A. H. Belo Corporation
Q4 2018 Earnings Call Transcript

Published: 8 Mar 2019

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the 2018 Fourth Quarter and Full Year Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the call over to your host, Katy Murray. Please go ahead.

[Katy Murray:]

Thank you, Greg, and good morning, everyone. This is Katy Murray, Chief Financial Officer of A. H. Belo Corporation. Welcome to our fourth quarter and full year 2018 conference call. I am joined by Robert Decherd, Chairman, President and Chief Executive officer of A. H. Belo Corporation; Grant Moise, Publisher and President of The Dallas Morning News; and Tim Storer, President of Belo and Company, who are all available for Q&A. This morning, we issued a press release announcing fourth quarter and full year 2018 results. We have posted this release on our website under the Investor Relations section. Unless otherwise specified, comparisons used on today's call measure fourth quarter 2018 and full year 2018 performance against fourth quarter 2017 and full year 2017 performance. Our discussion today will include forward-looking statements. Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those statements. The Company assumes no obligation to update the information in this communication except as otherwise required by law. Additional information about these factors is detailed in the Company's press releases and publicly available filings with the SEC. Today's discussion will include non-GAAP financial measures. We believe that non-GAAP financial measures provide useful supplemental information to assist investors in determining performance comparisons to our peers. Reconciliations to the most directly comparable financial measures based on our segment reporting, presented in accordance with GAAP are provided on our website under the Investor Relations section. I remind everyone we adopted two new accounting pronouncements effective January 1st of last year. Detailed information is available in our GAAP to non-GAAP reconciliation provided on our website under the Investor Relations section. A. H. Belo reported fourth quarter 2018 net income of $151,000 or $0.01 per fully diluted share, compared to income of $12.8 million or $0.58 per fully diluted share in the fourth quarter of 2017. For full year 2018, we reported a net loss of $5.4 million or $0.26 per fully diluted share, compared to net income of $10.2 million or $0.46 per fully diluted share reported in 2017. As a reminder, in 2017, the company sold three parcels of real estate in Downtown Dallas that generated capital gains of approximately $12.5 million. For the fourth quarter of 2018, we reported adjusted operating income of $2.6 million, a decrease of $2.9 million or 52.6%, compared to the fourth quarter of last year. For the full year, adjusted operating income was $5.4 million, compared to adjusted operating income of $11.7 million in 2017. Today’s discussion will address the financial performance of the Dallas Morning News and Belo and Company separately. Beginning with the Dallas Morning News, fourth quarter 2018 total revenue was $47.1 million, a decrease of $9.4 million or 16.6% compared to Q4 of the prior year. For full year 2018, total revenue was $180.3 million, a decrease of $37 million or 17% when compared to the $217.3 million reported for the year – for the 2017 fiscal year. Approximately $8.8 million of this year-over-year decline is attributable to the new revenue standard requiring certain transactions to be reported net versus gross. Adjusting for this change, full year 2018 total revenue declined by $28.2 million, or 13%. Print and Digital Advertising revenue of $22.5 million for the fourth quarter of 2018 was down $7 million or 23.8%, compared to $29.5 million reported in the fourth quarter of 2017. Full year 2018 Print and Digital Advertising revenue was $83.5 million, a decrease of $28.5 million or 25.5% when compared to the $112 million reported in 2017. Approximately, $7.8 million of the full year decline was due to the new revenue standard. Excluding the impact of the new revenue guidance, full year Print revenue decreased $20.7 million or 18.5% when compared to the prior year period. Approximately, $3.1 million of the year-over-year decline is related to the revenues of The Denton Record-Chronicle, which was sold in the fourth quarter of 2017. Circulation revenue of $18.4 million in the fourth quarter of 2018 declined of $1.4 million or 7.2% compared to Q4 2017. Circulation revenue for the full year was $71.9 million, a decrease of $5 million or 6.5% compared to the prior year. Approximately $1 million of the full year revenue decline was the result of the new revenue guidance and $1.1 million was related to the sale of The Denton Record-Chronicle in December of 2017. Excluding the effect of the new revenue guidance, and the sale of The Denton Record-Chronicle, home delivery revenue declined by a net $2.4 million or 3.7%. Single-copy revenue declined by a net $459,000 or 4.8% and digital-only subscription revenue increased by a net $1.2 million compared to the full year of 2017. The declines are primarily due to lower home delivery and single-copy volumes, partially offset by rate increases. As previously stated, one of our highest priorities is to grow the News pay digital subscriber base and digital subscription revenue. In the fourth quarter, the News reported approximately $1.1 million of digital-only subscription revenue, an increase of $288,000 or 36.7%. Full year 2018 digital-only subscription revenue was $3.9 million, an increase of $1.2 million or 42.9% over 2017. Other revenue at The Dallas Morning News decreased $918,000 or 12.8% to $6.2 million for the fourth quarter. Full year 2018 revenue decreased $3.6 million or 12.5% to $24.9 million. The year-over-year decline was due to a $1.4 million decrease in commercial printing revenue and a reduction of $1.9 million in event-related and other revenue. Operating expense for The Dallas Morning News for the fourth quarter of 2018 was $48.8 million, a reduction of $9.8 million or 16.8% compared to Q4 of last year. Full year 2018 operating expense was $191.5 million, a reduction of $36.5 million or 16% compared to the full year 2017. Excluding $8.8 million related to the adoption of the new revenue guidance, full year 2018 operating expense decreased $27.7 million, or 12.2% compared to the prior year. Full year expense reduction is primarily due to improvements of $13 million in employee compensation and benefit expense, $6.1 million in distribution expense, $1.9 million in advertising and promotion expense, $1.3 million in news print expense, and $1.2 million in temporary service expense. Additionally, in 2017, the company recorded asset impairment charges of $3.3 million. Adjusted operating expense, which adjusts total operating expense for the new revenue standard, pension benefit, severance expense, depreciation and amortization and asset impairment was $47.7 million for the fourth quarter, a decrease of $4.4 million or 8.4%, compared to Q4 of 2017. Full year 2018 adjusted operating expense was $186.1 million, a decrease of $23.6 million or 11.3% compared to 2017. The significant year-over-year improvement in adjusted operating expense is a result of continued management of discretionary spending and a decrease in headcount. Adjusted operating income for The Dallas Morning News was $1.6 million in the fourth quarter of 2018, a decrease of $2.8 million or 62.8% when compared to $4.4 million reported in the fourth quarter of 2017. For full year 2018, adjusted operating income was $3.1 million, a decrease of $4.6 million or 59.7%, compared to 2017. As reported earlier this year, we have already taken specific actions in 2019 to address secular changes in the newspaper business including a product repositioning and the shift of internal resources at the News to support subscriber initiatives and technology investments. Additionally, we are eliminating the News brokered printing business and will reduce the number of its local and national commercial print customers for more than 30 to 5. This action will increase operating income by over $2 million in 2019. Turning now to financial highlights for Belo and Company. First, I will review GAAP and non-GAAP results. Then, provide additional operational metrics on how Belo and Company is reviewed internally. For the fourth quarter, Belo and Company reported total revenue of $5.5 million, a decrease of $2.1 million or 27.6%, when compared to the fourth quarter of 2017. Annual Belo and Company revenue in 2018 was $22 million, a decrease of $9.3 million or 29.8% compared to 2017. Approximately, $3.9 million of the full year decline was attributable to the new revenue standard. Adjusting for this change, total revenue declined by $5.4 million or 17.4%. Operating expense at Belo and Company in the fourth quarter of 2018 was $4.8 million, a decrease of $1.9 million or 28.7%, compared to 2017. Full year 2018 operating expense of $20.7 million was down $7.5 million or 26.5% compared to 2017. Excluding the decrease related to the new revenue guidance, full year 2018 operating expense decreased by $3.6 million or 12.7% when compared to 2017. The year-over-year decline was primarily due to reductions of $2.2 million in revenue-related cost, $1.2 million in employee compensation and benefit expense, and $200,000 in printing supplies. Adjusted operating expense was $5.5 million for the fourth quarter, a decrease of $1 million or 15.9% compared to 2017. Full year 2018 adjusted operating expense was $23.6 million, a decrease of $3.7 million or 13.6% compared to 2017. The year-over-year reduction in adjusted operating expense is a result of lower digital cost of sales and lower variable compensation. Adjusted operating income for Belo and Company in the fourth quarter of 2018 was $1 million, a decline of $136,000 from the $1.1 million reported for 2017. Full year 2018 adjusted operating income was $2.3 million, a decrease of $1.7 million or 42.8% compared to 2017. We have updated our GAAP to non-GAAP reconciliation which is posted on our website under the Investor Relations section, to include a reconciliation of segment reporting in addition to the consolidated reconciliation. To provide more clarity with regards to the operational performance of Belo and Company, we have provided unaudited 2018 and 2017 quarterly operational metrics that reconcile revenue and expense per the 10-Q or 10-K with an adjusted internal operating income metric. This internal operating view includes two items in the reconciliation

[Operator:]

[Operator Instructions] Your first question comes from the line of David Cohen from Minerva Advisors. Please go ahead.

[David Cohen:]

Good morning, guys.

[Katy Murray:]

Good morning, David.

[David Cohen:]

I am glad it’s 2019.

[Katy Murray:]

We are too.

[David Cohen:]

So, I know, you’ve been assiduous about scrubbing every expense item you can think of and unfortunately I think that’s probably involved cutting some muscle, as well as some fat. And I am just wondering, there is one expense item that I had sort of have no visibility into which is the public company cost. Could you talk a little about how you would estimate that number? And whether it’s changed over the last few years?

[Katy Murray:]

David, I’ll be happy to answer that question. Over the last year, we have made significant decisions around how to reduce our public company expenses. I think you are aware that we did change from KPMG to Grant Thornton this year. We announced that in the proxy last year and you saw that. And in part that was thinking about where we were as a public company and what we needed to do from an audit perspective and the types of fees that we were able to afford and that actually saves significant dollars. It will save over $400,000 in a year. The other thing that we do is we are continually looking at other areas of public company expenses that we can reduce and you kind of get down to a point of – there is some certain fixed things that you have, but I would say the other piece of that is, being a public company has afforded us a lot of opportunity over not just the last several years, but really over the last couple of decades. And I think, while there is regulatory and some things that we need to do as a public company, I would have to say that I think a lot of private companies that our size are doing the same thing. They just may not have the quarterly filings and things like that. But I think that we’ve done a really good job of managing our public company expenses and we continue to look for opportunities of ways to reduce those as we can.

[David Cohen:]

Well, so, can you give us a ballpark number? I mean, I have thought obviously this is now based on the last proxy that audit cost last year prior to the change were $1 million, forward fees were $1 million, and obviously your time and the time of the accounting staff adds to that. And I came to a number which was certainly over $2 million and $2 million isn’t that much compared to adjusted operating income of $15 million or $20 million, which we use to generate. $2 million compared to $5 million of adjusted operating income. That’s pretty substantial and I am just not sure I agree that historically, there were some benefits of being public. I am just not quite clear on what the value is as being public right now. I don’t know, if you want to comment on that.

[Katy Murray:]

Well, I think David, I mean, there are couple things. I think, one, there are some easy expenses that you could point to and say those are public company expense as you could reference the audit. You could reference the Board’s fee and things like that. But I would also say that, some of that is in, how people look at certain expenses and what you want to put in Board’s fees or what you are going to put in public company fees could be really discretionary and based on individual input. So, look, I agree that, if you had a $2 million public company expenses, you are looking at that at directly across adjusted operating income is it could look alike. I would challenge you that I don’t think our public company costs are that much. But then again, it’s going to be whatever you decide that you want to put into that bucket of expenses and when you look at private companies, I mean, they are still going to have an audit. They are still going to have an executive staff, private companies have Boards. And so, I think, it’s not necessarily a one-for-one on what you would be able to eliminate by not being a public company, versus being a private company.

[Robert Decherd:]

David, this is Robert Decherd. There are two other aspects for this, of course are apparent to you. One is, as it has always been the case for us, the benefit of the disciplines financial accounting operating of being a publicly reporting company are significant. It’s a different management environment. And I would say, one that is very beneficial as we work our way through this transition through a digital world. This one is a big deal. And we applied a lot that thinking in the last year, many of the moves we made reflects that. It’s not because we are public that we do that, but those protocols, those routines, match up to the intensity of the challenges that we are facing or how intensely we are addressing them. And what I’ve been advocating and preaching internally is, we had to think like a small company which we have become. And I would say, we are almost through that change in mindset and behaviors. We were a much larger company. We grew for a long time. You know us so well. And when you say, we are public, you have to think in the context of how large a company you are at the moment and we are definitely a small company with lots of obvious issues that we need to address. But I think we are making progress there and whether public or private, this is I think the more important point, anyone in the newspaper business has got to get to the digital side of this river and do it on the back of subscriptions, both print and digital, which is what Grant has articulated very persuasively internally. It’s where all of our attention is focused. It’s the internal shift of resources that we’ve discussed and that process as he going to test is well underway. So I think – not for a moment minimize the importance of, pick your number, $2 million or $2 million plus dollar expense line and whether Katy’s interpretation is exactly right. Now I do think some of those expenses will persist in a non-public environment. But for now, I and the Board like where we are in terms of the required disciplines, the intensity of the focus we have to bring to this and the things we’ve undertaken are measurable. I mean, we will know that we are making progress, The Dallas Morning News moving to this subscriber-oriented subscriber first approach and we’ll know whether Tim is able to establish momentum that is sufficient to grow at the range we know we need to grow. While we are dealing a company not only that complements what The Dallas Morning News has done historically, but build a business on its own. I mean, we are not early stage, but we are certainly not half way there. And all these things we have to be looked at together.

[David Cohen:]

Good morning, Robert. Thank you. Respectfully, because I do have a lot of respect for you, I think, the discipline of being public which you refer to, is cosmetic and superficial on the circumstance, because, as you know, it’s not as if voting control of this company is in the public marketplace, so, from our perspective, you bear many of the costs of being public including, not only these direct financial costs, but the inability to manage this transition, sort of without a light shining on you, if I can put it that way. And I guess, the thing that’s really acute to me right now, is you’ve got the previous architect of the corporate strategy which I would say, has not been a rage in success namely the marketing diversification. Constantly in the market, selling his non-voting or selling his shares that don’t matter in terms of the votes. He has sold 130,000 shares out of 420,000 that he filed to sell. He is still collecting Board fees as far as I am concerned. I just don’t – I think the message that you are sending to the public market that you want to be responsible to and responsive to is extremely negative. And I am not – as you know, I’ve been very supportive and I think The Dallas Morning News is an incredibly important piece of the Dallas media environments and it’s a civic institution. I don’t think that as a public company, that’s - the health of that civic institution can be assured and in fact you are working across purposes to what’s held by being public. And I just – I really want to make that clear, because I think there is some misunderstanding that outside shareholders don’t believe that The Dallas Morning News is important. I don’t know, if you want to respond to that, but.

[Robert Decherd:]

Rather than respond, I will say, well taken and to the last point, you and I’ve known each other a long time. I fully appreciate and all of us to the extent which you do recognize the importance of The Dallas Morning News and your other points are all well taken. I will communicate those to John Beckert, who is our Lead Director and we are attentive to these matters. I’ll just leave it that.

[Operator:]

[Operator Instructions] Your next question comes from the line of Michael Melby from Gate City Capital. Please go ahead.

[Michael Melby:]

Good morning and thank you for taking my questions.

[Katy Murray:]

Good morning, Mike.

[Michael Melby:]

Good morning, and thanks again. Robert, I was hoping you could provide the rationale for maintaining two classes of common stock for the company? Thanks.

[Robert Decherd:]

Well, the rationale is the same it’s always been, which is, the industry, many, many years ago was generally characterized by having two classes of voting stock for the companies that went public. That includes us. It provides a certain degree of continuity and stability, which I know is, from a public shareholder standpoint and it’s arguable both ways. But the Board believes it’s served our interest well and as no particular incentive or idea of that changing.

[Michael Melby:]

Thank you.

[Operator:]

Your next question comes from the line of Boris Senderzon from Hilbar Capital. Please go ahead.

[Boris Senderzon:]

Yes, good morning. I have two questions. First question I was wondering [Indiscernible] real estate sales and second, your pension liability went up since last year and I was curious whether it’s the return from an asset side didn’t perform as you expected or is it something else? Thank you.

[Katy Murray:]

Hi, Boris. Thank you. I’ll take these questions. First on the pension, I think you will see this across all organizations who have pension plans. The market performance at the end of the year was less than stellar. So I think from an asset return perspective, everyone saw the pain of that on the pension plans. And then, also from – while the daily, from a discount rate, there was some movement on that. When you look at pitch and plans, you are also looking at 30 year discount rate that is impacted by day-to-day market activity. So, the pension swing that you are referring to in the unfunded liability, it was a direct correlation to the market and to economic events. There was nothing to do with the management specifically of the pension. And I will say, with that, the very strong first two months of 2019 has helped to turn a lot of that market activity from the fourth quarter of last year around. So, again, we feel very good about the pension and pension plans where we are. We don’t have any mandatory contributions this year on in the near-term. And we have been very active and very successful in all of the derisking plans that we executed on over 2016 and 2017. On the real estate sale, on 508 Young, as I mentioned, it is actively being marketed. There is a lot of activity around that property and we are optimistic that something could transact this year outside of that real estate. We do not have any other real estate that is for sale. And do not own any other real estate in Downtown Dallas

[Robert Decherd:]

Boris, Robert Decherd, just tagging on, it’s also worth noting that the former campus 508 Young Street is in an opportunity zone and as all of you are probably aware, this has become a very active market in the last 90 to 120 days. And once the rules for how capital gains are deferred through opportunity zone investments would actually be applaud. So that’s helping us and as Katy said, we are optimistic the Dallas commercial real estate market remains very healthy.

[Boris Senderzon:]

Thank you.

[Operator:]

Your next question comes from the line of Chris Mooney from Wedbush Securities. Please go ahead.

[Chris Mooney:]

Good morning.

[Katy Murray:]

Hey, Chris.

[Robert Decherd:]

Good morning, Chris.

[Chris Mooney:]

One simple question. In prior calls over the last year or year-and-a-half, you were confident that $30 million was an appropriate price for the prior corporate headquarters. Is that still what you are thinking?

[Katy Murray:]

Chris, absolutely, it’s higher than that.

[Robert Decherd:]

Yes, that’s – I think, it’s – our expectation has moved up with the opportunity zone development or evolution of that.

[Chris Mooney:]

Well, that’s good news. Can you give us some additional color or can Tim, on what’s going – happening with the Belo and Company? It seems like we’ve had several quarters of disappointment despite the profits and positive EBITDA. Could we get a little more color on that? And why there seems to be optimism going forward?

[Tim Storer:]

Yes, hi, happy to chime in. I think that, as we alluded to and talked throughout the year, last year, we started the year off with a significant amount of large accounts that we have attritioned late 2017 early 2018. So we spent a good portion of 2018 working to replace that revenue and EBITDA in the business. I think that, as Katy alluded to, during earnings call, the internal operating metrics that Katy has published does show that we had good quarter-over-quarter growth as we made headway replacing many of those larger accounts. Specifically, starting in September, we noticed a nice rebound in our ability from a sales perspective to replace that revenue. Coincidentally, that results in us having really strong quarter-over-quarter sequential growth that we were happy to see as well as resulting in significant quarter-over-quarter EBITDA growth as well. So, we are encouraged by that trend and are optimistic that we are going to be able to hold that and continue that into the future. We feel very strongly that the offering that we have from a market perspective is being very well received. And it’s the matter was continuing to operate and execute the business in order to continue to show value with those accounts.

[Chris Mooney:]

And are you – the clients that you are gathering up more regional and local than national?

[Tim Storer:]

I would say, that 2018 certainly represented an uptick in more regional-focused accounts.

[Chris Mooney:]

And is there a year-over-year comparison in the Belo Company you can give us in headcount?

[Tim Storer:]

From a headcount perspective, so, in 2018, we ended with 105.

[Chris Mooney:]

Thank you. Robert, you were optimistic in your brief comments about 2019. Can you give us a little more around that?

[Robert Decherd:]

Chris, optimism in the newspaper business and even tagging into marketing services were just – is we know highly competitive. You have to – I think put it in context, we believe, we are making important progress. The optimism is that we have the right people in the leadership positions. The moves that we have made, the ones The Dallas Morning News particularly where the result of deep analytic work that we started last May and continued through the fall and it gives us confidence that these are the right kind of steps to support the Subscriber First strategy that Grant is leading. We’ve also recruited some very talented people to both organizations. I am sure, you saw the release recently about Eric Myers who is joining The Morning News and Belo Marketing Group as Chief Revenue Officer. Eric is a big talent and someone Grant has known for a long time. I am going to let him comment on the impact Eric will have in just a minute. And some of with Eric’s digital experience, really tracks exactly where we want to go to the Belo and Company partnership and, I’ll say, go to market strategy that relates both to The Morning News individually or separately to Belo and Company where we have in the presence of two leaders of print and digital subscriptions, two industry savvy, very outstanding people and there are other moves that Grant can talk about. So, when you – and then say, what about the product repositioning at The Morning News, that’s all about supporting or correlating to the Subscriber First strategy. Given that we are just beginning that and we have the Art platform coming on soon, my optimism is that, these moves set the stage or begin a process where we can accelerate growth in digital subscriptions. We can hold our print subscriptions and subscription revenue and ultimately that’s the crossover that has to occur for any newspaper regardless of its size. And it applies to everyone, but a very few newspaper publishing companies which are in a different part of the galaxy. On the Belo and Company side, Tim has also restructured some of his management team, brought in a very capable person with lots of agency experience. He is filling in importantly some of the creative capabilities that we need for Belo and Company to drive. That’s also just getting traction. So, as we go through the year, these are all things we’ll be able to talk about on our quarterly calls. It’s certainly the focus of a lot of the effort here and we are also with various, I’ll say trusted advisors looking at all sorts of operating opportunities and they are not just efficiencies, they are ways to actually do the higher math to get the three out of one plus one, which I believe with our focus, we are doing fewer things and we are trying to excel at all of them. Because of the way we are structured, as you know, so well, and because we are small, and because we have a balance sheet that is as strong as ours, we are able to do this in a way that none of our peer companies can. And again, I am excluding the New York Times and The Wall Street Journal, The Washington Post, they are not peer companies to any of the major metros of the United States. So, we are on the way and we’ll be able to measure progress that’s one thing that I like about where we are now. It was a little harder to do that just a year ago. So, Grant, do you want to elaborate on your team and you might do the same, Tim?

[Grant Moise:]

Sure, just from a talent standpoint, Chris, as Robert was talking about, recently hiring Eric Myers from Cox, Eric was over all four of the Cox Newspaper properties in terms of running all of sales and advertising revenue. Eric has been widely known to be one of the best in the country. I feel great that we have that in very capable hands. Eric also very uniquely has a background where he is been able to maximize the marketing services and what we call kind of the internal agency space. And so, we also believe that our sales force at The Dallas Morning News will also be able to continue to grow the revenue into Tim and the Belo and Company businesses. Also, I will just specifically focus on two other key leadership positions, because for us, these are all the most important three revenue positions in our company. The other two is Dan Sherlock who is running our Digital Subscription business and I was very pleased with having over 40% growth last year in digital subscription revenue. I’ve got great confidence in what Dan is leading in that regard. And then, we split the digital leadership of digital subscription revenue from print, where Sue Kerr from Tribune about nine months ago now and I am seeing very good quarter-over-quarter progress with the exception of the fourth quarter, where we had some fees that we had kind of cycled up against in print subscription revenue. But we are focused on the basics and I’ve got great confidence in the three key revenue leadership positions at this point.

[Tim Storer:]

And I’ll just tag on to Grant. Likewise, we’ve added a couple senior leaders into our organization that we are very excited about the first being Cody Bailey who is our Senior Vice President of Marketing Operations. He has extensive agency experience. He was a former managing partner of a large digital agency. In addition, we added Susan Irish as our Vice President of Client Services who also has extensive digital agency experience and was formerly Vice President of Client Services and Strategy at another large digital agency with over 1,000 employees. So, we are very excited to have both of these join our organization and help us continue to build a foundation that we can build upon and scale the business.

[Robert Decherd:]

The other thing this does , Chris, having this kind of talents in the leadership development force we are doing with all of our key leaders is, we will be better able to take the inevitable bumps along the way. This is not going to be a predictable course from where we are to this digitally dominated environment. In the 10-K for example, we note that we got cars.com’s negotiation underway. Well, we have to have this kind of talent and this kind of energy and imagination to figure out what an alternative is, if that agreement isn’t renewed and that’s next fall, it’s a big deal. I am much more confident. In fact your question about optimism that we are able to anticipate and respond to those inevitable bumps or hiccups along the way, eventually, we get to a steady state. That’s the goal and I feel like we are on the way.

[Chris Mooney:]

Yes, and I’ve got one final question for Katy on the tax status of the sale of the former corporate headquarters. Has anything changed?

[Katy Murray:]

No, it does not. Given the net operating losses that we have coming out of prior years, and being generated, we fully expect that we will be able to shield the sale of 508 Young from a capital gains perspective.

[Chris Mooney:]

Well, I certainly hope you all succeed. You oversee a very important institution in the State of Texas. Thank you very much.

[Robert Decherd:]

Thank you, Chris.

[Katy Murray:]

Thank you, Chris.

[Operator:]

And at this time, there are no further questions.

[Katy Murray:]

All right, Greg. Thank you. Thank you everyone for joining us and we will talk with you again when we have our first quarter earnings later this year. Thank you.

[Operator:]

Ladies and gentlemen, this conference will be available for replay after Noon Central Time today through March 15. You may access the AT&T Teleconference Replay System at anytime by dialing 1-800-475-6701 and entering the access code of 464458, international participants dial 320-365-3844. Those numbers once again are, 1-800-475-6701 or 320-365-3844 with the access code 464458. That does conclude your conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.