Audacy Inc (AUD) 2002 Q2 法說會逐字稿

Good morning, and welcome to Entercom's second quarter earnings release conference call. All participants will be able to listen only until the question and answer session of the call. This conference is being recorded at the request of Entercom. And now we will turn it over to the company.

Good morning, and thank everybody for joining. This is Steve Fisher. Before we start the call, let me note the disclaimer. The matters we'll be discussing here today contain certain forward-looking statements that are based on current expectations and involve certain risks and uncertainties within the meaning of the U.S. Private Securities Litigation Reform Act o 1995. Additional information and key risks are described in the Company's filings on forms 8-K, 10-Q and 10-K with the U.S. Securities and Exchange Commission. Listeners should note that these statements may be impacted by several factors, including changes in the economic and regulatory climate and the business of radio in general. Accordingly, the Company's actual performance and results may differ materially from those stated or implied herein. Entercom assumes no obligation to publicly update or revise any forward-looking statements. And now to go on with the meat of the call, I turn it over to David Field, President, Chief Executive Officer.

Thanks Steve. Good morning, and thank you for joining us for Entercom's second quarter earnings call. We are very pleased to report record-breaking results in all key financial metrics. Our results exceed our prior guidance and continue Entercom's track record of outpacing the industry each and every quarter in organic growth. We congratulate the entire Entercom team on delivering these excellent results. With me today to discuss the quarter are Joe Field our Chairman, and Steve Fisher our Executive Vice President and CFO.

Net revenues for the quarter increased 15% to $108.5 million while BCF climbed 18% to $47.8 million. After tax cash flow increased 10%, to $29.1 million or 59 cents per basic share. These are all record results for the company. On a same station basis, revenues increased 6% and broadcast cash flow was up 7% for the quarter, compared to the prior year. As always we'll provide you with some additional color on the quarter and recent events of course, and then provide some insight on current business conditions.

We achieved these results by once again gaining market share across our platform. We gained share in 11 of 17 markets. Enabling us to gain 50, that's 50 bases points of market share from our radio competitors. Both national and local revenues were up, with national achieving a slightly higher growth rate. Our Q2 growth was distributed across many growing ad categories. The strongest categories included automotive, restaurants, entertainment, home furnishings and health and medical.

We achieved our results despite the fact that market conditions were quite weak in Seattle during the quarter. Seattle market revenues, again not Entercom but the market, declined 8% during the second quarter. Entercom Seattle achieved significant share gains during the quarter, enabling us to achieve better results than the overall Seattle market. Nonetheless, the fact that we were able to achieve 6% same station growth company wide, and post one of the industry's strongest quarterly performances, at a time when our largest market declined 8%, is a testament to our team's ability to consistently execute and achieve superior performance. To state the obvious, when the Seattle market turns it will provide a meaningful boost to our performance. We are encouraged by the fact that the Seattle market is improving, going from down 13% as a market in Q1, down 8% in Q2, and Q3 is currently pacing up a bit.

Turning to our newest market, we are delighted by our progress in Denver, which we entered in late first quarter. We have moved quickly to enhance our operating team by upgrading over half of the senior management team, including the market manager. In addition we have launched a new format on one of our FM stations, and refined FM programming on the other properties. We are very pleased to note that every one of these stations achieved double-digit ratings share growth in the spring, led by our newly formatted station, The Mountain, which debuted at 5th place among men 25 to 54.

In fact, we are quite pleased with the overall spring ratings results across the country. Most notably in Norfolk, Entercom stations now rank first, second and third among adults 25 to 54. Second place honors belong to WBKL, our new urban adult contemporary station, which was just launched in 2001 and is now among the market's elite leaders. It is also worthy to mention that Entercom now holds the number one ranked station position with adults in Seattle, Portland, Sacramento, Kansas city, Norfolk, and Rochester.

During the current market conditions, operating fundamentals are continuing to improve. Our second-quarter results illustrate the meaningful sequential improvement that we are achieving. In third quarter we are experiencing accelerating advertising demand that is sequentially stronger than second quarter. As of today, we are pacing ahead of last year in every one of our markets. On a same station basis, July revenues exceeded prior year results by 14%. August is pacing up double digits at this early point in the month. And we have wondered, like many of you, whether the stock market decline will dampen ad demand. But to date, we have seen no evidence to suggest that this is occurring.

Shameful events of the last few months at a handful of public companies has created a ripple effect that has cut the market value of thousands of unrelated companies, such as ours. While we deplore the conduct of the corrupt and are angered by what they have done to the reputation of corporate America, we do take some comfort in the fact that ultimately this will all pass and we will have a more transparent, equitable system, that will reward companies like ours, who continue to deliver excellent results for their shareholders quarter after quarter. Entercom competes from a position of great strength. With the industry's strongest balance sheet, a 33 year track record of unblemished integrity, market leading clusters in top markets, portfolio of strong brand, and most importantly an aggressive, talented team. We will continue to look for attractive opportunities to expand our radio portfolio. We will continue to hold ourselves accountable for outpacing the industry and gaining material revenue share.

Let me turn first to Joe Field who was a couple of comments to add, and then Steve Fisher will continue with the rest of the report. David, thanks to you and the team for producing such great results. I would like to echo what you have just covered. I believe our operating results and our outlook for the future confirm the strength of our business model and of our team. It is gratifying to report another record quarter. Know that we have built a strong and growing portfolio of leading station clusters, while continuing to maintain one of the industry's strongest and most flexible balance sheets. I am proud to note Entercom's 33 year record of success, including both industry leading performance and the exemplary manner in which our team has consistently managed this company, with integrity for the benefit of its shareholders. Now Steve, would you cover the financial highlights.

Okay Joe, thanks. First before I cover the financials I'll address our guidance for the third quarter and then obviously we'll turn it to you for questions. Before I note our guidance, a note on -- a reminder on regulation FD as mentioned at the beginning of this call, where we do provide guidance, we accept no responsibility to update this guidance on a regular basis.

You'll note in the release our guidance for the third quarter of 2002, we expect to report revenue of about 102 million with broadcast cash flow coming in around 42 million. The resulting after tax cash flow per share would be about 54 cents per basic share. This guidance is based on same station assumptions of net revenues to increase by 10%, expenses to be up about 8%, and broadcast cash flow 14%. You'll note -- just a comment on the expense side and maybe in Q&A I'll let David cover the revenue side. On the expense side you'll note our variable is a little higher than we've historically had, that's due to the acceleration we've had on our brand marketing, primarily to capitalize on the strong ratings growth David had just mentioned, and highlighting in a few of our brands.

Few other notes on our third quarter expectations, we've closed now on two of the three Tribune stations. In fact, we closed on July 23rd. We, therefore, have restructured or time brokerage agreement with Tribune for the remaining one station. We also closed on the Emmis property on May 1st, therefore for going forward, we would expect to report time brokerage agreement fees in the third quarter, of 1.3 million and then in the fourth quarter and beyond, until the closing of the last Tribune property our TBA fee would be 250,000 per month, or 750,000 per quarter. And we do not have yet an expected closing date on the remaining Tribune station.

And again just to remind you, we operate that under an option agreement for up to three years. We can call at the end of that three years, this structure is to allow Tribune time to identify a tax efficient transaction, but as you know from following Tribune that's through acquisitions of TV properties.

I would expect our interest expense for the third quarter to be roughly in line with the second quarter. I'd also expect that we would continue to record a mark to market on our underlying hedges. As you know, companies have to mark to market on derivative instruments with new accounting rules that went into effect last year, and with the decline of long-term interest rates we would expect to record another non-cash provision of approximately $1 million in the third quarter, in addition I would anticipate that we could have a non-cash charge of 800,000 from losses and unconsolidated affiliates. So with the above guidance, we would expect to report diluted EPS in the third quarter of about 31 cents.

Couple highlights on the second quarter before your Q&A. David mentioned our same station revenue was up 6%. Broadcast cash flow up 7%. Our same station operating expenses were up 5%, reflecting increased marketing, primarily in several of our key markets and cost associated with the Denver format change with The Mountain, which again debuted in a very strong position in its first book, after only a month of operation. After tax cash flow 29.1 million, 59 cents per basic share, 58 cents per diluted share. And I would refer you to the financial table in our earnings release which provides you a summary of all the details supporting the quarter's after tax cash flow calculation.

Now unique in this quarter for Entercom was a one time non-cash charge of 650,000, this represented an accounting provision for the change in terms of outstanding options that had been previously granted to two retiring members of the board. This change was to clarify the option life remaining after their retirement, and accounting practice called for a provision to record this as an expense even though it was a non-cash charge and the options, frankly, haven't even been exercised at this point.

Couple highlights on the balance sheet. Quarter end our senior debt outstanding was 475 million, of that 325 million was bank term note and 150 million was from our newly issued senior subnotes. Now offsetting the debt at quarter end we had 182 million in cash, but we've subsequently drawn down to close on two of the Emmis stations. So let me give you the pro forma leverage as of June 30th. Had we closed on all the Tribute properties, and as you know we had closed on the Emmis properties, and our pro forma leverage on our senior note, on our senior bank debt and our senior subnotes would be 2.9 times trailing operating cash flow.

This represents the best balance sheet in the radio industry. Those willing -- interested in free cash flow, our Cap-X for the quarter was 2.4 million, our guidance for the year is 9 to 11 million. This may be somewhat lumpy in quarters and distribution is the vast majority of this. Relates to facilities consolidation and upgrades to combine operations in New Orleans, and Denver and to move to new facilities in Greenville and Rochester.

So in summary I'll say now what I've said for many quarters, we continue to excel in the key operating metrics in our market. Our balance sheet is strong and flexible, our business model is sound generating significant free cash flow. And as David said, we're excited about the recent ratings and the outlook for our recent Denver acquisition. What it means for us in the balance of this year and into next year. And hopefully, we will continue to perform as we have. So Operator, we'll now open up the line for any questions you might have.

Thank you. At this time we are ready to begin the question-and-answer session. If you would like to ask a question you may press star one. You will be announced prior to asking your question, to withdraw your question you may press star two. Once again to ask a question, you may press star one. Vic Vickers from JP Morgan, you may ask your question.

Good morning. A couple questions, please. First off could you just talk a little about the trends in your Boston and Portland markets? And then can you talk a little bit about how national and local progressed during the quarter -- the second quarter and the third quarter, we've seen national was up pretty significantly and heard that and local was actually closing the gap a little bit. If you could just talk about that a little bit please. Thanks.

Sure Vic. National has been a little stronger than local but I would say they are both doing quite well at this point in time. Going back to your first question, in the Boston marketplace and the Portland marketplace we had good ratings. In Portland in particular, our stations are number one with adults, number one with men, number one with women 25 to 54. It's hard to beat that. In Boston, we bounced back a bit on WAAF, our rock station, and the remaining properties all had solid books.

As the market conditions in those two markets, they both are positive. Portland which had been negative in the first quarter we indicated on the last call, we expected to swing positive in the second quarter and we did see that for the market overall.

And that's true for Boston as well?

That's correct.

Great. Thank you.

Our next question comes from Drew Market from Deutsche Banc.

Good morning, gentlemen. Couple questions here. First on the pacings, we've obviously seen some soft economic data in the last week or so, have you seen any change in the pacing data in the last week or so? Second, with your 10% revenue growth guidance in the third quarter, how much of that is impacted by 9-11 especially sports revenue assumptions? And then thirdly, there has been some speculation in the press that you might be interested in buying House of Blues, can you comment on that?

Do we have enough time today? Drew, that's a three-part question. Why don't I go last on 9-11David. Last year obviously 911 impacted many broadcasters for Entercom, we also carried three major league baseball teams and an NFL football team. As you may recall, basically a week's worth of games were pushed from September of last year into October, so were pushed from Q3 to Q4. We think that that was less than $1 million in revenue and expense. But when we give -- when you noted our expense guidance for Q3 being up 8%, some of that would be the impact of sports rights this year to cover the games that were cancelled last year. As for the overall effect of 9-11, while it's hard to quantify specifically, we would, I think we talked about it last year as being between 4 and 5% of revenue, which would include the effect of the sports and David, if you can remember the other two questions.

Drew, as far as the current environment is concerned we have not seen, at this point in time, any slow down in pacings over the last couple of weeks. Obviously the future will be the future. As far as HOB is concerned, you know, we have discussed before that we had explored making a small strategic investment in HOB as we periodically do look at other opportunities, which if we could identify strong synergistic benefits we might pursue. unfortunately that process leaked to the press. We have a very disciplined process and we elected not to pursue that opportunity.

Thank you very much.

Our next question comes from Paul Sweeney from Credit Suisse Bank.

Thanks very much. Good morning. Two questions. One, given the uncertain environment we're in and given your very strong balance sheet, I wonder if you could talk about what you're seeing out there in the M&A market? Is there any decent inventory for sale? If so, kind of what are your thoughts as to the M&A environment? And second, your expenses as you mentioned, expense growth accelerating a little bit from the first quarter into, I'm sorry from the second quarter into your third quarter guidance, when do you expect your expenses to perhaps begin to moderate? Thanks.

As far as the M&A environment is concerned, there continues to be -- continue to be discussions about possible acquisitions in the industry. But I don't see any change having occurred here over the last several weeks, as the market has bubbled a bit. And given our balance sheet we will continue to look for opportunities to make quality acquisitions of strong radio assets in top 50 markets stretching to possibly top 75, and we remain optimistic that over the course of the next couple of years we will be able to make meaningful investments going forward and we will do so in a way which will not impair our strong balance sheet. As far as the expenses are concerned let me give you a -- just a general headline on that and then Steve may prefer to give you some more color. But I think as Steve mentioned in his remarks, we do intend to ramp-up a bit on our marketing spending on our brands as we go into the second half of the year and believe that is a prudent and wise investment for us that will yield strong returns in the future.

Yeah, we have made conscious decisions to ramp-up our marketing, and we are seeing pay back and we believe we can continue to see strong pay back on it. The rest of our business model is quite healthy Paul, and I think as -- over the past three years, those of you who've followed us know that we've got pretty tight expense management. We think we see some real opportunities to accelerate our revenue growth in some brand building, not that they were weak before, but we've just seen some very, very strong opportunities. The rest of the business model is pretty solid. Underlying that I think going through all our expenses are wages and everything like that is in control. I would note, as I think you're going to hear from our public companies, there are a couple things such as employee benefit cost or insurance cost, things like that, that we and every other company in corporate America, but that's a fairly small part of our total expense puzzle.

Great, thanks very much.

Our next question comes from Jason Hellstein of CIBC World Markets.

Thanks. What was the -- can you tell us what the growth was on I guess a pro forma basis in Denver in the quarter, and then I've got -- one other question also on the fundamentals. Any change in categories as relate to September versus the strength you're seeing in July and August? And then just two housekeeping questions for Steve.

As far as Denver is concerned, the second quarter actually was down a little bit as we anticipated because of the expense of launching the new format. We're very pleased with the results we've seen on our other properties in that marketplace, and expect Denver to be a significant contributor to our performance going forward. Particularly based upon the great ratings results we talked about before, which among other things included our KOSI, our strong, our mainstream AC radio station going to number two in the market with women. As far as category composition is concerned, I don't think there's any material deviation or trend to speak of other than as we mentioned before, a fairly broad range of strength across multiple categories.

Yeah, I would echo what David said. We achieved our same station results while taking some delusion to the format change in Denver, upside of that, the Denver market was up. And we were very pleased with the performance in looking at pacings in the base we built there. As we say, that's going to be a nice contributor to us going forward. What are your housekeeping questions?

Deferred taxes in the quarter looked a little bit lighter than expected. Do you have the an estimate for what the full year's going to be, or at least for the third quarter? And then also interest was -- actually what's the piece remaining I guess on the last Tribune station, the outstanding chunk? As far as the dollar value?

Please stand by your conference will continue momentarily. Please stand by. Please stand by, the conference will continue momentarily. Please stand by. Mr. Fisher you may continue.

Hello. For those who are still on the call, you should know David and I are are not in our office, we're both off site at a management meeting and using a speaker phone in a hotel. We had a power surge here which knocked the speaker phone off. Operator, I will throw it to you for questions now.

Okay, Jason Hellstein is still online.

Okay, Jason, sorry.

Thanks, just deferred -- deferred taxes and then just so we can calculate the interest expense, which you told us was going to be flat in the third versus second quarter. What's the remaining piece of the Tribune deal?

The remaining piece of the Tribune deal I believe that's $68,000 in cash because we have a deposit down on a piece of it.

Okay, and do you have a estimate for deferred taxes for the year?

Well, for the year part of that gets back to what the profits would be, but we will step up probably to around $7.3 million in the third quarter, be my estimate. I think what'll probably go, it could go higher than that in the fourth quarter but a lot of that will be dependant on what our profit guidance will be for the fourth quarter.

Okay.

But it's not going to materially change from that ramp rate. I think we were around $7 million in the past two quarters. Probably jump up to about 7.3 in the third quarter Jason.

Okay, thank you.

Victor Miller from Bear Stearns American Securities. You may ask your question.

Good morning. Could you contrast the Boston-Seattle market for us? What was the pacing like in second quarter in terms of dollars? You said I guess Seattle was down eight. Could you contrast what you're seeing in pacings for those markets -- those two markets in the third quarter? We understand they look like they're probably mid single-digit up as opposed high single-digit down. Secondly, the mid markets seem to be driving the boat in the first two quarters. Could you give us a sense of just how well some of your mid markets did, in terms of revenue, and if they're maintaining that momentum? Lastly, you mentioned that you made changes to your rep firm in terms of staffing, in a rep on the national side. Could you give us a sense of whether that's helped increase your national dollars? Thanks.

Yeah, Victor, in Boston and Seattle, we are experiencing growth in those markets that significant single-digit growth for the markets. For the broader question of the mid markets, yes, we are continuing to see great strength in those middle markets, so many of which we are competing in, and not only driving share but taking advantage of healthy market conditions.

And just a side note a lot of those were Sinclair markets where we're also have over the past two years and continue to accelerate our share gains in those markets as well.

And finally, as far as retooling our national rep, yes, we are seeing significant benefits from that. The leadership team at our -- in our D&R division of InterRep is significantly enhanced, frankly, due predominantly to our efforts to retool it, and we're pleased with their performance, and are seeing solid growth nationally at this point in time.

David, if I could just ask, could you actually give us the actual revenue and broadcast cash flow numbers on the same station basis, that [inaudible] of the numbers you have in the press release? Thank you.

They are the numbers in the press release.

Okay.

Yes, those are the numbers inclusive of Denver, inclusive of the Greensboro acquisition earlier this year so that is the same station base.

I apologize.

Not a problem.

Alright, thank you.

Tim Wallace of Banc of America Securities. You may ask your question.

Thank you very much. When you went into the recession or when we went into the recession in 2001, could you give us some commentary on which categories started to slow down for you first? And whether you're seeing anything like that happening in your third quarter numbers? And then second, on your nontraditional revenues, could you comment on what percentage of your total revenues that represents, and whether there were any significant changes there? Thanks.

Let me handle the first question. There really wasn't any particular categories that led us into the recession in '01. And I think more pointedly there are no categories right now where we are seeing any declines or deterioration over the past several weeks. Steve, do you want to address that?

Yeah, we've been -- we've historically run about 3 to 4% of revenues in NTR. You know, you can see some changes from quarter, quarter on events. I can't think of any material change on this one, Tim.

Thank you.

Melissa Goldwasser from William Blair and Company. You may ask your question.

Good morning. Two questions. First can you talk about your satisfaction with LMIV and your current commitment to it? And then secondly it looks like so far in the first half corporate expenses have been flat. Is that what we should expect for the second half?

I missed your second question.

I'll tell you, it was corporate expenses. They've been trimming around, again if you exclude the non-cash charge for the director's options around 3.3 million and I would expect that to be about the guidance going forward. Melissa.

As far as LMIV is concerned, obviously it's a trouble time for the space. I think that Entercom will continue to pursue an internet strategy which will minimize our investment and which will enable us to take advantage of some of the internet tools. But on a very -- on a minimal -- investing as small amount of funds as possible going forward.

Would that include perhaps a restructuring of your current LMIV investment?

I think that's an issue for the entire board as you know. It's a group of five radio operators. And I think it's probably fair to say that all the operators are looking at what's the best way to go forward and pursue that strategy.

Okay, thank you.

Michael Russell from Morgan Stanley. You may ask your question.

Thank you. I'm interested in the second half investing in the branding. Is that something that we should expect you to kind of continue through the first half of next year or just how should we think of the timing of the expense growth normalization?

Yeah, I think that's right. I think what you're going to see to some extent is that in the wake of 9-11 we cut back on marketing expenditures last year which affected both third and fouth quarter spending. And so to a large extent what you're seeing now is a rebound to put us back to more normalized levels of marketing. As you look at '03 and you model forward, I think you could look at a more normal extrapolation based upon 2002 which will be back at a healthy level, which is where not only do we maintain our brands but we are continuing to invest in new opportunities and growth.

And about how much is going into that? I mean, is that kind of 5 or 10% of your revenues, or could you give us a ball park idea of how much is going to brand marketing?

We've never given a specific number out on that, Mike.

Okay. And then is there a range you can give us on your revenues that come from nontraditional revenues?

Yeah, I had mentioned that earlier. About 3 to 4% is the run rate on NTR.

And then, is there a portion of that that comes from kind of more on the concert side of things or is it all just your usual nontraditional that doesn't include that?

It's a mix. We do have two or three concert, big concerts per year,I'm looking at David. We probably have five to, how many concerts would you guess in a year?

There's some big ones and there are some minor ones.

We have several big ones. Again, it's not material but those are concerts where we own the hall or we booked the hall. We sell the tickets we're financially liable. And we bear all the operating expenses as well.

And then it's encouraging to hear in this type of climate that the House of Blues is something you have elected not to pursue, but it still seems that in general that is an area of some interest that maybe the concert line could be important to you. Are there other opportunities to pursue maybe ampitheaters on a one off basis or some other type of relationship that would fulfill that need?

No.

Alright, thanks very much.

David Bank from RBC Capital Markets. You may ask your question.

Thanks, guys. A couple of questions. First of all, it is conceivable that you guys could throw off as much as $150 million in free cash flow over the next 18 months. What are you going to do with all that cash, or, you know, or whatever free cash flow you generate which is quite substantial? And actually I'd like -- if I could get the answer to that question first.

It's a great, great, great problem to have and aren't we fortunate to be in a industry which has those dynamics and be in a company that puts us in a position to be able to exploit that opportunity. Obviously we continue to look for good opportunities to grow our business and do what we do best which is develop great radio stations and enable them to perform at levels of achievement which make our team very, very proud. And in the interim while we're waiting for those opportunities to present themselves we'll continue to pay down debt and leverage our after tax cash flow and free cash flow growth accordingly.

So you think we should sort of model you guys taking the cash to pay down debts.

That's correct.

Okay, and the second question would be, you are one of the few companies that have reported so far to demonstrate real acceleration in the third quarter. You know, versus the second quarter in terms of same station revenue growth. And I was wondering if you could just -- I know you can't really talk about the competition, but what do you think is distinguishing you in that respect, in that you guys are seeing this acceleration and everybody else is kind of not seeing that kind of acceleration?

Well, I think they're really two answers to your question. I think the first is that we have again demonstrated quarter after quarter after quarter as both a public and private company, that we have been able to execute on a consistently superior basis to our peer group through the things that we do, the team that we build, the brands that we develop, the best practices that we deploy, and over time that has enabled us to generate the track record we've generated. So to some extent I think that our guidance is consistent with the fact that we have been able to achieve a certain differentiated growth, and third quarter will be no different than we've accomplished in the past. Beyond that, we also are very comfortable with our guidance, but perhaps and this is purely speculation, but you wonder if maybe other companies are being a little more conservative. We're being conservative. Maybe they're being very conservative in their guidance, but that's speculation.

Thanks a lot guys.

Our next question comes from Richard Rosenstein from Goldman Sachs.

Thank you. Two questions, one is related to inventory and rate. Of the 14% revenue growth that you saw in July, which I presume is now an actual number, how much of that would you say was rate versus inventory? And then as you look at your pacings going forward, you had mentioned that August is pacing up double digits. How much of that is comprised of units versus pricing? And then second, David, in the past you've talked about aspirations of being the third, you know, big player in radio. And I'm just wondering, based on everything that you've seen over of the last couple of years in terms of consolidation opportunities, do you think you can get there through Denver type kind of one-off acquisitions that are sort of creatively assembling assets within markets or something larger? Thanks.

Your first question first Rich, the -- it's more rate probably than inventory utilization. We are not adding units, so it's really just a question of yielding more from our existing inventory, and we're benefiting from just an increased level of demand in the third quarter vis-a-vis last year. Insofar as our growth plan, yes, we will continue to look for one-off opportunities like Denver, but the reality is that the true opportunity for us to grow in the future will probably come from more dynamic opportunities to acquire or merge with other existing, mid-size broadcasters and take advantage of that significant growth opportunity.

Can I just follow up on my first question, which is if, in fact, most of the 14% growth that you saw in July was rate, how dynamically does rate change from month-to-month? In other words, is there any reason if your units sold finish up in the month of August at a comparable level as they were a year ago, and your rate isn't fluctuating very much, that your revenue growth in the month of August wouldn't be comparable to that in July?

You know, theoretically that's possible. We're not guiding August obviously, but, you know, there is dynamic pricing in our industry and as demand grows and as our inventory tightens, then, you know, we are able to capitalize on that opportunity. And certainly that opportunity unveils itself in any given month.

Great. Thank you.

Doug Cranfis from Shankman Capital, you may ask your question.

In --I know you had mentioned that pacings were up. How is the visibility doing. This is a question I've been asking of most players in the industry. I know it had tightened up pretty substantially and relative to what the historical level of visibility has been. Has that level been extending? Are you seeing any contract terminations, are the contract terminations off, or have they gone away almost completely?

Visibility, as you know, in this industry is always somewhat limited because of the buying cycle. It had gotten better over the course of the last several months or last couple of quarters as buyers began to buy a little bit earlier than before. We have not seen any change in that trend and, therefore, we are entering months now with a higher percentage sold than we had let's say a year ago. Your second question--

Was more just in terms of are there any contract cancellations, you know, is that something that has been increasing, or decreasing or even gone away.

No, I'd say at this -- I wouldn't say it's gone away. I'd say there's a certain amount of fluctuations that we experience which tends to be minimal and that that has remained the case of late.

Thanks.

Once again if you would like to ask a question you may press star one. George Billius from Sykes Investment Advisors, you may ask your question.

Good morning. Just a couple questions. One, how would you define your target leverage now that you're below three times, and also if you could just tell us if you've had any recent discussions with rating agencies. Thanks.

Most recent discussion with rating agencies were in February when we were notched up as part of the offering of the senior subnotes. The target leverage ratio, obviously that's dependant on opportunities. I'll go back over the 30-year history of this company both public and private. And I think we've always wanted to operate with a very comfortable level of leverage and that would be in the senior bases in the mid fives probably based on acquisitions, and that's been our history as we've levered up over the past three years, doing about 1.7 billion of acquisitions. We've kept the senior leverage at -- in the mid five range. So for purposes of guidance I think that's where we're comfortable. And as indicated earlier, we generate significant free cash flow through this business model, and we'll continue to pay down debt. Again, a reminder, our pro forma debt at the end of -- on June 30th was 2.9.

Okay, thank you.

Once again if you would like to ask a question you may press star one. At this time I show no further questions.

Okay, well thank you everybody, and we look forward to reporting back to you in 90 days