator Instructions)

We'll go to the line of Craig Huber from [Access 342]. Please go ahead.

A few questions, if I could. Can you discuss what your [TV pacings] are looking like for the fourth quarter year-over-year? Particularly interested to hear what November looks like after the election, and the impact it might have there, but more importantly December.

Honestly, Craig, it's still a little early. One of the dynamics that we talked about in the first half of the year that continues to play itself out is how late the business is breaking. That trend still absolutely continues. You know, we obviously saw some nice sequential growth through third quarter. September was the best month of the year. October obviously looked good on the spot side, because of the heavy go against -- with political and all that displacement going away. But, you know, we're still early in November, and November and December I still think has a lot of business to write. I'm optimistic about where I see the quarter, but I'm not quite ready yet to give some numbers, just because I think there's still so much business to write.

Also, could you guys think out on the TV side for costs for 2010, are there many opportunities left to take out a significant chunk of costs there? Also be curious to hear about programming, and how that's lining up for next year in terms of costs year-over-year, what investors should expect?

On programming, we were up double digits this year. Most of that had to do with a decision a year ago in several of our markets to give up the Martha Stewart show, which was pure barter and place programming that we felt would generate more revenue for us, which were cash expenses. So as a result, we had double-digit programming increases all this year. As it relates out to next year, we're looking at low single-digit programming increases. I think Tim referenced the fact that we just picked up the Dr. Oz show, which is doing very well for us in those five markets, and so most of that increase is there, but I think we'll be -- again, very modest growth in terms of the programming costs next year.

We are, you know, continuing to pull some costs out of the operation. This year, we spent much of the year building out traffic and graphic hubs, and in the fourth quarter this year we'll have the expense associated with all of those hub costs and severance costs. But all of that savings will come to fruition in 2010. So I do still think that there are some more expense savings that we'll be showcasing in 2010.

If we could switch over to the newspapers, if we could. Of this rough -- you know, 27% ad revenue decline for the quarter year-over-year, how many percentage points of that do you think comes from advertising unit pricing being down on average at your newspapers, versus volume?

Go ahead, Mark.

Craig, it's Mark. You are persistent on this question, so I'm going to take a crack at it, but I want to warn you that what I'm going to tell you is full run ROP. It is not -- you shouldn't take this and apply it to the entire revenue base. But retail rates in the third quarter were down about 2.5%; national down about 5.9%; classified in general down about 10%, and that's a mix of auto, real estate, help wanted, and other, and each of them performed slightly differently.

So again, the warning here is that you can't apply this to the ultimate ad revenue number, because it's just retail ROP -- I'm sorry, it's just full-run ROP which, you know, is a big chunk of our business, obviously, but our product portfolios have much more in them than just full-run ROP.

Fair enough. I appreciate that. Also if you would, please, and I may have missed this, by each of the three months of your newspaper ad revenue, how much was the decline for each of the three months year-over-year for the newspapers?

For the quarter, it averaged about 27%. The danger -- what we saw in September was 24%, 25%, but here is the danger in looking at that, Craig. There was a difference in the Holiday, and so what we did was we looked at both August and September combined together, and it's about the same run rate as it was for the entire quarter. So, you know, I don't want to take what it was reported, you know, a decent -- a better September, and then transfer out that that's going to, you know, signal continuing decline in the run rate, because I do think it's largely as a result of the change in the Holiday.

Lastly, if I could. Do you envision a day at all -- I know this probably comes up a lot behind the scenes, do you envision a day where you could potentially get away with actually charging for online access to newspaper websites?

We're talking about that constantly. We have had some experiences, both in Knoxville as well as Albuquerque, with that question. Today, our point of view would be that it's not immediately clear to us that that is a path to increasing our reach in our markets, and significantly increasing our revenue. We just haven't seen consumer behavior act that way. We are experimenting. We have one of our major papers on the Kindle platform. We're going to expand that to seven more by the end of the year. So we're going to keep our toes in many, many waters, to make sure that we're knee-deep in the discussion and we're able to take some markets and experiment. But I don't see that as a -- today as a panacea.

Great. Thank you very much.

Thanks, Craig.

Thank you. Our next question comes from the line of Scott Davis from JPMorgan. Please go ahead.

Yes, hi, good morning. I guess I have two broad questions. I apologize because they both sound kind of negative, and just unfair, because I think that you're actually a fairly attractive small cap stock. But my first question is, you know, when I look at the newspaper performance, and the year-over-year growth is betting better, but it's, you know, getting 200 basis points better, yet the comp eased by more than that. I guess I wonder, you know, how much do you worry that there's a secular issue for the local economy as a whole? So not just a secular issue for usage of newspapers or a secular issue in terms of how advertisers use newspapers, but do you think that the US, you know, just is less of a local economy because there's more big businesses? There's less mom and pop places that need to, you know, advertise locally? Then I have a second question.

This is Rich. I'll take it, and then Mark and Brian might want to say something. You know, over the past 20 years, you have seen an expansion of the national media platforms, first on cable TV and then on the web. So without question, there have been dollars over the past 20 years that have moved from local to national. That's a long-term trend. So what we focus on today is, what's the size of the uniquely local pie? You know, how big is that? How much share can we take, and how can we do that profitably? The uniquely local pie is still very large, and presents a significant opportunity. It may not be a great opportunity for as many players as we see in markets today, there may need to be some consolidation; but that uniquely local pie is still very attractive, and will continue to be even a pie that the nationals now target as they try to move local.

I'll take a crack at the local for the newspaper side. We've looked at the last couple of years, and we've tracked this for a number of years, the total pie of locally available ad dollars. In '07 and '08, for largely reasons of the economy shrinking for advertising, that pie has shrunk. Our share has been disproportionately hurt, because of our ability to have the classified stream of revenue which other media has not had. That said, we still command roughly 25% of the locally spent ad dollars in our markets and, as Rich mentioned, you know, we're uniquely positioned in terms of audience and our sales forces to take the maximum advantage of whatever the pie ends up being in the long run. But we do see that the economy is going to allow the total pie to bounce back in the last couple of years.

Hey, Scott, it's Brian. I know the question was motivated by newspaper, but I would tell you on the television side, we've actually had a pretty neat experience in the last year, year and-a-half. You know, with our core category showing the erosion that it did, it brought down our average unit rates, and allowed us to become a little bit more affordable than we've been in the past. As a result, we were able to target advertisers that in the past perceived television to be too expensive. And through a series of initiatives that we've put in place, we've had incredible success of getting out and tapping into new advertisers who we haven't done business with in the past. In fact in September alone across our ten television stations, we had 168 more local new advertisers on than last September.

Now our new business, which is clients who have never been on TV or haven't used our stations in over a year, now represent almost 18% of our total local billing. That is by far the highest we've ever seen. I think the people that got the chance to experiment in this environment have had very positive results, and I would expect that they will continue to be advertisers with us. So actually we're very excited about the future development of development of local advertisers into television.

That's interesting. Thank you.

My second question is on the TV side, because I guess the part that seems attractive to me is the cyclical bounce-back that you can get in TV, and in some ways your profitability will be more about TV in the future than newspapers, probably. But I guess to play devil's advocate, I'm wondering if I'm ABC or one of the networks, like, I would have never thought of selling my stations at the bottom. However, with things, you know, presumably recovering in the next couple years, and the credit markets obviously much better, I wonder if -- you know, we've all talked for ten years about do the networks switch over to a cable model? And I guess I'm wondering, Rich, specifically do you worry more about that over the coming five years than you did in the past? And specifically, I'm also thinking the Government probably wouldn't protest as much as I would have once thought, because they could probably use the spectrum and sell it off?

This is Rich. Over the next five years or so, we do not worry about that. It's still a model that, as we look at it and talk to the networks, it still works for both sides. They end up with a much larger audience, and we end up with a better business model. It still is a win-win.

Let me let Brian touch on it as well.

Yes, obviously I work closely with both NBC and ABC, and those conversations continue on a regular basis. I'm probably more convinced now than I was a year or two ago that the local part of the customer proposition of what we bring to the network, in terms of the local audience, the local marketing platform, as well as the local news coverage, which we've invested in so much in each of our markets, is what would continue to keep their brands thriving and relevant in each of the local markets. And so I do believe that the current network affiliate relationship will continue to exist, certainly in the next five years.

Thank you very much.

Thank you. Our next question comes from the line of Barry Lucas from Gabelli & Co. Please go ahead.

I've got a couple things. Maybe we can just stay on the TV side for just a second, because you're kind of in a unique position without much in the way of retransmission fees, so could you maybe talk about affiliation agreements? And I know ABC is in talks with several group owners, so how do you see Scripps evolving without retransmission as kind of a hot button in affiliation renewals?

A little bit of background for others on the call. This is Rich. Our retransmission consent rights to a large degree are tied up inside of agreements that we signed when we were still one company, and having a lot to do with affiliation agreements that we did for Scripps networks at the time. So when we separated the company into two pieces, a fair amount of that retransmission fee benefit stayed on the -- what is today the SNI side. Over time, we've regain that, and Brian can talk about some of the recent negotiations, but over time we also will have the opportunity for much more revenue for retransmission consent, but were held back in these early years.

Go ahead, Brian.

I really want to be careful what I say, because we're 90 days out from our current contract with ABC coming due, and so our conversations are ongoing with them, and so I would prefer not to say much about how those conversations are going or where I think they'll end up. I've, you know, certainly heard the discussions that other groups have had as it relates to their larger pots of retrans and the discussions they're having with the network. So we do have a little bit of a different profile as it relates to retrans, so that's shaping our discussions in an appropriate way. So, again, because we're actively involved in that, I would not want to say much more than that at this point.

Two others, if I may, then. On the newspaper side, if Naples is complete, you know, what do you get for the new plant in Naples, and with the understanding that there were physical limitations and storm damage and stuff like that? What else can you you do with Naples to drive an ROI on the investment?

Barry, this is Mark. For one, it allows us page capacity that we've never had, and color capacity that we've never had. That's kind of point number one. So from the reader's perspective, folks in Naples are going to get a much more vibrant, much more colorful, frankly much more flexibly put together newspaper.

Secondly, it does put us in the position to take on printing for either other regional publications or national publications, and we do think that there's going to be an extra revenue stream that comes with that. And we're having lots and lots of discussions at this point about that, and you know, I'll kind of wait to see how those developed before getting specific about that. But those are the two major benefits that we see out of Naples, Barry.

Barry, we also should say we still have a lot of long-term faith in Florida. As the economy recovers, people will recognize that Florida is on sale, that the housing values have come down an awful lot, there's great inventory on the market. As winter descends in New York and Vermont and Chicago and Ohio, and as people gain more confidence in their personal balance sheets, we really do feel that Florida will be one of those regions that's going to have a very, very nice bounce and a long recovery period. It's hard to see that at the moment. I mean, the economy out there is very difficult. But all of the attributes of Florida are still intact, and we're glad we're there.

Last question for Tim, if I may. With Naples put to bed, and CapEx goes down to the $20 million, $25 million dollar range, what are the other financial obligations? I think primarily of pensions, and the cash funding that you may have to do over the next several years?

That's -- hey, Barry, that's exactly one of our top priorities, is to make -- to the extent that we can, make voluntary contributions into the pension plan. So we're going to be balancing a lot of different things, you know, as we head into 2010, rolling up the budgets, looking at the cash flow forecasts, but we do have like a lot of companies an unfunded pension obligation that we need to close over time.

Our preference, if we have cash available, is to make voluntary contributions to the plan sooner rather than later, because we can carry back to prior years taxes paid, to the extent that we make those contributions, and they are for tax purposes an expense, we can fund those with $0.65 dollars, effectively. So we're looking at that. That's probably right up there on our list of what we would do with any excess cash that we generate.

Great. Thanks, Tim.

Thanks, Barry.

Our next question comes from the line of Alfred Anderson from Anderson Stanley LP. Please go ahead.

I have two questions. One's for Rich, and one's for Tim. The first one is, Rich, about Scripps 3.0, which was one of your key decisions. I think you said it was the second one, and it related to the market penetration advertising, and I was wondering if you could give us some more details about how Scripps 3.0 works?

Really Mark -- it's in the newspaper division, Mark's heading up the project. I'll let him give you just a little bit of an overview of what we're doing.

Alfred, just in general, the way that we're viewing all of our newspaper businesses has traditionally been 13 different markets, 13 different ways, 13 different structures, all with unique approaches. When you look at our business in general, it's very complicated today. For example, we've got 60-some thousand advertising rates across all of our businesses. Our attempt in this effort generally is to take each major function, advertising circulation, news, production, G&A, et cetera, and get standardization of practices in place so that we can get some advantage of scale, both from the the revenue side as well as the cost side. Hope that's helpful.

Mr Anderson, the other key part of the project is to allow people in the field to focus on the things that are most important to local markets. That's ad revenue, marketing and great content. And we think by doing this, we free them up to focus on what has the best return.

Okay. No, what I was really trying to get to is are you reducing at all the advertising departments locally at the newspapers, and centralizing that function to some extent?

What we're going to do is keep a keen eye on making sure that the feet on the street that we have, both in news and in advertising, stays healthy. Where we are going standardize will be in areas that a customer or reader don't see.

Second question was really for Tim, and it relates to the fourth quarter. I'm wondering if you've seen extraordinary items coming along that might have credited a charge to the balance sheets in regards to writedowns, pensions, tax or whatever?

Alfred, I don't foresee that in the fourth quarter. I think we've written down our goodwill to zero. So the answer would be no.

Thank you. That completes my questions. Thank you.

Nice to hear from you.

Thank you. And at this time, I'm showing no further questions. Speakers, please continue.

Cynthia, we appreciate your help this morning. We thank everyone for their interest and their attention. That'll wrap up the call. Thanks so much.

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