ACME Communications Inc Q4 2007 Earnings Call Transcript

ACME Communications Inc. (ACME)

Q4 2007 Earnings Call

March 25, 2008 4:30 pm ET

Executives

Jamie Kellner – Chairman and Chief Executive Officer

Doug Gealy – President and Chief Operating Officer

Tom Allen – Executive Vice President and Chief Financial Officer

Analysts

Nelson Obus – Wynnfield Partners

Harvey Hanerfeld – West Creek Capital

Eric Von de Porten – Leeward Investments

Bobby Melnick – Carrier Partners

Presentation

Operator

Ladies and gentlemen, welcome to the ACME Communications Fourth Quarter 2007 Teleconference. Copies of the earnings release have been sent to you for your information and reference during this call. If you have not received the earnings release please call Brainerd Communicators at [phone] If you have become disconnected during today’s teleconference, please hang up and dial [phone] to be reconnected. (Operator Instructions)

Before I turn the call over the ACME management I would like to note the company’s forward-looking legal disclaimer. Today’s call will include forward-looking statements in both the prepared comments and in the Q&A session that follows. ACME cautions that these statements are subject to a number of uncertainties and actual results could differ materially. For a review of the factors that could cause ACME results to differ, please see the company’s earnings release form this afternoon and consult its filings with the SEC.

I would now like to turn the conference over to Tom Allen, Chief Financial Officer of ACME. Please go ahead now, sir.

Tom Allen

Thank you, operator, and welcome everyone to ACME Communications Fourth Quarter and Year End 2007 Earnings Conference Call.

This afternoon’s conference call is being simulcast via our corporate web site, www.acmecommunications.com and will also be available for replay on both our web site or by telephone as indicated in this afternoon’s release.

With me on our call today are my colleagues Jamie Kellner, Chairman and CEO of ACME, and Doug Gealy, our President and COO. After we conclude our prepared remarks we will be happy to take your questions.

ACME issued its Fourth Quarter and Full Year 2007 Earnings Results after the market closed this afternoon. As indicated in the release, the results of our Champagne-Springfield-Decatur, Illinois (WBUI) station sold on October 25, 2007. This reflected a discontinued operation, along with our Ft. Meyers-Naples, Florida (WTVK) station sold earlier this year, for all periods presented in our earnings releases.

Affecting our quarter comparisons against the fourth quarter 2006 is the fact that The Daily Buzz is included in our consolidated numbers this quarter but for the fourth quarter 2007 was accounted for using the equity method. Due to the inclusion of The Daily Buzz our fourth quarter net revenues increased 8% in 2007 compared to the fourth quarter 2006. But for our continuing six television stations our fourth quarter net revenue declined just short of 4% compared to a year ago. Cash-based stations operating expenses for the fourth quarter increased 11% on higher programming payments and advertising and promotion expenses compared to the fourth quarter 2006.

At The Daily Buzz our revenue for the fourth quarter was $884,000. While we did not consolidate the venture in the fourth quarter of 2006 the revenue figure for the fourth quarter of 2006 gave a basis to a 95% increase year-over-year for the revenue for the show. The show actually delivered a modest positive cash flow of $39,000 for the fourth quarter of 2007 compared to a negative cash flow of $166,000 for the fourth quarter of 2006, which represented just our half of the losses as Emmis was still sharing 50% of the losses at that point in time.

Our resulting overall continuing operations broadcast cash flow for the quarter was $453,000 compared to $1.1 million for the fourth quarter of 2006.

Our full year BCF was $2.3 million compared to $3.6 million for 2006.

Our fourth quarter EDITDA was negative $405,000 compared to positive $153,000 for the fourth quarter of 2006 and our full year EDITDA was negative $1 million compared to positive $152,000 for calendar 2006.

Other notes on our fourth quarter results: corporate expenses decreased 12% to $899,000 for the quarter compared to $1 million for the fourth quarter of 2006 on lower G&O insurance; JamieKellner has waived consulting fees effective November 1; and the shut down of our corporate graphics department in of June 2007.

Interest expense for all periods through the date of our Champagne-Springfield-Decatur, Illinois (WBUI) sale has been allocated to Discontinued Ops as the proceeds relate to the sale of our Salt Lake City, Utah (KUWB), Ft. Meyers-Naples, Florida (WTVK) and Champagne-Springfield-Decatur, Illinois (WBUI) stations exceeded all our outstanding balances for all periods presented.

Depreciation and amortization for the quarter was $768,000 compared to $836,000 for the third quarter of 2007 due to more assets becoming fully depreciated than placed into service over the past several quarters.

Based on our annual formal evaluation of our broadcast license values we booked an additional charge during the fourth quarter of $1.5 million bringing our full year impairment charge of our broadcast licenses to $5.3 million. These impairment charges reflect lower than previously expected market revenue growth in virtually all of our markets with the exception of Albuquerque.

Capital expenditures for our continuing station operations for the fourth quarter were just $59,000 and for the full year was $1.8 million respectively. We expect our full year 2008 capital expenditures to be around $0.5 million.

Our loss before income taxes from discontinued operations for the quarter was $188,000, made up of losses at our Champagne-Springfield-Decatur, Illinois (WBUI) station and interest expense for the month of October. Our pre-tax loss for discounts for the fourth quarter of 2006 was $253,000, which represents significantly higher interest expense along with Decatur station losses, net of operating income from our Ft. Meyers station.

As of December 31, 2007, we had no outstanding debt under our revolving credit agreement compared to $2.7 million outstanding at September 30, 2007, which was repaid with the proceeds from the Decatur sale in October.

In our release this afternoon we provided guidance for the first quarter 2008. Based on our current sales pacings and a continued soft advertising environment we expect our continuing six stations to generate a first quarter year-over-year revenue increase in the range of 1%-2%. On the expense side we expect cash-based station operating expenses to increase in the range of 5%-6%, driven by an expected 14% increase in program payments. We do not expect these increases to be indicative of our expense growth for the full year, which we preliminarily expect to run in the range of 2%-3%.

We expect that The Daily Buzz, due to seasonality and its advertising revenues, will post a negative cash flow for the first quarter of 2008, but that cash flow will be less than the first quarter 2007 with a negative cash flow of $161,000, which represented, again, only one half the show’s loss since Emiss was sharing in those losses for the first quarter of 2007.

Based on the foregoing, we expect our broadcast cash flow for the first quarter to be in the range of $325,000-$425,000 compared to a first quarter 2007 broadcast cash flow of $611,000.

I’m going to turn it over to Doug now for more detailed comments on our fourth quarter results and our outlook for the first quarter. Doug.

Doug Gealy

Good afternoon. Our continuing stations’ fourth quarter revenues were up 1% locally and down 12% on the national side for a total of (3.7%). For the full year, the local was down 2%, national down 6% for a total of (4%).

Fourth quarter stations market and revenue performance—and I’ll also give you a year-to-date, for the full year—fourth quarter market revenues were up 8.1% excluding political and down 19% including political. Full year market revenues were up 0.6% ex-political and down 11% if you included political.

Our fourth quarter revenue share is down 7% excluding political and up 19% if you include political. Four-year shares are down 2.5% excluding political and up 9% if you include political. Our markets only had a total $760,000 in political in Q4 and $4.4 million for 2007.

Looking in categories. Automotive you’ve got—you’ve all hear the woes there. Our domestic is down, and I’m going to give you the quarter then followed by the year. Domestic automotive is down 12.4% and down 16% for the year. Foreign minus 33% and 22% for the year. Local is plus 97% and plus 54% for the year. And total automotive spending for the year is down 5.9% for the quarter and 7.5% for the year. Retail for the quarter was down 6% and 12% for the year. Soft drinks down 65% for the quarter and 15% for the year. Fast food came back strong in the fourth quarter with a plus 70% and for the year was plus 11.4%. Movies continued to be soft at minus18% for the quarter and minus 6% for the year. Political was minus 94% and minus 73%. Total political for us in Q4 2007 was $18,000 and full year was $104,000. Corporate packaged goods, we were up 6.3% in the quarter and plus 15% for the year. Schools and education, plus 8.7% for the quarter and down 1.5% for the year. Telecommunications were up 76% in the fourth quarter and plus 29% for the year. Banking and financial, we were down 13% for the quarter and minus 16% for the year.

On the pacing set up for first quarter we finished January at plus 2.4%, February plus 5.3%; March is currently pacing down at 1.3% for a quarter pace of plus 2%.

We just received our last ratings book from February and our Albuquerque market--I had a brief moment to look at it before I got on the call. All four of our metered market stations show year-to-year gains in key day parts with the exception of prime time and there is an exception there, at that’s My Network television station which had virtually no ratings last February and prime is up nicely in February 2008. Our two [inaudible] markets are down year-to-year in February, but are both up from our November performance.

On The Daily Buzz side, Tom talked about we’ve turned our first ever stand alone profit; we’re happy about that and expect the profit and revenue to grow at The Daily Buzz with The Daily Buzz going fully this year. And we are way ahead on our renewals with current affiliates versus last year.

And with that I will throw the call to Jamie.

Jamie Kellner

Can you give me a little color on the switch in revenue from the national to local on the cars.

Doug Gealy

We’ve had to put together a program and promotions to get our local dealers and keep them on the air—that’s one reason why our local is off so much. There’s also been some chaos with some dealer groups and where money used to be spent nationally and some of the money has now been moved to local agencies. But generally, automotive in general has been soft but the good news for us is the local automotive dealers realize the value of our younger demo.

Jamie Kellner

I think it’s better from a local than it is from a national and I think also what we told you on the last call about the early books that we had had—Knoxville and Dayton—we had said that we thought were really strong performances and they really led to the, I would say, better than average returns that we’ve had in this quarter versus our peer groups. Is that not true, Doug?

Doug Gealy

Yes. In fact they’re both doing very well in the first and second quarter for this year, also. In fact, very good, both.

Jamie Kellner

Okay, we’ll take questions then.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question is coming from Nelson Obus of Wynnfield. Please go ahead.

Nelson Obus - Wynnfield Partners

You said on the call that we have no debt. Do we have any cash balance at the end of the year.

Doug Gealy

A little over $800,000.

Nelson Obus - Wynnfield Partners

Okay. Jamie, perhaps you could give us an update on the efforts to liquidate the company. It seems like the market place has already liquidated the company but hopefully you’ll be able to do better. I mean the stock market.

Jamie Kellner

You mean in terms of our efforts to sell individual stations?

Nelson Obus - Wynnfield Partners

Yeah. I think now we’re talking about putting the lights out on this thing ASAP. I mean, it’s kind of getting silly. But go ahead. I mean, I know you may have to do it incrementally, but the stock dropped below $2 the other day so the quicker we halt the pain the better. So give us an update.

Jamie Kellner

Well, the update is we are in the same position we were in our last call. We have--our broker has been working with a number of different clients and having discussions and it takes time. And the existing market and the credit markets certainly doesn’t help that. So there is not anything more that we can tell you today than we did three months ago.

Tom Allen

That’s not to say that we haven’t had meetings at the stations and had people through. And we’re still getting our weekly updates from Brian Cobb, who’s pushing.

Nelson Obus - Wynnfield Partners

Okay.

Jamie Kellner

But we’re not in a position to announce anything or tell you that we feel more positively today than we did three months ago.

Nelson Obus - Wynnfield Partners

Apart from non-program expenses—I mean apart from program-related expenses, what do you expect expenses to be in 2008 versus 2007?

Tom Allen

Excluding programming payments?

Nelson Obus - Wynnfield Partners

Yeah.

Tom Allen

I’ll answer that. Let me answer that before we get off the call. But obviously it’s a pretty small number, if not negative, for the station.

Nelson Obus - Wynnfield Partners

Okay. I mean, what can you say about The Daily Buzz in terms of—it’s very hard for me to—I think it’s very hard for all the shareholders to understand whether or not we have something that could truly add to the liquidation value here or whether—it’s a nice achievement to get it positive but just not a lot of leverage. I guess I’m focused on the potential ability to meaningfully affect the positive cash flow.

Jamie Kellner

The initiation of the program was to fill a programming gap that we felt we had on our stations and it was done in such a way that we didn’t charge the stations a license fee so it always came up with a negative but as we justified it each year it was because Doug felt very strongly that The Daily Buzz generated enough local revenues for the stations to justify the negative on the corporate side each year.

We’re now at a place where it is no longer a negative; it’s a positive. And it still provides a positive, on a local basis, for each of the stations. So while it’s a very small achievement, probably for most people to look at it in terms of the overall positive, it still helps every one of the stations. And as Doug mentioned earlier, the distribution is now is getting easier to reason with. There are increases in license fees; it’s becoming a little business. So it is never been a negative to us because we always felt that it justified itself, even when there were skeptics about why we were going to try continuing doing it.

You never know where these values are. All you need, really, with The Daily Buzz is to get one of the bigger groups to put it on in some of the bigger markets then it could become a valuable operation. You don’t know if that’s going to happen or not but you wait. And things in this business are changing so fast, there’s—I mean, you have Mr. Zell go in and change all the management and [inaudible].

The other guys didn’t want to try a show like this; maybe the new guys, who are much more familiar with education and things like that, will. But you don’t know that. I think Doug is working on that right now. You look at every opportunity and you try to take it.

Nelson Obus - Wynnfield Partners

My last question. You know when you were discussing progress we might have made in regard to selling individual stations, you actually did use an interesting term, “discussions”, which implies to me there are people who are at least interested enough in buying the stations to have a bid and ask, or at least some kind of a dialogue. Now with that in mind, and the stock threatening to drop well below $2—and only the management really knows what a conservative break-up value is for this company; I assume it’s greater than zero since you have no debt—the issue becomes the thinking on your part and the board’s part about the pluses and minuses of conducting a buy-back program, not to support the stock—which would be foolish—but because the gap between what is a conservative break-up value and balancing that against the financial risks of putting some leverage on the company again—maybe you could give us some insight about that calculation and thoughts that might have been thrown around about that. It’s really a buy-back question.

Jamie Kellner

What we have said in the past about that, Nelson, and what we did last time on the sale of the last station was the distribution to all the shareholders and I think that—I have liked that as a strategy because it rewards everybody who’s patient, equally. And I think at one point you liked that also. Is that no longer something that you appreciate as a strategy?

Nelson Obus - Wynnfield Partners

Well, I knew that to be a strategy but I thought that there was also a sense that, at some point without selling any more stations, we would have enough confidence in the ability of the remaining stations to at least carry their own. At a low enough stock price the risk/reward, so to speak, of engaging in a buy-back at these levels—I mean these discussions we had we were at $4. Now we hit $2 the other day and there’s half a million shares around, which I’ve been offered 13 times.

So the question is a different question. I certainly approved of that strategy but this is a slightly more complicated calculation and in a different price arena. It really has to do with how bad you think—certainly the stock price is extraordinarily low, in my opinion. I think you’d be shocked if $2 was the total break-up value. So then it becomes a real value creation exercise to buy shares back at this level unless you feel there is financial risk in doing so, or that the real value of the stations has imploded enough to justify a $2 stock price. So it’s not a simple calculation but I think it’s a relevant one.

Jamie Kellner

I think you ought to add in, also, the environment that we’re living in right now and the uncertainty of it that would probably make the best judgment to be a conservative judgment. I’m not a fan of putting leverage in this situation and we’ve worked very hard to try to continue to grow the ratings, even in difficult market places; try to grow the revenues as much as we can and reduce the costs so that we don’t have any debt on the company, which does give us the ability, if this is a storm, that we will be able to hold on through it and sell the stations at a better price.

If you look historically at the prices that we’ve gotten for the stations, and none of them were done quickly and all of them started out at fractions of the prices we ultimately sold for. So, I think that fire selling in this environment is a mistake. There are good broadcast companies out there who might be at this point at bit gun-shy about investing, but the best way, still, in this business, for an in-market player to grow this business, is to get a reasonably priced second station or add to its portfolio and newspaper, or whatever it is that where they bulk up, still seems like the best strategy for the big media companies to play out.

So, I think that it would be a mistake to give the stations away and I think it would be a mistake to add leverage and debt and put ourselves in a position where we don’t control our destiny.

Nelson Obus - Wynnfield Partners

What is our line, by the way, and then I’ll get out of the away.

Tom Allen

$16.9 million and there’s no reserves on it because we’re obviously not expecting to borrow over a six-month period, which is how the reserves are set up.

Nelson, I would just add to what Jamie said, that this is not a stubborn, static decision that we’ve made. We address this at least every other month, on a full-board basis. Because obviously at some price—if the stock were trading at $0.10 today obviously we wouldn’t be sitting there saying we can’t buy the stock or we shouldn’t buy the stock. But I think when we balance everything, as Jamie has said, relative to our cash needs, our kind of firm desire to stay out of debt, and as I mentioned to you we have a little over $800,000 in cash and obviously a very uncertain marketplace going forward with a negative cash flow in the fourth quarter and obviously will project that for the first quarter, too, based on our BCF projections—I think just at this point in time a more conservative approach—you could obviously argue with it, but it’s a more conservative approach we have which is to not borrow to repurchase stock.

I also wanted to get back and answer your question on the non-programming cash base expenses. They are essentially flat, projected flat, for calendar 2008 versus 2007 for the station group. And you know, when you take into consideration that the bulk of those other costs can probably be split between Nielsen, which obviously is long term contracts with generally low single digits, kind of cost of increases on an annual basis to rent expense which has similar kind of cost pressures on it, you can see that on the stuff that really is truly discretionary we haven’t really been able to cut back costs in some of those areas to maintain a flat posture for 2008 versus 2007.

Nelson Obus - Wynnfield Partners

So I just want to clarify one thing. We have a $16 million line, which means, of course, you could retire 10% of the shares if you take down a quarter of the line, so I assume then the line is only there to offset future operating losses. Under those circumstances would we use that line to . . .?

Tom Allen

We don’t foresee using the entire amount of the line. We do have, as we’ve talked about in previous order calls, a carve-out that allows us to borrow under that line for stock repurchases. We don’t believe we need the full line. We probably, at this point in time, would have cut the line back voluntarily to save on unused line fees if it hadn’t generated an offset to the savings going forward in prepayment penalties. But we actually get past that window where we can cut the line back if we so choose and that’s something the board will be looking at here shortly because we just don’t envision, obviously—we’re not in acquisition mode so the only two things you could envision using the line for would be to support operating losses opposite a negative cash flow and/or stock repurchase.

Nelson Obus - Wynnfield Partners

Okay, I just wanted to clarify that.

Tom Allen

And it’s $16.9 million. So it’s closer to $17 million today.

Nelson Obus - Wynnfield Partners

Okay. What’s the carve-out real quick?

Tom Allen

The stock’s purchase carve-out is, I think , is at least half that amount.

Nelson Obus - Wynnfield Partners

That’s 20% of the market. Okay 20% of the shares outstanding. Okay, thanks.

Operator

Thank you. Your next question is from Harvey Hanerfeld of West Creek Capital. Please go ahead.

Harvey Hanerfeld – West Creek Capital

I think all my questions have been answered. Thank you.

Operator

Your next question is coming from Eric Von der Porten of Leeward Investments. Please go ahead.

Eric Von der Porten – Leeward Investments

Thanks for the update. Most of my questions were related to the line and things like that as well. I’ll just ask a somewhat rhetorical one; it looks like the fourth quarter loss, your book value is about $63 million at the end of the year. Is that correct?

Tom Allen

Yes, that’s pretty close.

Eric Von der Porten – Leeward Investments

So obviously you haven’t been required to, or felt required to, write the assets down, the values down, any further than that.

Doug Gealy

That’s correct. The only write-down has been on the actual license fee. Not the fair value of the stations.

Eric Von der Porten – Leeward Investments

Okay. Thank you and good luck for the year.

Operator

(Operator Instructions) Your next questions is coming from Bobby Melnick of Carrier Partners. Please go ahead.

Bobby Melnick – Carrier Partners

Strategically, what is Plan B? And when do you plan to implement Plan B?

Jamie Kellner

What is Plan B?

Bobby Melnick – Carrier Partners

Well, Plan A is liquidating the company on a piecemeal basis, selling the stations. You haven’t been able to sell those stations over the last six to nine months, so what is Plan B and when do you plan to implement it?

Tom Allen

I would guess that the default answer to Plan B would be to try to operate the stations in a way that we don’t go backward in terms of either borrowing money or straining the amount of cash that we currently have at this point in time. There’s not a lot of other options other than either you sell the stations or you operate them.

Bobby Melnick – Carrier Partners

Well, there are other options, obviously, and that’s what I’m asking. What are your other options that you’re contemplating at the board level? You could go dark, you could eliminate more overhead, you could combine some of the general managers. We have six stations. You could clearly combine them. Obviously the New Mexico stations you combined; you could combine the Wisconsin stations, you could combine the Ohio Valley stations. I mean, what is Plan B? Is it simply we either liquidate this company or it’s sort of business as usual? Because that’s unacceptable for the long-term shareholders. It should be unacceptable to you.

Tom Allen

I think, Bobby, it’s pretty clear. You could cut your promotion, you could not renew Nielsen. You could do a lot of things to save costs that we believe would only hurt you more by loosing revenue.

Bobby Melnick – Carrier Partners

How would going dark hurt you more but it wouldn’t affect your revenue?

Jamie Kellner

Well, I don’t know how you sell stations going dark.

Bobby Melnick – Carrier Partners

No, if the company that goes dark; stops becoming an FCC filer for example.

Jamie Kellner

Okay, that is something that we have talked about.

Bobby Melnick – Carrier Partners

That’s what I’m asking. I’m asking what is Plan B? So tell us rather than just sit there and tell us there is nothing you can do. Tell us what Plan B is. You’ve had these stations for sale for a long time. We all know it’s a crappy market. You guys had your opportunity to sell these stations years ago. You chose, strategically, the three of you and your then board not to sell them. You’re not trying to sell them. The train has already left the station. What is Plan B?

Tom Allen

First of all, we take exception to the fact that you claim we’re not trying to sell them.

Bobby Melnick – Carrier Partners

I didn’t say you’re not trying to sell them.

Jamie Kellner

That’s totally inaccurate.

Bobby Melnick – Carrier Partners

Years ago you had the chance to sell them and you did not choose to.

Jamie Kellner

Give me an example of that.

Bobby Melnick – Carrier Partners

January 2005 I was with Tom Allen in Orange County and I pleaded with him to sell the stations and he told me no; said that was an inappropriate thing to do at $11.50, when the stock was then $10-$11. It was inappropriate to do at $15 because a year from now it would be $20. That’s an example. You want more? You want me to go on and on? You want me to embarrass you. Everybody knows you’ve been running this company in the ground. I’m not here to badger; I’m here to figure out—if you cannot sell the stations—which I think many people believe to be a reasonable assumption—you haven’t been able to sell them for nine months. What is the alternative? That’s all I’m asking. Is it business as usual? At first you said no, we either run them or we sell them. And then when I pressed you, you said, “Oh, yeah, yeah, yeah. Actually there are a lot of things that we’ve talked about at the board.” I’m asking you to share with your owners what those things are. Thanks.

Jamie Kellner

Who said, “Yeah, yeah, yeah, there are a lot of things we can do?”

Bobby Melnick – Carrier Partners

Tom did. We’ve talked about it before, going dark at the corporate level. There are other things that any outsider could suggest.

[Simultaneous remarks by two to three speakers]

Jamie Kellner

Just stop for one second. We are operating the stations—in fact, if you look at our performance this quarter versus October, we actually did better than our peer group.

Bobby Melnick – Carrier Partners

In what respect?

Jamie Kellner

Because our revenue actually . . .

Bobby Melnick – Carrier Partners

Because you spent so much on programming, so you lost more money. I mean, you spent more money and lost more money. Congratulations. So, what does that accomplish? You maintained your market share and you increased your market share by spending money out the wazoo. It remains to be seen whether that’s a viable strategy. We’ll see when you stop spending on programming whether you still have the revenues or not. That’s not better than your peers; you spent more money than they did. You bought the most expensive programming.

Tom Allen

Bobby, you don’t know that.

Bobby Melnick – Carrier Partners

Well, you bought expensive programming.

Jamie Kellner

Don’t say something you can’t support.

Bobby Melnick – Carrier Partners

Your programming was up 11%, same station; your revenue was down 4% a station. Is that true or false?

Jamie Kellner

That’s for one quarter.

Bobby Melnick – Carrier Partners

Okay, so let’s see what happens.

Jamie Kellner

[inaudible] in the last conference call, Mr. Melnick.

Bobby Melnick – Carrier Partners

So?

Jamie Kellner

So why don’t you be accurate?

Bobby Melnick – Carrier Partners

I just gave you accurate numbers!

Jamie Kellner

There was an earlier payment and that payment dropped down and in fact, Tom, why don’t you run through what happens the rest of the year.

Tom Allen

Well, the broadcast cash flow is—for us and most straight station companies, is based on program payments. Our program payments for one particular show, That 70’s Show, which we have across all of our stations was paid over shorter periods than the actual contract termed by six months. So, in 2008 we go without payment for six months, April through September inclusive.

But I just think, Bobby—you can claim we’re embarrassing, but I think from our vantage point you’re just embarrassing yourself. So, Operator, I think we’re ready for the next question.

Operator

Thank you. Your next question is a follow up from Harvey Hanerfeld at West Creek Capital. Please go ahead, sir.

Harvey Hanerfeld – West Creek Capital

Thank you for Anglicizing my name. I appreciate it. I just sort of had a comment after the last questioner. I’m extremely frustrated as well and I think a lot of shareholders are frustrated and I’ve got to believe that you guys are frustrated. And I guess given the fact that the stock is now—I don’t even know what you would call it—microcap, mini-microcap and that the shares are incredibly concentrated, is there a way to communicate answers to the types of questions that people are really asking on the call without compromising your ability to sell and maximize value for the stations? So that we have some confidence, or incremental confidence—really know what you’re thinking, really know what you think the stations are worth and know what we’re playing for and what some kind of time frame is? I think that almost everyone on the call understands reality but if you could give us a little bit more I think that would go a long way to tamping tempers down.

I don’t have a specific question but you’ve been asked lots of different things. I mean, what do you think the values are? When do you think we can achieve them? What are we playing for? I mean, saving operating expenses versus incremental receipts in six months, a year, two years. I mean, that’s really what we’re asking for. I mean most of the people on this call, I guess, feel trapped. And want some information.

Jamie Kellner

I think that’s true. And I think that the management feels the same way. The board does. This is not a situation where only you are trapped but when you’re in a difficult situation the last thing I think you do is stop paying attention to the realities of the business you’re in. This business requires programming—television stations without programming are useless. The only real value of these stations is the circulation they provide for advertisers. That’s what also will attract a market player who has seen his own audience whittled down and the strategy of the second station, or even the third station, as Sinclair’s done, is to bulk back up and become the important provider in the market.

So, you know, what the previous questioner was bringing up was probably the fastest way to destroy whatever value there is in this company. You know, it could be [inaudible], the worst strategy I can think of. What we have done is cut every penny we can out of the company and tried to continue to operate to grow the businesses. And we’ve been selling these stations for quite a while now, for quite a number of years. This has been an ongoing effort; it never stops. Every opportunity we have been able to uncover we have taken advantage of and, then, if you look at the spread in prices in this business, they’re enormous. The first offer on our television stations, every one of them was substantially below what we ended up. You have to be willing to be patient and continue to sell through the process, all the way. Once you find someone who is a potential good buyer and that’s what we’ve done in each case. But it has required a lot of work and a lot of patience.

So what is the value of the stations? It’s very, very hard to tell. If we had taken the first offer, Ft. Meyers would have been about half of what we ended up with. So you have to work these things, you have to be willing to be patient and work them. And then there are new buyers that come out of things that you don’t expect. Hispanic station groups are becoming more important. In certain markets that becomes an option; it wasn’t an option before. But to suggest that the company is not doing everything it can and hasn’t always done everything it could to sell these television stations is just not a truthful statement.

Doug Gealy

I would add, too, Jamie, that we’ve got two board members that were added to our board over the last several years that were representatives, or suggestions, let’s say, of our current or then larger shareholders. There is no dissension or disagreement amongst the board, the people who know the most, because they have obviously full access to information that the public doesn’t have, about the strategies that we’ve employed over the last 18 months, or are currently employing. So, I would hope there would be some trust amongst the shareholders, and I totally agree with Jamie and with your comments, Harvey—I mean, this is a pretty stuck feeling here. But our options aren’t many.

Bobby talks about what’s Plan B. We have two options. We can either sell out in a very tough, distressed environment and get basically auction value for the stations, wrap it up and go home. Or we can continue to try to operate and hope that the market improves to sell them at what we believe would be better prices.

Now, obviously we haven’t done a great job of projecting when the market would turn, but that makes us in a very large majority of companies that have felt the same way for the last three, four, five years. So, from our vantage point there’s two basic strategies: we can either call it a day, sell on an auction basis and get out; or we can try to hunker down, operate as close to the break-even as we can, hopefully pop some numbers--The Daily Buzz is obviously starting now to contribute, not to use cash—and get to a better environment to sell.

We’re doing this in consultation with, obviously, the full board, with the strategic advisors that we’ve engaged to help us sell the stations, whether it be the current folks at Cobb or the previous team at Blackstone. You know, we’re not doing this in a vacuum without a lot of input. So that’s the thing I would like to convey.

[dialogue in voice too soft to distinguish-comparing to real estate market?]

And the thing with television stations is the more eyeballs you have the more valuable it is and we have excellent revenue sharing and rating shares. Now we could pull back the programming and stop paying our sales people and have declining stations which is going to be less valuable in the eyes of anyone who looks at it.

Tom Allen

Well, and to a certain extent, Doug, we can’t pull back the programming. There’s nothing we can do today that will affect programming costs over the next two years.

Operator

Thank you. There appears to be no further questions at this time. I would now like to turn it back to management for any closing comments.

Jamie Kellner

Well, as you all know, this quarter close is late so the next call will be in roughly 45 days and obviously the update Doug gave you is good for the first quarter so we will talk to you again in 45 days or so. Thank you very much for calling here.

Operator

Thank you. This concludes today’s ACME Communications conference call. You may now disconnect and have a great day.

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