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Belo Corp. (NYSE:BLC)

Q4 2009 Earnings Call

February 4, 2010 2:00 pm ET

Executives

Dunia Shive - President & Chief Executive Officer

Dennis Williamson - Executive Vice President & Chief Financial Officer

Carey Hendrickson - Senior Vice President & Chief Accounting Officer

Peter Diaz - Executive Vice President of Television Operations

Paul Fry - Vice President of Investor Relations

Analysts

Edward Atorino - Benchmark Co.

Avi Steiner - JP Morgan

Michael Meltz - JP Morgan

Barry Lucas - Gabelli & Co.

Bishop Cheen - Wells Fargo

Sam Yake - BGB Securities

John Cornrich - Sandler

Marci Ryvicker - Wells Fargo

David Cohen - Athena Capital Management

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the fourth quarter earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions)

I would now like to turn the conference over to our host, Mr. Paul Fry, Vice President of Investor Relations; please go ahead, sir.

Paul Fry

Thank you, Shane, and good afternoon. Welcome to Belo’s year end conference call. We issued a press release today announcing the company’s fourth quarter and full year 2009 earnings. This release has been posted on our website at www.belo.com.

Today’s call will include comments from Dunia Shive, President and Chief Executive Officer; and Dennis Williamson, Executive Vice President and Chief Financial Officer. Also with us are Carey Hendrickson, Senior Vice President and Chief Accounting Officer; and Peter Diaz, Executive Vice President of Television Operations.

Before Dunia makes her opening 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 as detailed in the company’s press release and public filings with the SEC including the Annual Report on Form 10-K A.

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

Now, I’m pleased to turn the call over to Dunia.

Dunia Shive

Thank you, Paul. Let me start by saying that I’m pleased to have Carey Hendrickson, joining us today. Many of you know Carey, from when he led Belo’s Investor Relations group prior to Paul Fry. As we mentioned in December, Carey will take on the role of Chief Financial Officer on Dennis’s retirement in March. I’m confident the transition will be very smooth and Carey will do a great job in his new role.

Turning to our results, the company’s spot revenue excluding political in the fourth quarter of 2009 was down less than 1%, when compared with the fourth quarter of 2008, a marked improvement from 2009 third quarter decline of 16%. The fourth quarter 2009 total revenue decline of 13.8% is almost entirely due to the decline in political revenue.

In the fourth quarter of 2008, the company generated $35.9 million in political revenue versus $8.8 million in the fourth quarter of 2009. For full year 2009, total revenues declined 19.5% as the company managed through one of the weakest advertising environments in recent history and had to contend with cycling against record $56.2 million of political revenue in 2008.

The company’s combined station and corporate operating costs increased 13% in 2009, due primarily to expense reductions implemented over the past year. The company’s ability to generate cash remained strong during the challenging economic environment as station EBITDA totaled almost $200 million in 2009 with a station EBITDA margin of 34%. The company reduced its debt by $65 million during the year.

Belo’s television stations enjoyed strong performances once again in the November ratings period finishing number one or number two sign off in 12 of 15 Nielsen rated markets. Belo stations also continue to be recognized for their outstanding journalism, two of our television stations were recently honored with national Alfred I. duPont-Columbia University Awards.

The awards were given to KHOU television in Houston for its extensive reporting on fraud and discrimination in the Texas National Guard and WWL television in New Orleans for its investigative series about government corruption in the aftermath of hurricane Katrina.

For the fourth quarter of 2009, the company improved its capital structure by successfully completing a $275 million senior note offering due 2016, which bears interest at a rate of 8% per annum. The net proceeds from the offering were used to reduce the company’s borrowings under its revolving credit facility, which was amended and extended upon closing of the offering.

The amendment provides greater flexibility under the facilities leverage and interest covenants and also reduces the bank commitments to approximately $461 million through June 7, 2011 and to approximately $205 million thereafter through exploration of the facility on December 31, 2012.

The company had $143 million in outstanding borrowings under the revolver at December 31, 2009. In summary with an improved advertising environment, the strong competitive positions we enjoy in our markets and what should be a strong political season, the optimistic about our opportunities for growth in the coming year.

Now I’ll turn the call over to Dennis to provide further details about our results.

Dennis Williamson

Thank you, Dunia. Belo today reported fourth quarter and full year 2009 pro forma earnings per share from continuing operations of $0.21 and $0.36 respectively compared, to $0.28 and $0.79 respectively for the fourth quarter and full year 2008. The fourth quarter pro forma earnings per share from continuing operations of $0.21 exceeded the analysts’ consensus estimate of $0.17.

Pro forma earnings per share from continuing operations exclude three items, non-cash impairment charges to intangible assets in 2009 and 2008, gains on the repurchase and retirement of company bonds in 2009 and 2008, and spin off related charges in 2008.

Further details about these items are included in the press release we issued earlier today. Including these three items, GAAP net earnings per share from continuing operations for the fourth quarter and full year 2009 were $0.21 and a loss of $1.06 respectively compared to GAAP net losses per share from continuing operations of $4.74 and $4.45 respectively for the fourth quarter and full year 2008.

Total revenues decreased 13.8% in the fourth quarter of 2009 versus the fourth quarter of 2008. Total spot revenue including political was down 16.4% in the fourth quarter of 2009 with a slight increase in local spot and a 2.4% decrease in national spot. Total revenues decreased 19.5% for the full year 2009 versus 2008. Full year 2009 total spot revenue including political was down 23.3% with 18% and 18.5% decreases in local and national spot respectively.

The fourth quarter spot revenue decline was due mainly to the decrease in political spending that Dunia mentioned earlier. Automotive revenue declined 9% in the fourth quarter of 2009 which was a significant improvement from the third quarter decline of 36%.

The spot revenue decline for full year 2009 was due to the weak advertising environment, particularly in the automotive category, which was down 39% and the significant political revenue generated in 2008. In 2009, political revenue totaled $13.4 million versus the $56.2 million in 2008 that Dunia had mentioned earlier.

Advertising revenue associated with Belo’s websites decreased 3.2% in the fourth quarter 2009, and 5.2% for the full year 2009. Retransmission revenue totaled $42.6 million in 2009, a 29% increase from 2008 and represented 7% of Belo’s total revenue. The increase in retransmission revenue is due to contractual growth rates included in existing agreements, the full year effect of negotiations completed in the past year, and the continued growth in subscribers across cable, satellite, and telecom distribution systems.

Total station expenses decreased 16% and 13% respectively, for fourth quarter and full year 2009 due to continued implementation of cost saving measures. The station EBITDA margin for the fourth quarter of 2009 was 43% versus 41% in the fourth quarter of 2008. The station EBITDA margin for full year 2009 was 34% versus 39% in 2008.

Corporate operating costs were $8 million in the fourth quarter of 2009 as compared to $10.6 million in the fourth quarter of 2008, a decrease of 24% due primarily to the continued implementation of cost saving measures. For full year 2009, corporate operating costs totaled $29.9 million versus $32.2 million in 2008, a decrease of 7%.

Belo’s depreciation and amortization expense totaled $9.4 million in the fourth quarter of 2009, 12% lower than the fourth quarter of 2008. Full year 2009 depreciation and amortization expense totaled $41.7 million, a decrease of 2.9% when compared to 2008.

The company’s interest expense totaled $18.4 million in the fourth quarter of 2009, an increase of 3.9% compared to the fourth quarter of 2008. Full year 2009 interest expense totaled $63.9 million, a 23% decrease compared to full year 2008.

Other income net decreased $18.7 million in the fourth quarter of 2009 due primarily to a $16.4 million gain in the fourth quarter of 2008 from the retirement of $43.6 million of our bonds. Other income net decreased $7.4 million for full year 2009, compared to 2008 due primarily to a second quarter 2009 write off of certain analog equipment following the digital television transition and a third quarter 2009 loss on the sale of certain non-operating assets.

Income tax expense increased to $131.3 million in the fourth quarter of 2009 and $10 million for the full year 2009 due primarily to a non-cash income tax benefit in 2008 associated with the impairment charge for that year. Total debt at December 31, 2009, was $1.28 billion. The company’s total leverage ratio as defined in the company’s credit facility was 5.9 times at December 31, 2009. The company invested $4.7 million in capital expenditures in the fourth quarter of 2009 and $9.2 million for the year.

Now I will turn the call back over to Dunia.

Dunia Shive

Thanks, Dennis. Looking to 2010, total spot revenues in January were up more than 9%, compared to January 2009 with higher percentage growth expected in February, due to the Super Bowl on our five CBS stations and the Olympics on our four NBC stations. First quarter spot revenues are currently pacing up in the local double-digits with the automotive category currently pacing up about 40%. We expect robust political spending in 2010, most of which will come in the second half of the year.

Our approach to expenses in 2010 will remain cautious and will be tied to the strength and stabilization of the revenue environment. We plan to lift the wage freeze for our employees at some point during the first half of the year. As you model 2010 expenses for Belo, keep in mind that we expect to have approximately $6.8 million in non-cash expense credits in the first half of 2010 related to the previously disclosed frequency relocation project compared to credits of $2.6 million in all of 2009. Capital expenditures for 2010 are not expected to exceed $15 million.

This concludes our formal remarks, but before we go to Q-and-A, I want to recognize and congratulate Dennis on an outstanding career. He has truly done an exceptional job for this company and we’ll miss him on a professional and personal level. We wish him the very best in his retirement.

Now we’ll be glad to answer any questions you may have.

Question-and-Answer Session

.

Operator

(Operator Instructions) Your first question comes from Edward Atorino - Benchmark Co.

Edward Atorino - Benchmark Co.

First on that credit is that sort of even in your first, second quarter or Nextel credit?

Dunia Shive

The Nextel credit, I can’t give you the specifics because we can’t really control when the timing of it is. We think it will be in the first half of the year, and I believe the comparable number in the first quarter…?

Dennis Williamson

The first quarter was about $1.9 million.

Dunia Shive

Yes, close to $2 million.

Edward Atorino - Benchmark Co.

Then you got $4 million plus, I mean more?

Dunia Shive

In the first half of the year.

Dennis Williamson

I’m not sure it is the first quarter.

Edward Atorino - Benchmark Co.

Second, I got sort of a couple of detail questions. Depreciation dropped off quite a bit. What’s a good run rate going forward, $9million a quarter, $9.5 million a quarter?

Dennis Williamson

That’s probably reasonable. Obviously with a lower cap spending in the last couple of years, it is trending down.

Edward Atorino - Benchmark Co.

Same number on interest jumped up. Carey, that number straight out or will comedown at all during 2010?

Dennis Williamson

It is going to go up because as you know we just did the new bond issue. I think, Carey you have numbers.

Carey Hendrickson

With the debt restructuring in 2009 about 87% of our debt is fixed at an average rate of 7.5% and then the rest is a floating rate and right now we’re paying LIBOR plus 400 basis points. So we wouldn’t expect that rate to fluctuate too much in 2010 and our interest expense should be pretty steady quarter-to-quarter. All-in-all I think our interest expense in 2010 will be somewhere around $80 million. That includes amortization of fees.

Dennis Williamson

If you just do the straight calculation you miss the fee amortization.

Edward Atorino - Benchmark Co.

The last question I had to do with programming expenses quite a bit higher in the fourth quarter than the rest, that just seasonality or an advance bump up there coming into 2010?

Dennis Williamson

Are you talking about the financial statements that were attached to…?

Edward Atorino - Benchmark Co.

No, program inner expenses, when running about I know it is Mickey Mouse stuff, it’s been running about 48, 49, jumped to almost 53 in the quarter just seasonal?

Dennis Williamson

Yes.

Dunia Shive

I am not sure where that is coming from, Ed, in terms of that information was not in our release. We’re just trying to get where your question is coming from.

Dennis Williamson

I thought end of the cost, 52…

Edward Atorino - Benchmark Co.

Across the quarter?

Dennis Williamson

Yes. Yes, if you look at program expenses, it was running about 48, 49, it was 52.

Carey Hendrickson

Ed, there were some things that were in the third quarter and some of the other quarters that were like, for instance, pension for expense, varies from quarter-to-quarter based on our expectations for…

Dunia Shive

That would be in the salary line adding that line on the financial statement programming and all other expenses, that’s everything other than compensation expenses.

Dennis Williamson

I mean its utilities, its property taxes, it’s not just programming. So that’s what threw us off a little bit.

Edward Atorino - Benchmark Co.

Program and other…?

Dunia Shive

Right.

Dennis Williamson

Yes, it’s all our other operating costs other than salaries and wages and benefits.

Dunia Shive

It’s just a programming is the single largest line item, but certainly all other expenses are in…

Edward Atorino - Benchmark Co.

Run rate, $50 million, $51 million, through?

Dunia Shive

We’ve not given any guidance on that number for 2010.

Operator

Your next question comes from Avi Steiner - JP Morgan.

Avi Steiner - JP Morgan

Three questions here, on the cost side you talk about lifting the wage freeze. Can you just help us out on when some of the other cost cuts you made last year will analyze this year? Secondly, basic question here, just can you go over components of debt one more time and try to figure out if you bought back any additional bonds in the quarter as well; and lastly, if you can update us on the status of the ABC affiliation negotiations, that would be terrific.

Dunia Shive

We did not buy back any bonds, so there was nothing there, the debt number, Carey he wondered if you could repeat what you said on the debt.

Carey Hendrickson

We have 87% of our debt is fixed, and the rest of it’s floating at this point, and that should remain pretty steady.

Avi Steiner - JP Morgan

Can you go through revolver balance was what again?

Carey Hendrickson

Revolver balance was $137 million.

Dennis Williamson

Avi, were you asking if the cost reductions that were fully implemented by fourth quarter, is that what you’re asking?

Avi Steiner - JP Morgan

I’m trying to figure out as we model 2010, I know you took a bunch of actions in ‘09 when that will annualize it out?

Dunia Shive

Avi, when we implemented the wage freeze, it was implemented in November of 2008, so that went throughout 2009. As you know, we had staff reductions during the year. Most of those happened at the beginning of the year, in the earlier part of the year rather than the later part of the year.

We mentioned lifting our wage freeze in the first half of 2010. We are looking at other benefits to see when we may be able to restate some of those or reinstate some of those as well, but a lot of that point depends on the strength of the revenue environment. As you know, the first quarter has Super Bowl, has Olympics, has political, so we to want see how things were settling out in the first quarter, but at a minimum, we will lift the wage freeze and the rest of what we will do will depend on the stability of the environment going forward.

Avi Steiner - JP Morgan

Then, if I can just get the ABC affiliation questions on 2010…?

Dunia Shive

I can’t comment specifically about ABC other than to say, that we’ve extended our agreement through the end of February, discussions are ongoing, and I do expect to ultimately renew our affiliation agreements on terms and financial and otherwise that are reasonable, but we did extend through the end of February.

Avi Steiner - JP Morgan

Are you running a parallel process with Sinclair, or it just happens to be the same timing?

Dunia Shive

I think a number of groups with affiliation agreements expired at the end of the year.

Avi Steiner - JP Morgan

Are you talking as a group, or…?

Dunia Shive

No, no.

Operator

Your next question comes from Michael Meltz - JP Morgan.

Michael Meltz - JP Morgan

Can you talk a little bit about your expectations for political advertising? I know you think it will be robust. I do, too. I’m just wondering, are you targeting the ‘08 level or is the ‘06 level more on your sites at this point and I have two follow-ups.

Dunia Shive

Michael, as far as giving a specific number or targeting, we haven’t given one. As you know, if you go back ‘04, ‘06, ‘08, ‘02, it’s generally in the $50 million range give or takes a few million dollars in each one of those particular periods. We do have some important races in 2010 in our markets.

We mentioned that Texas is going to race. They mean that we would have a Senate race in Texas as well and then we have other markets, Washington, Oregon, Arizona, Missouri, Louisiana, others that have some congressional and races as well that should be strong and contested races that we should see strong political spending from.

Having said that, we’ve not give an estimate, but generally had seemed to be in that $50 million range regardless of whether you had a presidential year or not, because you may have strong issues in some markets and strong contested races in others.

Michael Meltz - JP Morgan

Within the kind of spot advertising, when you’re talking your pacing in the low double-digits for the quarter, what besides auto, can you talk a little about specific categories, what’s anything else perking up in Q1 versus what you saw in Q4?

Dunia Shive

If you look at the fourth quarter, we mentioned that auto in the fourth quarter was down about 9%. The other large categories down for us in fourth quarter were entertainment and telecom. We did see strength in categories like financial services, grocery and healthcare in the fourth quarter and that strength has continued into January.

I would also say a couple of other categories have improved in January, categories like home improvement, retail is up a little bit in January as well, and as we mentioned our report auto is up and that’s different from what we had in the fourth quarter obviously.

Michael Meltz - JP Morgan

Last question for me, on the expense side can you talk a little bit more on the Nextel credit, just elaborate a bit. I thought you had said a few months ago that you were going to be $8 million to $9 million credit, take it all in ‘09, and that would kind of contra expense would go away in 2010, it sounds like that’s not the case?

Dennis Williamson

That was our expectation. The problem with it, Mike, is the whole market has to transition to digital at the same time. So our stations were ready, but some of our colleagues in those markets were not, and those markets got deferred. We actually thought we would be done by the end of the year and in fact we were ready. Unfortunately, the whole market has to move simultaneously. So it will be done by the end of the second quarter.

Michael Meltz - JP Morgan

Then I understand the expenses are somewhat predicated on where advertising trends, but can you give us any more commentary on how to think about your expense growths in 2010?

Dunia Shive

Yes. Without being specific to numbers, let me ask Carey to just give general comments on certain categories that we have in 2010 and the directionally. Carey.

Carey Hendrickson

You mention of course we would like to restore some compensation of benefits to employees in the first half of the year. Beyond that we would also expect our national rep commissions to be higher based on large political advertising we would expect in 2010. We would like to restore some of the advertising and promotion dollars if we could in 2009. If we hit our performance targets, we pay bonuses in 2009 which was not part of the 2010, which was not a part of the 2009 equation.

On the pension side, we had a credit of $400,000 in 2009 in total pension costs, and we expect those costs to be higher in 2010, all in about $9 million. We also had some vacation expense credits of about $8 million in 2009 that won’t repeat in 2010. So we’re launching some new programs in some of our markets and that will add some costs in 2010 as well.

Going the other way, we talked about Nextel having the $6.8 million credits in 2010 versus only $2.6 million in 2009, so quite a few moving parts, but we do expect 2010 expenses to be a bit higher than 2009.

Michael Meltz - JP Morgan

So as a starting point if I take the three ex corporate expense, I guess with corporate, if I say the 421 and then add the 17 credits that go away and then you get $4 million benefit from Nextel. So the starting spot is 435 and then there’s higher cost for everything else you said, is that the right way to think about it?

Dennis Williamson

Yes, Mike, we really can’t comment on that. We’re not trying to provide guidance hereof how you start or where you go from there. I will tell you this. We’re at the one month into this year and a lot depends on our performance, not only in from a bonus point of view as Carey mentioned, but in terms of our ability to add dollars in either advertising promotion or so forth.

So I think we’ve 11 more months to go in a very still uncertain period. Although it feels better now, we want to make sure that’s sustainable. I think we’re really not going to provide much more guidance on the expense side than that.

Operator

Your next question comes from Barry Lucas - Gabelli & Co.

Barry Lucas - Gabelli & Co.

Can you repeat these expenses to death? Did you take any involuntary furloughs in 2009?

Dunia Shive

No, we did not.

Barry Lucas - Gabelli & Co.

One of the biggest variants on the programs side is programming. So could you just remind us about what contracts such as Oprah are coming up and if she goes away where is the programming line going to go directionally?

Dunia Shive

I will start and I’ll let Dennis fill in. We’re actually start with program expiration dates for the larger contracts and what percent they represent?

Dennis Williamson

Very few programs come up and expire in ‘10. It is mostly in the fall of ‘11. That’s Oprah, the biggest one, entertainment tonight, Wheel and Jeopardy, Dr. Phil, those are out delays. So we’re secure in those, and those are petty stated with a typical run rate. I would say that we have renegotiated some agreements and extended some in 2009 that will provide reduced license fees through ‘10. Obviously the biggest expiration is Oprah in fall of ‘11.

Dunia Shive

Barry, what I would say that what we do there and obviously we’re starting to talk about that, but what we will do there will depend on a lot of things including the availability of what’s there in syndication and what the costs of those programs are. We certainly have internal options as well in terms of locally produced content, news or otherwise. So we started the conversations at the operating level, but certainly we will have lower expenses in 2011 and forward as a result of the expiration of the Oprah contract.

Barry Lucas - Gabelli & Co.

One thing I would add, Barry that excludes the notion that we may pay something to the networks because if we did, it would go in the program line, just so you know.

Operator

Your next question comes from Bishop Cheen - Wells Fargo.

Bishop Cheen - Wells Fargo

This seems to be a pretty good day to look at the balance sheet given the nasty mood out there in the market. So you have done a great job in giving yourself flexibility and my question revolves around I guess your priorities.

You seem fairly motivated to get your leverage down because you can pursue dividends again or buyback bonds once your leverage gets down under 5.25, and this is the good cycle year perhaps to do that, but you also have a revolver you have to look at in 2011 that becomes due pretty sizable chunk I guess a couple of hundred million. So as you think about it over the next eighteen months, can you give us a little color on what you think your priorities are?

Dunia Shive

Bishop, let me clarify one thing. Our revolver goes through December 2012.

Bishop Cheen - Wells Fargo

The whole revolver, I thought a chunk of it has to come out.

Dunia Shive

What we did when we amended and extended the facility, that’s the commitment level. So we had a $500 million some odd revolver, when we did the amendment and extension with the number of bank that is we did our deal with we ended up with I think about $460 million in commitments through June ‘11, the original expiration date.

Then the extending rates provide $200 million in commitment through December 31, 2012. If you look at where we are today at about $140 million, we have plenty of commitment, the commitment doesn’t drop off until 2011 in our uses of cash between now and that time are to pay down our debt. I expect that revolver balance to go down and have plenty of commitment available.

Bishop Cheen - Wells Fargo

That makes your life a lot simpler.

Dennis Williamson

It does.

Bishop Cheen - Wells Fargo

So, I guess you’re going say something like when you get to year end and see your leverage then you will figure out what your priorities are as far as arbitrating your balance sheet or pursuing dividends?

Dunia Shive

Right now I’d say our priority has been and continues to be the reduction of our debt balance and we haven’t discussed any other significant uses of that pay down or of that cash other than reducing our debt.

Bishop Cheen - Wells Fargo

One follow-up, can you talk a little more about auto? The 40%, I guess that implies it was up 40% through January or are you looking at bookings? Can you give us a feel for the tenor and the ton tone of that robust auto through Q1 and beyond?

Dunia Shive

Again, the auto number we gave is a pace number. So that can obviously fluctuate. It is based on bookings. That was not a forecast, when we said about up 40% that was a pacing at a point in time for the first quarter. When I look at the details of that, both national and local are up, national is up I think on a percentage basis a little bit more than that, and imports were pacing just a little stronger than domestic, but both of those were pacing up nicely.

Bishop Cheen - Wells Fargo

Are that means you are expecting auto does it feel sustainable?

Dunia Shive

Again, I was giving a pace number not a forecast, but in terms of looking, if you think about the first quarter of last year, you have to keep in mind auto was down 50% or actually over 50% in the first quarter of 2009 over 2008.

So you had auto manufacturers last January that were trending at all, so I don’t think if you’re question is asked to sustainability. I wouldn’t look to that category today and say that that’s a run rate I would expect for a full year. I think it is way, way too soon to try to speculate on what auto as a category looks like for the year, but certainly it start to a strong start.

Bishop Cheen - Wells Fargo

Right I degree. I was just suggesting for all of the entire quarter.

Dunia Shive

Okay.

Operator

Your next question comes from Edward Atorino - The Benchmark Co.

Edward Atorino - The Benchmark Co.

I got on a few minutes late. Did you mention cable retrans and the outlook for 2010, isn’t it, 2010?

Dunia Shive

We gave our 2009 number, Ed. We did not give an outlook for 2010.

Edward Atorino - The Benchmark Co.

Anything coming up of significance in terms of contract renewals, etc?

Dennis Williamson

Not until the end of the year.

Operator

Your next question comes from Sam Yake - BGB Securities

Sam Yake - BGB Securities

I was just wondering what your thoughts about the recent Supreme Court ruling? Do you expect that might lead to more money coming on the political side? What are your thoughts on that?

Dunia Shive

I think from a political advertising point of view it certainly a positive, but there are some unknowns around it and make difficult to try to gauge any impact about it, and when I say unknowns, I guess some of it has to do with whether or not corporations want to have their name tied to specific candidates and how much money they would be willing to put against that given that their customers and constituencies I am sure I would fall on both sides of the opposite side of the pages in some cases.

I would also say if the money is spent in the last weeks of the general election as you know there were limitations that in the past. Those have been lifted, but if that money comes in last week of the general election in a very heavily crowded market, you may have spill over to another medium rather than significantly increase the amount that would go to a station.

Again, it would have a positive impact on rate. It is a positive, it is just not easy to quantify. I think the last thing I would say, it is unclear whether or not there will be efforts to curb the impact of the ruling because you know there were some that were not happy with the reversal of the past practices, so again I think it is a positive for political advertising. It is impossible to quantify at this time, but I guess this will be the year that we’ll be able to see what type of implication it will have.

Sam Yake - BGB Securities

I had one other question. Now that we have come through the most serious period of downturn, when you look at things, what are your thoughts on do you think there has been any long term damage to the network affiliated TV stations or do you think what happened the severe downturn was almost entirely cyclical?

Dunia Shive

I think most of what we went through was a cycle, but certainly there is some secular items happening underneath the cycle when you have two of the three major automotive companies go bankrupt, certainly there is secular change that happens in that space and how that works.

I think most of what we saw again though I would tie to a cycle, but there are secular issues in the business that we’re dealing with, but going back to looking at some of the margins that were generated in the business in the fourth quarter and for the full year in an economy that wasn’t necessarily a good year, we were able to post pretty decent margins, so again I would time most of it to economy television viewing is up, networks and affiliates are getting deals done. There is a nice pickup in business activity, so we’re optimistic going into 2010.

Operator

Your next question comes from John Cornrich - Sandler.

John Cornrich - Sandler

When are the CBS and NBC agreements up?

Dunia Shive

NBC goes through 2012 and CBS varies. We have one this year and I think they go through 2016. They’re not on a one year cycle.

John Cornrich - Sandler

Through 2012 for NBC.

Dunia Shive

Yes.

John Cornrich - Sandler

Could you repeat again your feeling about sharing retrans revenues with the networks even though it is out in 2012 and 2016?

Dunia Shive

This isn’t specific any particular network. I guess what I would say is I believe that both parties in the network affiliate relationship provide great value to each other, and that an appropriate arrangement that keeps the relationship in that can be found, and I believe if affiliates are asked to pay something individually that’s a reasonable amount for that station, but in the aggregate it is meaningful for the network at both parties can continue preserve the benefits of the relationship longer term.

John Cornrich - Sandler

What would be your benefit?

Dunia Shive

Preserving, the network affiliate relationship.

John Cornrich - Sandler

Not asking for more at time, not anything…?

Dunia Shive

Those are all, I mean that would be getting into what individual negotiations would be that are off sometime, but again I believe that ultimately that if we can get point there is a reasonable payment, but meaningful on an aggregate base that would benefit the relationship.

John Cornrich - Sandler

This has to a wait the expiration of the network agreement.

Dunia Shive

It generally would, yes.

John Cornrich - Sandler

CBS, is nothing to do for five years or six years?

Dunia Shive

Again, they expire at different times; different markets have different expiration dates, 2010 maybe one in ‘11, a couple in ‘12 and one out to ‘16.

John Cornrich - Sandler

Did I miss a CapEx estimate for ‘10?

Dunia Shive

About 15 million.

John Cornrich - Sandler

The last thing is I am sort of surprised that you can’t give an estimate for retransmission revenue when it is far and away the most predictable revenue item you have?

Dunia Shive

It is not that we can’t. I guess we said we didn’t and you saw some pretty strong growth rates in retrans over the last several years, because we had several large agreements come due where we didn’t have payment before. We had very small payment and we only have one large one to speak of in 2010.

So I think what we said in the past is we expect retransmission revenue to continue to grow with that rate of growth and would moderate because you do have escalators and agreements. You have the teleco providers adding subs and some of the cable and satellite adding subs as well, so we expect it to grow. We just haven’t given a specific growth rate as to what that is.

Operator

Your next question comes from Marci Ryvicker - Wells Fargo.

Marci Ryvicker - Wells Fargo

Thanks. How did the Olympics impact auto pacing, I guess without the Olympics would you still be up 40%, and then a question about visibility, is it getting any better this year or are advertisers still spending last minute?

Dunia Shive

Let me take that that reverses order. I would say that visibility is still about the same. There is not a whole lot I can point to that would say that I have any greater visibility than I had before. While I don’t have information broken out the way that you have with respect to Olympics, what I will say is auto pacing up in all but one of our markets and it is also pacing up in all of our ABC markets.

Operator

Your final question comes from David Cohen - Athena Capital Management.

David Cohen - Athena Capital Management

Most of what I would have asked has been covered. Dunia I was wonder if you might want to speculate a little bit and I assume the answer is probably no, but with regard to the Toyota situation, if you look out over the next sort of twelve to eighteen months, do you think that might have some kind of impact on either Toyota’s willingness to spend on TV and/or some of the competitors?

Dunia Shive

I think anything I say would be speculating, but Toyota is a big brand and a big advertiser, and I think that they will do what they need to do to re-establish their position in the marketplace, and at the same time you may have competitors who decide that while Toyota is going through this period, they may want to go after share and step up their spending.

In fact, I think Peter sent me something today that said Hyundai was making more money available to their dealers currently. So how very hard to speculate as to what the ultimate outcome would be, but I think that Toyota long term will want to continue to advertise for its image, its brand, and its sales.

Dunia Shive

Operator, is that all?

Operator

Shive, please continue, there are no further questions at this time.

Dunia Shive

Okay, thank you operator and thanks everyone, for joining us today. We will have a public presentation or two between now and the end of the quarter or between now and the end of the first quarter and we’ll update the market again at that time. Thanks, everyone.

Operator

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