Audacy Inc (AUD) 2003 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.

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

Thank you, Michelle, and good morning everyone and thank you for joining us on today's call.

Before I turn it over to David Field let me first make a couple of the required communications.

The matters we''ll be discussing here today contain certain forward-looking statements that are based on certain expectations and involve certain risks and uncertainties within the meaning of the US Private Securities Litigation Reform Act of 1995. Additional information and key risks are described in the company's filings on forms 8-K, 10-Q and 10-K with the US 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 broadcasting in general. Accordingly the company's actual performance and results may differ from those stated or implied herein. Entercom assumes no obligation to publicly update or revise any forward-working statements.

During this call this morning we may reference certain non-GAAP financial measures. We would refer you to our website, Entercom.com, for a presentation of the most directly comparable GAAP financial measures and a reconciliation of GAAP of each such non-GAAP financial measure we may refer to.

In addition, our website includes useful tables of prior period pro forma financial information adjusted for acquisitions, divestures and significant contracts which we would refer you to as you build your models for 2004.

With that I will turn it over to David Field, President and Chief Executive Officer.

Thank you, Steve, and good morning and thanks every one for joining us for our third quarter earning's call.

Net income per share increased 32% to 41 cents per diluted share from 31 cents in the prior year exceeding our guidance. Net revenues for the quarter grew 3% to $107.8 million on a same station basis. We held our operating expenses flat for the quarter, enabling us to achieve 6% same station growth in station operating income to $46.6 million.

Finally free cash flow grew by 14% to $34.2 million. Our net revenues, station operating income and free cash flow results all represent new third quarter records. We are pleased with these results in the context of the advertising market conditions during the quarter. However, we hold ourselves accountable to a higher standard, and are frankly disappointed the market conditions deteriorated during late August and September precluding us from posting stronger results.

Our growth was led by particularly strong gains in Buffalo, Denver, Boston, and Norfolk. Each of these markets achieved robust revenue growth and strong double digit growth and operating income.

Company-wide we continued to gain local revenue share in the majority of our markets and we experienced strong growth in several categories including pharmaceuticals, financial services, travel, electronics and automotive.

As I mentioned earlier, our prudent expense management enabled us to maintain costs flat with the prior year, driving our margins up 140 basis points for the quarter. We achieved this through appropriate fiscal discipline and by reducing unproductive expenditures such as selectively eliminating NTR events that were generating low returns on investment. We did not curtail spending on key brand development which we continue to aggressively support. An excellent illustration of this strategy is Portland. We trimmed back our NTR efforts during Q3 resulting in a slight decline in revenues, but we achieved strong double-digit operating income growth in Portland as margins increased significantly.

During the quarter we changed the formats on two of our stations in Kansas City. We launched a new sports station in the market and successfully recruited three of the four leading sports personalities from a competitor station to join us. Simultaneously, we relocated WDAF, our country station, from AM to FM in order to enable it to compete more effectively and enhance it's future performance. The move required us to eliminate our FM Jazz station, and as a result of this, and the start-up expenses for the two new stations, this adversely affected Q3 revenues and cash flow. Absent these changes in Kansas City, our same station revenues for Q3 would have been up 4% and our operating income would have been up 8% again for the quarter. We are excited about the change into Kansas City, while it will adversely affect Q4 results we expect it to make a positive contribution during the second half of 2004.

We remain delighted with progress in Denver both financially and ratings wise. Our new station launch, KQMT, or The Mountain, has now climbed to the number 2 run station in Denver with men 25 to 54 and number 3 with adults in just the second year in the format. We are not aware of any major market station launch by anybody in the United States in recent years that equals The Mountain's initial success. We also now hold the number 1 position in the market with women 25-54 with, KOSI, better known as "Cosey".

We are extremely pleased with the initial progress of our new acquisitions in Portland and Sacramento as as well as. KWJJ in Portland has been the market's perennial runner up in country before we acquired it. We successfully have now recruited a highly regarded PD, or programming director, from the leading country station in Nashville to join us and build KWJJ to greater success. Already we have seen the station improve in its ratings to a top 5 position with adults in the market.

Similarly we have recruited a new sales manager and sales team to capitalize on our new Sacramento property, KWOD, or "QUAD", and are seeing significant growth which we expect to accelerate in 2004 when we can fully participate in advertising opportunities.

Turning to current business conditions, unfortunately the advertising market has been sluggish since late August adversely affecting Q4 performance. As a result, we are issuing guidance of flat to slightly down revenue performance. I should note that this guidance understates our true underlying growth which is a bit stronger, but is negatively affected by comparisons with nonrecurring prior year's results which included over $3 million in net additional political and NTR event revenue.

Absent the effect of this revenue, we would be guiding to low single digit growth for the fourth quarter. We are disappointed with the current ad climate that has adversely affected all forms of ad supporting media, of course, not just radio. However, as we look ahead to 2004 we believe that there is cause for great optimism. Macroeconomic trends are positive and political spending will further boost performance.

In addition, very early indications for 2004 radio ad spending are positive. While it is too soon and our data is too limited to draw any significant conclusions we are encouraged by what we see to date for 2004. Time will tell.

While we've been less than thrilled with the ad climate over the past few months, we have maintained a healthy perspective on the broader realities and trends. The fundamentals of our business remain excellent. Along with television, radio remains as one of only two universal reach mediums in the United States. We are also the number 1 medium in terms of reach and time spent listening from 6 A.M. to 6 P.M. daily.

Radio is also the low cost provider of advertising, offering eye balls and ear drums at half the price, or less, of television, newspaper and direct mail. And yet we still generate a mere 8% of available ad dollars, a small fraction of TV, print and direct mail. Our upside remains extremely attractive.

Here at Entercom we continue to focus on the things we do to produce superior results. Recruiting and developing outstanding leaders, continuously improving our sales practices and creatively building and developing our brand. We are vigilantly committed to building sustainable, competitive advantages and capabilities to enable us to outperform our peer group and take full advantage of the opportunities, which we believe exist, to generate additional revenues at the expense of other advertising media. We will continue to hold ourselves accountable for outpacing the industry, gaining material revenue share and delivering superior results for our shareholders. Steve.

Thanks, David.

Let me first address a few comments on the fourth quarter guidance and then I will give a few operating highlights on the third quarter.

In the fourth quarter of 2003, the company expects to report net revenues of approximately flat to down 2% or between $103 and $105.5 million for the fourth quarter. And as David mentioned earlier, given the $3 million of nonrecurring, political and NTR revenues last year, this results in a comparable spot revenue guidance of low to mid single digit. On our expense side we continue to show excellent expense management or forecasting expenses for the fourth quarter are up, 1.5 to 2%, primarily as a result of the format changes that David mentioned earlier.

With the top line and cost guidance we should see out station operating income between $43.5 and $45.5 million for the fourth quarter. As noted in the release, we expect to close on our $44 million acquisition in two stations in Portland from Fisher Broadcasting, which was announced in May, in a few weeks. We continue to operate those stations under a time brokerage agreement and we would expect an expense of $300,000 in the fourth quarter prior to closing on that transaction.

We are guiding to EPS based on the revenue guidance above of 36 to 39 cents per diluted share for the quarter, and for those of you who would like to work on free cash flow, we currently are forecasting Q4 capital expenditures of about $2.5 million.

Our third quarter. David gave you an excellent summary of the third quarter operating highlights. I would point out that we are pleased to see expanding margins, tremendous cash flow generation for our shareholders and the ability to meet the high end of our station operating income guidance and exceed our EPS guidance while taking on the challenge and the expensive of reformatting and taking on station integration to do acquisitions, all in the challenging advertising climate.

In the first earnings call of the year back in February, I mentioned to you that we would have lower expense growth in the second half of the year based on how we structured and planned our expenses for the year. So that, now in the second half, even with the format changes in Kansas City, both the launch of Rush in Seattle and the format change in Greenville, and the integration of the acquisition, we'll have same station operating expense growth of just over 1% in the second half of the year, around 2.5% for the entire year.

On the tax side, Entercom has a very profitable business model. That's the good news, the bad news is we are on the cusp of exhausting our net operating loss carry forwards in this quarter.

As indicated to you in past conversations that basically we will now begin paying cash taxes in the fourth quarter. Based on the mid-range of our guidance previously mentioned, we would expect to pay a little over $1.5 million in cash taxes for quarter 4. That is roughly 10% of GAAP earnings. For your models of 2004, you should expect to see us pay between 17% and 19% of our reported pretax earnings and cash taxes.

And a note on Cap Ex, you will note that we ran a little higher in this quarter, as we have in the past. That is primarily driven from the facilities and new acquisitions. In this quarter, we completed our move in Denver to a new consolidated location resulting from last year's acquisition of stations and two facilities from MS and Tribune. We also expanded our Sacramento facility to accommodate the May acquisition of KWOD in Sacramento.

On the balance sheet, industry leading, our debt leverage at the end of the quarter, net of cash, dropped below to 2.5 times and our pro forma debt, adjusted for the anticipated close of the Portland acquisitions as I mentioned earlier, would be about 2.7 times at the end of the quarter.

And that, with that Michelle, we will turn it over to you to open up the phone line for any questions.

Thank you, at this time we are ready to begin the Q&A session.

If you would like to ask a question, please press star then 1. If your question has been answered and you would like to withdraw your request, you may do so by pressing star then 2. If you are on a speakerphone please lift your handset up before your request.

One moment please for the first question.

Our first question comes from Paul Sweeney of Credit Suisse First Boston.

Thanks very much. Good morning.

A couple of questions, please. David, I guess in the third quarter, if you could just give us a sense of how the pricing environment was, maybe talk about Entercom in terms of inventory sellout and rates because obviously there has been a concern about rate integrity in the business.

Second, if you could just talk about the retail category, are the retailers stepping up here for Christmas? There has obviously been positive buzz about retail sales and in the short term, are you starting to see some of that business come in at all as you look at your November and December pacings? As it relates to retail longer term, is that a catagory of concern to you given the consolidation of the retail sector? Thanks.

Starting with your first question, Paul.

You know, we saw business drying up as we got through -- towards the end of the third quarter, and a lot of our activity disappeared. So essentially we saw demand reducing. We did not see any material changes in the pricing environment, and we see the same basic tendency going into fourth quarter. You know, again. Pricing isn't down per se. I think what you were looking at is more of a reduction in the amount of spots being ordered, and pricing holding okay.

As far as retail is concerned, yes, we are seeing retail doing pretty well in fourth quarter, in terms of as a category in its performance. And as we look ahead to the future, I think the one thing we know about our world is that we live in a world of constant change and, yes, we may have a world where there are fewer old line department stores competing against each other but they are replaced by specialty retailers, online retailers, you know, other entrants into the business. I think in our capitalistic society we do not have to worry about somebody coming along with a well funded business plan, that will be in there fighting for lion's share so they can sell goods and services to the public.

All right. Thank you.

Our next question comes from Victor Miller of Bear Stearns.

Good morning.

Two things. How long can you maintain this kind of very low single-digit to flat cost base for the business? And at what point do you say that it actually could be damaging to the company, if at all?

And, secondly, the summer book obviously for (INAUDIBLE) from 9.9 to 4 with the loss to the Seattle Mariners. Could you talk about how that station's been faring on an actual, you know, what the financial impact wound up being, whether it was better, or worse than you expected now that the baseball season is done?

Yes, good questions, those who may not be familiar with the situation. As you recall we opted not to renew our Seattle Mariners deal. We had a competitor come forward with a deal which we thought was outrageous. They basically paid the Seattle Mariners rights fees that were significantly higher than the New York Yankees received for their rights fees in a market which we all know is approximately 1/4 the size of the New York metropolitan area. We think that was a very smart business decision and remains a very smart business decision.

We saw the ratings impact that decision this year in that our competitor which picked the team up had substantial ratings growth and we had substantial ratings decreases. However, what is fascinating is those rating changes are almost exclusively impacting just the times of the game. So if you broke apart the [inaudible] ratings, you will find that we remain an extremely powerful radio station in the mornings an extremely powerful radio station in middays, which is our strength. Yes, nighttime the other station is doing great with the baseball. That's exactly what we expected, that's exactly what we promised advertisers and we are very pleased with those results. And I think the fact that the Seattle Mariners did not make the playoffs, yet again, this year, and there's some real disaffection in Seattle, I think also bodes poorly for the future ratings performance of the Mariners as we look ahead.

Turning to your other question of costs, I gonna let Steve address it, but let me give you one other word. One of the things we are absolutely vigilant about in this company is we do not spare one nickel in investing in initiatives which we think are gonna drive through to growth. That pertains to new brands that we're going to launch that you are seeing this year, it pertains to new sales initiatives, we are willing to up front money in order to put ourselves into a position of competitive advantage going forward. And let me ask Steve for -

It is hard to follow that.

Yes, Victor, I think it is a good question. I think over the years we've shown good, prudent expense management. We are very proud of that. Obviously when you look at a flat expense growth in the third quarter, that is not indicative of the business model. I would point you more to say 2.5% for the year. Can we modulate that up or down if we need to? We're very willing to make the investment where we see a return, witness what we have done in Kansas City. Witness some of our other sales initiatives. But I think the bigger issue that I think I'd point out for Entercom, I think, even for peer groups, is the radio business model on the expense, I think, holds.

Thanks, guys.

Our next question comes from Michael Russell of Morgan Stanley.

Thank you. I was wondering if you could just give us an idea on the NTR. Some of that sounds like it might be more than one quarter. I know you lumped it together with political by saying it was about $3 million. Could you maybe slit out what's political and what's NTR and give us an idea of what the margins were on the NTR that you cut out?

Sure NTR was about $1.3 million, political about $1.7 million rounded. Obviously the margins on political are very high, being spot revenue. NPR I can't give you, Mike, exactly the margins, on the old one, I think, I have heard from other companies that there has been a reduction. Most of that being on the concert side, I'll turn around and say we are still doing NTR, we look for those really that build the brand or contribute to the margin or contribute to our earnings. I think we are just making smart, tough, business decisions on those. And if that results in fewer events, so be it.

And so would it be fair to say that you took 1.5 million out of NTR this quarter, the fourth quarter, and then the two quarters after that?

You know, Mike, I don't have the data in front of me. I think probably for the first half we were probably flat to down slightly, not as much as this quarter.

Okay. When you are giving your guidance of 0 to minus 2%. Give us an idea of--that includes that you are beating the market by your usual measures? So that your view of the market and the markets you are in is that much more negative? Or just give us an idea of your performance relative to the markets given your guidance?

Well, it's hard to judge that at first because we only really get that data after the fact. From our standpoint, you know, yes, we continue to look to be gaining share in the markets we are in and we continue to deal with some of the anomalies of growth in certain markets.

Right now, for instance, we are seeing the Denver market looking particularly weak this quarter. We are doing great. We are gaining share. For some reason, Denver is soft. You know, so it's trying to--you know, you really don't see how that all sorts out until the quarter is over and you can determine what, how your growth is composed between your share gains, market conditions, etc, etc.

Because one of the things you guys have persistently done is grow, 100 basis points to sometimes even 300 basis points faster than the market. I am trying to figure out what you are seeing in the marketplace versus your own operations.

Is it fair to say you are not counting your chickens until they are hatched on the market share gains, talking about the industry? Because your guidance is similar to other operators, but your past performance has been better.

I think, you know, I mentioned the Denver situation, I think another factor is, you know, we have had some format changes in the summer in Kansas City, and also in Greensboro, South Carolina which will have some mild impact. But again, I don't know if I want to characterize it any further than to say you know that we remain optimistic about the future, and feel good about our business position, our platform and our opportunities and, you know, we will continue to roll out very successful quarters as we have done in the past.

Great, then the last question is when did the Kansas City format changes begin, just so we can calendar that?

You know, I think they officially occurred in August. There was some flux in the market starting in July, because a lot of the pieces were being put into place but, I think, formally the changes occurred beginning in August.

Great. Thanks very much.

Our next question comes from Tim Wallace of UBS.

Thank you.

On the political advertising you did last year. Is that really incremental or would you consider that -? 'Cause my understanding is that you would sell it at lowest unit rate and I am confused why that would be incremental.

The second question I have relates to the wide diversity in market, in station performance in markets, and this is for the whole industry. David, this is more of a longer term question.

One, you know, what are the characteristics in the markets where things look pretty healthy from the others, is there something different? Second, what gives you confidence as we go into 2004? I understand political would put some pressure on inventory but what gives you confidence that we are not going to go through this kind of a trend for a fairly long period of time? Thanks.

First, Ken, on the political side, yes, it is incremental, remember that political is not just candidate promotion at risk, but it is also issue advertising, which generally also comes in towards the top end on rates. And so it really is an amalgamation of different things, yes, it is all incremental.

As far as variance in markets is concerned, yes, we are kind of stumped about it too. It is an interesting phenomenon. I am not sure how meaningful it is, candidly, because we see certain--I mean you get certain obvious situations where you have a market like Wichita, for instance, which is very small in our business model but because of the general aviation issues of the last couple of years that market has been a poor performer as a market. Again, we are gaining share but it's a tough market.

But when you are dealing with a more diverse, bigger economy, and some of the, you most of this is the typical market we are in, yes, why is Denver looking weaker this quarter? Frankly, we don't know, but what is good about it is if you track this over time these trends are not pervasive. You see the progression of the mean occurring fairly quickly.

I think the most important question you raised, is what gives us confidence for the future. Again, I think it's a long answer, and I will try to distill it for purposes of this call because we also touched on it in my remarks. But if you look at the fundamental business model in radio, it is outstanding. And, if you were to--today, create a new medium and say I am going to give you universal reach, I am going to give you the most time spent with your ear drums, eyeballs, what have you, of any other medium except for television, I am going to make it totally mobile and transportable and put you out there in a mobile society with people as they're out shopping, I'm going to make you the low cost for the buyer in terms of your costs of reaching these people, and, yet, I am going to put you in an 8% share of ad dollars when everybody else you are competing with is doing two to three times as much. You would love that model. You would love that model.

You know, it is--it is absolutely a fact that we can capitalize on that model better than we have in the past going forward. In that we, as an industry, would be able to capitalize more growth if we do some hard things. Part of it is frankly telling that story more effectively to our end users--and candidly, we need to be doing a better job of that. As an industry, we need to do a better job of marketing ourselves.

The good news is, there is, and I have talked about this before, but it's happening, there is a growing consensus within the industry that we need to do more to fund the marketing of the medium and I think you will see some interesting developments coming down the road, which I think you're -- are going to yield higher returns for the industry going forward.

Thank you, David.

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

Thanks, two questions.

One, while everybody hasn't reported yet, clearly, your revenue results will be at the very high end of where most of the companies fall out. Can you talk about, perhaps, maybe a little more specifically, you know, where you are out pacing the markets, just maybe what your--the level of outpacing, maybe in your top three or four markets specifically, or if it is actually coming from the, you know, let's say the bottom 10 stations, bottom 10 markets.

And secondly could you give us a little color on what is happening in Sacramento? I have noticed there is a little bit of negative ratings trend there, 25 to 54. Just some color. Thanks.

Sure, starting with your first question, Jason, we are, in my remarks I noted four markets which I would refer you back to in terms of markets which are in particularly strong gains, Buffalo, Denver, Boston and Norfolk we're gaining significant share. The only other color I would add is that we are doing better in gaining share locally than nationally for whatever that is worth.

Sacramento, interesting that you raise that, our flagship station in that market, KSUG, The Eagle, did dip a little bit in ratings over the course of the last year but I am extremely pleased to tell you that it had just an extraordinary strong summer bill. It is number 1 with adults 25 - 54, it is number 1 with men 25-54, and is looking as strong as it ever has. And if you look overall at our Sacramento ratings, yes, you're perceptive to have noted there were some dips over the course of last year, but overall that cluster is in nice shape and we are feeling really good about it right now.

Have the revenues outpaced the decline in ratings, I guess is the question, in that market or have the revenues tracked with ratings? In other words, have you seen power ratio expansion in Sacramento?

Yes.

What about - what would you say in the other markets the other four markets you listed? Would you say the same thing, that you've seen power ratio expansion in those four markets as well?

Yes.

Okay. Thank you.

Our next question comes from Drew Marcus of Deutsche Banc.

Good morning, guys. Could you talk strategically about your desire or lack of desire to pay dividends and how it relates to acquisition opportunities?

Sure, Drew.

Would we consider doing dividends at some point in the future, yes. Is that the best use of our balance sheet and capital today? We don't think so, because we continue to believe that there are some very-- there are and/or will be attractive opportunities to grow within radio, make smart deals for our shareholders, and they will benefit to a greater extent from us deploying our capital that way rather than distributing dividends.

In the future that could change and we have no--there is no institutional aversion to dividends per se, and if they become the best option, we will go down that road.

Thank you very much.

Our next question comes from Jim Boyle of Wachovia.

Good morning. The Field family has been in the radio for quite a while. Many of the other veterans have said, this is a most unusual recovery in that radio is not participated. Do you have any reason or rationale for why radio is not participating in this time around and whether next recovery the same thing will happen?

Jim, I don't agree with the premise of the question, because, the fact is nobody is participating in the recovery right now and you have this bizarre, this bizarre market condition where we have GDP growing 7% in the third quarter, we have Wal-Mart coming out today saying October same store sales were 4.5% we have lots of other strong macroeconomic data. Goldman Sachs comes out this morning and says CEO confidence is as high as it has been in a long time, and yet television advertising, newspaper advertising, radio advertising, essentially all the advertising sectors are slumped.

And your rationale for every one not participating this time around would be maybe--?

I honestly don't know. I think it's a timing difference. I think when we look back over time and we draw out conclusions based upon significant periods of time, we will see that there will be a minor change in the graphs and the points of inflection will not be time preps, as they have been choreographed in the past but it will be a rounding error in the big scheme of things.

I continue to believe the issue we have here not a question of where will there be a point of inflection but when will have a point of inflection? And we can debate whether it started yesterday or will start tomorrow or a month from now, or a year from now, I don't know. The fundamentals that exist are so clear there is no reason not to expect we will not have a point of inflection.

Is there one or two categories, one or two events or one or two macroeconomic things that should trigger that point of inflection when it will would come that you look for, that you watch for?

Jim, I am not sure I am smart enough or anybody is smart enough to figure out that question. It's a fair question, but you know, I think when we get hung up on rigid formula, formulae, I think we tend sometimes to get myopic. It is one of those things, you know, we sort of feel it--

To go back to your comment on demand. You know, we have not seen tight demand in the radio industry or, you just saw Network Scatter still has some unsold inventory. I think it is across the board. I think as you see demand tighten up, you will see the kind of inflection we talked about.

Thank you.

Our next question comes from Mark Navy of Merrill Lynch.

Thanks, Good morning everyone.

Just two questions. One with the format change in Kansas City, I am curious if it had any effect or what effect it would have on the growth where you had said, stripping out the NTR and political in the fourth quarter you would have been in low single-digits. Would that have moved the needle at all with that format change, number 1?

Number 2, could we maybe talk about trends between national and local? Obviously we know national has been doing well. prior, though, to September, and are you seeing a slowdown in national advertising occur? And also what is going on as far as the growth rate and maybe you could talk about what is going on in local advertising.

Sure.

In Kansas City, Mark, yes, if it weren't for the format changes we would see some incremental growth in fourth quarter. You know, maybe that would be an extra point, maybe somewhere short of a point, but you know that's the magnitude of that, but, you know, we did not-- we did not, you know, when we talked about the fact we would have got it low single-digits were it not for NTR and political comparisons, you know, we did not choose to pile on and embellish the argument by talking about format changes because we thought oh it would be a little bit unfair. But technically, that is the point.

We have seen local and national growth rates converge. In the third quarter, national grew much more rapidly than local. We are now looking at the fourth quarter where they are essentially in tandem. In fact local may end up being slightly more robust, not a fair word to use but local may end up outpacing national slightly in the fourth quarter.

And then as far as categories go, Mark, we are seeing auto a little sluggish here the fourth quarter, we are seeing retail fairly well, and movies, financial have also done fairly well. We are still sort of feeling out what will happen with wireless. Some reports wireless is picking up now, some reports, the wireless won't really pick up until January. But I think it is pretty clear the industry is spending a lot of money around portability.

One thing I also want to ask. You talked about every category not going well, I'm sorry, not category, media sector. What about cable television advertising? That seems to be the big buzzword on Wall Street. You know, they are going to take share away from the TV station group operators, newspaper and radio operators. I would like to hear your thoughts on the cable industry's push on just local advertising.

Well, we poke around with that and we're not feeling it and we're not seeing it. There is nothing new about cable TV. It has been around for quite some time. Like everybody else, they have their pluses and minuses.

You know is it possible that cable TV will gain ad share of the ads going forward? Sure. That is not dispositive of our growth model and our industry strength. You know, I think as we all look and try to determine who the winners and losers will be in the ad pie over the next few years, you may want to put cable TV in your win column. We have not looked at it exhaustively, but you may reach that conclusion.

Radio, we're not really feeling it, but I think is more of a threat to broadcast television perhaps to the newspapers as well but frankly we are both targeting more efficient medium.

Great. Thanks very much, guys.

Our next question comes from Richard Rosenstein of Goldman Sachs.

Thank you. Two questions.

For how long into 2004 would you need to see flattish revenue trends before you would say, maybe, maybe there really is a problem, it is not a rounding error and maybe 2004 won't be the recovery you think intuitively it ought to be.

Secondly in terms of Wal-Mart how much was Wal-Mart spent on Entercom's radio stations over the years? Thanks.

I don't know the answer to your first question, Rich. It bothers me now, it will bother me more a month from now and it will certainly bother me more a year from now. Now that we have moved up to the 8th floor, I am not sure jumping out the window would be a great idea. I don't know when we get terribly concerned.

I guess I reject the premise of your question, because I don't believe that can occur. If there is any question one could raise, it's does advertising decision making, as we are currently seeing it, foreshadow a dip in the economy? You know that might be a reasonable theorum, but I don't buy into the question, could we see a sustained economic recovery in general and no increase in the advertising model? I just don't believe that can occur.

So how much money did Wal-Mart spend? Not a hell of a lot. You know, I think they remain in a category which has not been an aggressive advertiser or a company that has not been an aggressive advertiser and, obviously would like to do a better job of bringing them into radio. I think there is a tremendous amount of upside here.

Just a follow up on a comment you made earlier. You talked about the industry doing a better job of selling itself to advertisers, and maybe picking up on what the RAB has done historically and maybe doing a better job. Through the 90's radio gained share every year, of outspending from other media and that stumbled in '01, bounced back in '02, and then stumbled again in '03. What do you think the industry did to stop selling itself on the premise that you outlined on the call?

I am not sure we ever stopped selling ourselves on the premise. I don't know if we did a great job of selling ourselves. You know, when we built critical mass in the late 90's it gave us some inherent powers that enabled us to grow shares, it also gave us some additional visibility in the marketplace that we didn't have before. But I am not sure we have ever done a good job as an industry in marketing ourselves to end users. But as long as we live in a world where network TV advertisers and newspaper advertisers are increasingly frustrated because they are paying a fortune for what is less and less every year, and they see radio again an alternative that provides so much more for so much less, you know, I like the side of the fence we're on.

Great, thank you.

Our next question comes from David Miller of Sanders Morris Harris.

Yes, good morning, you guys. Congratulations for blocking and tackling on the expense side against an obviously tough environment.

I was wondering if you could comment on the state of your business in Seattle? If you could possibly quantify how you see pacings trending out for the rest of November and December, specifically for Seattle? Do you specifically see it pacing negative locally ex - political? Thanks very much.

You know, Seattle is, you know, at this point in time, it's a market which I think, you know, we talked about the variance in markets? I think Seattle's market is probably somewhere in the middle right now in terms of market, market performance. We are seeing some encouraging signs for December from a pacing standpoint. You know. We will see.

Okay, thanks very much.

Our next question comes from Bill Myers of Lehman Brothers.

Thanks, a couple of quick ones.

Going back to the NTR issue, what percent of revenues are currently represented by the NTR and how does it compare say to the last year or before?

Well, I don't have that number off the top, it would be down from what it was a year before. I think probably it was high it was probably about 3% or 4% of revenue as broadly designed--defined in NTR and we would be down from that.

Okay just in terms of first quarter visibility. I am sure it is fairly soft at this point in terms of total visibility. We heard from other operators it is pacing up low single-digits. Do you have any reading at this point or is it just too early to tell?

Too early to tell but some encouraging signs.

Thanks.

Our next question comes from Alissa Goldwasser of William Blair.

Hi, I was wondering if you could talk about your observations on the fourth quarter. How did your portfolio do in October and then are you seeing progressive strengthening, weak or mixed in November and December?

Well, if you look at the three months individually, November appears to be the weakest of the three. You know, we are seeing December looking to be the strongest of the three. We will see how it plays out over the next few weeks. I am not sure I understand your first question.

You got November and December, what about October?

October appears to be right in the middle.

You discussed before, this inflection point, that will happen eventually it's just a question of timing. If it happens in the fourth quarter how prepared are you from an inventory perspective take advantage of that. I guess more specifically how sold out are you for November and December at this point?

If the market kicks up and we see some acceleration in the next few weeks, we will have the inventory to handle it. You know, November right now, we are running at, you know, roughly 80%, maybe a little higher than that, but 80 is probably a pretty good number. I would say if you look at December right now, we are probably around 60% sold. So we have got, you know, we have got plenty of room to deal with that-- if it occurs.

Right, then finally, I know it is early, but can you talk about the progress that you have seen so far in Kansas City following the format switches?

I can, but I don't think I can give you anything meaningful. There really aren't--there is no rating out yet to reflect the moves. That's a question, it is a good question but one we really probably won't be able to answer until the release of the [fall book] to give us our first glimpse of how it is all playing out.

Okay, thank you.

Our next question comes from David Bank of RBC Capital Markets.

Thank you. Hey, guys. I was wondering if you could talk about when you expect kind of discretionary NTR cut backs to anniversary? Should we look for them in first quarter and second quarter as well?

We don't know. How is that?

Well, each one of these are discrete events. We have not done our planning yet for next year. I don't know what we will see for next year.

I don't anticipate--I don't know, I am looking at data. I don't anticipate a meaningful change next year over this year.

I would agree. And, again, it is important to recognize, that we are agnostic on NTR. Some companies think NTR's bad. We don't have that point of view. We think NTR is brilliant when you have a good event or good program which yields a healthy profitability and is worth your time and effort. We think it is bad when you can't.

We make a business decision as Steve said discretely on each of these projects, on a local basis or regional basis as they come up and we will [accordingly].

Just to follow up on something that David said earlier, you said that when a buyer isgfoing to figure out that they are paying more and more for less and less. There has been a fair amount of discussion in the trades about how ratings are disappointed at the network TV level this year. I was sort of wondering, do you expect to be seeing some sort of backlash? And do you expect to be seeing more dollars flowing into it radio? Are you seeing any backlash from that? When do you think it will materialize?

Yes, it is way too early, of course you have to remember the planning cycles when people buy media tend to be several months, if not a year in advance, because of those allocation decisions. And so, are we seeing any fallout from the fact that they are way, way under delivering, particularly in younger men in the fall? You know, it is way too early to tell from that. We had hope to see it.

Thanks.

Once again, if you would to ask a question, please press star then 1.

Okay. Well, thanks, everybody and we will look forward to reporting back to you again in 90 days.

Thank you.

This concludes today's conference call.