Audacy Inc (AUD) 2002 Q3 法說會逐字稿

Good morning, and welcome to Entercom's third quarter earnings release conference call. All participants will be able to listen only until the question-and-answer session of the conference. This conference is being recorded at the request of Entercom. If you have any objections, you may disconnect at this time.

I would like to introduce your first speaker for today's conference, Mr. Steve Fisher, Executive Vice President and Chief Financial Officer. Mr. Fisher, you may begin.

Good morning, and obviously, thank you to everyone for joining us on this, our third-quarter conference call.

Before we begin we would like to first note the following disclaimer that the matters we'll be discussing here today contain certain forward-looking statements and are based on certain expectations and involve certain risks and uncertainties within the meaning of the US Securities Private Litigation Reform Act of 1995. Any additional information and key risks are described in the Company's filings on Forms 8K, 10Q, and 10K filed with the U.S. Securities and Exchange Commissioner. Listeners should note that these statements may be impacted by several factors, including changes in economics, regulatory climate, and the business of radio broadcasting 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.

Now as we move to the crux and the meat of the call, I'd like to note that I'm joined by Joe Field, Chairman of Entercom, but now to take us through the results of the operation of the quarter I'll turn it over to David Field, President and Chief Executive Officer.

Thanks, Steve and good morning and thank you for joining us for Entercom's third-quarter earnings call.

We're very pleased today to report outstanding record-breaking quarterly results. Our net revenues for the quarter increased by 25% to $106.7 million while our broadcast cash flow jumped 38% to $44.9 million. After-tax cash flow increased 37% to a record high for the company of $29.6 million or 59 cents per basic share. Same station revenues were up 15%, same station broadcast cash flow was up 22%. And these results represent the single best performance of any radio broadcasting company.

Our results also significantly exceeded our prior guidance, which I will point out at the time was, by far, the highest of the non niche radio companies. We congratulate the entire Entercom team on delivering this excellent industry leading performance. We achieved these results by capitalizing on improving industry fundamentals and by gaining significant market revenue share across our platform. We gained spot revenue share in 14 of our 17 measured markets enabling us to gain 70, that's 7-0, basis points of spot market share from our radio competitors.

Every single one of our markets was up double digits in revenues, with only two exceptions, Denver and Greensboro, where we are digesting and developing new acquisitions made earlier this year. And these markets were up, albeit in single digits.

Our strongest markets were Kansas City, Portland, Buffalo, New Orleans, and Sacramento. And as predicted on our last call, the Seattle radio market turned positive in the quarter, with our team in Seattle continuing to gain significant revenue share.

If you were wondering if political advertising was a key driver of our performance it was not. Political spending was responsible for less than 1% of our quarterly revenues. If you are wondering about the ripple effect from political spending on television, I would note that in July, long before the political season, we were up by 14%. Obviously, September comparisons were easier, but the lion's share of our performance had nothing to do with 9/11 comps or political.

Our third-quarter growth was distributed across a broad base of growing categories, including food and grocery, automotive, financial, beverages, and television. And both national and local revenues were up double digits. These results demonstrate once again the capabilities of the Entercom team and our ability to execute and deliver consistently superior results quarter after quarter.

We were also delighted by our progress in Denver. When we assumed operating control in the first quarter, we moved quickly to upgrade the management team, enhance the brands, deploy best practices and set higher goals and expectations. We focused our initial efforts on programming, making selective improvements to two of our brands and launching a brand new FM station, The Mountain.

Just last week we received our second Arbitron ratings book in Denver, and we're pleased to note that all three of our FM properties are moving up. KOSI, our flagship station in the market, has climbed to second in adults 25-54 for the first time in years. And Alice our hot AC is now 62% higher in its target demographic of women 18-34 than when we acquired it from Emmis.

Last, but certainly not least, The Mountain, which launched just five months ago, debuted in third place with men 25-54 and debuted in first place with men 35-54, substantially exceeding even our aggressive expectations.

Due to the lagging impact of 8 ratings improvements these improving conditions in Denver have not yet impacted our financial performance. We do, however, anticipate a healthy contribution to our financial growth rate from Denver in '03 and '04.

Turning to current market conditions, business remains strong. We're experiencing healthy advertising demand as advertisers are booking earlier and rates are firm and rising. Q4 pacings are up double digits. We believe radio is continuing the trend of recent years of gaining share from other media.

Now we are in the midst of budget prep and growing increasingly excited about our prospects for '03. We are confident that we will continue to gain significant market share next year. The caveat, of course, remains the overall state of the U.S. economy, which, to state the obvious, will have a significant impact on our performance, But as of this movement, market conditions remain sound.

Once again, let me salute our team for delivering a sensational quarter. You know, it used to be difficult to differentiate operating performance among the radio groups during the flurry of station trading of the late '90s, but now that things have settled down a bit in the last couple of years, there is much greater clarity on how each of the groups is performing. And the distinctions are truly material. Unfortunately, too often the press focuses on companies surpassing their own low guidance, rather than reporting on objective, comparative performance measurement which, of course, is what really matters. Hopefully this will change and we will continue to proudly highlight our consistently superior performance in all key metrics.

We compete from a position of great strength. With the industry's strongest balance sheet, market leading clusters in top markets, a portfolio of strong brands, and most importantly, an aggressive, talented team. We will continue to look for attractive opportunities to expand our radio portfolio and we will continue to hold ourselves accountable for outpacing the industry, gaining material revenue share, and delivering superior results to our shareholders.

Steve.

Thanks, David. First, I'll address our guidance for the fourth quarter, then I'll briefly summarize our 3rd quarter financial highlights, and we'll get to your questions.

Before I begin, a reminder on regulation FD. As mentioned at the beginning of this call, while we do provide guidance we accept no responsibilities to update this guidance on a regular basis.

Let's turn to the guidance that we supplied you in our press release this morning. For the fourth quarter of 2002, the company expects to report net revenue of approximately 100 to $101 million and broadcast cash flow of approximately 45 to $46 million. This would represent same-station revenue growth of approximately 11% and broadcast cash flow growth of around 14%. We would also expect to report after-tax cash flow, based on the above, of approximately 60 cents per basic share for the quarter.

I'd like to add a note on our revenue guidance. Last year, comparisons are difficult, due to the impact of September 11th on Major League Baseball, when a week's worth of games were postponed from the third quarter to the fourth quarter.

In addition, last year, the Seattle Mariners, which we carry, were in postseason playoffs but, as you know, they were not so lucky this year. So our effective, underlying fourth-quarter guidance is actually stronger than the percentage we just gave you, and to be fair, our third-quarter revenue effective growth rate was effectively more like 14.5%.

Some additional notes on fourth quarter guidance, we'd expect our corporate expense to be about the same as the third quarter. We would have a TBA for our single station in Denver of around $750,000, and our net interest expense for the fourth quarter should be roughly the same as the third quarter, as we have lowest interest income, given our closing on significant portion of our Denver acquisition in the third quarter. While we are not yet providing guidance for 2003, I thought a few notes for your model would be in order.

As we previously announced on the last call, we did not redo our contract to broadcast the Seattle Mariners, which concluded this year. As you begin considering your 2003 business models, I would guide you to reduce 2002 pro forma revenues by about $9 million, again $9 million. And that's pretty much equally split between the second and third quarter, and on a pro forma basis, minimal broadcast cash flow impact.

Also, since we've received no notice from Tribune, at this point, on the closing of the remaining station in Denver, I would guide you to include this TBA expense of 750,000 per quarter throughout 2003. Beyond the above model, beyond the above mentioned items, we do not see any other material change to our business model, and we'll obviously be back to you early next year with more insights on the first quarter and additional thoughts on 2002 pro forma information.

Now to the third quarter, briefly, as David mentioned, our same-station revenue was up 15%. Same station broadcast cash flow was up 22%. The primary driver of our expense increases in the quarter was variable sales costs and bonuses, related to our exceptionally strong performance and an increase in our brand marketing, as we enhanced our platform for the future. In addition, NTR expenses in sports rights were higher versus prior year, particularly due to the 9/11 rescheduling I mentioned earlier, and like most other companies, we've experienced a sharp increase in medical and general insurance premiums.

Our after tax cash flow for the quarter was 29.6 million, or 59 cents per basic share, 58 cents per diluted share, this represents a quarterly record in after tax cash flow performance. I'll refer you to the financial table in our earnings release, which provides you with a summary of all the details supporting the quarter's ATCF calculation.

Those looking at free cash flow, our cap ex for the quarter was $2.8 million, our cash taxes paid for the quarter was zero. As a footnote, we do not expect to be a cash tax payer until late next year, based on current Street expectations. Also, during the quarter, I'd note, we sold a small AM station in Wichita, Kansas for $2 million, resulting in a gain on the sale of this asset.

Our balance sheet. Our balance sheet is quite strong. Our senior debt outstanding at the end of the quarter was $451 million. Of that amount, $301 million was bank debt. $150 million from senior subnotes, offsetting that debt at the end of the quarter, we had $71 million in cash on hand. On September 30, our pro forma leverage, net of cash, of our senior and senior subdebt, would have been 2.9 times, assuming the remaining Denver transaction were closed.

So in summary, we have market-leading clusters in major markets, a portfolio of strong brands, and a tremendous management team. We continue to excel in all key operating metrics. Our balance sheet remains strong and flexible, in fact, the best in the industry, and we're excited about our outlook for radio advertising and our operating performance specifically.

So operator, we will now open up the phone lines for any questions.

Thank you. At this time we are ready to begin the question-and-answer session. If you would like to ask a question please press star 1, you will be announced prior to asking your question. If you'd like to withdraw your question, press star 2. Once again to ask a question press star 1.

Our first question comes from Kip Spring from Steven Nicholas.

A great quarter. Could you give us an update on what your pacings are in Seattle and Boston? I think I heard on a couple other conference calls that those markets were particularly strong.

And then secondly, could you update us on how you feel about the acquisition front, if you see any opportunities there, if multiples are coming down or kind of staying the same, what your appetite is for acquisitions, has it changed at all over the last few months? Thank you.

We'll start with your pacings question, I think Boston and Seattle can be categorized as markets that are growing at a healthy clip, consistent with the overall American radio industry and certainly the markets that we're in.

As far as the acquisition front is concerned, yes, we continue to be very focused on that. We have articulated a desire to continue to grow the company and to continue to make smart acquisitions that add value to our shareholders, and that remains a focus of this company.

As far as the climate is concerned I think the multiples are essentially consistent with where they've been over the course of the last year or so, and while discussions continue on an ongoing basis, there is, that's an effort that we would continue to pursue, and hopefully, as we've indicated, sometime in the next year or two, be able to materially increase the size of this company.

Great, thank you.

Our next question comes from Victor Miller of Bear Stearns.

Morning. Just to round off Kip's question, could you talk about the Seattle and Boston market maybe sequentially? How much it's changed in tone from first quarter, second quarter, third quarter, and as you go into fourth quarter? It's, you know, 20% of your revenue comes out of the top 10 markets. That seems like an important change there.

Secondly, could you, talk a, contrast national and local dollars, what have you seen in terms of the trends there as you move through the year?

And then Steve, maybe you mentioned this but, you mentioned there's $9 million of revenue associated with the Mariners for the 2003. Could you talk about the expenses associated with that and how that breaks up by quarter as well? Thanks very much.

Let me start, let's do those in order. Victor, as far as Boston and Seattle are concerned sequentially, I think Boston could be categorized as, again, being somewhat in line with the overall radio economy over the last few quarters. Seattle has been a laggard, as you know, and, in fact, was behind earlier in the year and has begun to pick up.

The market was down low double digits in the first quarter, again not Entercom, but the market. We were gaining share in each of these quarters. It advanced to a high single-digit decline as a market in second quarter, and then flipped into the black with a mid single-digit increase in the third quarter. If you connect the dots from a prior comment I made, we actually gained double figure revenues in that market, so, obviously, we were able to gain significant share there.

National is outpacing local right now, but they're both so healthy, I shouldn't say so healthy, but they're both very healthy, and I'm not sure there's a meaningful distinction between those two categories and I'll let Steve handle the third question.

We'll give more detail on 2002 pro forma as we get toward the end of this year, beginning of next year. As I indicated on the call, $9 million on the revenue, approximately, split pretty much equally between Q2, Q3. Expense is pretty much mirroring revenue.

Can you give the same color for Boston in terms of the tone of how that's changed quarter to quarter to quarter?

The tone is strong. Boston's been positive all year. I don't have that trend in front of me, but I think that the move, obviously, in Seattle from minus double-digit to positive is obviously quite significant. Boston has been positive all year.

You know, it's been interesting. We've made this point on prior calls, but given how slow the Pacific Northwest had been, the fact that we were able to put up superior numbers during those quarters I think was a testament to the quality of the job our team is doing. What you're starting to see in the last quarter or two is, as Seattle begins to round into forms of market, it is essentially unleased, or unmasked the headwind that we have been facing. And I think you're seeing that reflect itself in our results and how they compare to our peers.

And Seattle still looks like, at least, mid single-digit up for fourth quarter as well, right now?

At this point, we see no reason to expect anything other than sequential improvement from Seattle in fourth quarter.

Our next question comes from Drew Marcus from Deutsche bank.

Good morning, good numbers. A few quick things. One, about Portland, it's your fourth biggest market and also market that had struggled in the first half of this year. Comments on that, and then on the acquisition front, comments, number one, on House of Blues, which I believe has been pulled off the market, and if you've confirm that you've heard that also. And then second, obviously, a big buzz in the industry is Disney, whether or not they're going to sell. You guys have always said you wanted to be the number three, that obviously would enable you to do that. Any comments on how important that would be to you?

Portland has accelerated at a somewhat faster clip than Seattle, and emerged out of doldrums earlier, more like in second quarter as opposed to Seattle with the third quarter. From an M&A standpoint, frankly, I wouldn't know if House of Blues was on the market or off the market, because, as we've discussed before, we kicked the tires on that several months ago. Never got to the point of making a bid, because we rejected it, and would not, at this point, know if they were for sale or not for sale, having already rejected that as a potential investment of the company.

And far as ABC is concerned, that's a rumor that, of course, has recirculated in the last few weeks, and as it has kicked up in the past years and, you know, we'll believe that, if, and when, it happens.

You know, on a broader note, obviously, we would look at -- we would be excited about any opportunity among any of the larger or medium-sized radio broadcasting companies that would come to market, and clearly, it would be something that we would take a look at.

Thanks a lot.

Paul Sweeney from Credit Suisse First Boston. You may ask your question.

Thanks very much and good morning. I was wondering, David, if you could talk about advertising rates that you're seeing now, obviously, much healthier than a year ago. I'm wondering if you could comment on those rates versus 2000. Are you actually breaking new ground on rates or are you still trying to claw back to where you were in 2000?

And second, Denver as you implied, seems to be doing better than you expected. I wonder if you could talk about how you guys are thinking about the returns you're going to generate on that acquisition? I know there was some concern in the marketplace about the multiple you paid at the time of the transaction. But it looks like the market's doing better, you're doing better than, perhaps, initially expected, so, therefore, if you could talk about where you think you can get the multiples in a year or two there? Thanks.

Yeah, I think, Paul, that our numbers this quarter are better than our numbers in Q3 of '00, overall. And what I look at is it's a healthier rate profile. If you think back to that quarter, that was towards the end of the dot-com craze, and so there were certain accounts that we were booking at very, very, very high unprecedented rates, but the overall bulk of our business was being dragged up, but of course, there was a big discrepancy in pricing from our more traditional customers.

What I think you're seeing now is, yes, rates are improving and business is firm. And I think it is, I wouldn't say, a runaway seller's market, but it is probably more of a seller's market at this point than a buyer's market, and buyers placing time more in advance and a healthy buyer/seller dynamic. So if you compare it to '00, and I don't have data specifically in front of me, but I will tell you intuitively, I think our folks would say, overall, our average rates are up, but it's a healthier, broader base of rates, as opposed to the discrepancy I alluded to before.

As far as Denver is concerned, we're very excited about Denver. This is a company that, historically, has viewed itself as a development company, and we look for assets that we believe we can add value to, and we can grow by enhancing everything from brands to leadership to every aspect of the operation, which we think we can move the needle on. And Denver is a great example of that. We felt that we could go in and improve the leadership, we could improve the brands, we could improve the systems, and we could raise the bar in terms of accountability, and we're doing just that. The ratings are ahead of where we expected, and frankly, we're just thrilled about that. And I think going forward, what you're going to see is, we will be able to drive the revenue and cash flow growth from these stations so they, like so much acquisitions we've done in the past, will look extremely compelling.

Great. Thanks so much.

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

Good, thank you so much. You're now the leader of the pack here, David, on same-station revenue growth. Congratulations.

Is there a prize for that? (laughter)

There is, and we'll be giving it out later. What's that?

Trick-or-treat.

Trick-or-treat, yeah, Now, here's the trick. Just kidding.

Could you comment, I think your last question kind of answered this, but the tremendous same-station revenue growth that you're getting, can you quantify how much of that is your improved ratings versus pricing.

And then a second question, this isn't specific to Entercom at all. But the market seems to be particularly concerned over broadcasters expenses, in the third and fourth quarter. And we saw this with Infinity, and yesterday we had, Radio One was sort of on, everybody was -- you know, could you talk about the dynamics for Entercom versus last year. What kind of expenses you had last year and why you would have 11% growth in expenses this year and then 9% on a same-station basis in the fourth quarter? The market may be a little confused about what was going on last year versus what we're seeing now. Thanks.

Let me touch on your first question. The -- it is predominantly a function of pricing going up in the supply demand dynamic that exists in the marketplace today. Having said that, we are doing a good job of developing emerging brands. Brands that have been launched over the last couple years or brands that we've managed to enhance the perception of value in the marketplace by the investments we're making in them. But overall, it is our ability to drive price and our ability to capitalize on the strength of our clusters in the market we're in.

As far as expenses are concerned, let me touch on that briefly, and then Steve may have additional comments. We are not concerned about the increase in expenses, at this point in time. Obviously, we control them as we see fit. But to a large extent, what you're seeing is strong revenue growth driving some of those expenses, as Steve touched on before, there being the variable cost, but also, we are reinvesting more in our properties from a marketing and advertising standpoint.

And we are paying the people that are delivering industry leading results, bonuses to reward them for that performance. And, therefore, these are not uncontrollable and, frankly, they're not even recurring, in terms of the magnitude of the increase, and so we feel pretty good about that. Obviously we don't like our medical bills going up, but in the big picture, that's a relatively small part of the pie.

I agree, and I think for those listening, comparisons to last year third and fourth quarter are extremely difficult, because business conditions, as you know, following 9/11, were unique. I think what we're seeing is a return to our traditional business model.

We're spending millions more in marketing versus last year. But you know what, we curtailed a lot of marketing in the wake of 9/11. One, because of it was the right thing to do. Second, because of financial reasons, given the falloff in revenue. So I think we're seeing a return to that. I would not expect to see these type of expense increases going forward. So again, Tim, the vast majority of our Q3-Q4 is, you've got the sports issues, you've got events that we had this year, NTR events that were cancelled last year.

And as David indicated, people are making bonuses, we're paying our salespeople, and we're putting money back in marketing, so we feel very good about our business model. I would note that our conversion ratio, of our revenue up from last year to this year, we're taking about 60 cents to the bottom line on that. That's a great number.

That's great. Thank you. And congratulations.

Our next question comes from Vinton Vickers from J.P. Morgan. You may ask your question.

Following up on tim's question, firstly. In a sort of mid- to high single-digit revenue growth environment, how should we think about the longer term expense growth that we should expect from your company? Then I have a couple follow ups.

Given the variable expense of high single-digit, then you'd probably expect mid single-digit. An old metric, I'm just throwing out an old metric as I view this industry, not just specific Entercom guidances, generally about half the revenue growth rate in a single-digit environment for expenses.

That's very helpful.

In terms of your pacings going through the quarter, at the time, I guess early August when you reported your second quarter, you guys had said, I think July was up about 14%, and you were seeing, sort of, mid-teens pacings in August. Did August slow down a bit, and then what's the pacing, what are the pacings like in September, October, November, right now?

Looking ahead, again I mentioned we have double-digit pacings in the future and the fourth quarter, and we're feeling very, very good about that. As far as August, August ended up being a strong month and was a little bit below the -- our overall growth for the quarter, but that's to be expected I think, given the fact that September we had the anomaly of that comparison in post 9/11.

Okay, so consistently, you're seeing, sort of, consistent trends October, November?

Absolutely.

Yeah.

And then lastly, for the fourth quarter, what's the growth based on your guidance, excluding the Mariners? I think he said it was about 11%, the guidance. But the Mariners shifted into the fourth quarter this year.

Well, yeah, it was both the Mariners and the Red Sox from last year, and as we said, it's probably about a point, if you try to normalize it.

Great, thank you very much.

Let's make sure we get the right direction here. In other words, all things being equal, with baseball, our revenue, our same station guidance for revenue, would be more like a 12, 12.5.

Right.

Okay. Great, thanks a lot.

Bishop Chain of Wachovia Securities. You may ask your question.

Good morning, David, Joe, and Steve. A couple questions just on the balance sheet. Of the troika from Tribune, the one we're waiting to close on and have that long horizon is KQMT, I believe?

Correct.

How much more outlay to complete that acquisition, what will we have to lay out?

I included that in the pro forma. The additional cash requirement on that, we've already put the deposit down, would be about $50 million, Bishop.

$50 million is the incremental to close that.

Correct.

So, the 451of total debt net of $7 million, you can either take it out of cash or take it out of your --

Out of the revolver, correct.

Out of the revolver. So the 2.9 times is, everything proper is in there, apples to apples, oranges to oranges?

Correct.

That gives you great drive to powder, so I guess the question de jour for all of radio operators is, to expand and do the kind of acquisitions you're known for, the accretive acquisitions, do you want to take it out of free cash flow cash and debt, or will you use your stock as currency to help limit the debt spike?

I think I'll just make a caveat in answering that. I think we've always been very prudent in managing our balance sheet, but I think your sheet, Bishop, is so situational specific. I think we look at, A, all of the above, keeping in mind we want to run a prudent balance sheet and manage our business smartly. I think that has to stand by itself.

That's a fair answer, Steve. Last question, where is your comfort level longer term in the amount of leverage that, you think would be prudent to carry?

Again, all situational specific. I'll note back when we acquired the Sinclair stations. We were very confident in our ability to de-lever rapidly as we turned those stations, and we were willing to go to the mid fives in terms of leverage. I can just give you that as a historical norm. As to the future, each one will be specific. But I think, keeping it at or below six times, again, depending on how quickly we think we can de-leverage, so it is a good rule of thumb.

And you did take that down from the mid-5s?

Very rapidly.

Very quickly. Thank you, Stephen.

Our next question comes from Mark Naby of Merrill Lynch.

Hey everyone, how are you doing? Just a question regarding categories into the fourth quarter. Maybe you can talk about if you're seeing a pickup in auto, obviously from 0% financings and new promotions out there, retail obviously, I would assume, soon to be a large category too. Maybe you can talk to the strength of some areas and weaknesses in other.

You know, again, with our business being as diverse as it is from our customer base, we don't see meaningful trends in any one particular element. Auto business remains solid, but it is just one, one piece of the puzzle. And the feedback we get from the field is that it is a broad-based level of activity that crosses across categories and that there's no real meaningful trends that would indicate anything of significance.

David, also, what are your top five categories today?

Let's see, I'll jump in. We have that on a slide, but I would say generally, it probably would be automotive, in most categories would be large. Recreational amusement is the next category. Home furnishings improvement, restaurants, fast-food, telecommunications, those would be some of the larger categories.

But you'd be splitting hairs, trying to distinguish between them.

I always make that comment when I talk to people. A lot of people fixate on categories. I must tell you, in the three or four years as a public company, we have not seen any significant movement, other than the continued growth in retail as we continue to take share from newspaper, and the growth in health and medical as we've seen further abilities for electronic media to take prescription drugs. I think that's the best indicator of the longer-term trend.

Okay. Just one other question relating to, again, you talked about your acquisition strategy. Could you talk about actual acquisition multiples, what you've seen in the marketplace with respect to stations? Obviously, I'm sure you're more of a mid-large market stationary, so talk over the last six months what you've seen?

I think you have to look at deals that have been done as opposed to shop talk, and every situation, fortunately is,for better for worse, is unique, based upon the metrics and the opportunities of those stations. I think we're still looking at a marketplace today that is in the mid- to upper mid-teens.

Okay. Thanks very much.

Richard Rosenstein of Goldman Sachs. You may ask your question.

Good morning. Two questions. First, just to be clear, you had said that there was about a point impact on growth in the third and fourth quarter related to the shift of sports, of baseball specifically. So, X that shift, third quarter would have been up 14% and fourth quarter closer to 12. But you'd also said that your fourth quarter underlying growth was stronger, so I presume that that difference is NTR and maybe something else. If you could quantify that impact, as well?

And then my second question relates to, Steve, your comment about cash taxes next year. Can you talk about how much of your tax yield currently relates to near-term timing differences, versus longer-term timing differences, as it relates to amortization of goodwill? Thanks.

Let me take the last one first. Near term, obviously, we're using down some NOL's. Also, I would say the fundamental difference on our tax issue between GAAP taxes and cash taxes is the amortization of goodwill for us and other broadcasters, so that's a longer term as we amortize those for tax basis over 15 years.

And what would the cash taxes have been in the quarter, and then I guess this year, without the NOL's, just so we can model it consistently over time?

You know, I don't know that off the top of my head. I'll have to get back to you on one.

Let me jump to your first question in terms of numbers because I think there's a little confusion. As you know, we were up a shade over 15% on our same station revenues for the quarter. The shift of Major League Baseball games cost us close to 1%, it would have actually worked out to be 14.5%, roughly. Would have been our growth rate, were it not for the shift of games in the fourth quarter last year.

Steve alluded before to the shift of games plus the playoffs, which we have a comparison to from last fourth quarter, so that ends up being a larger number. And so the guidance we gave of 11, were it not for 9/11, baseball and playoffs, would look more like 12.5 for fourth quarter. You know, I point out, of course, that we're not alone in this regard. As you look at our numbers comparatively, certainly most of our peer group has baseball games as well, that factor into their numbers.

Was there anything else in the differential like NTR events between the quarters or anything else?

Would have been some small NTR, but I wouldn't consider it significant. We did have a few events that we cancelled or postponed last year after 9/11.

Okay. Thanks.

Brian Pitts of Morgan Stanley. You may ask your question.

Thank you very much. Just two questions. My first question is how many of your markets underperformed the industry in the first half of this year? I'm trying to get a handle on how much better you should fare than the industry in the first half of '03.

And then second, what other markets, besides Denver, will be key drivers for 2003? Thanks.

Well, as far as market share is concerned, we posted a pretty stellar result of 14 up markets and only 3 down markets, in terms of share gains or share losses, which we think is terrific.

As far as other markets that are going to drive the bus next year in addition to Denver, I think we're going to look at a significant rebound in the Pacific Northwest. I think that'll be a factor for us in '03. And I think that there are many markets around the country where, as we model 2003 and look at our budgets, we are baking in market-share gains in, really, in all those markets. Probably won't work out that way that we'll achieve it in all markets, but we think there's healthy growth available throughout the vast majority of our portfolio.

Thank you very much.

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

I'd like to follow up on that last question and ask it more directly. In your current markets in the 17 markets for this quarter, about how much do you think you outperformed the industry on in third quarter of the 14. Are they 15% same station growth? Was it, kind of, 500 basis points above, or can you give a general idea?

And second question, I guess, for Steve. Just a clarification, if you could tell us what was not in the same station portfolio, besides Denver, for the numbers that you reported.

I mean, you can look at what other guys have posted as well as we can. Clearly, you have a range from, you know, I guess 13 being sort of the high, and zero essentially being the low. So you can triangulate those numbers as well as we can.

Yeah, but the 13 is like, really big markets and zero is smaller markets and --

I don't agree with that. I think if you look, and again, I don't want to talk out of school here, but I think if you look across all of the companies we compete with, I think, as we pointed out in our opening remarks, I think you can delineate which companies are performing and which companies are not. If you try to distill that into some sort of an overall industry number, obviously, you can look at REB figures, or you can, sort of, draw your own conclusions from the public universe but clearly --.

Here's the headline. Headline is, Entercom's same station growth clearly is industry leading and it's significantly so. And that is not a new story.

REB's number is not out yet, I was just trying to get ahead of it.

Understood.

As to same station, let me clarify. We include acquisitions after we've operated it for one complete quarter. So these same stations do, in effect, go back pro forma to Denver prior year. I would note, those dilute our overall revenue and broadcast cash flow growth rate. We're actually higher than that in all our stations, but we do include it, we think that's fair and right to include.

Terrific.

Our same station numbers are 100% of our portfolio.

Thanks very much. Guys, nice job on the growth.

Thank you.

Our next question comes from Elissa Goldwasser of William Blair Company.

Good morning. Question on Denver. I believe that you just said that the same station performance includes all three of the Tribunes or all three of the Denver stations. The two stations that you did not reformat, can you talk about revenue growth in the quarter there?

Elissa, It's actually hard to hear your question, would you mind repeating that?

Sure. Can you hear me better now?

Yes.

All of the Denver stations that you now operate are in the same station base, and you had a format flip there from last year, so presumably, that station's revenues are probably down. What about the two stations that you did not reformat?

They were healthier, they clearly, again, we noted that we gained revenue, we were up single digits in Denver. One of the stations, the format change station was down so the other ones were up, but at a higher clip, and we're very, very pleased with their progress.

Okay. And then summer book, traditionally not important, but can you talk about any notable trends there for you?

Well, first of all, they're not all out yet. We've only seen a handful of the book so far, and have not had a chance to fully digest them, And I don't think there's any material results that would either -- that would positively or adversely affect us that come to mind. Obviously, there are a lot of good stories, and we're overall, very pleased with our progress, but no seminal event.

And then lastly. I think Joe is there. Of the million shares registered, I think about two-thirds have actually been sold so far in the first two months of what was described as a 12-month period. I'm curious if we should expect anything more coming after that registration is used up?

Oh, the question was for me. Yes. No, I've announced what my plans are and that's what I plan to stay with.

Great. Thank you very much.

Jason Helstein of CIBC World Markets. You may ask your question.

Thanks. Focused on a more longer term question. And I guess it's two questions. Number one, can you give us an idea of, kind of, the current margin breakdown of your portfolio? You know, when you look at your total BCF, or look at total stations, what percentage of the stations' margins fall into different buckets? In other words, how many stations have over 45% margins, how many are, we'll call, 30 or below, so we can get an idea of the developmental upside in the portfolio?

And then specifically for Denver, when you look out, how many years do you think that can grow at an above average rate? Is that kind of an additive to your growth, you know, for two years, two more years, or do you think it's potentially longer than?

On your second question first, Jason, the answer could be more than two years. If you look historically at how we develop radio stations and our track of growth, I mean, I think, let's look at the fact that in this last quarter, 14 of our 17 markets are up, And obviously, from a share standpoint. And obviously, most of those markets have been in the portfolio for many, many years, and so I would look at Denver, if we're able to execute as we've executed in the past, to be able to deliver significant growth for several years. Obviously, at some point that begins to level off, but we think it's a multi-year evolution.

Just as we're continuing to see major gains from our Sinclair acquisitions of several years ago, and many analysts on the Street said, gee, you're buying some fairly mature properties. Well, they haven't been.

To answer your second question, Jason, or actually it was the first sequentially, which is the breakdown of our margin composition, we haven't done that. We'll do that as we go out and speak at various conferences coming up.

Obviously we've just put together and released our numbers and we haven't gone through that, but I would characterize it as, we're moving the goal line higher across all our properties, whether they're mature. And I'll define mature as, we've owned them for four or five years, or whether they're newly acquired. We have made the statement in investor conferences and the meetings in the past that we see significant pipeline in our portfolio of stations in our -- that we own and control, and we still believe that, as we look to 2003 and even 2004, as David mention.

Just to follow up on that. When you guys look out where you generally feel like there's upside beyond normalized growth, how much of that do you think comes from just the ability to take share, whether it's from competitive radio stations where you feel you do a better job, or alternative media versus, as far as revenue share, versus ratings growth?

And then, in the third category, and that is gaining revenue share away from other media, of course, which is out there. And the answer, of course, is all of the above and every situation is a little bit different.

When you look at our model, we believe in, whether it's the development opportunities at the radio stations to -- or it's the ability to execute at a level that is, frankly, better in most cases, than the guys across the street.

And finally, and perhaps what is ultimately the biggest price of all, and that is, that as an industry, if we're able to do a better job, than candidly, we've don in the past of collectively marketing radio to Madison Avenue, we can begin to address this, still anomaly, in the advertising world, where we're responsible for somewhere between a third and 40, 45% of the time people spend with media, and yet we only get 8% of the dollars. And part of that is the fact that we still, as an industry, have not done a good job of capitalizing or raising this equilibrium, and we're starting to do a better job of that.

But just to repeat again, this year you feel most of the gains this year have been mostly rate driven as opposed to ratings driven.

Yes.

Thank you.

Our next question comes from Bob Critcha of Credit Suisse First Boston.

Given how strong your balance sheet is and your repeated comments that you guys are going to be pretty conservative with how you fund acquisitions and maintaining your leverage, have there been any consideration of conversations with the rating agencies, particularly S&T, about upgrading, I know that might end up being a curse?

I think, Bob, an overall comment. One, we were upgraded pretty much two notches by the two major firms back in February when we did an offering. We are not chasing, at this point, investment grade rating, what we think for a growth company, as you said, that might be a curse. So we're quite comfortable with our cost of borrowing, with our rating, and obviously, with our balance sheet overall.

Another quick followup, you guys, in the stations that you had mentioned that did particularly well, it seemed like a number of them were some of the smaller markets that stood out like Kansas City and New Orleans. I was just wondering are there any, sort of, in the stations that you have that are in markets smaller than 25, were there any particular differences in the trends that you were seeing in those stations, either greater national growth or anything like that?

I'm not sure I agree with the premise, Bob. Because if you think of it, I mean, Kansas City is a top 30 market and we saw great strength across the portfolio, be it in the Bostons of the worlds, and be it in the Madisons of the world, so it's pretty representative throughout our platform.

So no real differences by market size, then?

No, not at all.

Okay thanks.

Jack (indiscernible) of (indiscernible) Capital. You may ask your question.

My question has been asked, thanks.

Our next question comes from Jim Gross of Barrington Research.

A couple of things for David. One, the radio ad spending trends have been very encouraging for you and others, but some of the economic news hasn't been so great and I'm wondering if you had any thoughts on the apparent disparity or disconnect between those two elements? Another thing and are you looking at any metrics to, you know, monitor it going forward.?

Then also, timing of ad placements, you indicated, were fairly early. Is there anything that will speak to how much pacings will translate into revenues, whether they'll be full in force.

And then, Steve, I'm wondering if there was any greater consideration to shifting from an ATCF focus to free cash flow focus, since that seems to be picking up some currency among other companies in the industry?

Let me address that, and that's a fair question. I gave all the data for free cash flow. I note in, yes, I acknowledge that we are a laggard on adopting that, but what I note is, there's still great disparity on how people calculate free cash flow out there, and I'm hoping that there will be a little more of a shift toward standardization. Maybe I'm whistling in the dark.

I think definitely there needs to be some standardization.

I'm not going to drive that, you all on the call are. So, that's why I throw the data out there. Yes, we will probably be talking more in terms of free cash flow next year. I would note that there's very little different between free cash flow, as defined by most of the models, and ATCF, as we put in our press release.

David, on the other comment.

The question you raised, Jim, about the advertising economy, your radio advertising economy versus the general economic, of course, is an interesting question, one for which nobody has a perfect answer.

I can give you my best instinct on it, which I'll be happy to share, and that is that, I think after a period of many years in which companies made investments in a lot of very long term and somewhat speculative areas, be it IT, be it in internet technologies, be in it telecom platforms, and so on and so forth. I think that there's a certain tried and true benefit to advertising that works, that puts people into stores and sells products today.

And that if people focus on delivering the bacon for their companies, advertising, and particularly radio advertising, because it is the most efficient and effective ad vehicle, becomes an extremely compelling choice, where to invest your limited dollars if you want to maximize return.

And I think that's what we're seeing and, therefore, that should be sustainable, if my thesis is correct, almost regardless of where we are in the economic cycle, because at the end of the day, these companies still need to spend the money where they can to make their cash registers ring.

As far as timing is concerned, yeah, buys are being placed sooner. That reflects the fact that we have more of a sellers market, albeit again, there's a balance there, but I think it's a little more sellers than buyers, and that gives us the ability to price more aggressively and to control our business better.

But does that mean then that say, a 12% pacing number might mean a 9 or 10% revenue when it's all in?

No, I don't think I would assume that at all. I think that has a lot to do with, sort of, the underlying question of how much inventory our folks are giving up, and what kind of rates they're getting. And obviously, from our standpoint, we --, our people are forecasting on a continuous basis, and cognizant of those issues, and hopefully, making the right decisions in terms of their business judgment. and we feel very good about, again where we are in the business cycle right now.

Okay. Great.

I think that's it for now, we thank you all very much for your attention and patience and look forward to delivering more good news to you in 90 days. Thank you.