Sinclair, Inc. (SBGI) Q2 2012 Earnings Report, Transcript and Summary

Greetings, and welcome to the Sinclair Broadcast Group Conference Call -- or Second Quarter Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. David Amy, Executive Vice President and Chief Financial Officer of Sinclair Broadcast Group. Thank you. You may begin.

Thank you, operator, and good morning, everyone. Participating on the call with me today are David Smith, President and CEO; Steve Marks, Chief Operating Officer of our Television Group; and Lucy Rutishauser, Vice President, Corporate Finance and Treasurer. Before we begin, Lucy will make our forward-looking statements disclaimer.

Thank you, Dave, and good morning, everyone. Certain matters discussed on this call may include forward-looking statements regarding, among other things, future operating results. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ materially and adversely from those described in the forward-looking statements as a result of various important factors. Such factors have been set forth in the company's most recent reports on Forms 10-Q, 10-K and 8-K filed with the SEC and included in our second quarter earnings release. Our earnings release was furnished to the SEC on an 8-K earlier this morning. The company undertakes no obligation to update these forward-looking statements. The company regularly uses its website as a key source of company information and can be accessed at www.sbgi.net. In accordance with Reg FD, this call is being made available to the public. A webcast replay will be available on our website later today and will remain available until our next quarterly earnings release. Redistribution of this call is prohibited without the express written consent of the company. Included on the call will be a discussion in non-GAAP metrics, specifically television broadcast cash flow, EBITDA, free cash flow and leverage. These metrics are not meant to replace GAAP measurements, but are provided as supplemental detail to assist the public in their analysis and valuation of our company. A reconciliation of the non-GAAP metrics to the GAAP measures in our financial statements is provided on our website under Investor Information Reports and Filings.

Thanks, Lucy. We have a lot of good news to report today, and before we go through the results, I wanted to highlight some of our more recent accomplishments. We announced that we entered into an agreement to buy 6 TV stations owned by Newport Television, along with the right to operate 2 LMA stations. These stations, upon closing, will strengthen the Sinclair television group. The sales process was subject of a robust and competitive auction because of the large midsize markets, the competitive strength of the stations today and immediate synergies and retrans we can generate. The purchase price is $412.5 million, and we are providing a forward estimate of roughly $50 million of incremental synergies, which is net of $2 million of additional corporate overhead, along with the impact of increased reverse retrans fees. Beyond our initial synergies, we are not including or projecting longer-term benefits those stations may enjoy as part of the Sinclair television group or the tax benefits provided from being an asset purchase. Our $50 million of estimated synergies brings our odd/even year purchase multiple to what we believe to be a very attractive multiple of 7.2x, implying a seller's multiple of approximately 9.75. These stations complement and strengthen the Sinclair television group and are a perfect fit for our business strategy. They are larger midsize markets and either have a 2-station footprint or expand our existing end market positions. We project that EBITDA of these stations will increase by approximately 40% and that on a 2-year average, free cash flow after-tax is going to increase by approximately $35 million or $0.43 per share, and net income will increase by approximately $0.22 per share. This also includes our plan of investing about $5 million to $7 million in the first 12 to 18 months into the aging infrastructure of the Newport stations. Depending upon which part of the cap table we finance the acquisition, we expect that this acquisition will add only about 0.4 to 0.5 turns of leverage. In July, we made a $41.3 million deposit as part of the agreement. We expect the deal to close no earlier than December of this year. In May, we renewed our affiliation agreement with Fox, entering into a long-term agreement that runs through 2017. This agreement covers the 20 Fox stations we own, operate or provide cell services to and most importantly, locks up our flagship market in Baltimore. In achieving this goal, this agreement included a number of unique elements. We exchanged options on some of our existing properties, where we can acquire Fox's MyTV affiliate in Baltimore, WUTB, and Fox can acquire certain of our stations in up to 3 or 4 markets. These stations are either MyTV or CW affiliates and are in Raleigh, North Carolina; Cincinnati, Ohio; Las Vegas, Nevada; and Norfolk, Virginia. Both ours and Fox's options are exercisable from July 1, 2012 to March 30, 2013 and are at agreed-to fair values. The agreement calls for up to $52.7 million to be paid to Fox. However, that amount decreases by $25 million should Fox exercise on any of their market options. In June, we paid $25 million to Fox pursuant to the agreement. Included in the agreement is a schedule of reverse retrans payments along with annual escalators [ph] , and we believe having this clarity will be beneficial in our future retrans negotiations with the MVPDs. In June, we sold our equity investment in Rowan University student housing and bookstore for $10.1 million. This represented an approximate 18.3% annualized return on our initial $5.1 million investment made in May of '08. In addition, in July, we sold our strip mall in Crossville, Tennessee at a gain of $2 million, representing a 26.4% annualized return, and we completed a recap of the Bagby office building in Baltimore, bringing in $7.7 million. These transactions are in addition to the 2011 sale of our investment in Lafayette Rehabilitation Hospital, which generated a 21% annualized return. In short, during the second quarter, we invested about $80,000 and received $12.1 million in distributions, which provided about $0.035 per share in earnings. The investment portfolio now consists of net invested capital of approximately $157 million and an estimated fair value of between $200 million to $220 million, consisting of income-producing businesses of $30 million, income-producing real estate of $41 million, real estate development projects of $124 million and private equity firms of $25 million. In July, we announced that we entered into an agreement to buy Bay Television, which owns WTTA-TV, the MyNetworkTV station in Tampa. The purchase price is $40 million or roughly a 5.7x BCF multiple. We have been operating the station pursuant to our local marketing agreement since January of '99. In light of the incremental free cash flow from the acquisitions, our Board of Directors authorized a 25% increase to our quarterly dividend rate, bringing the dividend per share to $0.15 per quarter. On an annualized basis, this represents an approximate $9.7 million in incremental shareholder distributions, which would bring our annualized total dividend payments to almost $50 million. Now let's turn to our results. Net broadcast revenues for the second quarter were $220 million, an increase of 38.1% or $60.60 million higher than second quarter of 2011 and beating the high end of our guidance by $7.8 million, primarily on higher political revenues. Excluding $46 million from the acquisitions, same-station revenues were up 9.2%. Excluding political, same-station core revenues were up 4.6%, with growth coming from retrans, time sales and digital interactive. Television operating expenses in the second quarter, defined as station production and station SG&A expenses before barter, were $105.6 million, up 44.4% or $32.5 million from second quarter last year. Excluding $24.2 million related to the acquisitions, $400,000 of stock-based compensation and $1.4 million of corporate overhead allocated to the TV operations, same-station expenses were up $6.8 million or 9.3%, which was $700,000 better than our guidance. The increase was due to higher reverse retrans fees, higher employee compensation and higher commissions on higher revenues. Corporate overhead in the quarter was $7.5 million, up $400,000 or 6.2% versus the same period last year. Excluding $500,000 in stock-based compensation and adding the $1.4 million of expenses allocated to the TV operations, corporate expense would have been up $1.9 million due to acquisition-related costs and staffing, as well as compensation increases. Television broadcast cash flow in the quarter was $98 million, up $27.6 million or 39.2% from last year's second quarter BCF. The broadcast cash flow margin on net broadcast revenues for the quarter was 44.6%. The acquisitions contributed $19.3 million of BCF in the quarter. On a same-station basis, BCF was $78.7 million, up 11.7% or $8.3 million. EBITDA was $92.7 million in the quarter, up $26.5 million or 40.1% higher than the same period last year. The EBITDA margin on total revenues was 36.6% for the quarter. The acquisitions contributed $19.3 million of EBITDA in the quarter, and on a same-station basis, EBITDA was $73.4 million, up 10.9% in the quarter or $7.2 million. Net interest expense in the quarter was $29.3 million, up $4.4 million versus second quarter last year primarily due to adding the $350 million of term loans to acquire the Freedom stations. Our weighted average cost of debt for the company, including our bonds, is approximately 6.3%. We recognized $5.1 million in income from our non-TV equity investments primarily related to the gain on the sale of our Rowan investment. We had diluted earnings per share of $0.37 in the quarter compared to $0.23 in the same period last year. The acquisitions added $0.04 to EPS in the quarter, which includes the acquisition financing costs. We generated $51.1 million of free cash flow in the quarter and $174.8 million for the trailing 12 months. During the past year, we converted 56% of our EBITDA into free cash and distributed 22% of the free cash to our shareholders. We produced a 23.7% after-tax free cash flow yield on our market cap and paid a 5.3% dividend yield based on our second quarter closing price of $9.06. We remain disappointed by the market's continued low valuation of our broadcast stocks. In the past 9 months, approximately $2.1 billion in TV assets have been sold at multiples ranging from 9x to 11x. Yet public valuations continue to trade 3 to 5 multiple points lower despite stronger balance sheets and multiple revenue streams in advertising, retransmission, digital interactive and digital spectrum opportunities. With all the positive activity and performance improvements that Sinclair has been providing to our shareholders, including our 25% increase to our dividend, there should be a strong sentiment that public trading value should be higher. With a simple 1 multiple improvement, that would generate a 30% increase in our stock price and would still be deeply discounted from a private market valuation standpoint and from an expected equity return position. So with that, Lucy will take you through the balance sheet and cash flow highlights.

Thank you, Dave. Total debt at June 30 is $1,728,300,000, which includes the draw of the $350 million in term loans for the Freedom closing. The debt also includes $62.6 million of the nonrecourse VIE debt that we are required to consolidate on our books and another $8 million that is related to Cunningham's debt. We ended the quarter with $31.1 million of cash on hand and $11 million drawn under the revolver. Capital expenditures in the second quarter were $11.7 million with no change to our full year guidance of $45 million. Cash programming payments in the second quarter were $18.5 million and estimated at $70 million for the full year. Of the $51.1 million in free cash flow generated in the quarter, we used $10.6 million for debt repayments, $9.6 million for dividends and $25 million pursuant to the Fox agreement. Total net leverage through the holding company at quarter end was 4.41x, and this excludes the VIE nonrecourse debt and is net of cash. The first-lien indebtedness ratio was 2.46x on a covenant of 3.25x. The total indebtedness ratio through the television operating company was 4.43x on a covenant of 7.25x, and interest coverage was 3.42x on a covenant requirement of 1.35x. We believe these ratios will improve significantly in the back half of the year as we enter the height of the political season. Based on guidance in our earnings release this morning and assuming that Newport closes in early 2013, we feel that we have a very real possibility for our total net leverage to be below 4x by year end, and it's significant here is that our leverage after acquiring almost $600 million in assets would be lower than our 2011 pre-acquisition levels. So with that, Steve Marks will now take you through our operating performance.

Thank you, Lucy, and good morning, everybody. Our net broadcast revenues in the second quarter were $220 million and, as Dave mentioned, $7.8 million better than our guidance. This reflects 9.2% same-station growth and 4.6% growth excluding the acquisitions and political. Political revenues in the quarter were $11.4 million, almost 3x more than the $4 million we expected. $6.3 million of the total came from 3 states, Ohio, North Carolina and Florida, and 50% of the total was candidate-related. Local broadcast revenues were up 32.1% in the second quarter. On a same-station basis, local net broadcast revenues were up 5.3% and up 4.5% excluding political. National broadcast revenues were up 58.2% in the quarter. On a same-station basis, national broadcast revenues were up 22.3% and up 4.7% excluding political. Same-station categories that were up in the quarter were automotive, services and direct response, while fast food, schools and telecommunications were weaker. Same-station spending by the automotive sector represented 21.2% of our time sales and grew 16.8% in the quarter, slightly higher than our guidance of mid teen percent growth. Turning to our outlook for third quarter, we are estimating that net broadcast revenues will be approximately $223.1 million to $228.1 million, up 46.9% to 50.2% as compared to third quarter 2011. This assumes $18.5 million to $23.5 million of political versus $2.4 million in the same period last year. Also included is $48.8 million of revenue related to the acquisitions. Excluding the acquisitions, same-station net broadcast revenues are expected to be up 14.8% to 18.1% and up 8% excluding political. We are not seeing any indications that the core business is being impacted by financial issues in Europe. Regarding political, we are dealing at never-before-seen levels, including Four Points and Freedom. When you compare this election to the 2008 presidential race, political is expected to be up 85% through the third quarter, and we believe that we will exceed the $34 million of political reported in the fourth quarter 2008, including the acquisitions. Our third quarter on a same-station basis is expected to be driven by retrans renewals, digital interactive revenues and time sales growth. Categories that are expected to grow are automotive, direct response, telecommunications and grocery, while media, fast food and schools are expected to be down. As we discussed last quarter, we believe we have seen the bottom of the telecom weakness. Auto is expected to be up by low mid-teen percent despite the amount of political we expect to be booked. On the expense side, we are forecasting our TV production and SG&A expenses in the third quarter to be approximately $106 million, of which $24.5 million relates to the acquisitions, $1.3 million relates to corporate expenses that we will be allocating to the stations and $300,000 to noncash stock-based compensation. Excluding these, same-station expenses will be up 10.1% over third quarter last year. Included in the $7.4 million same-station increase is higher reverse retrans payments of networks, higher compensation and bonus expense and variable expenses relating to the higher sales. As in previous quarter, our expenses are fully loaded, assuming full staffing and maximum bonus potential. We expect EBITDA in the third quarter to be $95 million to $100 million or 53.1% to 61.2% in growth. Of that, the acquisitions are expected to contribute $22 million and the legacy Sinclair stations to contribute $73 million to $78 million, which is a 17.7% to a 25.8% growth rate, representing $11 million to $16 million in incremental EBITDA on a same-station basis. With that, I would like to open it up to questions.

[Operator Instructions] Our first question comes from the line of Bishop Cheen with Wells Fargo.

Lucy, you and the whole team have a knack for managing the platform and managing the balance sheet. And with $1 billion of acquisitions now behind you, I'm wondering if you can you relook at the balance sheet at a way of reducing your cost of capital and if you can tell us how you think about that.

Sure. Absolutely, Bishop. So when you look at the cap structure, we have 2 things that are going on. Next November, we have our most expensive piece of debt, which is the 9 1/4% senior secured notes. They become callable in November of next year, so that's a piece of debt that we would like to get out of the cap structure. But in addition to that, we also have the $400 million for Newport that we'll need to finance. And the nice thing about what we've done with the balance sheet is that we really can access any part of our cap table, whether it's first-lien unsecured debt. We can really go to any part of it to get the notes refinanced and the Newport deal done.

Bishop, I just wanted to thank you for being such a great supporter of the media industry. Everything's here, your peers, your professionalism, and your knowledge of the media industry has just been a great benefit to this industry. And we're really going to miss you.

Our next question comes from the line of Marci Ryvicker with Wells Fargo.

I have a couple. In terms of the third quarter, you mentioned a couple of the categories that are pacing up. Can you just talk broadly about the categories outside of auto, if they're trending better collectively than they did in the second quarter? And then the second question I have is just clarification on net broadcast revenue. That plus 8% same-station ex-political includes retrans. Am I correct?

That's correct.

Okay. On the first question, Marci, I guess the biggest plus for us in the third quarter other than automotive which continues to look quite good is the telecommunications category, which we believe in the third quarter, coming off of a down second quarter and coming off of 6 consecutive quarters that were down in pace, we're going to show a nice increase in that category in third quarter. And it's a substantial increase. It could reach double digits. So we're excited about that. Some other categories that are picking up steam for us that are also beneficial, especially to our MyNet and CW stations, we're plussing up in direct response, we're plussing up in religion, we're plussing up in pay programming. Those are all vital categories through MyNet and CW stations, of which we enjoy a lot of coverage with. So the third quarter, on the spot end, is impressive, actually, and it's going to outdistance the first 2 quarters of 2012. So we're actually picking up steam in third quarter, which is interesting, considering that political is picking up as well. So we're firing on all cylinders right now and very optimistic that third quarter will continue to show the strength that it's presently showing.

Great. And I just have one broader industry question. Just your thoughts on what's going on with the area litigation and how this may impact retransmission negotiations.

I think, Marci, it's way too early to give any considerations of what the effect that's going to have on the industry. The litigation surrounding that's going to become very technical. We tend to think, based on what we know now, that there are some really interesting technical issues that may create problems for it. But then in a larger sense, what I would tell you is in the last 15, 18 years or so, we've seen a lot of people with a lot of money try to come into our space and figure out how to get our content and get it into other people's hands and circumvent the traditional process, and I would tell you, they're all gone. So I don't necessarily hold out any particular hope for them as a business model. Over the long term, I really personally view it as kind of background noise, and that is what it is.

Our next question comes from the line of Aaron Watts with Deutsche Bank.

Most of mine have been answered, so maybe just one other kind of topical matter that's been out there. David, maybe your thoughts on the Dish's Hopper DVR that allows people to skip commercials. How big a threat do you see that as being to the ad model, if it's even allowed to kind of continue?

I don't -- again, I don't put much talk on all these technologies, but my simple answer to that is if anyone cut our commercials, then we're going to raise our retransmission rates.

Yes, I guess that make sense.

Yes, but nothing tricky.

And then I guess I'm just curious, your thoughts, I know this has been long a point of frustration for you guys, but what do you believe are kind of the main reasons why you're not getting kind of the public multiples you want on the television stocks right now? We have seen the M&A, private transactions getting done, where they're getting done. Just curious what you think are the main reasons for the gap existing today.

If I knew the answer, then I'd really be rich. Yes, we take a look at this history in regards to multiples and multiple valuations as a single source of revenue 4 or 5 years ago and to what we are now with our multiple sources of revenue and the technology opportunities that we have as we go from analog to digital, and you see the private market values that are pretty significant in that regard. If you just take a reflection back to prerecession levels and the multiples then, back in '07 we traded at 9x. That would be the equivalent of a $23 price per share today versus around what we've been trading at, $8 to $10. I get a little cynical at times when I take a look at the technical guys that are in there, and they're just playing the game with, "Let's play Sinclair from a $9 stock to a $12 stock. Let's buy at $9. Let's sell at $10 or $12. Let's take our profits and just play that game." And it has little -- seems to have little or no reflection to the true value of the properties. You take a look at us and where our upside is. You take a look at -- listen to the Nexstar report from the other day, when they talked about what the impact of the Newport stations will have, the refinancing of their balance sheet, the free cash flows that they're generating and the multiple -- leverage that they're looking at. And to see where their stock trades and where we trade, it's just, to me, just hard to explain, if not impossible, at this point.

Yes, and I would just add too, Aaron, that a lot of investors don't take the time to really understand what is happening outside of the industry. So you've taken the time to address and ask us about ad hopper. Many people don't. They just put -- thinks that these are automatically threats to the industry and really don't try to dig down to understand the true impact to broadcast.

Okay, fair enough. And one more, if I could, just kind of tack it on to that conversation. Maybe just what you're seeing, the latest on what you're seeing, if possible, through the flurry of political activity in the local market on the competitive environment, how the ad dollars that are being spent. Digital was obviously a question that came up, how much is digital going to erode from television or is television going to keep most of their share and digital's going to grab from radio or newspaper, some of the other local mediums. So maybe your latest thoughts on that and what you see going into next year.

I always say, and I believe this whole heart, that we represent the most powerful force on the face of the earth, and that's the television set. So regardless of what affiliation you are, there's one thing that's constant. Everybody watches TV. There's not a day that goes ahead that they don't. And that's the product that we represent. So everything else is in second place. Everybody tries to take a shot, and as Dave mentioned, they fall by the wayside. We are very optimistic about our future and our present, so the competition, as far as competition, we've always had it. It's there. And day in and day out, we go head-to-head with them, and we like our results. What we do is compare [ph] Share, and there's nothing that suggests that that's going to stop anytime soon.

I'd say just to amplify on your question a little bit, I think when you go back and you look at the history of the broadcast business and you look at what we've always been viewed as, we've always been view as a one-to-many business from an advertiser perspective, unlike the Internet that can deliver 8 billion spots to 8 billion people anytime they want. What I would tell you is with the advent of technology and a lot of other things that are happening within the industry, when we talk about being optimistic, we're of the belief that in the not-too-distant future, we're going to have technical capabilities that will exist, that will provide us the very distinct capability to be in the one-to-zillion delivery capacity. So I tend to think that the industry needs to get away from the notion that we're just a one ad to the entire marketplace as opposed to the what could be the optionality to be able to deliver 10,000 ads to 1 million people in a marketplace. Those kinds of things are on the drawing board and being discussed now in terms of all the technologies around us, and we're giving a lot of thought to how to start to think about this things and implement them over time. So again, we're optimistic just given what we know about the technology side of the industry. And I think as everybody's kind of said, the Wall Street folks tend not to bore into details or kind of get their head around that kind of stuff. They spend more time focusing on things like Facebook or LinkedIn or Groupon or whatever, which, by the way, aren't what they used to be. But then nevertheless, that's kind of where they spend their time. And I think somewhere along the line, if they want to get educated as to what's going on in our business, then we're happy to spend time and help people understand it, as is I'm sure Disney [ph] and anybody else that's a public company, because it's quite enlightening when you really get into the details of it.

Our next question comes from the line of Douglas Arthur with Evercore.

Two questions. The 8% ex-political same-station guidance for Q3, is there any crowding out factor in that, i.e. because that figure would actually be slightly understated for crowding out? That's my first question.

We've got, as I mentioned in my ultimate speech, there's 3 very hot markets for us, which is Columbus, Asheville and Florida states and cities. And we're in a great position. The crowding out situation and the question of what happens to those advertisers, this is nothing new. They will be back because they understand the power of the medium, and they'll be back the next day when the election is over. So the crowding out issue is not really a major factor. The bottom line is you got X amount of spots to sell, and we're going to sell every one of them at the highest rates the market is going to bear. And when the election is over, the people that did get crowded out, they'll come back because they know that it works. And in these markets where we're hot politically, we also happen to enjoy some very strong competitive television stations in these respective markets that are very difficult to buy around. So crowding out, really not that big of an issue for us.

Okay. And then my second question, regarding the Fox station deal, I mean, there's additional detail, obviously, in the release on that today, I believe. Can you make any comment on how that station arrangement did or did not impact reverse retrans back to Fox? Can you put any color on that? Or is it totally separate?

Well, there's a number of elements to the deal, and 2 of the key elements were the reverse retrans negotiation in regards to the long term being a 5-year deal, through 2017. So we negotiated that piece. And then there was a discussion regarding Baltimore, where they have an O&O here in Baltimore, and they had the right to take that -- our affiliation, not Fox affiliation, away from us here in Baltimore. So that was another key element to the negotiation in terms of getting to a long-term deal. So that's where the -- those are the 2 primary issues that were dealt with.

Our next question comes from the line of Andrew Finkelstein with Barclays Capital.

A few questions. One, just following up on the Fox question there. Can you tell us what the payment for the Baltimore station would be and, I don't know, how you think the options get resolved? And are they sort of tied together with you guys taking the Baltimore options and Fox taking some of the others or are they completely independent?

We indicated to you the total could be $52.7 million. $25 million has been paid, and if they don't exercise their option, $25 million will not be paid. So if you kind of back the math, it gives you $2.7 million exercise price on the option for UTB, which is assignable because we have limitations under the SEC ownership rules within Baltimore to create a legal duopoly here, so that is an assignable option and as such, protects us pretty much in perpetuity in regards to our Fox brand by having them.

Okay, great. And then just going to the core local sales in the quarter, the same-station, 4.5%, and then I think also for the 8% for the next quarter. Would you guys still be positive if we took retrans out of those numbers? So just the core time sales.

Absolutely.

Okay. Is it similar to the 4% and the 8% growth rates, 4.5% and 8%?

Repeat that, please. I didn't hear it.

With the core time sales on a same-station local, 4.5% for the second quarter and 8%, I guess, all-in for the guidance, will they be similar to that if we took out the retrans growth?

Actually, I think we're a pinch ahead in spot, political excluded, for the third when compared to the second. So as I mentioned a little bit earlier, we're actually gaining steam on spot, political excluded. Right now, it looks like it clearly will be better than the first 6 months of 2012.

Okay. And then, Steve, also, you gave us some political numbers in your prepared remarks. I just wanted to confirm or if you could go back, I think you said up 85% or so of the '08 number. Was that on a sort of same-station looking back at what the [indiscernible] Stations did, or is that just on sort of the old Sinclair numbers from '08?

Andrew, those are assuming the acquisition in 2008, so it's the legacy and the acquisitions for 2008 and 2012.

It's all same-station comparison there.

Okay. So you'd be up -- was it 85% that you'd be up, you said, through the third quarter, I think?

Yes, that's right. So if you compare the 3 companies in '08 through September of -- year-to-date through September and then you compare the 3 companies for the same time period in '12.

Good, okay. That's a huge gain. I mean, is it the PAC money or issue or...

A little bit of everything. Andrew, right now, we're pacing 50% candidate and the other 50% is between PAC and issue.

I just think that there's something that continues to be lost on the investment community in general is the notion that the political business as a business is an ever-expanding business, just like retrans is. I don't think we've begun to see, and we may not see it in the cycle, but certainly, I don't see any evidence that it's ever going to go away, that the notion of the potential third party in this country called the Tea Party or whatever they want to refer themselves as and various political action committees are just going to continue to drive this platform on a going-forward basis. I just don't think it's going to stop that, unless for some reason, we become -- the fantasy of a place to live in the world when everybody goes to sleep and everybody loves everybody. I don't think that's not going to happen anytime soon. In a political sense, it's just going to keep getting bigger and bigger and bigger. It has to.

Right. David, while I have you, I know the board considered just given your comments on the stock. Have you thought about buybacks or maybe shifting from the dividend to the buyback.

We analyze that on a constant basis, and there's no set answer as to what we're going to do at this point in time, but trust that we'll make what we deem to be the right decision for everybody concerned.

Okay. And then last one for me is just the Bay TV acquisition. Multiple seems pretty good. It's just obviously a big price, I guess, for a MyNetwork. I don't know if that -- did that station do anything in particular that drove such high, such strong performance for that market size at MyNetwork? It looked like a pretty big price.

It's not a big price when you take a look at the cash flows, and you can see that in the multiple. It's an opportunity there from a related -- it is a related-party transaction, so I think that gives us the benefit of being in the right place at the right time in that regard to be able to get a cut price at that level. The reality is it's worth more than the $40 million. So you can really bore down into it. One of the owners that's not related is reaching that point in life where he wants to monetize his investments, and this is an opportunity for him to take advantage of that, and he was ready to go out and take some cash. So he's about a 25% owner, and with that, we're able to put a deal together that made some sense. Otherwise, if I were sitting in the Smith shoes, I would have said I'll hold onto it for another 10 or 15 years, but their partner wanted to exit. So that's kind of the long and short of it.

Is that one of your bigger MyNetworks in the group?

Well, yes, in that market size. Tampa's just a -- it's a huge market, so competitive as a MyNetwork in terms of the share we get and the result is seen on the bottom line.

I think there's other strategic reasons for wanting to continue to be in Tampa for the longer term, not the least of which is spectrum space and big markets, but also, as you, I'm sure, observed, there's a continuing consolidation going on in the business. So there may be, at some point in time, an opportunity to create duopoly structure in Tampa. So we're not here to tell you it is or isn't going happen, but we're looking at literally every market in the country. And we're looking at who the sellers are, and we're kind of contemplating the kind of downstream activities that may be of interest to us in that marketplace. So look at it as, at least in one sense, as kind of a layaway platform that can be trade-based. It can be any number of things that we want it to be.

[Operator Instructions] Our next question comes from the line of Edward Atorino with Benchmark.

The dollars in the marketplace are piling in. Are any advertisers sort of skipping the third quarter instead of fighting the political battle and the auto battle and sort of committing into the fourth quarter. In other words, what's the visibility sort of now on the fourth quarter from a bookings point of view, I guess?

I think we're going to be fine. Again, the crowding out issue, we're really talking 3 states, a handful of markets that affect less than 2 handfuls of stations. So when you're talking about a company that has over 70 television stations in the hot markets are really less than 2 handfuls. We're fine. So I expect that in fourth quarter, you'll see continued growth from automotive. We just talked about telecommunications turning around to positive for the first time in 6 quarters. So I think we got a lot to look forward to towards the end of the year that brings us into 2013. So we're clearly going to put a ribbon on this right through the end of December.

There are no further questions at this time. I'd like to hand the floor back over to Mr. Amy for closing comments.

Well, thank you, operator, and thank you, everyone, for participating on the earnings call with us this morning. And as always, if you have any additional questions, please do not hesitate to give us a call. Thank you.

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.