Urban One Inc (UONEK) 2007 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Radio One Inc. third quarter earnings release conference call. At this time, all participants are in a listen-only mode. Following the formal presentation, instructions will be given for the question-and-answer session. (OPERATOR INSTRUCTIONS) as a reminder, this conference is being recorded today, Tuesday, November 6, 2007.

At this time I would like to the conference over to our host, who is President and CEO of Radio One Inc., Mr. Alfred Liggins.

Thank you very much, operator, and thank you all for joining us for our third quarter results conference call. With me today are our Chief Financial Officer, Scott Royster, and also our Chief Administrative Officer, Linda Vilardo. Scott will open up with a disclaimer, then go into the numbers, and then we'll go into Q&A.

Thanks, Alfred. Good morning, everyone.

This conference call includes forward-looking statements of the meaning of Section 27A of the Securities Act of 1933 and Section 21E 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 the potential inability to integrate acquired businesses, need for additional financing, high degree of leverage seasonal nature of the business, granting of rights to acquire certain portions of the acquired company's or radio station's operations, market ratings, variable economic conditions and consumer taste, 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 Form 10-K, 10-Q, and other filings with the Securities and Exchange Commission. Radio One does not undertake any duty to update any forward-looking statements.

The third quarter was another challenging one for the radio industry, down 4.2% in our markets. But adjusted for Los Angeles, Radio One actually outperformed the industry. Further, given how soft the industry was, this quarter you can clearly see the benefit to revenue associated with our diversification strategy. I am sure that will become more clear as we progress through this conference call.

On a consolidated basis, net revenue came in at $90.4 million, down 1.7% from the third quarter of 2006. While our spot radio business was down in the mid-single digits, our other businesses were additive to our revenue picture. If you adjust for our L.A. station as if performed in line with the industry, our core radio business' performance would have improved by approximately 300 basis points. Pockets of strength included Atlanta, Cincinnati, and Dallas, why we were soft in Detroit, Philadelphia, and Baltimore.

The average unit rate fell by 5% as pricing challenges were made prevalent in the industry. Health care and financial were the two strongest categories, while retail and travel were two of the weakest.

For the quarter, station operating income was $40.9 million, a decrease of 12% from 2006. Adjusted EBITDA was $35.4 million, a decrease of 6% from 2006. Beyond the headline numbers, station operating expenses, if you back out certain onetime charges, growth initiatives, and other nonstandard items, were actually flat for the quarter. Now, I know that is a mouthful, but it does show that from a core business perspective, we are holding the line on cost very well. As we said in our prior call, going forward, there will continue to be a tension between managing expenses in a difficult revenue environment and investing in the future of the Company, but we are highly mindful of the need to control costs and adequately balancing the needs of the enterprise.

Net income was $4.8 million, or $0.05 a share, driven by lower core profitability. For the quarter, CapEx was approximately $1.4 million versus $4.7 million last year and as of September 30, 2007, we had debt, net of cash balances, of approximately $815 million and our leverage ratio for bank covenant purposes was approximately 7.13 times.

With that, we would like to turn the call over to the audience for questions.

(OPERATOR INSTRUCTIONS) Bishop Cheen, Wachovia.

Thank you for taking the call. Okay, I know you're going to give lots of color on L.A., so I'm going to pass that and go to kind of the balance sheet management question. $150 million of assets sold, I think you had mentioned a couple of quarters ago that you thought there were $200 million of assets.

No, when we announced a couple quarters -- when we announced over a year ago that we were going to undertake a disposition of nonstrategic assets strategy, we said that we were going to dispose of between $100 million and $200 million worth of assets. And ironically enough, we came in right at $150 million. So we never suggested that we were going to get to $200 million definitively, but we said the range would be $100 to $200 million. So we are at $150 million today.

You know what? I think it is a good place to be. There are some odds and ends that are clearly nonstrategic, like our AM in Boston, and we have closed on over 130 and I think we've got $15 million or $16 million left to go. But we are in good shape at this point in time and we are working on the rest of our business, including L.A. as a major focus.

So what I hear is we should not be looking for anytime soon a big, chunky announcements of more sales to come?

No, you should not.

All right, then last question and I will pass the baton, what fate awaits the 8 7/8? I know that is a high coupon for a public equity company to be lugging around, but with your leverage the way it is, your options seem somewhat limited.

Well, I have not checks what our sort of pricing options are in probably about week, but last I checked, I thought our bonds were trading at about 9.

Yes.

So when you said the fate of the 8 7/8, I do not think there is an option to refinance them at lower rates today. Scott, do you --?

I would agree with that. It is sort of ironic because, Bishop, when we actually did that deal, it was a really attractive price at the time. And then of course, rates fell precipitously and we actually did a similar financing a couple years later at 6 3/8. But, listen, the 8 7/8 in the scheme of things, given the state of the credit markets and where market rates of interest are today, which is not all that unusual, frankly, it is not a bad piece of capital, pretty patient capital.

I think when the business starts to settle down and when the markets returned to normalcy, obviously refinancing those is a leverage-neutral transaction, effectively. So when there is a window, I think the Company would be well-suited to find a more efficient way to refinance that, but I do not think it is necessarily weighing heavily on your mind right now.

Yes, and since we had to get our bank amendment done and I have been more engaged, and so I have been kind of keeping tabs on what our options are. Again, I do not -- if there was an option to refinance at a lower cost, we certainly would be looking hard at it, but at one time, there was not an option to refinance period at any cost. So now the credit markets are coming back a bit, but still I think we probably end up at about the same coupon. So we have not given much thought to it as to date.

Very good. Thank you.

Victor Miller, Bear Stearns.

In terms of the growth, can you talk about one that is in the P&L and one that is not talked about? You did not mention Reach often in this press release. Maybe you could talk about the growth dynamics of that and then maybe talk about TV One.

Then just, Scott's, could you tell us how do we calculate your leverage? What is the numerator and what is the denominator and what is the current leverage?

Well, Reach, is essentially business that is built around Tom Joyner to date, although we are in the process of and have been over the last year and a half of expanding with other products off of the Reach platform, including our talk network. We have three shows and our talk network, including Al Sharpton. We shuttered the other two and we're keeping Al Sharpton, but we also are launching two new syndicated morning shows that are using Radio One stations as a base, and that is the Rickey Smiley Morning Show, which is a young [end] morning show off of our Dallas radio station, and the Yolanda Adams Morning Show, which is a gospel morning show off of our Houston radio station. We are actually picking up speed and traction on those shows in terms of getting non-Radio One affiliates, however Reach's sort of growth profile is really centered around Tom at this point. And, yes, it's radio business continues to grow. We have a relationship, a sales representation relationship with ABC radio networks, which has a built-in guarantee which has escalators it. They also have an online business, BlackAmericaWeb, that continues to grow. They do a number of events.

And so that makes up the growth profile of Reach today as we speak and we're hopeful that as we grow out of these other programs, you'll start to see us be able to diversify our syndication revenues outside of just Tom Joyner. But if you put those shows together along with Russ Parr and Tom Joyner, ultimately you have what is really the dominant urban radio network in the country.

So we are also preparing for what life looks like in, you know, 2.5 years when that ABC radio agreement is up. I don't know if it gets renewed. It is too early to tell. I do not know if we end up building our own sales force, but certainly we are preparing for Reach to be a bigger platform than just the Tom Joyner platform and for it to really be a network platform.

TV One is no different than what we discussed on the last conference call. We expect TV One to be cash flow positive in terms of needing any more cash to fuel the operations going into 2008. I just recently had their budget meeting and they confirmed that, absent any extraordinary transactions, investments, just running the business on its own as it is currently projected, that TV One will not need more cash and just crossed the 40 million sub line. They are doing well and fortunately, the cable advertising marketplace is very robust. It has been robust for the last two years and we're expecting another robust year in '08.

So it is unfortunate we do not get credit for it, but I guess I kind of understand that. Until there is cash coming through the door that is hitting our P&L, investors might be reluctant count that, really, as value, but I'm glad that we did it. It is a great hedge against a maturing and flattening traditional media business. My guess, cable would be considered almost semitraditional, but not old line traditional like magazines, newspapers, broadcast TV, and radio. So think it is a good hedge.

On the radio -- Reach Media's performance was strong for the quarter. What were the metrics in revenue and cash flow? What does that mean strong for the quarter?

Their revenue was up double digits and their station operating income was up north of 20%

Thanks, Scott. Then on the leverage --?

So, it's Victor, it is a fairly typical leverage ratio. It is gross debt, okay? So even though I gave everyone on this call the net debt number, because that is one way that we look at how much debt we are actually carrying, in terms of measuring leverage for bank purposes, you do need to take the gross debt, which are the end of September was $836.4 million, and then that's over an LTM EBITDA. And if EBITDA, and again, this is all in the the bank credit facility in terms of the terms and conditions. The EBITDA is just built from net income in a very traditional way, where you are adding back all the initials of EBITDA, which would include all the various non-cash charges between net income and EBITDA.

But the what is the number?

Then obviously interest, as well.

What is the number that we're dividing -- 836.4 divided by what?

I'm sorry, so I said my opening remarks that leverage was -- leverage ratio at the end of the quarter was 7.13 times, so you're looking at approximately $117 million of trailing EBITDA.

How much has -- in that, you do add back, what, 49% of Reach? Is that right?

Well, what you effectively do is you exclude 49% of Reach's EBITDA, that is correct.

So what is a 49% of Reach that you subtracted to get to $117 million?

We have not historically broken that out, as you know. Let me talk it over with folks here and then if you and I -- if you want to talk off line, we can talk about whether or not that's something we're going to share with the market.

Okay, thank you.

Marci Ryvicker, Wachovia Capital Markets.

Can you talk about the environment for the fourth quarter at both your stations and in your markets? Then also can you talk about how September did for Radio One? The RAB came out with a 7% decline for the industry yesterday. Just curious how you compared to this.

The fourth quarter is I think not a surprise to anybody. It is not a robust quarter. I think I have taken a lot of heat probably over the last two or three years and actually beginning at the Bear Stearns conference, where I was sort of negative one the growth prospects of not just radio, but the traditional media business. And I think it is -- I think it is borne out that it is kind of a fact of a life.

I do think that we as a radio industry have got some challenges that we need to correct, most notably I think that our pricing strategies have missed the mark as an industry. But certainly the growth in online advertising has not boded well for traditional media. I think that is continuing to show in sort of the pacing for the radio industry.

So that was a big number in September, down seven. For our markets, and large markets were down let's call it 6 and we were, if you exclude -- including L.A., we were down slightly north of that. We were down about 7.4, but if you extract L.A. out, which is a big number for us, we were roughly in line with the industry.

One of the things that you have happening in particular, I think, that we are being affected by it significantly is political spending from last year. We own every black radio station in the state of Ohio, as an example, and there was a highly-contested I think it was a governor's race. We took a lot of political money in Ohio and it is showing up in our markets this year, so when we look at our comps, if you started in September -- you want to --?

Yes, I actually have those numbers. I have got it by quarter. Last year in the third quarter, we had about $1.1 million in political. This year it was $146,000, so obviously a $1 million swing just in that one category. For Q4 last year, we had just under $3.3 million.

Yes, and we also had a big political intake in Baltimore, which is one of our bigger markets, because there was a hotly-contested governor's race between the Democrat Martin O'Malley and the black Republican, Michael Steele. We had the dominant position in that markets, so we took a -- and we are in Washington, so we benefited in Washington and Baltimore.

So for us, even though the industry took it on the chin in September, and when I start to articulate our numbers, I actually felt better about our performance, given how much political advertising I know that we took that was disproportionate to us, in particular in places like -- I guess it is in both places, because Baltimore was a black Republican running against a White Democrats. And in Ohio it was the opposite, it was the white Democrats running against a -- no, same thing, black Republican running against a white Democrat. So we got paid by everybody, which made us have a disproportionate amount of political.

So when that cycles through, I think that next third and fourth quarter for us here are going to be actually very good, because we're not taking these big hits.

As far as that Maryland rate is concerned, we also got money in D.C. for that.

I said that earlier.

Baltimore and Washington.

With Baltimore and Washington, we got a ton of money.

Thank you.

John Blackledge, JPMorgan.

Just a couple things. Just wondering for TV One, over time, what is the sub number that you guys -- that TV One can get to? Who are the big MSOs that are still left?

You know what? It is really two players. It is EchoStar, which is DISH Network, and it is Cablevision. Getting those guys is going to be the difference between being, call it, a 45 million sub network and -- when I say 45, call it, over the next five years with growth a high 40s to 50 million subnetwork or a 60 million to low 60 million -- 62 million, 63 million sub network. It really is based right in those two distributors.

Now fortunately, because of our target, we will be a very profitable cable network and sell lots of advertising and have coverage. Cablevision is obviously a huge part of New York, but we do have Time Warner there, so we are on in Manhattan on channel 90 and we also have nationwide satellite coverage with DirecTV. And DISH Network's African-American penetration is about half of what Direct's is. So if our -- if the business did not change, if we did not get those guys, it would still be a good business for us. If we get those guys, it will be a better business for us.

Thanks, just one follow-up. I know your leverage is over seven times, I am just wondering what is the timing and other stakes in TV One coming up? Can you guys get involved there? I do not know if you have the first rights for some of the venture interests in TV One, but if you could just give us an update on that --

Yes, we actually have calls on the venture interest in TV One, not first rights. The calls do not trigger for another two years, so if the venture guys decide they want to sellout early, then they can make a deal early. If they decide they want to ride longer, then it will be two years before to call them out.

How much is that, Alfred? Does that get you over 50%? Could you consolidate?

It would not get -- actually, if we bought out every single venture investor currently that was there and we bought it out and we did not do it through the network, we do not have the right. Comcast split the right to buy out, so we don't have the unilateral right to buy that entire interest. But if we were able to buy the entire venture interest, we could go over 51%.

And to be clear, the accounting rules these days are such that they do not just look at the bright line number and say that that is the determining, the only determining factor as to whether or not you consolidate. It is very possible that, given our I guess relative influence relative to the enterprise, that if we were in the mid to high 40s -- again, we would have to test it at the time -- it is possible that there might be consolidation at that time.

Okay. And this is last question. Thank you. Are you guys gearing up to get a bigger stake in TV One? Is that where we're going? I know you have a lot of things going on. I know you're diversifying, but --?

I just said that we do not have the right to call out that stake for two years.

Right.

So we cannot control what our venture investors decide that they want to sell, so there is no gearing up to do. They have got decide they want to do something early and I -- I do not think that it is a wise move for us to pay an unreasonable valuation just for the right to consolidate a little bit early. So that is out of our control in the near future.

Okay, thank you.

Alfred Liggins But the answers your question is when we have the ability to buy those states, we plan to buy those states and ultimately the deal was structured so that we could ultimately consolidate the entity.

Great. Thank you very much.

John Klim, Credit Suisse.

Two quick questions for you. First, can you provide us an update on Internet initiatives that you have touched on in the past? And then secondly, are there any urban-focused media acquisitions that you could consummate to further diversify revenue streams and in a perfect world, how would your revenue streams look in five years? Thanks very much.

You know what, our Internet initiative, we are building our Internet initiative as we speak in New York. I am not in a position right now where I want to fully articulate what our strategy is, although it is all-encompassing, which includes a big content effort, big content push fueled by sort of our network of radio markets, because I view our radio markets as content bureaus. And when you look at the existing Internet players or players in the black Internet space, they do not really have the same kind of sort of resources to generate content, not to mention just the ability to cross promote. It is also -- the business is also going to consist of a technology and ad sales platform for more than just our radio websites and for more than just the websites that we currently own and control, so that other publishers, people, personalities, whether they are bloggers or big personalities, we can provide them the ability to monetize their Web presence. We have got some really smart people working on it. I am pretty high on the idea and its prospects, and you -- I will probably reveal more in the very next conference call.

There are acquisitions that could be made, but unfortunately, the number of acquisitions that are large enough to make a big impact on a quick basis are slim. So this is one of those things where you have kind of got piecemeal a number of things to build scale. I guess if Viacom were ever to sell BET, we could buy BET and we would be diversified tomorrow. Or if Clear Channel decided to sell their urban radio presence, we could -- we would not be diversified, but it would change the profile. It would change the growth profile of the Company because we compete with them in a lot of different markets. Short of that, we are probably going to have to build our diversification a little more deliberately.

Great. Thank you.

Eileen Furukawa, Citigroup.

Can you just give us a little bit more specifics on L.A., what the third quarter decline was there, and you had said last call that you expect to return to year-over-year growth sometime in the fourth quarter as you anniversary some of your comps. It is that still the case?

Also can you give us kind of an idea on the competitive environment? You said before that you thought that someone needs to drop out and it's going to be a long, drawn-out battle. Is that still the case? When you say long and dawn-out, do you think this is something that is over multiple years, or I'm just kind of trying to get an idea of what's going on there. Thanks.

Look, you say long and drawn-out -- I know that analysts want answers, but I cannot tell you when the competitor is going to decide they want to do another format. That's just something you cannot handicap. What we can tell you is that there's $1 billion there. We are fighting for a hill. It is costing money to do that. Stations probably going to -- what are we going to do? Actually, I don't want to give specific revenue figures. We're going to lose -- the station is going to lose money this year and the reason I do not want to give you revenue figures is because I do not want our competitors to have detailed information on what we are spending in the marketing and promotion battle and what we are building, things of that nature, because it just does not make good business sense.

But we are committed to it and we think once it ultimately shakes out, it could be a really good business for us again and if there is any sort of consolidation in that market -- look, consolidation could happen in a number of ways. I know people freaked out when I said we could get bigger there, but we could also do a joint sales arrangement with one of our competitors or do and LMA with one of our competitors. If we bought one of our competitors for not a lot of money and turned it into, you know, a much better combined business, then people would be happy and not really freaked out about the word acquisition if it was a prudent business decision.

I would hope by now the market trusts us enough, based on our actions, that we try to manage our balance sheet. We do the right things. We're not married to a certain point of view on what is the best way to create shareholder value. Again, well over a year ago, we were the ones that said we were going to divest nonstrategic assets and the market did not have to ask us to do that. I think we got out ahead basically of a fairly significant decline in values. And that is a good thing. So for now L.A. is a battle, and we just got to win it.

What was the exact revenue decline there in the third quarter? You had said before you thought you might see a return to growth in the fourth quarter.

I did say that and actually in the month of October, we are up roughly high-single digits year-over-year in the month of October. We had a big, extraordinary NTR event that helped push us there. I do not -- the reason I am not crowing now, right now, is because it is still on the edge about whether we're going to be up in November or December. But we were definitely up about 9% in October. And so we're looking to try to repeat that in November.

Okay, thanks a lot.

Jim Boyle, C. L. King.

Alfred, what would be the biggest negative and the biggest positive of private radio ownership in major markets that might be relatively speaking more near-term oriented then maybe family or founder-run groups?

I do not really understand questions.

You're going to be competing against some people who are no longer going to be publicly owned. Do you see any big positive or any big negative with that?

Well, put it with this way, it depends on how their deal was financed. I see a huge positive in competing against somebody that is going to be levered at nine, ten, 11, or 12 times. I do not know where the Clear Channel financing is going to end up, but certainly Univision was levered at 12 and the history of private equity firms is to take on as much debt as the markets will allow. So I think that that is a good thing for us from a competitive standpoint.

Now, if they decided to write a bigger equity check and they stayed levered at, you know, 7.5 times, then I think that is a much more manageable leverage ratio for a radio company to stay competitive. But anybody who is going to be levered at double digits is going to have operational stress, and so that is a good thing for us.

Okay. Radio One does not own stations in four of the top 10 markets. If you sold off or lost another top five market position, do you see any sort of overly big impact with national spot advertisers looking for an urban format environment? Or is -- whether you are in five out of ten or six out of ten, it is indifferent?

You know what? I think our platform is fine the way it is. We do not have any intention of selling out of any of our larger markets and I think it is helpful for our national presence. I mean, the reason I -- I tell my staff this all the time. I like our position better than anybody's position. We actually have the opportunity to morph into an urban media and content company across all distribution platforms, radio, cable television, online, print, content, which will allow us also to open an ample presence in mobile and things of that nature. Most of our other brethren in the sector are essentially radio companies, mid-market radio companies. Not that radio is bad, but it is kind of like being a newspaper company, or just -- I guess people love television now with the hope that they are going to get retrans fees from the cable and satellite operators. But I think that fortunately we have got a move. We have got a move that we can make and I cannot say that about everybody else.

That is what I have been doing. It is going to take a minute to get there, but at least we've got a move. At least I am not sitting here. It is no fun to sit here and talk, well, the industry was flat and our cash flow was only down one or two and have everybody crow about what a great job that is. I mean, that is not the kind of business that I want to run. You know, if I thought that's all that was there for us, then I would probably be selling.

Thanks.

James Farrant, Morgan Stanley.

Could you just characterize what happened in Philly and Houston this quarter? You mentioned on the last call that Houston was having a decent quarter looking into the third and that Philly had improved from a much weaker second quarter. So I just wanted to understand, one, how those markets are performing and if you could sort of characterize the conversations that you're having the advertisers on PPM and whether or not they are sort of making cost per point adjustments as they look forward.

Yes, I cannot bring you up to speed. PPM is spotty in terms. Some advertisers are absolutely making cost per point adjustments. Some advertisers are actually making a cost per point adjustments but then dropping the amount of points that they ultimately buy actually in a number of weeks. So I think that is still flushing itself through. It is very, very, very new and Scott, if you want to --?

Houston performed in line with the industry in the quarter. Philadelphia did not. They underperformed, but we have some in challenges in Philly for awhile. We have new management there. I am not sure if you're trying to connect performance with PPM. I do not know that is exactly what our issue is in Philly.

Put this way. It has to be -- any time you have noise in how a medium is perceived and ultimately the size of its audience and you're going to have certain noise in the perception of its value, and I think PPM is causing that in those two markets. I mean, it is clear that they have got sort of growing pains and they are working on it. Hopefully when they get it all figured out and get it right in the end analysis, urban radio is not getting hit.

It is actually strange because in Houston, early accounts are that urban radio is getting hit hard, particularly the one stations that were older and had longer time spent listening. I don't have the numbers at my fingertips, but I was told the last by my staff in the last month of PPM that our urban HD station there was a top-four radio station, like either the third or fourth 25-54, which, you know what, is a respectable position.

I think PPM is going to help us in some places. It is helping us in Philadelphia with our young end station, where it's actually showing us beating our former -- our competitor, who was formerly the leader, the Clear Channel station. It is going to help us in number of other places like Atlanta, Georgia, Dallas, and Washington, D.C.

Great, thanks.

David Bank, RBC Capital Markets.

This is Ryan Vineyard in for David. Could you provide us with an expense growth run rates, including Giant, and also give us a little more color on the increase for music royalty costs that you mentioned in the press release?

I am sorry, when you say expense growth run rate, what do you mean?

Just for the entire consolidated business, given the acquisitions and divestitures that you have made in stations and including Giant, operating expenses.

All right, well, our expenses in our press release are all of that, right? I mean, it's the station operating expenses for the enterprise. So what is not in the press release that you're looking for, because that includes Giant.

So any additional investments, expenses you would intend to make in Giant or Internet or any of your other initiatives?

Are you looking for forward -- so you want me to provide expense guidance going forward?

Yes, just the run rate.

We're not going to do that.

Okay. And then on the increases in music royalty costs?

Music royalty costs? There is a formula that is in place for the industry. You know, one of the things that is negatively affecting L.A.'s cash flow is L.A. is still paying music royalty debts as if it has a three share and unfortunately, it is a biannual look-back in terms of the calculation.

So we are getting crushed by now, right now, but over the next -- actually, is it next year or the year after that it will come into -- probably the year after, so we'll probably have one more year of that, but it '09 and '10, hopefully we're going to be billing a lot more money and paying -- and having higher ratings and paying music royalty rates as if we have a one share. So it is kind of wacky, but I was not on the committee that negotiated it. I probably would have done something different had I been, but it is kind of a drag-along situation.

Okay, thanks.

James Dix, Deutsche Bank.

A couple questions. Just on your fourth quarter outlook, are you looking for your markets generally to be similar to what they were in the third quarter or better, worst? Just trying to get us sense there. I think you indicated your markets, at least in the third quarter, were down around 4%. Then I guess, Alfred, if you could just look outside Los Angeles for a moment and I know you're going through budgeting now, what do you see in terms of particular sources of upside or things which need to be fixed in markets outside Los Angeles, kind of your top three? What tops your list as you look at 2008? Then I guess the last one just quickly for Scott or -- do you have any particular leverage target you're trying to get to for like year-end '08?

Particular outside thrust would be places like Atlanta, where I think we have a lot of upside and we're probably taking out 10% of the market. We have got almost 14 to 15% of the audience. Dallas, Cincinnati, potentially Washington D.C. because we have got a third, an extra station here that we are monetized in. I would say Houston and actually I have said Houston in the past because of a third radio station there, the gospel station, where we're going to be seeing significant revenue gains. But because there is such a disconnect with PPM in that market, until that gets figured out, I do not know if I can count it as a growth market. I can say that our position should be stable and we do very well in that market.

So -- and Philadelphia has been a disaster for us. We have got all new management there and we're hoping that is a big improvement area.

In terms of the markets in the fourth quarter, James, your guess is as good as ours in terms of what the performance is going to be. But we're not seeing necessarily anything out there that would lead us to believe that there is going to be materially different performance in the industry. Hopefully better than September, but again, as Alfred alluded to earlier, you do have that political comp in Q4 that for October and November could make it a little tough.

In terms of leverage, we do not have a specific target in mind for next year yet. We're going through our budget process. I think it will be better for us to go through the next month, see where we are coming out, and then take a look at what organic growth would lead to in terms of leverage and then sort of strategize around that based on what the outlook for the business is according to what our management, thinks, over the course of the next one to two months, we will have a better look on what next year is going to look like from that perspective.

Okay, great. Thanks.

(OPERATOR INSTRUCTIONS)

Operator, let's close this out, please. Thank you very much, everybody, and we will speak to you next quarter.

Thank you very much. Ladies and gentlemen, that does conclude our conference call for today. If you would like to listen to a replay of this conference, you may do so by dialing either 1-800-475-6701 or for international participants, 320-365-3844. You will need to enter the access code of 892774. (OPERATOR INSTRUCTIONS)

That does conclude our conference call for today. We do thank you for your participation and for using AT&T executive teleconferencing. You may now disconnect your lines at this time.