CC Media Holdings' Management Discusses Q3 2013 Results - Earnings Call Transcript

Nov. 7.13 | About: iHeartMedia, Inc. (IHRT)

CC Media Holdings Inc (CCMO) Q3 2013 Earnings Conference Call November 7, 2013 8:30 AM ET


Greg Lundberg - SVP, IR

Brian Coleman - SVP and Treasurer

Rich Bressler - President and CFO

Bob Pittman - CEO


Marci Ryvicker - Wells Fargo Securities

Jessica Reif Cohen - Bank of America Merrill Lynch

Jason Kim - Goldman Sachs

Avi Steiner - JPMorgan

Lance Vitanza - CRT Capital Group


Ladies and gentlemen, thank you for standing by and welcome to the Clear Channel Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. (Operator Instructions) And as a reminder this call is being recorded. I would now like to turn the conference over to Senior Vice President of Investor Relations, Greg Lundberg. Please go ahead.

Greg Lundberg

Good morning and thank you for joining our 2013 third quarter earnings call. On the call today are Rich Bressler, President and Chief Financial Officer and Brian Coleman, Senior Vice President and Treasurer. We’ll provide an overview of the third quarter 2013 financial and operating performances of the CC Media Holdings, Clear Channel Communications, and Clear Channel Outdoor Holdings.

For purposes of this call when we describe the financial and operating performance of CC Media Holdings that also describes the performance of its subsidiary, Clear Channel Communications. After an introduction and a review of the quarter, we’ll open up the line for questions.

Before we begin, I’d like to remind everyone that this conference call may include forward-looking statements that involve uncertainties and risks. There can be no assurance that management’s expectations, beliefs or projections will be achieved but the actual results will not differ from expectations.

Please see our annual reports on Form 10-K and our quarterly reports on 10-Q filed with the Securities and Exchange Commission for a discussion of important factors that could affect our actual results.

Pacing data will also be mentioned during the call. For those of you not familiar with pacing data, it reflects revenues booked at a specific date versus the comparable date in the prior period and may or may not reflect the actual revenue growth rate at the end of the period.

The company’s revenue and pacing information includes an adjustment to prior periods to incorporate all acquisitions and exclude all divestitures in both periods for comparative purposes. We also eliminate the facts of movements in foreign exchange rates from pacing.

During today’s call, we will provide certain performance measures that do not conform to Generally Accepted Accounting Principles. We provided schedules that reconciled these non-GAAP measures with our reported results on a GAAP basis as part of our earnings press releases which can be found on the Investor Section of our website and

Please note that our two earning releases provided detailed breakdown of all foreign exchange and noncash compensation expense items as well as segment revenues and OIBDAN for the quarter and nine months. Our discussion today also excludes the effects of movements in foreign exchange and an adjustment for divestitures in 2012 unless otherwise noted.

With that, I will now turn the call over to Rich Bressler.

Rich Bressler

Thanks Greg, good morning everybody. As you know, as I have been working with Clear Channel as a board member for some time. But I have only been in my new position for three months which made us seem like a lot of time, but I have to tell you how excited I am about everything that’s happened already. It makes me even more confident in the growth opportunities we have here. So let me start with just a few of the really big changes that I have seen across the Company.

First and most importantly, there are the great new people who have recently joined us. We already had amazing teams, but they just got even better with new hires like Tim Spengler, who comes from Magna Global and with the Public Group and he is now our President of Content Marketing and Revenue Strategy for Media and Entertainment. Tim is going to work with top level marketers to create experiences around their brands for consumers and to promote radio’s effectiveness and efficiency with advertisers, and we now have volumes of case studies proving how effective we can be.

Unlike others, we are just starting to increase their sale presence. We continue to invest in and grow on national and local sales platforms and radio because we’re increasingly excited about what we can do to help advertisers. This is also true with Outdoor where we just hired Walker Jacobs from Time Warner’s TBS to lead our revenue efforts at America Outdoors as Chief Revenue Officer and President of Sales. Walker used to lead Turner Digital and brings us the special skills and relationships we need to help marketers reach mobile consumers.

I have also seen big changes in all products, which are key to bringing new advertising opportunities to the market. For example, an NHL Chicago (Ph) to our Jingle Ball line up which now expands our tour to 12 major cities and for the first time where brand get nationwide as the iHeartRadio Jingle Ball tour and televising it on the CW Network.

Launching a new iHeartRadio Theater Los Angeles with an album released party for Katy Perry sponsored by Wal-Mart that was also screened on Yahoo and carried on the CW. Creating unique content to new stations on iHeart like Nick Radio in partnership with Nickelodeon and a new healthcare channel called ReachMD. We are rolling our innovative global digital billboard campaign for Lady Gaga and Paul McCartney.

And when we put on September’s iHeartRadio Music Festival, it was a huge success. We generated 2.3 billion social impressions over the festival weekend, more social impressions than the Super Bowl halftime show and double last year’s level. And last but certainly not least, we're enhancing our content by bringing The New York Mets to Clear Channel's WOR 710 AM, where we'll promote the Mets and create advertising opportunities across the entire range of our multi-platform assets. I have also seen change in the way we do business. At both outdoor and media entertainment there is an extremely coordinated push to educate the market and bring advertising money to our sector that should be spent here.

We're showing them new industry data that illustrates improved advertiser returns through increased allocations to radio and outdoor. We as a company recognize that our assets are in the sweet spot to reach consumers, because we exist where people are now, they're mobile and they are out of home.

And let me remind you that both outdoor and radio generate significantly lower CPMs than media with comparable results like TV. For example a 30 second spot on broadcast network TV has an average CPM of $13.16 compared to $5.23 for radio and $2.50 for outdoor. We have a tremendous opportunity to significantly increase our revenue without adding one more listener or investing in any additional products or services.

As I have now been telling Clear Channel's story with Bob Pittman along with our sales people, the point that resonates most with people is how unique Clear Channel is as a fully integrated multi-platform company.

Before I turn to the quarter I want to spend a moment on this, because as we're feeling very good about what we're offering in the marketplace. In outdoor, we have a unique global footprint that we help carry creative ideas from one region of the world to another. Our UK team recently broke all the rules of digital, instead of running loops from various advertisers, they're selling their best signage in London as a client branded network that delivers unique customized solutions in extremely short timeframes.

The Sun Newspaper just displayed a message about England's qualifications for World Cup on all key digital sites simultaneously, even before the fans had left for the stadium. And the message remains off through the next morning's rush hour. This is an extremely innovative use of technology, which is what's driving the already fantastic unskippable core premise out-of-home. That's great for the client, great for the consumers and great for us at Clear Channel.

In media and entertainment, we're seeing the same kind of innovation from a bench to digital to radio. It's important to dig into that word radio bit, because there is a bit of confusion out there, what we are is real radio with very unique content and unique distribution. By that I knew we have strong franchises in each of our radio station brands backed by local personalities, guest audience talking to our listeners, 20,000 annual local events, local content and almost 3,000 local sellers engage in their communities.

It's a real relationship with listeners who tune in for companionship and go find out what’s going on in the world. They already expect advertizing to be part of our content, and they stay tuned in through commercials, because they are informative and often entertaining themselves, especially if it involves one of our personalities endorsing a product.

Real radio also has the unique distribution, broadcasting to the entire population of the market; this is true mass media not delivery to a single user.

Last but not least, radio listening is back by a credited media metrics. Rather than internally generate statistics, we use third party data. Advertisers know who is actually listening to our content. In a market like New York City the monthly reach of this one of our station broadcasting from the top of the Empire State Building is three times larger than a collection of every single Pandora stream in the market.

AM FM radio also dominates listening, the latest figures as reported last week in the Wall Street Journal show AM FM radio at 92% of all radio listening. This means that 8% of all listening is digital and of that 8% it's estimated that Pandora is only 4% to 5% of that. And of course we are also part of that digital 8% with iHeartRadio and local radio stations, where franchises had to go nicely into digital as well. Radio's engagement, it's interactive and it's highly targetable.

Clear Channel has the largest U.S. reach of Hispanics, African Americans and mobs (Ph) and in every market our cycle graphic targeting can deliver even now through our individual stations. Our iHeartRadio app delivers all of our radio station franchises plus expertly curate stations, the best talked radio and user created playlist based on favorite artist and songs through our custom radio feature.

We can use all of that to help advertisers to crease multi-platform solutions across radio, digital, events and outdoor. No radio broadcaster outdoor company or streaming service can come close to anything like this. Again these are the conversations we're having in the marketplace to show advertisers what we can do to help them even more. It's their excitement that should make you as happy as we are and so I wanted to share it with you. Now as we do our performance in the quarter compared to the same period last year as well as our pacing starting with our overall results for CC Media Holdings I’ll continue with our media and entertainment business and then discuss Clear Channel Outdoor Holdings. Lastly, I’ll wrap with a review of our capital spending and liquidity before taking your questions.

CC Media Holdings revenues totaled 1.6 billion consistent with last year. We had 3% growth in our media and entertainment segment which was 52% of our revenues offset by 1% decline in outdoor. We’ll get into the performance drivers of our segments in a minute but I want to focus you on some expenses affecting overall CC Media Holdings OIBDAN of $442 million for the quarter, which was a decrease of 8% or $37 million. OIBDAN included $90 million of expenses related to executive transition, legal and other cost, up $17 million from last year and also included $18 million of strategic revenue and cost initiatives flat with last year’s level. So when you look at the $37 million decrease in OIBDAN, $17 million of that are almost half is from an increase in these costs. This includes $8 million related to executive transition cost and $11 million of legal and other costs which included stockholder derivative litigation and our digital outdoor litigation.

Let’s move down to our segments in more detail, beginning with the performance of media and entertainment. Overall media and entertainment revenues increased $25 million or 3% driven by a local, national and digital and we continue to outperform the entire radio sector overall. Look at just the stations and excluding premier and traffic, local revenues were up 4% and national was flat and if we exclude the impact of political advertising in both quarters local was up 5% and national sales rose 4%. Our strongest performing advertising categories included telecom, retail and auto.

Digital sales continues to grow in the double digits as we continue to sell advertising across our station website in iHeartRadio. In fact iHeartRadio had a 30% increase in total listening hours during the quarter and reached 39 million users, up a 114% from last year. Also in the quarter, we saw improvement at total traffic network from improved sales strategies and from some new services like weather reports.

Operating expenses increased 17 million or 3% from performance-based compensation, cost for the iHeartRadio musical festival and increased digital listening hours offset by a decline in direct operating expenses from cost savings initiatives. Media and entertainment’s OIBDAN rose $9 million or 3% to $317 million. As we look at the fourth quarter we’re excited about the iHeartRadio Jingle Ball Tour, the season’s biggest annual music event, which captures the holiday spirit of the iHeartRadio app and will be televised on the CW as a nationwide two hour broadcast special. The tour is in Chicago this year as I mentioned earlier, bringing the total to 12 cities. And we look forward to the excitement we can also generate for advertisers on our stations.

But the fourth quarter will also reflect the absence of last year’s very strong political spending. Moving to our Outdoor results I’ll go to first discuss our Americas international segments and then Clear Channel Outdoor Holdings in total. Americas Outdoor revenues declined $3 million or 1% to $332 million, driving this decrease was lost contracts on our airport business from large national accounts last year that did not run Outdoor campaigns this year. It was also due to the absence of our digital boards in LA, in Los Angeles. On the positive side, we saw higher occupancy and rate on traditional bulletins as well as strong growth from rising rate capacity and occupancy of digital bulletins.

Across all of our products, the quarter’s best performing advertising categories included healthcare and medical, business services and both media and retail. Americas operating expenses were down 2 million or 1% driven by lower variable cost like site leases in connection with the decline in airport revenues as well as savings from cost initiatives. Even with the upward pressure on legal cost, OIBDAN margins calculated as OIBDAN as a percentage of revenue remain constant year-over-year at 41% while OIBDAN in total decreased 1 million or 1% to 135 million.

In terms of pacings, as of last week revenues at our Americas segments are pacing down 3% for the fourth quarter compared to the year ago period. This pacing reflects in part revenues from the 77 digital billboards in Los Angeles that contributed to our 2012 results that are now zero revenues in our 2013 fourth quarter. As a reminder, the boards went dark in April 2013 that means our pacings will not normalize with zero revenues until April of next year. So far in the fourth quarter our strongest performing top advertising categories include auto, food, food and beverage home building, medical and retail.

Now let’s turn to our international results, international revenues declined 3 million or less than 1%, the best results of the last four quarters, we continue to see very strong growth in emerging markets China and Latin America, offset by revenue declines in developed markets overall, there are certain developed countries that are performing well such as the UK, Australia and Norway. Operating expenses rose 3 million or 1% to 328 million, we saw a decline in expenses from strategic cost initiatives carry out in previous periods, offset by higher cost in certain emerging markets and from new contracts. Also included in the overall expense increase were 3 million of legal and other costs that did not occur last year. These higher costs coupled with the revenue decline led to an 8% decrease in our OIBDAN to $62 million.

Turning to our pacing data, as of west, international revenues are pacing down 1% for the fourth quarter compared to the year ago period. Overall the pacing information continues the same stores of third quarter. Strong growth in emerging markets were offset by decline in certain developed market such as France. Our [indiscernible] shut the operation with the discussion of the consolidated results at Clear Channel outdoor holdings. Revenues decreased $6 million or less than 1% in the third quarter to 723 million. Americas was 46% of revenues and international was 54%, segment expenses for Americas and international were up 1 million to 526 million and corporate expenses rose 3 million to 28 million driving a 10 million or 5% increase in OIBDAN to a $169 million, this includes a $3 million increase in legal and other costs as well as a [indiscernible] strategic revenue and cost initiatives down 1 million from last year.

Now let me turn our attention to capital spending and the balance sheet. CC Media Holdings Capital spending for the quarter totaled $65 million including $34 million in Outdoor and $22 million at Media Entertainment. Within Outdoor we spent $14 million in the Americas for new advertising structures including 26 new digital bolt ins, bringing our total to 1081 including the 77 turned off in Los Angeles, international's 20 million of capital expenditures went to new advertising structures including billboards and street furniture, for the nine months ended September 30 2013, CC Media Holdings capital expenditures totaled a 197 million, although we expect to invest in the fourth quarter including more digital deployment in the Americas, we expected our total CapEx for 2013 will come in below the guidance of 350 million that we provided previously. As of September 30th, CC Media Holdings debt totaled 20.4 billion, senior secured leverage as defined on the Clear Channel Communication's credit agreement at the end of the third quarter was 6.3 times, based on consolidated trailing 12-month EBITDA of 2 billion as of Q3 2013. This calculation of EBITDA is detailed in the press release for your information and make certain adjustments pursuant to the credit agreements. Cash on the balance sheet amounted to $711 million as of September 30th, 2013, Clear Channel's Outdoor Holdings debt was unchanged at 4.9 billion and leverage others in dentures was 6.3 times on a total consolidated debt basis and 3.5 times on a senior debt basis.

Cash on the balance sheet totaled $419 million. Year to date we’ve been extremely active in the debt capital markets and are very pleased with the progress we made gaining increased financial flexibility. Despite recent changes in the credit markets we remain very focused on our next steps. These include improving our liquidity to both capital discipline and working capital improvements which you saw us do in this quarter. In addition, we put a new $75 million revolver in place at Outdoor to support liquidity needs as well as provide for the issuance of letters of credit. CCOH has already begun the trends for existing lesser credit from their old cash secured bilateral facility to the new revolver, thus freeing up cash that had been previously used for security. We are also evaluating our portfolio of assets to determine what is noncore or could it enhance our liquidity like the sale of our series XM stock last quarter. And lastly we're looking at additional tactics to address our upcoming maturities. But the biggest thing that's going to have an impact is operational improvement that drives OIBDAN growth. We’re most confident that the investments we're making which are showing up more on core side right now are going to boost our future revenue performance.

As I said at the beginning of this call, things are changing quickly here at Clear Channel. We're keeping up our momentum and are seeing both optimism and sense of urgency across the entire company. Financially our team has really transformed the balance sheet this year giving us room to execute on our plan and our third quarter results are a solid step forward in that transformation. We’re making the investments that we need too for top light growth which we're already seeing in key areas like digital and our core business remains very healthy. We look forward to you with future updates on our business at upcoming investment conferences and on our fourth quarter conference call in February. Thank you very much and, operator, please open the lines to questions.

Question-and-Answer Session


(Operator Instructions). Our first question comes from the line of Marci Ryvicker with Wells Fargo. Go ahead.

Marci Ryvicker - Wells Fargo Securities

I have a couple of questions, the first in media and entertainment; what are you pacing for the fourth quarter and what's the political impact?

Bob Pittman

I have got to say starting out and those of you know me from my time [indiscernible] 24:24 I do hate giving out pacing, so that would be like such a snapshot in time and I know you all know that and it doesn't include everything we do as a company and particularly because we are global, weakened weather a lot of things as evidenced by the results talking about the guidance we gave before. And it also doesn't take into account other categories that we continue to get into now as a company and move forward and exploit our assets. But having said that comps of third quarter were just fairly tough as a result the political specialty media (Ph) and the fourth quarter is even going to be tougher. And that's why people talk about political yields and non-political yields.

In Q3 political revenues at our station was $3 million compared to $13 million in 3Q '12, political revenues continued into the fourth quarter of '12 through the November elections, but again to make you realize the point pacing really can change quickly. Radio stations; we're currently pacing down about 1%, but if you exclude political, we are pacing up 6 and looking at CC M&A as a whole, as a reminder which includes traffic in premier in about flat and again if you exclude political pacing out, 5%.

So political, in summary I would say political is definitely an impact as you can tell by the numbers, but the sales teams are working extremely hard to fill that gap. So, that's really kind of a picture of how we think that CC M&A.

Marci Ryvicker - Wells Fargo Securities

And then turning to the outdoor side, revenue came in better than expected both in the Americas and international, I’m curious about the Americas you are pacing down 5%, and you ended down 1%. So where did the acceleration in the quarter come from?

Bob Pittman

It really kind of came across the Board. We just had strong growth across the board and even when you exclude the loss of the Digital Billboards in LA, which obviously we're working hard with the city and a long term legislate solution to bring back but it's going to be a lengthy process. But as I think I gave the categories upfront that we had revenue too. Really pretty broad-based, particularly in local, we had strong local during the quarter.

Marci Ryvicker - Wells Fargo Securities

Excluding LA would it be fair to see that you may have been up like 3% or 4% in the quarter?

Bob Pittman

I am not going to, you know, I’m not going to comment on that, but as a reminder we do have 77 digital billboards that are now turned off and we’re looking forward to resolving that again just working with the city and the industry on a long-term solution. But we do have a great, just remind if we try just for a second, we do have a great LA presence outside of this 77 digital billboards with the 2,000 traditional bulletins and posters, in the city of Los Angeles we have another 2,800 in LA County, we have got another 3,200 in the LA DNA, so we are big in LA. But excluding the digital we were up strong.


And our next question comes from the line of Jessica Reif Cohen with Bank of America Merrill Lynch.

Jessica Reif Cohen - Bank of America Merrill Lynch

Can you just give us an update on the Neilson Arbitron point for radio measurement? What's in the pipeline and when might it come?

Rich Bressler

So since the -- I don’t know if everybody, I don’t know over the last couple of weeks, Neilson released their earnings and I was kind of reading through a bunch of stuff obviously as I got ready for this call in the last couple of days and just in the general nature of the business. And Calhoun had a quote that I pulled out and I think he said it better than I can Dave Calhoun, I am sorry; he's the CEO of Neilson. And what he said and I am quoting him now, it’s a big opportunity with respect to radio is really ROI, is to demonstrate that radio is more effective than the world thinks it is. And he said that again quoting him, “Radio can be a bit of a forgotten medium relative to digital and TV but radio is more vibrant medium than the way the world perceives it”.

Now obviously we agree with all that, he then added that Neilson's job is to demonstrate with what kind of, with retailers what kind of impact radio has on the consumers? And then they can with this we can begin to educate advertisers as to what the impact is so they can include in their media mix models and other forms of resource allocation models that they do. And the really important thing to understand in all that is one at it started to talk about Nielsen, they believe that radio is a misunderstood medium, and then two is The Nielsen in the middle of the media mix modeling world and there has been a lot of press on media mix modeling specially recently, so they understand exactly how radio gets factored into the mix models for advertisers and as Kalvin (ph) said it’s not as well as represented as it should be and Nielsen’s job is to now develop metric that would shed light why that and then ultimately what to play out in the mix modeling and resource allocation decision that advertisers make, so again, bunch of words bunch of quotes, but its quotes from us but from third party that’s can be driving this.

Jessica Reif Cohen - Bank of America Merrill Lynch

And then can you give us views on, how do think the launch of iTunes Radio and Pandora as well are impacting your business, is it all?

Bob Pittman

Sure, I have covered a bunch of that in my opening remarks of Pandora, but let me first say categorically starting out that we have not seen any impact on local ad sales from any digital service whether its Pandora, iTunes Radio, and again I just want to take a second just may reiterate a couple of points I made upfront is, first and foremost, these guys are non-radio, there are convenient way to make a playlist which is a great service for the consumers, but can’t over emphasize its not even close to being real radio and what we believe in playlist we call that custom radio you hear Bob or I talking about custom radio, and custom radio it’s a feature, but again I think as evidenced by lot of numbers you guys see out there too and it’s not a free sending service, and we have custom radio in iHeart. We got something core accurate service called Perfect For stations and remember iTunes offers custom radio as an add on to their iTunes download service part of our is custom radios and add on to their subscription service, but these are not again standalone services.

And the other thing I think just to remind everybody, let’s take Pandora for a second, these are biggest of these services with all of their stations combined on the market it is yet to penetrate even the top ten in New York City can’t over emphasize that and then you take a Clear Channel station like WLTW has the number one reach of 54% in New York compared to Pandora at under 18%.

Lastly, I will also mention, we do have 3000 sellers across the country. We have had 3000 sellers for a long time we continue to add to that as I highlighted right upfront in my remark, and we think that anybody that’s willing to build the infrastructure like that it’s really-really hard, you build it from the bottoms up and the sales lead time and process time to drive revenue locally is long lead times to do it.

We have been doing it for long time and I think we understand it better than anybody else and finally just one set on iHeart, I did mention in the press release 30 million usage at the end of the quarter, just a quick update, we have actually crossed 40 million by the end of October, so that’s to this 39 at the end of quarter, we’re now over 40 probably continue to see very strong growth anyway, it’s a good question.

Jessica Reif Cohen - Bank of America Merrill Lynch

I'm sorry to make you repeat some of that -- and then again as you said on LA, what is the timing of getting into resolution of the digital billboard?

Bob Pittman

Look, if you know we’re working with the industry and it’s really on a long term solution. It’s a lengthy process and so I’m not going to comment specifically on the timing but I am going say it’s a lengthy process and in the meantime I think I gave some stats before, you know, we have got gigantic position in LA away from the 77 digital billboard that are now turned off. Like just quickly again in the City of LA, we have got 2000 traditional billboard, LA Country we have got another 2800 I guess previously mentioned, and the greater our DNA, you know Orange County, St. Bernardino, Riverside, Ventura, we have got another 3200.

So we have got a big presence but having said that we’re working hard to get the digital billboards back up.

Jessica Reif Cohen - Bank of America Merrill Lynch

Great, thank you.


Our next question comes from the line of Jason Kim with Goldman Sachs. Please go ahead.

Jason Kim - Goldman Sachs

I have two questions and the first question is on margins. You’ve spent the past couple of years in managing cost but also investing in growth areas like iHeartRadio and historically I think a radio business had around close to 80% incremental margin profile, is that type of operating leverage still achievable for this business and specially given some of the more recent deals even making with public to share more revenue, and on the related note, how do you feel about overall business infrastructure right now whether it’s technology wise for iHeart or national sales force, is there room for increment investments in those areas over the next years or it is bulk of the investment behind this?

Bob Pittman

I get the couple of things, first on you know I absolutely believe on the margin point that we clearly do have and will get back to the margins -- in this quarter and this year particular and again just to go back to focus back on the quarter we had a couple of unusual things, we’ve got executive charges or severance charges for executive that are no longer with us. We do have some overall legal course just in terms of business that are larger we’ve had in the past and we are making overall investments in the business and these investments are important right now and I think you see even in terms of our revenue performance compared to how we’ve done pretty much I think to the industry out there we continue to outperform. So, we’ve made these investments, we’re going to continue to make these investments as we go forward to build the company for long term value.

But, what you don’t see right now is you’re not seeing the benefit yet, you’re starting to see the benefit of those revenues initiatives and we don’t breakout individual numbers but we’re trying to give you some sense of the impact that we are having when we talk about 2.3 billion social impressions big in the half time and Super Bowl double last year’s numbers, we’re going to continue to try and give you indicative data that we’re making progress out there.

Jason Kim - Goldman Sachs

Okay, great. Just one question on the balance sheet you’ve done a lot in terms of pushing on maturities this year and as you stated here today and what group your future maturity that can do three buckets to 2014 and 2015 legacy notes which are small but they do come to you earliest and then the remaining Term Loan B which is just over 3 billion outstanding and then in 2016 stock ABL notes which come to you after the term loan but obviously the risk profile as little bit different for those notes compared to bank. So, as we had into 2014 the markets feeling pretty strong right now can you talk about how you prioritize addressing these through different buckets of the maturities.

Brian Coleman

I like your three bucket analogy I kind of use that internally as well. It really goes to I think how we view each of these first and then kind of talk a little bit about the strengths of the market. Like our senior secure debt the bank it’s doing 2016 as immediately financeable when we get the $5 billion the extension earlier in the year there is a significant amount of over subscription that we did not include in that deal. So, I think a lot of what’s left can be extended or exchanged in the PGM and I think the remaining amount could be refinanced through the assurance of cash PGM. So, I think the real focus is on the legacy note maturity even in the second bucket ABL notes.

ABL notes we also were very successful expanding proximately half of those earlier this year. So, I think there is interest in that investor growth I think largely as you’ve noted in your own right ups we’re generally ’09 with our investor base and while we may not be able to extend all ABL notes I think that there is an opportunity to refinance some of those as well. The legacy notes are smaller but the inside notes that at least mature over the next couple of years and that is one what I think that we need to continue to do things that increase our offers and that growing, we talked about growing Richard talked about growing cash flow and EBITDA you’ve seen us disclose from noncore assets to generate liquidity we raised our liquidity facility at outdoor.

So, we continue to do things to bolster liquidity, to increase our liquidity and be prepared to repay those notes with cash and maturity let not just say that’s the only solution, we look at the markets, the markets are strong, if there is an opportunity to push those out and at a acceptable economic trade off or refinance them on acceptable economic trade off we’d also look to do that.

I think one of the big differences between where we’ve been in the past or we’ve kind of attack these different types debt discreetly is that there is so little left really the one way and then its 3 billion or little but compared to where we were it is, there is only so little left to the cash, we may be looking at something that they are all related to each other and so that’s what we have to think about, the markets are there, we’re aware different markets are very strong that creates new opportunities, to make existing opportunities more attractive whether it’s our continued strategy of shipping away or something more comprehensive, we’ll continue to look at it and if its right and it make sense then the company is been pretty aggressive in pursuing those opportunities.


Our next question comes from the line of Avi Steiner of JPMorgan. Please go ahead.

Avi Steiner - JPMorgan

Richard, I want to take the margin question in a little bit of different direction because you made some higher and some of things you’ve discussed in previous answers but is there sense of getting or sense you can give us of timeframe to achieve some real revenue growth of the back of some of these investments is it one year out or two year out. How do we think about that?

Bob Pittman

I’m not going to give a specific timeframe on that but let me mention the couple of different things, one is on the cost side, I just want to make sure one additional point to Jason in your question I think everything is seen about bunch of group of questions and again those of you who had known me historically IMA ROII return on invested capital, whether its capital or expense. To me that’s just an accounting pervious cash outdoor I will tell you and promise you every investment and that investments include people looking at on a forward basis on a P&L basis all the investments I am looking at we’ll look at them on cash on cash do not assume the visual value and then the valuating investments and looking at rate of return and hurdle rates back there. So I assure you that we are focused on expenses and driving flow through and driving margin.

In terms of the revenue side, we are seeing investments starting to pay off? We are going to be just look at our numbers and try to give you some numbers the bench numbers separately but I’m just telling they are very strong and I try to give you some indicative operating metrics. Again national sales you look and say that’s political also very strong compared to political year and the same in terms of my comments on digital. So you’re going to continue to see improvement as you go into 2014 I think this is strong improvement to your question in ’14 but I can’t say that’s going to be all be improvement there.

Avi Steiner - JPMorgan

And then back to the balance sheet and I don’t know Brian if you want to take this one but just to be a little direct here. Would you consider using some amount of cash small amount of cash perhaps but help in pushing out some of these front end maturities?

Brian Coleman

Yes, sure I’ll be happy to give you Rich a break. I mean I think we’ll look at all opportunity I think we’ve also expressed our sensitivity in using liquidity. And so it would have to be the right balance of things to look at and review. But sure I think we’d look at whatever combination make the most sense.

Avi Steiner - JPMorgan

And then just on the Outdoor revolver. Is this new in design to free up liquidity at outdoor or is it something that could potentially be board against with cash and up to parent and if it’s the latter are there any prescribed uses of the cash I know it’s a small facility but I just want to make sure I understand it?

Brian Coleman

Yes it’s the former it’s the first part. It provides liquidity Outdoor in two ways one it’s available for draws to the extension we’ve got operations but secondly and it’s a process we’ve already put in place and Rich eluded to it in his open remarks is Outdoor had a cash occurred letter of credit facility and letters of credit are important to the business. And so by putting this in place we’re able to migrate those letters of credit under the bilateral program under the revolver and free up cash security at outdoor. The decision to move money out of Outdoor and up to the parent is a separate and discrete decision and is not part of the revolvers today.

Avi Steiner - JPMorgan

And then on the 14% notes that you own, can you just remind us on the registration timing on that? And then is there any further thought perhaps either using that as a liquidity lever through an outright sale or using it as exchange currency and then one more in probably some time. Thank you.

Brian Coleman

Yes, so it is currency and it’s something that we have in our back pocket now the trading level even though they’ve improved or still not particularly attractive but it is something that we have and have and have available to us. I think you think the public extended LBO notes need to be registered by mid-January so we probably need to be up and moving through December. I think that makes it easier to the extent that we wanted to monetize that currency of the notes that are held by Finco in that we could sell those I mean they could participate in a registration program along with the public notes that are out there.

There is also the frangibility issue which the timing kind of is around the same time is going to give a six month window and there are some calculations you have to go through. However, even if the public notes are registered it doesn’t mean we can sell those notes and we certainly could register at a later point in time. The frangibility test will be a little different over the trading today that would still be frangible post registration.

So I think to answer your question it’s easier if we do it prior to the public notes being registered but they remain a currency and it’s a little more administrative work and maybe a little more of an explanation. But we think that could be frangible and registered post the registration of the public notes as well.

And operator we have time for one more question.


And that last question will come from the line of Lance Vitanza with CRT Capital Group. Please go ahead.

Lance Vitanza - CRT Capital Group

Thanks guys. Just quickly with the housekeeping item or two I heard the international Outdoor is pacing and the media and entertainment but I didn’t hear the Outdoor Americas pacing. Can I get that?

Bob Pittman

So on Outdoor’s America right now we’re pacing down about 3% to 4%.

Lance Vitanza - CRT Capital Group

Okay, and then the 8 million of executive transition and 11 million of the legal and other charges. Should I allocate that evenly between media and entertainment and Outdoor or some that specific to one segment or another?

Bob Pittman

It’s just all, it’s hard to figure that how to allocate that I would just say total we’re just about all the [copper].

Lance Vitanza - CRT Capital Group

And then moving on from the housekeeping so I am hearing anecdotally that the developed markets in Europe have really turned it around, are you sensing that as well? And I guess I am wondering you’re still reporting some lingering weakness. Is it possible that that’s share related or is this just the typical lag for outdoor as opposed to some other media?

Bob Pittman

Well, first of all, note sure the word -- that word you used about really turnaround I am not sure -- would be the adjectives I would use. What I would say well we saw nice strength in places like the UK and Australia and Norway and even France which was not great year-over-year we actually couple of good weeks I think and within the quarter within France so that’s really what you are seeing kind of reflect in the numbers. But honestly at the same point in time there is still pressure that is why the cash flow is pacing down one as I said earlier and it is still tough out there in the economies I think these are following businesses in both the developed markets and particularly in parts of Western Europe I would be surprised to hear much else, because I think we are on say kind of echo without healing the other boards that I am on also. We can advertize and contribute in that kind of businesses.

Lance Vitanza - CRT Capital Group

The Warner Music deal can you talk a little bit about that is that comparable in terms of the economics to some of the deals that you did with smaller CDOs or should I be thinking about that as essentially you give up a percentage of the revenues terrestrial to get away from paper play end?

Bob Pittman

Well look I can’t go into any of the details of the deal because as I am sure I would respect and appreciate we have got confidentiality but look it is a great strategic and economic benefits for both of us for both us and to WMG what it really does is just as a reminder contractually defines one of our most strategic relationships and takes it from something they have been traditionally operate on an ad hoc basis to make it a true partnership that now will become more predictable so we can do a better job of running our business and at the same time allows us to really drive digital growth, break new music, and create new marketing opportunities for established artists that are out there.

And so -- but like I said it’s off to a great start and it builds on the success that we have already established with the independence with labels such like the Big Machine and Glassnote and we have got over 20 of those to date as a reminder plus we also have a deal with Fleetwood Mac so I think if you ask them which is always the best test they would tell you that the direct licensing agreements we have with them are doing great for their business and to their fans.

Lance Vitanza - CRT Capital Group

My last question involves the promotional activity that you have going on with the CW network could you just discuss how you found them to be as a partner and do you expect that will continue or do you think there is an opportunity with some of the big four networks and how do you think about that going forward?

Bob Pittman

Well they have been a great partner quite frankly and again if you go back to what I have said in the opening remarks the number of shows we have on the air with them is significant I think in total we have about not all with them but we have about 17 broadcast shows in total but we really are they have been great partners but looking at the end of the day this is about driving results and driving revenue and for our company but right now I would say there is no reason to advancing but the way its partnered and we are going to explore we are economic animals at the end of the day and we are going to explore all opportunities that are out there and you are going to see us do a lot more utility space as you go forward which is all part of taking advantage of this platform we have and you are going to see us do a lot more events out there.

And again the last thing I would say and I know we have got a go but I just do -- as you guys won’t think about the potentially here and valued future revenue streaks I couldn’t help but think about when I watched I always wanted -- the Today’s Show on the lead story like about Twitter and you talk about people raving about the reach of 230 million people just as a reminder our reach is 243 million a month. So every time we will discuss our meeting about social we have the original social media and we have got mobile the radio is digital social media and that is demonstrated by that is how we got to 23 billion social impressions we are at our best of that weekend we didn’t get it by accident we got it because radio is social and they would have liked those impressions so.


And ladies and gentlemen that does conclude our conference for today thank you for your participation and for using AT&T Executive Teleconference Service. You may now disconnect.

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