Audacy Inc (AUD) 2005 Q3 法說會逐字稿

Good morning and welcome to Entercom's third quarter earnings release conference call. [OPERATOR INSTRUCTIONS] This conference is being recorded. I would like to introduce your first speaker for today's call, Mr. Steve Fisher, CFO and Executive Vice President. Sir, you may begin.

Thank you, Operator and good morning everybody and thank you for joining us for Entercom's third quarter 2005 conference call. Before we begin, I'd like to make the appropriate introductory notes that the matters we'll be discussing here today contain certain forward-looking statements that are based on current expectations and involve certain risks, uncertainties within the meaning of the U.S. Private Securities Act of 1995. Additional information and key risks are described in the Company's filings on Form 8-K, 10-Q and 10-K filed in the U.S. Securities Exchange Commission. Listeners should note 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 herein. 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 for a presentation of the most directly comparable GAAP financial measures and a reconciliation of GAAP 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 exciting news behind us, I now turn you over to David Field, President and CEO.

Thanks, Steve and good morning everybody and thanks for joining us. I am going to start and talk about operating results and give you some color on that, but at the end of my remarks I'm going to highlight some important comments on where we are in acquisitions and some of our thoughts on use of free cash flow relative to shareholders and so forth. So that will be towards the back end of my comments this morning. I'm pleased to salute the Entercom team for their important performance under the challenging conditions we're in currently in. Same station revenues grew by 3% despite third quarter. This despite the dampening effect of several recent format changes, a tough political comp and the devastating impact of Hurricane Katrina. Particularly when you consider that New Orleans represents 6% of Entercom's revenues. Lump all that together and you're talking about a 2 or 3 point headwind against revenue growth, and so we're pretty pleased with the 3% number that we posted for Q3.

Our quarterly operating growth, once again, significantly outperformed the industry. In fact, we outpaced our markets by 300 basis points during Q3 as our 3% same station revenue growth compared to flat revenues in our markets. On the cost side, prudent expense management enabled us to expand our margins and achieve a 5% increase in same station operating income. And the power of the radio business model was exhibited once again by our double digit earnings growth during the quarter as net income per share grew by 17% to $0.48 per share. Same-station operating expenses grew 2% during the quarter, marking the 12th straight quarter that we have contained expense growth at 3% or less. Local revenues grew 5% during the quarter, while national revenues were up 2%.

Some additional color, our third quarter results were led by strong performances in Boston, Sacramento, Providence, Buffalo, Greenville, and Wichita. We're generally pleased with our summer ratings results. Most impressive was Charlie in Portland, which debuted at Number 1 with adults and Number 1 with women 25 to 54 with its eclectic hits format that you've come to know as Jack, Bob, Dave, et cetera, et cetera, et cetera. This is a classic worst to first story that should help accelerate what is already a strong performance story in Portland in 2006. We also had a strong book in Sacramento where 98 ROCK and the EAGLE finished first and second with adults 25 to 54. Now, for us to be fair, it's inevitable that with over 100 stations we're going to have some good books and we're going to have some bad books but overall we're generally pleased with our results.

A New Orleans update, during the month of September, we were only operating WWLAM, which is the markets dominant news talk station. We simulcast -- in the month of September we chose to simulcast its programming against our four FM signals as well, meaning that none of those FM music stations operated as normal during the month. During October we put three of our four FM's back on the air, but the fourth remains essentially out of business, that is it is operating at low power and is currently simulcasting WWLAM's content. Now, for the long term we are highly bullish on the future of the city. We're dealing in the disruption of unprecedented magnitude to a city of this size. The scale of the rebuilding effort is likely to make New Orleans a boom town for the foreseeable future. Having said that, short-term business conditions are likely to remain quite choppy. But as we look ahead to '06, '07, and beyond, we think New Orleans is going to be a great place to be from a business standpoint.

One other update, last month we closed our acquisition of the Barnstable stations in Greenville, Spartanburg. And simultaneously spun out three small stations in the market. We are very excited by our new station lineup which combines Barnstables strong rock stations with our strong existing brands. Collectively, this makes us the number one player in the market with significant development opportunities to improve revenues and margins.

Turning to fourth quarter pacings, we are being adversely affected by what I guess you would have to call a perfect storm of negative events. We knew we'd have a difficult political comp this quarter. What we did not know, of course, was that Hurricane Katrina would happen. Unfortunately, the Red Sox, excuse me, the Red Sox returned to earth after their dream season in 2004 and as a result, we had only three playoff games this year versus 14 last year. Collectively, Katrina, the Red Sox, and political create a $6 million negative comp for Entercom, versus last year based on our current pacings. This creates a potential 5 to 6% distortion between our reported same station and a more normalized same station. Thus, our guidance of flat to down 2% on same-station revenues is a highly distorted figure, that should be looked at as a more normalized low-single-digit positive growth rate. On the cost side, we have done an excellent job of managing expenses this quarter and expect to have -- to reduce our costs during Q4 on a same-station basis.

I want to turn to what I alluded to when I opened the call and talk a little about the M&A side. As you know there's been a great deal of speculation over the past few months regarding M&A activity in the radio business. And as you know Entercom has been frequently rumored to be a player in some of those situations. I want to take this opportunity to give you an update on our M&A interests, and on our ongoing plans to utilize our free cash flow and balance sheet to reward shareholders. First, we do have an interest in expanding Entercom's platform in the radio industry but only on a very selective basis. At the right price and factoring in all relevant operating and financial metrics, we believe smart, prudent acquisitions can lead to great rewards for shareholders. On the flip side, we have a long history of not participating in potential transactions that do not make sense for our shareholders. As just one example, we concluded a Susquehanna transaction did not generate sufficient value to Entercom shareholders.

As you all know, the Walt Disney Company has recently publicly announced they are considering strategic alternatives for their ABC radio group. As rumored, we do have interest in ABC radio. There are several other parties that one could assume also have an active interest in the ABC radio group. If Disney ultimately elects to engage in a transaction involving this operation, we believe it represents an attractive growth opportunity for Entercom, but only if the terms and conditions of the deal make sense for our shareholders. As Disney has said, any transaction would need to take account of tax considerations. One possible structure would involve a merger in which Disney shareholders would receive a majority of the outstanding shares of Entercom and a majority of the voting structure at Entercom. We would also lever the resulting balance sheet of the combined company at a higher level than Entercom's current level. At this point in time, however, it is important to note that we have no assurance that Disney will ultimately elect to engage in a transaction involving a radio group or what the ultimate structure of any transaction might be. As with any ongoing M&A discussions, we do not intend to discuss or comment on any further details beyond what I have just provided here.

One consequence of our discussions with Susquehanna and ABC has been that beginning last April or April of '05, I should say, based on legal considerations, we suspended our share buyback program. As a reminder, for the 11 months prior to April, 2005, Entercom had been actively buying back stock. In fact, we were the first mid cap radio group to launch a buyback, and we acquired approximately 11% of our stock during this period. While we have been sitting on the sidelines with our hands tied, we have been highly frustrated by our stock's decline to what we believe are significantly undervalued levels. In fact, Entercom now trades at a discount to its peer group despite the Company's long-term track record of superior performance and shareholder-friendly stewardship.

We are making these disclosures this morning in order to enable us to resume our share buyback program. Effective next week, we intend to proceed with our previously announced $100 million buyback program of which approximately $90 million remains outstanding. As you know, our business generates an enormous amount of free cash flow. In addition, Entercom has historically maintained one of the industry's lowest levels of leverage. We will be actively considering a prudent increase in the Company's leverage to facilitate a more aggressive program of repatriating cash back into the hands of our shareholders through additional buybacks and dividends. This is important here, this holds true regardless of whether we do or do not enter into a significant transaction.

So here are the headlines. One, we are talking to ABC, but so are several others and there is no way of knowing whether or not they will do a deal with any of us at all. Number two, we will only pursue acquisitions that create value for shareholders. Number three, whether or not we do a major acquisition, you should expect us to be actively considering an increase in our leverage and an acceleration of our efforts to return cash to our shareholders. And Number four, we are resuming our buyback program.

In conclusion, I'd like to salute the entire Entercom team for a strong third quarter particularly considering the unique challenges we faced during the quarter. In particular I want to commend the Entercom New Orleans team for their extraordinary and heroic efforts during these trying times. They have exemplified local radio at its very best, providing a true lifeline to the community during its time of need, as recognized by a number of international news organizations, including the New York Times, the Wall Street Journal, CNBC's Hardball, Reuters, AP, the Los Angeles Times, and many others. We could not be prouder. Steve?

Let me pause and let all that sink in. Let me give you a few color points on the fourth quarter guidance, a few might highlights on the third quarter and we'll open up the line for your questions. In the fourth quarter of 2005 as mentioned in our earnings release this morning, the Company expects to report revenues in the range of 107 to $109 million. I would note that that's reported revenues for guidance purposes, not same-station revenues. We do not include results from newly acquired or recently divested properties that we did not operate for the entire quarter, and in this quarter, that is the Barnstable/Greenville stations that David referred to earlier, and we also divested two FM and one AM properties as part of that transaction.

Our fourth quarter prior year information is 107.7 million in revenue, and 60. million in expense -- 60.6 million in expense. I would note that this excludes the stations we divested but does not include the partial period for the stations that we acquired. Another comparisons to prior year, as David mentioned we had almost 4 million in fourth quarter political and baseball revenues alone in last year's fourth quarter. In addition David outlined the situation in New Orleans. I would note that once again you've seen tremendous cost management by the Entercom team. In fact, we would expect our fourth quarter same-station operating expenses to decrease approximately 1%, and that's same station. You'll note that reported is down more significantly. I would note that we have excluded, for purposes of same station and we communicated that to you prior, the Seattle Seahawks operations, as we no longer sell, time, or produce those broadcasts.

On the corporate expense side, I would expect corporate expenses of around 4.5 million in the fourth quarter. As a side note, our third quarter, and again our third corporate expenses included a special one-time $250,000 contribution to our New Orleans employee relief fund for the outstanding work of that team during the Katrina, as we seek to offset some of the personal losses suffered by our staff of approximately 150 people in that market.

With the recent acquisitions in Greenville, and divestitures, we will have some short lived amortization of acquired intangibles in the fourth quarter, which we expect would push fourth quarter depreciation and amortization to 4.8 million. Again, 4.8 million in the fourth quarter. However, as a note, for future modeling purposes, we would expect our normalized D&A to be about 4.2 million beyond the fourth quarter. With the closing on Greenville and the resulting increase in our debt which we drew down on our revolver, we would expect to see interest rate -- interest expense for the fourth quarter at about 7.9 million. Again, 7.9 million in the fourth quarter. However, I would note and let me circle back to David's announcement earlier, that this interest rate forecast does not include any potential future impact of expected share buybacks. I provide this only for your information as to our normalized interest run rate.

A few highlights on the third quarter, then your questions. As stated in the release, in spite of all the issues David mentioned earlier, we achieved record-breaking results in revenue. Station operating income. Station operating income margin, which was a quarterly high, 45% for the third quarter. And free cash flow. We continue to achieve significant free cash flow. And on a free cash flow basis -- free cash flow on a per-share basis, given the reduced shares from a year ago period, due to prior buybacks, we've seen tremendous growth there and our EPS growth continues to be very strong. Our CapEx in the third quarter was 2.8 million. We would expect capital expenditures in the fourth quarter between 3 to 4 million, some of that could move around, due to timing of a facilitates relocation project we're currently underway with.

So in summary, a record third quarter, gaining share, managing expenses, a strong buyback, and with this update to the public on our M&A stance and our view on our balance sheet, we believe we can now restart our suspended buyback and use our strong free cash flow growth to continue to reward investors. And with that, Operator, we'll now open up the phone line for any questions.

Thank you. At this time we're ready to begin the question-and-answer session. [OPERATOR INSTRUCTIONS] Our first question does come from Victor Miller. Sir, you may ask your question.

Just philosophically, David, when you talk about the M&A, can you talk about -- you did talk about metrics, you want to see metrics that improve for the Company, could you talk about, at least give us a sense of what metrics you are going to be most focused on in terms of whether a deal makes sense? Is it free cash flow, is it per share? What's the metric that matters to you? And then Steve, just two quick questions. One, you had $1.7 million of expenses related to natural disaster that was not included in the operating expense line for the third quarter. What do you expect that would be for the fourth quarter? And then your little reconciliation in the back, you have got $2.5 million adjustment to revenue and $3.7 million adjustment to expense. Is that just Seattle Seahawks, is that the divested stations? Could you just walk us through what that comprises? Thanks.

Victor, don't mean to give you a frustrating answer to your question, but I think you really have to look at all of them, you look at the ability to generate EBITDA, you look at the ability to generate free cash flow, you look at the strategic significance, you look at everything and you make a a judgment as to whether the transaction, as I said, adds -- creates shareholder value. Steve?

Yes, Victor, by the way, I probably should have mentioned the 1.7 million in special charge we did take. Let me give some color on that and then let me give an outlook. We did take a $1.7 million special charge in the third quarter, that related to establishing a reserve of 1.5 million against accounts receivable reserves. Clearly, there's going to be some impact on the New Orleans business community, and on the receivables we had outstanding. There are some businesses that frankly may just go away. I would make this caveat note, that's an estimate. The business community has not restarted in all parts of that market, and so there could be some future true-ups. At this point in time, Victor, that's our best guess. And as we say in our release, there could be some more adjustments up or down to that.

The other 200,000 related to a transmitter site that was flooded. It does not meet our insurance minimum. And as David mentioned that FM station continues to be off the air to this point in time. You're right, there are some swings on the same station, as I mentioned earlier. The biggest would be the Seattle Seahawks. We additionally had divested markets in Longview Kelso, and as mentioned earlier, we've taken out for the fourth quarter the three properties we divested in Greenville/Spartanburg. So the Seattle Seahawks is the most material aspect of the change to revenues and expenses for same station prior year.

Thank you.

Jonathan Jacoby, you may ask your question.

Good morning. Following up on the first question, following up a little bit on Victor, I'm just curious what your exit multiple assumption is, if you have one, in a radio acquisition transaction. And then secondly, is there any business reinsurance that you have obviously, but how does that run through the P&L going forward? How should we look at it? And then lastly, David, always like to hear an update from you on the progress in HD radio, realizing that you've actually taken a lead, and are you sort of -- is the industry perhaps also thinking about giving auto makers some incentive to try to get this into vehicles in the near future. Thanks.

Let me go first in answering your insurance claim. We expect very minimal insurance. Our damage to our facility was pretty much limited to the transmitter site, I mentioned that earlier, and some other damages downtown. We don't -- at our downtown office facility. We don't think the it rises to any kind of significant insurance claim. You would not expect to see any future insurance reimbursement on our financials.

And, Jonathan, we're not going to share any more color on what our internal thinking is and how we model acquisitions and bidding strategy and all that kind of stuff. So I'll refer you back to the comments I made before about how we're going to look at this. As far as HD radio is concerned, I'm very excited about the progress we're making. There are -- there is a ground swell of enthusiasm and support from major groups, and the most major groups towards this. At this point in time, I think it's appropriate for me not to comment anymore on that, because there's a lot of stuff in the works. But I think that if one were to speculate, that there is going to be a tremendous amount of industry collaboration towards a very exciting rollout of HD radio in both from the standpoint of content and also from the standpoint of promoting the technology. One would be, I think that would be an appropriate speculation.

Let me add one more comment, given the theme of Victor's question and your question, Jonathan, on the metrics. Obviously, we understand you as analysts and our shareholders' interest in knowing our thinking. Let me point out this. One, Entercom has been one of the most aggressive acquiring companies over the past several years. Almost $2 billion in transactions over the past seven or eight years. Yet, on the flip side, by all your metrics, we have among the highest, if not the highest return on invested capital among the radio space. And third, this is a fact, we have the highest percentage of inside management ownership. So we are very cognizant, and when we're doing a transaction or whatever we do with our balance sheet, that we're doing it for all shareholders, of which management happens to be the largest one. The past is only -- is not a guide to any future actions, but again, I think it's very illustrative as to how we've managed the balance sheet and how we've tried to reward shareholders in the past. Operator, next question?

Kit Spring, you may ask your question.

Hi, guys, good job in 3Q despite some difficulty. Can you comment on, if you don't buy Disney, what you think about potentially doing a large dividend, something similar to what Citadel or Sinclair Broadcasting have done? And those moves initially have seemed to buoy those stocks. Or just going private, so you don't have to take annoying calls from analysts anymore.

Let the record show, Kit, you broke up the room here.

We thrive on these annoying questions, actually. You know, Kit, we'd have to look at all of those options. Steve just articulated very well how we will view this issue. The bottom line is that our stock is significantly undervalued, both from and absolute standpoint and from a relative standpoint to our peer groups. We've been on the sidelines and have not been able to put our balance sheet or our free cash flow to work to take advantage of that and to reward our shareholders. That changes as of today. And irrespective of whether we are able to do acquisitions that make sense for our shareholders or not, we believe that the business model of radio puts us in a position to be more aggressive in repatriating cash flow back to and cash, I should say, back to our shareholders. I don't think you should rule out any possible scenario under that umbrella.

And Kit, as we've said, I think now for the past three or four conference calls since we announced the buyback, that's obviously something that management and the Board of Directors is constantly evaluating. So you can be certain that we are always evaluating the options, and we'll see what makes the most sense based on all the facts that the Board and management's aware of.

Thanks guys.

James Dix, you may ask your question.

Good morning, gentlemen. Just Steve, the guidance for fourth quarter operating expense seems pretty impressive, I just want to get a little more color as to what exactly you're going to be cutting there, and just any outlook as to what you think run rate, operating expense growth should be just going forward after the fourth quarter?

Two things. One, I refer you back to David's comments of our long, long history of expense management. Note 2% in this quarter. I would say there is no one area of cut. I don't think we manage our costs for quarters. We try and look at the long term business model. Obviously, though, we're cognizant of where the quarters come out. But a couple things, one, with same-station revenue, given the guidance that it's at, and there's some variable costs. Second, the obvious one would be we had expenses related to Boston Red Sox playoffs last year, the 14 games versus the three this year that we won't have this year. Beyond that, I think it's just continued cost management. We have not done any extraordinary action to change our business model in this quarter.

Great, thank you.

Jason Helfstein, you may ask your question.

Thanks. Just one question, can you comment as to your comfort with leverage, and also just review what's your maximum leverage under your bank and bond agreements? Thanks.

Sure. On the bond, I think it's seven times. On the bank, we stepped down, I think it might be five times currently under the bank agreement under our current structure. Again, it's a question asked all the time. I'm sure somewhere out there is Bishop Cheen and he'll probably ask that same question. As we've consistently said in the past, we don't give specific targeted guidance. You've just seen that we've acted very prudently to manage our balance sheet, rewarding shareholders and keeping ourselves with flexible operations. As David indicated earlier, with our leverage currently below three times, we think there's ample room to continue to reward shareholders while raising leverage to some level higher than it is today.

If I can ask a follow-up perhaps. I mean, is it important to you to maintain investment grade?

We're currently not investment grade. We've not changed that, however, I would note that our -- some would say our balance sheet operating metrics would be better than some who are rated investment grade in the past. So we're not chasing any specific debt rating at the moment, Jason.

Thank you very much.

Bishop Cheen you may ask your question.

Beautiful. Okay. Somebody would say we managed this Bishop. We just figured you were out there somewhere.

Somebody already asked my annoying question, so let me move on to something else.

This is so cool.

Can you talk about in the quarter, and even in Q4, what you're seeing in terms of a rate versus sell-through for your top line, and how your top line is outperforming your markets?

Fourth quarter's a little choppy. We are, as always, it's market-by-market and certain markets are doing well and certain markets are doing not as well. It's great to have powerful brands because the stronger your radio station, the more -- the better positioned you are to compete in this environment. We've seen some choppiness in automotive over the last few weeks. In several markets. And we're seeing some softness in national. On the other hand, local business retail business in most of our markets is pretty strong right now, and so when you distill all that down into a shorthand answer, we're seeing small rate growth, and basically the same level of inventory utilization as the prior year.

Okay. And where are you -- last annoying question -- where are you in the inventory reduction or efficiency or whatever, whatever you want to call it, in terms of--?

Well, we've always been in a place of supporting sustainable inventory levels. So when you look historically, we never did augment our spot loads to a level which we felt would be unsustainable. So we've always been in sort of the 11ish, say 10 to 12 units per hour, spot loads on our FM stations. I think the more important trend, though, for the industry and the more important development, is the move to shorter-length commercials. And I've spoken about this on many times in the past, I won't put you through the entire soliloquy, but in essence, when you think about society today moving quicker, people want to get your information, they want it quick and they want to move on. So we think there's an inexorable trend towards shorter commercials in the industry, meaning 10, 15, 30 seconds, and we are very much supportive of Clear Channel in that area, and have our offering, 15 and 30-second commercials, on all our radio stations to the extent our advertisers want them.

David, you just did that in 30 seconds, not bad.

I think that was 90 or 120 actually, but you're kind.

All right, thank you.

Thanks, Bishop. That's got to be the staged highlight, that's so funny. Okay, I'm sorry, Operator, next question.

Mark Winkess you may ask your question.

Actually, I have no significant, meaningful, or insightful questions.

Do you just want to say anything else while you've got 100 people listening?

I'm good, thank you, that's pretty transparent.

Thanks, Mark.

Lee Westerfield, may ask your question.

In 30 seconds or less -- actually, I just wanted to get a little more specificity on the moving items in the fourth quarter, it's going to help to understand a little bit better the underlying growth. Do you mind sharing specifically what the revenue impact that you're omitting this year from the Red Sox as they moved further in the playoffs and World Series last year, also, of cours, we want to bear in mind the costs for this incremental gains last year.

Lee, speak up, it's hard to hear you.

Can't hear me?

Caught most of the beginning, but speak up a little bit? Give me the last sentence please.

Sure, just if you can speak specific with regard to the year ago dollar amounts from Red Sox playoffs and World Series for revenue and costs, also political a year ago so that we can see the underlying.

We're not going to do that because we don't really want to be too transparent in exactly what we're getting per game for Red Sox so on and so forth, but if you lump together Red Sox and political and Katrina issues, you're talking roughly about $6 million. You could assume that Red Sox would be about, let's say, would be somewhere between, let's say, 15 and 25% of that total.

All right, I want to be fair on the cost side as well, the costs on the Red Sox incrementally?

I'm sorry, 10 to 20%.

Okay, that's fine. The cost side, Steve?

Well, you could imagine once you do back the envelope on the revenues that we had related costs with it, we did make a margin on the Red Sox, but it would be a margin that was less than the Company's overall. And one other data point, because we have disclosed it in the past, political was 3.9 million last year, just to help.

All right. Gentlemen, that was very helpful.

Thank you.

Laraine Mancini, you may ask your question.

Great. About New Orleans, one of your competitors mentioned that they were starting to see some adds coming back in, are you seeing those sorts of trends as well, do things feel like they're getting a little bit better or is it pretty much status quo? Secondly, can you talk about how the fourth quarter's looking at in your markets, excluding New Orleans? What do the rest of them look like?

Yes, I saw those comments. Look, I think New Orleans is getting a little better. I think that's fair. I mean, life is beginning to return to a more normal level. But obviously, when you look at the devastation and the disruption in that community, it will be years before you will have entirely normalized business environment. So, yes, it feels like it's getting better, but we have a ways to go there. As far as the rest of the markets are concerned, as always, Laraine, it's all over the lot. We've got some markets that are just thriving, and some stations that are on fire, and we've got others that struggle. It's always sort of a bell-shaped curve.

If I look at your growth the first -- sorry, if I look at your growth the first three-quarters of the year, it looks like you've been low to mid single-digit growth, and that was the low single-digit includes New Orleans. So is it fair to say that the other markets could still do a mid single pace in the fourth quarter?

Well, I think, we've already, again, if you take into account political, Katrina, and Red Sox, I think as we said on the call, the answer to your question is yes.

Great, thank you.

David Bank, you may ask your question.

Thanks, good morning. Just one question, David, on the 3Q, '04 conference call, about a year ago, you said that you're seeing annual pricing generally up 5 to 10% with some pricing sort of ahead of that. Can you talk about kind of retrospectively, how all the annual pricing sort of ended up a year ago, and how are you seeing that annual pricing shaping up right now?

It's a good question, David, I'm going to be honest with you and tell you, I can't give you a good answer to your question now. It's still a little bit early for us to give a sense. We had, I think last year we had some more color. At this time, this year, we do not have as much color on '06 pricing yet. As far as where we ended up for '05, it did not come in consistently. I mean, a lot of the annuals were done in that range, but I think that the trend line was down from there, and we obviously, if you look at this year, as an industry, we're not able to sustain that level of revenue increase.

Okay. When do you think you'll have a better sense of those annuals?

Over the next, you get -- it's incremental. I mean, each week you get a little bit more information and there are a few more deals done and this continues into the beginning of our first quarter.

Okay. Thank you very much.

Marci Reisaker, you may ask your question.

Just wondering if you can go over your significant add categories with us in the third quarter. Which were strong and which were weak, and how these trends have changed, and also I was wondering if you've seen any cancellations in the auto category? Thanks.

The -- there have been some cancellations by local dealers in some markets over the last few weeks. That's always part of the business. You always have a few cancellations. I'd say there have been probably a little more than normal over the last few weeks.

I'll give you the data on the categories, I always do this reluctantly for those of you to know, because I can't draw correlations on this, and I compare our categories to others and I'd be totally confused. But since it's asked, automotive and telecom were off in the third quarter, professional services, medical and healthcare, TV, cable, and beverage experienced growth in the third quarter for Entercom.

Thank you.

David Miller, you may ask your question.

Yes, hi, a few questions and I apologize in advance because I had some problems logging on initially. David, can you just comment on where you guys are in terms of overall pacings in your PAC-West cluster, are you generally comfortable with the asset mix up there and the programming mix? And do you see any changes on the horizon in that all-important cluster for you guys? And then Steve, could you just confirm that you guys are through with the third buyback? I anticipate that you probably are since you were, I guess, more than halfway through it as of the last call, and also on the debt composition, what portion of that is fixed versus floating? Thanks very much.

Let me grab your second question first and refer you back to the call, because David, we did cover that extensively, I don't want to drag everybody else through that. So as far as the northwest is concerned, we're doing fine there. I'd say it's pretty much in line with our group at this point in time. And as far as our asset mix is concerned, we've got phenomenal positions, we're the number one broadcaster in the Pacific Northwest, and we are number one in Seattle, we are number one in Portland. We have just announced, and I talked earlier in the call about it, our -- probably our greatest programming highlight of the summer arbitrons was in Portland, where we programmed a sort of a flailing oldies station and put it into the new sort of Jack, Bob, Dave format under the moniker Charlie and it went to number one in the market. So we've got a terrific lineup in Portland and are primed for a great year. As far as Seattle is concerned, more of a mixed bag. We've got a few really exciting stories up there, and we've got a few challenges, but overall, I'd say it will be an average performer for us in the year to come.

As far as the debt structure, if you take a look at our total debt, including our outstanding senior sub notes, we'd be about 40% fixed, 60% floating at the current time.

Okay, thanks very much.

Eileen Furukawa, you may ask your question.

In the markets that you compete against Clear Channel, I was just wondering if you guys are seeing any change in the way that Clear Channel is approaching less and more compared to the first half of the year? In other words, do you get the sense that they're being more flexible as to their mix and beginning to allow for more 60-second spots than in the past, creating a little less opportunity for share shift in the 60-second inventory than you saw in the first half of the year? Thanks.

I don't know. I mean, it's -- we have a -- we've talked about in earlier quarters, the fact that if you look at our success this year, it really has not been share shift from Clear Channel. Our markets that we're not really actively competing with Clear Channel have done just as well as those that haven't. We didn't do that analysis this quarter, I think we got bored of it, more than having looked at it and not wanting to talk about it anymore, to be perfectly candid, I think that Clear Channel is going to be in a nice position next year, because they have to their credit taken the lump -- taken their pain in 2005, and I think they go into 2006 with a -- no longer having to bear that burden.

They're going to be -- they're going to be in a much better position to achieve next year, and I think that the challenge, I'll tell you, the real key in the industry is pricing on our 30's and 15's. Because to the extent that we are successful in having advertisers shift to shorter commercials, we make local commercial radio more listenable to consumers for the long haul. For that to work, the economic model to work, we cannot afford to just charge $0.50 of a 60-second rate for a 30. When you look at the research that has been done, the Burke study, it shows that a 30-second commercial is roughly 75 to 85% as effective as a 60-second commercial. Therefore, advertisers should be very willing to pay $0.75 for is that commercial. Hence, we price our 30s at 75% of a 60. I think that as an industry if we price at that level, we will end up in a place where we will see a nice transition to shorter length commercials in the future, which is good for listeners, good for advertisers and good for the business model. If we price those commercials too cheaply, it will not -- we will just have more shorter commercials. And that is why at Entercom we are pursuing a very strong policy of pricing at 75% on those 30-second commercials. Giving you a little more than you asked for there, but I think hopefully that gives you some color, Eileen on what we see going on in the -- sort of goes on on the commercial side of the business.

Okay, thanks a lot.

We do have time for one more question and our final question does come there Jim Goss. Sir, you may ask your question.

Okay, thank you. One question relates to the acquisition issues you brought up before. Given ABC's scope, would it be fair to think that you would be back on for other acquisition opportunities until you see how that played out? And secondly, I wonder if you might give a little bit of a format progress update, including Jack, I know you've focused on that in several markets. Does that format seem to be evolving into an implication of a broader play list applied to various other formats, sort of morphing into something different from what it started out at? And then finally on HD, are you still sort of focusing on the multi-channel approach as the primary way you think you may get a payback from that development?

In order, there's no other acquisition on the horizon that -- to discuss at this point in time that we're aware of. Number two, as far as the Jack implication, it's an interesting question that we discuss from a programming standpoint, and will the notion of more variety and deeper and broader play lists and more eclectic play lists apply to other types of genres, there's some interesting experiments going on in the country now, there's an Indianapolis station that Emis operates that is doing that in country, and has had some good initial results. I think we look at that, Jim, I think it's an interesting question and I think we'll see how that plays out over the course of the next few months or years. As far as HD is concerned, yes, we think multicasting is the killer APP, or that technology, it will be great to have higher levels of audio quality, but what will really drive consumer adoption is the addition of a multiple of more radio stations providing more variety and depth and breadth of choices, and to do so at a price point and create a value proposition that gets the consumer excited.

All right, thank you.

Thank you. So with that, we will adjourn the call. Thank you all very much for joining us this morning and we'll look forward to reporting back to you again in 90 days.