Audacy Inc (AUD) 2004 Q4 法說會逐字稿

Good morning and welcome to the Entercom's fourth quarter earning release conference call. All participants will be able to listen only until the question-and-answer session of the call. This conference is being recorded. I would like to introduce your first speaker, Mr. Steve Fisher, Executive Vice President and Chief Financial Officer. Sir, you may begin.

Thank you, operator. And good morning to everyone. And a special early good morning to those of you on the west coast listening live. Before we begin this morning's conference call, I'd like to make the following note, that the matters we will be discussing here today contain certain forward-looking statements that are based on current expectations and involve certain risk and uncertainties within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.

Additional information and key risks are described in the company's filings on 8 K, 10-Q and 10-K as filed with the U.S. Securities and Exchange Commission. Listeners should note that these statements may be impacted by several factors including changes in the economic and regulatory climate and the business of radio broadcasting in general. Accordingly the company's actual performance and results may differ materially from those stated or implied here in. Entercom assumes no obligation to publicly update or revise any forward-looking statements. During this call we may reference certain non-GAAP financial measures.

We refer you to our website, www.entercom.com for a presentation of the most directly comparable GAAP financial measures and a reconciliation to GAAP of each such non-GAAP financial measure. In addition, our website includes useful tables of prior period pro forma financial information adjusted for acquisitions and divestitures. So with that very important note, we now turn the conference call over to David Field, President and Chief Executive Officer.

Thanks, Steve. And good morning, everyone. Thanks for joining us for Entercom's fourth quarter earnings call. I'm quite pleased with the performance of the Entercom tean in the context of sluggish industry growth during Q4. We substantially out paced our markets during the quarter, posting 3% same station revenue growth.

200 basis points better than our markets, which grew by 1% during the period. Similarly for the year we achieved 4% same station revenue growth, double the 2% growth of revenues in our markets. If we have now out paced our peer group in each of our six years as a public company, we're proud of that. Same station operating grew 2% for the quarter and 5% for the year. 2004 earnings per share grew 8% to $1.50. For the quarter we posted earnings of $0.40, one penny better than last year's pro forma $0.39. During Q4 we gained revenue share in 13 of our 18 measured markets.

This is the second straight quarter in which we accomplished this feat. We also gained share both locally and nationally for the quarter. In sum, our team did a great job of executing during Q4. We continue to be excited about the developments going on both within our company and within the industry that bode well for the future. We are quite pleased by our progress at our new acquisitions in Indianapolis, Providence and Buffalo. Each of these new properties is positioned to deliver strong growth in 2005 and beyond.

We've also just launched new formats in Milwaukee and New Orleans with high expectations for both. In Milwaukee, WSST is now the city's first and only full-time sports station, while the bayou in New Orleans features a unique mix of classic based rock music. We would expect these properties to begin to contribute positively to our performance during Q3 or Q4 of this year. We continue to believe Entercom's ability to create compelling original programming, with a strong track record of success, is a powerful differentiater and an important competitive capability for the future.

On the HD radio front we're excited by the opportunities implicit in this new technology and have accelerated our deployment plan. In fact, we expect to have virtually all of our significant FX stations broadcasting digitally within two years. Turning to sales, we continue to achieve great success with our shred business development initiative that has enabled us to generate millions of dollars in new business.

At a time when some would believe radio is no longer a growth industry, it is refreshing to see the hundreds of clients within our markets who are converting significant chunks of their marketing dollars to radio. We remain a medium that reaches 96% of Americans for 20 hours per week. Only television rivals this.

And what may observers are missing us that radio's value proposition has actually gotten significantly stronger, not weaker in recent years, due to the significantly greater problems confronting several of our key advertising competitors. And now, for the first time in the industry's history, we have powerful research from RAEL or the Radio Ad Effectiveness Lab to validate radio's highly compelling value proposition.

We're beginning to integrate this RAEL research into our local shred efforts, alphabet soup here, and are expecting great things here. One early sign of success came from one of our mid-size markets which last month received a $900,000 two-year order from a local business that had previously relied almost exclusively on newspaper and had never used radio for their marketing.

Turning to pacings, we have experienced a steady, significant improvement in business conditions over the past couple of months and are increasingly optimistic about 2005. Q1 pacings have been gradually increasing since early January. Entercom's January revenues finished 7 % ahead of 2004 on a same station basis. February and March are now basing in line with January.

And while it still very early, Q2 pacings look promising as well. It is also worth noting that Q1 is the most difficult comp of the year for us. Entercom posted 6% same station growth during Q1 '04, on top of 7% same station growth in Q1 of '03. Now, what is the significance of this? A few points here. Number one, we believe the radio industry is starting to accelerate. It is early. And appropriate caution is due. But the tone and the activity level is gradually improving.

Point number two, we think we are beginning to see the embryonic success of some of the industry initiatives, such as the REL research, clutter reduction and the RAB industry marketing efforts. Like all industries, we still have our issues, to be fair, but the initiatives are beginning to gain traction.

Point number three, Clear Channel's less is more is clearly making a positive impact on the industry. It is still very early, but we are witnessing a growing number of clients requesting and booking 30s and 15s. Clear Channel's leadership on this front has been exemplary. And the recently released Burk study is a terrific validation of the merit of shorter commercials. Customers recognize that shorter commercials have recall which according to the Burke study equals 75% or more of 60-second spots. And in fact in some cases, shorter spots can actually be more effective than 60s.

The take up rate for these shorter length spots should accelerate. This is a big win for advertisers. It's a big win for listeners. And it's a big win for broadcasters. Point number four, Entercom's Q1 success that we are currently experiencing is not -- repeat not -- attributable to less is more spillover. Yes, we are selling some additional 30s and 15s. And yes, we are benefiting a bit from Clear Channel's tighter inventory posture, but this is not a material factor in our current performance.

In fact to validate this thesis, we calculated our pacings in those market in which Clear Channel has a strong presence and compared that to those markets where Clear Channel is void for a secondary or tertiary player. And our pacings in each of these two buckets, is essentially equal. Finally, point number five, the Entercom team is doing a terrific job of executing and I would be remiss if I didn't applaud them here on this phone call.

Our 7% growth rate in January, as you may have seen in yesterday's released RAB figures, compares to 3 % industry growth. And in fact, in our own Miller Kaplan data, we also experienced 3 % market growth in our markets. So we're out pacing the market by 400 basis points in the month of January and appropriate kudos to our team for that effort. Clearly it is early. But , we're pleased with where we are, two months into the year.

On the other hand, we remain highly frustrated by stock valuation. The fact is Entercom's stock price does not adequately reflect the fundamental strength to performance of our company and thus it remains highly attractive for us to continue to buy back our stock. Having completed our first $100 million buy back program during 2004 we have been actively repurchasing our stock under a new $100 million buy back announced on the last earnings call.

In conclusion, I'd like to salute the entire Entercom team for their performance during '04 and for continuing our multi-year record of continuously out pacing the peer group. Entercom remains committed on focusing on the things we do to produce superior results. Recruiting and developing outstanding leaders. Continuously improving our sales practices through efforts like shred. And creatively building and developing our brands.

We are also steadfastly committed to working with others in the radio industry to development and implement industry initiatives and enhancements to optimize our future potential. In sum, we'll continue to hold ourselves accountable for delivering superior results for shareholders. Steve?

Wow, that was so just so exciting, I just, you know, almost want to stop now. However, l will give a few additional notes. Let me give you a little more color on first quarter guidance. As we stated in our press release, we expect a same station net revenue increase of approximately 5 % in the first quarter. That same station is 5 % above of prior year same station, which was 89 million in revenue. I also note that we had same station expenses of 56.6 million. You can see a reconciliation of this material on our website, entercom.com. Our expense growth in the first quarter should be around 4 % over the prior year.

In 2004 we managed our expenses to a 3 % growth with quarterly fluctuations between 2 and 4 % during the quarter. We do not see any change to our business model in 2005. Although there will be quarterly fluctuations due to timing of marketing, NTR events and other items such as the two new station launches in the first quarter in Milwaukee and New Orleans, which David mentioned earlier. As indicated with the status of our share buy back through yesterday, we expect our Q1 interest expense to increase in the first quarter to about 6.5 million based on current interest rates.

For purposes of guidance only, this figure does not assume any further share buy back beyond that mention in the press release. Our corporate GNA expenses should pace consistent with the past few quarters and we would expect to see our normalized corporate expense -- expenses with a run rate of approximately $4.1 million per quarter throughout 2005 with some normal fluctuations around that point. I would note that this does not include any impact from changes to stop opt -- stock option accounting rules which may take effect in the later half of this year.

Our capital expenditures of 4 million in the fourth quarter and 9.5 for the year, was under our prior guidance. Due to the timing of several projects which will carry over into 2005. Now, with those carryovers we would expect capital expenditures in 2005 of between 14 and 16 million. I'd note that the majority of this CapEx results from the planned consolidation of our two separate physical facilities in Kansas City into one new broadcast center, and several other minor facility relocations.

And, as David mentioned earlier, we are aggressively rolling out HD audio transmission capacity. In 2004 we lit up eight transmitters and we plan to turn on another 29 or so in 2005. As was the case in 2004, we guide you a GAAP tax rate of 38.5%, although there will be quarterly fluctuations around that data point. And our deferred taxes for the year should approximate $37 million as a result of the amortization of intangibles for tax versus book.

You'll note in our release this morning that we will also have a gain in the first quarter of about 5.5 million before taxes, due to the sale of some smaller stations. I'd like to do a brief update on our share buy back program. During the fourth quarter we reduced our shares outstanding, via our buy back program, by half a million shares. And ended the year with approximately 48.6 million basic shares outstanding. Now I'd like to give you a subsequent update. In addition, during this current quarter, as of the release date -- this release date, we've retired an additional 800,000 shares via the buy back program.

So since the beginning of our buy back program, which was first announced just 10 months ago, the company has bought back about 3.8 million shares, or about 7 % of our shares outstanding prior to the buy back. Before we go to your questions, let's just step back and look at 2004 in perspective. Again, industry-leading operating results throughout the year.

As David outlined, our shred initiative is yielding exciting results. And the new industry research we'll be able to couple with that in 2005 and continue to supercharge our performance. We generated over 122 million in free cash flow throughout the year. We bought $100 million in station properties in 2004. In 2004 we reduced our shares by about $3 million.

Three million shares, excuse me, with another 800,000 retired in early 2005. We replaced and enhanced our credit facility and we ended the year 2004 with leverage of just 2.9 times, keeping us well positioned for 2005. So a great year in 2004 and off to a great start in 2005. With that, operator, we'll open up the phone lines for any questions.

Thank you, sir. At this time we would like to begin the question-and-answer session of the conference. If you would like to ask a question, please press star, then one. You will be prompted to record your first and last name. To withdraw your question, you may press star, then two. Once again, if you would like to ask a question, please press star, then one. One moment, please. The first question comes from Mr. Victor Miller with Bear Stearns. Sir, you may ask your question.

Good morning. Thank you. Actually two questions, if I may. First of all, the larger public companies you provided the highest guidance for first quarter at plus five, which is actually below what looks to be your plus seven for January and February. So obviously this seems fairly conservative.

I imagine you don't think March is going to break down that much. The question is, do you -- how much of this do you attest, do you attribute, sorry, to industry efforts as you broadly define them, David, versus improvements in some of the markets like Seattle, or Denver, Boston haven't been terrific over the last couple of years anyway.

And secondly -- as markets. And secondly, with a leverage of two point nine times, you know, when you look at the fact that Infinity may be looking at some spins versus your stock trading at, a low double digit multiple, where do you think the best, you know, the best place to put your -- your cash is? Thanks.

Let me take this sequentially Victor. First, yeah we are -- we do feel very good about your guidance for the quarter and we've shared a lot of information with you here, in terms of underlying performance. I think there is, you know, always -- there's always the question about how well March will end up? Based on were we sit today, we feel very good and we think we've allowed ourselves -- we've been reasonably conservative in our guidance to allow for possible erosion in our growth rates in March.

Should that occur. But again, we're not seeing that yet. As far as industry versus execution, you know, I went through sort of a list of factors there, which I thought were pertinent. I think that, candidly, the biggest thing that is happening right now is, we're getting rate growth. If you look at the difference between -- where it is coming from, we are getting real pricing power right now. We're seeing rates for the first quarter up mid-single digits but with a bias towards higher than that rather than lower to that. And we're seeing some acceleration in that in experiencing not infrequent high single digit rate growth as we look forward into Q2 as inventory tightens. So we feel good about that.

Our industry efforts, part of that, absolutely. I mean, I think that the general tone, the general momentum of things is improving. We're not pounding the table here, because I think that, you know, we've got a ways to go. But, again, we're pleased with where we are right now. And finally, on the balance sheet, look, life is good when you have a balance sheet with, with leverage under three to one. And it is a -- it does give us a lot of power and opportunity. But it also gives us a great deal of responsibility. We've talked, you know, forever about the fact this is not a company run with other people's money.

And therefore we're going to be the most prudent agents to manage the company's balance sheet. You should not expect us to squander shareholder value with some sort of 'grab the brass ring' transaction with anybody. I think if we can make prudent acquisitions that are manageable in scale and are done at price points which are -- which are compelling and where we think we can create shareholder value, we're going to do those deals.

On the other hand, again, we're not going to break the bank for assets that would not materially change the base of our company. So I think you'll see us continue to do buy back and selectively look for acquisitions that make sense.

Echo that. A couple things Victor implied. It wasn't exactly a question but implied in that. I'd like to address it because it's been addressed to me a couple of times. The significant outperformance you're seeing is not due to market mix. You mentioned Seattle and Portland as an example. As indicated, our markets grew 2% last year. We grew 4%. Within that 2% market industry growth in the markets we operate in, Seattle, Portland were in line with that.

Boston was a little above it. And Denver was below it. So, I think what I -- what I've seen over the past year or two, is our markets are pretty reflective of the industry, although there'll be variances around that. I just want to dispel any lingering thought that is being driven by the Seattle market performance. In addition, David mentioned we were up 7 % in the month of January and a reminder that our -- what he indicated, our markets were only up 3%. Again, it is outperformance as opposed to our market mix.

Thank you, very much.

Sorry for the length of that. Next question.

The next question comes from Mr. Sean Freely with Credit Suisse First Boston. Sir, you may ask your question.

Good morning. David, can you talk a little bit about -- you talked about the 30s and 15s. And you've talked about pricing being better. Can you just give us a sense of how those are pricing relative to 60s. And, Steve, if you could just give us -- what's the dollar amount left on the repurchase authorization?

Why don't we do those in reverse order.

Okay.

If you do the math backwards on what we gave you in the press release, on November 3, the Board of Directors authorized $100 million buy back, we would be about 40 million into that as of yesterday. So there would be 60 million outstanding. And then, at the end of that, the Board would have to reauthorize any future buy back.

Great.

And pricing on 30s is, I'd say, averaging around 75%. I -- you know, there are -- the question is 75 % of what, of course. And rates do vary to some extent. I will tell you that we're seeing in some situations, in one of our larger markets, that the demand for 30s and 15s has been so great that we're now getting 90 % of a rate on our 30. And I don't want to suggest that is typical. But we're starting to see that in some selective situations. Again, that Burke study is going to be terrific. Because it gives advertisers the validation they've been looking for to determine what proper value is for a 30 and 15.

And for those of you that haven't seen it. And obviously, Burke is an extremely well regarded organization. It came back and said across the -- a significant number of different advertisements 30s had the -- had 75 % of the recall of 60s. And in fact with 15s they were able to generate 88 % of recall. So there's a very strong argument there for advertisers to step up and pay nearly full value for those shorter spotlights.

Thanks very much.

The next question comes from Mr. Bishop Cheen with Wachovia Securities. Sir, you may ask your question.

Good morning, David and Steve. Steve, you've been pretty good at -- at managing the balance sheet. As far as hedging, I think last year you kept it down to kind of a conservative 2 %. Tell us about your hedge plans for '05.

Sure. If you look at our entire debt structure, both our senior and our bank facility, obviously our senior is fixed. Within our bank facility, with I believe year end borrowing were 333 million. We do have about 30 of that were we have a swap on, the rest of it does float. That's thing we constantly evaluate and discuss internally within our Board quarter to quarter. We will just do what we think is the most prudent thing to give the best value.

Obviously, though, over the past couple of years by floating at very low rates, our incremental borrowing has been in the 2, 2.5% range. So, it's been -- it's been attractive. We'll keep our eye on that. I know you look at interest rate curves quite often. And it's always the trade-off of the price to fix versus the benefits of float.

So -- but it's going to be tough to keep in the 2 to 2.5 % range?

Oh, I would imagine. Yeah, you're correct. Let me back up and say I think under any scenario for both Entercom or any other company that borrows money, we'll probably see higher borrowing rates. I don't think anybody has hedged at 100 %. We've probably see higher borrowing rates in 2005, effective rates, than we did in 2004. That'd be my assumption.

Right. David, you've always talked about prudent acquisitions. And you've done it. Can you just give us anecdotally what has turned out to be your -- a couple or one of your best acquisitions, you know, the textbook way to do it.

Denver. How to do it in terms of our integration and how we created value? Or what specifically?

Yeah, both. The way, you know, you bought in and what it turned out to be on some sort of metric or --?

Look, we've historically put up slides at most of our presentations in which we've shown year after year all of the acquisitions we've ever done. And our initial multiple and then the current multiple. And I think those of you that have seen that slide, and it's most of you, we have uniformly been able to materially drive down those multiples.

And the reason is because we tend to buy into situations where we see an opportunity to dramatically improve cash flow performance. And do so in relatively short order. Denver, great example of that. But you can look at the new deals in Providence and Indianapolis and Buffalo as well. And we laid the groundwork in the past year. We've tweaked formats, we've done things to improve management.

We've many implemented our own proprietary systems and sales methods. And all of that yields, you know, enhancement and performance and the ability to grow cash flow and revenues at a rate that generates substantial shareholder returns.

Do you anticipate -- New Orleans and Milwaukee in the turn arounds you're restarting there, to produce results in line with let's say Indianapolis.

Well, they're not acquisitions mind you, these are --

Right.

-- these are stations that we've held of course for some time, but -- -- lets focus on the Milwaukee example which is terrific. We have an a.m. radio station which essentially had hidden value, being run on a religious format and bouncing along with a -- with a moderate amount of cash flow over the years. Improvements that we've made in our management team and in our -- on our FM stations put us in a position we felt ready to make the next move. And we were ready for the big time on the AM. And so we've -- we've moved forward with a station which we think is going to be terrific.

We have now tapped the programming skills of the gentleman who over sees our WEI in Boston which has been the most successful sports radio station in America. And he has now been upped to a Director of Sports Programming position. And he'll be directly involved in our efforts in Milwaukee. And so, yeah, here's a station which essentially will be breaking even. Which maybe in a couple years it's throwing up a couple million bucks a year. That's creating great shareholder value.

Okay, great. Thank you, David.

The next question comes from Mr. Jonathan Jacoby with Banc of America. Sir you may ask your question.

Good morning. Just a few questions here. First, just, if you, just to clarify the guidance. I believe in the release it said the 5 % guidance was for net revenues. During your remarks, that was the same station number. The second question is, if you can go through the HD radio strategy.

Clearly you have a lot of different possibilities with what you can do. Do you see some sort -- perhaps one day some industry consensus? And then lastly, if you could give us some color on the first quarter, if you're seeing certain categories pick up and give us some color there as well. Thanks.

I'll address the guidance in the categories. First on the guidance, yes, our guidance is same station. We've supplied last year same status and information net of all acquisitions, divestures. Obviously Indianapolis, Buffalo, Providence which we acquired in the middle of last year. So all of that is clean and 5 % same station on that. For categories, I don't think we have particular color on that at this point. As David said, I think it's pretty much across the board in all categories driven by rate and new advertisers to radio as evidenced by our shred program. And other advertisers coming back and using more radio.

On HD radio, we are very excited about where that's going. And I think, you know, in addition to obviously the enhancement in sound quality and the data streams that are available to us and potential applications down the road there. I think the most intriguing aspect is what the additional bandwidth and the availability of secondary channels does for us. And there, you know, there will be conversations within the industry on, you know, formulating the best strategy to deploy that -- that bandwidth. It remains -- it is too early to tell what solution or solutions will be rolled out.

But if you would envision a scenario in which a group of radio companies would form a consortium and roll out new channels on a collective national basis. With our ability to do so at a -- an extremely attractive incremental cost for those services, it opens up some interesting opportunities for either a subscription based or a -- an advertising supported vehicle to generate incremental profits for the industry. And frankly, also, to deflect the appeal of other radio services that are in the marketplace.

Thank you.

Thanks, Jonathan.

The next question comes from Mr. Kit Spring with Stifel Nicolaus. Sir, you may ask your question.

I was just wondering with Clear Channel's reduction in inventory, do you expect them to gain any significant share in ratings relative to your stations? Do you think that's a risk for second half? Or is your inventory also going down enough to offset that? And maybe just talk a little bit about -- you mentioned splicing up stations as something you might do to combat threats. What are you most concerned about? Satellite radio, I-Pods or Internet radio? Thanks.

Well, first there's a big misconception out there that is implicit in your first question. And that is inventory levels. We have always prided ourselves on maintaining a highly conservative and rigid posture on inventory over all the years. And that has limited our advertising on our music stations, for instance, to somewhere between 10 and 120 units per hour. And we are maintaining that policy now. And therefore we think we've -- since we've always maintained a sustainably conservative posture in inventory, we are not vulnerable to competitors making admirable moves to reduce their inventories to commence to similar levels.

But again, I think the big thing that's going on with 'less is more' and our own 'advertiser choice initiative' is what we call ours. And similar moves around the industry is this paradox shift to 30s and 15s. And that's something that's the key trend to watch over the course of the next few months, the next year or two, that can, I think, dramatically enhance the business model in terms of our appeal to listeners, appeal to advertisers and our abilities to generate revenues and profit.

Turning to your other question, I don't fear any of those sources. I think, you know, the reality is we live in a world where all media are confronted with a zillion new consumer choices. We should probably add gaming to your list, we should probably add surfing the web on that list. We should probably add a host of other applications as well. For us, the challenge is demonstrating, you know, continuing to deliver compelling content to our listeners. And I'll give you one -- one illustration. We just did focus groups in Denver. We brought a bunch of folks into a room.

And these are folks that were early adopters by nature in terms of their formatic interest. And we sat them down and said what is your interest in satellite radio or other alternative technologies. And their answer was none. And the reason was, they said Denver radio is great. They loved their radio station. And I'm not just patting us in the back, the fact is, Clear Channel and Jefferson Pilot and Entravision and others, Infinity, have been -- have delivered great product into that market.

And so we don't -- again, we deliver good product to our marketplace. I think we add new channels in the future. I'm very comfortable with where we are. Another way to look at this is, you know, we reach well over 250 million Americans every week for over 20 hours. That's an extraordinarily powerful platform. All the data I've seen, has indicated that while there may be some erosion to alternative audio services, the fact is that erosion is very very minor. We're talking -- estimates I've seen, a half a percent per year.

Others have said 3.5 % over the course of six or seven years. It is a trivial impact on an overall platform which is as powerful as -- as I've just argued. So, even if you fast forward and say, okay, how many people will listen to radio in a few years and how many hours will they listen, you still have an extraordinary powerful vehicle that we think scores some very -- which still appears extremely powerful and even stronger versus our principal competitor such as television and print, which we think have greater issues.

Thanks, guys.

The next question comes from Mr. David Miller with Sanders Morris Harris. Sir, you may ask your question.

Yeah, hey, guys. Could you possibly quantify where pacings stand in the current quarter in your Seattle, Kelso and Portland cluster? That would be great. And if you can't quantity where pacings stand for the quarter, if you could talk about how January finished out in those markets that would be great. And also, Steve, I'm just curious about the share repurchase initiatives in the fourth quarter?

Your press release says you repurchased point five million shares in the amount of 15.9 million at what looks to be an average price, slightly below $32. There's nice chart support around that area on the stock price. I don't -- correct me if I'm wrong, I don't think I've seen the stock price dip below $31. Why would you not have been more aggressive around share repurchases around that price in the fourth quarter?

Again, we're not trying to pick and choose and gain the market on our buy back period. We had some internal issues of windows and also, as we obviously are looking at acquisitions. So, we're always balancing the mix of all of that. But, I should -- if you go -- if you go back, when we started our repurchase in May, we are not trying to "bottom pick the mark", we're trying to be reasonable and prudent overtime and I think that's what we demonstrated. In terms of the pacings, we don't get into market by market.

Let's just say that the northwest, as I said earlier, has been in line with overall performance. You mentioned Kelso. I would note, in the press release, we are divesting the Kelso Longview market. That's a very small market that's between Portland and Seattle, for those of you who are geographically challenged,

We had bought that to accomplish a signal upgrade in Portland. Having now completed that, we'll be divesting those four small stations. They've been nice performers, but again, doesn't fit with our major market focus.

Okay. Thanks very much.

The next question comes from Mr. Jason Helfstein with CIBC World Markets. Sir, you may ask your question.

Good morning. It's Alper stepping in for Jason. David and Steve, if you can just run through how your fall book was in terms of -- we have it slightly down. But I'm just wondering how the divestures are impacting or if you're thinking about any reformats in Portland, Denver. And then I have one follow-up, thanks.

Our fall ratings were down a little bit. We had put up four very strong rating books in a row. The fall dipped a little bit. As all of you know who have been following this industry, ratings go up. Ratings go down. They bounce around. You should never look at any one book. If you look within our portfolio, we're very pleased with the continued strength of most of our -- and growth I would say in our leading core stations. We're also very pleased with the ratings growth at some of our up and comers. And we've got great success stories.

I mean, KSW in Seattle has now broken out as the number one radio station[inaudible] 49 and 25 to 54. We've seen great rating strength in Kansas City. We've seen a great pop at KOSI in Denver and so on and so forth. So, we've got a lot of very strong stories and feel very good about it. As far as reformatting is concerned,you know, we don't -- we don't envision any reformatting on any stations that, you know, we haven't mentioned. And frankly that's not something we share publicly anyhow to the extent that we're looking opportunistic moves to enhance the performance in the future.

And in terms of any help -- or do you see any help from the fact that you divest stations on future books? Just like --

I don't know what you're referring to when you say divestitures. We've never divested radio stations due to ratings issues, one way or the other.

And, one follow-up, on, what should -- assuming worst case scenario for the year and lack luster revenue performance, not that I'm implying anything but, what should we think about the expense growth rate for the year, like kind of a range?

I don't even, I don't think I want to go to a range. What I'd say is, we manage our revenues -- or excuse me, we manage our expenses prudently at all times. You can look back in the past, through 2001 through a war, recession, 9/11 and see how we and our industry managed. So I'll leave you to do your guidance. As I've said earlier, we're comfortable with our business model. There is a variable component of our rev -- of our expenses that float with revenues. I don't think I want to predict certain scenarios that we don't envision at the moment.

Thank you.

The next question comes from Mr. Bill Meyers with Lehman Brothers. Sir you may ask your question.

Okay, thanks. David, in recent days there's been a lot of discussion about softness in the national business and issues with the rep firms. Can you break out your local national performance in the fourth quarter and in your guidance for the first quarter of '05?

We are not -- we're not providing any breakout in the first quarter in terms of guidance. l will tell you that both local and national are essentially in line with our overall numbers. And so we don't see any material differentiation there. You know, I know a couple of folks have discussed this at greater length on their calls.

I'm not sure I can add anything to what has already been articulated on this point other than to say that, you know, national remains an important part of what we do. And we do believe that the national reps need to become more cooperative in working together to grow radio revenues. And we've seen some examples of that in the course of the last year which we're pleased by.

And we've seen other situations where that is not been the case. We think that's an opportunity squandered. And we would strongly encourage both inter rep and [inaudible] to work together as much as possible for the betterment of all radio broadcasters.

Hey, David, what about the performance in terms of the fourth quarter as well as last year? If we'd lead -- if we lead beside the first quarter this year?

Well, performance-wise, you know, our share gains were roughly -- were roughly the same between local and national. So, you know, I can't sit here and point at a national problem or tell you that it's driving the buff. It's essentially they're performing, I'd say, in line with the way our local teams are.

Thank you.

The next question comes from Miss Marci Ryvicker with Wachovia Securities. Ma'am, you may ask your question.

Good morning. Less is more doesn't just deal with the length of spots but it also deals with the position of spots. Are you moving toward any of these strategies such as charging a premium for the first in pod position? Or island spot? And a second part of this question is, do you have an inventory management system that would enable you to provide advertisers with the requisite information regarding spots?

To answer your first question is no, we are not. We thought about it and elected not to engage in any practices which would allow advertisers to chart pick their position within stop sets. So, I think it may render your second question moot, unless I misunderstood you.

No, and what's your average inventory spot load? And do you plan to change this.

We covered that a bit earlier. We have been a very conservative -- we've always believed in maintaining a sustainable level of spot loads of roughly 10 to 12 units per hour, on our FM radio station. We did not increase that during times of strong demand or for that matter of times of weak demand. And we see no reason to change that now.

So I think what you'll see is, over time, you'll see us reduce the amount of time devoted to commercial content in a typical hour as we are able to successfully morph some advertisers from 60s to 30s to 15s. I would add that we will always be in the 60-second business and recognize that 60 second creative is terrifically effective for many, many advertisers and we'll still be in that business for, you know, for perpetuity.

Thank you.

The next question comes from Mr. Lee Westerfield with Harris Nesbitt. You may ask your question.

Gentlemen, good morning. Just two awfully brief questions here. First, WEI up in Boston, in the northeast, what the impact was of the Red Sox success and also the Patriots in the last four or five months, with the fourth quarter as well as if there's any material in the first quarter in January?

Well, WEI is clearly performing well. But it's performed well for the last three years and, you know, as a Philadelphia sports fan it is somewhat sch-- it is somewhat troublesome to note that Boston has almost gotten into a regular cycle of sports success over the last few year, so, we don't see anything new there in particular.

I would add that what is really terrific about WEI, is that we are not dependent of the success of the Boston Red Sox, and we are not dependent upon the success of the New England Patriots, or for that matter, any other sport. And, I would point you to the fact that in the last winter arbitron, winter of 2004 when we have no Red Sox content at all on the air, the station was number one with adults in the market.

What we have done in that market has been very successfully able to deploy some terrifically talented, on air hosts, who are compelling and who are -- they create must-listening, must listen radio for New England.

Perfect. The second question is regarding political advertising, what that amounted to in the fourth quarter and how it impacted your growth in the fourth quarter?

Yeah, Lee, let me pull that data. The fourth quarter was probably about, I don't know, a little over 3 million versus about a half a million the year before. So, some of that would have crowded out other advertisers. As you know, some advertisers stay away because they know political's going to crowd it out. Obviously we have no political going on in the first quarter. And David's indicated our growth rates there.

Sure. Very fair points. Gentlemen, thank you very much.

The next question comes from Miss Laraine Mancini with Merrill Lynch.

Thanks. Couple of quick questions. First one, you mentioned that , in your CCU versus non-CCU markets that the pacings are relatively equal. And I was wondering, do you have a sense, are inventory loads across those markets roughly equivalent as well?

Second, can you detail what your CapEx budget would be for your HD conversion? I know you said you were doing a lot of stations in '05, but sort of what your planned budget is, your, you know, each year? And then third, satellite radio has shown that they're willing to pay for sports to drive their subscriber levels. Do you think that's going to impact pricing on your sports contracts?

Why don't you take the CapEx question and then I'll your other questions.

Yeah, on CapEx, it's a, it's a -- it's a it's a -- let me give you a fuzziness number Loraine. It costs about 100 to 150,000 per major market station. There's some variability around that because of other things that you might choose to do. As I indicated we will probably turn on between 25 and 30 stations this year, leading to 2.5 to $3 million. There could be as we get into that, some deployment, higher or lower, but that gives you a ballpark number on that.

Spot loads, we do not differentiate spot load of course, between Clear Channel or non-Clear Channel markets. So, you know, ur levels are going to be roughly the same. Beyond that, each market's a little different. You have some operators who maintain a posture as conservative as we do. And you have others that run a few more spots than we do. So it really, it really varies.

Satellite radio has been aggressive in courting content from the major sports leagues. And the impact of that is actually going to be to reduce the price of local sports content. I think there's a generally accepted belief amongst broadcasters that by allowing satellite broadcasters to clear our content, this is -- broadcasters, local broadcasters have not taken kindly to that and I think basically therefore are going to be more aggressive in their negotiations for that content. But we will see how things lay out.

Have you had any conversations on your sports contracts about that? Or is this just sort of beginning thought process?

We have not had any contracts renew since the, since -- let's say over the last year or so. So it is too early to tell. But anecdotally, we are hearing of a number of sports contracts being renewed locally at price points that are perhaps lower than they've been in the past.

Great. Thank you.

The next question comes from Mr. David Bank BC Capital Markets. Sir you may ask your question.

Thanks very much. Good morning. I was wondering if I could ask about as the pace of business has picked up, have you seen earlier bookings and I guess specifically, if you think about where you were in terms of sellouts versus plan for April a year ago, I'm guessing somewhere around the 40 to 50% -- 50 % range, you know, can you comment on where you are this year, for April?

That's a fair question. I mean, right now, for April, we're probably right around that 40 % level which we feel pretty comfortable with. And we obviously have our eyes wide open. It is stair to say there is more demand booking earlier this year as advertisers I think are -- whether they will, whether they will state this publicly or not,

I think they recognize that there has been an improving shift, shall we say, to favor the broadcaster a little bit more perhaps than in the past. Maybe a little bit more of a seller's market than we've had historically. And so to that end, they are trying to book a little bit earlier. As I mentioned earlier, we're seeing pricing rising to reflect this and are looking right now at rate growth in the high single digits, in the month to come.

Do you think that's the key driver of that rate increase, the fact that you're seeing less last minute business?

I didn't say we're seeing less last-minute business. I think what we have is -- it's like any other market-based negotiation. I think that demand is up, I think, in some markets due to Clear Channel's moves, supply may be down a little bit. I think you have, therefore, a different pricing dynamic and a different karma in the marketplace. And again it's early, but the trends are in the right direction.

Okay, thank you.

The next question comes from Mr. Alex Rosenstein with William Blair and Company. Sir, you may ask your question.

Thank you. Following up, actually, on the last question, what is the sellout for March and where was it at this point last year? And then, your second question is, how much of your current inventory is 60 second positions versus 30 and 15-second positions? Where do you see that mix going in the future and what kind of time frame? Thanks.

We're about two thirds sold in March at this time.

We're higher.

Wait, looking at the wrong number, go ahead, Steve.

No, we're probably as of today, you know, approximately 70, 75 %. And we're pacing ahead comfortably, of last year.

Yeah, I was looking at the wrong form. Your other question was?

The mix of --

Oh yes, that. You know, we -- we have not -- we have not articulated a fixed inventory strategy. Rather what we have done is worked out a, a -- a, a flexible and moving policy to enable us to adapt as the marketplace dictates, the relative demand for 60s and 30s.

Alex we can't let your call go by without recognizing Alissa Goldwasser who's home with a new born baby.

She is. She's home very well.

That's great to hear. Our best to Alissa if you're listening to the replay.

Thanks, guys.

Once again if you would like to ask a question, please press star and then one. You will be prompted to record your first and last name. To withdraw the question, you may press star then two. Once again to, ask a question, please press star then one. One moment, please.

Okay. Hearing no other questions. Operator we will end the call here. Thank you all very much for your time this morning and we look forward to reporting back to you all next quarter.

Thank you.