Urban One Inc (UONEK) 2007 Q4 法說會逐字稿

Welcome to the Radio One Inc. 2007 fourth-quarter results call. Now at this time all lines are in a listen-only mode; later there will be a question-and-answer session and instructions will be given at that time. (OPERATOR INSTRUCTIONS). And as a reminder, this conference is recorded. We ask that you please remain connected just for a few moments at the very end of the call to get some important replay information. Now I'd like to turn the conference over to your host, Mr. Alfred Liggins. Please go ahead, sir.

Thank you, everyone, for joining us for our fourth-quarter results conference call. Joining me today are our new CFO, Peter Thompson; our President of Radio, Barry Mayo; our Chief Administrative officer, Linda Vilardo; and our VP of Finance, Deborah Cowan, for the first time -- she's the lady behind our numbers.

As you've read in our earnings release, the headlines show a decrease in net revenue and station operating income of 5% and 26% respectively for the quarter. In addition, we are taking a non-cash impairment charge of $404 million in the quarter. There's quite a bit of noise in our numbers and Peter Thompson is going to go into detail to help you sort out that noise and get a clear picture of our business.

Although 2008 looks to be a challenging year given the economy, I believe that our radio business has bottomed out and we are poised to outperform the industry in 2008. Barry Mayo will give you some color on how we are starting off the year. Peter?

I'll just start by reading the standard disclaimer before we get into the detail. During this conference call Radio One will be sharing with you certain projections or forward-looking statements regarding future events or its future performance. We caution you that certain factors, including risks and uncertainties referred to in the 10-K's, 10-Q's and other reports periodically filed with the Securities and Exchange Commission could cause the Company's actual results to differ materially from those indicated by its projections or forward-looking statements.

This call will present information as of February 21, 2008. Please note that Radio One expressly disclaims any duty to update any forward-looking statements made during this conference call. During this call Radio One may also discuss some non-GAAP financial measurements in talking about its performance; these measures will be reconciled to GAAP either during the course of this call or in the Company's press release which can be found on our website at www.radio-one.com.

The conference call will be recorded in made available for replay from 1:30 PM Eastern Time today until 11:59 PM Eastern Time the following day. Interested parties may listen to be replay by calling 320-365-3844, access code 909-227. Access to live audio and replay of conference call will also be available on Radio One's website at www.radio-one.com. The replay will be made available on the website for seven calendar days following the call. No other recordings or copies of this call are authorized or may be relied upon.

And now moving on to the detail. In the fourth quarter the radio markets in which we operate were down 4.6% year-to-year. On a same station basis our radio division, excluding Reach Media, was down 6.9%. On a consolidated basis net revenue was $78.1 million, down 5.1% on a same station basis from the fourth quarter of 2006. Of this decline 306 basis points is attributable to political comps.

Looking at our spot radio business, national advertising was down 17.8% year-to-year which is against a 12.4% decline in our markets, and local was down by 2.4% against 3.3% decline in our markets. Looking by market, we had year-over-year growth in Atlanta, Dallas and Raleigh while we underperformed the market in Baltimore, Cleveland, Detroit, Houston, L.A. and Philadelphia.

We'll talk specifically about Los Angeles later during this call. And although the 2007 numbers were disappointing, accounting for $1.8 million of the adverse Q4 year-to-year EBITDA variance, and $10.5 million for the full-year EBITDA variance, we've seen some definite signs of improvement in our performance there.

Turning to pricing, the Q4 average unit fell by 5% year-to-year as pricing softness continued within the industry. Our total number of spots sold declined by only 1%.

Looking by advertising category, the only real bright spots were health and finance whereas most of the larger categories, including automotive, retail, political and telecommunications, were weaker year-to-year.

In the fourth quarter station operating income was $27.8 million, a decrease of 26% on a same station basis from 2006. Adjusted consolidated EBITDA was $20 million, a decrease of 37% on a same station basis from 2006. Operating expenses for the quarter were up 15% year-to-year on a same station basis.

Normalizing for new 2007 expenses, such as Interactive One which had costs of $2.7 million, WPRS, which is our new gospel station in the Washington market which had costs of $0.3 million and PPN cost of $60,000 reduces this increase to 9% or from $57.3 million to $54.2 million.

Other variances within that $54.2 million include $1.2 million of marketing costs in Los Angeles which are non-recurring; additional syndicated talent costs of $0.7 million from which we will generate future incremental revenues; additional music royalties resulting from streaming and ratings improvements of $0.4 million; outside legal and tax costs of $0.7 million which should be non-recurring; senior management hires of $0.7 million and our consumer research project of $0.3 million.

This variance list that I've just outlined totals $4 million of which I estimate $2.2 million to be non-recurring. There are other small variances, both favorable and adverse, which make up the difference. Thus I estimate the increase in our core expenses, which excludes the Internet, magazine and non-recurring expenses, to be approximately 5% for the quarter.

During Q4 we invested $2.7 million into our Interactive One division which includes Giant Magazine. Internet ad sales from our radio websites including Reach Media generated revenue of $1.8 million in the quarter, which is a year-to-year increase of 32%, and $6.7 million for the full year 2007, a growth rate of 40% year-to-year.

Moving down the P&L, as part of our year-end review we recorded impairment charges to our FCC licenses of $404 million. This reflects the combined effects of slower revenue growth, a riskier economic outlook, and the lower multiples that we're currently seeing in the radio industry. Of this write down, almost half was attributed to Los Angeles with the balance split across six other markets. As a result of the large non-cash impairments our net loss was $386.4 million or $3.91 per share.

Unlike in recent years, the non-cash impairments pushed the Company into a cumulative loss position for the three-year period just ended and thus under FAS 109 accounting for income taxes we reviewed the realization of our deferred tax assets which are predominantly NOLs. The result was that we provided for a full valuation allowance, an approximate $132 million charge for these assets.

I think it's important to point out that the underlying deferred tax assets should remain available to be used by the Company in future periods. Our estimated NOLs at year-end are roughly $645 million gross and $128 million tax effective.

For the quarter CapEx was approximately $4.8 million and for the full year $10.6 million. We've now substantially completed the conversion of our stations from analog to digital and thus our 2008 CapEx is projected to be significantly lower than 2007.

As of December 31, 2007 we had debt net of cash balances of approximately $791 million and our total leverage ratio for bank covenant purposes was approximately 7.58 times against a limit of 7.75 times. Our interest cover was approximately 1.60 against a limit of 1.60. Although this is projected to ease with reduced interest rates and lower borrowings moving forward.

Our projections for 2008 show compliance within the existing covenant package for each of the four quarters. Moving forward we intend to break out numbers for Interactive One and Reach Media to give the market a more transparent view of our business. As a starting point for that process I'd like to break out for you the full-year net revenue and EBITDA contributions that these units made.

Reach Media on a pre eliminations and purchase price accounting basis contributed net revenues of $49.8 million and EBITDA of $13.8 million of which our share is 51%. Interactive One on a pre eliminations basis had net revenues of $3.2 million and negative EBITDA of $5.1 million.

Other numbers that you may find useful in understanding the Company's 2007 performance are the net revenues and EBITDA impact for the stations that we sold which are approximately $27 million and $7 million respectively for the full year 2006 basis. So that effectively $27 million of revenue went away and $7 million of EBITDA went away, which enabled us to deleverage during the year by approximately $123 million of which around $108 million were the proceeds from those assets sales.

I hope that this has been helpful in providing some additional detail on the numbers contained in the press release. And I would now like to hand over to Barry Mayo who will provide some information on our current performance.

Thank you, Peter. Even though our markets have been adversely affected like the rest of the industry, we are feeling cautiously optimist about the start of this year. We're currently pacing flat to plus one for Q1. Frankly a week ago we were pacing plus two, but we've had and continue to have a strategic focus on managing expenses, being careful not to cut expenses that will cut into our ability to grow in 2008.

We're starting to believe and have good reason to believe that as a division we're starting the year off positively. The January (inaudible) is out. 12 out of 15 Radio One clusters of stations outperformed their respective markets. As a division in January we outperformed our markets by over 4 points -- all good reasons to believe that the year has started off pretty well for us.

With all the focus on L.A. you should also know that we feel like we've turned the corner there. While L.A. did have a tough Q4, almost all of it attributed to, as Peter mentioned, a $1.2 million marketing and promotions campaign, we're expecting much better Q1 year-over-year results. As a matter-of-fact, we expect to break even in L.A. or better in Q1.

So net, net I feel like we're definitely headed in the right direction and we're starting off the year in a positive way, poised, as Alfred said, for Radio One to outperform their market. Thank you.

Operator, let's open the lines up for questions, please.

(OPERATOR INSTRUCTIONS). John Blackledge, JPMorgan.

Thanks for taking the question. A couple things. I was just wondering what local and national are pacing in the first quarter. And then if you can give some color on OpEx growth in fiscal year '08, can we expect to see double-digit OpEx growth for the year similar to last year? Thank you.

We're not going to break out specifically national/local, but let's just say that national is a big driver in terms of the downdraft, and local less so, but they're both taking a beating in Q1. I think RB just released their January numbers recently and said it was down 6, and they broke out national and local.

OpEx -- I think Peter did a pretty good job of breaking out what our '07 core OpEx was -- looked like and that was just about 5%. At the end of the day we're in an industry that's going to be flat, maybe down negative this year. So a large part of our expenses in '07 are us diversifying and trying to get into faster growing areas like online.

I don't expect our core expenses to rise significantly. We're going to manage those and we've been careful and deliberate with our bank amendment to get carved out of that what we're spending on our online effort. So I don't want you to think that overall this company's expenses are growing 15%. At the end of the day in Armageddon you got to do what you got to do -- meaning that before we get into any kind of dangerous territory we'll make appropriate adjustments.

But at the same time we need to try to position ourselves to get to some smoother air as the pilot says when you're in the airplane and an arena where revenues are growing. And so that's what we're doing. We anticipate more of the same in '08. Although we anticipate, as Barry said -- last year Los Angeles lost $5 million, and the only reason we lost $5 million is because we changed the format. We blew everything up, we spent a boat load of money on marketing. Even on the revenue base that the station currently has you don't have to lose that kind of money. And so we are going to eliminate that loss this year.

The first quarter is the very toughest quarter to make money in because it's got the lowest amount of revenue and you've got a fixed amount -- a high level of fixed expenses. And we're going to break even or do better there. So we expect that the rest of the year is only going to be better. So we've got sort of kind of $5 million we feel in our pocket because we know we don't have to lose $5 million in L.A. alone. And I hope that answers your question and that's how we kind of look at it for next year. Next question, please.

Marcy Ryvicker, Wachovia Securities.

I just have two questions. What has changed to make you believe that radio has hit bottom or Radio One has hit bottom? Is it just L.A.?

I didn't say radio has hit bottom. I don't know what radio is going to do. Quite frankly when we went into this year's budgets we said -- we kind of got religion and we said all right, it's going to be another flat year. And I read your cheerful news this morning in Inside Radio and your view, so I know that you don't view it's going to be flat and I hope you're wrong but let's assume that you're right.

We just got a fair amount of momentum in the number of markets like Philadelphia and L.A. and Dallas and our new station in Washington where we're just poised to take market share. So when I say we've hit bottom -- look, I get questions all the time. If the industry was flat we'd probably have in our opinion a pretty good year. If the industry is going to be down 6 then that's obviously going to mitigate how good our year is going to be.

We're exposed to the macroeconomic factors like everybody else and so I can't handicap it. But if you ask me why -- I mean, if you actually pull out Los Angeles, our last year was kind of in line with the industry, maybe even a little better. L.A. was the big driver. At one time we had close to $20 million cash flow and then you go from $20 million to negative $5 million and that's a gigantic swing. And in the middle of also a downdraft in the industry. So that's why I feel that we've sort of bottomed out and we're poised to outperform the industry.

Okay, and then I have one more question. Since you're still a pretty highly levered what plans do you have to reduce your debt?

Right now the plans are to grow our cash flow and if we come to a decision or a realization that that's not possible, then we're always thinking about how we prudently manage our balance sheet. But right now that's our game plan.

But look, anybody who's levered where we're at has got the same issue and, quite frankly, on a widely heard conference call we're probably not going to articulate every thought process that we've had in terms of how we reduce our debt, but there are a number of things that we could potentially do.

And sure, we did a number of asset sales over the last year, year and a half to do that, but there are even other things that could be done to reduce our debt and reduce our leverage. But we're starting with improving our cash flow.

Victor Miller, Bear Stearns.

Good morning. Barry, could I ask you in Los Angeles specifically, what gives you the sense that things are turning? Is it that the ratings are starting to improve or do you have the cost there? Do you feel like the right cost base will allow you to make profits there? Secondly, on the PPM, for the year in Philly and Houston now what's your general impression of the impact that you've seen on urban radio? Obviously you said, Alfred, that you felt one of the markets was actually performing quite good for you in first quarter. So that and then I have one follow-up? Thank you.

Victor, good morning. First of all, in L.A. I think that I feel most sanguine about our growth because of management. We've got an extremely good manager there who I've worked with for many years who has put together and restructured our sales effort and it's showing dividends. I mean, it's showing dividend. The ratings are relatively flat. We're in the process of just selling more and selling better with those ratings. And we're delving into areas of nontraditional revenue in an effort that the station has previously not had. So those are the combination of things why I feel better about L.A.

As it relates to PPM -- actually PPM has been a mixed bag for us, currently pretty good. PPM has shown in Philly, and I believe philosophically, Victor, just so you know that radio stations that are not the [herring] stations have upside in PPM and PPM overall in Philly has shown that we've done actually a little better than the [diary] method with at least one of our stations, that being WPHI. And I expect for urban radio to see stuff like that around the country.

When PPM first hit in Houston it had a very deleterious effect on us. We lost about six or seven ranks which obviously caused us pause because people were saying that type of thing might happen in urban radio. But since then we have regained our right position in Houston with the box regaining its number one 18-34 position in the marketplace and KMJQ retaking its position in PPM as number one 25-54. So look, there is no playbook, Victor, for PPM and we're figuring it out as we go. But we feel pretty good about where it's going. Like I said, we went from six or seven ranks down back to number one in both those stations.

Barry, was that you think better sampling or you just feel like the market woke up to the power of that brand or --?

I can't tell you what Arbitron is doing because I really don't know.

And I don't think they know either.

Let me follow-up (multiple speakers). If you were going to give guidance for TV One this year all in in terms of top line including sub fees and advertising what would the guidance for that look like in first quarter for the year? Give us any metric on how you think that (multiple speakers).

Well, we're not going to give guidance for TV One and the numbers that you have and have had you should stick with because those are the numbers that we've given to the Street and we feel good today about those numbers. Now those numbers will be affected by whether or not we get Equistar and Cablevision, two of the most difficult distributors to do deals with and that we don't have.

And at some point in time we've got to decide how real that is because it will impact the numbers that you've had for a number of years. We haven't gotten there yet and maybe when we come to that realization we'll double back and give new numbers. But long story short, it will impact it, but it will impact it by some percentage.

It won't really affect ultimately the real long-term viability and robustness of the business, meaning that the cash flow at TV One will start to grow dramatically in hockey stick, it's going to go cash flow positive on a cash basis, not on an EBITDA basis because the way cable networks do their accounting you have to amortize the programming cost not as you pay it in cash but as you run it off as an expense. The following year it would be EBITDA positive, but it will generate more cash than it spends this year, but we're not prepared to go out and give guidance.

Thank you.

Eileen Furukawa, Citigroup.

I have a couple questions, just some follow-ups. On L.A. can you just split out in the fourth quarter how far your L.A. market was down and how did that compare to the L.A. market?

Repeat that question, how far the L.A. market was down or how far --?

How far you were down in L.A. and how far the market was down in L.A.?

You know what, the market in L.A. was down almost 6% and we were down about 12%.

Okay. And then second question, you talked about under performing in the markets on your national side versus the markets that you're in, you gave that number. How long do you think that's going to continue? When do you think that reverses itself when you start to be a sort of peer perform leader on the national side?

There's a downdraft in national period.

I know, but you underperformed, that's why I'm asking.

I mean, in January, as Barry said, we over performed the market in 13 of the 15 markets of Miller Kaplan surveys; we're in 17 total markets but they don't survey Raleigh. So in January it's reversed itself already. So my sense is that in order for us to outperform the industry then we're going to -- because we're more exposed to national than other companies, not by a ton but by a little bit.

Debbie, national is what, about 30%? About 30% and the average for the industry is probably about 25%, so we're 5 percentage points above. But in order for us to do that we're going to have to close that national gap or start outperforming in national as well, and that happened in January.

Okay. And then my last question is really a longer-term, bigger picture question. You talked about one of the reasons for the write-down of the licenses is your outlook for a softer radio market. And I guess my question is what kind of longer-term market outlook were you using when you were figuring out your asset write-down?

I'll take that one. We hired an outside third party appraiser to do that and, as you know, this analysis is pretty complex, pretty highly judgmental. If I recall it's done over a 10-year period. The longer-term growth rate horizons that were used were somewhere in the range of 2% on average. So again, it's looking at our particular markets that we participate in, 10-year horizon, somewhere in the neighborhood of 2% on average is what they looked at.

Okay, perfect. Thank you so much.

Mark Wienkes, Goldman Sachs.

Just wondering, is it fair to think the declines in Detroit and Cleveland will continue just given the issues there? And then in the 12 or 13 markets where you are outperforming, do you think you're taking ad dollars from other stations, radio stations or from other media?

The Miller Kaplan only surveys other radio stations, so we don't have enough information to know whether -- actually just sort of intuitively, we're taking it from other radio stations. And because radio's overall share is not growing, in fact it's going down, it's not coming from other media. So that's kind of sort of the Layman's (inaudible). It's just improving our operations and taking market share from the amount of money that is in the radio business.

One of Barry's priorities is to reorient our company and culture to figure out how to get more revenue from outside the industry by working closer with clients because we have a unique platform that only Univision really has duplicated. I think Detroit is going to continue to see pressure because the woes in the auto industry are still fast and furious.

And I can't really speak for Cleveland. Cleveland is an interesting town from the perspective that it has been considered part of the rustbelt in the past. But of all of the Ohio towns Cleveland I think has done -- Cincinnati and Columbus really sort of have their own separate kind of economies, Cincinnati because it's home to more Fortune 500 companies than any metropolitan area in the U.S. Columbus is the state capital. So taking the rest of the towns in Ohio and calling them or labeling them industrial, blue-collar, rustbelt -- Cleveland has actually done a fairly good job reinventing itself just by its shear size, whereas a Youngstown has not.

So I don't know what happens there, but in general you're not sort of forecasting robust growth for any of those Midwestern markets. But I don't think you're going to see anywhere near the kind of pressure in those markets like Cleveland and Ohio that you see in Detroit. Detroit is an anomaly right now because you have towns built on a specific industry, the industry drove American economics for such a long period of time. And the fallout from sort of a decline in that kind of pillar of American economic society is just major.

Right. And then just a follow-up, if I may real quick, on the leverage. How do you get to the 1.6 times interest coverage ratio numerator and denominator? Can you tell us how the -- do the covenants change through the year? And then just a general color on you've been buying stations, selling stations over the past couple quarters. What do you see in terms of the number of buyers out there, the nature of the buyers that are there, more strategic, etc., and how the ability to get financing has changed?

I'm going to answer that last question first and then Peter Thompson will answer the leverage ratio. There's no credit so there are no buyers. People don't finance stations with 100% equity, so let's just say that. And when I say no buyers, I mean I'm sure there's somebody out there who can get a bank or has an existing credit facility, but net, net the M&A market is dead in the water across all spheres unless you're Microsoft. So that's the long and the short of that. And Peter, why don't you answer the interest question, the covenant?

Sure. The numbers that you asked for, the consolidated interest expense is roughly $67.1 million against bank EBITDA of $107.7 million. And we do step down, the total leverage covenant steps down on the 1st of April to 7.5 and again on the 1st of October to 7.25. that then stays in place at 7.25 through into the middle of 2010, so we then stabilize at 7.25. The projections that we've done looking out do show us compliant all the way through, I think I modeled that out for another three years. So we're projecting that we can accommodate those stepdowns.

With no additional asset sales, just based on cash flow?

Correct, yes.

Okay, great. Thank you.

David Bank, RBC Capital Markets.

Good morning. A couple questions. First off, Alfred, I guess you guys have an interesting perspective because you're in so many different media businesses right now. So I was wondering if you could compare and contrast the trends you're seeing in an online in Giant in terms of publishing and in terms of radio, in terms of the cable advertising business. I know the numbers are small for some of those businesses, so it's hard to judge. But from an industry perspective how divergent are the trends given all that we're hearing about (multiple speakers)?

I think magazines are -- the industry is flat, but that's a misleading number because it's so easy to start a magazine and you can get different revenue streams and I don't think they just call magazines, so it could be print. And so print could be business-to-business publications, it could be consumer publications, it could be educational but they call it flat, but it's just the easiest business in the world to start up.

We didn't pay much for Giant, $270,000, so really the big thing for us is the losses that we incur on it. But we bought Giant really sort of as the editorial platform for what we're going to do online. In fact, our online operation at Giant, you don't share the same offices. We incubated our online operation in the Giant offices, and those operations, those assets are now all combined in one.

So our goal is to figure out a strategy to get to breakeven quickly and then to grow it over time and get to $1 million, $1.5 million of cash flow and probably end up spending total $3 million on it. Not the best deal you have ever done in your life, but in addition using that content and those people to create content for what we are doing online, which is a rapidly growing sector as you well know, and in fact it is the fastest-growing advertising sector today. And the cable business had a really strong year last year.

We are seeing CPMs go up in Q1, although activity is starting to look softer in Q2, and I think that is probably as a result of the economic outlook. But pricing is still rather strong, and I think that is because the cable networks continue to gain share against the traditional broadcast networks. So I think advertisers continue -- because you have to remember how much money was spent or has been spent or still is being spent in newspapers and broadcast and network terrestrial television.

So those share shifts happen over long periods of time, and I think you are seeing that people still look at cable as a pretty good value. So cable and online are the two growth areas, and that is where we have been focused. When I say we have been focused, this is where I have been focused in terms of our diversification strategy. And Barry is now spending his time focusing on how do we maximize our radio platform in a challenging business.

Two quick follow-ups for Peter too, if I could. The first is can you give us -- I know for sure that you had Louisville and Dayton, I guess, in the discontinued ops line in the second quarter and the third quarter of last year. But I think you had them running through the income statement in the first quarter. So either correct me there or do you have an apples-to-apples number for first quarter that we could model off?

The second question is, Alfred, you also talked a little bit about the ramp in terms of online spending and some of the other initiatives. I think they started certainly in the fourth quarter and to a certain extent in the fourth quarter last year. When do we start to see an anniversarying of that big ramp in an ancillary business expense?

When do we see a ramp for our online --?

When do you see an anniversary, right? So it started obviously in the fourth quarter or earlier. When does the ramp anniversary?

You know what, I would have to go back to look at the business plans. I mean, our online effort like TV One is scheduled to lose -- we carved out $39 million for our online effort, and we are projecting we are going to lose about $10 million a year for the next three years. Now, revenue will ramp on that, but we are going to lose money for a number of years and then cash flow will start to ramp. But I'd have to go look at those business plans to kind of give you --.

Which really I'm really not looking for even the breakeven point so much as we understand that your expense book kind of spiked this quarter and part of that is those initiatives. So which is the call where we hear, hey look, we may be losing money on divisions --?

You know what, I would have to go back, but our head of online, a guy named Tom [Newman], started May 1st. And then between May 1st and the year end we started ramping up expenses. But he didn't start and bring 10 people with him. So I think that sort of fourth quarter was when you really started to use the full effect -- I don't want to say full effect, but the impact of meaningful hiring, software development and things of that nature.

Got it. And then on the (multiple speakers)?

I'm not familiar enough with his pace of spending versus his launch of the products to give you better timing than that right now to know when we're going to actually anniversary the peak if you will.

Got it. Okay, and then just on the apples-to-apples for first quarter.

I have in front of me the Q4 numbers and the full-year numbers for all the discontinued ops. I do not have a Q1 number in front of me, but obviously we can get that.

Okay, so let's do it off-line.

(OPERATOR INSTRUCTIONS). Calvin Lyons, Trillion Communications.

One of the advantages of being last or later in the queue is that a lot my major questions have been answered. I have one remaining question. It appears that Reach Media/Tom Joyner seem to be a major asset of Radio One. Are there any plans for or has any thought been given to succession planning for that particular program or for Tom as an individual?

Because just based on the data I've received he seems to be getting a little bit older and I'm not really sure how much longer or what the future holds for Tom. (inaudible) if I could he seems to be a major contributor I wonder if there's any consideration being given to what happens after Reach Media changes or if it involves (multiple speakers). I hate to put it out there like that. I'm from Chicago so I'm pretty familiar with Barry and Tom. Don't tell Tom I said that, but --.

So not only do you pose an interesting business question, you pose a very tough political question. And so the answer to the question is no, we haven't had succession planning, but I think Tom considers himself sort of like Paul Harvey who has been on the air for a very, very, very, very long time. And quite frankly, when we made the Reach deal we thought about it. And the format that Tom's in are urban adult contemporary formats, so they're sort of 35-54 focused formats.

So Tom can be on those formats on the radio for a very long time. It's not like these are youth oriented formats where at some point in time he just kind of looks a little weird next two Ludacris or whoever -- Little Wayne or Little Shawn or Little This or Little That. And so I don't think that we've got a problem with that for the foreseeable future.

But at the end of the day it's been a pretty good investment for us. We're now breaking it out; Victor Miller will be happy to hear that. And we're also using Reach Media as a platform to syndicate the rest of our shows like Ricky Smiley and Yolanda Adams and some other upcoming stuff. And so our plan is to turn Reach Media really into the biggest African-American targeted network syndication and content play and not just the Tom Joyner Company.

I'm glad you brought that up because specifically I was looking at Tom Joyner, I've followed Tom Joyner's career for many, many years and I can kind of compare and contrast him to maybe someone like a Ricky Smiley and I look at it and it's almost even Ricky has a pretty solid show in his market, it's just it's not the same model. So that's one of the emphasis of my question.

What's not the same model?

Well, I mean as far as -- because Reach Media seems to be more of a diverse company within a company, whereas Ricky Smiley appears to be more of just a personality show. And I think I kind of view Tom Joyner's entity has being almost like a multimedia company within a multimedia company. I think that's a very impressive model and I didn't see any duplication of that type of modeling in something like a Ricky Smiley which just appears to be a straight --.

No, we're going to use Reach Media to be that platform for us.

Got you. Thank you very much.

Benjamin Swinburne, Morgan Stanley.

This is actually Jim Farrant. Just getting back to a previous question; you mentioned that you're sort of projecting to stay under your leverage covenants as you look ahead, but given that you split the option with Comcast to buy out the venture interest in TV One in 2009 and assuming that you're positioning yourself to allocate capital, do you think you'll generate enough cash flow to stay under your leverage covenants including an incremental investment in TV One, or would you expect that asset sales might be part of that capital allocation process?

Don't know how we're going to finance the call of the financial investors if you will which is in October of '09? Yes, October of '09. And we'll cross that bridge when we come to it. But one of the things that people forget, TV One is going cash flow positive; it will also be leverageable. So there are probably a number of ways to skin that cat.

So we're forward thinking, but we haven't figured out what the capital structure is going to look like and we don't ultimately know what it's going to cost us to call those investors at that time either. But again, there are a number of ways to skin the cat, so I think it's premature for us to make a decision that we have to sell an asset in order to accomplish that goal.

Okay, thanks.

Victor Miller, Bear Stearns.

I just wanted to dial back and say thank you for breaking out pro forma.

I gave you (multiple speakers), Victor. You got disco ops, you got Reach. And you tried to get greedy and ask for TV One guidance, but that's all right.

I just wanted to show there are certain elements of your business that are doing quite well. Peter, on the banks, how do they treat the interactive losses? Are those carved out for (inaudible)?

They are.

Yes, they're carved out up to $30 million.

Up to $30 million cumulative losses?

That's correct.

On Reach growth you've always said, Alfred, that's like a 20% compounded grow on EBITDA, do you still believe that's (inaudible)?

You know what, I don't think they're going to hit that number in '08 because they're going to be challenged like everybody else. I'd have to go back and look at the budget. And actually we're not going to give guidance for Reach, but just to say I don't believe that they're going to do 20% EBITDA growth in '08.

And so -- because they're subject -- they've got a revenue guarantee from ABC Networks which is in place, but they also derive a fair amount of their revenue from online with Black America Web, from events and things of that nature. And if there's a general slowdown in the economy and the advertising industry is always affected by recessionary times, then they're going to get hit too.

(multiple speakers) ABC agreement runout, when was that?

Two years and some change. What's the date?

2009.

2009, end of 2009?

Yes.

Yes, the end of 2009.

Thanks very much.

And at this time we have no additional questions. Please continue.

Ladies and gentlemen, thank you for your support in calling in. And as usual I am and Peter and Barry are available to speak with investors off-line if they've got any sort of questions or want to dialogue more. Thank you very much.

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