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The E. W. Scripps Company (NYSE:SSP)

Q2 2010 Earnings Call Transcript

August 9, 2010 9:00 am ET

Executives

Tim King – VP, Corporate Communications and IR

Tim Stautberg – SVP and CFO

Rich Boehne – President and CEO

Mark Contreras – SVP, Newspapers

Brian Lawlor – SVP, Television

Analysts

Alexia Quadrani – J.P. Morgan

Craig Huber – Access 342

Edward Atorino – Benchmark

Scott Davis – J.P. Morgan

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the second quarter earnings report conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mr. Tim King. Please go ahead, sir.

Tim King

Thank you, Roxanne, and good morning, everybody. We appreciate you joining us for this call. We're going to start this morning with Tim Stautberg, the senior vice president and chief financial officer. He'll discuss the second quarter financial and operational highlights. He'll cover some non-operating data, and then give you a little bit more color on trends for the benefit of your third quarter models. Then you'll hear from Rich Boehne, our president and CEO, who will provide some context as we look over the longer term horizon. Then of course, we'll open up the lines for a Q&A that will include Mark Contreras, who runs the newspaper division; Brian Lawlor, who's in charge of our TV stations; and, Doug Lyons, our controller.

Now, the commentary you'll hear from our executives this morning may contain certain forward-looking statements. And actual results for future periods may differ from those predicted. On page 11 of the 2009 Form 10-K, you can read some of the factors that may cause the results to differ from what you're about to hear.

And as a reminder, you can access a streaming audio replay of this call by going to scripps.com, and clicking on the Investor Relations link at the top of the page. It will be active later on this afternoon. And we'll keep it there for a couple of weeks.

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

Tim Stautberg

Thanks, Tim, and good morning, everyone. It's a hopeful sign of the times that we felt a year-over-year consolidated revenue increase was noteworthy enough to be called out in the narrative of our earnings release. For decades, the only mystery in a media company's earnings report was the magnitude of the year-over-year revenue increase. But that changed with the onset of the current secular and cyclical challenges. We're still a long way from some of our businesses being as vibrant as we'd like them to be, but reason for optimism can be found at some of the numbers we released today.

The positive news on revenue occurred despite the fact that we're not yet feeling the full effects of political advertising on our television stations. As you know, the heaviest political spending tends to fall between Labor Day and Election Day. And in the current environment, where no incumbent feels safe, it's reasonable during the third and fourth quarters to expect TV stations across the country, especially those like the Scripps stations that are positioned in battle-ground states, to have a very satisfying political season. Despite the absence of the full force of political advertising, our consolidated revenues in the June quarter increased more than 5%, compared with the second quarter last year.

Our costs increased, too, but at the slower rate of 2.7%, excluding restructuring costs. Dramatic expense cuts implemented early last year helped our bottom line for the past four quarters. But our comparisons now include the effects of those cuts in the year-ago quarter, some of which were temporary in nature and are being restored this year.

In the second quarter of 2010, for example, consolidated expenses increased due to, among other things, the resumption of normal marketing activities to support the May sweeps period at our TV stations, which we suspended last year; and, an accrual for network programming expenses that I'll talk about in more detail in just a few minutes. As a result, our income from continuing operations before taxes was $3.7 million, compared with $1.6 million in the year-ago quarter.

We reported income from continuing operations after tax of $0.03 per share in the second quarter, compared with $0.04 per share last year, reflecting a tax benefit of $800,000 in the 2009 quarter.

In early June, we closed on the sale of our licensing business to Iconix Group for $175 million in cash; the operating results of that business; and, the $96 million after-tax gain on the sale, now reported as discontinued operations. Including the results of discontinued operations and the gain on the sale of the licensing business, Scripps reported net income of $99.5 million or $1.56 per share, compared with $2.3 million or $0.04 per share in the second quarter of 2009.

Let's turn now to the operations by starting with our TV stations. The momentum that started late last year strengthened in the second quarter, with revenue increasing 22% over the second quarter of last year. We noted in the press release that the gain is not due just to election year seasonality. The sequential revenue improvements of the second quarter over the first quarter in the last two election cycles were less than half of what we reported this morning, importantly, the momentum built throughout the quarter with total revenues of 27% in June.

Digging into the ad revenue, there is no doubt that an easy comparison helps the performance of the auto category in the quarter, but the 84% rise was impressive by any measure. We also saw strong revenue gains from the brand name consumer goods category, which was up 31%, retail of 13%, travel and leisure of 12%, and professional services rising 11% year-over-year.

Those of you who are familiar with the Scripps' story know that we place a high priority on developing business from customers who are new to TV or who have not advertised on our stations in the past 12 months. Revenue from these initiatives grew 16% in the quarter to $7.4 million, up 24% year-to-date. Advertising on Web and mobile platforms is a small piece of the pie, but it continues to grow at a healthy pace, including a 29% jump in the second quarter to $1.9 million.

Year-over-year expenses in the TV division were up 9%. After several consecutive quarters, the expense declines. The reversal was due to several factors. Among them, employee costs were up 5% due to the absence of temporary pay reductions instituted in last year's quarter. We resumed our traditional marketing support of sweeps weeks in May, which we did not do in 2009, determining then that there would be little return on that investment given the weak advertising environment early last summer.

And we're accruing for expected payments to ABC for its programming. As you know, our affiliation agreements with the network expired in January. And we continue to negotiate with them for a new long-term agreement. Thus far, our discussions with ABC have been productive. The bottom line for the television division gives you a sense of the strength of the recovery in that industry. The $13.3 million in TV segment profit in the second quarter nearly tripled the performance of the year-ago quarter. And it's more than doubled the figure from the first quarter of 2010.

Turning to newspapers, the division's revenues declined, but at a much slower rate than we've seen in a long time. We reported the decline in total revenue with just 4% year-over-year, about half the rate of decline in the first quarter. Ad revenues, which were down 12% in the first quarter, were down 7.7 % in the second.

What is most striking is that all categories were contributing to the trend, with every category, but national, reporting only single-digit declines. National was down 10%. Local was down 8%, and preprints and other dropped 7%. Online ad revenue was down less than 6%, but pure-play online advertising was up 14%.

Classified advertising staged the most impressive comeback. It was down 18% when we spoke to you three months ago, but it was down only 8.4% in the June quarter. Within classified, year-over-year declines in the second quarter were 15% for real estate, 13% for the all other category, and 3.8% for auto. The (inaudible) category actually increased 14% in the quarter, which is good news for Scripps as well as for the health of our markets.

In the second quarter, we reported circulation revenue increased 4% to $29.7 million. But I need to remind you of the effect of a change in the nature of the business relationship between Scripps and certain newspaper distributors in select markets. I discussed this in our last two calls. In short, the company is transitioning to a system where we pay most independent distributors on a per unit basis, recording circulation revenue after the transition at a higher retail rate and recording the per unit delivery costs as distribution expense. Excluding the effects of that change, which does not affect segment profit, circulation revenue in the second quarter was down 3%.

Newspaper expenses decline in the second quarter by 4%, which is a big accomplishment. The dynamic that affected costs in the TV division, tough comparisons for employee costs due to the competition reductions a year ago, also affected newspapers. But a 10% decline in the number of newspaper employees, compared with the year-ago quarter, and good cost control by our operators around the country contributed to the overall reduction in newspaper costs.

The expense for newsprint and press supplies fell 18%, compared to the year-ago quarter. While we'll start to see that category swing the other way as newsprint prices are now higher than they were last year, we expect newsprint prices could be 25% higher in the second half of the year. Segment profit from our newspaper group was $14.6 million, compared with $15.4 million in the second quarter of last year.

With the sale of United Media Licensing business, our third segment is now called syndication and other. The licensing business had dominated this segment. What remains, United Media's syndication business and other entities such as Scripps hired news service, forms a very small segment, which have less than $6 million in revenue in the quarter and a segment loss that narrowed to less than $200,000 from more than $400,000 a year ago.

Let's turn now to some non-operating items. Our loan deck had been an attractive part of the Scripps' story since we spun off the cable networks in 2008. But our financial strength is even more compelling today. Thanks to the proceeds from the sale of United Media Licensing, today, we have no outstanding bank debt, and $140 million of cash and short-term investments at the end of the second quarter.

We also used the portion of the proceeds from the sale to make a voluntary contribution to our defined benefit pension plans. We made a $65 million contribution to our pension plans in June, which should relieve us of the obligation to make any significant contributions for several years.

Capital expenditures dropped sharply after the completion of the newspaper facility in Naples. In the second quarter, capital expenditures totaled less than $2 million, bringing the year-to-date figure to $4 million.

I'll give you a little more now on the way of revenue expense guidance for the third quarter. We still believe total newspaper revenues will be down in 2010, compared with 2009. And we see newspaper ad revenue declines in the third quarter continuing to moderate slightly. Newspaper expenses are a different story. While cost cutting has been dramatic for the past four quarters, expenses will likely be flattish to up slightly in the third quarter depending on the magnitude of the expected newsprint price increases. We still see 2010 full year expenses being lower than in 2009, but the comparisons gets more difficult. And there's more up for cost pressure in the back half of the year.

As you would expect, there's a rosier outlook on the TV side, where we think year-over-year ad revenue growth will exceed 30% in the third quarter. This is the result of the general uplift in many key advertising categories that we already discussed as well as the potential for significant sums of political dollars flowing into our stations. With competitive raises in virtually in all of our markets, it's possible that we will exceed the $44 million in political advertising we reported during the 2006 mid-term elections. TV expenses should again be higher than last year, and at about the same year-over-year of growth we experienced in the second quarter.

During the second half of the year, we'll continue to implement the restructuring of certain functions and the standardization and centralization of key systems and processes in the newspaper division. This pursuit of efficiency accelerates in the second half of the year and could result in restructuring charges above the $15 million in the aggregate for the full year during the course of 2010.

Looking out for the full year, we expect capital expenditures to be approximately $20 million, maybe a little less. And depreciation and amortization will be approximately $46 million.

And as we noted in today's release, we expect to receive a federal tax refund in the third quarter of $57 million. But also, we'll be making estimated payments in the back half of the year of $45 million towards our 2010 tax liability.

With that, let me turn it over to Rich.

Rich Boehne

Thanks, Tim. Thanks everybody for joining us this morning. As Tim said, we have a pretty good quarter and the outlook is improving. But the stronger operating results are only a piece of what we believe is a good story for all Scripps stakeholders.

We plunged into 2010 determined to crank up cash flow from operations, and also to build our balance sheet into a strategic asset with which we can create and deliver value during this uncertain times. So we paid down debt rapidly. And we parted with a non-strategic asset, United Media Licensing, at an attractive price. Our plan worked. And as a result, in addition to better results from TV and newspapers, we now have no debt, no pension shortfall hanging over our head, and more than $2.50 in cash in the bank.

But as we all know, financial flexibility and shareholder value are not necessarily one and the same. Our diligence and creativity over the past 18 months put Scripps in better shape than we could have imagined. Now, we must use to the economic benefit of our owners. This all came together rapidly and recently, so we're looking at a number of options. But I assure you that we're patient, discerning, and determined to deliver real value to our owners. In other words, the cash is not burning a hole in our pocket. It's not a war chest in search of a quick acquisition.

Regardless of what we do in the short term to reflect a proper balance of cash, debt, and investment, over the long term, we intend to stay the course, seeking to build value by servicing physical communities and communities of interest with high quality news and information content and attractive marketplaces for advertisers who want to reach them. Despite the economic challenges of the past 18 months, we have continued to invest in our newsrooms, expanding the quality and quantity of our content, thereby expanding audiences and revenue streams.

We're focused on being the news and information provider of choice in our newspaper and TV markets, especially in a period when many of our competitors have cut resources and put valuable segments to the audience in play. We're also putting our money to work to expand and capture those audiences on mobile platforms as well as on the good old-fashioned Internet, where business models are beginning to, albeit slowly, mature.

In all cases, our strategic goal is to drive value by creating content for which there are no or very limited available substitutes for consumers and advertisers. In other words, in a world that's awash in commodity content and ad inventory, knowing what you do well and doing it better than anyone else is absolutely crucial.

In Detroit, for example, we recently proved that once again that there is no substitute for the high-quality watchdog journalism provided by our station, WXYZ. The station's recent reporting on the city's chief of police resulted in changes that benefited both us and the community. There really is economic return on public service. And we intend to continue to put our resources behind this kind of community building that expands our audiences and our valuable goodwill.

Local news businesses still face many challenges, including the big ones presented by the general economy. But while these may not be times for the timid or for the faint of heart, we are in a season of opportunity for those with the financial flexibility and the creative vision to capture new audiences and revenue streams. We've made all the right moves over the past 12 months, we believe, to benefit from this period of transition for the news industry and its business models.

With that, now let's open it up to questions. Operator, we're ready.

Questions-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Alexia Quadrani with J.P. Morgan. Please go ahead.

Alexia Quadrani – J.P. Morgan

Hi. A couple of questions, first, Rich, if I could follow-up on your comments about the balance sheet and the cash on hand. Could you give us a little sense in terms of I think maybe what you or the Board are considering, what are the options, and maybe an idea of the timing?

Rich Boehne

Sure. We've said that we got $2.50 per share in cash in the bank today. And we're looking at a lot of options. I guess the one thing I would want to emphasize is, often, the times to monetize and build up your cash and the opportunities to invest don't necessarily perfectly align. So I think a little bit of patience is probably in order.

We're discussing all the options that you would think of. But probably overall also, it's – probably in general more – a little more cushion, a little more financial flexibility is probably appropriate in these uncertain times. So the first and most important thing we did was make a big contribution to our pension plan at that time when it was tax advantaged, and got us back in great shape. And beyond that, Alexia, I just have to say, we're looking at all kinds of options.

Alexia Quadrani – J.P. Morgan

Do you think your decision might be made by the end of the year?

Rich Boehne

Well, yes. I think we'll make a lot of decisions by the end of the year because we'd probably – probably could do a combination of things. We could buy stock. We can return cash. We can make some investments, although as I said, we are not necessarily or have not been in the market for big acquisitions within our current businesses. So regardless of what we do, I think some combinations are probably appropriate and be the result.

Alexia Quadrani – J.P. Morgan

And then, just a couple of fundamental questions, first on the newspaper business, could you give us a sense of how newspapers revenue just generally progress as the quarter progress? Do they continue to improve at the quarter? I mean, was June a better month than I – early in the quarter? And the second question's still on newspapers, is really any color on the operations by regions.

Rich Boehne

We'll let Mark answer that, Alexia.

Mark Contreras

Sure, Alexia. Just generally in the second quarter, June was our best month in that quarter. And just to give you some flavor for the regionality – the regional performance, overall, we went from about 12% down for the division to 7.7%. But within regions, the strongest change, first quarter to second quarter, happened in Florida and California. And we have not seen that happen for several years, at least.

Alexia Quadrani – J.P. Morgan

And should we assume July's facing well, relatively in line with June?

Rich Boehne

Too soon to tell, really.

Alexia Quadrani – J.P. Morgan

Okay. And then, on the broadcasting side of the business, I think you outlined the pacing for the third quarter. But could you give us a sense of – I guess if you have any sense of what the core is pacing, your ex-political in Q3?

Mark Contreras

The quarter is pacing in line with our performance in the second quarter, the categories that we outlined that we had nice growth in. And second quarter remained consistent. Automotive had a great July. Retail and services both had double-digit increases. I expected auto to slow a bit off of that 84% in third quarter just we're going against the clunker comparison of last September. But the first two months of automotive are very strong in comparison.

Alexia Quadrani – J.P. Morgan

Okay. Thank you very much.

Operator

Our next question comes from the line of Craig Huber with Access 342. Please go ahead.

Craig Huber – Access 342

Yes. Good morning. Thank you. Concerning TV, the auto category, in the quarter, what percent of your TV station revenues came from the auto category?

Tim Stautberg

That's a good question, Craig. Let me run a couple of numbers. And I'll jump back to you before we wrap up the call.

Craig Huber – Access 342

Okay. And then also, if I could maybe talk – could you talk a little a bit the TV station costs or outlook here for third quarter? Can you just give us a little more flavor of what you – as you've done in the past or your current thoughts on your programming costs third quarter back half of the year going into next year?

Tim Stautberg

Sure. I said that the auto represented just over 19% of our overall first quarter – second quarter revenue. And that includes political. So it's 19% of our total ad sales revenue.

Craig Huber – Access 342

Okay.

Tim Stautberg

And then, as it relates to third quarter, your question is, is it related to programming cost?

Craig Huber – Access 342

Yes, programming costs, with details on the changes that we should know about there in the third quarter, fourth quarter, maybe going into next year as well.

Tim Stautberg

Yes, I think our programming will – in terms of our syndicated programming, it's flat for last year's performance. We didn't have any real increases as it relates to programming on the syndicated side. Next year, we will have Oprah leaving four of our television stations. That'll happen in September. So we'll have a programming expense there based on the programming that will be replacing that.

Our overall programming line has the same outline in the summary there. We are accruing some dollars for our ABC affiliation agreement. And that's hitting our programming line, so that throws an apples-to-apples comparison a little out of whack, but in terms of syndicated, no increase through the rest of this year. The big recapture comes in the second half of next year.

Craig Huber – Access 342

Okay. Thanks for that. And then, if we can just jump over the newspaper side. Can you just update us on the quarter on where your advertising pricing is by category year-over-year for national cost-side retail?

Mark Contreras

Sure, Craig. This is Mark. And again, just a reminder that this is full run, which is a segment of our total ad revenue. You're not going to be able to take our total revenue in the back end of this easily. But retail for the quarter was down 3%. This is just full run rates. Classified, by category, auto down 2%, employment about flat, real estate down 2.6%, other classified down 8.6%, total classified down 4%, and then national down 5%.

Craig Huber – Access 342

Maybe if you could just explain, if you would, that other – I know it's relatively small.

Mark Contreras

That's primarily foreclosures and legal notices. And we're seeing that category as the housing market from up is a bit diminished. We had a mini bubble in that category for about a year-and-a-half, two years.

Craig Huber – Access 342

And then lastly, if I could, you had some comments about your California and Florida papers. Could you give us some detail on how the ad revenues there trended year-over-year, maybe in the month of June first out of the whole division did, or if you want to do the whole quarter, just give us some flavor?

Mark Contreras

I'll maybe stick, Craig, to the whole quarter. So if you took the whole division 7.7%, Florida did slightly on par, let's say. And California did a little worse. What I was talking about earlier is that first quarter to second quarter, they had the strongest improvements. So net-net, they're doing – they're finally starting to be on par as opposed to be outliers, which they had been for about a year-and-a-half, two years.

Brian Lawlor

Hey, Craig. It's Brian. On the television side, we've got two stations in Florida, West Palm, and Tampa. West Palm is a great rebound story in terms of market recovery. It was actually the strongest market to recover in the second quarter with the total television market rebounding 27.8% within the quarter, which was pretty darn strong. As it relates to the Tampa market, it was up about 10%. It seems to be a little bit slower to bounce back. But the West Palm market is very strong, driven by heavy automotive and some pretty good political right now.

Craig Huber – Access 342

Great. Thank you.

Operator

(Operator Instructions) We have a question from Edward Atorino with Benchmark. Please go ahead.

Edward Atorino – Benchmark

Did you say $44 million political? Did I hear that right?

Tim Stautberg

I think that's where we're forecasting. That was–

Edward Atorino – Benchmark

Yes. What would the third quarter be seriously?

Tim Stautberg

I think we're looking at a forecast – probably it's somewhere in the $50 million range.

Edward Atorino – Benchmark

Other companies have said they're a little crowding out going on as the political money starts to pour in. What's been your experience in some of the dollars that are getting – if they are getting crowded out? Are they going into the post-election period in November, whatever that whole Election Day is or any spilling into 2011?

Rich Boehne

Yes. The scenario you just painted, Ed, is pretty normal. We do have a lot of pressure on our (inaudible) as it relates to the political. We certainly understand the cycle. And we work with our advertisers from early on. Some of the – we've spend a lot of time in the last 18 months developing small and new-to-television advertisers. The good news is we can still usually accommodate them in the political periods, politicians by the bigger prime, the higher price newscasts, and some of those new-to-television advertisers. So we're seeing a lot of success in our investments. We're able to accommodate in some day time areas and some lower price areas, where they try and build their brand around frequency. And so, I think we're still able to accommodate many of those.

But we understand the cycle. We've lived through as have many of our core advertisers. And so, we worked to accommodate them in other areas. But there is, to some degree, displacement, but it typically bounces back the week in November. When the elections stop, those folks come back, obviously. They're gearing up for a holiday season and a strong year-end push. But I don't know how much of it. I think the biggest question is the first quarter of '11 because I think everyone understands the cycle.

Edward Atorino – Benchmark

Yes. Looking at balance of the year, you just heading towards "flat", any guess whether you could get close to flat by the end of the year in the newspapers?

Rich Boehne

You mean on the revenues, Ed?

Edward Atorino – Benchmark

Yes.

Tim Stautberg

Yes, Ed. We're not forecasting that we're going to get to flat by the end of the year. It's just a very – we would just have little limited visibility between now and the fourth quarter. But I don't think we're going to end up hitting flat.

Edward Atorino – Benchmark

Okay. Thank you.

Rich Boehne

Thanks, Ed.

Operator

Our last question comes from the line of Scott Davis with J.P. Morgan. Please go ahead.

Scott Davis – J.P. Morgan

Yes, hi. Good morning. I have three questions, I guess, one is just following up on Ed's question about the crowding in political. It sounded like from your answer that you're expecting the crowding result in non-political maybe getting boosted after the political season in the first quarter. But I guess I'm curious because I heard other people argue that because political is going to be so tight, obviously, or create such a tight environment that some non-political advertisers are trying to get in early in advance of that. It doesn't sound like that's the experience that you're seeing. And then, I have two follow-ups.

Tim Stautberg

No. I think that's, again, part of the way we work with our core advertisers, understanding the cycle, understanding the pressure of those – last two weeks of September, the first four weeks of October, and the first week of November. We do work with advertisers early. We're trying to accommodate them, understanding the pressure's there and the expectations by the SEC to accommodate several little candidates.

We do look for day parts and to lay in a base with them, where we feel there'd be a level of protection. But you can't put on $15 million to $20 million from political in the quarter and not have pressure and have to work on accommodating your core advertises. But I think that that's part of our normal course of doing business, working with them early as we started late last year looking at the cycle of the year and trying to accommodate their schedules around the political weeks.

Scott Davis – J.P. Morgan

Okay. And then, my two follow-ups were, are you using any spillover from national advertisers who are looking at the international spot market. I guess there're been some rumors Walmart might be an example of that. But are you seeing that or there are others?

And then, my last question is you mentioned West Palm being very strong. Do you have the two-year comp or what it was down last year so I can understand in putting context to 27% or 28% growth this year?

Tim Stautberg

Let me run the number on West Palm, as it relates national, yes, absolutely. Our national was up 32%, compared to our local up 13%. So we are seeing some national spill from the scattered market that's coming our way.

Scott Davis – J.P. Morgan

Okay. Thank you.

Operator

You have a follow-up question from Craig Huber with Access 342. Please go ahead.

Craig Huber – Access 342

Yes, just follow-up, please. Given all the talk in recent months of a potential double dip recession or it's just a significant slowing in the economy, I'd just be curious to hear your commentary as you talk to larger advertisers, how they're feeling here of the economy, what they're going to – how do they feel about spending in general – or about advertising, just spending in general out there, commentary there, both TV and the newspapers side? I'll relate it to – we have forecast this for the third quarter. But how has that may have changed over the last two to three or four months? Thanks.

Rich Boehne

Thanks, Craig. We'll let Mark talk about the newspapers first.

Mark Contreras

Well in general, Craig, the caution that I think everybody's feeling is being mirrored among both our big advertisers and our small ones. Our chunk of revenue – just as a reminder is that 80%-plus of our ad revenue based consists of small advertisers. And so, what we're subject to is a much greater degree of market-by-market effect. But on the larger ones that we've talked to, they're expressing caution as well. I hope that's helpful.

Craig Huber – Access 342

Give us some more commentary on the TV side.

Brian Lawlor

I'm sorry, I was working on those comp numbers there.

Rich Boehne

Advertisers seemed to be cautious or not cautious.

Craig Huber – Access 342

Yes, just from a broad economic question if we get more–

Rich Boehne

What do we get from advertisers about their view of the economy?

Brian Lawlor

I think they remain cautiously continue to do business on a little bit of a shorter cycle than we've done in the past. People used to be more comfortable laying in annual or quarterly commitments. They seem to be placing business a little bit later, often times, especially in the auto category, waiting to see how sales were the month before, and then that hand set to mouth – making the investment once they know what their sales were from the previous month.

But obviously, from the results we just reported, retail is very strong and automotive separately is very strong. And so, I think the caution they have is warranted. But obviously, they're moving some product and continue to put a large portion of their ad budget since the television.

Craig Huber – Access 342

You think that caution has increased here in less than two to three, or four months?

Brian Lawlor

No, I don't think so.

Craig Huber – Access 342

Okay. Thank you.

Operator

At this time, there are no other questions.

Tim King

All right. Well I'd say we appreciate your help this morning. And thanks for all the folks on the call for joining us. We'll talk to you in three months.

Operator

Ladies and gentleman, this conference will be made available for replay after 11:00 a.m. today, running through August 16th, 2010 at midnight. You may access the AT&T executive playback service at any time by dialing 1-800-475-6701, and entering the access code 162775. International participants may dial 320-365-3844. Again, the numbers are 800-475-6701, international is 320-365-3844. And the access code is 162775. That does conclude our conference for today. Thank you for your participation and for using AT&T executive teleconference service. You may now disconnect.

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