E W Scripps Co (SSP) 2010 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 participant lines are in a listen-only mode. Later there will be an opportunity for your questions. (Operator Instructions). As a reminder, today's conference call is being recorded. Digitized replay will be given at the conclusion of today's call. And I'd now like to turn the conference over to Tim King, Vice President of investor relations. Please go ahead, sir.

Thanks, Leah. Good morning, everyone, and thanks to everybody for joining us on the call. We're going to start this morning with Tim Stautberg. He's the Senior Vice President and Chief Financial Officer. He'll discuss the third-quarter financial and operational highlights, cover some non-operating data, and give you a little more color on trends for the benefit of your fourth-quarter models. Then you'll hear from Rich Boehne, our President and Chief Executive Officer. He'll talk more about the recent announcement regarding our new bank agreement and our share repurchase authorization and what those developments signal about our businesses for the long term. Then, as usual, we'll open up the phone lines for Q&A that will include Mark Contreras, who runs the newspaper division; Brian Lawlor, who's in charge of our TV stations; and Doug Lyons, our controller.

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. On page 11 of the 2009 Form 10-K you can read some of the factors that may cause results to differ from what you're about to hear. As a reminder, you can access a streaming audio replay of this call 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.

So with that, I will turn over to Tim Stautberg.

Thanks, Tim, and good morning, everyone. I'd like to start by wishing everyone a happy election day, or as we call it in the Scripps TV station group, Christmas in November. This is a bittersweet day for us, the end of a political season that started nearly a year ago, ebbed and flowed, but continued to an gain intensity up to and including today. The political ads helped our TV station groups report a year-over-year revenue gain in excess of 30% during the third quarter, which puts our performance among the best of the publicly-traded peer group. The strength of our TV station sales effort contributed to the second consecutive quarter of consolidated revenue improvement. It was encouraging in the second quarter to report that our total revenues rose 5%, the first time that consolidated revenue improved since the spinoff of Scripps Networks Interactive in June of 2008. In the third quarter we stretched that figure to a year-over-year consolidated revenue improvement of 8.6%. Our consolidated costs increased during the period, as well, but at a pace of less than 3%.

In the third quarter the Company reported a slight loss from continuing operations before taxes of $34,000 compared with the loss of $6.9 million in the 2009 quarter. Income from continuing operations, net of tax, was $5.4 million, or $0.08 per share, compared with a loss from continuing operations of $5.7 million, or $0.11 per share in the 2009 quarter. Now the tax benefit in 2010 was affected by an adjustment to the Company's estimated reserve for uncertain tax positions based upon the settlement of examinations of certain state and local tax returns during the quarter.

Let's turn now to the operations by starting with the TV stations, which continued their momentum by reporting a year-over-year revenue increase in the quarter of more than 30%. You would expect September revenues to be strong due to the influx of political ads that traditionally start after Labor Day, but the sales performance was strong throughout the quarter. All three months were marked by revenue gains in excess of 25%, with total local and national spot revenue, excluding political, up double digits for the quarter, reflecting the general health of nonpolitical categories that have rebounded from their 2009 lows.

Aside from political ads, automotive advertising led the way, as it has all year. The category was up 70%, as automakers provided marketing muscle to support their offerings and local dealers continue to find our stations to be effective partners for selling cars and trucks. Those of you who closely follow the Scripps story know that our most of our retrans consent rights are tied up for years to come in agreements reached before we spun off Scripps Networks Interactive. This means there is great upside in the long run, as old contracts roll off and new deals are negotiated in the coming years, but it also means our current retrans bucket is much smaller than that of our peers, with revenue in the third quarter of $3 million, or 66% higher than a year ago. Another small but growing piece of the pie is our online and mobile revenue on the TV station side, which surged 35% in the September quarter.

Year-over-year expenses in the TV division were up about 7%. We kept our employee costs essentially flat in the third quarter, but overall costs rose due in part to an accrual for expected payments to ABC for its programming. As you know, our affiliation agreement with the network expired in January, and we continue to negotiate with them for a new long-term agreement. As a result of our industry-leading efforts on the top line, TV segment profit was $17.7 million in the third quarter, almost six times what it was in 2009 and, more importantly, slightly ahead of the $17 million that we recorded in 2008.

Turning to newspapers, the division's revenues declined by 3.8%. That figure, which is in line with our guidance, is a slower rate than we've seen in a long time. Year-over-year ad revenue was down 12% in the first quarter, 7.7% in the second quarter, and in the third quarter it moderated slightly down 6.8%. Within advertising, the local and national categories were off about 10%, similar to what we experienced in the second quarter. Preprints actually were down only 2.7% in the most-recent quarter compared with a 7% decline in the second quarter. Peer pay -- pure play online advertising was up 7%, but because many of our online ads are tied to print classifieds, total online advertising was down 4.2% during the third quarter.

Classified advertising has been experiencing a recovery in two key categories and moderation in its overall rate of decline. Classified was down 18% in the first quarter, down 8.4% in the second quarter, and down 6.6% in the third quarter. Within classified, there were numbers that were so surprising that we called attention to them in our release. Real estate remained weak for us due to our exposure in the hard-hit markets of California and Florida, but automotive was actually up 6% year over year and help wanted ads rose 17% during the quarter. Let's hope that trend continues. It'll be good for our newspapers and good for the economies of our local markets.

In the third quarter, our reported circulation revenue increased 5.4% to $29 million, but I need to again remind you of the effective change in the nature of the business relationship between the Company and certain newspaper distributors in select markets. Excluding the effects of that change, which does not affect segment profit, circulation revenue in the third quarter was down 1%. Newspaper expenses were essentially flat at $94 million. Good control over employee costs more than offset the rising price of newsprint. As we mentioned on the second-quarter earnings call, the year-over-year comps for newsprint prices had worked in our favor of for several quarters but the inflection point came at the end of the second quarter when newsprint prices tipped higher than the prior year. For the third quarter the average price for newsprint was 30% higher than the prior-year period. As a result, the cost of newsprint and press supplies rose 11% despite a 9% decreased of newsprint consumption. Segment profit from our newspaper group was $6.6 million compared with $10.9 million in the year-ago period. With the sale this past summer of the United Media Licensing business, our third segment is now syndication and other. The components of this small segment, United Media's syndication business and other entities, such as Scripps Howard News Service, form a very small segment, which had $4.7 million in revenue in the quarter and a segment loss of $1 million.

Let's turn now to some nonoperating items. When we talked to you in August during our second-quarter earnings call, we discussed the fact that we had no debt and $140 million in cash on hand as a result of the sale of the United Media Licensing. We are still debt free and as of September 30 we had nearly $200 million in cash and short-term investments. That's and enviable position in this environment, although it's more cash on our balance sheet that we believe we need in the long run. It's also more cash than we envisioned under our secured revolving credit agreement, so we recently amended the agreement to reduce our fees and improve our financial flexibility. We also received board authorization to repurchase up to $75 million in Class A shares, which Rich will talk more about in a moment. Capital expenditures have dropped sharply after completion of the newspaper facility in Naples last year. In the third quarter CapEx totaled $4.5 million, bringing the year-to-date figure to $8.7 million, well south of our original full-year guidance of $20 million. We now expect total capital expenditures to be in the mid teens for the year.

I'll give you a little more now in the way of revenue and expense guidance for the fourth quarter. For newspapers, the rate of decline in advertising revenue is expected to moderate slightly, following the same pattern as in the third quarter. Total newspaper expenses are expected to rise slightly as a result of the higher newsprint prices, which were 20% lower last year than we're seeing today.

On the TV side, I'm proud to say that we're expecting another quarter of strong growth, fueled by record political spending. Two of our markets, Cleveland and West Palm Beach, are in the top ten markets in the country in terms of saturation of political ads. The guidance we've been giving all year is that political advertising in 2010 will match the figures in the low to mid $40 million range of 2006 and 2008. But just in the past week we surpassed our previous record and have now booked $48 million in political advertising this year, $28 million coming in the last 33 days. That's a heck of a lot easier to say than it is to do. Just a tremendous team effort across our TV station group and I know Brian Lawlor will have more to say about the effort of his team when we get to the Q&A. For the fourth quarter overall, we expect total TV advertising revenue growth of 35% to 40%, which should again put us at the top of our peer group. TV expenses in the fourth quarter expected to increase in the high single digits. Finally, corporate and shared services are expected to be about $8 million in the quarter.

With that, let me turn it over to Rich.

Thanks, Tim. Good morning, everybody. Tim just gave you all the details, I'm going to add just a little bit of context and then we'll take your questions. The rebound in television advertising is encouraging, especially the nonpolitical categories, which have been strengthening. The year-over-year comps will get tougher, obviously, but what's most important is that on an absolute basis we're back to pre- 2009 levels, back to the revenue levels our stations were booking before the painful resetting of the US economy began. If, indeed, we can then build revenue from here, local TV is an encouraging story, especially when you combine that organic recovery with our strategies to expand local audiences and improve the revenue we yield from those eyeballs.

Although none of us has enjoyed the adventures of the past 24 months in America, this difficult period has provided Scripps with a season of competitive opportunity. Because we are not faced with the same life-or-death financial pressures as some of our local competitors, we have been able to retool our stations and their newsrooms for both greater efficiency and long-term audience performance. I'm confident these modest strategic investments, made at a time when we have the greatest leverage, will yield very good returns in the years ahead.

On the newspaper side it's been a similar strategy. Instead of random expenses cuts, like furiously bailing water during an intense storm, we instead had the opportunity to reengineer the ship for smoother sailing over the long term. Now don't get me wrong. Ad revenues are still below the prior year, which is anything but sunny skies and gentle breezes, but after overhauling the entire newspaper operating system, putting the greatest emphasis and energy on content and ad sales, we're approaching a newspaper operating system that's dramatically more efficient and more opportunistic than the one that dominated the industry and largely defied the forces of evolution for 100 years. Here, again, there's much more to do, but we've made the very most of the recent economic crisis in America.

The opportunity to play offense in the past two years is the direct result of a full commitment to financial stability and flexibility. We made a series of very tough decisions, closing unprofitable operations and selling non-strategic assets and asking all employees to sacrifice. In essence, asking employees to make an investment in the Company's future right out of their paychecks. The result is an enviable balance sheet; no debt, cash in the bank, a well-funded pension plan, and now the opportunity to invest in the opportunities we know best through the repurchase of our own shares. Allocating up to $75 million to buy in shares is a very good way to return capital to those shareholders who choose to take it, and at the same time get a return on that cash.

In addition, we will continue to make investments in new and valuable products, audiences and revenue streams. At its core, this is an entrepreneurial enterprise and I cannot imagine a better environment for the well funded to build from within. This also is a perfect environment to remember what never changes at Scripps, a full commitment to doing well by doing good. Our overarching strategy is to capture an economic benefit by making communities better places to live and do business. We do that in a lot of ways, but always led by dedication to multimedia journalism and high-quality enterprising reporting that informs, engages, and empowers our markets from coast to coast. On this election day in 2010, and on the 132nd anniversary of the Company, it's hard to imagine a better place to be, a better place to do business, and a better place to build businesses than in a dynamic marketplace for ideas.

Thanks for joining us this morning and for your support of the Company. Leah, we're ready to take questions.

Thank you. (Operator Instructions). The first question's from the line of Craig Huber with Access 342. Please go ahead.

Yes, good morning, I'd like to start with television, if I could. You mentioned auto, I think, up 70%. What was the -- what percent of the total revenue in the quarter was that? Was that roughly 25%?

It was 17%, Craig.

17%. And then also, can you speak about your TV pacings after the election? How are those tracking?

Well, in terms of fourth quarter, obviously, once we get through the election and the $28 million that we've had, that should open the inventory for us to be able to concentrate on growing our core audiences. We do expect our local and national spot, exclusives of political, to be up, again, in the fourth quarter as it has been all year.

Do you mind if you quantify that, how the -- post today, rest of November, how December TV paces are looking, as well?

I think the pacing is still strong. One of the things you want to keep in mind is the recovery started last December, so after -- in 2009, after negative comps January through November, December was plus 11 in 2009. We do expect to see growth over that, but quite frankly, it's still early in the quarter to determine exactly where the month's going to finish for December.

Okay, and then if we could switch over to newspapers, a question I typically like to ask. How much of your advertising revenue decline came from pricing versus volume in the quarter over the average?

Craig, this is Mark, let me just give you the big buckets and then we can go from there. Again, this is full run ROP rates versus the entire revenue category, so it's a little bit of apples and oranges, but total local in the quarter was down 10.4%, total local full run rate was down 4%, so the difference was lineage.

And what about the national classified categories?

Classified revenue was down 6.6%, rate was down about 7% in the aggregate, and then national was -- let me just get you that real quick. National revenue was down about 10.6% and rate was down about 12%.

Okay. And then lastly, can you -- maybe I missed this, but your ad revenue declined by month in the quarter. How was that for each of the three months and how was October shaping up? Appreciate that.

The quarter actually was lumpy. We improved as we hit the last month in the quarter and we have some reason to believe that we will continue the improvement. Just keep in mind, our October has five Sundays in it, but even with -- even accounting for that change, we still think that we'll see some pretty hopeful improvement in October and hopefully that will carry through for November and December, based on where we ended September.

Do you have -- do you mind if you quantify that for the four months?

Probably not, we'll wait for the end of the quarter, Craig.

But July, August and September you don't have those ad revenue percent changes?

Not by month, I don't think. I think we report now by quarter.

Okay. All right, thank you.

Next we go to a question from a line of Edward Atorino with Benchmark. Please go ahead.

Yes, I want to get back to the TV side. So if you look at last-year's fourth quarter, $73 million with $3 million in political, and you take out pol -- so you're looking for growth in the core local and national business, even with political in there?

Hi, Ed, it's Brian. Yes, that's correct. I see local growing, national growing and, of course, we've got the political on top of that.

You are one of the few broadcasters that's been willing to make that kind of call. I hate to say why? Is it just the big markets have room for that type of business to come in the door?

I don't know if it's the big markets or just the opportunity. We, obviously, had record political, but quite frankly, it was driven by almost three markets; Florida Tampa, West Palm Tampa, and Cleveland. So that actually opened the door for us to maintain consistent core business in most of our other markets that were not deluged with the heavy political.

Got you. Okay, it's the markets. Yes, okay. And on the cost side, are you going to put any money back in the television group in addition to the continued accrual stuff, or do you need to add costs anywhere, or put some money back in, so to speak? Raises, bonuses --?

I think we're investing money in places that can increase the quality of our content, as well as increase the number of sellers on the street. Over the last 18 months we've been pretty disciplined in taking some permanent costs out. We've built some graphics in traffic hubs. We've implemented automation in several of our television stations. So I think a lot of our reinvestment in our product has come as a result of some of the efficiencies we've gained.

On the ABC accruals, do they end in 1Q 2011, or when will you know what you've got to pay?

We continue to negotiate with them. I'd say conversations have been -- continue and are productive and I'm hoping that in the near future we will be able to reach final agreement with them. So in a perfect world in fourth quarter we will reach agreement and therefore --

What would that mean for your 2011 costs versus 2010? Is it a small increase? Would they be down and you've got more investment to go? You lose Oprah at some point, which ought to save you a lot of money.

It will, that'll go away in September, and I think it's fair to say that whatever we pay the networks would probably not add up to what we will save with our Oprah reduction.

One last question on "visibility" on newspapers. Do you see anything beyond 4Q? Do you think January could have some retail carryover business? How do you look at the early part of 2011?

Ed, this is Mark. I can't remember ever being in an environment where there's so little visibility so I'm going to just beg off that one, if you don't mind.

No, don't mind at all, that's what the situation is.

Yes.

Thank you.

Next we go to the line of Barry Lucas with Gabelli & Co. Please go ahead.

Great, thank you and good morning. A couple of items here. Brian, could you talk about some of the other categories with auto up 70% and still just 17% of ad revenues, so what else is moving the needle?

Hey, Barry, let me also clarify that when I say it's 17% of our revenue that includes political, which was about 20% of our overall revenue. Beyond that, auto in terms of our core categories is actually are second largest and we have a category services that actually is a larger category, and that includes medical, financial, legal. That category was up 8% in the third quarter. Beyond that, retail was flat in the third quarter. So some of our biggest core categories are flat to up as we finish third quarter.

Okay. If we switch gears just a bit to the print side, we haven't heard much about either Hot Jobs or Yahoo and the switch to Monster. Can you talk about that relationship, how it's changed and how it is likely to change going forward?

Barry, it's Mark. We are literally -- last week, I think, was our first week with the Monster folks. They are in the middle of a transition with Yahoo and the Hot Jobs folks and so I think probably next quarter we'll be able to see. I will tell you the early read from our folks working with the Monster people is that they're very focused and we have some reasonable hope that we'll be able to actually generate more revenue with Monster than we did with Hot Jobs, but that's a very preliminary statement at this point. But we're literally right in the middle of the transition and we'll have more for you when we -- once we're up and going.

Well, a quickies, if I may, one on the repurchase authorization. How aggressive do you think you might be, Tim?

Barry, it's Tim. I'm just not going to comment on aggressiveness. We put out a release that told you the board authorized us to repurchase up to 75 million shares and the timing of that and the method of that we're going to just remain flexible on. We're looking at it as an investment and so looking at the intrinsic value of the business and what we can buy in shares at and it's pretty much as simple as that. I don't think we would get so aggressive as to make a poor investment choice.

Last area, maybe for Rich, bigger picture. What is your business going to look like two, three years down the road, to your best guess, and what opportunities are there looking around the landscape, either to broaden or deepen the business?

Hey, Barry, it's Rich. Well, I guess probably most telling is that what we've chosen to do is build up our balance sheet so that we have maximum flexibility. We want to continue to be very opportunistic. Obviously, we've decided to make an investment in the assets that we already have in markets where we think there's an opportunity through our own shares. And then beyond that, like I said, very opportunistic. Obviously, you've not seen us, even though we have some flexibility, be in there an aggressive buyer of more TV stations and more newspapers. You've been around us a long time. We try to be very, very conservative value investors and make sure we're going to get a very good cash return, so we've been cautious the last couple years. But I guess most important is that we believe financial flexibility gives us the opportunity to be opportunistic going forward.

We are still putting money -- you don't see a lot it, it's a lot of it -- not a lot of it because we've been very careful investing in our current operations. Brian talked a lot about what we've done to retool the stations (inaudible) 3.0 project, but that has not -- thankfully that has not consumed a lot of cash, although we think it'll have a very good return. Bottom line, Barry, I think you're in a very interesting moment in the news business and in these industries, and what we want to do is have maximum flexibility so that we have that opportunity to reach into the chaos and make good investments and show a very good return over the long term. But exactly what we might look like two or three years from now I think is very hard to say.

Okay, thank you.

(Operator Instructions). We go to the line of Alexia Quadrani with JPMorgan. Please go ahead.

Thanks. This is [Tom Zembarkles] for Alexia with a few questions. First, in the TV business your core advertising growth is clearly very strong, though a bit slower from Q2. How much of that would you attribute to displacement by political ad dollars?

I'd say a fair amount of that, Tom -- it's Brian. We had tripled the political advertising in the third quarter, as we had in the second quarter, and we had almost none in first quarter, and as we grew to $7.5 million in political in September that resulted in a fair amount of displacement. So it clearly had an impact, but not overly dramatic.

And can you talk about performance by geography in the core business? Is Florida a big point of weakness on the TV side, as well?

Well, it's hard to say because the political in Florida has just been wild. And so if you look at third quarter for our two markets including political, the West Palm Beach market in third quarter in total ad revenue for the television business was up 49% and Tampa was up 33%. And so obviously, that's going to have a pretty dramatic impact on the core business. But even if you pull out the political, both Tampa and West Palm's spot business, of the core categories also increased in third quarter. So I think we feel pretty good about Florida and we're looking forward to -- we've enjoyed the political dollars, but we're looking forward to getting back and serving our core advertisers.

Looking out of it further into 2011, just in the overall Company, can you give any sense on your cost outlook for areas, such as newsprint pricing and employee comp, some of the headwinds and opportunities you see?

You want to do newsprint pricing and --?

We think -- this is Mark -- we'll probably experience a few more single-digit increases in newsprint pricing as we go through the year. The markets are still different east to west and it's -- but we're baking into our plans that we'll experience a slight increase next year in newsprint. I don't about employee costs, if you guys want to add more.

For next year?

Employee costs for next year.

(inaudible) We're just starting into the budgeting process, and we'll be finishing up, at least a first look, by the time we get to New York for the December investor conferences, so it's probably premature to give specific guidance on 2011.

Got it, thanks, and one final. Can you say whether you've started buying back any stock yet?

We report on a quarterly basis if we've had any activity, at the end of the quarter.

Okay, thanks a lot.

Yes.

And we have a follow-up question from the line of Craig Huber from Access 342. Please go ahead.

Yes, my first follow up, please. You have these $3 million, $3.5 million dollar restructuring charges each of the first three quarters this year, are you expecting to do that again here in the fourth quarter? If so, what areas are you targeting?

Hey, Craig, it's Tim. That's probably a decent amount and most of the dollars today that are going through restructuring are for systems implementations, where we're sourcing our finance and accounting functions and putting in new revenue front end and editorial systems as part of 3.0, but I think those are going to tail off in 2011.

Okay, and the this small -- but it's a very small category, syndication and other, I'll call these small but annoying $0 to $1 million loss quarterly here. Is there anything you feel you can do in that segment here to get that thing at least break-even on a go-forward basis, or anything you can shut down here, or anything?

Craig, it's Rich. Not on the shutdown. There are a whole bunch of different things that are in that segment. Syndication by itself is a good chunk of revenue. It's a small business. We will get that, we believe, to break-even. The other pieces in there, are the Scripps Howard News Service, for an example, and although you see some of the costs there, the revenue shows up in other places because the content is use in the newspapers and the TV division. But in general, sure, we don't want to show loss in that segment and we'll do what we can, all the way down through those various pieces, to get to break-even or better.

That's your goal, you're saying for 2011 to get to break-even?

By the end of 2011. It's more annoying than it is a concern for us. These are important businesses for Scripps. We're sorry if they're annoying to you, but yes, we'll do our best to manage them efficiently, but they were -- they've always been there, they've just been part of what was a bigger segment at the time.

Also, did I hear you right, perhaps these expected added costs here for the ABC contract for programming, you don't think that will be so large offsetting the program cost savings once Oprah falls off on a net basis?

I think on an annualized basis, I think that's correct.

And that also takes into account the programming that you end up replacing Oprah with? I assume the revenues would probably be lower -- net all that together, all three pieces the revenues with replacement versus the Oprah cost saving versus the ABC extra payments, net-net you think you can come out ahead?

Yes, Craig, I think that's accurate.

Okay, great. Thank you.

And we have a question from the line of Aaron Rosen from Archview. Please go ahead.

Good morning, everyone, thanks for taking the question. I just had a question on Scripps 3.0 and as you've gotten into it, just kind of the effects that your seeing thus far, and we got the sense the margin opportunity was pretty dramatic and that you were spending a great deal of time on it. Just if you can give us any commentary as you look forward?

Aaron, this is Mark. In general, where we've seen real immediate benefits have been both in the cost and on revenue side. In some of the areas related to production and transportation we've been able to take significant -- move significant risk off our sheets to focus primarily on content and sales. We've also been able to generate new revenue streams in search and in several other online categories, but do it across the board, and we've got plans for next year to generate two or three similar pots of revenue that didn't exist in 2010 and we would, again, be doing those in most of our markets in concert. So it is still a work in progress, I guess is the best way to characterize it, but the goal here is to create an organization that focuses very clearly on content and sales and leverages the ability to do it across 13 markets, in addition with partnership -- in partnership with other organizations, as well.

Okay, and if I could just follow up just on the cash balance. We congratulate the Company on the share buyback, I think that's great news. As we look forward to the fourth quarter, it seems that even with the tax payment there will still be cash generated and that the cash balance at the end of the year will be even higher than where it is today and then the Company should be cash generative again next year. How do you think about the $75 million in the context of, again, your cash balance increasing in the fourth quarter and again next year?

Aaron, it's Tim. We do have an expected payment to the IRS to settle tax liability that we estimate for 2010 -- not to settle, but to make an estimated payment for 2010, so I think we are planning to send another $15 million to $20 million to the IRS in the fourth quarter. So I assume we'll probably be around $200 million at the end of the quarter, but I'm not sure that it's going to be significantly higher than that and we'll see how 2011 turns out. Clearly, we're not going to have the kind of political revenue that we enjoyed this year. We're going to continue to work hard on the newspaper business, but we should be still in a very strong position financially and that'll give us the flexibility to decide how we want to allocate that capital. It's not burning a hole in our pocket. We're being very thoughtful about how we allocate that and to the extent that we return it to the shareholders through share repurchase that seems to make sense to us. But, again, we're not doing anything with an overly heightened sense of urgency here.

Right, okay. And then just finally, on CapEx, can you give us any thoughts on next year whether that number, the $15 million number we'll see this year will decline?

We're still in the midst of the budgeting process, so it's probably too early to be too specific, but I don't think it'll be significantly higher than that number. I don't see any big projects coming.

Okay, thank you.

Thanks, Aaron.

And there are no further questions. You may continue.

Well, Leah, we appreciate your help this morning and thanks to everyone else for joining us on the call. Take care.

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