Young Broadcasting Inc. Q4 2007 Earnings Call Transcript

Young Broadcasting Inc. (YBTVA)

Q4 2007 Earnings Call

March 7, 2008 11:00 am ET

Executives

Vincent J. Young - Chief Executive Officer

James A. Morgan - Executive Vice President, Secretary, and Chief Financial Officer

Analysts

Bishop Cheen - Wachovia

[Meredith Allen] - Bear Stearns

[Ken Silver] - Royal Bank of Scotland

[Sam Yaaks - Private Investor]

Lance Vitanza – Concordia

David Shapiro - Aegis Financial

Avi Steiner - KBC Financial

Presentation

Operator

Welcome to the fourth quarter 2007 earnings conference call. (Operator Instructions) I will now turn the call over to Mr. Vincent Young, Chairman of Young Broadcasting Incorporated and Mr. Jim Morgan, Chief Financial Officer.

Vincent J. Young

We’re very excited to have this call with you to talk about the fourth quarter, the year ‘07 and some other items that, of course, you are probably interested in. We have a couple of ground rules about what we’re going to cover and not cover in the Q&A. I think Jim will speak about the KRON auction a bit and about liquidity in general, but I’m going to give you some thoughts.

First I’m going to turn over to Jim, and then we’ll have time to take some of your questions. I’ll just go through a couple of quick items, Jim, and I know you have some important things that you want to discuss with the listeners.

It struck us, it struck Jim and I after our last earnings call that we did not make it clear enough that we would not allow liquidity to be a problem for the company, that we have a determined view on that. In that regard, of course, we first announced the sale process for KRON in San Francisco.

And secondly, we have recently announced our major initiative of streamlining our operations, mostly through the use of modern technology. We are very proud of this. This has been a major 18-month long planning process. We mentioned that there will be more savings to come, which are not personnel related, and significantly more savings to come.

We’ve realized that we’ve been producing plenty of revenue. Revenue has not been the issue. But we’ve just been spending too much money to get it. It has been planned carefully, it being the streamlining, to eliminate the costs without harming the product, thus harming the revenues. To sum up, we are very comfortable with our liquidity going forward, and we will not allow it to hamper the company.

And if you thought you’re going to get away with a call without my mentioning the 3rd Leg, you’re wrong, but it’ll be brief. But I think it’s important, because I’ve noticed in other earnings reports that other broadcasters are putting out they’re speaking of local sales initiatives. Obviously, it’s not just a Young Broadcasting issue. It’s very, very important for the whole industry.

Speaking of the affiliate group, now the nine station group, we’ve done about $25 million of 3rd Leg-related revenue this past year. And, that is very significant, because it speaks to the fact that our local revenue has grown over the last three years. It’s grown 17%, a fact that gets easily lost in all the other numbers that get thrown around.

But local is, what used to be 60% versus the national 40% of the local national combined number, has now grown to 74% of the mix. So, we are busy mining in the mine that contains the gold. Local is our biggest growth opportunity, and it certainly, as we’ve said before, it allows us, with our 3rd Leg programs, to go after the 90% of local ad revenue that is not using local television. It is a wonderful opportunity.

And what this means is that our stations have, over the last three or four year period, since we’ve gotten into our 3rd Leg program, significantly grown their local share of the revenues in the markets. Sometimes of course it’s a little frustrating when the market over three years is down $3 million, and we’re up $0.5 million. We’re only up $0.5 million, which is nothing to have a party about, but obviously we’ve grown our share dramatically in that market, and that’s about all we can ask our local people to do.

But that’s the end of Part 1 of the 3rd Leg. We’re now going into Part 2 of our 3rd Leg, because it gets harder, in that the competition doesn’t play dead forever. As I mentioned, a lot of other broadcasters are talking about local sales initiatives, and they’re breaking out local to show the strength and the growth of local, and this is not lost on other broadcasters. This is a very important initiative.

So, after, the Part 2 of the 3rd Leg, after getting the first programs ironed out and working, and which are now producing $25 million a year across the group, across the nine stations, we are launching new programs to expand local further.

And I must say that the culture at our stations has developed so that 3rd Leg ideas and programs are expected and looked forward to. It wasn’t the case at the beginning, because it certainly wasn’t the way we used to go about our operations in the sales departments of our stations. But we are very, very, very proud of this effort indeed.

So to kind of sum up, we are driving up our local revenue. We’re dramatically reducing our costs, and actually the local revenue is kind of producing one interesting aspect right now, that KRON is the best pacing station in the group by far right now. Which is a nice turnaround for that station, it is indeed by far the best pacing station in the group, not just locally, but locally, nationally and all around. So, that’s a very important item I think right now.

And we have upcoming retransmission discussions, looking forward to that a lot. We’ve been developing retransmission dollars, as you’ve noticed, from the satellite and phone companies, but we have more interesting discussions that will come up that I think Jim will say a word about.

And with that, I will turn over to you, Jim.

James A. Morgan

Before I get started, I have gotten a couple questions from analysts who have been looking through our numbers, and have got some confusion about how the discontinued operations break out there, seeking to figure out KRON’s broadcast cash flow. In reviewing it, I think we should disclose a couple of other things, which I will give you right now, to help you get to the answers I think you’re seeking. And I will be, later today, putting out a revised financial page to include these disclosures.

The first thing is I think is causing some confusion is the way the discontinued operations work. Our other financial data, which includes, where our amortization of program rights are, our payments for program license liabilities, capital expenditures is inconsistent, as far as the accounting rules for discontinued operations, is inconsistent in what I know a number of you are trying to accomplish.

So, let me clarify a couple of things. First the amortization of program license rights is in fact correct, those numbers, $9.394 million in ‘06 full year; $9.404 million full year ’07; $2.542 million for the first quarter of ’06; and $2.484 million for the first quarter of ‘07, those numbers are all correct. They pertain just to the continuing operations and KRON is not in those numbers.

Payments for program license liabilities should be, for the full year 2006, they should be $9,448,000, and that is just the program license payments for the continuing operations, the affiliate group excluding KRON.

For the full year ‘07, the program license payments were $9.306 million; for the three months ended December 31, ‘06 they were $2.504 million; and for three months ended at December 31, 2007 they were $2.386 million. Those numbers, as I say, exclude KRON, they include only the continuing operations, which are the network affiliates.

The capital expenditures number also had in it the KRON numbers in the press release, strip those out for the full year 2006 they should be $3,716,000 that is the CapEx we spent on the affiliate group; in 2007 it was $5,621,000. For the three months ended December 31, ‘06 it was $759,000 and for the three months ended December 31, ‘07 it was $993,000, and those numbers are all for just the affiliate group.

We’ll be revising the press release financial page to make that clear, and I’ll be issuing that again this afternoon.

Second thing that I think causes some confusion is the loss from discontinued operations. What we should footnote in there, and we did not in the original press release, is that those numbers, the loss from discontinued operations, include some deferred tax-affected items.

Now deferred taxes, the account for deferred taxes, because of the accounting conventions, we are unlikely to have to pay these taxes in the future, but if you take the numbers that are disclosed as loss from discontinued operations, let me give you the numbers that are included in there for taxes.

For 2006, the loss from discontinued operations is $22.151 million for the full year, included in that number is deferred taxes of $17.041 million. For ‘07 for the full year it was $28.122 million includes deferred taxes of $17.474 million.

For the final quarter of 2006, the loss from discontinued operations of $2.424 million includes deferred taxes of $4.260 million, and finally for ‘07 the $5.048 million loss from discontinued operations includes taxes of $3.020 million. As I say, we’ll be putting out an expanded page to make that clearer. That should enable you to get back to the BCF numbers you’re looking for.

A couple other things, Vincent said we’d give you some ground rules on the KRON auction. There’s a statement in the press release that we are not going to have an agreement signed by the end of the first quarter. This proves that we were a little bit too optimistic when we put out the January press release. We are continuing with the auction process, it’s going satisfactorily.

We’re pleased with the efforts that Moelis has been making on our behalf. We’re very pleased with the response we’ve gotten from two of those discussions. We’ve had a number of parties who’ve signed disclosure agreements with us. We’ve sent out the books on the station to quite a number of parties. He’s in the process and continuing apace. The fact that we’re not going to get done by the end of the first quarter should not be taken as something out of place on the auction.

Now with that said, we are not going to be going beyond that in Q&A. So, if you want to ask questions about the KRON auction, you’re going to get essentially a no comment. But if you want to ask, go ahead and ask, but we’re going to get, to give you nothing beyond what I’ve already said and what’s in the press release.

Moving on to things that I think are clearly optimistic things for the company in the future and I expect for the industry, as you’re all aware, our retransmission renegotiations are coming up this year. Most of our agreements expire at the end of 2008.

We are starting in the preliminary stages of beginning to discuss with people, with cable operators, the value of our signal and how we fit that signal and the value of that signal is important to their business, and important to them to continue to carry it. We need recognition of our value, and we will be negotiating hard for that recognition.

We’re already seeing in some markets, some interesting battles developing between the cable folks and the telcos who put in fiber optic video to the home. And they are now becoming heavy competitors. Those competitors are competing in all the usual ways, including interestingly enough, with television advertising. The cable operators and the telcos are becoming major advertising categories on a number of our stations that have these kind of things starting up.

Which leads me to my other comment that I’ve made on a number of calls, when we talk about cable retransmission and satellite retransmission and telco retransmission, we talk about dollars and cents. And those dollars and cents are real cash that I can take over and deposit in Wachovia, our principal bank.

That cash is not sullied up by, we did a deal that guaranteed a certain amount of advertising, or we think that we can place this much value on placements on the cable systems or that kind of thing. This is pure cash. We don’t include in our retransmission non-cash type things, which I think some of our other brethren may be less careful about doing.

Cable, the telcos, satellite are all major advertisers, and they will continue to advertise on us, regardless of retransmission agreements. So, we don’t think advertising revenue trades for retransmission are necessarily a good trade. The advertising is going to occur anyway.

Finally, I want to talk a moment about the expense reduction plan that Vincent talked about, and we put a press release out several weeks ago about. That has done very well for us. We are very pleased with it.

Virtually all of the cost savings in there are either in place or are in the final stages of being put in place. This is not a pie in the sky thing for our $13 million we talked about this year. This is real cost savings that are coming in now. The future cost savings have been identified and will be worked in.

One of the things, I think, as a management team we are driven to is being a low cost television operator, with quality programming, competitive newscasts, everything that our sales folks need to sell, but really rethinking all those department usages that we used to have, all those areas we used to have, how much they add to our bottom line and how much do we need to do. We’ve made some cuts. They’ve been very painful cuts.

There’s a lot of very good people who we’ve separated from. We fortunately are through most of the personnel issues we have there, most of the personnel cuts. But we look forward to the future, because we see cash flow and benefits coming out of these cost savings for the shareholders in the future.

Vincent J. Young

I think with that, operator, we’d like to turn to questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question is from Bishop Cheen - Wachovia.

Bishop Cheen - Wachovia

The cash balance, the exact debt numbers, but especially the cash seems important at 12/31, and also if there any significant cash inflows or outflows other than normal operations, that you anticipate or have already occurred in Q1, that would be helpful.

James A. Morgan

At December 31, our senior bank debt was $341.6 million. Subordinated debt, debt issue, which are the two issues, the 10% and the 8.75% is $486.1 million, cash balance at the end of the 12/31 was $62.9 million. With respect to your other question, are there any unusual or strange payments in and out that we have to account for, no, there aren’t. We don’t have anything peculiar or that would affect that.

Bishop Cheen - Wachovia

So, follow-up to your clarification, the BCF numbers that we have in the press release right now, the station operating performance numbers, are they still relevant?

James A. Morgan

Yes, the SOP numbers are relevant, Bishop. Those are the SOP numbers for continuing operations. They exclude KRON. As you are well aware, because of the SEC’s rules, we have no longer actually calculated out BCF.

We give other financial data to enable those people that want to still figure that out, which I think are probably many people, to figure it out, and I realize that by strictly following the balance sheet, income statement and statement of cash uses, we put numbers which I think are totally confusing some people who try to take those numbers on down to BCF line. That’s why we’re going to put a corrected one.

Bishop Cheen - Wachovia

Understood, and then I don’t know if you plan to do this, would be issuing a restatement of prior Qs for ‘07 and ‘06 with out KRON because it would be helpful when trying to do our LTM kind of tracking.

James A. Morgan

Yes, when we put out the 10-K, we will have in there a complete build-up for KRON. I’ll have to make sure. I will check that right now, Bishop.

Bishop Cheen - Wachovia

The way it used to work in a more normalized world from program payments, let’s say you sell KRON and the buyer doesn’t want to take the program obligations and you’re sort of stuck with the program obligations. But you find, or the syndicators help find somebody else to take the obligations, and it’s a debits and credits onto your books as to your program obligations. Is that possible this time around, or does the program obligations that you carry have to go with KRON?

James A. Morgan

Well, program obligations, every television station, as you know, has 24 hours a day that it needs to fill, and it needs programming for that. So, program ownership is the key thing that somebody’s looking at when they’re evaluating it.

Now whether or not they need all of that or want all that or feel it’s appropriately priced, that’s all part of the negotiation. We obviously have no need to retain programming rights in San Francisco without a station. But at the same token, the buyers will need it to run a station. So, I think that the specifics go to the individual buyer negotiations.

Bishop Cheen - Wachovia

Yes, so it’s going to depend on the deal, whether you have any adjustments back onto your balance sheet at some point after you sell it?

James A. Morgan

Yes, when you get into a negotiation to close a deal, there are a whole bunch of things that go into that. You’re referring to program payments, and that is something that is always a subject of discussion there.

There’s discussions about who gets the net working capital, that kind of thing. Those are all discussions which occur between the buyer and the seller to arrive at what the real transaction price is which as I recall; you’re pretty good at ferreting out when you push the numbers around.

Operator

Our next question comes from [Meredith Allen] with Bear Stearns.

[Meredith Allen] - Bear Stearns

I just wanted to follow up and see if you had yet received your asset appraisal?

James A. Morgan

Yes, Meredith we’ve done all the work necessary to complete the 2007 financial statements. We have, that is part of our FAS 142, 144 consideration of our intangibles, and the carrying value of our investments is part of it, and the results of that are reflected in the financial statements.

[Meredith Allen] - Bear Stearns

Can you share with us the appraisal figure?

James A. Morgan

I am not going to share with you the appraisal figure, because I think that the appraisers have in general become more concerned about our giving exact numbers, at least I’m hearing from them. But I’ll tell you that the appraisal figure does not require any write-down of any of our intangibles or any of our assets.

[Meredith Allen] - Bear Stearns

Can you give us a sense as to how it compares to last year’s figure, qualitatively even?

James A. Morgan

It’s in the ballpark of last year’s figure. It’s higher than our carrying values.

[Meredith Allen] - Bear Stearns

What were your NOLs as of year-end?

James A. Morgan

Why don’t you ask another question, and we’ll get the exact number. Because I think it’s about $420, but I want to check that.

[Meredith Allen] - Bear Stearns

Okay, just in terms of the way that KRON is held, structurally is it in its own operating entity and does it have net operating losses that are unique to it?

James A. Morgan

Well, as we’ve talked in the past, KRON is indeed held in its own operating entity. As a separate subsidiary, it’s been generating losses. It’s part of our consolidated tax return. It’s generating losses over the years.

If we were to sell KRON, there are two ways of selling it. We could sell it with a traditional asset sale mechanism, in which the buyer buys assets, writes them up to the purchase price, and then amortizes those assets over the period of years associated with it, usually pick that, but it’s anywhere from 5 to 7 years and intangibles for 15 years.

As you all know, we carry KRON in the $360 million range. If someone were to buy KRON for that kind of a price today, they would probably find it a more attractive idea to buy the stock of KRON, because they would step into our shoes with the amortization of the intangibles. It would be a wash basically to the value you placed on the intangibles in that kind of analysis.

The reason you step into our shoes, of course, is we only have seven years left to go on the amortization, so you can in effect double up your early year amortization rather than taking it over the 15 years, which you would if you started fresh. So, that’s the possibility, and if we sold the KRON stock, we would have to allow the NOLs associated with that to follow the sale.

At year end, I was wrong, we actually have $522 million worth of NOLs for federal tax purposes, and about, I think it was about $350 million of that is associated with KRON.

[Meredith Allen] - Bear Stearns

And can you just remind us, what’s your basis in that asset?

James A. Morgan

Our basis in that asset in KRON is $365 million.

Operator

Our next question comes from [Ken Silver] - Royal Bank of Scotland.

[Ken Silver] - Royal Bank of Scotland

You mentioned retransmission in your prepared remarks. And how you expect to get cash when you negotiate a deal. What about carriage of your digital channels is that going to be part of a deal?

James A. Morgan

Vince has been yelling at me, I should make one comment on Meredith’s account. $365 million is our inside basis. The basis of stock in KRON is about $738 million.

To answer your question, Ken, retransmission, I carefully did not say we expected to get cash. I said we expect to have negotiations which will have full realization of the value from the cable operators. I’ve stayed away from saying that we’d be demanding cash, which is probably what you’d infer from my comment. Where our lawyers are concerned, we appear too aggressive on that subject, all likelihood that that will be the outcome.

We do have significant carriage rights already. In the last round, 2.5 years ago, that was the principal negotiating point between the cable operators and ourselves, full carriage of our 19.6-megahertz digital spectrum. We wanted that to be on the table and not in dispute, and in that we were successful.

As a result of that, we have several of our stations have local weather channels, which they program and sell advertising on. We have, at least in Sioux Falls, a station, a MyNetwork affiliate, which is broadcast through our digital capacity, in addition to KELO, which is our primary CBS affiliate there. So, we continue to look at ways to develop the extra digital capacity, and that digital capacity is for the most part assured in our cable retransmission agreement.

[Ken Silver] - Royal Bank of Scotland

Cable carriers?

James A. Morgan

Cable carriers. Right.

[Ken Silver] - Royal Bank of Scotland

In terms of the auction of KRON, does the bank agreement, as it’s currently stated, require asset sale proceeds such as those that would come from KRON to be used to repay bank debt?

James A. Morgan

The priority of repayment, first thing happens is when the cash comes in, we have a period of time, I think it’s 360 days, to reinvest it in other broadcast assets. Then we, or anytime during that 360 days, if we decide we want to pay down some debt, what we can, we have to do is first pay the senior secured bank debt.

That senior secured bank debt of $341 million would be in the first place it would, we’d go to. Depending on whether we sold KRON and generated more cash than the senior debt obligation, we would go down to the sub-debt. Sub debt, the 10%’s are callable today. We could potentially call those, or we could do some pro rata offer to both of them. And depending on what we sell KRON for, there is a strong possibility we’d look at refinancing the senior secured debt and rearranging that.

[Ken Silver] - Royal Bank of Scotland

Are there maintenance covenants in the existing bank debt right now, the term loan?

James A. Morgan

The existing bank debt is covenant light. It is a debt and currents test, and the only maintenance covenant is that we continue to have $10 million of cash on the balance sheet. We have about a little bit over $62 million at the end of the 2007.

[Ken Silver] - Royal Bank of Scotland

On the first quarter, can you just give us a sense of revenue pacings?

James A. Morgan

We have not given first quarter information out. We have not given guidance on that, and so we would prefer to stay away from that.

[Ken Silver] - Royal Bank of Scotland

Can you say whether, you think it’s going to be positive or negative?

James A. Morgan

That’s a form of guidance Ken, and no, we can’t.

Operator

Our next question comes from [Sam Yaaks - Private Investor].

[Sam Yaaks - Private Investor]

Good morning. I was wondering, there is some interesting things going on in the Richmond, Virginia market with Raycom, and they have to sell one of the stations. How do you think that’s all going to shake out?

James A. Morgan

We can’t really tell you that, because we’re obviously not privy to what Raycom’s got, but it does make it for an interesting upsetting development in the marketplace. Anytime a station like that is sold, which is a good, solid station in that market, it causes opportunities for others.

[Sam Yaaks - Private Investor]

Your stock price, to me, as an investor, it seems awful under-valued. Do you have any insights on what happened? It just seemed to fall off the earth, and hopefully it’s coming back and heading in the right direction, but do you have any comment you want to make on that?

James A. Morgan

Getting in the minds of investors is always a tough thing. We had a quarterly Board meeting the other day, and we had a fair amount of discussion on it. I think the consensus of the folks is that the television industry in general today, there are a number of people that are kind of down on us, and as a highly levered member of that community, we may be taking a disproportionate share of the approbation.

Operator

Our next question comes from Lance Vitanza - Concordia.

Lance Vitanza - Concordia

The KRON process, I would imagine, resulted in what I would at least consider to be one-timish type professional fee expenses and so forth that I wouldn’t want to deduct from my calculation of SOP or EBITDA. To the extent there were expenses along those lines, where are you including them? Are they in the corporate overhead line, or did those start after the end of the year, and so there is none in Q4, could you help me out with that?

James A. Morgan

Lance, if there are any in Q4, it’s minimal. The professional fees, there are some legal, but very minimal, in Q4. That really starts up in Q1. We will identify those. We keep them in corporate overhead, though.

Lance Vitanza - Concordia

And then if I just take the SOP, deduct the overhead, the CapEx, and what I would expect your actual cash interest outlays were in Q4, I’m coming up with about a $10 million increase in cash, yet your cash balance looks like it was up only $5 million since the end of September. Is the delta KRON losses, working cap related, what?

James A. Morgan

It’s partially KRON losses, there’s probably a little bit of working capital, although I would have to go though and detail that out. The CapEx for the quarter was not extraordinary; it was a little bit over $1 million including KRON.

Lance Vitanza - Concordia

I’ve got that, but $15.5 million of EBITDA, less $1.1 million of CapEx, less $4.5 of cash interest expense, you’re right around $10 million, in terms of a simple increase in cash. And as I mentioned, yours was up only $5, so just wondering where the other $5 million, I guess, were there cash taxes that you guys wound up paying?

James A. Morgan

There was, we pay our cash taxes on an estimated basis. There wasn’t any particular amount in there that stands out, and our cash taxes are pretty miniscule.

Lance Vitanza - Concordia

Could you just sort of go through local, national, political, in terms of the percentage comps versus last year?

James A. Morgan

In percentage, I did comment on local and national and how we did last year versus this year. The outlook’s in the press release. Let me, I’ll offer a couple comments. Vince is going to see what he has, but we had a pretty good political in the fourth quarter.

We had some good races in Louisiana and in Iowa. Iowa we got a lot of political from the presidential, which made it, the political, not as weak as it usually would be in the fourth of an odd numbered year. With respect to local for the quarter, local and national combined were up 2.8, and I think the bulk of that was local. Vincent?

Vincent J. Young

Yes, we had a fair amount of information just in the headline of the press release about local and national, and then I went into local growth earlier on in the call, I don’t know whether you heard that, but it’s now, of the local/national mix, it’s, instead of 60:40, it’s now 74% of the local/national mix.

Some of that is because national has slowed down and in some years it’s negative, but the majority of the reason is because local is growing so much, and we have a long list from all of our stations of the success stories of local accounts that we’ve gotten on the air. Sold them a thoughtful program about how to use television intelligently, and these local retailers, whether it be a car dealer or a jewelry store or anything else, have seen incredible results.

Bottom line is TV works, and that’s our biggest asset. The biggest thing we have going for us is that television works like crazy. It still works like crazy, and it’s a great media to be in.

We have, we had situations where, when you look at the sort of circulation that you get from a TV schedule, there’s nothing like it that you can buy in your local markets in print or radio or anything. There is nothing like it that has the reach and the circulation that a TV schedule can have. Where else can you go to get a 20-rated spot or a 20-rated news spot in some of our stations, or even a 25-rated news spot? I mean it’s just, the power is there. So, we’re very optimistic about where we take this in the future.

Operator

All right. Next question is from David Shapiro - Aegis Financial.

David Shapiro - Aegis Financial

In regards to 2008 and your ad revenues, how do you, I know you’re not issuing guidance. How do you see the season from sort of the 10,000 foot high level shaping up versus ‘06?

Vincent J. Young

You mean the last political cycle?

David Shapiro - Aegis Financial

Right, how do you view the opportunity coming about this year versus the last cycle and how it may affect you?

Vincent J. Young

We’re very careful about internal planning on the political line, because we don’t want to be overly optimistic, and then have it come around and bite us. So we’ve often been pretty sober about how we internally budget that. And then I must say every cycle we’ve been pleasantly surprised by the amount, and it’s not just the candidate money, but a lot of it is issue money.

And issues tend to have two sides to them. We wish they had three and four sides to them, but we’ll take two. But, that’s very important in places, in California and all across the country; we see a lot of issue advertising.

As we see the candidate races develop in the past, we like presidential years, but we really like the big in-state races, the US Senate races and the governor’s races, that’s where television had always done well in the past. And the presidential candidates would buy network time and not spend a lot of money on local television, and then when they discovered the so-called swing states, then we started to see a lot of presidential money as well.

We still own, happily, a number of stations in swing states, such as Wisconsin, Michigan, and Virginia, Tennessee and so on. And significant stations with good newscasts that are very much in demand.

So, we’re still trying to be sober and careful about how we look at ‘08 developing. I’ll just say we’ve been pleasantly surprised in every past cycle, knock on, I am actually touching wood as I say that, but TV is a way that people who want to get a message across have found to be the most dynamic way to do it, the most successful way to do it, whether that’s candidates or issues.

So, we think we’re in a pretty good space. From a 10,000-foot level, the rest of the business looks fine, and we’re meeting challenges as they come up, and we’ll see how the political develops, but it should be a good year for the industry.

David Shapiro - Aegis Financial

On your NASDAQ delisting comments, what alternative plans does the company have in place, assuming the stock cannot maintain a $1 level for the necessary amount of trading days?

James A. Morgan

Well, we’re optimistic it is going to maintain that, but if it doesn’t, there are some discussions we’ve been having internally that I’m not really prepared to describe in detail on a conference call at this time.

There’s 180 days, trade above $1, and I think just looking over the last week or so, we seem to have moved up above $1 for a number of those, I think all of the days this week. So, I’d be hopeful that would continue for the next week or so, which would address the situation.

David Shapiro - Aegis Financial

Is it management’s intention, though, to keep the stock listed on NASDAQ and to do what’s necessary?

James A. Morgan

We would like to, yes. But do what’s necessary is a large, all-encompassing term that I really am not prepared to address like that.

David Shapiro - Aegis Financial

In regards to sale of KRON, without getting specifically into buyers or anything like that, do you believe that the financing atmosphere, or the lack thereof, in the markets right now, the lack of liquidity, is that really hurting the process in your opinion? Or is there something else going on with your process, something special that you really think this is going to have very limited impact?

James A. Morgan

We think it’s a very unique asset in San Francisco. It’s a UD, it’s mounted on Mount Sutro, which poises over the city, has excellent coverage. It is a strong news competitor in that market. As Vincent mentioned, it’s doing very well in this year’s pacings. We think that it’s a unique type asset, appealing to people who may or may not be constrained by the current state of the capital market.

David Shapiro - Aegis Financial

On retransmission, right now retransmission’s a de minimus amount of your revenue stream, correct?

James A. Morgan

A little bit over $3, about $3.25 million.

David Shapiro - Aegis Financial

And that’s sort of just based on your non-cable outlets, correct?

James A. Morgan

I wouldn’t, because of confidentiality, I’m not going to characterize it beyond its retransmission content fees, but you would be right to assume cable’s a small component.

David Shapiro - Aegis Financial

That $3.25 million is an annual number?

James A. Morgan

That’s correct.

David Shapiro - Aegis Financial

Cable right now, as far as your viewership over cable, about what percentage is that, currently?

James A. Morgan

In the high 60s. Let me comment one thing on that, though. It’s in the high 60s, but the cable last year, or year before last, actually had a down year, and I don’t know what the numbers are for last year. Cable is under increasing pressure from the telcos and from the satellite guys, the alternative delivery systems, those are growing by leaps and bounds, and cable is under pressure.

So, which is one of the reasons why I’m not sure how aggressive cable is going to be in our negotiation, because cable faces a situation where a large proportion of main markets, over half of their audiences of the over-the-air signals, and if they aren’t going to have those, but the other guys are having them, they may have an uneconomic distribution.

Operator

Our next question is from Avi Steiner - KBC Financial.

Avi Steiner - KBC Financial

If you, in your negotiations to sell KRON, have to retain programming, could you just remind us maybe some of the terms of the major programs you have on, Dr. Phil, I think Sex and the City?

James A. Morgan

Okay, off the top of my head, Dr. Phil goes out to 2011. I think our other major syndicated programming that we have on a daily basis is Entertainment Tonight, and that goes out to a similar type time period. Sex and the City, I think we have one more year on that, and that expires, and I can’t think of any of the others that are really significant. Those are the three primary shows.

Avi Steiner - KBC Financial

Perfect, and then on the cost savings dollars your referenced in the press release, $13 million and the $19.5 on an eventual basis, there’s nothing related to KRON in that, is that correct?

James A. Morgan

No, there are a small amount related to KRON, less than 10%.

Avi Steiner - KBC Financial

On an earlier question, as it relates to the bank agreement and proceeds, if you get consideration for KRON other than cash, let’s say other stations, as an example, are there any restrictions or anything you would need to deal with on the bank agreement or perhaps the bonds, if that were the case?

James A. Morgan

I think that would be treated much like the selling for cash, using cash to buy another television station.

Avi Steiner - KBC Financial

Did I hear correctly that the inside basis or effectively the book of KRON right now is $365, is that right, and you had no need for write-downs? Did I hear that accurately?

Operator

Our next question is from Bishop Cheen - Wachovia.

Bishop Cheen - Wachovia

Jim, maybe I missed it, but I don’t think you ever gave us, if you could, the net political for the four reporting periods shown on the press release, I know you talked about the net difference.

James A. Morgan

The net political, Bishop, I could do it really quickly. If I did that, I fear that I might screw something up quickly. It will be in the 10-K. It will be out in a day or so.

Bishop Cheen - Wachovia

You will show it for on the restated. So, it’ll just be the affiliate?

James A. Morgan

That’s correct.

Bishop Cheen - Wachovia

So the K will be out Monday?

James A. Morgan

No, the 10-K will be out in the middle of next week.

Vincent J. Young

We are very pleased to be able to report the fourth quarter and the year and to let you know what the plans are going forward. And we’ll be speaking to you again about first quarter results and any other subsequent events maybe before that. Thank you very much.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

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.

If you have any additional questions about our online transcripts, please contact us at: [e-mail]. Thank you!