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Emmis Communications (NASDAQ:EMMS)

F2Q07 Earnings Call

October 10, 2006, 9:00 am ET

Executives:

Jeff Smulyan, CEO and Chairman

Patrick Walsh, CFO

Rick Cummings, President, Emmis Radio

Analysts:

Victor Miller, Bear Stearns

Lee Westerfield, Harris Nesbitt

Lorraine Mancini, Merrill Lynch

Jonathan Jacoby, Banc of America Securities

Mike Kupinski, A.G. Edwards

James Dix, Deutsche Bank

Operator

Good morning and thank you for standing by. At this time, all participants are in a listen-only mode. After today’s presentation there will be a question and answer session. To ask a question, you may press the * and 1 on your touchtone phone. Today’s conference is being recorded. If anyone has any objections you may disconnect at this time. I would like to introduce the speaker for today’s call; Kate you may begin.

Kate

Thank you very much, good morning. Thank you for joining us for today’s Emmis Communications Conference Call regarding second quarter earnings. I want to extend a special welcome to all the Emmis employees who are joining us and listening in this morning and those of you listening in from our website, www.emmis.com. We will begin in just a moment with opening comments from Emmis Chairman and CEO, Jeff Smulyan, and Pat Walsh, CFO. After their opening comments, our conference call moderator will come back on the line to instruct you on how to submit questions. Joining us to help answer your questions this morning is Rick Cummings, President of Emmis Radio. A playback of this call will be available for the next week by dialing 203-369-0658.

This conference call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please refer to Emmis’ public filings with the SEC for more information on the various risks and uncertainties. Additional disclosures related to non-GAAP financial measures can be found under the Investor tab of our website, again www.emmis.com. Jeff?

Jeff Smulyan, CEO and Chairman

Kate, thanks, and I want to welcome all of our Emmis employees and also to his first Emmis earnings call our new Chief Financial Officer, Patrick Walsh.

This was obviously a challenging quarter in what’s been a very challenging year and yet really what’s interesting is this is really a story about two separate companies within Emmis, New York and Los Angeles which have been severely challenged both in our performance in those markets but also the markets themselves, and really their performance has cast a pall over much of American radio. And yet if you look at the rest of this company or other radio markets where we’re performing very, very well and those markets are doing better this year as well as the rest of Emmis, we’re really having a very, very nice year; whether it’s our publishing division which has had a great year, our interactive division, our international radio group, all have seen very, very encouraging signs.

Everyone on this call is going to focus on New York and LA as they should because that’s the bulk of the company’s cash flow and it has been challenged. I think the thing that encourages me the most is that there’s not only a sign of a rebound for our properties in those markets but also what we see as the beginning of an upturn in the radio industry.

Let me first talk about our performance. We’ve had several good trends at Hot 97 in New York that WBOS is holding nicely in the face of significant competition, and in Los Angeles we are particularly excited. Power 106 has gone back in the last two trends to number one, 18-34 has had its best trends in almost two years, so we see very good things on the horizon for Power 106 after what’s been a very tough 16- to 18-month period in Los Angeles.

Also, moving our new radio station, 93.9, which has been anchored by Rick Dees and has given us some very, very encouraging initial signs, we think we’ve made the right decision there. The performance of those stations we think should lead a significant turn around for this company. We think we’re near the trough, we think our third quarter will be the bottom, and then all the signs point to significant improvement after that.

But let me just also talk not only about our company as I’ve said; I’m very encouraged about the things that we’ve seen. We have a saying around here that you do your best work in the most challenging times, and I think our people have done a remarkable job whether it’s the performance of our international group, the records that our city and regional publishing business have had, the remarkable growth of our interactive group, great radio performance in a lot of our markets we’re having our best year ever in Indianapolis and Austin. We’ve seen innovation with Moving in Los Angeles with what we think is our groundbreaking new morning show in Chicago at Q101 as well as great uptick at the loop in Chicago with Jonathan Brandmeyer.

I’ve seen so much about how radio is dead and I’ve heard that for so long and yet I think about the 200,000 people that we had at the Jonathan Brandmeyer event with Carl Wylander a few weeks ago in Chicago, I think about the quarter of a million people we had at our fireworks show here in Indianapolis last month, and all over this industry I see more and more examples of an industry that’s not only not dead but it’s as vibrant as ever. And I think this is finally the time when people are starting to realize, whether it’s through the new RAIL studies or several other reports that have shown that people are not only listening to radio less but they’re actually listening to it the same and possibly even a little bit more than in the past.

This industry is starting to get its positive spin back, and I said a long time ago that we’ve sort of lost our hipness and I think that’s coming back, and I’m very encouraged about it. Maybe it’s because this was the quarter that the buzz about satellite radio really died with all sorts of evidence that terrestrial radio is not only not going to replaced by satellite but satellite itself is starting to see dramatically lower growth. And the reality is that we reach about 95% of the American population every week and we continue to connect with that population every week, and it’s a vibrant media. So, I have no problem casting my lot in the radio business, and I think that while certainly New York and Los Angeles have suffered and we’ve had a tough year, we see positive signs on the horizon largely through the creativity not only of the people at this company but also a lot of dedicated people in the radio industry that have started with HD Radio a commitment to electronic measurement, the RAIL studies which indicate the vibrancy of the advertising media, and a whole host of innovations that we think are finally making the point that terrestrial radio is an incredibly strong media that has a lot of life let.

So with that, I want to turn it over to Pat for some of the financial metrics for the quarter and then we’ll take your questions.

Patrick Walsh, CFO

Jeff, thank you and good morning many old friends on the call, I look forward to working with you in my new capacity at Emmis. A little bit of color on the quarter. Diluted net income from continuing operations for the second quarter ended was $0.05 per share, up from $0.03 in the prior year. This was driven by net revenues during the second quarter of $99.9 million, off 4.6% from the prior year. This reflects a 7.7% decrease in domestic radio revenues indicative of the weakness in our important New York and LA radio markets, offset to some degree by above average performance in our other domestic radio markets, and a 6% increase in revenues at our foreign radio properties.

Publishing revenues for the quarter were flat despite the elimination of two titles at our Country Sampler Craft Magazine. The domestic radio revenue performance off 7.7% while our markets were up 3.6%. Excluding New York and Los Angeles, our other markets outperformed finishing up 5% while our markets were flat. In particular, Austin, Indianapolis, and Chicago exhibited strong revenue growth. New York and Los Angeles unfortunately exhibited weakness for both us and our competitors during the second quarter.

The New York market was off 3%, our stations off 10%. The LA market was off 5% with the R2 stations off 18%. This weakness is the key driver of the 5% decrease in second quarter net revenue and our guidance for third quarter ’07 radio revenues to decreased low double digits compared to the prior year.

We expect the third quarter to represent a trough in terms of revenue performance as recent ratings trends in Los Angeles and New York coupled with the launch of new morning shows in Los Angeles and Chicago will begin to have topline impact in the fourth quarter of ’07 and beyond. Rick Cummings will comment more extensively on other recent positive trends related to the format change in Los Angeles and the recent rating improvements.

A little bit of additional domestic radio color -- our local performance was off 11% compared to the markets being off 6%, and nationally we were off 1% compared to our markets which were actually up 2%. Again, this is indicative of the weakness in the New York and LA markets.

For the second quarter our largest category automotive was off 3% with beverages, entertainment, media, sales, and department stores also exhibiting negative trends. Gains were exhibited by movies, financial services, and home improvement. During the second quarter our sellout was down 2% and our average unit rate down 3%.

Finally on the revenue side, our fastest growing segment Emmis Interactive continues to exhibit a rapid revenue growth and profitability expecting to generate between $9 million and $10 million of revenue during this fiscal year. We continue to be excited about the performance of this emerging unit. We think it is a leader in this industry and will continue to exhibit strong growth in the years ahead.

On the expense side station operating expenses excluding cash compensation were up 2.3%, reflecting a 6.5% increase in domestic radio expenses offset by decreases of 6% in foreign radio and 5% in publishing expenses respectively. The increase in domestic radio expenses is driven by expenses related to the KVLA format change and that’s related to the recent Tower Records Bankruptcy and the WLUP morning show expenses in Chicago. Absent these times expense growth would have been in the range of 3%. We provided guidance this morning in the earnings release that expense growth in the third quarter will be in the lowest single digits.

Corporate expenses during the second quarter were $8.3 million, which includes $2.4 million of cost associated with the proposed Go-Private transaction and an additional $1.2 million of noncash compensation. Our current normalized corporate expenses are in the range of $5 million to $6 million, although I should indicate that we anticipate approximately $2 million in corporate expenses associated with the $4 per share special dividend announced in September.

In terms of our capital structure, during the second quarter we closed on the sale of our TV properties in Mobile/Pensacola in Orlando and completed the sale of KKFR-FM in Phoenix. Proceeds from these transactions leave Emmis with total leverage at 08/31/06 of 6.6 times and taking into account the $195 million of cash on the balance sheet, a leverage of 4.3 times on a net debt basis. Our current weighted average cost of debt is 6.93%.

In light our success in selling 14 of our 16 television properties at prices well in excess of consensus estimates, the board of directors announced the authorized management to take all necessary actions to enable the board to declare a $4 per share special dividend. We expect to complete this return of capital to shareholders in November 2006. Coupled with our successful “Dutch Auction” last year, Emmis will have returned $550 million to shareholders and repay the $1 billion in debt since last May 2005.

Additionally, Emmis Operating Company has commenced an offer to purchase at par 6% and 7% senior subordinated notes. We expect to complete the assets sale and tender offer for the notes on October the 19th. We are in the process of negotiating a new credit facility and anticipate that leverage post the $4 special dividend will be in the low 6 times range.

Finally, in terms of capital expenditures excluding TV during the second quarter were $1.3 million and will be approximately $4 million in the third quarter and $8 million for the fiscal year.

With that we’ll move on to the question and answer section.

Kate

Julianne, I think we’re ready for you to give instructions on how to ask questions now.

Question-and-Answer Session

Operator

Thank you. At this time, we are ready to begin the question and answer session. To ask a question please press the * and 1 on your touchtone phone. You will be announced prior to asking your question. One moment please for the first question. Our first question comes from Victor Miller from Bear Stearns.

Victor Miller, Bear Stearns

I appreciate you taking the call. Jeff, you in your comments said that you felt like there was a bit of a recovery underway for radio yet the guidance that you provided is actually almost double in terms of the wrong direction where you ended the second quarter for your company. Could you talk about maybe the changes at Q101, Moving, 93, and Power 106 and maybe the impact to that third quarter number more discretely so we can get a sense of where you do see recovery? Secondly, you did say at filings that you were willing to pay $16.80 a share which is almost $5 higher than the company is priced right now, are you happy with the ultimate outcome of winding up with a $4 special dividend and would you like to revisit that at some point? Thanks.

Jeff Smulyan, CEO and Chairman

Victor, to the second question, we’re comfortable with where it landed. We just felt that given everything of the changes in the market place that while we were fully prepared to go through with $15.25 and obviously at filings we made discussions and offers at a higher number, we’re comfortable at where it landed. We said we are capable of being a public company, we are capable of being a private company. We’re just going to run the company the same way we’ve always run it for almost 26 years. So, there was a strong consensus to give the special dividend and we’re very comfortable with that. As to the guidance this quarter, it does represent a trough because we have significant startup expenses at Moving in Los Angeles, some expenses with our new morning show in Chicago getting up to speed, there’s also the effect of the loss of the old morning show at Q101 in Chicago, and some additional marketing. Those are all the reasons that we’ve been cautious in our guidance in the third quarter because we think this is the trough. But, obviously the ratings that we’re seeing, both in the last few trends in New York and Los Angeles as well as some of the anecdotal information from Moving in Los Angeles and our morning shows in Chicago, both of them indicate that the fourth and next year should be very, very encouraging for us. That’s company specific. As far as the industry, we believe, and I’ve talked about this repeatedly, that there’s been a sort of a satellite cash A that’s been out there that’s finally starting to lift. Everywhere you go advertisers and consumers have said “Well what about satellite radio?” And I think finally the bloom is off that rose. I saw this morning and I happened to see one of the spots last night, XM is redoubling their marketing, is spending a lot more money. Those businesses have been very troubled, and that’s not to say that one or both of them may someday be viable economically, but no one has ever made any money than satellite radio business ever, and some of the dire predictions about our demise at the hands of satellite radio are clearly not coming to pass and right now they have 11 million subscribers they manned with 15 or 25 million, but at the end of the day most Americans will connect with terrestrial radio and advertisers are starting to finally realize that there’s a pretty significant bargain in that relationship, and that’s what leads me to believe that we’ve finally hit the trough both as a company and as an industry.

Victor Miller, Bear Stearns

Thank you, Jeff.

Operator

Our next question comes from Lee Westerfield from Harris Nesbitt, your line is open.

Lee Westerfield, Harris Nesbitt

Thank you gentlemen, good morning. Three questions; the first one, Jeff if you can go into a little more detail about the developments at MS Interactive such as the iTunes relationship and also how MS Interactive may differ from some other more typical radio groups, online initiatives. Secondly, if you can update us with regard to the remaining television assets, where you stand in terms of the efforts to market these properties and given the lapse in time can they remain discontinued ops from an accounting standpoint? I’ll just keep it at those two questions, thank you.

Jeff Smulyan, CEO and Chairman

Let me talk about TV first. We are deep into discussions with several buyers in each market. Deals are never done till they’re done. We think we’re fairly far along with two and three people in New Orleans and Hawaii, so I feel very comfortable. I also should say that maybe what’s made us a little bit more bullish is there’s been a remarkable performance in both Hawaii led by Rich Blangiardi and his staff and New Orleans, Vanessa Oubre and her staff, they have just done an incredible job. New Orleans billing will actually exceed the calendar year before Katrina. It’s just been one of the great turn around stories of all time and it’s probably made us a little bit more bullish about our prospects. And in Hawaii I’m sure we’re having our best year ever at KGMB. So while we’re in discussions nothing is ever done until the contract is signed and the deal closes. So, we feel in the near term those transactions will both be done. And as you know in this quarter we closed our transaction, our sale of WB-18 or I guess it would CW-18 now in Orlando for $217.5 million. We believe our total purchase and our sales will be about $1.250 billion, which by all standards will be several hundred million dollars or more above what was expected, so we feel good. As far as MS Interactive is concerned, the team led by Deborah Esayian and Ray…has been remarkable. Our iTunes plate…the most innovation relationships they have, we have more people coming to us through the iTunes MS website than anybody else other than Yahoo in just a few short months and there have been calls for us to sort of take this technology and then put it out to the rest of the industry. It’s just another example of the innovation that our people have had. It is growing by leaps and bounds; I think because of one word, because they’ve been able to engage our consumers, our listeners in our websites, and it’s the reason we’re consulting other companies and it’s a reason that we’re probably going to branch off into some new ventures. Rick, do you want to add to that?

Rick Cummings, President, Emmis Radio

Well, I think you pretty much said it Jeff. We’re really proud of the iTunes stores. We’ve launched 12 of them, we stood 12 over the past eight or nine months I think it is, and we are the number two iTunes affiliate behind Yahoo Music, which is pretty impressive. They have indeed talked to us about perhaps coming up with some kind of white label business that we could take out to the rest of the broadcasters who have expressed interest. We’re also really proud of a new tool called Profiler, which does a remarkable job of tracking listeners, tracking their website preferences, tracking what they listen to, what they respond to on the air. We think it’s going to be a great marketing tool that we can take out to other broadcasters at a future point. So, I’m really proud of what we’ve done with this over the last four or five years and we’ve done it by also staying in the black, which is not something too many broadcasters can say. Our sort of marching order to those guys was, “We’ll keep this business running but you’ve got to make it work,” and they’ve done a very, very good job of doing that.

Jeff Smulyan, CEO and Chairman

I think we made far more money this year and than U2, so we’re in discussion with them…$3 billion we think.

Patrick Walsh, CFO

Lee, one last thing, just to get back to your original question on the TV operations, management and our auditors are both comfortable, but given the fact some circumstances with the New Orleans and the Honolulu stations continuing, we’ll include them as discontinued operations as appropriate.

Lee Westerfield, Harris Nesbitt

And we’ll put in Google calls in a little while, thank you gentlemen.

Operator

Our next question comes from Lorraine Mancini from Merrill Lynch, your line is open.

Lorraine Mancini, Merrill Lynch

Can you just give a little more flavor on the timing of Moving, the Chicago, and the New York ratings will start falling through the numbers specifically against prior to the ratings and the new reformats you were running domestic radio that’s 260 to 270 in revenue and 120 to 125 of VCS, which implied a 40% margin, how long does it take up to get back there, is that a 2008 event or later?

Jeff Smulyan, CEO and Chairman

Rick, I’ll certainly defer to your, but this has been such a tough year because of both the softness in those markets and our performance, but all the metrics are in place for this to get quite a bit better next year. You never want to predict how fast a station takes off, but we added a morning show with Jonathan Brandmeyer and he had his best trend ever in Chicago. The anecdotal evidence about Rick Dees and Moving in Los Angeles have been very good. I think we look to fiscal 2008, which starts for us next February, is when things should really start to move dramatically forward. Rick, do you want to add to that?

Rick Cummings, President, Emmis Radio

That’s pretty much it; I mean we just had a trend in Chicago with the loop where we were number 554 adults, now can I think that’s going to hold? I don’t know about that but I think certainly we’ll be inside the top 10 and that’s been the business plan, to stay inside the top 10, so we’re very, very encouraged about that. We’ve got great anecdotal feedback about the launch of Moving. It really is a case of fishing where the fish are. This is targeted towards Hispanic women. Rick Dees is an absolute star for them. He is back on the air after nearly a three-year absence. I listened to him again on the way this morning and he is really on top of his game. We think that station can be top 10 adults within the next year. If that happens, that is a big change in our circumstances in Los Angeles, and with Power in LA we are back in first place, 18-34, back in the high 7 share trends for the last two months. Those are the best numbers we’ve seen in almost two years. The last time we had a high seven 18-34 we were number one in the 18-49 demo, which is really the money demo for us. So if those trends hold, I think next year will be a very, very strong year for us in Los Angeles. Does it all grow back in one year? I’m not sure, but I think we’ve made great strides.

Lorraine Mancini, Merrill Lynch

And one quick clarification, I think you said in your prepared comments Jeff that Moving would be a positive impact versus KZLA and 4Q, does that mean that we expect you’ll have the same time of billing and cash flow as you had with KZLA by the fourth quarter already?

Rick Cummings, President, Emmis Radio

I’d comment on that Jeff if you’d like. I think next year we’d get back to the cash flows we projected for this year before the format changed, the year after that we passed KZLA’s best performance ever.

Lorraine Mancini, Merrill Lynch

Okay, thank you.

Operator

Thank you. Our next question comes from Jonathan Jacoby from Banc of America.

Jonathan Jacoby, Banc of America Securities

Good morning and Pat welcome. Just a few questions here, just to get a little bit more color on sort of the radio market place, are you seeing any improvements in the overall market in New York and Los Angeles? Second question is, are you seeing still pricing pressures from competitors since your price per unit was down? And then lastly for Jeff, clearly the company has had some different attempts at different strategies over the last few years, post obviously you’re going to pay the special dividend, I’m assuming the focus will be probably using cash to pay down debt, but I’m curious to actually what the strategy will be in terms of free cash flow and perhaps on the acquisition strategy front? Thanks.

Jeff Smulyan, CEO and Chairman

Rick, why don’t you do the first and I’ll talk about the strategies.

Rick Cummings, President, Emmis Radio

Well, we haven’t seen any signs in New York that the market is turning around just yet. In fact, it is still negative double digits through October and November. I think that it will turn around but I don’t know if it’s going to turn around this calendar year. I think we’re probably talking early next year. There are a lot of reasons for it. I think some of it is changes in the agency business, I think some of it is perceptual, you know most of Howard Stern money in that market place is gone. I think that all of those things added together have demonstrated why that market is so negative. In Los Angeles, the market is negative single digits, mid single digits for the year. We do not see signs of that changing the rest of this calendar year. I think that’s also sometime next year.

Jeff Smulyan, CEO and Chairman

Jonathan, as far as our strategy, we’ve really always said we’re going to look at…the best way to deploy our capital every day we’ve been in business…sometimes we look in different areas and obviously some of those areas we haven’t found any and I don’t think that the streets really love, whether it’s more international or sports or building or interactive or buying more radio or buying or selling television, but we’re going to run the company for the long term, doing things that we think make the most sense and at any given time we’ll consider the alternatives. We felt that the overachievement on our TV sales made sense to return some of that to our shareholders. There was a long and very strong consensus on our board that that was the course of action we should follow. We still have a capital structure which allows us the flexibility and we feel good about where we are going forward, and whether it is domestic radio or international radio or publishing or some new areas, we’re going to try to find the best way to deploy capital to go into the future.

Jonathan Jacoby, Banc of America Securities

Thank you.

Operator

Your next question comes from Michael Kupinski from A.G. Edwards and Sons.

Mike Kupinski, A.G. Edwards

Thank you for taking the question. I just want to follow on the corporate expenses, there were $8.2 million in this quarter and you were indicating that there is an additional $2 million next quarter, is that year-over-year incremental $2 million or can you just give us some color on what you think that the runrate will be in the next quarter? And then if you could just talk a little bit about the fiscal fourth quarter, you think you’ll get back to the normalized levels as you mentioned, Patrick, in that $5 million to $6 million range? I have one other question after that.

Patrick Walsh, CFO

Mike, I think the normalized runrate is between $5 million and $6 million per quarter. The $2 million is specifically associated with some costs that we’re going to run to do the special dividend, some fees associated with that transaction. So we won’t see those again in the fourth quarter, and we would expect to get back to a more normalized rate in the fourth quarter.

Mike Kupinski, A.G. Edwards

So, the basic you’re using is the $5 million to $6 million for the incremental $2 million?

Patrick Walsh, CFO

The incremental $2 million is on top of the $5 million to $6 million.

Mike Kupinski, A.G. Edwards

Okay. And then also just kind of going back to Jonathan’s question about New York, certainly CBS is seeing sizable reductions in their ratings for switching formats to the jack format with a likely reduction of about 45% ratings, I was just wondering how much pressure are you seeing from CBS in that market place, how much is that affecting you, do you believe that any shifts in format there might help you out a little bit, or in general what else can we see in New York to kind of stabilize that market place?

Rick Cummings, President, Emmis Radio

I think that does contribute to why the market has been as negative as it has been; I mean CBS has a big cluster there and like us in LA this year they are struggling and I think that does contribute to everybody. Let’s face it when markets are weak like this everybody prices for share, business comes in at the last minute, buyers sit on orders because they can, and everybody kind of dives for their share of the business. That’s what is happening and that has all contributed to that negative high single digit near double digit deficit for the year. But, we are a little disappointed in our performance because with essentially the same ratings that we had a year ago when we beat the market by 5 points we were trailing the market, and some of that has been a change in sales management, which took place over the past year. We have a new DOS in place, we have a very confident in-house skills, there will be further sales management changes, we have a new market manager who we think is very, very focused on driving sales in that market place, because with essentially the same ratings we should be performing better, and I think we will. I really think before the year is up we will be pacing with the market and in a position to beat the market again next year like we did last year. But no question about it, when the company with a big cluster is having some ratings challenges that affects everybody.

Mike Kupinski, A.G. Edwards

Thanks Rick.

Kate

We’ve got time for one last question, Julianne.

Operator

Our last question comes from James Dix from Deutsche Bank, your line is open.

James Dix, Deutsche Bank

Good morning everybody and Pat welcome. Just a couple of questions, kind of followups here I think, what is your general assumption for market growth on the radio side in the November quarter if you have it? And then in terms of looking at the margins on your clusters in your top three markets, where as a group do they stand roughly on a runrate now versus the rest of your group and how do you think that’s going to change as you see more recovery going into fiscal ’08?

Jeff Smulyan, CEO and Chairman

On the market side we’re actually anticipating for third quarter that our markets will be down 5, so that’s what we’re projecting there and we built that in as part of the guidance, the low double digit guidance for ourselves.

Rick Cummings, President, Emmis Radio

In terms of margins, clearly our margins have come down quite a bit. Historically we’ve had very significant margins in the top two markets, but obviously you see if it’s kind revenue decline…I don’t have it right in front of me, but we believe that that will start to revamp pretty nicely in the next year.

Jeff Smulyan, CEO and Chairman

I mean they’re still pretty exceptional margins on each of these large markets, but we have seen compression in New York where the margin has come down year over year by about 5 points, in Los Angeles we’re seeing margin compression as well, but you’re still talking about BCF margins north of 45% in these margins, so they’re exceptional cash flow machines, and we expect them to continue to be.

James Dix, Deutsche Bank

Any sense as to where you think those might go if your turn around continues as you expect next year?

Rick Cummings, President, Emmis Radio

James, they clearly have been well north of 50 in the past and we expect that it will get back there. We’ve had some stations north of 60. I don’t want to give you more specifics on that because I don’t want our competitors to jump into any more formats than they have in the last year. I mean they’ve been very good and most of the major players in the major markets have margins that are well north of 50.

James Dix, Deutsche Bank

Okay, thanks very much.

Kate

Before just closing comments I just want to remind you that a replay of the call will be available until a week from today at 203-369-0658.

Jeff Smulyan, CEO and Chairman

Okay, thanks. Somebody was kidding between the difference between the old story about the level of commitment and the story about baking the eggs, the chicken has a level of interest and the pig is very committed. This company has shown people who are incredibly committed to our industries and I take great pride in them. It has been a tough year but it has been probably one of the best years for innovation that we’ve had ever as a public company, and I couldn’t be prouder of that. We think that for those people who have a long-term focus on what we do that we’re planting the seeds that will lead to a much brighter future. Everybody in American radio is challenged and yet I am proud of our company, our peers and how we’ve come together, and I think that as we go forward in the future things will look better. So with that I thank you and I appreciate your interest.

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