ALLBRITTON COMMUNICATIONS COMPANY
1000 Wilson Boulevard, Suite 2700
Arlington, VA 22209
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY ALLBRITTON COMMUNICATIONS COMPANY
FOR PORTIONS OF THIS LETTER IN ACCORDANCE WITH 17 C.F.R. ss. 200.83
September 15, 2009
Mr. Larry Spirgel
Assistant Director
Division of Corporation Finance
United States Securities and Exchange Commission
Re: Allbritton Communications Company
Form 10-K for Fiscal Year Ended September 30, 2008
Forms 10-Q for the Quarters Ended December 31, 2008, March 31, 2009
and June 30, 2009
File No. 333-02302
Dear Mr. Spirgel:
This letter sets forth the responses of Allbritton Communications Company
(the "Company") to the comments made in your letter to Stephen P. Gibson, dated
August 27, 2009. Each of the Company's responses are set forth below, organized
in the same manner, order and format as your letter, with your comments repeated
and our response immediately following. Pursuant to 17 C.F.R. ss. 200.83, we are
requesting confidential treatment for Exhibits 1 and 2 which are provided in
connection with our response to Items B and H of Comment 1 below. We
respectfully request that you return this information to us when you have
completed your review.
Segment Disclosures
1. In your August 10, 2009 correspondence you indicate that you have modified
the monthly financial reporting package provided to your CODM to remove the
disaggregated financial results of the seven ABC network-affiliated
television stations, NewsChannel 8 and Politico (the nine "business
units"). While this information has been historically provided to the CODM,
you have determined that he "does not regularly review disaggregated
operating results or use disaggregated operating results as the basis for
his decision-making." As a result of the modification, you have changed
your determination of operating segments under paragraph 10 of SFAS 131 so
that only one component of Allbritton Communications Company ("Allbritton")
meets the definition under paragraph 10. Despite the modification and the
information provided in your correspondence, it remains unclear how your
determination of CODM and operating segments complies with SFAS 131.
Accordingly, please address the below comments:
Mr. Larry Spirgel
United States Securities and Exchange Commission
September 15, 2009
Page 2
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY ALLBRITTON COMMUNICATIONS COMPANY
FOR PORTIONS OF THIS LETTER IN ACCORDANCE WITH 17 C.F.R. ss. 200.83
A. Please describe for us the budgeting process for your business units,
including the types and levels of approval outside of the business
unit.
The budget process, which takes place annually, begins at each
business unit and consists primarily of two components. The first is
the overall strategic plan for the upcoming year. It includes analyses
of the current competitive position, changes within the local market
and proposed operational changes for the upcoming year. This portion
of the budget is the primary focus of the CODM. The CODM reviews the
strategic plan and the competitive and operational information for
each business unit as he develops his consolidated strategic plan for
the Company.
The second component of the budget involves detailed financial
information, such as the components of each revenue and expense line
item by month. This portion of the budget is the primary focus of the
CFO, the corporate finance team and certain functional officers. The
VP-Sales reviews the revenue and sales department expense sections of
the budget at each business unit in detail. The CFO and corporate
finance team review the detailed expense accounts in a variety of ways
including reviews for evidence of appropriate expense controls,
justifications for significant variances from the prior year, accurate
application of contract terms and proper GAAP accounting. Any
significant specific concerns or operational decisions arising from
this detailed review are communicated to the CODM for resolution.
The budgets at each business unit reflect the results of the work done
by the finance team and the strategic decisions made by the CODM.
These budgets are then accumulated to generate a consolidated budget
for the upcoming year. The consolidated budget is presented to the
CODM and the Chairman/CEO by the CFO and ultimately approved by the
CODM in conjunction with the Chairman/CEO. After the strategic
decisions have been made and the consolidated financial budget for the
year has been approved, the CODM is focused on the Company's
consolidated results as compared to the consolidated budget. These
comparisons represent a significant component of the revised monthly
reporting package. The CODM does not regularly review actual versus
budgeted results at the individual business unit level.
B. Please provide us an analysis of your 2009 expense reduction
initiatives, as identified in your most recent Form 10-Q. As part of
your analysis, quantify the number of employees terminated by business
unit, quantify the dollar amount of employee terminations per business
unit, the amount of pay
Mr. Larry Spirgel
United States Securities and Exchange Commission
September 15, 2009
Page 3
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY ALLBRITTON COMMUNICATIONS COMPANY
FOR PORTIONS OF THIS LETTER IN ACCORDANCE WITH 17 C.F.R. ss. 200.83
reductions per business unit (e.g., across the board % pay reduction),
and the amount of any other expense reductions per business unit. In
addition, explain to us how the expense reduction initiatives were
allocated to each business unit and identify the people who determined
and approved the allocation. If the expense reduction initiatives had
a disproportionate impact on any of your business units, please
explain why and tell us how this occurred.
In January 2009, the quarterly update of projected results for the
remainder of the fiscal year indicated a significant drop in revenues.
As a result of this updated projection, the CFO met with the CODM and
the Chairman/CEO to discuss the projected decline in consolidated cash
flow and related issues surrounding future compliance with our debt
covenants. The CODM, in conjunction with the Chairman/CEO, determined
the level of consolidated expenses which needed to be reduced in order
to ensure adequate cash flow and debt covenant compliance for the
remainder of the fiscal year.
The expense reduction initiative primarily involved the CODM, the
Company's functional officers, the corporate finance team and the
business unit General Managers and Business Managers. Several "across
the board" decisions were made by the CODM and rolled out across the
group. These included a salary freeze, the elimination of incentive
bonus accruals and the suspension of the Company's contribution to the
401(k) Plan. The CODM then issued instructions and guidance to the
rest of the team involved with the expense reductions. Examples of
this guidance included a request to review and/or renegotiate
employment contracts and third party service contracts, a request to
make headcount reductions, a request for a reduction in pay for
non-contract employees, and a requirement for the elimination of all
non-essential travel and entertainment expenses. While the reductions
at each business unit shared common themes (such as headcount
reduction or reduction in travel/meals/entertainment), there was no
mandate that each business unit eliminate the same expenses, reduce a
certain level of expenses or achieve a certain level of profitability.
Each member of this team involved in the expense reduction initiative
reviewed their area of responsibility (either for their business unit
or for their functional area across all business units) and also
shared ideas with other team members. Potential expense reductions
identified by the various members of the group involved in this
process were tracked and accumulated by each business unit and also
consolidated by the corporate finance team. Each specific expense
reduction proposed was reviewed and approved, modified or rejected by
the CODM. There
Mr. Larry Spirgel
United States Securities and Exchange Commission
September 15, 2009
Page 4
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY ALLBRITTON COMMUNICATIONS COMPANY
FOR PORTIONS OF THIS LETTER IN ACCORDANCE WITH 17 C.F.R. ss. 200.83
was no focus by the CODM during this process on the impact of the
expense reductions on the profitability of any individual business
unit. Rather, his focus remained on achieving the necessary overall
level of consolidated expense reductions, which had been previously
determined by the CODM in conjunction with the Chairman/CEO, without
significantly impacting the operations of the Company.
The impact of the expense reductions on each business unit was unique
as a result of the process described above. There were many reasons
for differences between business units. For example, some business
units had more immediate opportunities to renegotiate contracts and
realize savings than others. Also, some business units had made
personnel reductions in the past twelve months, so they were less
likely to propose the same volume of headcount reductions during this
process as they might have otherwise. Finally, fewer cuts were
proposed and made at Politico due to the negative operational impact
this would have during their current stage of development and growth.
Please refer to Exhibit 1 for a presentation of the specific data you
requested by business unit. Note that while we have provided you with
the data in the format you requested, this presentation is not
representative of how the CODM's decisions were made.
C. Please describe for us the process a business unit would follow as
part of a request to increase its budget for capital expenditures or
staff, explain the related approval process, and identify the person
or persons responsible for approval.
Our policy is that capital expenditures and staffing are approved as
part of our annual budget process as described in the response to item
A above. Exceptions to this policy are individually addressed.
Exceptions related to capital expenditures for routine or minor items
such as a replacement news vehicle or photocopier would be evaluated
by the Director of Technology and then approved, deferred or denied by
the CFO. In the rare circumstance that a request for a significant
capital expenditure is made outside of the annual budget process, it
would first be reviewed by the Director of Technology and the CFO to
consider the rationale for the expenditure and whether it was of a
critical nature. It would then be approved or denied by the CODM in
conjunction with the Chairman/CEO. A request for additional staffing
outside of the annual budget process would be reviewed and approved or
denied by the CODM.
D. On page 6 of your June 11, 2009 response you state that "the CFO
reviews all financial data, including operating profit by segment, to
assess the financial
Mr. Larry Spirgel
United States Securities and Exchange Commission
September 15, 2009
Page 5
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY ALLBRITTON COMMUNICATIONS COMPANY
FOR PORTIONS OF THIS LETTER IN ACCORDANCE WITH 17 C.F.R. ss. 200.83
performance of each operating segment against its own budget and
historical trends." It is not clear how the CFO follows up his
assessment of each business unit. Please describe for us the reason
for the CFO's assessment, and describe the process the CFO would
follow if there are any unusual or unexpected results regarding one or
more business units. Clarify whether the CFO would communicate the
unusual or unexpected results to the CODM. In this regard, clarify
whether unusual or unexpected results would be communicated to the
CODM by anyone.
Just as the VP-Sales is responsible for the Company-wide function of
generating revenue, the CFO is responsible for Company-wide expense
controls and overall cash flow. Just as the VP-Sales reviews revenue
by business unit and/or sales team, the CFO reviews expenses and
overall cash flow by business unit in order to manage the overall cash
flow budget of the Company. If he identifies something that is
different from his expectations during this review, it is investigated
and analyzed by the CFO or a member of the finance team.
For example, if expenses were higher than expected at a particular
business unit, the underlying reason would be identified. If the
expenses were being driven by news department overtime costs that were
related to an unexpected event requiring extraordinary news coverage
(such as the sniper in the Washington, D.C. area several years ago or
a severe weather event impacting the viewing area of the business
unit), then there might be no need for further action. However, if the
news overtime costs were due to a failure to adequately manage
personnel within that department, and if these costs were not brought
under control after discussions with the business unit General
Manager, then the CFO would inform the CODM of the particular expense
that was not being managed effectively. This communication would
include the names of the personnel involved, the amount of news
overtime at issue and a status of the action taken to-date. The CODM
would ask the CFO for his opinion and/or recommendation regarding the
matter, and he would then have a similar conversation with the General
Manager at the respective business unit. The CODM would then decide on
a course of action which might include reviewing the matter again
after a period of time to give the General Manager and news overtime
manager an opportunity to fix the issue, or he might decide that
specific personnel action needed to be taken.
The CODM communicates with a variety of people regarding specific
operational matters. For example, if there was a specific
sales-related issue or a personnel matter, these issues would be
communicated to the CODM by the respective functional officer. The
CODM would then make a decision regarding the specific
Mr. Larry Spirgel
United States Securities and Exchange Commission
September 15, 2009
Page 6
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY ALLBRITTON COMMUNICATIONS COMPANY
FOR PORTIONS OF THIS LETTER IN ACCORDANCE WITH 17 C.F.R. ss. 200.83
issue. None of these communications relate to overall financial
results by individual business unit as that is not the focus of the
CODM nor is it the basis for his decisions.
E. Please describe for us the frequency the CFO and CODM communicate, and
describe for us any information that the CFO provides orally to the
CODM relating to his assessment of the financial performance of each
business unit.
The CFO and CODM communicate on a daily basis. With respect to
individual business units, these communications involve discussions of
specific issues as described in the responses to items C and D above.
There is no regular discussion of overall performance by business
unit.
F. You state in your response that each business unit has a General
Manager that reports to the CODM. Please describe for us the frequency
of communications between General Managers and the CODM, the primary
reasons for their communication, and the information that is
communicated to the CODM by the General Manager. In this regard, tell
us whether they discuss "operating activities, financial results, or
plans" for the individual business units as contemplated by paragraph
14 of SFAS 131.
The General Managers and the CODM communicate regularly on a variety
of strategic operational topics such as:
o Specific changes in the competitive landscape including the size
of the business unit's audience or its share of earned
advertising dollars within its market. There would be related
discussions regarding the proposed operational reaction to a
negative change which might include a request for additional
promotional spending, a change in programming or a proposed
personnel change.
o Specific personnel matters such as a need for additional
personnel, proposed contract renewal terms for key employees, a
plan to change on-air personnel, or a performance issue.
o Potential changes in programming such as a change in syndicated
programming, the addition of a newscast or other locally produced
program, or the pre-emption of network programming to air a
special program such as a local football game or a candidate
debate leading up to an election.
o Specific community events and opportunities such as the recent
contribution of the archived news footage at one of our stations
to the local University.
Mr. Larry Spirgel
United States Securities and Exchange Commission
September 15, 2009
Page 7
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY ALLBRITTON COMMUNICATIONS COMPANY
FOR PORTIONS OF THIS LETTER IN ACCORDANCE WITH 17 C.F.R. ss. 200.83
o Updates on committee participation such as from the General
Manager who sits on the ABC Affiliates Board.
o Other specific issues that were brought to the CODM's attention
by one of the functional officers.
The communications and discussions are centered around the competitive
landscape, operating activities and strategic plans for the business
unit. Because the CODM is focused on how these matters affect the
consolidated results of the Company, these discussions are not focused
on the financial results or profitability of the specific business
unit. The General Managers and CODM do not regularly discuss overall
financial results for individual business units.
G. Please tell us whether you have historically provided the
disaggregated financial information to your Board of Directors.
We have three members of our Board of Directors, each of whom is an
executive officer of the Company. Two of these three members (our CODM
and our Chairman/CEO) receive the monthly closing package. The third
member of our Board of Directors does not receive this package and
does not or has not received disaggregated financial information.
H. Please provide us an Allbritton executive officer and senior
management organization chart.
Please refer to Exhibit 2.
In summary, the CODM is integrally involved in the operations of the
Company and makes all significant operational decisions, either alone or in
conjunction with the Chairman/CEO. In making these decisions, his focus is
on the impact of his decisions on consolidated cash flow and debt covenant
compliance rather than the specific operating results of any individual
business unit.
In connection with our responses, the Company hereby acknowledges:
o The Company is responsible for the adequacy and accuracy of the disclosure
in the filings;
o Staff comments or changes to disclosure in response to staff comments do
not foreclose the Commission from taking any action with respect to the
filings; and
o The Company may not assert staff comments as a defense in any proceeding
initiated by the Commission under the federal securities laws of the United
States.
Mr. Larry Spirgel
United States Securities and Exchange Commission
September 15, 2009
Page 8
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED BY ALLBRITTON COMMUNICATIONS COMPANY
FOR PORTIONS OF THIS LETTER IN ACCORDANCE WITH 17 C.F.R. ss. 200.83
If you have any questions regarding this letter, please contact me directly at
(703) 647-8700.
Sincerely,
/s/ Stephen P. Gibson
Stephen P. Gibson
Senior Vice President and Chief Financial Officer
cc: Mr. Michael Fay, United States Securities and Exchange Commission
Mr. Robert Littlepage, United States Securities and Exchange Commission
Mr. Joe Cascarano, United States Securities and Exchange Commission
Enclosures: Exhibit 1**
Exhibit 2**
**Exhibits 1 and 2 have been omitted pursuant to a request for confidential
treatment and have been furnished separately to the SEC.