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Belo Corporation (NYSE:BLC)

Q3 2008 Earnings Call Transcript

November 3, 2008, 2:00 pm ET

Executives

Paul Fry – VP, IR and Corporate Communications

Dunia Shive – President and CEO

Dennis Williamson – EVP and CFO

Analysts

Lee Westerfield – BMO Capital Markets

Peter Appert – Goldman Sachs

Barry Lucas – Gabelli & Company

Steve Flynn – Morgan Stanley

Edward Atorino – Benchmark Company

Harry DeMott – King Street Capital

Operator

Ladies and gentlemen, welcome to Belo's 2008 third quarter earnings call. At this time, all participants are in a listen-only mode, and later we will conduct a question-and-answer session with instructions being given at that time. (Operator instructions) As a reminder, this conference is being recorded.

With us today we have Mr. Paul Fry, Vice President, Investor Relations and Ms. Dunia Shive, President and CEO; and Mr. Dennis Williamson, Executive Vice President and CFO.

At this time I will turn it over to Mr. Paul Fry.

Paul Fry

Thank you, Laurie, and good afternoon. Welcome to Belo's third quarter conference call. We issued two press releases today, one announcing the company's third quarter 2008 earnings and another announcing the company's funding the retirement of its $350 million, 8% senior notes due November 1st. These releases have been posted to our Web site at Belo.com.

Today's call will include comments from Dunia Shive, Belo's President and CEO; and Dennis Williamson, Executive Vice President and Chief Financial Officer. Before Dunia begins her remarks, let me note that our discussion will include forward-looking statements.

Forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those statements. Additional information about these factors are detailed in the company's press release and public filings with the SEC including the annual report on Form 10-K.

Also, reconciliations of non-GAAP financial measures discussed during this conference call to the most directly comparable financial measures presented in accordance with GAAP, including the reasons we believe the non-GAAP financial measures provide useful supplemental information for investors are posted at Belo.com under Investor Relations.

Now I am pleased to turn the call over to Dunia.

Dunia Shive

Thank you, Paul. Belo's third quarter results were impacted by worsening economic conditions that led to a total revenue decline of 6.4% as declined in Belo's core local and national spot business and displaced revenue for hurricanes Ike and Gustav offset third quarter incremental gains from political and Olympics revenue.

As I just mentioned third quarter results were also negatively impacted by the hurricanes which hit our Houston and New Orleans markets respectively. We are proud of the hard work and dedication demonstrated by our employees during their coverage of the hurricanes.

Tireless work of our crews at KHOU-TV in Houston and WWL-TV in New Orleans along with assistance provided by Belo employees across the country provided important breaking news and emergency information that was an invaluable public service to our viewers and online users.

The financial impact related to the hurricanes totaled approximately $3.5 million, including an estimated $2.6 million in advertising revenue displaced due to continuous news coverage and lower audience levels stemming from lengthy power outages.

Excluding the effects of the hurricanes and spin-off related costs from the third quarter of 2007, the company's earnings from operations decreased to 3.4% largely due to expense reductions. Since we cannot predict the duration of the current economic downturn we are responding with an intense focus on cost reduction while maintaining the journalistic standards and competitive positions of our operating companies.

Actions taken to-date include the freezing of open positions companywide, staff reductions in certain markets and other cost saving measures. As a result, corporate and station expenses for the third quarter of 2008 are 5% less than the third quarter of 2007. Employment levels at our company are also about 5% lower than at December 31st, 2007.

Third quarter Internet advertising revenue from Belo's Web sites grew 18% to $7.9 million and represents 4.6% of total revenue, up from 3.7% in the third quarter of 2007. Automotive classified Internet revenue mostly associated with cars.com was up 14% in the third quarter. Banners and sponsorship advertising revenue was up 29%. And revenue associated with video stream served on our sites grew 58% in the third quarter. Belo's Internet audiences continued to grow in the third quarter with the number of unique users increasing 52%. Page views increased 42%, and video stream requests grew 95% in the third quarter of 2008.

Retransmission revenues totaled $8.4 million in the third quarter of 2008, a 41% increase compared to the prior year. The increase is due to recently completed agreements, contractual growth rates included in existing agreements, the full-year impact of negotiations completed last year and the continued growth in subscribers across cable, satellite and telecom distribution systems.

The company expects to generate more than $31 million in retransmission revenue for full-year 2008, up from approximately $23 million in 2007. Belo television stations enjoyed strong performances once again in the July ratings period finishing number one or number two sign on to sign off in 12 of 15 Nielsen rated markets.

We often talk about Belo's market leading television stations and the attractive growth markets they serve. According to the latest Nielsen DMA market rankings released in August, five of Belo's television markets improved their market rank, which is based on television households.

As a result, 11 of Belo's 15 markets are now ranked in the top 50. Also significant when you combine all of Belo's television markets the number of television households grew 2.3% according to Nielsen, 53% higher than the 1.5% national average.

We are obviously disappointed in the recent performance of our stock price and we do not think it reflects the appropriate value of the great assets we operate. We believe much of the recent performance is due to investor unease about the economy and financial markets as a whole along with sector concerns related to the downturn in the automotive industry and the general impact on advertising based companies during times of recession.

Everyone understands this is not business as usual, and that it will take time for the economy and investor confidence to recover. We are going to continue to operate these businesses as efficiently and aggressively as possible to maximize our competitive advantages. And we will evaluate everything we do against value to the company.

We are challenging our sales team to develop new and innovative ways to generate revenue while focusing intensely on cost reduction measures. We are also going to continue our focus on maintaining a strong balance sheet. In that regard I am pleased to announce that today Belo funded the retirement of $350 million in 8% senior notes due November 1st 2008, with funds drawn from its credit facilities.

The Company's credit facility currently has a lower interest rate than the 8% note. In addition, the company reduced its debt by $42 million using cash generated from operations in the third quarter and reduced debt even further in October.

Now Dennis will provide further details about our third quarter results. Dennis?

Dennis Williamson

Thanks, Dunia. Belo today reported third quarter earnings per share from continuing operations of $0.14 compared to $0.15 in the third quarter of 2007. Earnings per share from continuing operations for the third quarter of 2007 exclude the results of Belo's former newspaper businesses and related assets which were spun off on February 8, 2008. Those results are included as discontinued operations and total $0.03 per share for the third quarter of 2007.

Total revenues were $171 million in the third quarter, and represented a 6.4% decrease versus the third quarter of 2007. Total spot revenue including political was down 8.8% with local spot down 13% and national spot down 18%. Excluding the $2.6 million in displaced revenue due to hurricanes Ike and Gustav, total revenue decreased 4.9% and total spot revenue including political decreased 7.2%. Approximately, one-half of the 4.9% total revenue decline came from the company's stations in Phoenix, as that market continues to experience significant economic issues related to the current housing crisis.

Third quarter 2008 revenues were also affected by a weak national advertising environment, particularly in the automotive category which was down 26%. We also noted softness in several other categories, including retail, entertainment, real estate, financial services, education, restaurants, and telecommunications. While the consumer services, professional services, travel and tourism and healthcare categories were all up over last year.

Third quarter Olympic revenue totaled $9.7 million. Political revenues in the third quarter were $11.7 million, up $8.4 million over the third quarter of 2007. Markets experiencing the most political revenue included Portland, Seattle, Tacoma, New Orleans, St. Louis, and Charlotte. We had very little presidential dollars in Texas and Arizona, which includes three of our largest markets because they were not considered battleground states by either candidate.

Total station expenses decreased 2.4% in the third quarter versus the same period last year due primarily to the freezing of open positions companywide, staff reductions in certain markets and other cost-saving measures.

Station expenses decreased 3.2% in the third quarter of 2008 when excluding the effects of the one-time costs related to hurricanes Ike and Gustav which totaled almost $1 million. Station EBITDA for the third quarter of 2008 was down 13% versus the third quarter of 2007 and down 7.6% when excluding the effects of hurricanes Ike and Gustav.

Despite the current economic climate, the station EBITDA margin for the third quarter of 2008 was 36.1% and 37.6% again when excluding the effects of the hurricane. Corporate operating costs were $6 million in the third quarter of 2008 as compared to $8.4 million in the third quarter of 2007, a decrease of 29%.

The decrease in corporate costs and expenses was due primarily to lower share-based compensation, lower bonus expense and other cost saving measures. Third quarter 2008 combined station and corporate operating costs declined 4.3% or 5% when excluding the one-time effects of the hurricane. The company's earnings from operations decreased 5.1% or 3.4% again when excluding the effects of the hurricanes and the spin-off related costs from the third quarter of 2007.

Depreciation and amortization expense totaled $11 million in the third quarter of 2008, a 9.6% decrease from the third quarter of 2007. Interest expense decreased $2.4 million or 10% in the third quarter of 2008.

Income tax expense decreased $100,000 or 1.3% in the third quarter of 2008 compared to the third quarter of 2007 due primarily to lower pretax earnings. Belo's effective tax rate for full-year 2008 is expected to be around 39% excluding the one-time tax charge of $18.2 million recorded in the first quarter of 2008 and related to the transfer of certain intangibles in connection with the spin-off.

Turning to the balance sheet, total debt was $1.138 billion as of September 30th, a reduction of $42 million from June 30, as Dunia previously mentioned. Since September 30th, the company has paid down an additional $33 million in debt. The company's leverage and interest coverage ratios as defined in the company's credit facility were 4.4 times and 3.0 times respectively as of September 30th.

The company invested $3.6 million in capital expenditures in the third quarter bringing year-to-date expenditures to $20 million. The company expects to invest approximately $25 million in capital expenditures for the year.

And now I will turn the call back over to Dunia to comment on the fourth quarter.

Dunia Shive

Thank you, Dennis. The worsening economic conditions and national credit crisis have impacted financial and banking institutions unlike anything we have ever seen in modern times. The lack of consumer confidence and continued weak economic indicators point to a prolonged soft advertising environment. Current pacing trends indicate an 8% decline in total revenue in the fourth quarter. We expect political revenues to finish around $36 million in the fourth quarter of 2008 and around $56 million for the year.

Because of these extraordinary market conditions we will continue to focus on cost reduction and debt pay down for the foreseeable future. We expect year-over-year fourth quarter station expense declines similar to what we experienced in the second and third quarters of this year.

Full-year 2008 corporate operating costs exclusive of spin-off charges are projected to be approximately $32 million, down from our previous guidance of $36 million, a decrease of 21% from pro forma 2007 corporate operating expenses.

We'll provide an update on the company's fourth quarter outlook at the UBS Conference in New York on December 9.

This concludes our formal remarks and now we'll be glad to take your questions.

Question-and-Answer Session

Operator

(Operator instructions) And our first question is from the line of Lee Westerfield with BMO Capital Markets. Please go ahead.

Lee Westerfield – BMO Capital Markets

Thank you. Three questions if I may. Dunia, Dennis, first one will relate to retransmission fees and I want to ask two parts there. First, what still lies in store for 2009 and 2010, how complete are we, and are there escalators on your current agreements that we can look to, to build upon the base that you have set for 2008? The second question relates to political and Olympic advertising, which is always tricky for all of us to understand how much of that is incremental versus a substitute for otherwise saleable inventory especially given the downdraft in auto and maybe even retail too. So the question obviously here relates to how do we look into 2009? How do you think about 2009 in terms of a replacement of some of the political and Olympic dollars? And the third part, Dennis, if you can update us, I never thought I would be asking you, but truly your debt covenants I think stepped down to 5.0 times in 2009. And given where we are in the ad cycle I'm not seeing that yet as a threat but it is a something I have got at least one eye on. And so if you can talk about your debt covenants in 2009.

Dunia Shive

Lee, let me start with retrans. With respect to 2009, we do have one of our large cable providers that we are negotiating with now that expires at the end of the year, that is Charter. As you know, we completed Comcast earlier in the year and we completed Cox last year. Our Time Warner negotiations come up in 2010. With respect to our agreements, yes, most of them do contain some form of escalator for the out years.

On political and Olympics, it's a good question with respect to what you can call incremental, but I think it's important that I tell you with respect to Olympics at least for us, I don't see any of that as having been incremental this year. We did do $9.7 million in Olympics, but in a low demand environment, it's really more of a replacement of spot than incremental money. In other words, I would say that advertisers did not increase their budgets for Olympics; they just reallocated existing budgets to Olympics, which benefited NBC affiliates, and benefited ours, of course, but it made it harder for the others. We had 11 markets where we were up against the Olympics; we do have four NBC markets. So that to me was not incremental money particularly in this very soft advertising environment.

Political, that's another one that is hard to try to gauge with respect to what's incremental. Again, when you are dealing with a low demand environment because that obviously has an effect on rates, I would say that through the first nine months of the year, our political was probably below what our expectations were, but October, and the first couple days of November have been much greater than what our expectations were. So I wouldn't say that there was a tremendous amount of displacement although there might have been some. As you got into September, there is probably a little bit more in October, not November, because there is not enough time, but I don't think that you can say that political was as incremental as it's been in the past because of the underlying soft demand environment in the core business.

And with respect to the covenants, Lee, our leverage covenant right now is 5.75 times through the end of the year. It does go to 5 times on January 1st, which means you would need to be at 5 times or below on a trailing four quarter basis as of March 31, 2009. As Dennis pointed out in his remarks we are at 4.4 times now. The interest coverage goes to 2.5 times over the same time period. We are working on our 2009 budgets now, and debt to cash flow ratio will be an obvious focus area for us. It's really mostly about revenue at this point depending on what happens in the revenue environment in the first quarter.

I do believe if we had to make some kind of modification at some point that we would be able to do so. We have got great assets, we are not overlevered and I believe we will have the support of the bank group because our leverage profile relative to the sector is attractive. And let's keep in mind too, even today's tumultuous environment, we are generating earnings, we are generating cash and we're paying down debt. Certainly, there will be a cost if we got to that point, but at this point, we are working diligently on our plans for 2009. Did that address your question?

Lee Westerfield – BMO Capital Markets

It does. Thank you very much.

Dunia Shive

Thank you, Lee.

Operator

Our next question from the line of Peter Appert with Goldman Sachs.

Peter Appert – Goldman Sachs

Thank you. Can you remind us what the composition of the retrans fees is currently in term of cash versus noncash?

Dunia Shive

The numbers that we are giving you, Peter, I'm having a little difficulty hearing you but the numbers that we gave in our report are all cash.

Peter Appert – Goldman Sachs

All cash? Okay.

Dunia Shive

Sure.

Peter Appert – Goldman Sachs

And what does it show up in the income statement then?

Dunia Shive

Let me look at the line item. It is in other revenue. Let me say specifically.

Peter Appert – Goldman Sachs

It falls in other revenue, okay.

Dunia Shive

Yes, it would be in other revenue.

Peter Appert – Goldman Sachs

What else is in other revenue?

Dennis Williamson

You have network compensation, you have barter and trade advertising, retrans.

Peter Appert – Goldman Sachs

Okay.

Dennis Williamson

Production and some modest other revenues.

Peter Appert – Goldman Sachs

Okay. Good enough. Can you remind us, Dennis, how big is auto as a percent of revenue, and then also related to that could you give us any color on other specific categories where you are seeing either positive or negative developments?

Dennis Williamson

Yes, Peter, automotive is generally between 23% and 25% for the group. It fluctuates station by station, market to market, but generally that's a pretty good percentage. That's as of 90% of our revenues are spot generated. So that's about 23% to 25% of that 90%.

Peter Appert – Goldman Sachs

Yes.

Dennis Williamson

Again, we did see some softness in telecom. Obviously, home improvement, anything with home building we saw weakness and we saw some weakness in retail. That's reflective of the current economy that we're in. We did see upticks in travel. I mentioned a couple in the script as well.

Dunia Shive

Health care.

Dennis Williamson

Healthcare was up, and consumer services, but I would tell you there were more revenue categories down than up. Obviously we had a down quarter year-over-year and that was pretty well distributed across almost all of the revenue categories. Again, I would say that a few categories whether up or more exceptions rather than the low.

Dunia Shive

Certainly, none were down to the magnitude of automotive.

Dennis Williamson

Automotive was the worst.

Peter Appert – Goldman Sachs

Okay. And then the last thing, on the programming costs, you guys have done a great job in terms of managing those expenses over the years. Is there anything specific we should be looking for over the next 12 months or 24 months on the programming cost side in terms of renewals, et cetera that are coming up?

Dennis Williamson

No, we are pretty well renewed. I think you are probably going the see programming expenses in the low-to-mid single digit at most.

Peter Appert – Goldman Sachs

Okay. So in terms of where you have got flexibility on the cost side it pretty much has to come from the staffing side at this point?

Dunia Shive

Peter, if you think about the cost structure of the company, well over half of our costs are compensation and benefits related. Programming is anywhere from 17% to 18%. And then you got the other 30% or so in all other expenses, half of which are contractually, think about Nielsen, and outside solicitation, those kinds of things.

Peter Appert – Goldman Sachs

Yes.

Dunia Shive

Obviously, our biggest costs are assigned to people. So if you are looking at expense, where we have to go in the future, obviously, we have tried to be aggressive on that side, we've been holding vacancies, we have, also on our corporate side, we've been holding vacancies as well. So we will continue to look at that line and see what other levers that allow for us to pull to reduce expenses as we go into 2009.

Peter Appert – Goldman Sachs

Great. Thank you.

Dunia Shive

Thank you.

Operator

Our next question from the line of Barry Lucas with Gabelli & Company. Please go ahead.

Barry Lucas – Gabelli & Company

Hi, Dunia,.

Dunia Shive

Hi, Barry.

Barry Lucas – Gabelli & Company

Thanks for taking the call.

Dunia Shive

Sure.

Barry Lucas – Gabelli & Company

Question about Phoenix, by my count it looks like station revenues there have to be down 25%, 30%. How are you doing versus the market? In other words are you holding revenue share in Phoenix?

Dunia Shive

Sure. Our Phoenix revenues were down more so, obviously, than the others, I'd say it's probably closer to 20%. Through the first half of the year we had – I think we had performed on a relative basis pretty close to where the market was. In the third quarter we did not. We obviously had some work to do in Phoenix, but I would tie most of what we saw to market conditions, but we did lose a little bit of share there in the third quarter. Now part of that is the Olympics were on the NBC affiliate, so certainly that attributes some of the share decline to our station, as in a very soft environment like Phoenix to the extent they were advertising dollars spent, and availability and the Olympics, those dollars went to Olympics. So that hurt us disproportionately in the third quarter. I think that's one of the reasons why we didn't perform on a share level where we would expect. There is also very little political in Phoenix, but that would have affected the other stations as well. Obviously, with McCain being from Arizona, a state that was going to be a swing state a year ago was not, but that would have been one of the issues we share because that would have affected everyone in the same way.

Barry Lucas – Gabelli & Company

Okay. Thanks. But one more quick one. You expressed some disappointment with the stock price. Given the comments on debt leverage and that situation, what you do about it?

Dunia Shive

With respect to stock price?

Barry Lucas – Gabelli & Company

Yes.

Dunia Shive

I think part of the issue we have right now is what's happening in the economy. I don't – when you look at our performance at least on a year-to-date basis, with respect to how we perform from a margin point of view, we are performing at least as well as the rest of the group, we have great franchises but I can't – what I can't do is control some of the selling that's going on in the marketplace. As you have funds, having to liquidate for redemptions and the fact that we have a difficult advertising environment in '09 is not just for us, it's for everyone to deal with next year. But with respect to being able to do anything in this market that would move the needle dramatically, that – it's a good question. I'm not sure any of us could tell you what the answer to that is in this market.

Barry Lucas – Gabelli & Company

Thank you.

Dunia Shive

If you look at individual television you can take several of our television stations and look at the cash flow that they generate and put a depressed multiple against them and those individual stations would trade more at the collective equity value that our company is trading at today. It doesn't make any sense to us.

Barry Lucas – Gabelli & Company

Thanks.

Dunia Shive

Thank you, Barry.

Operator

And we have a question from the line of Steve Flynn with Morgan Stanley. Please go ahead.

Steve Flynn – Morgan Stanley

Hi, good afternoon. I just want to follow-up on an earlier question regarding the bank covenant. When you negotiate with banks what could you offer them, is there a potential to offer them liens or some fairy [ph] guarantees, any noncore assets maybe to sell, or can you just comment on the sustainability of the dividend?

Dunia Shive

With respect to the dividend, when you look at the size of our dividend today relative to the overall structure it's not large, the yield is obviously high because of what's happening with the current stock price, any changes to the dividend obviously would be the prerogative of the board, but we have the liquidity to support the dividend we have today. With respect to the bank though, in terms of whether or not we had to even have to have that conversation, we haven't had the conversation yet, we are working diligently to put together the best plan that we can for 2009. We have an unsecured facility right now. Our goal would be to continue to have an unsecured facility, but certainly there are things that if we got to that point that the banks would want, but I think most of it would be tied to pricing. We have a very attractive price in our credit agreement today and our current rating we have a ratings written in our agreement. We are paying LIBOR plus 87.5 basis points. So I think it would – this is just speculating, but I think it would be more in terms of what the cost of the agreement is versus very specific restrictive covenants. We do have some restrictive covenants in the agreement today. We are restricted into how great the dividend can be and also restricted in terms of share repurchase today. So some of those restrictions already exist.

Steve Flynn – Morgan Stanley

Okay. Great. Thank you.

Dunia Shive

Thank you.

Operator

And our next question from the line of Edward Atorino with Benchmark Company. Please go ahead.

Edward Atorino – Benchmark Company

Hi, good afternoon. Theoretical question. Obviously, the economic and credit conditions are hurting the economy. To what extent does it – is it credit or I've heard or spoken to other people where advertisers are simply sitting on their cash rather than spend money because the fear is they are going to run out of cash. Is this sort of an artificial additional depressant in the market or is it just wrapped into the overall disastrous environment?

Dunia Shive

I think it certainly a factor. Let's think about automotive for a minute. We have dealers that will tell us that they have people that come in, want to buy cars, but they can't get a loan to buy the cars. That certainly has an impact. When you think about real estate, the same things are true, for people who do want to buy a home in this market it's very difficult even with good credit scores to get the types of loans that people have been able to get in the past. So I think until we see a little bit more, we've seen the word “thawing” used, the thawing in the financial markets with respect to credit to consumers who do have the wherewithal to meet their obligations for cars and homes and other consumer goods, back to the retail category, I think that we're going to continue to see softness in the environment and advertising, not advertising until they can move their product.

Edward Atorino – Benchmark Company

Does that probably wishful thinking, does that suggest there's maybe a potential rebound as money loosens up, or is it too late in the year for that to happen?

Dunia Shive

I think you are really looking into '09 for that to happen. I think right now for me to say that that can have any major impact on 2008, I just don't see that at this point.

Edward Atorino – Benchmark Company

Yes, thanks a lot.

Operator

(Operator instructions) We will go to the line of Harry DeMott with King Street Capital. Please go ahead.

Harry DeMott – King Street Capital

Hey, there.

Dunia Shive

Hi.

Harry DeMott – King Street Capital

Thank you for taking the question. A lot of them got answered before, but one of the things, one of the guys who works with me here was saying that if you go through the fourth quarter numbers and you sort of take out the political and all rest of the stuff, sort of the other one-time items it looks like you're probably pacing down on sort of the core advertising, 20% plus. Is that a fair statement?

Dunia Shive

I think it's fair. I think it's closer to the 20% mark, I think it's also consistent with what you have heard from other broadcasters who already had their analysts calls for the most part.

Harry DeMott – King Street Capital

Right. So if you then sort of extrapolate from that and just say okay, that's what it is right now in the fourth quarter and then you go back to some of the debt covenant questions it looks like your EBITDA would have to be down somewhere in the mid teens for you to trip your five times covenant as you roll forward. So it would have to go from where you are today down I don't know 12%, 13%, 14% somewhat and then you would kind of hit that even with some debt pay down. So if you take a look at that, and you look at the revenue line now and the fact that it's obviously clear from listening to all of the calls and you are right in the business on a day-to-day basis no one has any clue what the revenue is going to be next year. You hope for the best but you plan for the worst I guess. So you have talked a lot about the facility. Have you actually had conversations with your bank group yet about this?

Dunia Shive

Very preliminary, just not specifically on this topic, but just as we had conversations in conjunction with paying down, drawing down on a facility to pay down the note.

Dennis Williamson

More so on the notes than anything else.

Harry DeMott – King Street Capital

Right. You haven't actually gone to see what their appetite is for whether they want to actually secure you or they just want you to pay the LIBOR plus 250 or something like that?

Dunia Shive

No, we haven't had, we haven't had that specific conversation yet. We are, as I mentioned we are working very diligently on our 2009 plan and we are certainly fine for the end of the year and we are working to see where different revenue scenarios take us in 2009.

Harry DeMott – King Street Capital

Right. When do you think you actually will start those conversations just given that I would assume you want to have them when you are levered at 4.4 times not when you're levered at 4.7 times or 4.8 times. Obviously, the stronger the hand you can show that the better off you are going to be.

Dunia Shive

Sure. But I think also we need to complete projections and be able to show the banks our different scenarios, I would also say that in this market environment today, whether you are 4.4 times or 5 times or 4 times today would not be the time, given the instability in the financial marketplace to try to do something if you don't know for sure that you have to. So but believe me we have great relationships with the banks. We talk to them all the time. We are working on our plans right now. We certainly have this as a focus area and we feel good about our ability to be able to get through this financial scenario that's going on right now one way or the other.

Harry DeMott – King Street Capital

And just a quick follow-up on Lee's first question there. So it sounds like the 31 million in retrans for this year should obviously be going up next year given that you will just come to some deal with Charter either you will fight it out or come to a deal amicably, but sooner or later, everyone always comes to the deal, and – ?

Dunia Shive

Sure. We think it will, and that would certainly be our goal to come to something that's a win-win for both parties. We won't see the same type of percent increase in '09 that we saw for '07 to '08 but we had some big deals coming up this year that we completed.

Harry DeMott – King Street Capital

Right.

Dunia Shive

But I would expect our retrans revenue to grow in '09 over '08.

Harry DeMott – King Street Capital

Right, some is almost are in the mid 30s or some in the mid to high 30s.

Dunia Shive

I don't have, until we get the ones, we've got a couple on the table. We obviously have one and then some several smaller on the table I would really rather not give an estimate as to what that's going to be other than to say that I think we can bring that number up in 2009?

Harry DeMott – King Street Capital

Alright, great. Thanks.

Dunia Shive

Thank you.

Operator

And I will turn it back to our presenters for any closing remarks.

Dunia Shive

Okay. If there are no further questions I just want to thank everyone for joining us on the call today. I also I guess want to reiterate given some of the questions here that we are a very sound company. We have leading television stations; we have growing markets as we pointed out in the script. The next 12 months to 18 months will be challenging for all businesses including Belo and other advertising-based businesses. But I am confident we are taking the necessary steps to be an even stronger company when this eventual recovery takes hold. If you have any further questions feel free to give us a call individually. With that, that concludes our conference call. Thank you.

Operator

Thank you. And ladies and gentlemen, the conference call will be made available for replay starting today, November, the 3rd at 3:00 p.m. Central time. The replay of the conference runs for one week until the date of November, the 10th, at midnight Central. You may access the AT&T teleconference replay system by dialing 1-800-475-6701. Please enter the replay access code 965609. International participants may dial 320-365-3844. Those numbers again. 1-800-475-6701. International participants dial 320-365-3844. Your access code is 965609.

That will conclude your conference call for today. We thank you for your participation. You may now disconnect.

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Source: Belo Corporation Q3 2008 Earnings Call Transcript
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