First Quarter 2003 Earnings
Conference Call
April 16, 2003
Don Grenesko,
Sr. Vice President/Finance and Administration
Welcome to our conference call to review Tribune’s 2003
first quarter results. I’m Don Grenesko, the CFO of
Tribune Company. Ruthellyn Musil is out-of-town this week
and unable to join us.
As usual, we’ll try
to keep our call to about 45 minutes. Our opening remarks
will be brief, as we want to try to get to all of your questions.
As you saw in our press release, Tribune’s
first quarter earnings of 41 cents per share included a two
cent gain associated with non-operating items. This record
performance was in line with analysts’ estimate of 39
cents per share, which excludes non-operating items. The first
paragraph of our release contains the information needed to
make a meaningful comparison to First Call consensus.
Before turning the call over to Dennis FitzSimons,
our CEO, let me remind you that our discussion today may include
forward-looking statements that are covered in greater detail
in our SEC filings. Now here’s Dennis.
Dennis FitzSimons, President and
Chief Executive Officer
We’re happy to be reporting positive first quarter results,
especially given these uncertain times. The year got off to
a good start, as you saw in our January and February revenue
reports. It slowed somewhat in March as consumer confidence
and job creation were impacted by the war. Don will take you
through some of the detail from the quarter in a moment.
Let me start with a few comments on our war
coverage. We have more than 70 reporters from across Tribune
currently in the Middle East, and 27 of them are embedded
with military units. We’re very proud of the job they
have done. Use of our internal Tribune wire service has increased
significantly since the war began, and our smaller papers
are getting great use out of the material filed by our reporters
from L.A., Chicago and New York that are in the region. We’re
also effectively sharing content between our newspapers and
TV stations. Print reporters from the L.A. Times and the Chicago
Tribune regularly deliver live satellite phone reports for
our stations’ newscast. Typically local stations would
not be able to afford this kind of expense. So far more than
400 reports have been made to our stations, and these reports
are also used in our Web sites.
We were also very pleased to see our commitment
to journalistic excellence recognized by five Pulitzer prizes
that our newspapers were awarded last week. Three went to
the L.A. Times and one each to the Chicago Tribune and the
Baltimore Sun.
On some other recent company news, David Hiller
has picked up additional responsibilities as senior vice president
of Publishing. He is now, in addition to his duties of Tribune
Interactive, he’s responsible for Tribune Media Services,
Tribune Classified Services, the Hartford Courant and CLTV.
David has done an outstanding job leading Tribune Interactive
to profitability, and in conjunction with this organizational
move we have incorporated Interactive into the Publishing
segment. As you see in our release, we will continue to break
out online revenues separately to show our progress in this
area.
Let me mention some other first quarter accomplishments.
In Publishing, the last phase of the L.A. Times insertion
facility went online this quarter, and we have already seen
79 advertisers shift their accounts away from competitors
and into the Times. Earlier this week, RedEye -- that is our
tabloid for younger, in town readers here in Chicago -- began
home delivery. This was launched, RedEye was, last fall and
has been averaging a daily circulation of more than 100,000.
Tribune Media Net is off to great start for the year and is
on track to generate more than $70 million in incremental
revenue for full-year 2003. Cross-media performance in particular
continues to grow at an accelerated pace. In the first quarter
we posted more than an 80 percent revenue gain across our
five multimedia markets, with Los Angeles leading the pack.
Turning to TV, we completed the acquisition
of two WB affiliates in St. Louis and Portland, the 22nd and
23rd markets in the US, and our stations overall are performing
very well thanks to the strong sitcom lineups in early and
late fringe , the WB’s record year and good local news
ratings. We’re delivering the young demographics advertisers
are looking for and our salespeople are our generating premium
cost per thousand.
Focusing on the WB for a moment, the WB achieved
its best February sweep ever and posted the strongest growth
of any network in the adults 18-to-34. That was plus 35 percent.
We had highlights on just about every night, with Tuesday,
Friday and Sunday leading the way. As most of you know, Tribune
remains the leading affiliate group for the WB, and that was
just increased with our acquisitions in St. Louis and Portland.
We represent over 50 percent of the network’s audience
delivery. And our strong VHS stations in New York, L.A. and
Chicago really anchor the network. They consistently double
the network’s national ratings, so the WB’s success
is amplified for us.
Now, let me turn it back to Don for some specifics
on the first quarter, and then I will be back to look at trends
for the second quarter.
Don Grenesko:
Our press release contains a lot of detail, but
I would like to emphasize some of the highlights. Consolidated
revenues were up five percent compared to last year’s
first quarter. Consolidated cash expenses for the quarter
rose by three percent, due to merit increases, higher medical
costs, lower pension credit and higher broadcast rates expenses
related to the fall 2002 launch of "Will and Grace".
Newsprint costs were down five percent in the
quarter, as the newsprint price increase announced by Abitibi
earlier this year did not affect us in the first quarter.
Total North American consumption in the first two months of
this year was down half percentage point, while inventories
have increased by 53,000 tons, certainly not indicative of
a price increase at this point. Margins improved at many of
our newspapers, with Chicago up two percentage points, and
the group’s cash flow margin improved by one percentage
point to 25 percent.
In Publishing, revenues grew by two percent in the first quarter.
In our three largest markets, total ad revenue for Chicago
and New York increased by five and three percent respectively,
while Los Angeles was up slightly. Retail rose by two percent,
driven by the continued strength of preprint, which increased
by 13 percent and reflected our new preprinting inserting
facilities in Los Angeles and Chicago. Categories performing
well included health care, food, and furniture/home furnishing
stores. National was up six present in the quarter. Categories
performing well included high-tech and auto manufacturers.
Classified was down one percent in the first quarter. Help
wanted was off 12 percent, as job creation has turned negative
in the last few months, but we see continued strength in the
real estate category, which was up 12 percent. Interactive
revenues, now included in the Publishing segment, were up
14 percent due to strength in both classified and national
advertising. Revenue associated with the sale of CareerBuilder
products by Gannett, Knight-Ridder, Tribune and CareerBuilder
totaled $34 million, an increase of 29 percent over the fourth
quarter of 2002. Increased promotional spending at CareerBuilder
helped drive a 41 percent increase in unique visitors to CareerBuilder.com
and a 48 percent increase in job searches.
Turning to television, revenues jumped 13 percent
as virtually all of the TV stations showed excellent growth,
reflecting strong ratings for our off network sitcoms and
the terrific season for the WB network that Dennis just mentioned.
Importantly, television operating cash flow rose by 23 percent,
and the TV station group improved its operating cash flow
margin by three percentage points to 36 percent this quarter.
Turning to other key items, equity losses of
$9 million in the first quarter were slightly lower than planned.
Our debt level, excluding the PHONES, has come down to just
under $2.7 billion. As we said before, we expect to reduce
that further to about $2.5 billion by year-end. CapEx was
about $30 million in the first quarter.
In closing, let me say that we continue to
have a strong focus on our cash expenses, which declined by
three percent in 2002. This year we expect cash expenses to
be up in the low to mid single digit range. We’re comfortable
that our full-year earnings per share estimates will be within
the current range of Wall Street analyst estimates, which
is $2.04 to $2.20, assuming that there is a rebound in the
economy in the second half of the year, and assuming that
non-operating items are not material.
Now back to Dennis.
Dennis FitzSimons
Just taking a look at current trends, as expected, April is
slightly better than March in our newspapers, and that’s
driven by retail advertising, which is benefiting from pre-Easter
advertising. National is up in the mid single digits and classified
is down, as the war is impacting job creation and help wanted.
In television, we’re seeing signs that the overall advertising
environment is relatively healthy, despite the war. Second
quarter pacings are up in the high single digits. We will
keep you updated on the advertising trends with our monthly
revenue releases.
Now, we would be happy to take your questions.
Brian Shipman/UBS Warburg
Q. Discuss the classified trends in March by major ad category
– real estate, auto and help wanted.
A. In terms of classified for March, help wanted for the group
was down 11 percent in March; Los Angeles and Chicago were
down in the mid-double digit range, and Newsday was down in
single digits. In auto, we were down one percent in March,
Los Angeles was flat and Chicago and New York were down in
the high single digits. In real estate, that’s an area
that really did quite well. We were up over 20 percent and
all of our markets did very well there, particularly Chicago
and Newsday.
Q. What were the margins were at the L.A. Times
and at Newsday?
A. As I mentioned, Chicago was up over two percentage points,
New York was up a little bit – they were up over one
percent and Los Angeles was down slightly.
Q. Could you discuss circulation trends in
your major markets and what you expect to report in the March
ABC audit ?
A. As far as circulation trends, we are up slightly. Looking
at the big three markets, the L.A. Times is up .2 percent
daily and up just slightly on Sunday, Chicago is up 0.7 percent,
New York 0.3 percent on daily. So overall, it’s a slightly
positive picture.
Douglas Arthur/Morgan Stanley
Q. The entertainment and other line was up about 70 percent.
Could you flesh that out?
A. I think the results actually went down a little bit, which
was a function of divesting the radio properties in Denver.
We had three stations under a time brokerage agreement in
last year’s first quarter, and only one Denver station
under a time brokerage agreement for part of the first quarter
before that was used in the ACME transaction. The results
at WGN radio were up, softer than last year, Tribune Entertainment
was up year-to-year, and the Cubs, kind of their off-season
expenses, were generally flat.
Q. Have you changed your guidance or expectations
for the equity investment line for the year as a result of
the first quarter?
A. We had been projecting at the beginning of the year that
our losses on the equity line would be in the $15 million.
We think given the first quarter that they will be somewhat
lower than that for the full-year.
Q. Why were the L.A. Times margins down in
the quarter versus the other papers, particularly with newsprint?
A. While they had a revenue increase of around one percent,
they had a couple things going against them on the expense
side. Their pension credit was significantly lower this year
than last year. Medical benefit costs were up. In addition,
they have started their new preprint plant fully, so we saw
some increased compensation costs because of that.
Peter Appert/Goldman Sachs
Q. The revenue trends were particularly noteworthy in the
context of what we’re seeing from some of the other
broadcasters. I’m wondering if you could speak to some
categories specifics, or some regional issues, that maybe
are helping you out beyond the strength of WB ratings obviously.
A. Olympic and political is not as big factor for us, so we
usually benefit in off years in terms of our increase. We’ve
got two things going, really. One, in terms of the comparisons
we’re dealing with, and the other is a strong programming
situation that we’ve got right now. So we’re seeing
a share increase in most of our markets. We still have seen
automotive very healthy. The movie category has been very
strong for us. Again, this is where the young demos benefit
us. And the retail category has been good also. We have seen
a decrease in direct response and the tourism category, as
you might imagine, has been soft.
Q. Any particular markets than are worthy?
A. New York is really strong, L.A. a little bit less, Chicago
is okay. Then it sort varies from the mid and smaller markets.
Q. Could you give us any guidance in terms
of how the cost trends might progress on the TV side over
the course of the year, remembering that perhaps the programming
expenses issues get to be less of an issue later in the year?
A. On the expense side, your recollection is right -- as we
get into the second half of the year our programming expense
costs flatten out and even decline a little bit. So we will
be down about four percent up for the full-year, but again
that moderates in the second half.
Q. Any thoughts on the regulatory environment,
whether you think June 2nd is truly the date where we get
some action?
A. The FCC seems to be serious about June 2nd. They are getting
letters from Congress on both sides -- some saying slow it
down, some saying June 2nd needs to be the deadline. Chairman
Powell seems to be, based on his comments at the NAB , determined
to bring this to a head in June. We hear nothing but positives
regarding our major issue -- cross-ownership -- and everybody
seems to agree that that will go away. There’s still
a lot of controversy on the cap issue and compromises are
being floated right now. Also, this diversity index, which
nobody has seen just yet, but we keep hearing, is a real wild-card
here. This is not going to be a problem for any of our market
situations. I think getting that through without a comment
period is going to be kind of difficult. So we will see. We
would love it if it was June, but we’ve always sort
of thought that September might be a more realistic date.
But we think it’s going to happen this year.
Q. You mentioned a $34 million revenue contribution
from CareerBuilder. That was the network revenues, not the
Tribune revenues, correct?
A. That’s correct, the network.
William Drewry/CSFB
Q. Could you give us any breakout on the expenses, compensation
versus benefit costs in both publishing and any more granularity
on the TV side for the quarter?
A. In terms of the expenses, our pension credit declined by
$10 million in the first quarter, so that goes into our compensation
line. I think, as we previously mentioned, our pension credit
will be down about $40 million compared to last year. However,
it still will be a credit, and we’re still in an overfunded
position. Our medical expenses, we’re looking at about
15 percent increases in medical this year, so that went up
about $4 million in the first quarter. Our broadcast rights
are the other big component here. That was up seven to eight
million. In terms of the salary increases, we basically instituted
merit increases this year of three percent, pretty much across
the board.
Q. If the WB has a very strong up front, which
it seems like they potentially could be up very strong double
digits, what implications will that have for you all financially
from a station group impact as far as forward visibility and
your confidence, and revenue growth over the subsequent 12
months?
A. On the revenue side, we are anticipating that the WB is
going to have a strong upfront. As far as the impact on the
station group, I just think the overall health expected in
that up front, the network marketplace, normally carries over
into spot . One of the advantages that we had last year is
we had a reasonable amount of inventory in the fourth quarter
to sell in the scatter market, which was very, very healthy.
We really got record cost per thousands in the scatter market,
and that’s business you don’t necessarily have
to guarantee. So we had everything going for us last year.
Again, this year we’ve got better ratings, key demos,
so the network I think is really going to be positive. As
I mentioned, the top three markets for us, the ratings have
been very strong there, so we are expecting a good second
half.
John Janedis/Bank of America Securities
Q. Can you tell us the underlying growth in retail, excluding
preprints for the quarter? Can you tell us the size of the
preprint market in New York and your current share?
A. We don’t normally break preprints out of retail.
Preprints continue to be stronger than the overall retail
growth rate. If you look at the attachment to the press release
on advertising volume, you can see that total full-run advertising
inserts for the quarter for retail was down nine percent,
so the war certainly was a factor in the quarter.
Kevin Gruneich/Bear Stearns
Q. Could you tell us if this cash corporate expense of $10.9
million in the quarter, is a good run rate to work with the
balance of the year?
A. In terms of the corporate expenses, the run rate is a little
bit higher for the next several quarters. We had some adjustments
and bonuses last year that impacted that. So that will be
a little bit higher than what we showed in the first quarter.
Q. My understanding was there would be quite
a bit of pickup in the promotional spending at the interactive
group, and I was wondering if that happened in Q1, or when
that will be stunted in throughout the year?
A. Yes, there was significant spending for CareerBuilder.
We are ratcheting that back a little bit, given the economic
environment. But, we did have a good spike in traffic at CareerBuilder.
Q. Full run advertising is quite weak at Newsday, part run
advertising quite strong and I was wondering if you’re
seeing quite a bit of substitution because of new zoning there.
A. We’re going to need to get back to you on that one.
Barton Crockett/J.P. Morgan
Q. Can you lay out for us what the current status is of your
31 percent stake in the Food Network, and the extent to which
that’s being reflected now or not and might be reflected
more so in the future? A little bit more color on the contribution
there from the WB network or the CareerBuilder on a GAAP basis.
A. We did begin to record some operating income on the equity
income from the TV Food Network in the first quarter. That
was a slight income that we had accrued there, and we are
anticipating that we will accrue some for the remainder of
the year. We’re still working through those numbers.
In terms of the WB network, typically there are losses in
the first three quarters of the year, with a profit in the
fourth quarter, but we don’t go into it any more than
that. But we do expect it to be positive for the year. With
most of the other equity investment so we have, we do expect
to have improved results versus last year. The exception is
CareerBuilder, where because of higher promotional expenses,
we think that’s going to be a little bit higher.
Q. The ratings that you’re seeing on
the WB network. I was wondering to what extent you’re
seeing that flow-through into your shows that lead into and
lead out of the primetime. Also on TV, the final question
here, I was wondered if you could quantify any impact of war
preemptions or add cancellations on TV in March.
A. The sitcoms in early fringe not really impacted by the
WB. We still have "Friends", "Raymond",
which was the extremely strong performer for us in both early
and late fringe, and "Will and Grace" is doing well
too. That’s leading into the WB. Then coming out, because
the ratings have been better, our news lead ins certainly
have been helped. Now everything in recent weeks certainly
has been impacted by the war. But overall, this is a very
good story for us.
Christa Sober/Thomas Weisel Partners
Q. Could you give us a sense as to where your share is in
the L.A. market? I know it has been around the third, but
you have been growing pretty considerably there.
A. We had an increase last year. We estimate a couple of share
points. We didn’t have our insertion facility in Irwindale
come fully online until this quarter, so we will see greater
impact this year. I mentioned we had a number of accounts
– 79, that came over from Advo and others to the L.A.
Times, given our improved capabilities in preprint insertion
out there. So, yes, we were at about a third. We expect to
grow that significantly. We expect at least a couple more
this year. Again, our goal is to get closer to where Chicago
is, which is a two-thirds share of the preprint market.
Q. How long do you think it will take to get
there?
A. Several years.
Q. Could you give us a sense as to what the
profitability of that Internet line was, just to get a sense
as to if it’s still in the probable range?
A. On the Internet line we still are cash flow positive with
our interactive activities.
Q. Because you guys are going to be reporting
on a GAAP basis going forward, any suggestion as to how to
estimate some of the below the line costs, or how we should
be thinking about those?
A. The non-operating items going forward, the principal one
will be of PHONES AOL stock transaction that we did a number
of years ago. There, there are 16 million AOL common shares
that associated with the PHONES securities, and it will all
depend upon the spread between the AOL stock and the PHONES
securities. To the extent that spread increases, which is
what it’s been doing over the past couple of years because
of the big falloff in AOL stock. To the extent that it widens
for each dollar, that’s about $16 million that we would
recognize, which would be about three cents a share; to the
extent that it contracts, then it would be positive.
Karl Choi/Merrill Lynch
Q. Regarding newsprint. Could you elaborate on your comment
earlier regarding whether you paid the April increase or not,
and acquired the margin increase in April or not, and do you
expect the increase to play out in the second quarter?
A. We did not pay any of the increase up to this point in
time that had been announced, and obviously it’s hard
to make a judgment going forward, but for planning purposes
we have planned for a modest increase.
Craig Huber/Morgan Stanley.
Q. If I remember correctly, when you bought the
L.A. Times a few years ago the margin spread there versus
your Chicago paper was roughly 10 percentage points. Can you
give us an idea what the spread is like today?
A. There was a big gap with the Chicago Tribune. What we have
seen, given the weakness in job creation in Chicago, has been
a real decline in classified advertising, help wanted advertising,
in Chicago. So Chicago’s margins have come down just
because classified was such a big percentage of their revenue.
So, we now see a gap in the two to three range. We have also
had a four percentage point margin increase in L.A.. So with
all the expense streamlining that’s been done in Los
Angeles, we have had a big improvement there, better performance
and it really has not shown, given that the L.A. revenue picture
hasn’t been that great. So once we see the L.A. revenue
picture, we will even see more impact from the cost streamlining
that’s been done.
Q. What is your expectation for full-time equivalent
headcount in TV?
A. Our broadcasting FTEs are projected to be up in the --
up slightly. On a station to station basis, they will actually
be up more, in the four to five percent range, because of
the new TV stations that we have in St. Louis, Portland and
Indianapolis.
Q. On the TV pacing number of 7-9 percent in
the second quarter, is there much difference between the FOX
TV stations of yours versus your WB stations?
A. I would say it’s really up and down, depending on
the market. Our margins at our FOX stations are usually higher
because of the sports programming that we receive from the
FOX network for free. This is -- when you look at it that
way, we are usually generating a lot of revenue in NFL programming
that comes with no cost, so it will usually improve a FOX’s
stations margins relative to a WB stations. In terms of the
full equivalents that we have, the full-time equivalents in
publishing, we are expecting a slight increase there, and
that’s basically due to the new inserting equipment
and facilities that we have for preprint in both Los Angeles
and Chicago.
Q. Back on that discussion for the L.A. Times,
is there much more opportunity down there on the expense front
or is it more of a revenue story going forward?
A. We think we have opportunities on both sides. We think
there are some cost issues that we can tackle. We’re
very pleased with what John Puerner and his team out there
have done over the last three years, but there are still areas
of opportunity on the cost side. Again, given the economic
climate since we took over the Times there on the revenue
side, certainly we expect a better performance once things
clear up in the Middle East.
Steven Barlow/Prudential Securities
Q. On the corporate expenses, could you just go through why
it did go up 10 percent? I understood that we have a new run
rate.
A. In terms of the corporate expenses, the biggest reason
for the increase was the pension credit. That went up significantly
for us for the full year and then the first quarter. The other
big piece is the D&O insurance. That’s also up substantially
over last year. Those are the two big increases.
Q. Could you just talk about the two TV stations
you bought from ACME, the margins there, the goals on those
and whether or not those will be accretive this year or do
we wait till next year?
A. On the TV side, we don’t normally give out exact
margins by market. St. Louis is a mature station, very strong
in the St. Louis market, good margins. Portland is a real
opportunity. The four share of audience translates to about
an eight or nine share of in-market television viewing. We
see big upside in Portland, both on the revenue side –
we think we can do a lot better sales job there. ACME did
a good job in both instances on the cost side, but we have
some programming efficiency that we think we can – will
kick in over time. This has been the pattern as we have made
all our acquisitions, the program buying power that we have
usually helps out these stations that we acquire from smaller
groups.
Q. The L.A.-Chicago margin differential, would
you be able to say that there’s 10 percent margin differential
between your current group of stations and the new ones? With
these stations, would you be able to say there’s that
much of a gap between your current stable of stations and
the two new ones you bought?
A. Usually when we pick up less mature stations we have a
lot of upside, in terms of revenue share in their individual
markets, and then what we can do on the programming line to
bring those costs down. That is the single biggest expense
that we have. Portland, we see a good amount of upside. St.
Louis is, again, a more mature market. It’s a VHF station
that from a revenue share standpoint is doing pretty well.
Our big opportunity in St. Louis should be on the program
expense side. We expect to still have some margin improvement
in St. Louis, although it will be tougher. Portland is our
big opportunity. St. Louis just fits into our portfolio very
well, as does Portland. For example, Washington station that
we bought about four years ago -- it takes awhile, and we
basically bought a stick in Washington. That station is starting
to perform well. We are actually beating the UPN station down
there now, which is a FOX owned station. So it takes some
time, but overtime the program buying advantages that we have,
as well as better operations and promotion, usually has worked
for us. We expect the same thing to happen with the ACME stations.
Michael Kupinski/A.G. Edwards
Q. How have you attracted the substantial preprint business
in L.A.? I know that you enjoy a pricing advantage there,
but have you lowered preprint prices at all to gain any of
those clients?
A. I would say there’s just much more emphasis. They
have a war report that they issue every month in terms of
clients that have been switched from the competition. Given
the increased capabilities and just the increased sales emphasis,
that’s really the reason for our increase. We just have
better capabilities and more to offer to advertisers. I would
say that’s the real reason for our share increase there.
We see that going forward too.
Q. What would be the pricing differential between
what Advo and what you offer?
A. Again, I would say more of a sales effort improvement on
our part, as well as a capability improvement. There is not
a reason once we have these increase capabilities to lowball
on price.
Q. Given the L.A. preprint facility and the
Chicago facility, CapEx of $30M appears to be a little lower
than I expected. Do you have any updates on plans for CapEx
for the year, and will that ramp up in the second quarter?
A. In terms of CapEx, you are right, we were at about $30M
for the first quarter. We’re still projecting about
$200M for the full year. Typically, we tend to be lighter
on capital expenditures in the first quarter than we are throughout
the rest of the year, so a lot of it gets back end weighted.
The big projects that we have for the rest of the year, we’re
looking at additional preprint insertion equipment at both
of our Florida papers and at Hartford; we’re looking
at co-locating the two Indianapolis TV stations. We still
have digital TV upgrades at about six of our stations, and
also about the possibility of contributing to a new tower
in New York.
Q. The radio and entertainment segment was
better than expected after adjusting for the sale of the then
the radio stations. Can you add a little color on the second
quarter revenue outlook? Will that be down significantly in
the second quarter?
A. We should come out close to flat there for second quarter.
Again, the radio divestitures are offset by improvements at
Tribune Entertainment. We are better barter ad market, and
there is also a timing difference with the number of Cubs
home games in the second quarter.
William Bird/Smith Barney
Q. Could you comment on TV auto ad trends?
A. TV auto trends have been very strong in the first quarter.
We’ve seen some softening going into second quarter,
but on the whole still pretty good. Automotive trends in the
first quarter were double-digit. That’s been positive.
Q. Updated thinking on acquisitions, specifically
Freedom ?
A. As far as of Freedom, there’s been a lot of speculation.
We haven’t seen any book as of yet, and we would really
make no other comment than that.
Q. For the full year on TV, just wondering
what kind of margin progress you expect to make.
A. In terms of margin improvement on the broadcast side, we
had been projecting possible one share point -- one margin
point improvement at the beginning of the year.
Q. Any revision to that outlook?
A. No, not at this point.
Jim Goss/Barrington Research
Q. With regard to employment classifieds, was there any beginnings
of a favorable trend that was then derailed or potentially
just delayed because of the war? How important is a recovery
here to meeting your full year targets?
A. On help wanted, we had been seeing the trends pretty much
match in ‘91 recession, and that was until February
when the specter of war seemed to eliminate or reduce job
creation, and then we saw our current results go below what
we had seen coming out of the ‘91 recession. I would
say that’s where we still are. With some clarity in
the Middle East, we hope that’s going to improve soon.
Q. With regard to regulations, I would presume
that duopoly relief would probably be next on your wish list
after TV-newspaper cross ownership. What sort of duopoly relief
is sought by you and what do you think you might get on that
score?
A. Duopoly, yes, that is second on our hit parade. The eight
independent voice tests we think will go away. The top four
rule we think will get to more of an antitrust summary. Again,
we haven’t seen any specific diversity formula that
Chairman Powell has been referring to, so it’s difficult
to comment on that. We’re not concerned at all about
the UHF discount. We don’t think that’s going
to go away. No concern about that.
Q. What is an acceptable cap, vis-à-vis
your ultimate plans? With regard to that, do you think there’s
a possibility that the UHF discount, which was arbitrarily
set at one half, could be modified given cable carriage ?
A. The 35 percent cap is not an issue for us. We’re
at 40 percent over the year, but 30 percent with the UHF discount.
In the short-term we can acquire a lot of stations, because
most of what’s available is UHF, and still not get to
35. Long-term, it seems there’s going to be some kind
of compromise here at 40 or 45 percent. Even if that compromise
occurs, you might see the networks go to court on that anyway.
Q. Finally, do you have any thoughts on dual
must carry ?
A. It’s certainly something we like to see implemented.
As you look at the cable operators, one of the biggest advantages
that they have right now versus DBS is the ability to air
broadcasters’ high-definition signals. But, they are
charging on tiers for that. DBS doesn’t have a spectrum
capacity to air high-definition or offer it on a local market
basis, so this is a great advantage for cable operators. But
they’re putting it on tiers, charging for it, but not
wanting to pay broadcasters. So somewhere, and we’ve
got very good relationships with our cable operators, we hope
there’s going to be negotiated settlement on this where
everybody can win.
Kevin Sullivan/Lehman Brothers
Q. You noted the cash expenses was going to be up low to mid
single digits. Is the bottom end of that range a slight change
from what you previously said? I thought you were looking
for just mid single digit. And if so, what’s driving
that?
A. Yes, we had been thinking that our expenses were going
to be closer to the five percent to the mid single digits,
and we have lowered that. What we’re implementing here
are some contingency plans. We’re cutting back on a
lot of discretionary expenses that we have in and travel and
entertainment, promotions, consulting, not filling as many
open positions, that sort of thing. We are implementing some
expense controls throughout the entire company.
:: :: ::
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