Q4 2008 Primedia Inc. Q4 2008 Earnings Call Transcript

Mar.12.09 | About: Primedia Inc. (PRM)

Primedia Inc. (NYSE:PRM)

Q4 2008 Earnings Call

Mar 12, 2009; 10:00 am ET

Executives

Charles Stubbs - President, Chief Executive Officer

Kim Payne - Chief Financial Officer

Analysts

Michael Meltz - J.P. Morgan

AJ Guido - Golden Tree Asset

Operator

Good morning and welcome to Primedia’s fourth quarter and 2000 year-end conference call. I am pleased to be joined by Charles Stubbs, our President and CEO, and Kim Payne our CFO, along with other members of Senior Management. As always, we refer you to the section of our earnings release entitled “forward-looking statements” for important factors that apply to and qualify any forward-looking statements made on this conference call.

Also, a reminder, any non-GAAP terms mentioned on this call are reconciled to GAAP in the earnings release. Let me now turn the call over to the President and CEO of Primedia, Charles Stubbs.

Charles Stubbs

Good morning, everyone. Today, we want to provide you with an overview of the company’s fourth quarter and full-year 2008 results as well as a more comprehensive view of Primedia’s path forward for 2009. 2008 was an important transitional year for Primedia and we made significant progress in transforming our company into the clear leader in our search space, primarily focused on the more stable rental market verticals.

We completed the divesture of non-core businesses, relocated our corporate headquarters to Atlanta and added and promoted leadership talent to implement a new set of strategic objectives. We also generated relatively solid financial performance in a difficult macro economic environment.

More importantly, we entered 2009 with the sound financial foundation, supported by strong cash flow and reasonable leverage that is enabling us to aggressively address our challenges and opportunities.

Our financial performance and confidence and our competitive position and outlook are evidenced by our $0.7 per share regular quarterly dividend and our $5 million share repurchase program. Our CFO, Kim Payne, will provide more details on our financial performance for the quarter and full year shortly.

Primedia has one simple vision, to be the leading cross platform provider of content to help consumers find a place to live. A consumer focus with our products will enable us to become the most trusted source of quality leads that will result in occupancies or sales for our advertiser clients.

For consumers, advertisers and the investment community, I believe we are delivering a unique value proposition. Our print, internet and mobile platforms are backed by established national brands with strong advertiser relationships. We are committed to industry leading innovations to drive increased value for our consumers and advertisers anytime, anywhere.

We have multiple growth opportunities through internet market expansion, new products and optimizing existing distribution channels. We have demonstrated solid financial performance with EBITDA margin expansion supported by aggressive cost efficiency programs. We have reasonable leverage and strong free cash flow generation to support growth and dividend payment capacity and we have the right leadership team in place to execute our strategic plans.

Primedia has four strategic objectives that encompass our operational and financial initiatives. First, grow our audience by strengthening our consumer product offerings by focusing on our core brands and delivering products that meet specific needs and are user friendly. Second, maximize the connections between consumers and our advertisers, which we refer to as leads.

We define a qualified lead as a correct consumer or prospect phone number or e-mail that is delivered to our advertiser client. Third, we grow our market share and revenue by monetizing these leads. And fourth, streamline our cost structure by aggressively cutting expenses to create a permanent new cost structure for our company.

Let me provide some supporting detail to these objectives. First, our ability to aggregate the largest audience of potential movers relies on strengthening our integrated print, Internet and mobile product platforms. The centerpiece of our efforts to strengthen our consumer products is our commitment to industry leading innovation. This includes detailed plans and execution around user interface, content, functionality and distribution, which will enhance the consumer experience and grow our audience. Though we are at a relatively early stage in this process, the level of consumer engagement with our websites continues to increase meaningfully.

Over the past several months, we have transformed our print, Internet and mobile delivery platforms. In print, we have reformatted ads with key shopping points such as photos, available units, price, floor plans and amenities and resized our publications to improve usability and paper use.

In internet, which represents our largest growth opportunity, we have developed a very powerful network of sites anchored by ApartmentGuide.com, Rentals.com, RentalHouses.com, NewHomeGuide.com and AmericanHomeGuides.com. Just within the last five months, we have re-launched virtually all of these sites with new and updated features and most are on new technology platforms that are nimble and highly scalable. These include enhanced search and refinement capability, a clean user interface and additional localized content to assist the consumer in making a more informed decision.

In mobile, we launched the apartment industries’ first iPhone app for ApartmentGuide.com in October 2008. Since then, we generated tens of thousands of downloads that resulted in qualified leads. Last month, we released an updated app with more advanced search tools and more comprehensive listings. We continue to evaluate our product offerings to expand our efforts in mobile.

Our second key objective is to maximize our connections between our consumers and our advertisers, which result in greater lead generation. We will properly track and qualify these leads and effectively communicate the results to our advertising clients. The results are very promising. For example, with an increased Internet platform delivery, we have developed sophisticated tracking tools that capture almost 100% above phone calls and e-mail leads generated online.

In addition, we have nearly tripled e-mail leads on ApartmentGuide.com compared year-over-year. Advertisers frequently tell us that e-mail leads are the most valuable. To enhance communication with our advertisers, we developed a state-of-the-art web based lead measurement tool called mydotapartmentgGuide.com, which we launched to advertisers on March 2.

This tool provides our advertising clients and our internal sales force with real time status reports of leads. Advertisers receive full transparency of results from print, Internet and mobile platforms by specific product or market. By providing these measurable results to our clients, we enable them to more accurately measure the return on investment from their advertising spend and more importantly, directly evaluate the value provided by our products.

Our web based lead measurement tool will become a centerpiece of our advertising platform to maximize our revenue. Our third objective is to grow market share and ultimately revenue, which will be driven by our ability to monetize the value of our increasing number of quality leads. We aim to cover the entire rental market by providing ad solutions for all advertisers from the rental house, individual investor to the portfolio of 700 unit professionally managed complexes.

We are achieving this through customer segmentation, pricing, planning and sales strategies. For example, we have re-launched our Rentals.com ad store, which is a self-service ad creation site serving the individual property investor-owner. We have grown our sales organization, which is currently approximately 50% of our employee base and are providing enhanced Internet training to prepare them for the evolution of the business.

We will continue to gain market share through national, inside and outside sales channels and through aggressive sales plans. This strategy is similar to what I accomplished at Yellow Pages.com.

Fourth and finally, we are permanently changing our cost structure to ensure that we can continue to make appropriate investments in areas with the strongest potential to drive productivity and revenue growth. Our approach has been and will continue to be to focus on actions that will provide recurring savings as opposed to one-time cost cuts. These actions include real estate consolidation with field facility offices, procurement, including but not limited to all vendor agreements with a special emphasis on retail display allowances, system automation to improve productivity, non-sales headcount reductions and re-engineering of our distribution systems.

These changes have resulted in a dynamic restructuring of our organization that positions our company for long-term profitable growth while serving to offset expected revenue losses in certain of our businesses in the short-term. We believe that the actions we have taken to this point should enable us to deliver permanent net operating cost reduction of at least $15 million in 2009. It is important to note that these savings are net of significant investments we continue to make in our Internet businesses.

As we progress into 2009, we intend to continue to grow customer count and market share in our largest business, Apartment Guide and ApartmentGuide.com and pursue enhancements to our product portfolio and selective market and market segment expansion. This is being supported by increased investment, search engine optimization and marketing.

In addition, we intend to aggressively grow our Rentals.com business by primarily focusing on driving revenue to improve sales, force execution and our reengineered ad store, while increasing traffic through SEO and marketing initiatives. As a result of the continued weaknesses in the residential real-estate sales industry, we anticipate increasing pressure on our new homes and DistribuTech businesses during 2009.

We expect that the full-year levels of percentage declines in revenue will exceed those experienced during the fourth quarter of 2008. We remain intensely focused on managing costs for these businesses in accordance with the anticipated levels of revenue and are managing our client relationships to best position us for opportunities as macroeconomic conditions improve.

We have powerful brands, a strong balance sheet, a solid infrastructure and a seasoned team with a successful track record of transforming traditional print businesses. We expect to leverage these strengths to increase our market share and continue to enhance long-term stockholder value. Thank you. I will now turn the call over to Kim Payne.

Kim Payne

Thanks, Charles. Let me begin with an overview of the full-year and recent quarterly trend analysis for net revenue and EBITDA and then provide more detail. We posted a 3.4% decline in net revenue in 2008 as the continued solid performance in apartments was offset by declines in new homes and DistribuTech particularly during the turbulent market conditions in the fourth quarter.

However, we have moved aggressively to improve operating efficiency and cut costs at a faster rate than the decline in revenue. This is clearly evidenced by our strong cash flow generation, which is highlighted by the 23.5% EBITDA margin in the fourth quarter. This recent performance helped produce 10.1% growth in EBITDA and a solid 21.1% EBITDA margin for the full year.

Taking a closer look at the components of our financial performance, we begin with apartments, which represents approximately 87% of fourth quarter advertising revenue plus a consistent growth of 2.7% in the fourth quarter and 2.4% for the full year compared to the same periods in 2007.

Apartment Guide and ApartmentGuide.com increased by 2.8% in the fourth quarter as well as increased by 2.8% for the full year compared with the same periods in 2007. These results were driven primarily by increased customer count and apartment community listings and increased Internet utilization due to targeted promotional offerings and new product introductions.

Revenue from Rentals.com and RentalHouses.com increased by 0.1% in the fourth quarter and declined by 4.7% for the full year compared to the same periods in 2007. The fourth quarter growth represents the year-long rebuilding of this operation focused on improving website performance and increasing traffic through search engine optimization.

New homes accounted for approximately 13% of fourth quarter advertising revenue. The nationwide weakness in the new homes sales sector and contraction in the credit markets continued to have a significant adverse impact on this business. Fourth quarter revenue declined by 37.7% and full-year revenue declined by 22.5% compared with the same periods in 2007.

The decrease in revenue was primarily due to significant reductions in new home communities served. We anticipate increasing pressure on this business for the foreseeable future and remain focused on maintaining close customer relationships and continuing to align the cost structure with the business outlook including suspension of print titles.

During 2008, we ceased publication of two new home guide professional editions. In early 2009, we announced that we were suspending additional print publications while focusing on Internet offerings in related markets as we continue to reduce our cost structure for this business to offset expected revenue losses. DistribuTech revenue declined 16.3% in the fourth quarter and 7.4% for the full year compared to the same periods in 2007.

Historically, the primary function of DistribuTech has been to ensure priority placement for Primedia publications and to reduce our overall distribution costs. Revenue from third party customers contributes to this reduction in cost. We continue to experience a significant loss of revenue from these third party customers particularly those who publish free resale home and automotive publication, which are scaling back or ceasing operations or providing an Internet-only product.

We remain focused on taking actions to diversify our customer base and to streamline the expense structure of this operation including real estate consolidation, process automation and optimizing our distribution footprint by eliminating less effective locations. Adjusted EBITDA decreased 3.6% to $17.3 million in the fourth quarter compared to the fourth quarter 2007.

This decline was driven primarily by lower revenue and to a lesser extent by one-time costs of $0.9 million associated with the buyout of certain retail distribution locations and general and administrative expenses partially offset by lower headcount, costs associated with our headquarters relocation and our cost efficiency program.

Adjusted EBITDA margin increased to 23.5% in the fourth quarter compared to 22.5% for the same period in 2007. Operating expenses decreased by 8.5% in the fourth quarter and 6.4% for the full year compared to the same periods in 2007. The decline for both was driven by decreases in cost of goods sold, marketing and selling and general and administrative categories partially offset by a small increase in distribution and circulation expense.

The decrease in cost of goods sold was due to the reformatting of our printed guides and distribution optimization partially offset by paper price increases. The decrease in marketing and selling expenses in 2008 was primarily due to a reduction of approximately 60 employees compared to the prior year.

Distribution and circulation expenses increased due to 2007 additions of new retail locations and the extension of national grocery chain relationships and one-time costs associated with the buyout of certain retail locations. These costs were partially offset by modifications of certain retail locations and delivery management.

General and administrative expenses declined primarily due to decreases in corporate overhead resulting from the completion of our corporate headquarters relocation to Norcross, Georgia from New York at the beginning of the year impacted our expense structure in a number of different categories.

These reductions were partially offset by increases in certain categories, a number of which represent non-recurring expenses. These would include costs associated with the headquarters relocation, expenses related to our former and new CEO and legal expense. For the quarter, bad debt expense was 1.4% of revenue compared to 0.8% for the fourth quarter 2007.

During the quarter, we collected approximately 99% compared to 101% in the fourth quarter 2007. Income from continuing operations increased $29.7 million to $34.7 million or $0.78 per common share in the fourth quarter 2008 compared to the same period in 2007. This is primarily due to the release of $29.3 million in deferred tax asset valuation allowance partially offset by restructuring charges of $3.3 million.

Our balance sheet remains strong. At December 31, our net debt was $230.3 million. Our debt facility is comprised of a $350 million senior secured credit facility, which includes a $100 million revolver and a $250 million term loan. Given the volatility in the financial market, we drew down on the revolver during the third quarter 2008 in the amount of $13.2 million to ensure that we had adequate financial flexibility. The revolver matures in 2013.

At the end of the fourth quarter, $247.5 million of the $250 million term loan was outstanding, which matures in 2014. Excluding the funds from the revolver, we had $18.3 million of cash on hand as of December 31, 2008. We believe that the combination of cash on hand and cash generated from operating activities will provide sufficient funding to manage and grow our business.

As of the end of the fourth quarter, our leverage ratio of consolidated debt-to-EBITDA as calculated under our bank credit facilities was approximately 3.2 times, which is well within the maximum allowable total leverage ratio of 5.25 times. During the quarter, free cash flow was $11.7 million compared to negative $16.4 million for the fourth quarter 2007. This improvement was primarily due to a reduction in cash paid for taxes for divestures in 2007.

Free cash flow was $7.6 million for the full year, which includes approximately $20 million in divesture and headquarter transition activity. During the quarter, we invested $5.1 million in capital expenditures compared to $4.6 million in fourth quarter 2007.

In summary, while economic conditions continue to pressure our new homes and DistribuTech operations, our largest business Apartments’ is moving forward. We are encouraged by the progress we have made against our Internet expansion and cost reduction initiatives and we look forward to updating you on our next call.

With that, we’d like to open up the line for questions.

Question-and-Answer Session

Operator

Thank you. And ladies and gentlemen at this time we will conduct a question-and-answer session. (Operator instructions) Our first question comes from Michael Meltz - J.P. Morgan.

Michael Meltz - J.P. Morgan

I think I have three questions. At Apartment Guide, it sounds like you’re expecting momentum to persist there. What are you seeing on vacancy rates in your markets? Has there been any change of late that would change your outlook on that business and then I have a couple of follow-ups?

Charles Stubbs

As far as the vacancy rates, it really varies by customer, by market, even by section of town as you know, but I think that the data that we are seeing in the industry stops that vacancy rates are increasing, obviously occupancy rates are dropping in the current market.

Michael Meltz - J.P. Morgan

Okay. But that’s not making you more cautious on your business?

Charles Stubbs

We are not giving guidance beyond what we enclosed in the earnings release for Q4.

Michael Meltz - J.P. Morgan

The language in your press release and on this call sounded like you expect customer count and I don’t know what you said, market share to improve in Apartment Guide’s. I would think that means you expect revenues to grow at Apartment Guide’s. Am I misreading that?

Charles Stubbs

I think we feel good about our strategies, tactics and plans in place during the current economic condition.

Michael Meltz - J.P. Morgan

Am I misreading it or am I making it up?

Charles Stubbs

I think the earnings release, it really focuses on Q4 and that’s the way that it should be interpreted. We don’t really give guidance. We feel really good about a lot of the plans. We are doing a lot of market level kind of tactics and strategy with our competition and we feel good that we have a very solid plan and are moving the business.

Michael Meltz - J.P. Morgan

Okay. Just as an aside, if you’re going to give guidance for the two tiny businesses, it probably makes sense to give it for the business that matters in my view. On the cost side, Kim, are you saying $15 million of cost takeouts; is that an ‘09 number or is that a run-rate number. And are you saying take the $240 million of pre-DNA costs that you did in ‘08 and just deduct 15 and that’s how we should be thinking about the run- rate of expenses?

Kim Payne

Think about it, it is an annual number, the $15 million, but think about it from the perspective of we had a couple big activities during 2008 with the transition costs as well as the CEO change that’s roughly $7.5 million to $8 million. So, I pulled that off the $240 million and then it should be $15 million net savings on an annual basis from that perspective, from that base line.

Michael Meltz - J.P. Morgan

So from the $240 million, go down to 32, 33 and then take off 15? Is that what you’re saying?

Kim Payne

That’s right.

Michael Meltz - J.P. Morgan

And that’s an annualized number or how we should be thinking about ‘09?

Kim Payne

Yeah that’s an annualized number not a run-rate off of Q4. The savings will not be equally spread across the quarters.

Michael Meltz - J.P. Morgan

And then the corporate expense, now that you moved down to the ATL, what was the corporate expense number in the quarter? Was it close to that $3 million run-rate?

Kim Payne

We are at the run-rate for the business. We are not breaking it out anymore because there was so much integration, but if you think about the $12 million annualized costs that we talked about and that we would get to a quarterly run-rate, we are there, everything that is part of the business has been reflected in the numbers. So there should not be any additional cost above our current operating levels.

Michael Meltz - J.P. Morgan

You said that the FT’s, I think you said employees were down, what did you say? 60? What was the year-end FTE number?

Kim Payne

For the total company, it was just over a 1000.

Charles Stubbs

And that’s down from 1150 in the prior year and all those details will be in the 10-K.

Michael Meltz - J.P. Morgan

So what was the 60 number?

Kim Payne

The 60 was specific to selling, we had some headcount elimination in the second half of the year and so the 60 was specific to the part of the driver of the reductions in selling and marketing.

Michael Meltz - J.P. Morgan

Two final questions on Home Guides. You said earlier in the year, you announced you were exiting some markets. I don’t think you said what markets. How many titles are being closed?

Charles Stubbs

We are continuing to evaluate and we are aggressively going after the cost structure in that market and looking at the contribution margin on a per-market basis we announced last year.

Kim Payne

In 2008, we specifically closed two publications, the Atlanta Professional Edition and the Charlotte Professional Edition. We still have a presence in those markets though with our New Home Guide. Those two publications were targeted towards the real-estate agent, the business side of the New Home Industry, and then the ones that we are looking at in 2009, we haven’t specifically stated the markets, but it’s a handful where we are looking at suspending the print, but our expectation is through NewHomeGuide.com that we would maintain an Internet presence.

Michael Meltz - J.P. Morgan

So 2 1/2 months into the year, have you actually closed any new home titles?

Kim Payne

We suspended publication in our Columbus, Ohio markets.

Michael Meltz - J.P. Morgan

And last question. Cash restructuring charges in ‘09, what’s the expectation?

Kim Payne

We wouldn’t give specific guidance, but if you think about the cost cutting initiatives that we are talking about, there will be some restructuring charges.

Michael Meltz - J.P. Morgan

Based on what’s already been done?

Kim Payne

Based on the plan that’s been outlined, some of what’s already been done and then what we are considering a part of some of this $15 million, there will be some restructuring as a part of that.

Operator

(Operator Instructions) Our next question comes from AJ Guido - Golden Tree Asset.

AJ Guido - Golden Tree Asset

In a challenging market, you guys have a pretty good year. I have a question on the magnitude of the home building declines in the DistribuTech business. I mean, when you say accelerating or similar to the fourth quarter of ‘08, I mean, should we expect that you’re seeing trends that are much worse or is it 70% declines or is it more like what you saw in fourth quarter of ‘08?

Kim Payne

From the guidance that we have given in the earnings release, when we talk about the percentage declines that we have had for the fourth quarter, we are saying they are going to accelerate beyond that on a full-year basis, so we wouldn’t give any more specific percentage declines than that.

What I want to, you know, really be clear about is, we are trying to let you know that those losses are going to be greater than what you’re seeing in the fourth quarter.

AJ Guido - Golden Tree Asset

On a percentage basis year over year?

Kim Payne

That’s correct.

AJ Guido - Golden Tree Asset

Charles, on the occupancy rate question, I think I missed it, the one that Michael asked. You said you’re seeing occupancy rates decline across the board?

Charles Stubbs

I think I said that it varies by market, by section of town, by the particular kind of property it varies, but I would tell you that the third party data that we look at and what we are seeing is that occupancy rates are dropping slightly.

AJ Guido - Golden Tree Asset

Historically, they have kind of been in your sweet spot about the low 90 percentage range, so if you’re looking at occupancy rates falling a little bit, I mean, theoretically wouldn’t that be somewhat good for your business as they do need to fill up these apartments?

Charles Stubbs

Yeah, I mean, as you stated, we have said that our sweet spot is in the 90% to 95% occupancy and the latest data we have seen the average is 93%, so we feel like that, the market is still in where our sweet spot is.

AJ Guido - Golden Tree Asset

And I actually have a few questions. So in your DistribuTech business, I think you told me before maybe a 30-year revenue from home builders, is that still the case?

Kim Payne

It’s declined more than that, but I don’t have the exact number for you. I can get back with you on that, but you’re still talking about a meaningful number that would be south of that percentage that I’ve given in the past.

AJ Guido - Golden Tree Asset

And you mentioned bad debt went up to 1.4% and then you also had a comment that you collected at 99%. Can you just repeat that for me?

Kim Payne

For the quarter, we are seeing bad debt expense increase, but the main point is we are still collecting. We have always had an annual average of about 99% collections of whatever we bill and we are hanging tough in our collection efforts. So while we are seeing bad debt increase a little bit, some customers are taking a little bit longer to pay, we are still receiving the cash. So that’s very important to the business.

AJ Guido - Golden Tree Asset

And so when you say 99% collected, that’s apples-to-apples? It’s not like you’re extending terms or anything like that? That’s what you would normally do even though it’s a tough environment, right?

Kim Payne

Yeah, that’s apples-to-apples.

AJ Guido - Golden Tree Asset

Looking at one of your competitors that is located I guess in the same state as you, I look at their apartment business and their home guide business and it seems like they typically have better revenue growth than you guys. I was just wondering, can you attribute that to anything? If they were up about 6%, obviously their numbers got cut off in the beginning of December, but I’m just wondering, it seems like they consistently outperform your Apartment Guide, business and I was wondering if you could attribute that to anything specific?

Kim Payne

I mean, one of the things that you can note when you look at that competitor is that they are continuing to do acquisitions, so that plays into some of their growth.

AJ Guido - Golden Tree Asset

As far as market share, you guys still believe you’re winning market share and taking over some of these, as you said new release, you’re not losing market share, I guess is the question?

Charles Stubbs

We believe we are moving in the right direction as far as market share with our strategies, plans and implementation of them.

AJ Guido - Golden Tree Asset

Just a couple more here, so I think you guys had an interest rate hedge on your term loan, about 4.9%; is that right, or no?

Kim Payne

That would have been last quarter.

AJ Guido - Golden Tree Asset

Okay. When does that roll off, just curious?

Kim Payne

We have a couple different termination dates but really you’re looking at the end of ‘09 and at the end of 2010.

AJ Guido - Golden Tree Asset

The end of ‘09 and 2010, so where are you hedged, then? I guess at what rate, roughly?

Kim Payne

It’s a little less than 4%.

AJ Guido - Golden Tree Asset

Okay. And that’s just on the LIBOR and then you got the --

Kim Payne

I’m sorry, effective 460.

AJ Guido - Golden Tree Asset

Okay. So it’s 460 and then you have the 200 basis points coupon, right? Or is that all in?

Kim Payne

All in.

AJ Guido - Golden Tree Asset

So you’re only paying 4.6% interest on your whole term loan facility?

Kim Payne

Right.

AJ Guido - Golden Tree Asset

And then, there wasn’t a cash flow statement in the release, but looking at the share count, I mean, it doesn’t look like you guys have bought back too many shares. Is that accurate? How much did you buy back in the quarter?

Kim Payne

At the end of 2008, we have not repurchased anything.

AJ Guido - Golden Tree Asset

And, I mean, can you say how much you have left now?

Kim Payne

In the first quarter, we purchased approximately 240,000 shares at a value of about 440,000. So, on a total $5 million share repurchase program, we expect to continue working through that plan this year.

AJ Guido - Golden Tree Asset

I mean, so you still have roughly $4.5 million left, which would probably be 7% of the share base outstanding and that should be pretty bullish for you guys, I guess. And just two more, the tax refund that you guys got, I mean is that just related to the NOLs you got when the sale was done, $440 million that we talked about, probably a year and a half ago? Is that what the case was?

Kim Payne

Our NOLs remain in that $400 million range that we have talked about, but the tax refund that you’re talking about, are you thinking about the valuation allowance?

AJ Guido - Golden Tree Asset

Yes, can you just explain that a little bit?

Kim Payne

So essentially it’s related to finally getting some benefit around the NOLs, but we did an evaluation of our NOLs looking at the company there’s positive and negative evidence, it’s an extensive analysis and we determined that we had an opportunity to release some of the valuation allowance against our deferred tax assets. So the $29.3 million is a result of that.

AJ Guido - Golden Tree Asset

And just two more, I promise. So you had mentioned about, we were going over the costs for the fourth quarter, I missed it because I was in and out, but there’s a one-time cost, I think you said a $1.9 million in the quarter.

Kim Payne

$0.9 million.

AJ Guido - Golden Tree Asset

$0.9 million. And what was that related to?

Kim Payne

We had some retail locations that we did buyouts on as well as just a little bit of G&A legacy type activity cost.

AJ Guido - Golden Tree Asset

So, I mean, that’s something that, I mean, I guess if you have to do more closedowns in ‘09, that could occur again, but it’s something that’s not part of the operations in a normal basis, right?

Kim Payne

Exactly.

AJ Guido - Golden Tree Asset

That is included above the line and it gets taken out of EBITDA.

Kim Payne

That’s right. It depends on what our activity is that determines the accounting treatment. In this case it was above the line.

AJ Guido - Golden Tree Asset

Okay. And then you have a $5.1 million of CapEx? I thought when we talked, that’s not a run-rate, right? You’re usually around $13 million to $15 million?

Kim Payne

Yes. Think of it as an annual number and it’s not incurred evenly over the quarters and we have talked about a run-rate of about $15 million.

AJ Guido - Golden Tree Asset

Just looking, you do have $18 million of cash and I guess you do have the buy back plan, which you plan to do. Looking at your term loan in the market, it doesn’t trade very often, but if you looked at it, it’s probably $0.60, $0.70 probably. Would you ever consider buying back some of that to get the cash-on-cash returns?

Kim Payne

We are always evaluating our uses of cash and prioritizing how we want to spend that, so, I mean, that’s one option of several.

AJ Guido - Golden Tree Asset

And are you going to pay down the revolver, kind of given that things have stabilized?

AJ Guido - Golden Tree Asset

Yeah. Ultimately we are going to pay it down from a timing perspective. We are just monitoring that and looking at what’s going on in the marketplace. So that’s ongoing evaluation, but ultimately we will pay it down.

AJ Guido - Golden Tree Asset

And you have just given where your free cash flow is coming out and it looks like you have pretty decent trends in the apartment business, obviously, we don’t know, I mean, is the dividend going to be set in stone?

Kim Payne

We have indicated that it’s a regular quarterly dividend, so unless we state differently, and we haven’t, we are still on that path.

Operator

Thank you. (Operator Instructions) And I’m showing that we have no further questions at this time. I’ll hand back to management for any closing remarks.

Charles Stubbs

Well, thank you for taking the time to join us today. I would encourage all of you to look at our investor presentation on the Primedia Investor Relations website. Thanks for your time today.

Operator

And, ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.

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THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

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