Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from David Saber - Wachovia Capital Markets.
David Saber - Wachovia Capital Markets
A few questions; first of all the ad environment in back half of 2008 and into 2009, just got off one of your previous conference call and in there you were pretty bearish on the ad environment. Also, the M&A environment, I know that you guys have said that that you might be interested in selling some non-core market assets; just curious on your insight there. And then as far as the covenant, you guys feel pretty good about the rest of the year and into 2009 given the soft core advertising outlook. And finally, just if you could comment on your free cash flow priorities going forward.
Matthew E. Devine
Let me grab a couple of those items for you. As far as the covenants go, I think you can tell that as we reiterate on this call we expect that will be leveraged down to about 5.5 times by year-end. That would give us at least a full-term of comfort vis-à-vis our dead covenants. So we feel pretty good about that; we have seen all month of July and we are happy with what we are seeing there, and so we really don’t have any major concerns about covenant compliance. Free cash flow will continue to be utilized to build up our HDTV platform so that we are in compliance by February of ’09 and any excess free cash flow will continue to be growing at our outstanding debts. We envision getting below 5 turns sometime mid next year and so we always are focused on continuing deleveraging our balance sheet.
Perry A. Sook
And I will speak a little bit for the ad environment and the M&A environment. I would say that third quarter to us and both Brian Jones and Tim Busch have been in every one of our markets and face-to-face meetings building our third quarter forecast from the bottom up, and I would say it is more of the same of the first two quarters; we really don’t see any headline movement one way or the other. In fact, for July our local revenues on an internal reported basis were 1% ahead of the prior year and that’s not spectacular growth, but it’s not a calamity either.
So we think that the guidance basically would provide for similar quarter revenue growth or lack thereof in the third quarter as to what we just reported for the second quarter with political and eMedia revenue being the drivers of the positive revenue growth in the quarter. So we don’t really see any change in the tone in the back half of the year than the first half of the year other than the virtual tsunami of political revenue that we would expect over the next 13 weeks with the election 13 weeks from today.
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