Audacy Inc (AUD) 2006 Q2 法說會逐字稿

Good afternoon, and welcome to Entercom's second quarter earnings release conference call. [OPERATOR INSTRUCTIONS]. I would like to introduce your first speaker for today's call, Mr. Steve Fisher, Executive Vice-President & CFO. Sir, you may begin.

Thank you operator, and thank you everybody for joining us here this afternoon, and we look forward to updating you on our quarter.

First let me read you our disclaimer. The matters we will be discussing today will contain certain forward-looking statements that are based on current expectations and involve certain risks and uncertainties within the meanings of the U.S. Private Securities Reform 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 with the U.S. Securities and Exchange Commission. Listeners should note that these statement may impact several statements include 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 measure.s We refer you to our website at 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 contains useful tables of prior period pro forma financial information adjusted for acquisitions and divestitures.

Now I will turn you over to David Field, President and Chief Executive Officer.

Thanks, Steve, and good afternoon to each of you. I'm pleased to report Entercom's second quarter results and provide you with an update on recent developments.

Q2 was a challenging quarter for Entercom as same station net revenues decreased 4% during the quarter. Strong expense management enabled us to reduce same station operating expenses by 1% during the quarter. As a result, same station operating income declined 8%. We achieved strong performance in Boston, Portland, Providence, Rochester, and Greensboro.

Business conditions remain sluggish in Q2 for traditional media. Like first quarter, Entercom's markets fared slightly worse than average. On the bright side, market conditions improved significantly in Boston during the quarter. However, the Seattle, Denver and Kansas City markets experienced particularly challenging conditions all down high single digits. The New Orleans market showed sequential improvement post-Katrina but posted a 16% reduction in radio revenues for the quarter. I want to re-iterate the comments I just made refer to market growth and not to Entercom's performance per se in those markets.

Strategically, we are focussed on a few key drivers to accelerate future performance. Enhancing our brand and content, building our business development efforts, capitalizing on strong internet growth opportunities. We are making good progress on each of these fronts and anticipate that each will contribute to improved performance in the future. Over the past year we have accelerated our investments in new brands and in compelling new content. On recent conference calls we have noted the addition of new play by play relationships with the Boston Celtics, Baltimore Sabres and Seattle Supersonics and new personalities such as Adam Corolla and Ronald Reagan, Jr. On our last call, we announced a 10 year extension of our agreement with the Boston Red Sox and have planned to leverage Red Sox related content on to a second Boston station, WRKO.

We have also launched a number of significant new brands over the past year and are just now beginning to reap the benefits of these investments. In fact, the recently released Spring ratings books have been an unqualified success. I will share a few of the many highlights.

In Seattle, we launched a new country station called The Wolf last December. In just our second ratings book, the station surged to number two among adults 25 to 54 in the market. Seattle sister station KISW has emerged as the single most successful post Howard Stern station in the country, achieving number one ranks in virtually all male demographics. We achieved this by successfully adding terrific local talk content and our ratings are now higher than when Howard was on the air.

In Portland two Entercom stations, classic rock KGON and The Wolf, another country station, tied for first place among adults 25 to 54. We also had a terrific ratings book in Boston led by Mike our eclectic hits, or jock station, which had its fourth straight book of ratings growth and emerged in the top five player among adults 18 to 49. Other big winners were Alice and The Mountain in Denver, The Mix in Milwaukee, 98Rock in Sacramento, WGR in Buffalo and several more. The impact of these improved ratings should affect revenues in Q4 and on into 2007.

As I mentioned earlier, we are also making significant investments to enhance our business development and internet capabilities. In June, to provide senior level leadership and advance our commitment to the internet and related areas, we established a new Senior Vice President Digital position. By focusing and investing in these three areas, brands and content, business development, and the internet we expect meaningfully enhance our future growth and opportunities.

I'm also quite pleased that we have been able to make significant investments in each of these three areas and yet maintain flat expenses. This continues a pattern of strong and consistent expense controls, that we have demonstrated over many years. We have been able to achieve this by continuing to find smart ways to enhance and streamline our business practices without resorting to unsustainable cuts in areas of strategic importance.

We believe our future opportunities and free cash flow generation of our business is undervalued by the market. Utilizing our strong balance sheet, we continued to repurchase our stock during the quarter and also continued to reward our share holders through our $0.38 per share quarter dividend which represents roughly a 6%-yield on our stock. In addition, we continue to look at prudent value creating acquisitions, but as we have very publicly demonstrated we will remain highly disciplined and selective.

Finally a word on current market conditions and expectations for the remainder of the year. With Q2 behind us, our future out look has begun to improve ,albeit gradually. First, industry conditions have begun to show modest sequential improvement. And we entered Q3 stronger than Q2. As a result we expect to achieve modestly sequential results in the third quarter.

Looking ahead to fourth quarter, we expect market conditions to receive a boost due to stronger political spending, and improved economic circumstances in New Orleans. We also anticipate a boost from the accelerating contributions of our new brands and the recently released ratings and our expanding business development and digital efforts.

Steve?

Thank you, David. First let me give you a few notes on our third quarter guidance, then we'll open up for your questions. In the third quarter of 2006, the Company expects to report revenues on a same station basis to be down low single digits, reflecting weakness in the mix of markets which we operate. This will be a sequential improvement on prior quarters. As David said, we would expect Q3 same station operating expenses to continue our strong trend of expense management. And our expenses, exclusive of non-cash compensation expense, lay flattish to up less than 1% in the quarter.

We do expect that non-cash compensation expense for the remaining quarters of 2006 to be approximately $1.8 million per quarter. As we now enter the second half of the year and the political season David mentioned, some of you have asked about political comps to 2004 and 2005 for those of you who will want to be analytical, let me give you those data . In 2005, which is an off year politically, we did about $200,000 in Q3 and $800,000 in Q4 of 2005. Prior year, 2004, a more comparable election year, we did $1.2 million in Q3, and $3 million in Q4. As noted on our website, our prior year third quarter same station information is $116.7 million in net revenues and $64.1 million in expenses. You can see full same station information on our website.

Below the line in the third quarter, we anticipate an asset writeoff of approximately $1.2 million related to the abandonment of our old Kansas City facility as part of the move to our newly constructed facility and we're looking forward to that as the team is in Kansas City. With those few notes, operator, we will now open up the phone line for any questions. Operator?

At this time we will begin the question and answer session. [OPERATOR INSTRUCTIONS] Our first question comes from Jonathan Jacoby of Banc of America Securities.

Good afternoon and thank you for taking the question. First question is, it seems that during this quarter you slowed the pace of your buy-back a little bit. You do have the dividend in place, which according to our estimates looks to be about 60% of your available free cash flow. Leverage is a little over four times. What is the key focus of management for the remaining free cash flow going forward? Is it toward acquisitions or to look for accretive acquisitions or to increase the buy-back?

First, let me address the beginning. We did a buy-back $18 million in the quarter. That is slower than in the past. I would note there is a technical reason. As you saw in the filing of our proxy and annual report we did a option exchange program where we exchanged some underwater options with our all of our employees who had underwater options for restricted stocks. Since that was set up as a tender under SEC rules, we cannot buy-back through that period of time which was most, frankly of the second quarter. There was a technical reason. As noted, and I'm glad you noted, we also paid a dividend. We now paid out $0.76 to share holders in the first half of 2006. David, why don't you address the ongoing commitment of our capital structure.

Jonathan, we still have an outstanding balance sheet and we are committed to continuing to look at buy-backs as our shares are undervalued. We also believe in rewarding our long-term share holders through the dividend and yes we will look to -- to prudent selective acquisitions where we think we can create value for our share holders.

And then the follow-up is on great expense management again and you guys have definitely proven that even in tough times. But now you have new programming initiatives you mentioned, from the internet, HD radio, new sports contracts being signed. What do you think is the underlying normalized growth rate for expenses may be starting in 2007?

Jonathan, I will take that. I don't think we will look at any of those as changing our business model. You are correct. We were going to have incremental expenses on HD. To this point we haven't seen that as being material or major. That could change at some point in the future but I don't see that changing in 2007.

Again, I think I will go back as you have seen quarter after quarter in the past several years, we continually were aware that some areas will increase including programming, and we seen the investment and major talent and teams. We will just continue to find other ways to offset that. I don't think we were changing our guidance to you in terms of how we see the future. I said quarter after quarter we don't see changes in our business model. We believe we can still continue to show great expense management.

Thank you so much.

Victor Miller of Bear Stearns.

Good afternoon. Could you tell us about third quarter that it's off to a better start than the second quarter was. Could we talk about, is it driven by particular markets, particular categories and then how much of that improvement is just the fact that you will have the one month essentially of comp on New Orleans?

The second question is, Steve, could you remind us of fourth quarter of last year you made a couple of strategic moves with some of your radio stations in changing formats running commercial free for a while. Could you remind us what major changes you made in some of your big markets that we can kind of figure out what impact it might have as we go into the fourth quarter this year? Thanks.

And actually, Victor, your question for Steve leads into my answer as well and that is that I think there are two factors why -- or three factors that we are looking a little better to Q3 than Q2. Number one, market conditions are moderately or modestly better. Number two, we did make a number and a disproportionate number of format changes and enhancements over the course of 2006.

So if you look at that sub portfolio that we are seeing rapid acceleration in that group, that had been a drag through second quarter, but begins to be a positive factor for us in Q3 and we believe continues to accelerate into Q4 in 2007. And third area being execution, I think we are executing a little bit better. I would like to see us execute a lot better but are seeing some modest improvements there. Steve?

I think for your data, Victor you were referring to the major format changes in Seattle that David alluded to, the Wolf, which, again to remind you in its second book came out number two in the adults 25 to 54, great success.

When did you make the change?

December 1 of -- December 1 of 2005.

And then what's remaining under your buy-back and right now?

Victor, I don't have the exact number in front of me. We are on our fifth $100 million buy-back authorization, and I believe we are probably about $90 million there. Don't take that as a hard number. If you want to call me back afterwards, I will try and get you the hard number if it's material.

You think you are the vast majority for the -- program?

I believe so.

If you are indeed that far through, there is any reason why you would not be announcing --

I'm sorry, I believe we have $90 million remaining. We just reauthorized it, and again as I mentioned to Jonathan earlier, we had to freeze it during a significant part of the quarter.

Okay, thank you very much.

Eileen Furukawa, Citigroup.

Thanks for taking this call. Just a couple of questions. Following up, you were talking about the format changes you made, it seems like you were a little more active in that area in terms of format changes. Is that something we should continue to see from you going forward and is that in response to sort of what you are seeing from competitors?

Also, last quarter you talked about an acceleration in your sales of shorter length ads. And growth in double digit range. Are you seeing growth in the double digit range for your shorter length ads and what percentage of your ad mix do your shorter ads now make up?

Let me take those in order. In terms of formats, I would suspect that you would see us continue to make enhancements to our content. But in terms of major format changes, the pace that I would anticipate in the future would be slower than last year. In terms of shorter spots, shorter spot length, we are definitely continuing to see a significant amount of growth. Yes, double digit growth in demand for shorter spots. Frankly more for the tens and 15s even than 30s. As far as as the percentage of ad mix I don't have that number in front of me.

We don't have that on a consolidated basis, Eileen, I'm sorry.

It's market specific. A.M. station run a higher portion of short spots than F.M.s. The numbers we have seen in some markets in the 20% range for shorter spot for F.M. as much as 40% for A.M.s. Again, that is more anecdotal than a hard number.

Why do you think that the tens and 15s in particular are rising in popularity?

There is just a great deal of demand for them right now. It's hard for me to judge as to why. I don't have a good answer for you.

Okay, thank you.

Bishop Cheen from Wachovia.

Thanks for taking my questions, David and Steve. David, what's the biggest challenge you face in trying to add value to your company basically through this year and some issues this year and just longer term?

You know, business climate.

Say again?

Business climate. It's right now business is sluggish. And developing strategies and executing them in order to achieve compelling growth rates in this climate is challenging. I can give you the speech and I believe in it that there is a tremendous amount of opportunity going forward for radio in particular radio in the digital world which we can leverage the inherent synergies between radio and the internet.

And in particular, there was just a study that came out this past week that talked about radio being the best medium to work in conjunction with the internet to drive marketing results. We think there is great opportunity there, but right now business conditions being what they are, that's our biggest challenge.

When you go give the speech and say this, do you feel any traction to whoever audience you talking to?

You would have to ask yourself that. I don't feel like I could possibly further comment other than to say we believe there are great opportunities out there and we are excited by what our future looks like, but we were sobered by the current market conditions.

Okay. Thank you.

James Dix, Deutsche Banc.

Good afternoon, gentlemen. Just a couple questions. I may have missed it and if so I apologize, if you have the number on your weighted average market growth was in the second quarter. And then just a follow-up on some of the prior questions. Do you have a number as to the number of new brands you launched in the past year and any rough proportion of revenue that those stations accounted for historically? Then the last one, just in terms of your internet initiatives, if you can give some sense what is the overall mix of your revenue from non-spot? I'm presuming non-spot where you account for the internet. We seen on industry numbers that non-spot revenues are growing pretty fast for the industry. I'm trying to get a sense as to if nonspot still at 2 to 3% or what is the overall growth that you are seeing there and specifically on the internet side of things. That's it.

Our markets in the second quarter were down roughly in line where we were down. We had as far as proportion of market launch revenue it's a moving target because of the fact that the revenues do contract before they expand going through that life cycle. I think we could give you a guesstimate that ever presents somewhere in the range of just under 10% of our portfolio. And then as far as internet revenues at this point in time, they are a small fraction of 1% of our business but they are expected to grow dramatically here in the future.

Just on the brand, do you have the number of stations at least, new brands that you launched in the past year?

If you say material brand launches, you are talking close to ten radio stations and some others are smaller A.M. format changes of less magnitude that -- probably another several of those.

Thanks a lot.

Marci Ryvicker of Wachovia Securities.

Thanks, I have two questions. David, when you talk about a sluggish business climate, is this due to lower demand, lower pricing? Or a combination of both? Then in terms of demand for the shorter length spots is this coming from advertisers or are your sales people pushing these?

At this point I would say the shorter internet spots are being demanded as much as sold. We are seeing a real surge of enthusiasm across the different types of advertisers but locally and nationally for those and I think and back to the earlier question on ten, by the end of the day you don't need 60 seconds to communicate a message. You can get it done at in ten or 30 and do so more efficiently if your creative is good and more and more advertisers are discovering that.

As to the overall sluggishness, I think we are going through a natural cycle here right now which is widely discussed of some share shift. The fact is that we are seeing internet growing at the expense of traditional media. We are developing strategies to harness that and capitalize on that on our directly and we are seeing results from that and expect to see accelerating results of that in the future.

But what I'm also very encouraged by, if you look fundamentally and structurally at the business and I won't go through the whole speech in the context of a earnings call, but when you look at the strength of radio and the durability and fact that 96% of Americans still listen every week and so forth, and you look at our value propositions compared to television print, direct mail, yellow pages and other traditional media, we have an extraordinary opportunity to grow share dramatically in that new context. That's our view of the world.

Thanks. That's been a very long natural cycle, though. Thank you.

Anthony DiClemente, Lehman Brothers.

Thanks for taking the question. I have two questions. First, as you think about and brain storm ways to kind of monetize your assets, think about your spectrum. Have you done any thinking what you can do with spectrum there? Is there any way using compression technology that you can monetize some of your spectrum whether it be leasing it out to wireless providers or data providers? That's the first question.

Then two, building upon some of the questions earlier on expense management. As you look at what you have talked about on growth and expenses on HD radio and potentially sports contracts, is the other moving piece your sales force? Maybe you can give us some color on whether or not you are holding your sales commissions flat or are they coming down and then does that imply that the number your sales people is coming down? Thanks.

Let me first address the spectrum question. This is Steve. Our primary spectrum is governed by the SEC. But I should note that HD radio is not only audio but also represents data opportunities for the industry. Most of the major players have launched in their primary stations, HD signal of their primary. That's HD1 and many, including Entercom, are launching HD2, offering new audio programming. That spectrum can also be used for digital services. No one has tremendous plans but Clear Channel has announced indications of playing around in traffic. Maybe we provide news headline updates and things like that. That's off the future --

I'm sorry, but if you see there is a quicker way to monetize that instead of HD to play out or maybe more than you need, is there if you decided to, there is a path to monetizing it by subletting that spectrum? Is that possible under the SEC license?

I don't know, and I think if it was there, someone would have jumped on it. I think these are things as an industry and as Entercom we are still exploring. I should note that many of us are using sub carriers on FM stations to transmit Muzak or other things. That is out there. I'm not going to represent that it changes the material of the business model.

As to the expenses, one, on our sales commission lines, I think that represents an opportunity in the future for Entercom and the industry to be more efficient in its sales model through the application of technology and how we structure, incent and motivate our sales force. Number of sales people have not gone down. And as I said, earlier as you mentioned, we don't see any other significant changes to our business model. Hopefully opportunity in areas like sales commission.

Thank you very much.

Lee Westerfield, BMO Capital Market.

Thank you, gentlemen. Good afternoon I have two questions. The first one picks up on earlier comments about spot load time and pricing. By my analysis, up in Boston, you have actually increased your spot loads in the month of July. We finished our own analysis of that subject by about 4.6% and a lot of that came from increased 30s, light decrease in 60s. The question here is really whether in the recovery of you've intimated in Boston are you seeing something in July greater than mid single digits in terms of growth? Are we seeing pricing in Boston as well as a result of the increase in 30s?

I don't think we will give detail that's that granular on a market by market basis. I think the broader question is do we anticipate acceleration in Boston? If you take a look at the not only the -- if you take a look at the ratings results at Mike and take a look at what the needle moving impact of that is, I think that on top of the enormous strength of WEEI and strategic move we made at WRKO with the Red Sox, not to mention WAS emergence in the last two books, I think you should anticipate strong results from Entercom from Boston going forward over the next couple of years.

Terrific. Okay. The second question relates to a better understanding and remembrance of what took place in the late third and the fourth quarters of last year and I'm going over notes from last fourth quarter here that you had experienced the unusual hits of $3.9 million overall from political and $2.2 million from Katrina and somewhat close to $1 million in Red Sox.

You mentioned, David, very specifically that you were seeing New Orleans strengthening economically. I want to make sure I understand what that may mean. Do you mean that there is a pick up, if you will, in total demand, the kind that one would see in a recovering market? Or do you simply mean that we were getting around the anniversary of Katrina last year, and so there is a natural uptick around the anniversary date?

My comment was more to the former. We have seen sequential improvement quarter after quarter in New Orleans and as I mentioned, it's still as a market, not us, but as a market, down 16% in Q2. The economic date thaw we are seeing out of New Orleans is reflecting a resurgence in economic activity as we see more and more federal dollars being put back in and therefore I think we can anticipate the really vibrant growth in that market going forward as that engine gets into gear.

We certainly hope for it. I thank you very much.

Mark Wienkes, Goldman Sachs.

Thank you. Wondering, does Entercom plan on contributing any inventory to D-mark's platform? Second, with satellite radio growth fading, it seems like it could open up a market opportunity for HD. What's your take on the best case scenario as to how quickly the industry can get digital radios into cars and out at retail?

We have no current plans to contribute any inventory to D-mark. And as far as the update on the cars are concerned, Steve sits on the board of --

I really think that shouldn't come from Entercom. I think that should come more from the HD alliance and from Ubiquity. I think they had access to much better data on that.

Let's try this one. With the ongoing share shift that you mentioned earlier in terms of ad share, is it the timing when assets become available for sale? Or what might make you think that it's a better time to buy more stations, like in '06 or '07 versus waiting for the share shift to settle out?

Well, look, I mean, we will take a look at any acquisitions that are strategic to us and where we think we can create value for our shareholders. As I mentioned before. I don't think anybody more publicly has demonstrated discipline that we have historically and walked away from a lot of deals over time that we could have done. So we will be cognizant of all market conditions and make what we believe are prudent judgment as we look at opportunities as they present themselves.

Station by station analysis?

Absolutely.

Yes.

Thank you.

John Klim, Credit Suisse.

Good afternoon. What's the minimum revenue growth rate necessary for you to realize margin expansion? And then a second question, do you view the internet HD radio or some other form of wireless distribution as the largest potential growth vehicle over the next five -- let's call it five to ten years? Thanks.

On the margin expansion, that's a good question. I would say probably 2.5 to 3% in Entercom's case based on how I view the business model going forward. And your question was the minimum based on what I see on the expense side?

Yes, exactly.

And then the other question, we divide the world in three dimensional buckets. Transaction world, there's the business development world, and then the digital world. And right now we were experiencing sluggishness in the transaction world. But we were seeing unprecedented opportunities in the development world because more television, newspaper, direct mail, yellow pages and so forth dollars are in play than ever before. We think by enhancing our efforts to be a developing business, by enhancing our efforts to be able to make a meaningful play on the internet by leveraging our relationships with our customers and our content and the brands we think we can see significant growth in that area as well going forward.

Okay, thanks.

David Bank, RBC Capital Market.

Thanks, good afternoon. Three questions. The first is David, you elaborate a little bit on what the role of the newly hired digital SVP is? What kind of initiatives do you think we are looking for specifically, what's the mandate. Second question is, how do you guys keep beating inflation on fixed expenses? What was left to cut? How do you do it? And were any of the expenses shifted from cash expenses to non-cash comp?

And the third question is major markets impacting the business. It sounds like over the second quarter, the first quarter and to an extent second quarter maybe weakness in Boston. Really had a big impact on the company overall. Sounds anecdotally that Boston is coming back and ratings notwithstanding. Maybe the market. Is Boston coming back, are there any other kind of weak points aside from New Orleans? Could you comment on the Denver market or anything else that might stand out?

Let me grab one and three and I will let Steve answer your second question. Let's start on three. As I mentioned in my earlier remarks, we did see significant improvement in Boston, but we continue to see material weakness and mentioned high single digit declines. Again, in market growth and not necessarily Entercom growth. But in several of our other large markets such as Denver, Kansas City and Seattle. As far as the role of Sandy Smallens, our new Senior Vice President of Digital, Sandy is charged with accelerating and providing leadership and focus and all of our efforts to again leverage and enhance our relationship to our listeners and create new opportunities to grow our business by capitalizing on those relationships for their listeners and the brand and content that we can deploy on to those new platforms in various ways.

I think --On the expense side, wish I could give you one thing. We constantly go through a process of poking, prodding and seeing where we can operate more effective. Let me first address your implication. There has been no shift of cash to non-cash expense. So I think --

Definitely not an implication.

Sorry. Didn't mean to do that. I wish I could give you a better answer, but I think you have seen the station pony up for significant talent, sports rights. We will make the investment. We will do the marketing and launch the brands. There is no one magic bullet. It's a lot of little things beyond that.

Okay. Thanks, guys.

Lorraine Mancini, Merrill Lynch

Two good questions. On the internet I know it's a small piece of revenue are there any categories that are a particular area of strength and what do you expect from that going forward? Second, one of your competitors this morning suggest there had was enough demand in radio if inventory was cut to eight to ten minutes or spots per hour longer term. How do you think about that?

First, we aren't going to provide granular data on the internet. I think it's too early.

We don't have any data on the internet.

Your other question is intriguing. And for quite sometime I have been -- publicly stated that I do believe that over time we will see a shorter amount of commercial inventory on our radio stations along the lines with the comment you referenced.

There is plenty of demand for radio. Right now we were obviously not in a seller's market. And I think that through our development efforts to drive demand, I see great opportunity there as well. If there is inventory contraction, that would help as well.

And how do you feel about short form spots in the context of that since it in fact increases the inventory level?

But it provides a -- it's a better way to conduct our business. Because we will be able to create a far greater yield for each second, if you will, than we can in a 60 second environment. Because it is to deliver a commercial message in 30 seconds or 15 and 10 is far more efficient than doing it in 60 seconds and no reason in this day and age why that's necessary.

Great, thank you.

Victor Miller, Bear Stearns.

A follow-up. I was struck by a couple things I asked Bob Neale about this morning. Media monitors suggest that units are down about 7% since '04 and minutes are down by 11% since '04 in general, and they don't cover the one, five, ten and 15 second spots, but let's assume there has been some reduction. The argument you could make is that a year from now the delta -- the change in decline will be moderate relative to what it's been in the last two years so you may have stability in inventory for the first time in awhile.

On top of that, if you look to the top 24 markets, half of them actually showed commercial listening increases. Some of the other markets were affected adversely by Howard Stern. The majority of the top 24 markets would have seen more commercial listening than they did in the last book. In fact, many at record levels relative to the last ten books or so. Is there an argument to be made that perhaps the effort by an industry in reformatting in cutting inventory is starting to resonate with the listeners and the combination of that and the fact that inventory is stabilizing that this could be an okay environment to actually see a better time maybe in '07? Curious what you are thinking.

I think that's a very plausible scenario that you painted. But you answered your own question, I think.

You are hitting us with facts and figures we don't have in front of us. I think it's intriguing and we'll look forward to that research note.

It came out this Monday.

Haven't read it yet. I've been on the road.

But I just elaborate a little bit. I think that there is a tremendous evert amongst radio broadcasters to produce compelling new content and compelling new brands and I do think we are starting to see that resonate in the marketplace. The fact is that radio listening levels remain very robust. And that I think sometimes we make too much of the very modest erosion that we've seen in the time spent with the medium given the fact that diffusion of time in our world today with an abundant number of choices and new gadgets and new ways to spend time we were seeing constant with everything in life including sleeping and eating declining. To be concerned about radio declining at 1, 1.5% or so in terms of -- while remaining a robust 59% reach in America, that's an extraordinary powerful platform that is very well positioned for the future.

Thanks.

Thank you.

Jim Goss, Barrington Research.

Thank you, good afternoon, David and Steve. I have three questions. One regarding New Orleans. Are you expecting that given the strengthening you are seeing that once you anniversary Katrina that you will be running positive and how do you expect that to play out over the next year or two?

Secondly the extent that you had a number of format changes, I presume you bite the bullet at some point and feel that in order to do better in the future it's better to sacrifice something near term. I'm wondering to the extent you are getting ratings momentum, what sort of ad revenue momentum may be able to follow in those types of markets.

Finally with regard to the HD area, what is the life cycle you expect in terms of dealing with the alliance, in terms of format, ownership, if you will, in that there was some agreement to divide up some of the good formats around the various markets at some point I imagine you will want to be competitive and do whatever it is that you think is appropriate market by market. How do you expect that to play out?

We don't publicly comment on Q4, but I think it's reasonable to assume that New Orleans, given the conditions of last year we would expect to be better, certainly to say the least better in Q4 of '06. We are experiencing, anticipate some acceleration in that pipeline of radio stations that we talked about and I think again I would encourage folks to look at our spring ratings book if they have the time and interest. And with the HD alliance, again, I think that there is a very rational process of each broadcaster choosing formats which create incremental -- incremental additive listening in areas like blues and comedy and so forth which are currently not available in free local radio. I don't see any reason why over time that philosophy wouldn't be sustained. Irrespective of the underlying alliance.

Okay. Thank you.

Our last question comes from Michael Kupinski, AG Edwards.

Interesting that you're doing better in Boston, with a number of companies are reported that they struggle there in newspaper and television. Aside from your ratings improvement there and some format changes and things that you might be having there, do you think that the radio is taking share from other mediums in the market? Are you solely taking share from other radio stations to account for your improvement maybe over that category net?

And then secondly, I was wondering in terms of I know the auto category is not one of your largest categories, or not that significant in total revenues. I was wondering in terms of we saw that last year I think it was in July when the auto as a category began to soften quite a bit and I was wondering in terms of that particular category are you starting to see as you cycle against maybe easier comps from that category a little bit of traction in the auto category?

I don't have enough data to give you a quality answer, Michael, in terms of share gain in Boston vis-a-vis other ad vehicles. I do think again that we are doing very well vis-a-vis our competition. We will have to define that broadly, and expect to do even better in the future based upon getting a content brand additions that we made and the results that we are seeing from the ratings standpoint.

Automotive is almost -- to some extent a tale of two cities is probably the wrong picture to paint. Foreign auto is pretty good right now. Domestic auto is bad right now. And I don't want to overplay that, but that's essentially what we are looking at right now. We do see some signs of improvement. We see some signs in some markets that we are seeing an acceleration in return or growth. But it's two spotty right now to come to the table and trumpet it.

Great. Thank you.

I think with that we are done. Thanks everybody for your time this afternoon and we look forward to reporting back to you at the end of next quarter.