Urban One Inc (UONEK) 2003 Q4 法說會逐字稿

Good morning and welcome to the Radio One fourth-quarter earning conference call. All participants will be in a listen-only mode until the question-and-answer session of the call. This conference is being recorded. If anyone has any objections you may disconnect at this time. I would now like to introduce Mr. Alfred Liggins, President and CEO of Radio One. Mr. Liggins, you may begin.

Thank you very much, everybody. With us today are also our CFO, Scott Royster; and our COO, Mary Catherine Sneed. And before we get started, Scott is going to read something.

Good morning, everyone. This conference call includes forward-looking statements within the meaning of section 27 A of the securities act of 1933 in section 21 E of the Securities Exchange Act of 1934. Because these statements apply to future events, they are subject to risks and uncertainties that could cause actual results to differ materially, including the absence of a combined operating history with an acquired Company or radio station, and a potential inability to integrate acquired businesses, need for additional financing, high degree of leverage, seasonal nature of the business, ramping of rights to acquire certain portions of the acquired Companies or radio stations operations, market ratings, variable economic conditions and consumer tastes; as well as restrictions imposed by existing debt and future payment obligations. Important factors that could cause actual results to differ materially are described in Radio One's reports on forms 10-K and 10-Q and other filings with the Securities Exchange Commission.

Thank you very much. We are pleased with our Q4 results. As you have seen in the press release that went out, that net revenues were up 1 percent, station operating income up 7. Our management team continues to demonstrate good fiscal discipline in challenging times. Things are getting better. December in particular was strong, and as we elaborated in the press release, that's carrying over somewhat inconsistently, but carrying over into Q1. Scott is going to elaborate on the numbers and then we're going talk more about the radio business and also our new cable network that we recently launched.

Okay, well, our fourth quarter results may not make it completely clear, the radio industry appears to be headed back to a period of modest and sustainable growth. Although, as we have said all along, that growth will come in fits and starts.

One thing is clear, however, and that is that Radio One is once again positioned to lead the industry as we significantly outperformed in December and January, and are feeling pretty good about our outlook for the rest of the first quarter and for all of 2004.

Radio One's net revenue in the fourth quarter of 2003 increased 1 percent to approximately $77.4 million, while operating income increased 9 percent to approximately $33.4 million. And station operating income, formerly known as broadcast cash flow, increased 7 percent to approximately $41.7 million. Net income for the quarter was approximately $14.5 million or 14 cents per diluted share and free cash flow increased 35 percent to approximately $20.5 million.

For the quarter, national slightly outperformed local, and growth came from the automotive, Telecom, financial, retail, and travel and transportation sectors. Markets that performed particularly well included Dallas, Indianapolis, Raleigh, Minneapolis, and Washington D.C. Underperforming markets included Augusta, Charlotte, Philadelphia, and Richmond.

On the expense side, the Company continued to perform exceptionally well. Station operating expenses actually declined in the quarter by 6 percent. And corporate expenses, excluding non-cash compensation, only increased by 3 percent, as the Company continues its hiring and salary freezes. Capital expenditures for the quarter came in at approximately $3.8 million, or 12 percent over the prior year's quarter. But for the full fiscal year, capital expenditures were $11.4 million, and in line with the Company's original guidance of 10.5 to $11.5 million for the full year. Also for the quarter, the Company's share of pretax losses in TV 1 was approximately $1.2 million.

Turning to the balance sheet, the Company continues to generate significant free cash flow and use that cash to deleverage its balance sheet. As of December 31, 2003, the Company had cash of proximally $78.7 million and gross debt of $597.5 million. On a net debt basis leverage as measured by net debt EBITDA was approximately 3.5 times, and the Company continues to have access to a $250 million undrawn revolver.

As for Q1 2004, we are off to a good start. Cash advertising revenue in January ended up approximately 9 percent, and we ended last week at 89 percent of goal for the month of February, and 51 percent of goal for March. Both in line with last year. What is different this year is that the economy is stronger, there are no war fears -- which had a negative impact on the last four to six weeks of Q1 2003 -- and if we are lucky, we will avoid another major snowstorm which shut down five our markets for almost a week in the latter half of February last year.

Nevertheless, we are guiding revenue up in the mid single digits for quarter one. That said, I think we can do better than this, but we are all having a hard time shaking the uncertainty bug loose.

We also expect station operating profit to end up in the mid single digits. A couple of things here -- one, fixed station operating expenses for Q1 are in line with Q4 results. Given the high fixed cost nature of the business, for the most part, only the variable costs -- which represent about 20 percent of our cost base -- ratchet down in Q1, the lowest revenue quarter of the year. Most other costs carryover quarter-to-quarter.

Two, we have quite a number of personalities who have contracts that require annual increases to be granted independent of the Company's wage freeze, and many of those occur in the first quarter.

Three, we are starting to make selective hires in various key areas of the enterprise, and are also looking very closely at the wage freeze as improving business conditions may warrant a loosening of the wage freeze to some extent at some point.

Corporate expenses will be up in the low double-digit range from last year's first quarter, but in the mid single digit range from last quarter as the Company is investing in additional personnel, and in its infrastructure associated with Sarbanes Oxley requirements and other costs in doing business as a public Company in this new world order.

As for TV 1, now that the channel has launched, (indiscernible) cash and non-cash expenses will be ramping up, starting in the first quarter. We expect our share of TV 1 losses to be approximately $3 million for the quarter. We will provide further guidance for more of 2004 at a later time.

Also in Q1, we closed on the $35 million acquisition of WSNJ-FM in Philadelphia, which we funded out of available free cash balances. We're in the process of moving the station and finding a suitable power location closer into the Philadelphia Metro, and expect it to launch in Q3 of 2004. Alfred may have more to say on this acquisition, but clearly this purchase price for our Philadelphia stick represents pretty good value, given the size of that market and the fact that we already have a major presence there. That's it for me, I will turn back over to Alfred.

Thank you very much. Continuing operations -- strength going forward is pretty broad-based across a lot of our large markets, which is a very good thing. We're seeing very good strength in Washington D.C., Atlanta, Los Angeles, Dallas, Baltimore, and Indianapolis. And so, Washington, Atlanta, L.A., Dallas, Baltimore -- 5 very good size markets for us are all kind of roaring along, so we feel very good about that.

Challenges that have been in the past, and we continue to see in the future, are Columbus, Richmond, Augusta, Louisville, Charlotte, and Philly. In Columbus, essentially it has been a management challenge there. We have had management turnover and we recently -- in the fourth quarter -- installed a new general manager and director of sales after a lengthy search. So we're hopeful that that gets turned around because we have a good competitive position and strong ratings, and good radio stations.

Richmond, continues to be a challenge for us and we've also installed a new general manager and DOS, there. But we've got competitive pressure from clear channel. However, the -- our underperformance there is overblown from the amount of the threat from the clear channel radio station. Because we've got four good radio stations there. And we should not be performing as poorly as we have been. So we think that -- that new management team will get that turned around.

Augusta is a very small and challenging market in our position. It's kind of marginal there, but the numbers are very, very, very small.

Louisville, tends to be a softer market; and, again, our ratings position there has actually been improving. However, we haven't been able to get the key to getting the management team gelled to the point where they can get the revenue moving in the right direction. And the market is also soft.

Charlotte and Philly are bright spots, where Charlotte in particular has been challenging for us, we were doing a young and hip-hop station there. We had decent ratings, but with one stand-alone FM up against Infinity and Clear Channel -- it was really tough to generate huge amounts of revenue. However, we recently were able to get the Tom Joyner morning show which was the top-rated adult 25 to 54 morning show from the No. 25 to 54 radio station, which was an urban AC station owned by Infinity over to our station. And we changed the format to urban adult contemporary. So we really have high hopes for strong ratings and revenue gains in the Charlotte, North Carolina market.

Philadelphia, we've got two FMs there. One, a modern rock station and the other a young and hip-hop station. The young and hip-hop station is actually doing well in ratings and revenue gains. We have had challenges with our modern rock station. The ratings have been off. And also, there is a challenge -- we do a lot of beer business on the modern rock station in Philadelphia, and because of the change in the self policing, or the self-regulation, that the beer industry is doing on themselves -- we're starting to see a falloff in our beer revenue, which is making the Philly market challenging for us. But we are adding this third FM -- we own it now, and we should have it on the air in the next six months. And we will come up with some new complementary format to our stations there that we think was going to improve our position in Philadelphia market and hopefully it will turn that market into a winner for us as well.

Other radio acquisitions as I've continued to say, we're looking for add-ons in markets that we already operate in, and I think Philly has proven that -- $35 million for an add-on there is pretty good. We have got a couple other small things in the pipeline, and we're going to be very methodical about them -- our acquisition strategy, and continue to block and tackle and build out our current clusters. And look for opportunities to get into large African-American markets that we don't already operate in. But those will be selective as they are not going to come up -- they won't come up all that frequently, but when they do, we will have to be prepared to make the right choice at the right price for that given market. So we're not -- we're not on a tear to try to break into a Chicago or a San Francisco. We prefer to build out these clusters and then have Chicago's and San Francisco's come up overtime and be prepared for that to happen.

TV 1 launched on January 19th -- Martin Luther King's birthday. And we launched in Washington, Baltimore, Atlanta, Detroit, Richmond, and Flint, Michigan; and also Cleveland, Ohio, which is a non-Comcast market. It is a system owned by Adelphia (ph). We are on analog in all of those markets. We're also now in Oakland, California on analog. We expect to be in the Chicago and Philadelphia markets soon -- don't know whether that is going to be analog or digital yet -- we will find out soon.

We're very, very excited about the early buzz on TV 1. It's very positive. Viewers are responding very positively. There has been strong advertiser demand. The other MSOs have heard very positive buzz. We are hearing good stuff from other systems that were not launched in yet about the network.

We also expect to have another MSO deal done soon. And when I say soon -- you know, probably in the next, hopefully, 60 days or so. That will also have a strong mix of analog and digital carriage. That will give us some more non-Comcast markets. So we're very excited about it, we continue to think that there is strong upside for TV 1. And, having an association with this cable network just makes our position as an African-American targeted broadcaster all that much more strong in the minds of advertisers.

And as Scott had mentioned earlier, in terms of corporate expense, you should expect to see us investing in our corporate infrastructure for the future -- adding some layers to our management team in order to be in the position to continue to grow the enterprise well past the size that we have now. Historically, our corporate expenses have been considerably lower than our peers, so we will not do this frivolously. Because that is not our operating style. But we do think that it's a prudent investment to make at this time, particularly since business is improving.

So, Mary Catherine, would you like to add anything to what I just said before we open it up to questions?

No, Alfred, thank you.

Operator?

Operator? Please turn over to questions please.

Thank you. (Operator Instructions). Jonathan Jacoby, Banc of America Securities. One moment please.

Operator can we go to the next question?

One moment please. You may ask your question, sir. Mr. Jacoby?

Three questions. If you could just give us some commentary -- a little color on pricing trends for you guys? And probably your thoughts on some of your peers? Secondly, as we begin 2004, you commented on national being up ahead of local in the fourth quarter -- some color on first quarter trends? And the third question would be on just general feelings on the M&A marketplace for 2004?

Yeah. I think pricing has gotten better, but there is also more advertising out there this year than there was last year. And one thing that I did go back and take a look at was the number of annuals that had not been placed at this last year was pretty significant for us. And I think the same thing happened for groups around the country. And so far it looks like -- I think all the annuals we were expecting had been placed at this point. So pricing is a little bit better -- not significantly better -- but also, there's a lot more advertising right now.

With regard to national versus local, for the quarter of Q1 looks like national will outperform local by a little bit. It actually started out stronger -- fairly considerably stronger in January. And that -- there's been some convergent as we go into February, and looking forward into March. And in fact, right now, we are forecasting local to outperform national in March -- whereas national outperform local in January and they were fairly close together. Although, national did a little bit better in February. Overall, national up a little bit faster than local. But go figure, the trend here over a three-month period is shifting, and I'm not sure there is much to take away from that. With regard to M&A --

I don't see the M&A margins coming "hot." I've always said that I believe that we're in the final innings of consolidation. That there's a few big groups out there that are still independent, but there's going to be three, four or five guys out there who will all want to try to do deals with those two, three or four big groups. And then it's kind of done.

It's a different story for us, because we're doing stuff like the Philly acquisition, and got three or four other markets that we want to do add-ons. These are deals that will range anywhere from 10 to $15 million -- but they help build our clusters. Because we're not up against the caps anywhere, I think, except for Louisville.

And I've always said that I believe that we could double the size of our Company in terms of revenue and cash flow, call it over the next three to four years from the M&A perspective. And that's a lot for us. Because it's not like we're leveraged at two times.

So, I feel good -- the M&A market is just where we want it as a Company, but if investors are expecting it to heat up where there is an announcement every quarter of somebody buying somebody else, I think those days are over.

Thank you so much.

(Operator Instructions). Jason Helfstein, CIBC World Markets Corporation.

A few questions. First, clearly -- on the revenue side -- you're outperforming it appears in first quarter in December is not really a comp issue, but specific to the way you guys are running the station -- can you talk about, perhaps, what sustainability to that outperformance through the rest of the year? And maybe you want to relate that through to the ratings gains you guys have seen over the last several ratings books in Dallas, Baltimore and Atlanta? Maybe talk about some programming changes you've made, or maybe perhaps just its related to sales intensity --? But just looking for some more color on the revenue outperformance that we saw. And then I have a follow-up.

I think that last year was a tough year for Radio One. What is a tough year? We performed respectively compared to the industry, but we've generally well outperformed the industry. And we think that our strategy of buying underperforming stations, being focused on an attractive demographic, allows us to do that.

Where I don't want to go any longer is how much you can expect us to outperform. I think Scott has historically said a couple -- several to a couple hundred basis points above the industry. And I guess we can stick with that. But that is going to be an average. December was a great month for us -- but you know what? We had two quarters in '03 that were tough. What I can tell you is that we consistently try to find ways to improve our ratings.

Charlotte is an example of that. Even though we had decent ratings at the young and hip-hop station -- were like third 18 to 34 -- our primary competitor did beat us in that market, and there's not a ton of 18 to 34 money. So now we got a big morning show and we're playing for the adult demo, where there is a lot more money. So we're hopeful that that improves there.

You're right -- Dallas has been a big win for us in terms of ratings. And those guys down there are converting it to revenue. And we've been in that market for a while now, so it has taken a while to get the ratings on the right track. It's just consistent focus on it.

And sales intensity has definitely improved. But that doesn't mean that sales intensity wasn't there in the past -- it's just -- like I identified earlier, our problem -- our challenge markets -- you know, Columbus Richmond, Augusta, Louisville, Charlotte, Philly -- well, you always got, you always have someplace where you are not doing as well as you know that you should be doing, or need to be doing. And you focus your energies on it and sometimes it can turn around fast and other times it takes longer.

Yes, and I want to build on that point that Alfred just made, -- that last point about sort of focusing on your problems. I think what we have proven over the past year is that -- when we do have problems, we are pretty passionate about how we attack those problems. And we tend to be pretty good at fixing those problems. So, if you think about the problem areas in the Company last year -- it was Houston, it was Cleveland, it was Baltimore, and we have talked about those issues -- and I think we're happy to sit here and tell you that, for the most part, the problems are fixed in those three pretty sizable markets.

Now, there is always shifting problems. You hope your problems tend to be in your smaller markets, and for the most part, the markets that Alfred mentioned are on the smaller side. The Atlanta's, the Baltimore's, the Washington's, the LA's, the Houston's -- all appear to be working pretty well right now. That's pretty hypocritical to our success.

Quite frankly, Richmond has been a problem for a while. But if you got a choice between focusing on Cleveland and Houston, then Richmond down the totem pole a little bit -- excuse me you guys (inaudible) (multiple speakers)

We've got a sick management team.

Two out of the three members of the management team here are sick -- But now we have fixed the bigger problems, and Richmond is on the radar screen, and Columbus is on the radar screen in a big way. So, we look in the mirror, and we see the truth. Where are we failing? And then we try to figure out why and what can we do to change that. And sometimes we're not right on the first solution, but we go to the second, we go to the third until we get -- and the other thing that we do, is we don't move to fast beyond our capabilities. One of the ways that you fail is you end up having a lot of these problems build up, but there's too much to tackle. I have actually enjoyed the slowdown in the M&A market, because we have been able to get our arms around our business, and our people, and nurture it and grow it.

Not to make this the longest answer in (multiple speakers) history but I've got one last point. Some of the investment that we're making in corporate is to allow us to tackle more issues and problems simultaneously. So don't think that we can only handle one or two markets at a time. One of the areas that we're looking at to bulk up the management team is on the operations side. And so hopefully, as Mary Catherine will have, sort of, more lieutenants, if you will, on her team, we can simultaneously attack more of the issues and challenges that we have in the Company.

So that's basically in your budget for the first quarter and in your guidance?

Yep.

Kind of bulking that up. And then just a follow to the point you just made. Without commenting specifically on the level, is it reasonable to assume that your outperformance is continuing, kind of, through March of '04 based on the, kind of, comparison (indiscernible) you've seen?

Yes.

Okay. Thank you.

Andrew Marcus, Deutsche Bank.

Let's talk about, like, just two questions. One -- Alfred, can you give us a little more details on TV 1 -- where, a little more precise on how many subscribers you have now, analog and digital? And if you want to give any sort of goals for towards the end of the year? And then second -- on categories, talk a little bit about that? Especially on telecoms, since obviously there were some hopes with regard to the but -- AT&T, I guess, to put a little bit of cold water on that by putting themselves up for sale?

We're getting pretty close to 3 million subs on TV 1. And it's starting to build pretty nicely. And I'm not going to give a goal for the end of the year. Even though we have them internally and we -- but, again, I don't know this space as well as, obviously, I know the radio space. And so, I can't really predict how fast the ramp up is going to be with certainty because there are so many moving pieces.

And you know what? A lot of people say this is a great network, it is underserved. But a big MSO might say -- I've got a deal with Viacom's renewal -- and they push you off. Doesn't mean they are not going to carry it. It just means that you're not the priority that day. And you know what? If somebody tells me MTV is more of a priority to get re-signed right now than doing a TV 1 deal, its kind of tough for me to argue that and so there is this sort of dance that you do in terms of where you're at on the priority list.

But I continue to be more and more hopeful for the network's prospects, there has been significant advertiser demand. Advertisers have been willing to bet that this network is going to be successful, on the (indiscernible) and we are outpacing our ad budgets right now.

How many different charter advertisers did you have?

Oh gosh, a lot, I mean -- Sears, Dell, Procter & Gamble, Gycko (ph), Wal-Mart, GM -- we're knocking down -- we're knocking down the big names and they're making real commitments. We're going to do millions of dollars of ad revenue in the very first year of this network's life.

With regard to categories, I had mentioned -- I don't know if you have more specific questions -- automotive, telecom, financial, retail, travel and transport, as being the stronger sectors in the quarter. Did you have more specific questions?

Yes, have you seen on the telecom side consistency month-to-month?

I'm sorry say that again?

On the telecom category, have you seen consistency month-to-month?

I think it has been fairly consistent. It certainly looks that way if you look at the results in the fourth quarter, which -- I tend to look things at things on a quarterly basis. But eyeballing it -- yes, it certainly appears to be the case.

It has been. It has been. On our last earnings call, its funny because that's when all this stuff first started. And somebody asked me how it looked. And we had just gotten an enormous order companywide in that morning -- it was for wireless. But that ended up -- they ended up changing that to another product. So that was sort of disappointing (technical difficulty) the money.

And just one last question for Mary Catherine. The industry has been vowing to hold down inventory even as demand increases -- what are you seen going on out there?

I don't think they are. I think there are some Companies out there that practice good inventory management (technical difficulty) but I still see (technical difficulty) running way to many (technical difficulty) I think we're very focused on it. Because we see over and over now (technical difficulty) views and call its research (technical difficulty) No. 1 (technical difficulty) some things going to have to be done about it too.

You're cutting in and out. And I don't know that's if -- if you're on a speakerphone -- if that's affecting it.

This is the only -- I tried (technical difficulty) move this around, but I can't.

We're good at reading between the lines. Okay, thanks.

Brad Naeby (ph), Merrill Lynch.

Couple of questions on the expenses, Scott. And another follow-up for Alfred as well. On the expense growth, what are you anticipating, Scott, to experience. You talked about probably a mid single digit growth rate on the expense side, excluding corporate overhead for the first quarter. Last year, the big theme in the beginning was health-care cost increases. What are we anticipating maybe for -- throughout 2004 on expense an expense growth side?

Well, we have not provided any full-year guidance. So if you're speaking specifically to health-care costs, we have done a pretty good job internally of managing that. We are probably looking at, sort of, mid to high single digit increase overall, where I think the market is double digits, if not midteens. So we've, I think, done better than the market. We are looking at the self-insurance marketplace. I think every Company has a responsibility to understand that better because that mail would be -- the route that your Company needs to go to control their costs going forward. But, '04, I think we are in pretty good shape relative to that particular cost component.

Okay. And the other thing is -- relates to the convertible debenture. Any thoughts -- obviously it would be an accretive event assuming you were to take that in. Any thoughts from where you stand today, being that your stock price is up -- is nice today? And also at the level where you could do something?

It's a bit of a chess match. It's not just about the stock being above the 1873 conversion price. There are -- you actually have to go out with a cash redemption, and you hope that your stock is above the conversion price and stays above the conversion price for a certain number of days. And you hope that investors choose to take to take the stock as opposed to the cash, because the stock is worth more than the cash.

And so, you have to factor a lot of things into it, in terms of how you approach it. You obviously have your banks to deal with on the Company side. So, were focused on it. We are working through it. We are watching the market and I would hope that at some point this year we're able to effectively execute that. Because it is absolutely in the best interests of all of the Company's shareholders. We pick up an additional 20 plus million dollars of after-tax free cash flow. It is highly accretive. And it just makes sense for the Company in terms of cleaning up our balance sheet and making things a lot easier to understand going forward.

So it's top of mind, and if the market cooperates, bless you, if the market cooperates, and things work out the way we hope they do for our business and our performance over the of course the next couple quarter, we hope we will be able to execute something this year.

Just last question. Alfred, when you talked about MSOs -- that's incorporating satellite Companies as well -- Direct TV and Echo Star (ph) -- which have about 22 million subscribers. Is that correct?

Yes. Yes, that's correct.

Okay. So that could be something on the (indiscernible) as well. Okay great, well, thank you very much.

Kit Spring, Stifel Nicolaus.

Can you tell me why SG&A expenses were so low in the quarter? Was anything onetime there? And then secondly, if you looked at what your power ratio is now and where you think it could go? Thanks. Revenue share divided by your audience share.

We have not done a power ratio analysis in a while. And you know what? We need to do that. And so, I cannot answer that question. Last time we looked at it, we were averaging about 0.9. But I do think we're making progress because, just as an example, we've got two gospel FM radio stations -- one in Raleigh, one in Atlanta. Historically, the power ratios on those stations have been -- at least on the Raleigh station -- has been around 0.6. We've been able to move that station up to about 0.8 and we think we are going to be able to get Atlanta up into that range too. So, we're making some good progress on some tough formats in terms of their salability and I am hopeful that when we do this analysis we will see progress (technical difficulty)

As far as SG&A is concerned, SG&A is comprised of selling expenses, general administrative expenses, marketing and promotion expenses, and special event expenses. So, it's more than just SG&A. That is a catchall for a number of other categories. And I would say that is pretty much across the board -- those four or five categories that I mentioned. We found cost savings in the quarter.

G&A -- let's keep in mind that when we set our budget, we were not -- for '03 -- we were not budgeting to be up 1 percent in the fourth quarter. So, G&A has a lot of bonus compensation built into it that was not earned, because we did not hit our budget for Q4.

Special events revenue -- we talked about how that's cycling. And actually, it's probably going to be up in Q1 of '04. But it continued to be down in Q4 of '03. And so we saved some money on some events that we did not do. We cut back in some areas of marketing and promotions. So, again, it was just an initiative on the part of the Company to control our costs in as many places possible.

Thank you.

Paul Sweeney, Credit Suisse First Boston Corporation.

Couple of questions. Just in terms of the guidance, Scott, you kind of suggested that you were for various reasons being conservative, obviously, particularly given the month of January -- up 9 percent. So, should we not I guess surmise that there is any material falloff in February and March -- I think most operators are reporting that February and March are certainly stronger than January. Is that fair to assume?

Well, actually, I didn't say I was being conservative. I said that I think we can do better. So that's little different than what you just said. To be clear.

I'm not convinced that February is all that much stronger than January for the industry -- I think it is in line. I think March (technical difficulty) now, with that said, I think there is an opportunity for February to actually end up showing stronger growth because of what happened last February in the latter half. Where business really slowed down because of the fear of war, which high happened in March, which is why I think March is going to be a great month for the industry.

But as of right now, the pacing for February are pretty much in line with January. But to your point, they could improve. But I'm just telling you where things stand today. If January was flattish to up slightly for the industry, I don't think February today is materially better than that.

Okay. And then I guess just following up on that -- as you think about some of the cancellations you experienced last year, some of the business that perhaps did not get placed in March, I mean from a mathematical perspective you could also, I guess, suggest that perhaps pacings through the month of March could actually accelerate -- is that something that --?

I agree with that. Absolutely. But, until I see that, I don't want to hang my hat (indiscernible) I don't want to (indiscernible) into my numbers. But I do believe that the industry -- there's some upside in the industry given the dynamics of the first quarter of last year. And if we're going to see it, we should start to see it over the course of the next couple weeks, because that's when things started slow down dramatically last year.

Agreed, and the last point on that -- on the expense side, obviously, after really holding down your expenses dramatically in '03, starting to build them up a little bit more, as you said. To the extent that revenue does come in a little bit better, for some of the reasons we just talked about -- is it safe to assume that you can drop that to the cash flow line? Or will you probably be a little bit more liberal on your fixed component of your expenses in the first quarter?

Well, given that we're halfway through the first quarter, if there is a significant pickup in revenue, through the end of the first quarter, yes, we should do a pretty good job of dropping a high percentage of that to the bottom line. We're not going to turn on a dime, and start ratcheting up costs all over the place just because revenue growth is accelerating through the end of the quarter. We will be much more prudent about how we do that, if we do it at all.

Victor Miller, Bear Stearns.

When you reported first quarter last time -- just trying to go on Paul's point -- you were seeing a double-digit March, and it looked like you just -- it looks like you ended it just under 3 percent if the transcript is right. Talk a little bit about just how much it decelerated? And then January -- is it true that you were up 16 percent in January of '03 and that you've actually done a plus 9 on that number? And I have a follow-up.

All right, so -- to your second question, yes it's true. (laughter) we don't lie or try not to, certainly.

We don't lie.

We don't lie. Right. Right. We may make mistakes, but we don't lie. With regard to the deceleration -- yes, the transcript is also correct in that, when we did our conference call around this time last year, business was looking pretty good, we had a very strong January, and things were pacing at that time pretty strongly in February and March. But then, like you said, the weather happened and the war happened. And March ended up being a pretty soft month. And that's one of the reasons why we think this year the dynamic is very different. So I guess I'm just affirming what you just said.

And then, Alfred, how do you develop programming that will draw viewers, while managing the losses and making a competitive entry in TV 1 in the early stages which build it to robustness without losing too much investment? (multiple speakers)

Yes that's a good question. That is also always the crapshoot in television, right? Michael Eisner -- known as one of the most brilliant television guys, and he was a programmer, that ever been in the business. And look how long he struggled with the ABC network. Every dog has their day. So there is no guarantee that you're be able to create or pick the right hit TV show.

And so for us, that is not -- I think we're most focused on -- now -- on making our programming dollars -- which are not -- they're not robust, but they are not meager either. (technical difficulty) we're spending millions of dollars in the first year of programming, but it's not double-digit.

So we will hear from producers and some people in the Hollywood community -- you don't have any money to do this -- you don't have any money to do that (technical difficulty) from distributors who want to licensees programming -- that want to charges three times what we can afford.

But what it is coming back to, and what are guys are doing a good job at -- alright, producers, who want to make programming for us, alright distributors who want to sell us programming that is already made. This is how much money we've got, and this is how much programming we need. Who is with us and who is not? At the end of the day, we have got budgets and they ultimately want money.

But we made some great deals with distributors for acquired programming. And we have got -- about 30 percent of our programming slate is scheduled to be original. That is a pretty big number. Lifetime is only about 20 percent. Whether those shows are going to be great shows, remains to be seen. We are hopeful, and if they are not, then we will try something else next year. But we will not be rated on this network for two years. So really it's about word-of-mouth and how the network looks and feels as opposed to what the ratings are going to be like.

But -- first and foremost, it's about managing to a specific budget. And keeping our expenses in line, which we are good at at Radio, so hopefully we will be good at it in television as well. Because that's the exercise that keeps you in the game.

Lastly, in August (indiscernible) year -- your conference call then, you talked about Baltimore not snapping back with the loss of Infinity as a competitor. Can you talk about whether that market has progressed nicely for you?

It's doing much better now. It has taken a while but it's doing much better.

Okay thank you.

Tim Wallace, UBS.

This would be for either Scott or Alfred. In terms of the Philadelphia station, what kind of revenue expectations do you have for this year, and when do you think it would be breakeven? And then, Alfred, Could you date update us on the Mapleton station situation -- has anything changed there in terms of that being up for sale? Thanks.

Philadelphia --

It's not going to be on for another six months. We don't know what format is going to be, or at least we have not announced anything. We have not provided any guidance. So, that is all we can say on Philly at this time. Obviously, looking forward to having another strong station in that market. But beyond that, we will just have to wait for the next conference call or two before we provide more specifics.

Mapleton, there is it -- this was the first year where I could actually end up buying out my existing partners in it, and actually taking control of the radio station. As I said before, I didn't actually own it. I owned small pieces of it, but didn't own or control it. It was controlled by somebody -- another party. And so, there were, call it a series of four or five options that I had to take people out, and I've been doing that overtime. There is a process that has been started internally here at the Company, where there is an independent committee that represents the Company. And we're in the process of trying to work out a deal with the Company in order to have the Company buy it in. And it's a process that has appraisals and this and that, and the whole bit. Because we obviously know that in this environment, it's got to be as aboveboard and arms length as humanly possible. But, I'm optimistic that that radio station will come into Radio One in '04.

Okay, and then one follow-up question on pricing. I think Mary Catherine had said it's improving. Can you quantify that? And maybe elaborate a little bit on how that is working out -- I know month by month is a little bit too minuish in detail, but I think the market is very focused on radio pricing, and what should happen to that this year?

Month-to-month no -- I just know that it's getting better, a little bit better. I don't think I could quantify it month-to-month.

We get that question all the time. We don't really have a process in place to track changes in pricing, or momentum in pricing. We get this question all the time. So maybe it's something we should really look into.

The problem is, if you look at it in aggregate -- I'm not suggesting you'd necessarily learn anything -- but we certainly have looked at it station-by-station, particularly where we have problem markets. But we're much more focused on whether or not people are achieving their revenue goals which obviously is not just a P issue. There's quantity, and there's capacity utilization, all that kind of stuff.

So for us, the way we manage our business is we sort of take a bigger picture approach. But obviously we will dive down and analyze pricing and things like that if we feel as though we need to know certain things. And sure -- we also tend to have a pretty decentralized operation, but I'm sure that our sales managers and our general managers watch this stuff very closely. But again, what is happening in L.A. versus Dallas versus Washington is dependent on the market, dependent on ratings, dependent on a lot of things. And to aggregate all that, I don't think is very instructive.

Well, actually, we do sort of have a process. We -- every month, we get information on every single seller in Radio One based on last year, this year, where they are year-to-date, and their average unit rate -- average unit rate per seller. So, we can compare that from year to year, and that's what I see for January. But we don't have that information in of course yet for February. We get it after the fact. So there is somewhat of a way for us to tell.

Okay, thanks.

James Boyle, Wachovia Securities.

You mentioned the very strong December and January and it's continued into the quarter somewhat inconsistently. Is that inconsistent, due to the usual up and down, and weekly casings, aggravated by the Iraq uncertainty of that impact? Or is it more due to the ongoing lack of rate card leadership? Or is it something else?

Well, the inconsistency that I am referring too is really a market by market thing. We have got market that are up double-digit -- solidly double digits in February and March. And we have markets that are high single digit negative. And I'm not sure that there is any sort of geography or size rationale to any of this, in terms of looking at it. And what I think we can learn from an analysis of what's going on each market. So, I don't know the answer to your question. MC, you have any further thoughts?

No. I think it might be a little bit of all three things that you mentioned, Jim.

Okay. Could you also please, kindly, tell us how the Q4 month-by-month built up to that very impressive December? And, Alfred, could you tell us how much management is spending it's time on TV 1, now that it's launched, and you have hired all those executives?

I don't usually do this but let's see. Cash advertising in October -- down 1. November down 3.5. December up 10. Management time. I'm still spending, probably, 50 percent of my time on TV one. Primarily -- actually it's interesting. I was just in Houston. And I went there because I needed to meet with the general manager of Time Warner cable system to talk to them about TV 1 as our second meeting. Because we're trying to convince them to give us some more distribution and not less.

But also coupled with a market trip to the radio station in Houston, where I went on sales calls for two days. And met some (technical difficulty) a group of advertisers that have not given us historically the shares they should be in Houston. So I am finding it very beneficial. And I'm working primarily on distribution -- trying to get people to carry it and also I see advertisers. Any -- Scott and Mary Catherine? I don't know the exact percentages. I think it's got to be really low.

It's pretty close to 0.

Yeah. TV 1 has got -- Mary Catherine will get roped into something on TV 1 when we need the radio stations from a promotional standpoint, just because she runs -- it's no different than TV 1 being Montgomery Ward's or some other client -- does Ward's even exist anymore? Sears. And we need the radio stations to execute on a promotional plan, so we will rope her into that because she has got great ideas, and all of the stations report to her. But as far as any sort of day-to-day management of the cable network, that time has got to be close to 0. Probably more so for her than even for Scott, because -- the oversight -- a lot of the oversight that we do have will be financial decisions and managing the board and stuff like that.

Scott, when you say cash advertising, is there any difference in that definition between that and net revenue?

Yeah. It's before special events, other income and before direct expenses. It's just growth cash advertising.

Okay, thank you.

Mike Russell, Morgan Stanley.

I was just wondering -- as you look out over the course of the year, are there special events comparability issues that we need to be mindful of? Because I know that you had changed your strategy in the second half of last year. It seems like maybe some of those events might be coming back? Or just give us an idea of maybe some of larger events as they kind of look out over the year.

Well, we put a new system in place at the end of last year during our budget process. Because I think we just had so many events and we were just so used to doing them, we were not tracking them. We track those week-to-week, now. We know if somebody's going to spend more on the stage that they need to build, than they put in their special events form which we have for each different event. And they are required to get the final information in to us very quickly after the event happens.

So far so good this year. And we've had some -- in first quarter, Super Bowl, a couple of big events in Houston that were very successful. And Los Angeles All Star -- there is a ton of events. And at this point, it looks like every single one of those are going to be successful -- have had a number of smaller events around the country at the other markets, and so far so good on those as well.

Second quarter, third quarter -- we had the big ones coming up. (indiscernible) and all the birthday bashes and summer jams. And we're very focused on those, to make sure that we do a lot better than we did last year. Some of them were successful last year, but we have had a couple bumps in the road on those. That was -- I think that was mostly because people were not spending money on tickets, and going to concerts or musical events last year and the year before. But we are very focused on it, and have a severe system that we're using now. We're not afraid to dump an event if it doesn't do well.

Great. And then, Alfred, as you think of TV 1 as Sears or Montgomery Ward as an advertiser, how much -- is there any money going right now from TV 1 for Radio 1 as an advertiser? And how do you think about yourself as an advertiser for that brand in using Radio 1's properties? Does it overlap well with the current coverage that you have of radio stations with cable systems? Is it an insignificant number now that could be significant in the future?

I think the overlap between the Comcast systems is awesome. Which is one of the things that was really exciting about the deal. The ability to -- TV 1 had a bank -- spot bank one radio, one station -- which was part of our deal. We got equity in exchange for an ad credit. And so, TV 1 is a client of Radio 1. So now, of course, we try to do creative (technical difficulty) with the radio station to help (indiscernible) TV 1's awareness. Because, at the end of the day, if TV 1 is a successful, that's going to be great for Radio 1 shareholders. And so, I think it works well.

I couldn't imagine being able to start Cable Net not connected to a big platform like Viacom, or Discovery Networks or having to transmission consent rights, like scripts, the scripts networks do. And out there trying to get noticed by the cable operators. That's a tough (indiscernible). So I think we've got a leg-up from that same (indiscernible). We do create consumer momentum advertisers like (indiscernible). We have not landed a TV 1, Radio 1 deal yet, but we're talking to one big advertiser about one right now. But I know it's going to be helpful. I absolutely know it's going to be helpful.

I hope you all get over your colds. I've got the same one.

James Marsh, SG Cowen & Co.

Two quick questions here. First, Mary Catherine, I was wondering if you could review the situation in Houston? Seems like things are improving there, but wondering if you can give us some metrics relative to the performance of national and net market? Maybe just some marketshare or just flesh it out a little bit there?

And then secondly on the Dallas market. I know you introduced Steve Harvey there. I just wanted to know how that has impacted ratings recently? I'm just wondering if you think you can syndicate that show in more markets without negatively impacting the L.A. ratings? Thanks.

Yeah, Houston national's through the roof right now. Scott, do you have the information in front of you? Because I don't know that.

Yeah. National for the Houston market is high single -- this is for the market -- up high singles in February, up double digits in March. And we're sort of operating roughly in line with that.

Yeah, it's really improved. We have turned that around. It took a long time though, actually too long. And local is looking good there too. So I feel really, really good about that market right now.

Dallas, Steve Harvey -- Steve Harvey has really big ratings in Dallas, and it did not take very long for him to get those. But the rest of the station also has enormous 1834 numbers. So, I think that we have a program director there who knows exactly how to program for that market because it's a little bit tougher than a lot of other markets. Because there is a somewhat of a Latino focus there too, and they have done an excellent job.

And as far as Steve Harvey being syndicated, I don't know the answer to that yet. We have been very hesitant, and when we put him on in Dallas, we know our general manager in Los Angeles wasn't happy, because she felt it might compromise the L.A. show, and so far it has not. I don't know what it would be like to roll out in another number of other markets though. So I guess we'll take that one step a time.

Thanks a lot.

Lanny Baker, Smith Barney.

I had two questions. One on the expense growth -- I know you've been over it a bunch of times. But looking last year, it looked like your expenses from the fourth quarter of '02 to the first quarter of '03 came down by a pretty high single digit percentage. And if we're doing the numbers right, it looks like the station operating expenses are up a little bit sequentially this go around. Is that right? And can you sort of flush that out -- have you in your guidance unfrozen wages -- is there -- how large are the costs or are there any costs of carrying the Philadelphia station before it goes on air in Philadelphia? If you just sort of hammer that through a little bit more, it will be helpful.

And then the second question is -- just on the convertible -- is it -- when is it that you -- when is the timing that you could go out and remarket that? When does that window open up?

The window opened last July. The window is open. With regard to costs, I mean, we're investing in the business. The environment has improved. This time last year, we were still mired in recessionary environmental, though it appeared skies were brightening. And then of course the war hit, and that sort of threw everybody for a loop.

And so, if you look at where we are spending money. We have -- as I said -- we have not universally raised the wage freeze or the hiring freeze. We are being selective, we're being prudent, we have obviously baked some of that into our numbers for Q1. As we continue to operate through the quarter, we may or may not loosen things a bit more. We are spending more money marketing and promoting various stations. There are no costs associated -- no material costs associated with carrying that Philadelphia station. And so it's not that complicated, and it's also not that much money. You're talking on a base of mid $30 million expense. So a million bucks moves the needle. So we're investing in the enterprise because the environment is improving and we're growing again.

Okay, thanks.

William Meyers, Lehman Brothers.

A couple and I will try to keep them quick, because it's getting late here. With respect to the first quarter guidance from mid single digit growth -- what is the underlying growth assumption for cash for the spot ad sales? I'm just trying to get a sense for the core business versus the NTR and the non spot revenues.

Its roughly in line. I mean that's 97 -- 97-ish, 98 percent of our business. And so, the cash advertising and the overall net revenue growth that we've guided for for Q1 are roughly in line.

Special events revenue for the quarter will probably be up faster than the mid single digit growth. But again, it only represents about 2 percent of our business. And then other income, which is the independent record money, some tower rental income. We get a management fee from TV 1. All that is another 1 percent.

And, in some cases it's going down, and some cases it's new money as in the case of the TV 1 management fee. But you should assume that for the most part, the growth in cash advertising revenue mirrors the net revenue growth because, again, it's 97-ish percent of our business.

Okay, because I guess in the last quarter, I think you're over revenues were at 1 and your cash was up 3. So it was a much greater disparity. So that's why I just wanted to clarify.

Yes well, we get -- fair enough. And two of the things that happened last year that were fairly material changes in our business on the revenue side which were negative where -- we talked about the rationalization of the special events money and how that -- in some cases, declined 25,30 -- 35 percent year-over-year. And then the independent record rep revenue money at one time represented several million dollars of business. And it hasn't gone to 0, but it has fallen dramatically.

So your point is a fair one. But for the most part I think -- given the lack of dramatic swings, positively or negatively, in any of those other categories for the most part, you can usually reconcile net revenue to cash advertising revenue.

Great. And then just two quick ones. First in a terms of iBiquity, can you update is on your digital roll out with iBiquity? Sort of how many stations have been included, and what's the overall cost?

We're running five stations and it's like 150,000 a station. And our further digital roll out is actually on hold contingent upon -- they're some (indiscernible) players in our industry negotiating with iBiquity now. Because, obviously, iBiquity's portions are married to what the industry decides to do in terms of roll out. And they've got the technology that is going to allow us to be more competitive with satellite radio in the future. So, that's all kind of tied up in a big negotiation and I suspect we will follow whatever the leading players in the industry decide to do. Because it's not just clear channel and Infiniti talking to these guys, it's some (inaudible) as well. And then we'll go from there. So that determines our digital (inaudible).

And then, if you can just quantify the impact of the Super Bowl on your Houston numbers?

The impact of the Super Bowl on the Houston numbers -- Mary Catherine, do you have any idea?

Yeah, I would hesitate to say yet, because they really still have some ticket money coming in. So it's a little too early. Probably need another week.

Okay, thanks, very much.

Okay, operator, we will take one more question.

Bishop Sheen (ph), Wachovia.

Question on your executive search that you're going through right now, Alfred, to free up more of your time. When do you think, or what is your goal for having the right person in place?

My goal -- the tougher part is going to be the operating person. Because we're going to add a General Counsel -- Scott bulked up his area. The tougher hire going to be the operating person. The goal was by the end of the first quarter. And I'm not optimistic that we're going to make that. But I can tell you that it's a priority, so we're going to come as close to that as possible.

Okay. And can you talk about if you've noticed any significant new competition coming into your markets? Under the idea that somebody is coming at you somewhere at any given time?

There is a rumor that somebody is going hip-hop every other week, and then we e-mail fire drills -- we had one recently in Atlanta -- we're like, great, the seventh urban radio station in Atlanta, and clear channel ended up doing hot talk for men. And so, MC, have we gotten any more format challenges anywhere lately?

I haven't heard of anybody coming after us in the last two weeks.

(laughter)

(laughter)

Okay, well I'm going to start a rumor.

You know what? Go ahead.

No, I'm going to come urban polka. I'm going niche.

The last is a (indiscernible) question, is swaps. In rationalizing your platform, do you have opportunities, do you think about swaps that would mix in terms of one market for another?

Not a lot. Sometimes we think about it. But the problem is that most of the stuff we bought, we bought because we wanted it. We haven't a lot of big groups. So, I think blue chip was the biggest group that we bought. I mean, even the clear channel acquisition was a big acquisition, made up of a bunch of a la carte choices. And so, and we want to be in bigger markets. So, is somebody going to let us get out of Augusta to get into Chicago? Probably not. So therefore, it really doesn't become that big a (multiple speakers)

Yeah, not to mention that you are always a better buyer than seller.

Yeah, well. Actually -- the times we stole things, probably has not done the best job of selling. But we think believe that we find good assets to buy at great prices. So, I would agree -- we're better buyers than sellers.

Gentlemen, thank you, and thank you, Miss Catherine.

Thank you, everyone, for joining us this morning on our conference call. We will look forward to talking with you next quarter (indiscernible). Operator?

Yes?

If you could just close us, please.

Thank you for participating in today's conference call and have a nice day.