itn networks board meeting march 11, 2009. financials 2008 financial recap the year-end audit is in...
TRANSCRIPT
ITN Networks
Board MeetingMarch 11, 2009
Financials2008 Financial Recap
• The year-end audit is in partner review at Weiser LLP. Other than minor
reclassifications, there should be no change to the reported EBITDA. The final report
should be issued by the end of March.
• The year finished with Gross Rev of $234.6m, 30.5% Station Profit Margin and the Year
End EBITDA of $32.5m.
• Voluntary Senior Debt Prepayment of $6.25m in ’08, $15.75m since inception
• The Leverage Ratio is 2.37 (Pass Covenant) max is 5.35
• The Interest Coverage Ratio is 4.48 (Pass Covenant) min is 1.80
• The Fixed Charge Coverage Ratio is 1.33 (Pass Covenant) min is 0.90, definition
changed to include change in working capital
Financials
2008 by Qtr
Financials2008 Credit and Covenants Analysis by Qtr
Financials2009 Financial Discussion
• The 4th Qtr effect on ‘09
• The decision to over deliver was made initially for covenant reasons, by over delivering the 4 th qtr we are
essentially moving ebitda from ‘08 to ‘09.
• We began to experiment with station group deals and shorter rotation buys. This experimentation led to new
buy lines that were not fully utilized at each station and subsequently increased our inventory base. The
new buy lines in some cases would provide higher ratings enabling us to further compete on value and not a
lowest cost basis.
• 1st Qtr Details
• The options were firmed up in the 4th qtr, prior to the continued decline of the economy.
• Canceled March Station orders to improve profit and take advantage of the soft local market by leveraging
March and the 2nd Qtr combined.
• Take advantage of low CPM’s by increasing the over delivery carried forward from $2.8m (end of 4Q) to
$6.4m. This was an extremely difficult task since you had to estimate what future options would be taken so
that you do not waste over delivery.
• The second Qtr “Roll Back” offer resulted in scatter deals that totaled over $9m.
Financials2009 Financial Discussion
• 2nd Qtr Details
• The offer of “Roll Backs” to clients were well received. The cancellation of 50-100% of the options on a client
basis was a reality so being proactive resulted in maintaining a good portion of our booked revenue. Initial
offer of 10% Roll Back on optionable dollars did not gain the traction we had hoped, so in many cases we
reset the 2nd & 3rd qtr upfront.
• Change in Buying Execution, creating minimal bases supplemented by high close in buying, creates a
dynamic risk/reward only to be executed in a soft market. The close in buying takes advantage of
distressed/opportunistic inventory while closely monitoring indexing, coverage and the possibility of local
tightening on a market by market basis.
• Planners must effectively execute & maintain the national unit structure based on this new degree of
complexity, while dealing with a different station weighting metrix, resulting in more volatile conversions.
• This is the Qtr where the bulk of the over delivery will be realized based on its high CPM. Schedules are
adjusted to realize prior over delivery to maximize profit, while still maintaining the integrity of the contractual
parameters sold.
• ITN’s proactive position of Roll Backs should put us in a priority placement for Scatter budgets.
Financials2009 Financial Discussion
• 3rd Qtr Details
• Options are estimated at the 2nd Qtr option % applied to the optionable dollars, and that estimated scatter will
be equal to 1Q of $9m.
• We have not bought the third qtr but based on over delivery and our 2nd qtr negotiations we are estimating the
profit margin to be slightly higher than ’08, if the 2nd qtr buying initiative gains traction and optionable dollars
are secured.
• Continue minimal base buys supplemented with close in buying while cautiously monitoring to see if the
local market shows signs of tightening.
• 4th Qtr Details
• The Billing is based on 80% of 4 Q ‘08 upfront in addition to the same scatter as 4 Q ‘08.
• Profit Margin is based on the ‘09 budget until we begin the 09/10 upfront negotiations.
Financials2009 Tracking
Financials2009 Forecast by Qtr
Financials2009 Credit and Covenants Analysis by Qtr