Salem Media Group Inc (SALM) 2002 Q2 法說會逐字稿

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Ladies and gentlemen, welcome to the Salem Communications second quarter 2002 conference call.

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At this time I would like to turn the conference over to Amanda Strong Larsen, manager of investor relations.

Please go ahead.

Thank you, operator, and welcome everyone.

I would like to welcome to you our second quarter 2002 conference call.

Before I turn the call over to Mr. Ed Atsinger we would like to advise you this conference call may contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Statements made in this conference call that address results or developments at Salem Communications expects or anticipates that will or may occur in the future are forward-looking statements.

These statements regarding the future plans, events, financial results, prospects or performance of Salem Communications are predictions and involve risks and uncertainties and actual results may vary materially.

We refer you to Salem's public filings with the SEC and the company's press release released August 6, 2002 for important risk factors you should consider in evaluating this information.

The forward-looking statements speak only as to the date here of and the company under takes no opportunity to update such statements to reflect future events or circumstances.

I now would like to turn the conference call over to Mr. Edward Atsinger, president and CEO of Salem.

Good morning, everyone.

As usual, David Evans is here with me.

I will begin a brief overview of our results and David will then discuss our financial results in detail and provide an update on our guidance.

Then we will take your questions.

However, to begin, I think it is important to address the subject of accounting and corporate governance.

We all know the market has been severely impacted by the accounting and corporate governance scandals at Enron, WorldCom and others.

This is an area of concern for investors and I consider it important to state my confidence in the accuracy of our financial reporting.

David and I both will be certifying our financial statements effective immediately.

We take pride in the accuracy and completeness of our statements and stand by them and will certify them both now and in the future.

Our chairman stew every and I began Salem in 1974.

This company is our life work.

We are financially invested in the company and we pride ourselves on the knowledge that this company is built to a commitment to the highest ethical standards.

Having said that, let me talk about second quarter results.

We are pleased to report that the fundamentals of the radio industry are continuing to improve.

We are continuing to successfully execute our growth strategy.

In fact, we believe our second quarter results represent some of the strongest revenue in boradcast cash flow growth rates in the radio industry.

Specifically, same station revenue for the quarter grew 16 percent, with same station bcf growing 19 percent.

These impressive results reflect the strong ratings, revenue, and bcf growth of our contemporary Christian music stations, as well as the strength of our and Christian talk teaching stations and unique block business model.

Most importantly we believe Salem is well positioned to continue to deliver industry leading growth for the next several years due to market leadership in religious and family programming and to the high growth nature of our station portfolio.

Of our 84 stations we currently have three pending acquisitions, 14 in the start up stage, 26 in early development stage, 25 in the developed with upgrades, upgrade or up side stage, and only 16 that we consider to be fully mature.

This proportion of start up and/or early development stage stations is higher than any other radio group that we are aware of and will serve as a growth catalyst for the company for the next several years.

During the quarter we have also focused on strengthening our balance sheet.

In early July we announced the sale of our country music station WYGY in Cincinnati to Susquehanna Broadcasting for $45 million.

We believe the sale of the station in a non-strategic format and not operated as part of a cluster is the best means to maximize return on investment for our shareholders.

We purchased WYGY in August 2000 for an allocated purchse price of $30 million as part of an eight-station purchase from Clear Channel.

With the sale of KALC FM in Denver, we were required as outlined in the emerging issues 87-11 task force, allocation of purchase price to assets to be sold, to adjust our purchase price so the 100 million we received for KALC FM in Denver was allocated to the purchase price of that Denver station rather than the original allocation to the station of $47 million.

As a result, the allocation price of WYGY in Cincinnati was reduced from 30 million to 18 million.

Therefore, 18 million became our book value for this asset.

At the time of acquisition, the station had about a two audience share and no cash flow.

We changed the format from a young country to a mainstream country format.

We were able to grow the ratings to a consistent four plus share and higher in the demographic over the past year and a half with cash flow projected to be between $700,000 and a million dollars for 2002.

Based on the sales price of $45 million, this represents a sale of multiple between 45 to 65 times 2002 cash flow.

We are obviously pleased with the sales price which we believes reflects the underlying value we brought to the station in a year and a half that we have been operating it.

As a result of this sale, we will have a substantially strengthened balance sheet which we believe is important in these times of market uncertainty.

Now I'll turn the call over to David for more detailed discussions of our financial outlook

Thank you, Ed.

All of you should have received our result in the second quarter in the press release issued earlier today.

I will briefly review this result on an actual and same station basis.

In addition I will provide some updated guidance for the third quarter of 2002.

First, I would like to reiterate Ed's statement regarding accounting and corporate governance.

As Chief Financial Officer for Salem with the primary responsibility for our financial records I will be certifying the completeness, accuracy and integrity of our financial statements.

Now on to operating results.

On an actual basis, net cost revenue for the second quarter increased 17 percent to 39.6 million.

And our broadcast cash flow increased 5 percent to 13.3 million.

Broadcast cash flow margin decreased to 33.5 percent in the second quarter, from 37.5 percent for the comparable period a year ago.

Broadcast cash flow and broadcast cash flow margins were negatively impacted by the start up losses of our recently launched CCM stations in Sacramento, Portland, Chicago, and Milwaukee.

We expect bcf and its margin to increase, as a radio station portfolio becomes more mature.

On a same station basis, net broadcast revenue, bcf increased 15.7 percent and 18.6 percent respectively.

Let me provide you with some additional background on our same station revenue increase.

The total increase includes our recently launched music stations which contributed 70 percent same station increase and our core talk stations contributed a 5 percent same station increase.

Looking a little deeper into the core talk stations, we saw a 7.7 percent increase in national program revenue, a 3 percent increase in national advertising revenue, an 11 percent increase in local spot revenue, and a 4 percent decrease in commercial revenue.

Sixty of our radio stations and 78 of our net broadcast revenues are included in our same station calculation at this time.

By the end of the year, that will obviously be 100 percent.

In the second quarter we reached a settlement in a legal proceeding related to our Internet business.

And as a result, we recorded a one-time charge of approximately 2.3 million in the second quarter of 2002.

Including that one time payment, we increased to 7.9 million in the second quarter of '02 compared to 8.9 million for the same period in '01.

We reported net loss after taxes for the second quarter of '02 of 1.6 million or 7 cents per share, compared to a 1.3 million loss for the same period a year ago.

Excludingment one time legal settlement, net loss was .1 million for the quarter, or 0 cents lost per share.

For the second quarter, we generated free cash flow of 4.9 million or 21 cents per share.

Turning to our outlook, we achieved same station revenue growth of 14 percent for July and based on the most recent pacings we expect third quarter same station revenue growth in the mid double digits.

We are projecting net broadcast revenue for the third quarter between 37.839 million, and broadcast cash flow between 14 million and 14.3 million.

EBITDA is projected to be between ten and 10.3 million free cash flow is expected to be between 18 and 20 cents a share.

Earnings per share for the third quarter is projected to be between 1 cent and 2 cents per share.

Turning to our balance sheet, as of June 30, 2002 we had net debt of 339 million, with trailing twelve-month broadcast EBITDA as of June 30 of 34.4 million.

This result insurance a leverage ratio of 9.6.

In evaluating this ratio, it is important to note all of our acquisition insurance the last twelve months except one were no cash flow.

As a result the debt includes approximately 150 million of financing for stick acquisitions.

That have made no contribution to EBITDA.

We believe EBITDA will increase substantially as a result of these maturing acquisitions, which in turn will return the leverage ratio to a more ever comfortable level.

In addition pro forma for the Cincinnati sale is ratiod to 8.2 at the time of the closing of that transaction which is scheduled for the end of the quarter.

For our bank and bond standpoint our leverage ratios are calculated a little differently.

Our bank leverage ratio was 7.1 as of June 30, 2002 versus a compliance covenant of 7.25.

Pro forma for the Cincinnati sale, ratio will be reduced to .60.

The bond leverage ratio was 7.5 as of June 30, 2002.

Therefore, we are operating within 75 million incurrence basket that fits on top of our incurrence covenant of 7.0.

We have used 23 million of this incurrence basket.

Pro forma on the Cincinnati sale, the ratio will be reduced to 6.4.

That is the end of our prepared remarks.

At this time Ed and I would like to open the floor for questions.

Operator? 10:12:18

Thank you.

The floor is now open for questions.

If you do have a question, you may press the number one, followed by four on your telephone key pad.

If at any point your question has been answered you may remove yourself from the queue by pressing the pound key.

Please utilize your hand set to provide maximum sound quality.

That is a one followed by four for questions at this time.

Drew Marcus from Deutsche Banc, your line is live for the first question.

Nice numbers for the quarter.

In going down the third quarter, can you talk about whether you are happy with the conversion of ratings to revenue in the third quarter?

Also talk about expenses at the music stations in the third quarter?

In terms of ratings to revenue, we are very happy with all of the ratings we are achieving from the stations.

The process of turning that into revenue is proceeding on plan, on budget, probably slightly ahead of budget.

So pretty satisfied with that.

What was your second question, Drew?

Expenses in the second quarter on the music stations.

How is that tracking?

In terms of costs, we typically spend a little bit more in the second quarter and in the fourth quarter.

Because that is when the key Arbitron books are scheduled.

The spring and fall are the most important.

We spend a little bit more in Q2 and Q4 than in Q3.

Other than that, I think the only other important note to bear in mind for Q3 is we have recently announced acquisitions in Nashville and Hawaii.

Nashville we begin LMA in May.

We have costs associated with that station.

Hawaii is scheduled to close this month.

We will have start up costs in relation to that station in the third quarter.

That's projected in our guidance.

What is the aggregate cost from those two events?

For the third quarter?

We will probably have two to 300,000 of costs in the quarter for those stations.

The last question for Ed, obviously the, you know, the world is a funny place right now.

You have been very good at looking at the nooks and crannies and finding deals when things become available.

Do you see any new opportunities in the acquisition department right now?

Well, there are still opportunities and there are good ones and not so good ones.

We have slowed down a little bit.

If you'll note, the last really significant acquisition we announced was a year ago in August when we announced the acquisition of Portland.

We have done a few deals in the last twelve months.

Nashville was a modest deal.

Hawaii was quite modest.

It helped round out our cluster there.

It was $650,000.

The only other significant acquisition that we announced I think was the acquisition of crosswalk.

So we slowed down a little bit, drew.

We want to strengthen the balance sheet.

We want to continue to grow cash flows and to improve the leverage ratios and that has been a focus.

We want to continue to focus on absorbing the significant acquisition activity that we have had in the prior year.

We will continue looking at building clusters.

So if an opportunity arises in a market where we already have a presence, where we would like to have an additional station, those will be our primary focus and as we find opportunities that are of the affordable and accretive and that we think make sense, we will look at them.

Certainly there are still deals out there.

We haven't been pursuing them aggressively for the reasons I've just outlined.

Thank you.

The next question is coming from Paul Sweeney of Credit Suisse First Boston.

Your line is live.

Thanks very much.

Good afternoon.

On your Fish stations, Ed, could you talk about, having had such tremendous success on the ratings and hitting into the revenue, how much promotion marketing do you spend on those stations?

For how long do you put in, you know, a launch type mode, promotion and marketing versus, say, cross promoting with the AM news talk stations in getting a sense of what drives the ramp up in revenues and ratings and if you expect that in other markets.

On the Fish stations, particularly the ones you mentioned, Portland, Milwaukee, Denver, when do you expect them to be cash flow positive?

Thanks.

With regard to the first question, clearly we have to promote heavily when we roll the fish stations out.

They are ratings intensive.

The other factor besides promotion and marketing that accompanies the start up of those is research.

Normally we will not launch them without some market research.

That is usually more heavily loaded obviously at the roll out period.

We do research on an ongoing basis to try to maintain the numbers.

Clearly, traditional market promotion, we use television fairly heavily.

Use some outdoor to promote those and some direct mail.

We certainly do use cross promotion.

But they are, the kinds of activity that are necessary to execute any mainstream A.C. format are exactly the kinds of activities that we use with a few fine-tunings for the particular format.

We do promote heavily to church organizations, para church organizations and other natural constituencies for the format.

With regard to your other question, which related, you mentioned - yeah, I am going to defer that one to David and he can give you a little more accurate answer.

Yeah, I think in terms of when those stations reach profitability, it will be sometime in the next six to nine months, depending upon the station.

Cleveland turns this quarter to profitability.

We may see break even in Sacramento, Portland either Q3 or Q4.

Chicago will probably be Q4 or Q1 next year.

The losses are reducing quite substantially in the first quarter of 2002.

Our start ups had about 2.2 million of losses in the second quarter.

Start ups have about 1.5 million of losses.

So the number is reducing quite rapidly.

And as they turn a profit, obviously they begin to generate cash flow.

Great.

Thanks very much.

Our next question is coming from Victor Miller of Bear Stearns.

Your line is live.

Thanks for taking the question.

David, you mentioned and Ed, you mentioned four basic changes of development.

David, can you give us some metrics whether the revenue, the margins of those groups, EBITDA, percentage is driven by the groups?

Give us a sense of how far along you are in?

The second question, given the uniqueness of the type of programming you do, what is the impact do you believe of 9/11 on your business in the third quarter last year?

Thanks.

In terms of the dollar contribution of each of those segments, I would - let me see.

Looking at it on a year to date basis, the mature stations represent about 13 million of cash flow out of a total year to date bcf I believe of 24 million.

They developed with up side stations represent just over 10 million of cash flow after the 24.

Under developed represent just over 3 million of the 24.

And start up sticks have a loss of about three and a half, $4 million of the 24.

And then our network business contributes about a million of cash flow.

If you add those up you get to about $24 million year-to-date in terms of cash flow contributions.

Thanks.

And 9/11, any thoughts on that?

We estimated that we lost about a million dollars of revenue in September in relation to 9/11.

And we lost between three and $4 million in the fourth quarter in terms of revenue.

And that was almost entirely on the advertising side of things as opposed to the block programming side of things.

Thank you very much.

Our next question is coming from Vincent Vickers of JP Morgan.

Your line is live.

Couple of questions.

Dave, you gave a breakout of the different components in terms of music talk, national programming and so forth.

For your third quarter guidance, could you provide what your assumptions are for each of those line items?

I don't have those numbers in front of me.

I would off the top of my head assume that they are broadly similar to the second quarter.

I think I would expect to get a touch higher percentage from my core talk stations.

Or if I got five in the second quarter, I would hope to get a little bit more than that in the third quarter, perhaps six or seven.

That would be due to, you know, number one continued advertising recovery; number two, there is some 9/11 impact in September.

I think those would be the two key things to consider.

On the music front, I would expect the 70 percent possibly to drop down a little bit.

As the stations get more mature within that segment.

Then the dollars continue to grow at a strong pace, but the percentages do begin to gradually move back to more normal levels, the more mature you get.

Okay, that's great.

Just a quick housekeeping.

What was your full CAPEX expenditures during the quarter?

CAPEX year to date, total CAPEX is 7.3 million.

The split of that between Q1 and Q2 - I'm just looking for that.

Split about between Q1 and Q2, Q1 we spent 4.7 million.

In Q2 we spent 2.7 million, for a total of 7.4.

Maintenance CAPEX Q1 was 1.3 million.

Maintenance CAPEX Q2 was 1.3 million.

The rest of the CAPEX related to either recent acquisitions or investment type activity where we will get a return on investments in the future from that capital expenditure.

What do you expect for the remainder of the year?

The CAPEX maintenance and non-maintenance?

3.5 to 4 million per quarter and CAPEX levels will probably - maintenance CAPEX will be probably a touch higher than the 1.3.

As we probably have to, one of our leases expires on one of our radio stations and we probably are going to have to move buildings.

So maintenance CAPEX will probably be 3.5 million for the rest of the year would be my best estimate, I think.

Great.

Thank you very much.

Our next question is coming from John Jakovia [phonetic] from Sun Trust Robinson Humphrey [phonetic].

Your line is live.

ANALYST Good afternoon.

Hello?

Hello!

ANALYST My question is, I guess, we are seeing nice rating improvements in the last Arbitron book.

I was wondering, in the markets what you think a sort of mature rating to look for, you know.

Some of your stations are already at three or so, above the three share.

Well, a market like Dallas, we moved in Dallas in the recent book from 2.5 to 3.2. 12 plus.

It did much better in our key demographic, women 25 to 54.

Went from 3.5 to 5.3.

That's very good and a very attractive level for us with this format in a market the size of Dallas.

A larger market as you get into the top five, Chicago, Los Angeles, you expect - we would probably be happy in Chicago with a 2.2.

We could do very well with anything above two would be very attractive. 2.5 would be wonderful in a market that size.

A smaller market like Honolulu or Colorado Springs, particularly where you have fewer stations, we would expect so see it a little bit higher, maybe move to the four level.

But in a market like Atlanta, Dallas, Cleveland, if we break three we are very happy.

We can do very well in terms of our business plan.

Thank you.

Thank you.

Our next question is coming from Fred Moran of Jeffries and Company.

Your line is live.

Thanks very much.

Could you talk a little bit about the 8.2 times pro forma debt level?

What is your comfort level with the new debt ratio?

Do you expect or hope to push it down further?

How do you weigh the benefits of acquisitions for cash relative to potentially paying down debt?

And then just remind us of how the six times bank defined debt to cash flow stands relative to your covenants and where those covenants will be over the next couple of quarters.

In terms of the leverage ratio, the sale of Cincinnati was, you know, a clear strategic move to strengthen our balance sheet.

We recognized that our leverage ratios are quite high and we are focused on bringing them down as rapidly as possible.

I think you probably have seen all you can expect from us in terms of asset sales.

The focus will be growing cash flow, growing free cash flow, and paying down debt with that cash flow.

As I'm sure you appreciate, with the number of start ups in our portfolio, as they drive to maturity, there will be a rapid growth in cash flow.

That will bring that ratio down still further.

We are quite focused on that.

In terms of the bank leverage ratio, the ratio as of today is 7.25.

That notches down to seven at December 31. 6.75 March 31, 2003. 6.5 as of June. 6.25 as of September.

And six as of December '03.

It gradually reduces during the course of the rest of the year and next year.

That presents no difficulties.

Great, thank you.

Our next question is coming from Lee Westerfield of UBS Warburg.

Your line is live.

Thank you.

Two questions for me.

The first is related to the Nashville market.

Could you go into that in a little more detail, with respect to the acquisition of the radio stations there, what that may mean to the Christian contemporary music market in the Nashville area?

Also with regard to any financial outlook impact that that specific market, in terms of rolling it into a new format will have on your outlookment and I have one follow-up, if I may.

First of all, again the acquisition in Nashville was consistent with our strategy of trying to build clusters where we already have a foundation.

In Nashville, not only do we have the two FMs that are doing southern gospel format, but our syndicated music operation is also located there.

And the two existing radio stations that we own before the acquisition of these two were consolidated with our music syndication business.

We offer a 24 hour a day turnkey music syndication service to radio stations in contemporary Christian music; we call it today's Christian music.

We also offer a solid gospel product.

And we have a third product we call the praise and worship product.

By acquiring these two additional stations we not only do southern gospel which we are doing, but we also do the contemporary Christian music.

And we will consolidate the acquisition of those two radio stations in the same operations with the other properties.

We also have management at our publishing, CCM publications is also located in Nashville.

Again it's a synergy with cross promotional opportunities which targets the listener for contemporary Christian music.

It is across promotional vehicle and also an opportunity to get talent that comes in for magazine interviews that we can put on the air.

There's significant cross promotional opportunities there.

We are going to simulcast the same format on both of these properties.

We, one of the properties covers the market primarily from the southeast.

The other covers the market primarily from the northwest.

Between the two, we cover the market quite adequately.

It was a modest investment in terms of Nashville properties.

And we think we can be fairly - we think we can reach break even fairly quickly.

We will have some promotional dollars involved.

In terms of specifics on cash flow, I will defer that to David, if he wants to comment on that.

Then we will take your follow-up question.

Yes, we expect approximately six months of losses from that station.

Probably two to $300,000 this quarter as we ramp up the operation.

By that time we will have relatively little revenue.

I think we will see good progress in Q4 towards break even.

And then next year should be cash flow profitable the entire year.

It will probably take three to four years to reach full maturity, three to five years to reach full maturity on that station.

Okay.

Our next question is coming from David Bank of R.I.B.C.

Capital Management.

Your line is live.

Thanks very much.

Hi, guys.

Good morning.

A couple of questions for you.

And I guess the first one is, we have heard a lot of companies, some other radio broadcasters that reported, when they gave guidance they have hedged a little bit kind of saying, well, you know, all these numbers of course are depending on the direction of the economy and it's not exactly clear where that's going.

My question for you guys is: How at risk do you think your numbers are to an economic slow down, given your sort of mix of the emerging growth of Christian contemporary music and the sort of traditional talk stations?

And the second question would be can you talk about your sell out rates and - or, you know, your sell out percentages as well as rates over the last kind of several months for those developing Christian contemporary music stations?

It is very difficult to predict the impact of an economic downturn.

If it is severe, obviously it will impact us.

The block stations which we still have the largest number of stations, I think about 48 or 50 are in our core of teaching Christian talk impact.

We have ridden out recisions very well in the past with those properties and been positive in broadcast cash flow growth.

We will have to see what the impact will be on the music world around us.

Because there is such significant up side once we get past the promotion and roll out period, they should still continue to show positive growth.

Obviously, the depth of any recession would determine how significantly they are impacted.

But even in a mild recession, we would think they would continue to show positive growth simply because we are getting them to an audience share of critical mass and the revenue has to get better when you start from zero with nothing.

You have no place to go but up.

As far as the sell out percentages go, that is a little tough.

We are scrambling here to see if we have some data on that, but we are pretty aggressive in the start up periods in trying to use our inventory.

We are not sold out - these are developing stations so there is always some inventory.

We normally do not waste it.

We can use our inventory at the network level.

Or we can in the start up phase use the inventory for more promotional spots.

So in terms of actual sell out percentages, David, I can't really get real specific.

I don't know, David, if David Evans can shed more light on it.

No, we don't have the sell out percentage information in front of us right now.

I think in terms of our guidance in Q3, clearly there could be, you know, some impact from what happens to the economy, either positive or negative.

We have given, you know, the guidance based upon the best information that we have available at this time.

But, you know, the economy goes up and down.

Hopefully it will go up.

Right.

What I will say is the block programming piece of our business that is sold annually in Evans.

We have locked in our rates for the entire year.

And block programming represents approximately 35 percent of our revenues as of Q2.

So certainly on that portion of our revenue base that piece of revenue is much more annuity like in terms of its predict ability.

So if there is an exposure or up side, it is more likely on the advertising side, which is the remaining 65 percent of revenue.

If I could ask one follow-up, guys.

I guess, I understand the difficulty in pinning down the sell out issue.

But maybe to frame it a little bit more broadly, for the Christian contemporary music stations that have been up and running for say, I think there are ten of them that have been up and running for, is it approximately a year or 18 months at this point?

Is that right?

Yes.

I'm trying to get at, say from half a point, from nine months ago, between then and now, do you have a sense of what the sell out rates are more then versus now?

If you think about Atlanta, Atlanta has been sold out pretty much every month for at least the last year.

What we really have focused on is rates.

Okay.

When you are sold out, what we have been able to do, certainly in Atlanta and I would say these other markets as well, is because we are sold out, we are able to consistently increase our rates, particularly when we've got rising ratings.

Got it.

Not sure it's necessarily so much of a sell out percentage.

It's more the rates we are able to generate at that station each and every month.

I would add to that, David, Dallas is pretty much sold out.

L.A. is pretty much sold out.

It is as David said more an issue of pushing the rates now.

With better ratings and with the increasingly sold out inventory situation.

Okay, thanks very much, guys.

As another reminder, if you do have a question or comment you can press number one followed by four on your telephone key pad.

Next question comes from Andy VanHalen [phonetic] from Deutsche Banc.

Your line is live.

Thank you, my question has been answered.

Thank you very much.

The next question comes from Ross Habermann [phonetic] from Habermann Brothers.

Your line is live.

ANALYST Just a quick follow-up question concerning the developed and the undeveloped stations.

Could you tell us how much money you have tied up in those two categories of say marginal to non-cash flowing assets?

You have thrown out, I want to say $100 million, maybe a quarter or two ago.

I would estimate that the sticks would start up losses are approximately 150 million best of your recollection let me just check that number quickly for you.

ANALYST Okay.

OPERATOR Gentlemen, there appear to be no further questions at this time.

Just going to reply to this one question.

Okay, sorry, sir.

Thank you.

We are doing a quick computation here, Ross.

I think we have $135 million invested in the start up stations that currently have losses.

Under developed will be a little bit more difficult.

As you are looking for that, maybe a quick question for Ed.

How quickly do you think those start ups and/or developing will begin to cash flow over, you know, what sort of time frame?

We said all along it will range anywhere from six months to a year before they begin to make significant contribution.

Usually there are losses for the first two quarters.

The second quarter they get into the break even category and the fourth quarter they begin to contribute.

That held true for the most part as an average.

Some have been a little quicker than that to contribute to cash flow.

Some have been a little slower.

Los Angeles was quicker.

Atlanta was probably on the schedule.

Dallas, which was in kind of a different category, we did have to pro mat, but it was in format.

We moved frequency and transmitter site.

That one was a little quicker.

Cleveland was maybe a month behind that schedule.

It varies, but that as an average has pretty much played out significantly, a couple of losses, a third quarter break even, and fourth quarter contribute to cash flow.

Pro forma for the pending acquisitions and sales, which net will that end up being vis-a-vis the 343 you show on the balance sheet as of the end of June?

The 343 will reduce for 45 million of proceeds in Cincinnati.

We will be classifying the cash loss carry forward so we pay little or no cash taxes.

So we will get the lion's share of that 45 million in terms of pending acquisitions, between Crosswalk, Nashville and Hawaii, that's about 10 million of acquisitions.

Between the two, you can expect to see an approximate $35 million reduction in net debt.

Thanks.

The underdeveloped stations, I think we've probably got 100 million of capital tied up in those stations.

That's an approximate number.

So 100 million for the under developed and 130 for the stick start ups.

I would say pretty good numbers for you.

Okay, thank you.

Next question, please, operator?

OPERATOR Gentlemen, there are no further questions at this time.

Well, we appreciate your attending the call.

And we feel very good about this quarter and positive about the guidance we've given.

We will look forward to visiting with you again when we announce the results for the third quarter.

Thank you.

This does conclude today's teleconference.

You may disconnect your lines at this time and have a wonderful day.