Urban One Inc (UONEK) 2002 Q4 法說會逐字稿

Good morning and welcome to the Radio One Fourth Quarter Conference Call. All participants will be able to listen only until the question and answer session. This call is being recorded at the request of Radio One. If anyone has any objections, you may disconnect at this time. I would like to introduce your first speaker today Mr. Scott R. Royster, Chief Financial Officer of Radio One. Mr. Royster you may begin.

Thanks. Good morning everyone. And no, there has not been a management coup here at Radio One. I am just going to read the disclaimer language and then turn it over to Alfred and Mary Catherine Sneed is also joining us, our Chief Operating Officer. This conference call includes forward-looking statement within the meaning of section 27-A of the Securities Act of 1933, and Section 21-E of the Securities Exchange Act of 1934. Because these statements supply the future events, they are subject to risks and uncertainties that could cause actual results to differ materially including the absence of the combined operating history with the required company or Radio station and the potential inability to integrate the acquired businesses, needs for additional financing, high degree of leverage, seasonal nature of the business, granting of rights to acquire certain portion of the acquired companies of radio station operations, market ratings, variable economic conditions, and consumer taste, as well as the restrictions imposed by exiting debt and future payment obligations. Important factors that could cause actual results to differ materially are described in the company's report on forms 10-K and 10-Q and other filings with the Securities and Exchange Commission. Alfred.

Thank you very much. We are very pleased yet again to produce another quarter of industry leading result as stated in today's press release. Q4 net revenue is up 14% and broadcast cash flow and EBITDA were up 19% and 20% respectively. Since going public in May of 1999, our strategy of finding underdeveloped opportunities in the urban niche has allowed us to significantly out pace the industry. We see no reason why this strategy will not continue to serve our shareholders well as we move into the future. However, Scott will jump in with the numbers and I will talk a little bit about our performance in competitive situation as well as our operating and acquisition strategy going forward.

Thanks Alfred. As Alfred just said Radio One realized a great quarter to end fiscal year 2002, with all results being inline with or in excess of our previously provided guidance. Net revenue increased 14% to $76.9m. BCF increased 19% to approximately $39m and both of these results are as reported at same station for the quarter. After tax cash flow came in at 18 cents per share or net income before onetime items in the effective and accounting change with 9 cents per share. Free cash flow was approximately $15.2m for the quarter. Flowing deeper into the numbers, the revenue growth was broad based as most categories and market contributed to the expansion. Station operating expenses grew approximately 9.8% for the quarter, which was acceptable to us in an environment, which is showing profits of significant cost increases. Insurance costs fell dramatically about 23% as the lower interest rate environment has had a very positive impact on a cost of debt capital.

Our tax provision increased to an effective tax rate of 46%, but this was associated more with yearend true ups for taxes; going forward your model should assume an effective all in rate of approximately 40%, which may be higher than the 38-39%, some of you have been using historically. Please note that we continue to not be a federal cash taxpayer and we expect that status to continue probably into late 2004, for early 2005. The company also took an impairment of goodwill in the Augusta, Georgia market resulting in an after tax charge of approximately $6.6m for the quarter. For the quarter capital expenditures were approximately $3.4m and CAPEX for the year ended at approximately $11m inline with prior guidance. The company ended the year with the cash balance of approximately $86m and gross leverage for our bank [inaudible] calculations of approximately 4.6 times. Netting out approximately $15m of exact cash, which is somewhat objective, but working with me here, that would give us a leverage of approximately 4.26 times. So we feel that our balance sheet is in very, very good shape today and obviously improving as we go forward. For all of 2002, the company had net revenue of $295.9m broadcast cash flow of approximately 151.4m, EBITDA of approximately $139m, ACCF of 63 cents per share, and pre-cash flow of approximately $53.4m. Same station net revenue growth was 12% and same station BCF grew 16% for all of 2002.

Moving on to guidance for the first quarter of 2003, the company expects net revenue of approximately 64.6m up approximately 29.1m, EBITDA of approximately 25.7m ACCF per share of 10 cents and net income before one-time items and preferred dividends of 5 cents per share. This would represent double-digit growth in both revenue and cash flow -- broadcast cash flow. The company experienced double-digit revenue growth in January and entered February at approximately 80% of its goal. Other highlights of the first quarter include an approximate $13.1m scheduled pay-down on the company's bank term loan at the end of March. It is expected that this payment will be made out of the company's free cash flow. Station operating expense growth for the quarter is expected to approximately 9-10%. In analyzing this further, however, we feel that there will be approximately 3.1m in dollar expense growth year-over-year. Approximately, 1m are new costs or costs of investing in the growth and future of Radio One, such as a new research department called Research One, programming cost ramp ups on our two newest stations in Atlanta, and new senior station level personnel added within the past year.

Another approximately $1m are variable costs which growth in line with revenue, and the balance is true fixed cost growth of approximately 5%, which is inline with our expectations for fixed cost growth in the normalized environment. While we are not prepared to give full-year 2003, overall guidance, we do expect capital expenditures to be in the order of approximately 10.5-11.5m and corporate expenses to be approximately $14-15m for the year, and if you would annualize our corporate for the fourth quarter of 2002, I think you can how we get to that $14-15m range.

As per competition, Alfred will touch on it further in those markets where we experienced competitive entry over the past 12-18 months; we were still able to grow our revenue in all cases in 2002. [inaudible] was up 14%, Richmond up 8%, Baltimore was up 3%, and Houston was up 10%. I am sure Alfred will have a lot more to say on these markets and some others, perhaps. So, all in, quarter to end a great year, and a positive near-term outlook for our industry and our company. Alfred.

Thank you. By far the biggest concern that we hear from investors about the company seems to be the fear of additional competition in the urban format arena. While we would agree that the competition has increased over the last 5 years, we strongly disagree that this will derail our growth prospects. We currently have competition in all but 5 of our 22 markets. The markets of most concern as Scott just outlined, have been Los Angeles, Houston, Baltimore, and Richmond, Virginia. We have had competition in these markets for quite some time now. In Los Angeles market, the clear channel station, KHHT actually changed format in the winter book of 2001. So, you know, we have been enduring competition within for just about 2 years, and we are still up 14% in revenue in '02. In Baltimore, Maryland where we had a direct format assault on our biggest station there from Infinity, because we do compete against the biggest companies in the industry. Revenue was up 3%, and cast flow was actually up more than that. In that, you know, in the face of us having a ratings decline that was fairly significant, however, our rank in key demos in Baltimore was still exceptionally strong in the 18-34 demo per WERQ which was our dominant station there. We still rank number one with the 10.7, and the Infinity station is ranked fifth with the 6.8. That competition also is just about 2 years old.

In Houston, Texas, another very large market for us, we actually had 3 different competitive threats there. One was the Qumulus station, which turned out not to be much of the factor at all. In fact, it was a young and urban station, which is now switched to urban [AC], which we see very little impact from. The other was a cop station, which had been arrhythmic crossover station plan, a lot of hip-hop music, but it crossed over into urban and also tried to support some of the Latino and Anglo audience. They recently switched their formant to country eliminating that competition. And the most significant competitive situation in Houston has been the Hispanic Broadcasting Station, which is essentially a hip-hop station. It was always there, they just got a signal improvement, and that station went from really not showing up in the ratings to having about 2.8 share. But we were still able to grow revenue in Houston [inaudible] last year. Our ratings are rebounding there. We are the station that has been under attack KBXX, is number 218 to 34, and then probably just stay number 2. One of the reasons why not number 1 any longer is because the new census came out and there are considerably more Hispanics in the Houston, Texas market and Arbitron going to -- have to wait their survey to reflect that. So with such a large Hispanic population, we will probably going to continue to sit second to the Hispanic station in Houston. And in Richmond, Virginia where Clear Channel came after our dominant [young-in] station there, we have been able to weather that format [attack] very well. In addition to having still dominant rating shares there, our revenue grew 8% in 2002. So, we think that we are doing pretty good job against these competitors, these big companies with lots of resources. However, we are prudent in the way we manage our business. We do not believe that you can spend your competition out of existence. So you will not see us have an irrational promotional response to competition because we don't believe that ultimately gets you home. We believe what ultimately gets you home is having a good product on the air, compelling programming that people like better than the other options in the market. And that’s how we face our competitive battle. So, hopefully that will alleviate some concern or at least give investors more clarity on how we are doing in those markets. As far as operating and acquisitions strategy for '03, we planned to continue to focus on our operations and growing our existing assets. We think we still got a lot of upside left in our existing asset base. We are about to launch the Steve-Harvey morning show in syndication in our Dallas markets and our Houston market; he is currently on in LA, does very, very well there. He has done well in Chicago in the past; he has done well in LA for us. We think that he is going to make a big impact in Dallas, at least bigger than what we have now, that station has got about a three share. However, we have been a weak performer in the morning, and Steve is actually from Dallas, and we believe that he is going to really help that station get to the next level. He is also going to be in Houston. We are pretty strong in Houston now, but he certainly will help us there as well. Acquisitions will be focused on the top 30 African-American markets with specific attention to getting larger in markets that we already operate in. I don't see a whole bunch of acquisition activity, but could be some fill-ins here and there. We just announced, not too long ago, the acquisition of our competitor in Dayton. The bankruptcy court has accepted our offer, so we should be signing that up here pretty soon, and operating it under an LMA. That's going to make Dayton a nice little market for us. Before it really wasn't a big contributor in terms of cash flow, although it did have some decent cash flow. Now we think, it will be a real market in terms of cash flow size that we can pay attention to; certainly not our first or second tier markets, but that will be third tier market. And we think long-term that Radio One is able to withstand the competitive pressures and win the urban battle because our competitors are essentially Clear Channel and Infinity and Cox, and a lot of large or other -- the other larger companies, and do not hear play urban operators. They will have to deploy resources to other formats and target demographics allowing us to continue to build urban market share. So, in markets where we competing against Infinity or Clear Channel, they may launch an urban station, but we are still able to build a cluster of three to four or five stations in the urban format when they are going to be hemmed in by the ownership caps allowing us to continue to build urban market share and become the dominant urban operator in those markets. If they were purely focused on urban radio, then it will be a real battle for acquisitions and for market share; that's not the case. And based on everything I’m hearing, the radio sector will be lucky, and I think, anything can happen, but we will be lucky that we don't get re-regulated; later on see further deregulation. So, I don't see the caps going up anytime soon allowing our competitors to continue to build urban market share. So, essentially they have to walk away from the 75% of the US population that's not Black or Hispanic so ultimately to win the competitive battle with us. In terms of acquisitions, obviously, if we don't operate our station from a programming and sales standpoint at peak performance, then you can lose on execution, but I think that we have shown that we don't had to execute in this format.

With that, I would -- we would like to turn it over to questions.

Thank you. At this time, we are ready to begin the question-and-answer session. If you have a question, please press "*1" on your telephone phone. You will be announced prior to asking your question. If you withdraw your question, press "*2". Once again, to ask a question, please press "*1". Our first question comes from Marc Nabi with Merrill Lynch. Sir, you may ask your question.

Thanks very much. Question for Alfred. Alfred, could you just give us an update as far as the new cable TV programming channel, just want to see what is happening there, as of things have changed in the last couple of weeks? And also may be just if someone just give us an update of the recent information that Cox is going to go out? You are making comments about competition, they are going to compete, obviously, in the Atlanta market where there is a format change, and I believe that -- I don't know what the actual percent of your revenue that comes out of Atlanta. I think, it is like 5-7%.

Sure, nothing has changed from the cable programming initiatives since we announced it that we are searching for a CEO, we are pretty close to somebody, once we get that locked down, we will announce it. We are rounding out the balance of financing, deciding who is going to be in with us, and things are going smoothly. The ComCast has been a great partner so far and we are pretty excited about it. Catherine, you are in Atlanta and so you are on the front line, you got a front row seat on the Atlanta -- in the Atlanta radio market, so why don't you speak to sort the competitive situation there?

Okay sure. Yea, that definitely came out on a leg field, they stunted for, I guess, a week and then when they came on with the format, I actually thought that it was part of the stunt, but it was not. The format is based on a press release that we have targeted 25-34 in Americans, and that's -- listening to it is a little confusing. I think, they might be some massaging the format somewhat, but their station to be in this market actually 50% of that audience that is blacks that listen to that station is actually 25-34. So, it is a little bit confusing, I guess, we just have to see how it plays out. Apparently, they are really targeting V103 more than any other stations in the market. But that is a really strong station. I used to work over there with them and they are smart people. So I am not quite sure there is room for the format in this market.

I guess what I think happened here with Cox is that they paid a lot of money for WALR, it may be something like $1m. That station have lost audience share, we have actually gained audience share and put in a number of new stations in the market. So I think it is under pressure and they want to somehow protect it, but we ultimately think that it ends up competing more with themselves or V103, which is the Infinity station, which is the dominant urban station in that market as Mary Catherine said because our formats are sort of very diverse and extreme. Our [young in] station there it is the Hip Hop station; it is not mainstream urban, it is not focused 25-34. It is by 12-24. So we are very young on that station. Then we have the Jazz station, which was actually a format that Cox vacated, we jumped into and Jazz is Jazz, very specific, very [inaudible] very specific musically. Then we have an R and B oldies station, which is at the very top end of the adult 25-54-- [likeable] 25-54 demographic target. Then we have got a Gospel station. So, based on the format that they are saying that this new station is, I don't see really where it is going to readily impact our particular positions because we are so -- again extreme and specific in our target demographic. And we had another good rating book in Atlanta last -- in the summer book, we had 15.2 shares of Atlanta audience. This book we have 15 shares. Cox vacated the general market Oldies format, they had a 2.5 share, I think they had to be billed on the $10m, a lot of money to walk away from, but Clear Channel, are loved because they jumped into the OD's format 24 -- actually may 48 hours latter. So, I don't know how it is going to play out, but we are not concerned at all in terms of still being able to grow at an exceptional level in Atlanta because we just got so much audience, we got such great format position. So if it comes out anybody we think it's going to come out of the infinity station or it will come out of the existing Cox station WALR. So, that's our [take on] Atlanta competition.

Great. Also the revenue contribution from the Atlanta market?

More than 5 less than 10%.

Okay. Thanks guy.

Michael Russell with Morgan Stanley. You may ask your question.

Sure. The first one is kind of housekeeping stock. Could you just gives us an idea, looks like decline interest rate that you are paying will imply that if you didn’t pay down any debt you have about $40m of interest expense for 2003 versus $60m in 2002. Could you give us an idea of may be how to think about the quarterly pattern of interest expense?

Well, actually if you were to look at page four of the press release that has all of the tranches of debt and the applicable interest rates and that should lead to the incidence that you are looking for and then I guess you just need to take down the term debt by about $13m per quarter and do it on that basis.

Okay. So, it is fair to say that $52.5m of principle payments is going to be quarterly pay out and you are going to putting in all the free cash flow towards that?

Well, it's required to get paid at the end of every quarter. And I would expect as I said on my -- as part of my narrowed impact at least with respect to this first quarter the expectation is that the payment will be made out of free cash flow. We will each and every quarter in large within the best interest of the company and our shareholders to determine how we are going to make that payment. Our other option of course would be to borrowing and start revolver if in fact we felt that we needed for whatever reason to preserve the free cash that we had on our balance sheet. At this point and time, given that there isn’t frankly much in the way MNA activity that's apparent. And I will think that's probably not going to be a requirement but I want to leave that option open. The other thing you should note is that the $125m under that senior bank term debt is truly variable rates. It is not subjected to any sort of swap and rates at [live work] continue to come down amazingly. I frankly thought it couldn’t get lower than, you know, 180, it is now down around 1.5, it is 90 day live work. So, again as you -- just keep in mind that, you know, rates will fluctuate. Lately they have been coming down even further but, you know, they may very well start heading up later this year and for that we will have an effect on $125m fees.

Great. And then just strategically, it was interesting what you mentioned about the breakdown in expenses. Do those expenses include certain amount for incremental Steve Harvey expense that you are going to incur?

Yeah, absolutely.

Okay. Because he is not a -- he is a big act not a cheap actor, so, I imagined that the expenses hit may be in the first quarter and then the ratings in the second quarter and the revenues may be in the third quarter or could you give us an idea of the pattern of cost benefit there?

I mean, you know, for realistic [inaudible] the year or so.

I mean, you know, lastly we were spending money on, you know, morning shows in both those markets so it is not like it is all just gross incremental increase, but clearly there is netting effect of the money that was being spent prior to Steve. But yes he is more expensive. And yes you are right if things work out according to plan there will be rating fraction and then ultimately the revenue share will follow what hopefully be rating improvements but obviously we are not betting on that.

And we try not to predict what Arbitron will do, our chance ultimately going to come back because you can get in trouble that way. We don’t budget that way and it's kind of silly that we do it in the public form with investors because you have [inaudible] but we -- unfortunately our last morning show after [inaudible]. We will therefore put that morning show for a long time. It didn't really get -- didn’t get any serious traction, so hopefully we can't fall off the floor, you know, but this one has got to be some positive impact. And if we can get some positive impact on that station, if we can get at four share, we got a three share now approximately. If we can get a four share, share point doubts with the lot money, it's worth $4m.

Hopefully Mr. Harvey doesn’t take all that from you.

He won't.

All right. Thanks very much.

Thanks.

Bishop Sheen with Wachovia Securities. You may ask your question.

Good morning. Alfred, Scott, and Mary Catherine. Let me just do one follow up, in your press release as usual studies laid up excellently, it leaves little to wonder about but of the free cash flow and the cash on hand that you have, how much for the forward commitment to the cable network, I know, it's over a long period, you think you will be pulling lot of cash this year?

For '03 and again a lot of it depends on when the thing actually launches and the very timely component. For, sort of gross modeling purposes, we kind of have been assuming $70m over 4 years with it being somewhat front-end loaded and so I guess I wouldn't be adverse to people generally thinking about $20m in year 1, $20m in year 2, $15m in year 3, and $15m in year 4, but that's obviously subject to change based on how the business growth evolve, etc.

Right, understood. And then the only other thing that I can remember is 9.5m for Dayton and that's pretty much it put forward announced commitment at this point.

We first -- sort of MNA related activities and that's why you have the debt service on the …

14th on the term.

Per quarter exactly.

Per quarter right. And that's it -- that's all she wrote that we know of at this point.

That's all she wrote that we know about at this point, yes.

Okay, not bad, that's the only question I have. Thank you.

Thank you.

Tim Wallace with the Banc of America Securities. You may ask your question.

Thank you. Scott, you had mentioned that February, I think you said you were 80% booked. Could you comment on what March looks like at this point? And then second in terms of costs, your year-over-year growth quarterly costs have been growing and do you expect that trend to begin reversing itself in '03 and then finally, I don't know if have this data, what percentage of your revenue in '02 came from underdeveloped stations and what kind of margins did those stations have? What were those margins? Sorry Alfred, if I didn’t give you a question.

That's alright.

With regard to your last question, we actually don't have that information for you Tim but we will provide that information at some point of time. I know that it is important to folks. March is looking pretty good, you know normally you would want it to be about 50%, 45 days from the end of the month or by mid-February at about 50% for that upcoming month and while we are not there yet, and today is only February 11th. We are in good shape and feeling generally pretty good about March. You know, for the most part we are looking at double-digit growth consistently across the quarter. And so that's.

Scott, is there any issue with the war in your advertisement for any kind of cancellation policy changes or anything like that?

They have the most liberal cancellation policy in all of the media.

That's it, I got you, but you don't -- I guess the question may be better put.

We are not guiding to a war, let's say that. I mean Mary Catherine do you want to make a comment on and certainly associate with war and how that could affect the business?

I haven't -- I think Tim, we talked about this already a little bit but, I haven't felt, we haven't felt, you know, anybody in that sort of mood and as Alfred said that you have liberal cancellation policy, but we do really try to stand firm on two weeks. And we have been pretty successful doing that. As I think, we have talked about the other day, if there is a war I think it will be very different from '91, which I was actually around then doing and I remember it paralyzed the country for maybe a month, because -- and that was different because that was the first time we had ever seen a war televised. I think we are used to those type of things now and I think we weathered this storm last year with 9/11, and I believe this country has shown that we just keep moving forward now. So I think that our people who sit around and watch CNN for a day and then hopefully will move on and do the normal things that we do. So I don't think it passed the radio or the advertising business the way it did the last time in 1991.

And Tim, with regard to your question on expenses, I mean, because we are not providing full year guidance here, and I am little hesitant to give too much detail but I mean at the end of the day, conceptually some of these new expenses that I have referred to that we are layering in for Q1 in terms of this research arm in terms of the Atlanta station, in terms of the Harvey's indication, I mean that stock will, you know, continue to sort of add to the cost base in the company for the next couple of quarters and then we will begin to obviously calendarize that stuff and it will become known part of our cost structure. And as I said, you know, if you would have to look at sort of base cost structure, I think we are looking at sort of 5% mid-single digit fixed cost growth year-over-year. So, I hope that provides -- so I guess the answer to your question is effectively yes, we would expect to see expense growth moderate, but again you know, we are seeing as the guys at intercom said yesterday some significant cost increases in certain part of our company and, you know, there is still some uncertainty with respect to what the impact of that will be over the course to next 12 months.

And I think, it is important to point out that most of this stuff is not related to "new competition". We’re launching Harvey and Dallas because we want to have a four shares of a three share and we haven't been able to get the rating to the level of -- that we feel that we can in that market. So, it is all sensible and it’s proactive. In Atlanta, we put those tuning stations on the air. We essentially just, you know, put the music on. You just have your morning shows now, a lot of any personality and that sort of natural revolutionary change of format, just put the music on right away and then you add personalities. We didn't have those personalities that of -- added response to a competitive threat. It is just naturally how you build the radio station. Though, you know, the fear that Radio One's costs are going to go up because of competitive threats or that were -- our strategy is going to be derailed by the more interests in the urban format arena -- we think it a little over done.

Okay. Thanks a lot.

Thanks Joe.

Kit Spring with Stifel Nicolaus. You may ask your question.

Hi. Good morning guys. My estimates Cox doesn't really have the significant impact on your growth, but I'm wondering if you see any other markets where competitors are likely to emerge and how do you forecast that likelihood. And then secondly, I just have a question for Scott. Is there any other debt that you can refinance, perhaps the high tides? Thanks.

I mean -- you know, we've got five markets with no competition Raleigh; Lousiville; Cleveland; Columbus, Ohio; Cincinnati, Ohio. The Ohio market except the Cleveland don't have the enormous black populations like 11% in Columbus, [inaudible]. So some coming into those markets will really feel [inaudible] for a small piece of the pie. Cleveland, even though its about 17% -- probably 16.9%, we've got two really strong station that is not a lot radio stations in the market period. And so somebody did switch, we still be dominant urban operator with two stations to their one, plus the still opportunity to get bigger in Cleveland -- if there is a -- you know one or two more stations that you can buy there. And so we are ultimately think that, you know, that turns out to be somewhat what the Baltimore, where we still grow, but we just got a competitor to rebuild again not a big black percentage population 12-13%, but we got a fixed radio stations in Louisville. So somebody would really have to be crazy to compete with us there because we could take any one of our non urban formats, and do what we did in Richmond essentially and [inaudible] and we are still growing in Richmond. Though in all those markets none of them are gigantic contributors to cash flow, while Cleveland is the biggest -- quite frankly Cleveland has been a problem market for us not because of ratings or competition, just because of having some management challenges there, which we are open, you know, to get worked out – so we think we'll get stronger.

I am sorry -- that’s handicapping, who slips, who knows, I thought the cost string was irrational, I thought, [inaudible] channel did in Richmond was irrational, I thought what clear channel did in Los Angeles was irrational, Baltimore may sense, I think because the market is so heavily, you know, African-American, but in Houston, you know, I think it meets sense for people to come after us, but we got, you know, two of the best signals in the market and when people attack us with weaker franchise.

With respect to your question on capital structure, debt, etc, I mean, we talked about the term loan, there is nothing outstanding on the revolver, the sub notes are not callable for I think another two years. And so then there is the high tide and you are right that starting this July we do have potentially some options with respect to the high tides and we have a two-year window to effectively executing into those options. One would be the call, at a slight premium another would be to potentially force conversion depending on what the underlying stock prices. And, so I have been meeting with bankers and talking through some options and looking pretty closely at that and so it is something that over the course of the next, you know, 6-12 months we will focus on. You know might it be a good use of our pre-cash, yes it might. But again it all depends on ultimately what we do with them, how much it cost? How we take them out, do we use pre-cash, so we'll refinance them with another security. What does that security look like, but we realized that we have some options there and we will be doing whatever again is in the best interest for our shareholders going forward. Thanks.

Did you give pacing by months or would you?

Well, what I said was that January was up double-digits.

Okay.

And that’s in the bag. I said we started out February roughly at 80% of our goal. I think I also said, you know, we are obviously guiding to double-digits for the quarter and that we are seeing fairly consistent growth across the three months.

Great. Thanks.

Jason S. Helfstein with CIBC World Markets. You may ask your question.

Hi, thanks. Two questions, the first that I don't want to hop on the expenses, but we invented things you know, lets say worse for the economy than any one thinks. What ability do you have to target and manage expenses if more bare cases plays out may be in the second and third quarter and you talk about that? Number two, your Alfred and Mary Catherine, can you talk a little bit about the difference with some of your competitors you lets say they target covering about more top 40 urban focus versus truly targeting the African American population with more the diverse formats that you use and how essentially that is the different for operating philosophy? Thanks.

I will handle the expense question and Mary Catherine will handle the, sort of crossover regular crossover versus urban question. I have always maintained that, you know, we have some significant ability to turn the expense -- dig it on and off to a certain degree. Obviously, we can't do anything about rent, you know, so we usually can't do anything about Arbitron, it’s a long-term contract. But sincerely doing stuff with advertising promotions and hope that the clear channel has proven that you can just stuff with bodies. They actually do a whole bunch of voice tracking in Armageddon if you had to. I mean, you could probably run a radio station with one body on the air, I am not so sure how the clients would feel from a promotional standpoint, people did now. But if you have to save money, the technology allows you to do that. We have been fortunate that even through the downturn, that we really didn't have to cut our expenses to the bone in order to maintain a growth position. And that's because we believe that we are allocators of resources and we try to put those dollars where they are going to get the best return possible and in all other places we don't spend where we don’t have to. We spend where we going to get a significant return, like hopefully, Harvey in Dallas. So that’s my take on the opportunity to cut expenses. And Sneed will handle the crossover thing.

Its just to add to that, you know, our sort of our montrif is you can't vendor right to fixed assets I think as Alfred told early, you also can save your right to success. And we always have, you know, our promotion budgets that we go to and it is just a fact of life that’s were largest dollars are and we have a great promotion department and personalities that know how to do marketing and promotion. So in lean times I would always depend on that more than I would be advertising dollars. As far as those stations Jason, I'll called generally rhythmic stations or crossover stations and when you have an urban station that’s up against a rhythmic or crossover station, generally what happens is the crossover station is not going to be in the block community they are not going to be the grass root promotions or marketing that we would do because of course that’s our focus and with that focus comes a lot of revenue. For example in first quarter of this year, there is always money attached to Dr. King’s Birthday, always money attached to black history months. We have an enormous nation wide black history -- sorry black college tour that we are doing right now with the rest of our morning show. So we have been able to put together programs to generate revenue because of those types of grass root promotions that enable us to get on to the community. So that is basically the difference between those two formats. Did that answer your question?

It does. This is hard to quantify, but when you just think big picture of the last 18 months about clinical where there has been new competition how much of that has been "true urban" versus more the rhythmic trying to take advantage of the popularity of the urban and top 40 right now?

I think in most cases it has been more rhythmic and for example the cost positive station here in Atlanta called the Beat that plays hip-hop of 100% hip-hop station, but I've never bumped into them on a promotion or a community event. They are basically kind of a station that or -- the like hits in the suburbs, that’s the kind of the station is rhythmic station are; they don't have generally morning shows that appeal to the African-American audience and like I said before they are generally not in that community.

Okay. Thanks, guys good quarter.

Thanks.

Andrew Marcus with Deutsche Bank. You may ask your question.

Thanks. I guess my introduction was the white kid in the suburb. Two questions one, Scott, how are you going to handle the accounting for the cable venture? And then two, looking at LA from a power ratio perspective and for when you first saw a lot of success with Steve Harvey and the ratings they just talked about closing the revenue gap. Do you feel that you have closed the revenue gap at this point now you are going to grow more with the growth of the African-America market or do you feel just to have more revenue share for you to gain in LA?

Well, I think we are outpaced the market in Los Angeles in '02, you know Scott got some information.

Yes XX

We were XX to markets. So in '02 we were XX to market and I have got the LA numbers here. You know is worried about LA. LA has got a great power ratio. They have got great sales team; they continue to do that -- to do well and you know turnover has been low there, we got a staff and we only had two really gigantic books, we had 38 somewhere in '01 and then we had a 43 in the fall of '01, but in winter '01, which was two books before that we had a 36 and that were, you know in fall of '02 we were at 36 so this has basically been the 3 share radio station. So we continue to out pace and we are outpaced in the market with that. So, I still think that we have got -- I think we will outpace the market again this year; I still think that, you know, we are picking up some revenue; we are not mature there yet and who knows maybe we can continue to get the ratings up if, the format line up and the market changes that could be helpful to us and sometimes stations just get better and the rating get bigger just doing what they already do better, and I am still hopeful for that we can make LA a 40 share radio station.

And the second question Scott?

Obviously, this is dependent upon ultimately how the entity is structured because you know we are still working through that, but if it would end up being structured the way it appears as though its going to end up being structured, you know, we would have a minority stake in its entity. The losses -- lets assume that there will be losses for, you know, the first several year, but in either case income or loss would flow to Radio One should be on a Pro Rata basis and that should hit our P&L below the line as income or loss in unconsolidated subsidiary or something along those lines.

Okay. Great. Thanks a lot.

Thanks.

Victor Miller with Bear Sterns, you may ask your question.

Good morning. Looking at some of the ratings, I understand that you are 12 plus, that is not the perfect assessment but it seems that the Dallas market from fall to fall up high 20%, Philadelphia up over 20% ratings, Atlanta up over 25% ratings, do you see mixing or could you talk about the some of the successes you are having in these marketplaces as opposed to focusing and listening on the markets we are seeing some competition, and secondly we did better…

It's funny you ask that, I mean, I guess, we got calls from investors, please talk about your competitor situations targets, this is likely the only question we get. These days competition, competition, competition, and so that's the reason we dwell so much on it, awfully given -- giving people more information as per our performance. So, they can get comfortable. But, obviously, Atlanta's is around the way. We are doing well in Detroit. We are doing great in Raleigh. Dallas is doing well for us, and then we -- Minneapolis is doing well for us. I mean, I am proud of Baltimore and those guys, you know, had a straight frontal attack and they grew. They grew their revenue 3%, they grew the cash flow more than that. So, I think, we are having success in many different places -- in most places, we got some problem areas, but our problems areas are sort of where we were growing less than the market, and not whether or not we are growing, but growing less than the market, and those have been places where we have taken some competitors. So, again Detroit, Dallas, Atlanta, we think, Philadelphia is going to do well. Of course, this year we think Cleveland can get turned around. And LA is going to continue to do well. Houston is going to continue do well. And we think those markets will allow us to carry to lead the industry again.

Just a follow-up. You mentioned some revenue in some of the markets and how much you are up. Could you mention that how much you are up relative to some of the entire market in general and then Scott, could you just tell us what's your cash tax expectations for the year, still most single digit for 2003? Thanks.

We did not fully understood.

We did not understand your first question.

You have mentioned some -- you have mentioned how much in revenue increase you had in fourth quarter in some of your markets, but you did not say how the overall market was, so may be you can compare your performance relative to the markets performance?

In which markets?

I can't remember exactly what markets you had mentioned. But you had.

You are talking about those markets where we saw competitive entry?

Yeah, in other words, you were up 3% and the market was up 2%. Could you give us some sense of some of the major markets and how you under or over achieved in those markets?

Yea, I would say that in those markets, where we experienced competitive entry, for the most part, we under performed the market with respect to the revenue growth, but that shouldn't be a surprise. So, when we talk about Baltimore, you know, having grown at a certain level for all of '02, the market in Baltimore in '02 was up 7.5%.

And we were up 3.

And we were up 3. And similarly in place like Richmond where we are up 8, the market was up 10. So, not bad relative to the fact that we did take on a competitor.

And how about some of the other markets where you didn't have a competitive entry?

I mean, I don't really want to go through all 22 markets, but I would tell you that in the majority of our markets, we grew faster than what the market did and that was true not only for '02, but for the fourth quarter as well.

And then cash taxes for the year or so?

Cash taxes for the year probably on the order of about $0.5m

For 2003?

Yea, and that's state taxes.

Thanks very much.

Thanks.

Paul Sweeney with CS First Boston. You may ask your question.

Thanks very much. Just two questions. Scott, just could you just talk a little bit about the local and the national trends that you are seeing. I know the kind of gapped out kind of why they are towards the end of the last year. So if you could just update as on what you seeing in local and national? And second, Mary Catherine, if you could just talk about Atlanta just a little bit more, there is some concern that after several years of being fantastic radio growth market that perhaps that market overall economically and significantly slowing, and so how do think about that market over the next year or so. Thanks.

MC you want to go first?

Sure, and you are right. It has slowed down. A s a matter of fact, spot radio was last year was, I think, only like 4.5%, which was really astounding. National normally in Atlanta is just a slam dunk and it wasn't last year. There is, you know, some unemployment here that does make me nervous. We do have office space available. However, the market is still so big and it is still such an incredible urban market that I think for us, it's going to be just fine. I think if the other general market stations I would have to worry about, but from an urban standpoint, there seems to be more money in the market, there will be because that audience is growing so much faster. So I think, as far as Radio One, I see, you know, a bright future for the next couple of years. And I don’t think the market is going to crash and burn by any means because I think it's going to rebound, it's still such sexy market. Just even this last weekend with the off target, and we are just phenomenal, the money that was spend here was extraordinary.

Right thanks.

And with regard to national versus local in the fourth quarter, national was up more than 20%, local was up sort of mid to mid-high single-digits, and in the first quarter, we are seeing local up high-single, low-double, and national up more than 20%. So, national kind of where it has been, and local improving here modestly.

Great. Thanks very much guys.

Sure.

James Boyle with Wachovia. You may ask your question.

Thank you. Mary Catherine, you like Bob Neill and Randy Michaels , you have [audio gap] background. What is the easiest format attack to defend against and generally, what's the hardest one in urban to fight off?

I think the easiest to defend against is when you have a heritage station, when you built a station from the ground up, and generally that's what Radio One does. I mean, in most of our markets, we established the stations, we built them, we didn't acquire them. So, that's the easiest to defend against. I think the highest to defend against is if you are the other station and you are sort of doing a rhythmic thing, you don't really have a base, you might be, you know, may be half black, half white, maybe a little Latino, and another station comes into to assault you, I think that's a very hard position to defend. Does that make sense?

Yes, and also could you tell us what's the average advertiser mindset that this may be indeed with Iraq invasion, another modern-day month or shorter American war. So, if an advertiser is in a market share tussle, are they less likely to pull back this time around or is it just wait and see and then you might have significant pullbacks?

You know, I go in a lot of sales calls, and it's just not coming up, at least not on the radio front, nobody is talking about it. So, I don't know really in the end what they would do, but I suspect because there seems to be not a lot of focus on it, and as I said earlier, I think -- I also think that as a country, we do move on now. And, you know, life has to go on. So I think that it might have a little bit of impact, but then I think everything is going to precede as normal because that's what we need to do, that's what we are supposed to do.

So when you are on sales calls, you don't a get a feel that may be budgets that were on the sidelines that should be dropping or staying on the sidelines or that they are doing shorter ad flights just to be cautious.

No. It’s a matter of fact, you know, it feels so much different right now than it did last year. This time last year, we were just waiting for calls, you know, from very large clients to tell us when we could come in and do our annuals, and those kept getting put off. There were a lot of large big, big important clients that didn't do annuals until March or April of last year, those are done now. That money is placed and it just feels so much better.

And are rates up?

Oh yes, rates are up.

Can you quantify or characterize how much up?

I don't think I can do that, but they are definitely up.

Okay. Thank you.

Okay.

Alissa Goldwasser with William Blair & Company. You may ask your question.

Hi. You talked about some great numbers in LA for 2002. I think, there were some indication though that there was some slowing towards the end of fourth quarter in the market. Can you talk about LA in the fourth quarter and if possible talk about what your revenue growth would have been without your LA station in it?

No, I am not going to do that because that would provide too much specificity with regard to what that one station does for us in terms of revenue cash flow, but LA as a market was up 15% in the fourth quarter.

Okay, and then either Alfred or Mary Catherine, in Atlanta you've got now four books showing the potential of the new or the rebound cluster, can you talk about where you are in terms of revenue share given that rating share?

You know, I don’t think we are going to give you the revenue share for Atlanta for '02, and the revenue share for '03 is changing. You know, I think, we said, it is you know more than 5% and less than 10 as a percentage of our total. We did about 5% of the revenue in '02. We did 5% of revenue in '01. I believe that it should be fairly easy overtime to get to 10%, and I think we can get to 10%. When I say overtime, I bet we can get to 10% in 18 months. And we get to 10% of the revenue in the market in 18 months. Actually, I will give you, in '02, we did 8.5% of the revenue in Atlanta. So, I think in 18 months we can get to 10% and then that last 5% for these format is going to be, you know, sort of the tough part, but you know, we have got some educating to do in terms of the Gospel format, get an advertisers comfortable with pay and [inaudible], you know, I would rather have a five share and convince people why, you know, my five shares just is given to somebody else's five share than having a two share. So, Atlanta is going to, you know, it is going to be great market for us.

And Alissa, one thing to keep in mind to is that two of that stations, the Gospel station and Classic soul stations were still relatively new last year. So there is still lot of growth there.

Great. And the Gospel station, as you mentioned, is a monster. Do you have any other examples in other markets where you have sold a big Gospel FM like that?

Raleigh we do about 0.68 hour ratio.

The other three stations can be anywhere from number one to number five in any book 25 54, and it is a very, very big radio station. And the revenues on that station, it's very, very hard to figure out how to sell Gospel, and I think we have got the formula now, and we are well on our way.

I think Atlanta is also going to be an easier place than Raleigh to sell Gospel because the bigger market will have more money in it, and probably will have more open and more open attitude to doing the format. You also have to remember Salem is in Atlanta, doing their fish format. They have got a 2.5 share, inspiration or contemporary Christian does well in Dallas. They have got a station there, probably does $10m. So, there is -- it big sort of bible-belt market. There is some history of contemporary Christian stations doing well in revenue, and now we are doing this bright Gospel format. For the life of me I think, if you sit down with an advertiser and try to explain to me again what's wrong with this format? What's wrong with the people who listen to, you know, other than the [bears] and may be the lottery. I mean, it is just a, you know, what's wrong with God?

One thing that we have found out is that advertisers were confused and we have unconfused them. A lot of advertisers thought that gospel meant preachers, and for example, you know big advertisers like Home Depot, and so you have to let them know. Now that's not what it is, this is definitely a contemporary music format. And once you get them to understand that, then, you know, it is just -- it's you're home free.

Nobody is going to have spent more time in efforts educating the ad community on the value of this format because we have got the most gain than anybody has ever had before. So, we are really going to put a lot of effort into it, and in the end, there going to be very few advertisers that, you know, sort of can justify, you know, not buying it because it is not a controversial format, and as Mary Catherine said, it’s a contemporary of music format. You listen to the [inaudible] for music, it’s not that much different than today’s sort of mid temple R&B. It’s just lyrics different, and they you know, exalt you know, different things as oppose to the standard R&B messages.

Very good. Thanks for the call.

James Marsh with SG Cowen. You may ask your question.

Yes. Hi guys. Two quick questions here. One on the corporate expense. Is trying to get to download it further and figure out why that the year-over-year growth seems to be higher. Is the new research on and then there is anything particular within that category that’s help to drive this growth rate, that's one. And secondly, I was hoping you could comment on when you start to cycle through the competitive attacks in various markets you mentioned, Los Angeles was one our book. May be if you could talk about when the competitive biggest attacks begin and also about when the impact was really felt. Because it seems like those are events that are more on your rear view mirror today then a few quarters ago?

I mean I gave those dates and going to happen rest on [inaudible]. We should probably talk a point of this. We are going through it, you know, for everybody else again might be redundant at the [inaudible] call me in the office I got right jobs to give you those dates. But cycle and through it. We were on the cycle through it, we’re growing. I mean you know; now when do we go back and grow with the market. I don’t know the answer to that question. It’s going to …

There was a point in time during ’03.

With regard to corporate I mean if you were to just take the fourth quarter and attack on the mid-to-high single digit growth rate and annualize it, I think you get to our guidance. I mean would you look at our corporate expenses relative to our peers and our accounting cost in Hispanic and I mean I think we’re kind of all in line. What it takes to run a company of this size and, you know, in a public environment. I mean if the cost as I have said time and again the cost is compliant with [inaudible] is owners right and so we got to incorporate that even more into our '03 numbers than we did in '02.

Okay. Thanks.

David Bank with RBC Capital Markets. You may ask your question.

Hi. I’m [inaudible] for David Bank. Not to beat a dead horse here, but did you incur any expenses associated with the cable venture in Q4, in the current quarter?

Non-operating. Not maturely operating expenses.

Okay that was it. Thank you.

Daniel Moore with CJS Securities. You may ask your question.

Good morning.

Good morning.

I think you talked about the up swing to certain extent that you are seeing in local as well, you know, what are you seeing in terms of trends in some of your midsize markets like Columbus, Dayton, Ohio, some of those markets?

If that market seem to be or not seem to all lacking. Last year actually the midsize markets, you’ve [inaudible] you know, actually through slow down wages that was in the big market now becoming -- it is normalizing again. We’ve always said that big market grow faster than mid or small market. And into the recession they did not, you know, performed worse because they were getting up the passes and now it’s reverting again.

Yes, but the profit is only to a little all over place. I mean it’s amazing. You can look at our four markets in Ohio, and you know Cincinnati seems to be growing little faster at the end of year as Dayton, but Columbus seems to be slowing. But the Indianapolis seems to be slow and that's not in Ohio. – But -- so it really is kind of all over the place, but yet for the most part, you know, where you are seeing the big growth year-over-year is in the larger markets.

And you know, we obviously have a large concentration of large market station. So hopefully the long-term trend of big markets growing faster than smaller markets has not changed and we’ll benefit from that. But with that said this is kind of did the fastest growing market in the fourth quarter for us was -- for the industry not for us but it actually is very close. For the industry was Augusta. Augusta was up 29%. So our smallest market grew the fastest and while it was all that political.

Yes. Thank you.

Michael [Kapinski] with A.G. Edwards and Sons. You may ask your question.

Thanks. It sounds like you have a nice, robust advertising environment in your first quarter. Can you add some color on the advertising categories in the first quarter? Where you seeing strength, particularly, are you seeing any emerging ad categories? And then Mary Catherine you looked through the past four with some radio experience and I agree that things don't necessarily rack the same way, but did advertising top back or were there some categories slow to come back following they start of the war?

Mary Catherine, you want to take that?

Well I don’t remember that exactly -- which category, but I do remember 1991 was a horrible year for radio. And, somewhere in the back of my mind I think that 50% of all radio stations lost money that year. So that was -- you know, it was not a good year period. And I just don’t remember what categories. I would imagine it was -- because of that number, I just gave it’s probably everybody.

…and the fact that it was related to prolonged recession to. So that probably had some effect on …

Exactly, it was a double hit. So it was really devastating.

Yes. With respect to category, it got to really get a gauge on first quarter – I mean it’s so early in the quarter. In January in the [inaudible], not a very important month. But if you look at fourth quarter. But let me tell you assume that the trends that were inside the fourth quarter are carrying over to the first quarter. And I don’t frankly see a reason why they wouldn’t. Automotive was particularly strong. Retail was actually kind of modest. But there were certain categories like, computers for us, computer retail that did particularly well. You know, entertainment did well. But in particular movies did very well. You know, where as sort of clubs and concerts didn’t do as well. Health care did pretty well, but in particular hospitals and medical, which is a sub category under health care did well. Transportation and travel was up strongly. And, actually for us in Q4, political was very strong. That obviously won’t be the case in Q1. So and then telecom was strong. Telecom was up, you know, mid teens. But again that’s a fairly broad category that encompasses a lot of stuff. But it was pretty broad in terms of the growth as well. Pretty much all the sub-categories groups grew pretty healthily in telecom in Q4.

Can you quantify your political last year?

Yes. Political last year was about $2.5m.

Okay great. Thank you very much.

Bill Meyers with Lehman Brothers. You may ask your question.

Thanks. Just a quick follow up on the corporate expense lines. I think there is another account on that. Is there anything incorporate that other operators may allocate to the station level. Again, may be looking at the things [BCA] versus EBITDA, to maybe account for some of the discrepancies.

Bill it sounds like another paper for you. Because you know, the kind of interesting analysis to see what various companies do in terms of their methodology for keeping an expense incorporate or allocating it, or you know either partially or fully. Obviously, I have no idea what other folks do for the most apart. I mean we have actually some of the CFOs have talked about this. But -- you know, the way we sort of look at it, if the activity that the person is responsible for is obviously, you know a 100% market focus. And the person gets a 100% allocated where our regional manager and they don’t have a specific market that they are responsible for. But ultimately, they oversee the operations of multiple markets and that the general manager is reporting to them, then you know, that person would get probably fully allocated to the markets. Other -- you know, there are some cases where you might have certain expenses that are corporate, but there is some partial responsibility for market level operations. So there will be a partial allocation. But for the most part it’s pretty pure. I mean, its all the folks that work here are corporate and the infrastructure to support the corporate office. And then, the outside folks that we use, the suppliers with respect to legal and human recourses and finance, like the orders and what not. Which pretty much are, you know 100% corporate related expenses.

It’s going to be something [inaudible] and have to take a look t it.

Okay Bill.

Our last question comes from [Bishop Sheen] with Wachovia Securities. You may ask your question.

Yes. Just one quick follow up, Alfred, competitive attacks and you’ve seen the cup of three in your day. At some point, you got to give up the ghost if you are not getting traction or approach if you are the attacker. You know, I did [inaudible] company-by-company, and be pocket-by-pocket but is there any general statement you could say that you’ve seen where competitive attack has to adjust or head 180 or give it up all together?

Yes. The answer to your question, I think you know, every market manager, every regional manager, every CEO, at some point in time have to look at their radio station portfolio and say, you know am I getting the most out of this signal that I can? And if somebody stuck in an urban format, and it’s not performing well, meaning its got low-power ratio, doesn’t have much more revenue then it had before in whatever the other format was and somebody else is at the top of the heap kicking butt in a rock format or something of that nature. You got to analyze that. You got to sit down and say how can I get the most money out of the signal? And right now maybe people are focused over urban top Radio One doing well, but that's no reason, you know, to doing those format, because you think you can make the most money with it. And so one thing for sure is we are not changing format. So whoever attacks has to know that either they are going to be in the competitive situation forever or they there is no pushing us to rock or anything like that. And so it’s not something that they should take lightly when they come -- when they consider doing it because we can't change. It's our strategy.

Right. It just seems to me I mean it’s a good discussion but you know, bottom line is I don’t care if you are in the community or out of the community or listening in to stations [inaudible]. If you are successful you are going to get competition and you are going to get attacked and you’re …

You know. . .

…the more [inaudible] for you again.

You got at the point. And that’s why I tried to make the point about our acquisition strategy. The difference -- the Hispanic broadcast – if it is SBS competing against Hispanic broadcasting, then, you know, they are just locked head-to-head. Every time that there is an acquisition available, that has a potential to go be Hispanic stations, and they’ll both compete for it and neither one of our change in formats because it's their strategy. We don’t have that situation. So, you know, there is a great deal of interest in urban now, but at the end of the day Clear Channel and Infinity can’t add stations in markets, in most markets that we are competing with them. So we have the ability to continue to build clusters around their urban positions and build our urban positions. So, ultimately we’re just going to end up with more urban audience in those markets than they will. And you know, I mean Cox has got four radio stations in Atlanta. We’ve got four radio stations in Atlanta. I mean, you know, Atlanta is actually more than -- Atlanta is about 70 something percent Anglo. What are they going to do? Turn all the stations to urban and just ignore that audience and give it away Clear Channel. Clear Channel already took that -- all these formats didn't take in 48 hours.

All right. Okay. Well it’s to be continued, you know, high drama, that's for sure.

Yes. Operator can we close it out?

We have no further questions at this time and as a reminder this conference is available for instant replay by calling 402-220-0248 until February 12 at 12:00 PM Eastern. Thank you.

Thanks everyone.

Thanks.