Entravision Communications Corp (EVC) 2002 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Entravision Communications fourth quarter and full year 2002 earnings conference call. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question please press the 1 followed by the 4 on your telephone. As a reminder, this conference is being recorded Monday, February 10, 2003. I would now like to turn the conference over to Walter Ulloa, Chairman and CEO for Entravision. Please go ahead, sir.

Thank you, operator. Good afternoon and welcome to our fourth quarter 2002 full year teleconference. With me is Philip Wilkinson, our President and COO, and John DeLorenzo, our Executive Vice President and CFO.

On today's call I will provide an overview of operating results for the quarter as well as recent developments. Philip will discuss the performance of our television, and radio division. John will highlight the aspects of our overall numbers as well as comments on guidance. We will then be available to answer any questions that you have.

Before starting the call, I would like to inform you that this afternoon's conference call may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ. Please refer to our S.E.C. files for a list of the risks and uncertainties that could impact actual results. In addition, this call is the property of Entravision Communications Corporation. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Entravision Communications Corporation is strictly prohibited.

For the full year and fourth quarter we continue to produce industry leading results. Our full year net revenue increased 14%. Broadcast cash flow increased 14%, and EBITDA as adjusted increased 16%. Free cash flow improved from 1.4 million in 2001 to 18.3 million in 2002, a spectacular increase. On a broadcasting station basis, revenue increased 17% and broadcast cash flow was up 22%. This growth comes on top of double digit increases in 2001.

For future reference, in light of the new rules announced by the S.E.C. regarding the use of non-GAAP measures, we're going to be referring to EBITDA as adjusted going forward to more clearly reflect the fact that our definition of EBITDA includes adjustments that we believe are appropriate and consistent with our prior practice, but I want to make it perfectly clear when I refer to EBITDA adjusted, I'm talking about the same exact same measure we always provided with the same exact adjustments that we've always made. Specifically, we do not include EBITDA as adjusted interest, taxes, depreciation, amortization and noncash stock-based compensation. We've always detailed that definition in a footnote EBITDA has used in our public files. I just wanted to clarify that this new label does not change our calculations in any way.

In the fourth quarter, our television [INAUDIBLE] division recorded double digit revenue and broadcast cash flow while free cash flow improved almost 300%. On the same basis revenue increased 16% and broadcast cash flow was up 15%. Once again the results of that by our television group with fourth quarter revenue growth of 20% over fourth quarter 2001.

Our radio group firmly established itself as the second revenue engine for our company with revenue growth of 18% for the same period 2001 and we had a stunning fourth quarter with revenue growth of 15%. I believe it's important to note that we didn't have the benefit of soft fourth quarter comparables like our general market competitors.

The distributing growth of our company is a direct result of our ability to successfully execute on business strategies. We are strategically positioned in the fastest growing hispanic market allowing us to capitalize on the explosive purchasing power of the hispanic consumer. We are creating leading media brands in the community we serve and establishing the foundation for continued financial returns in the years ahead. As we enter 2003, all of our divisions have strengthened their operations and will be positive contributors to revenue and cash flow growth. We are seeing the solid paces in the first quarter as indicated by our guidance and expect to once again lead the industry with our financial performance.

In our television group, our Univision affiliated television stations continue to deliver market viewing shares against hispanic and English language competitors. As a group in November 2002 sweeps, our station had a phenomenal growth, delivering outstanding rating increases over a year ago November. Overall in primetime, our Univision affiliated television stations grew plus 24% in households, plus 27% in adults 18-24 and plus 28% in age 18-49. [INAUDIBLE] Our prime time gains were even more substantial growing plus 29% in households, plus 37% in 18-34 and plus 47% in 18-49 versus a year ago November.

Our television stations have consistently delivered solid rating gains and we ended the year with six number-one ranked television stations regardless of language in prime time in adults 18-34. Our stations also ranked number one in news in eight markets in any language in adults 18-34.

Our [INAUDIBLE] group is showing continued momentum. We expect our current entire television station group to reach break-even this year. These stations are benefiting from our duopoly strategy as we leverage existing operating and sales infrastructure of our Univision affiliates. Viewing markets remain strong. In our overnight markets in a November survey, our combined station share dominated the competition by obtaining an approximately 90% share in prime time Spanish-language television viewing. Our duopoly strategy is producing results allowing us to capture a greater share of the hispanic advertising pie. We will opportunistically seek to expand our [INAUDIBLE] base in 2003.

In our [INAUDIBLE] position, 2002 clearly we are turning more as we capitalize on the rating success of our reformat and return to both top and bottom line growth. [ INAUDIBLE ] In adults 18-34 increase in 29.5% versus the summer 2002 ratings and rising 35.1% over the 2001 fall Arbitron growth. Our sales teams continue to convert [INAUDIBLE]. Under L.E.R., the national sales for the fourth quarter increased 45% and were up an incredible 38% for the year.

We recently adapted acquisition subject to S.E.C. approval of three radio stations from Big City Radio Los Angeles. We began operating the stations under an agreement on January 14th. This brings our L.A. area cluster to six stations. We believe this acquisition presents a significant strategic opportunity as it allows us to capture additional advertising share in the nation's largest hispanic market. In addition to the transaction, expands our footprint, providing flexibility to develop formats and drive revenues while removing a competitor from the market. We have moved our popular format to a stronger signal and consolidated the dial location to 107.1. With the consolidation of the pop format we're able to out-pace the market in January by 15.9%. According to Kaplan we increased sales by 27.7% in January 2002 versus January 2001.

On January 17th we launched a new format on our 103.1 frequencies. 103.1 KDL. is uniquely designed for ethnically diverse Los Angeles marketplace. 103.1 KDL. is formatted similarly to our station in Dallas, Texas, KKEL, 106.7. [ INAUDIBLE] In the next three weeks we plan to debut a new Los Angeles Spanish-language radio station on our 97.5 frequency. This will attract slightly overruled demographics than the pop rock demographics. We are expecting to be able to receive a four share for our Los Angeles cluster which is the result in the 2003 Arbitron. We look forward to updating you throughout the year as we execute our strategy in this market. [INAUDIBLE] We continue to see [INAUDIBLE] our acquisition of KXPK last year. At the same time the ratings for two other stations increased in adults 18-34. [INAUDIBLE] Total revenue for our Denver cluster in the fourth quarter increased 52% while the market increased by 12.7% according to Miller Kaplan. Each station contributed to the 52% increase. KXEX had a 39% increase over fourth quarter prior year. [INAUDIBLE] contributed to 25% increase and with a new Latina format also brought in additional revenues. For the year the Entravision Denver radio cluster increase in revenue 27% over the previous year.

In Dallas KKDL and our acquisition last year with the super straight format continues to develop and prosper. The fall '02 audience share of the format increased 64% over summer '02 in 18-34. In the fourth quarter, KTTY revenue increased 320% over prior year. Our maximum regional radio station in Dallas also continued to grow and prosper. [INAUDIBLE] 02 share increased 61% in adults 18-34 over fall 2001. Our radio cluster in Dallas increased its revenue a spectacular 57% in fourth quarter '02 and 50% for the year.

At our [INAUDIBLE] we are making substantial progress. As I mentioned earlier fourth quarter revenues were up 15%. Cash flow increased 83%. Rates on average increased by approximately 10% and in the fourth quarter overall occupancy improved.

In conclusion, our television, and radio division, we are strong entering 2003. We are producing ratings growth and capturing an increasing share of the advertising market. Our sales force is aggressively going after level and national business while working diligently to close the revenue gap. Our management team is focused on controlling costs and maximizing leverage. We are uniquely focused on the hispanic markets in the United States and continue to see opportunities to expand while leveraging our existing infrastructure. Our long-term outlook remains strong and we expect to deliver double digit growth in the first quarter of 2003. Now I'd like it turn the call over to Phil.

Thank you, Walter. Good afternoon, everyone. I'm just going to run through some primary performance areas in each of the three media divisions starting with television.

The fourth quarter revenues for the television stations grew an industry-leading 20% and that was at the very high end of our guidance. For the full year television posted a 22% revenue increase and B.C.F. grew 24%. Rating success in new business continues to drive our revenue growth. As mentioned earlier, we had another outstanding November Nielsen book across all of our station groups. Overall prime time our Univision affiliated stations grew 24% in household ratings, 27% in adults 18-34 ratings, and we also grew 28% in adult 18-49-year-old ratings versus November '01 book. It's interesting that the actual universe estimates grew 3% according to Nielsen. They upped the population count 3% year to year, and we grew 2 plus audience by 18% so our growth significantly out paced the population growth.

In prime time in November '02 our stations ranked number 1 in six markets regardless of language in adults 18-34 versus November '01. A few individual station adult 18-34 highlights are in Albuquerque they grew 84% over a year ago November and Vegas ranked number 1 in the market growing 24% over November '01. [INAUDIBLE] KNBO continues to grow audience increasing 9% over a year ago and delivering a strong 4.6 rating. Finally two of our developmental stations ranked number 1 and number 2 in prime in the respective markets.

Our local newscast continues solid performance in the November Nielsen books. As group our television markets grew new viewers plus 13% over a year ago in November. They ranked number 1 early news in adults 18-34 in any language in the entire market and [INAUDIBLE] market, and we're number one or number two in 12 of our 15 markets where we produce news. KMVO is the number one local newscast and grew 20% over a year ago November. In LAS Vegas, they ranked number 1 and grew 29% over November '01 and in Tampa they have grown over 82% over a year ago November to rank number 2 in the time period. Only one rating point from the number one position. Interestingly, in these markets, every English language broadcast news competitor declined year to year. Our newscasts have grown year to year.

For our TV group overall fourth quarter national advertising increases 38% while local was up 12%. That's for fourth quarter T.V. Key categories during the quarter include auto, retail, fast food, and record political advertising spending. For the full year national advertising increased 40% while local was up 14%. That's for the full year.

Our focus new business efforts have continued to pay off. Our largest advertising category which we have targeted, automotive, posted the greatest dollar increase and was up 46% for the year and all of the top five auto advertisers grew strong double digits with Nissan doubling spending year to year. Food services, the service industry and retail, the next three largest categories all grew double digits. These categories saw the largest business gains from Pepsi, Burger King and Taco Bell for food services, B of A of [INAUDIBLE] insurance for the service industries and Wal-Mart led the increase in the retail category. [INAUDIBLE] remain strong in the first quarter and the first quarter has seen rises in all top five categories and the largest dollar increases are coming from G.M. and Verizon thus far.

Turning to our radio division. Excluding the radio stations we sold in 2001 revenue increased 18% in the fourth quarter double the radio industry growth. National sales increased 45% and local sales which represent 70% of the total sales increased 9%. For the full year revenue increased 17%. National sales increased 38 and local sales was up 16 for full year. Local represented 73% for the total revenue on radio.

Our top three categories were automotive, department stores and restaurants. Dollar growth was led by the automotive category which recorded a 27% increase in spending. Within this category, the increases were led by Mitsubishi Motors and General Motors. We had significant gains in the department store advertising spending as well. Gains were led by Sears and J.C. Penny, 37 and 28% respectively. Within the restaurant category McDonald's advertising increased 29.8% and Burger King increased by 17.9%. New accounts during the quarter included Proctor & Gamble's product Secret, Shell Oil, Toys'R'Us, and Telecom Sprint PCS. Pacing in the first quarter remained strong for radio and gains were seen in automotive, Telecom and the restaurant industry led by McDonald's, Burger King, Verizon and [INAUDIBLE], two additions to the TV division as well as radio.

Our ratings increases continued. We experienced 29.5% for all our radio properties combined in the fall versus summer 2002. That's an average quarter hour adults 18-34 covered in the demo. When we looked at the fall 2001 to fall 2002, a full year, overall ratings grew 35%, also an average quarter hour adults 18-34. Our stations continue to post strong results. Radio continues to post great results. KLMV in Phoenix remains the market's number one station with a 3.9 share in persons 12 plus in the fall book. The station share increased 22% from the fall previous year, and ranked number 2 in the entire market in adults 18-34.

In Denver, KXDK in its first full complete rating period debuted as the number one Spanish language in the market but even more impressive is that it is ranked number 9 in persons 12 plus and number 3 in adults 18-34 in the entire mark et in any language. The station 18-34 audience is up 111% over summer '02 and in Monterey, the station is the number one in the market in any language in fall 2002 persons 12 plus and 18-34. That station increased audience 89% in adults 18-34 versus summer-02 with an 8.3 share.

In our second format we enjoyed large gains as well. In the fall '02, KRRN in Las Vegas increased its 12 plus audience in the summer 2002 by 80% and 180% in the fall 2001 for a full year. In adults 18-34, KRRN in Las Vegas has a 4.2 share which is an increase of 68% over the summer 2002. In Chicago WRVA and [INAUDIBLE] continue to see gains. The station increased its audience in the coveted 18-34 demo by 171%, fall '02 versus fall '01 19% vs. Summer 2002 and Dallas increased audience share by 64% over summer '02 in adults 18-34 in the past year the station's increased 50% in the same demo.

As far as the rating, San Francisco had another strong ratings period. We continue to have the number one Spanish station in the bay area and in adults 18-34. The station also climbed the general market in any language ranking number 10 in persons 12 plus and number 3 in a demo 18-34. In the fall of 02 San Francisco increased its audience by 30% versus summer with a 5.6 share and increased 93% in the past year in adults 18-34. The two stations in Phoenix had best performance since the fall of '99. The station increased its shares in adults 18-34 by 11% over the summer with a 2.9 share. The station also grew 1% over the fall '01 for Radio Romantica, a strong success.

Our newest format also saw increases in the fall of '02 Arbitron ratings. In Monterey they increased the share 18-34, representing a 41% increase in the summer '02 where there has been growth in every Arbitron rating period since the station went on the air during fall 01. In Denver, they debuted with a 2.2 share in adults 18-34, the station's first complete Arbitron period. This increase represents a 57% gain over the summer. Again, strong results in our ratings. Last week a station rose to be ranked number one in the entire metro with a 12.6 share in its demo adults 18-34.

Turning to our outdoor division, revenue totaled 8.2 million in the fourth quarter, up 15.3% over the comparable period last year, slightly ahead of expectations. The New York revenues were up 21.4%, and the increase was the result of an improved national advertising market coupled with our continued efforts to drive local sales. The primary contributor to our growth during fourth quarter '02 is the continued recovery of the national advertising revenue. Again, in the New York market. The New York national sales rep were up 21.6% over last year. Spending included Glaxo, American Express, Warner Brothers, and Proctor & Gamble. On a broader scare combined spending of three specific sectors alone, entertainment, financial amounted to over a million dollars in the quarter over the same period last year.

New York local revenue also increased up by 20% as efforts to develop business in the local community continues to gain momentum. New billboard advertisers for the quarter include, among others, DeBeers jewelry store, a national automaker and Campbell's Soup. The top ten categories for the quarter include entertainment, movies up 12% in Q4, retail up 5%, health care up 36%, and our financial category which is up 141%. Banks and financial services. Improvements in both rate and occupancy were achieved across most formats in both major markets based on average increase approximately 10% over last year while overall occupancy improved. Revenue from our posting business in the L.A. city grew approximately 9.5% while revenue from our large format business, the Times Square supers improved by 22%.

With New York national advertising seeming to have turned the corner, we remain optimistic that our growth story will continue in the first quarter of '03. In fact, we're seeing that. Accordingly, based on both improved pacing and analysis of businesses in the pipeline, we anticipate revenue in Q1 20 grow between 8 and 10% from Q1 '02 revenue of 5.7.

In summary, all three of our core media segments are in a stronger operating and competitive position than a year ago. We have made substantial progress across our asset base in ratings and revenue growth. And based on current pacings we are well on track to delivering strong growth in the first quarter. And now I'd like to turn the call over to John for the financial review.

Thank you, Philip and good afternoon, everyone. It's Walter and Philip that discussed Entravision industry leading financial results for 2002.

Full year net revenues were 238.5 million dollars, up 14% and broadcast cash flow increased 14% to 75 million dollars. EBITDA as adjusted was 59 million dollars a 16% increase over the prior year. If you exclude from 2002 a one-time only charge of 600,000 related to the legal costs associated with the proposed merger between Univision and hispanic broadcasting corporation, our EBITDA has adjusted increased 18%. Our after-tax cash flow for the year was 31 cents per share, up from 30 cents per share in 2001 -- from 2002. We define free cash flow as EBITDA as adjusted minus capital expenditures, cash interest, cash taxes plus interest income. Free-cash flow for the year was 18.3 million or 15 cents per share, up from 1.4 million or 1 cent per share.

Overall, our B.C.F. margin was 32% for the year and 33% for the quarter. TV and radio margins for the quarter were 39 and 35% respectively while for the full year, TV margin was 38% and the radio margin was 33%. Operating expense for the year increased 14%. These expenses, consisting of variable costs of 5% primarily attributable to the increase in commission and bonuses as a result of the increase in revenue. Startup costs of 4% primarily attributable to TV,. And other cost represented 5%, the largest portion of which was rating services and payroll.

Turning to our balance sheet, as of December 31st, 2002 our total net debt was $306 million and our EBITDA as adjusted for the year was $58.7 million. This year the ratio of debt to EBITDA as adjusted of 5.2 times while a recent big city transaction will increase our leverage. We expect to end the year in the low five times range.

Before turning to our guidance for the first quarter of 2003 I'd like to comment on an item in our press release today and will appear in our S.E.C. files going forward. In the fourth quarter we received a routine review letter from the S.E.C. commenting on our 200110-K and our 10-Qs for the first three-quarters of 2002. The S.E.C. will not, as a matter of policy, tell us why we were selected for this review, but all public companies will receive a similar review at least once every three years. As part of the review, the S.E.C. reviewed our accounting treatment of intangible assets under SFAS142 which was effective January 1st, 2002. We made a good faith judgment call on the application of SFAS142 which was a brand-new pronouncement on which there was at the time and remains very little interpretive guidance.

However, as a result of our situation and our dialogue with the S.E.C., we have determined that the value of our radio network and tangible asset is not considered a separable asset and therefore should be included as excess purchase price, good will as opposed to a separate intangible asset for accounting purposes. In our 10-K we will revise the quarterly information and our 10-Qs for 2002 to reflect the reclassification in the amount of $160 million and the related deferred income tax of 64 million dollars. There was no result in income tax effect at both good will and indefinite life intangibles are not amortized.

In addition, concerning our Univision television network affiliation agreement intangible asset we initially felt this agreement had an indefinite life and therefore did not need to be amortized. Among other factors this determination was based on present expectation of management that this agreement will, in fact, be renewed at the expiration of its initial term and the duration of the affiliation agreement, 25 years, as well as the mutual dependency of the companies that we believe makes renewal a near certainty. Upon reevaluation of SFAS142, however, we have determined that this agreement does not meet the strict requirements for classification as an indefinite life intangible asset because we do not have the unilateral right to renew the agreement indefinitely. We will begin advertising going forward and in our 10-K we'll revise the quarterly information included in our 10-Qs of 2002.

Please note that this is a noncash low EBITDA adjustment relating to the adjustment of an intangible. The total value of the intangible asset associated with the Univision affiliation agreement is 47 million. The amortization of the asset over its remaining life is only approximately 350,000 dollars per quarter, net of tax. We will reflect all revisions by quarter affected in 2002 in our 10-K for 2002. We will not have to file amended 10-Qs for 2002. Upon filing our 10-K, we will have can complied with all comments that resulted from the S.E.C.'s review.

Turning to our outlook for the first quarter 26003, based on the current pacings we are seeing, we expect to report net revenues of between 54.3 and 55.4 million dollars, an increase of 11-13%. Broadcast cash flow in a range of 13 million to 13.8 million, an increase of 6-13%, and EBITDA as adjusted in the range of 8.5 to 9.4 million dollars, up 0-10%. Free cash flow is expected to be approximately minus 3.2 million to minus 4.1 million or minus 3 cents per share.

For the quarter 2003, we expect corporate GNA to be approximately 4.4 million dollars, depreciation of approximately 6.4 million, amortization of approximately 5.6 million, and interest expense of approximately 7.2 million, and capital expenditures in the range of 5.5 to 5.7 million dollars. Placing our operating expense growth for the first quarter of 13%, 3% would consist of variable costs, 3% would consist of startup cost, particularly the big city acquisition and 7% would be other costs. It should be noted that an incremental revenue and expenses from the big city were removed from the first quarter forecast. EBITDA as adjusted growth is projected to be 6% to 15%. Although we will continue to have expanding for news station-new station improvements in 2003 we expect overall expense growth to decrease compared to 2002. This concludes our formal remarks. Walter, Philip and I will be happy to take your questions. Operator?

Thank you. Ladies and gentlemen, if you would like to register a question, please press the 1 followed by the 4 on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration please press 1 followed by 3. If you are using a speakerphone please lift your handset before entering your request. One moment please for the first question. The first question is from the line of Paul Sweeney with Credit Suisse First Boston.

Obviously you guys are having great success in the top line with radio and TV and we're seeing that in the revenue guidance for your segments, but we still have this issue with your cost both on an operating basis and on I think a corporate overhead basis. So my question is, you know, I mean, the operating expenses we're now on another quarter with the first quarter guidance, double digit operating expense growth then 19% expense growth on the corporate overhead. Both seem just very high relative to kind of what you've done in the past and relative to what this industry should do. What do you think so specifically in the operating expenses for the first quarter, if you could break down that other, that 7% number seems kind of big and then also if you could talk about the corporate overhead, why is that up 19% again similar to the fourth quarter and specifically when will these expense growth numbers start to moderate so that you can deliver operating leverage on a cash flow line? Thanks.

Paul, looking at the corporate first, the 18.7% increase, if we were to take out -- we had projected in the first quarter 175,000 dollars, -- $180,000 of legal costs relating to the hispanic broadcasting Univision broadcasting plus there was an increase in the D.and O.in the area of 175. That would make the 18.7% increase a 9% increase in corporate so they were basically a one-time item, and we certainly can't control which is rising insurance costs that would bring that 19% down to 9%. As far as other, we're looking at in both of our television and radio divisions, 6 and 8% respectively of other. 8% in radio alone is startup costs relative to the L.M.A. As you're probably aware, that went into place January 15th, and a certain amount of -- costs were significantly larger in the very first opening quarter than it would be the revenue side. And like I mentioned before, our EBITDA growth would be 6-13% range if it were not for the associated costs from revenue of big city. Is that --

Yes. As you guys think about it, how should we think about this expense growth both on the operating side and the corporate overhead side? When does it begin to moderate? I know on the INAUDIBLE] future a costs in the second quarter that starts to lapse. Should we assume that you get to a model that shows some operating leverage and how should rethink of expenses through the remainder of the year on the operating and corporate overhead side?

Certainly you have to look at the big city being in the mix so we're going to still be developing the situation in Los Angeles in the second quarter. So you don't have any of the expenses for big city in the second quarter of last year from the comparative perspective. Also, the TELEFUTURA, all those stations will be become cash flow positive throughout the year but although telefutura started January 15, there were stations we put on throughout the year. As you go through second and third quarter there will be those stations that will have a comparable from the year before. As far as corporate expenses, the difference between -- that's that 9% growth, basically mostly from additional personnel that we put into the corporate office. We think we're pretty much done there, maybe one other accounting person. So that should moderate, you know, barring, you know, additional insurance costs and so on and so forth that we can't control. So that certainly -- we don't expect to increase corporate to any great extent as far as personnel goes for the near-term. I addressed the Telefutura stations. We have radio.

It's important to point out that in Los Angeles, as John explained to you, we had startup costs here in the first quarter with the results of the big city L.M.A.without any revenues to set off those costs, and that won't be the case in the second quarter. In the second quarter we will have -- we will be producing revenue and not only from the one I indicated had huge gains in January of this year, but also our dance format as well as 97.5 which will be our new introduction of the Spanish -- of an additional Spanish language format into the Los Angeles market which will compliment our super format. So that certainly will make a difference with regards to our revenue growth and cash flow going forward into second quarter.

And certainly one final measure on expenses, certainly when you're growing revenue in the high teen ranges, there's a significant amount of that operating expense increase related strictly to variable cost. For instance, in the first quarter you're looking at 3% of the 9% increase for television, variable all related to sales-related costs and 5% for radio. So if you break the remaining 9% and you say okay, an average of 4% is for sales-related costs then you're basically increasing your cost [INAUDIBLE].

Great. Thanks very much.

The next question is from the line of Leland Westerfield with U.B.S. Warburg.

Good evening.

Hi.

Three questions if I can take them one at a time, please. John, I think you said that your targeted leverage should be in the low five times range. I wonder if you would walk through the free cash flow and how you derive that figure posted big city transaction.

Well, I'm talking from a leverage ratio from an EBITDA perspective. We're currently finishing this year at a 5.2 times. As you're aware, the transaction requires $100 million in cash which we expect to close at the end of the year. Also be aware that as the station's developing, we have a cost-free L.M.A. in place right now so that's basically giving us the benefit of developing the station, getting it cash-flow positive, while not incurring the capital costs for the station. Based on our projected for the year revenue increases and EBITDA increases of our existing stations, our developmental stations, as well as particularly the big city growth in Los Angeles, we expect to increase cash flow that will bring us down to an EBITDA, that EBITDA ratio which is pretty similar to where we are today at 5.2. I want to emphasize that that projection is based upon just the cash flow growth to deliver, not any dispositions of any properties.

Then if I might focus on the radio market in particular today, a lot of investors are focusing in on changes in one of your competitors, maybe sister companies in terms of the L.A. market, specifically I'm referring to one in the afternoon and a show host coming on in a morning time period in KSEA. [INAUDIBLE] was in San Francisco and syndicated elsewhere. If you could tell us what the strategy is, if there's an impact to you from the radio standpoint or whether there's not.

This is Walter, we believe we've got a terrific radio program and we are well-prepared for the change. We're very pleased to have that provision. Guillermo was one of the predecessors in the formation of the Entravision communications. He started in January of '93. At which time he established himself as a top morning personality on our Mexican regional format. Between 1997 and 1999 he worked side by side with Mr. Sotolo also known as Pilene, the afternoon host in that period. Guillermo continued do the morning show until he relocated back to Sacramento. More importantly the nucleus of the morning show remains. The show is directed by our format director, Manuel, and most importantly our Entravision Vice President of programming. This the same team that helped create Mr. Sotell's success and we believe the same team that takes Mr. Nava and makes him even more successful. We take pride in the fact we're able to build talent and grow that talent and have great confidence that our success in the radio will continue despite the change.

Okay. Thanks. And one final question because it struck me as interesting, in television, the opportunities that may arise to add a TV station here or there to program on Telefutura, how should we be thinking about how you'll assess your priorities and use of your balance sheet between deleveraging or making station purchases and putting Telefutura across those stations?

Well, we've always said as a company that we would like our leverage to be in the high fours, low five range, where it's been traditionally but we also said in acquisition -- an acquisition that would be an important acquisition to the company, we would not be adverse to going higher, which we're doing with the big city. But one of the reasons why we're doing this is because we also believe that we will get the leverage down as we talked about earlier, down to where we were in less than a year. So that this short period of time to get us back where we are makes it -- made the decision to lever up on the short-term. And that's the way I think we'll approach on a going-forward basis. We feel we will be able to get leverage down, be where we are today and therefore have room somewhere throughout the calendar year coming up to do other acquisitions. But certainly, it will be nothing more than what leverage we're comparable at what point in time and the expected return and how quickly we can go to the cash flows of the acquisition that we'd be looking at.

Gentlemen, thank you very much.

Thank you.

The next question is from the line of Kit Spring with [INAUDIBLE].

Good afternoon, guys. You mentioned that you're stealing share from English language competitors. Can you give us an update on how you're doing against your Spanish-language competitors in both TV and radio?

Well, on the TV side -- this is Phil -- we have phenomenal growth as I mentioned earlier. We have the new Nielsens that came out, a 3% increase in the fall of '01 to the fall of '02 and that same persons 2 plus we saw an 18% increase. We're not only growing our audience based on the increase in the population, estimates going into the numbers, but we're growing in terms of our audience in terms of popularity in programming. We have in our combo markets where we have Telefutura and Univision, we have nearly 90% share of Spanish language television audience, you know. We continue to be the most dominant player in Spanish language media and television and radio in our markets. And in radio, you know, we made some format changes, some 30 stations almost 18 months ago and we've been very successful with our promotional efforts and with those formats in multiple markets. And we've continued to see the growth book after book, and we continue to turning the ratings growth into revenue. There's a lag time but we continue to grow our revenue as a result of the ratings growth.

Okay. And how much of your incremental expense growth would be related to promotional activities on the TV side?

We have very -- it's less than 1%. It's very little promotional on the TV side because where we do the most advertising and the most promotions is our comparable market where we have the television available to us and we don't pay that expense.

Thank you.

The next question is from the line of Michael Wrestle of Morgan Stanley. Please go ahead.

I was wondering if you could give us an idea of the average price of a commercial in your L.A. market relative to that of some of your competitors. For instance, I know in the past you've kind of talked about your power ratio being slightly higher in Los Angeles and I was just wondering how much of that comes from just charging more per spot or is it more based on a C.P.M. basis?

Our average rate for the existing stations last fall was 325. $325. And on a cost per point basis, it's a little bit higher than what our competitors are charging. On a cost per thousand, cost per point. We get premiums and we have for many years.

And as we think about the L.A. signal that you've acquired, is there a way that we could kind of compare it to the average a signal in Los Angeles in terms of its total reception and what percentage of the Spanish language market gets good reception with it? We've heard some things said about the quality of the signal, maybe if you could he'll us data little more about the signal that you have.

Yes. We believe that based upon all the testing that we've done and all the engineering work with this acquisition that we -- our coverage is over 90% of the total market and 100% of the hispanic market.

And is that just your due diligence or what you can do to the signal now that you own it?

Well, it's our due diligence. It's our due diligence. Given the characteristics of that signal and the way it's on the transmitter side, it had the characteristics of a B-1 in the Los Angeles market.

Okay, and then last question, with all the changes or hubbub about what's going on in Arbitron, specifically in the L.A. market, is there a sense that buyers are really focusing on old books or how are they dealing with changes in ratings information as we go forward through what's clearly a difficult situationing in terms of understanding the metrics? Is it one of those if you do well on ratings you don't get paid for it, if you do poorly on it you get beaten up. How do we go for next couple of years, the nextly years as Arbitron awaits getting us better information?

Well, we saw 50% growth in Los Angeles from that format from the fall 2002 -- from the summer 2002 to fall 2002 and we've been able to effect an increase in our rates so we're getting the benefit of the ratings in the books. The industries follow very closely, but if you are referring to what Arbitron plans or has proposed to do, just refresh your memory, Arbitron has agreed. They agreed last November to do an audience sample by language preferences which is what Nielsen is currently doing in several markets and that waiting in addition to waiting by age, sex and geography among other things, to ensure a more representative sample and to be more in line with the population makeup of the market, particularly in Los Angeles where Spanish dominance, hispanic is such a large portion of the total hispanic population. Arbitron, you know, we feel must move forward in the oversampling in high hispanic areas. You get more relevant and accurate ratings in the process of preliminarily been approved from the crediting agency, the media crediting agency, and proposed this new methodology to kick in in 2006 and the Spanish broadcasters are not happy with the timing on that and they have proposed an interim solution that we don't think about are is enough so we continue to press Arbitron to do what they have stated is the right thinking in terms of implementing this weighting by language spoken in their ratings system. And so we'll continue to push to get a more accurate, more representative sample, and therefore a more representative rating but having said that, we continue with our ratings in Los Angeles and all our other markets, in Dallas we're up 56% from summer to fall books and we're turning those into revenues.

I'd like to add we already view the big city acquisition as a huge success. Our sales increase, our revenue increase in January was up 28% over January '02, and we expect the quarter to be very strong as well. That's without the launching of two additional formats, at least the actual sales or revenue production on those two formats because as you know, right now there are 10,000 in a row and that will terminate around sometime the end of February, and then of course the launching of our new Spanish language radio format 97.5 which we haven't announced yet but that will be sometime in mid February. Next week perhaps.

Okay. Thanks very much.

The next question is from the line of Victor Miller with Bear Stearns. Please go ahead.

Good afternoon.

Good afternoon.

A couple questions. First of all, if you take the reported numbers and you subtract your same station numbers you should get the residual, ones that are not same station, and the margins on those same station -- on same station -- stations with 32% for the year 2002, the ones that were not part of the same station were about 13%. I guess the question is what's the margin potential on the same station and is there any reason that the nonsame station -- stations shouldn't reach the margins of the same station ones. Sorry to use those confusing terminology. The second thing I want to ask you is again under the same thing if you subtract the reported minus the same station, it would imply that the nonsame station group revenues were up 7%, expenses up 14%, cash flow down 27%. What's the dynamic of that group of stations that we should be thinking about? Are those the ones where the reformats are there and the new Telefutura station there is? What's in that group that caused that kind of differential in cash flow growth for that group versus your same stations?

Well, to start with you have to look at the quarters that we're dealing with, Victor. We're comparing an expense quarter against 2001, now, which was -- preceded, came after September 11th. So the expenses were not there for the prior year's quarter. So the increase looks larger. Going to your question as you talked about the potential for stations, certainly we expect all our stations to continue to increase in margin because of the leverage of the business and the ability to grow business expenses going forward. Certainly a radio station would expect to get up to the margins. On the developmental television stations you're basically talking telefutura. Telefutura is really going to need to be looked at from the perspective of what it's doing in the duopoly, regarding the ability to combine on the margins of the Telefutura Univision market stations because it's basically -- the cost benefit will come from the duopoly. In radio, we're constantly improving formats, putting news in various stations so even the same stations are still being improved with better coverage, engineering, and like I said, just adding news to stations that don't have it right now. It may not be -- they are considered same station in the sense that we view same station fast they were there in the period before but they may not have been fully developed or fully expensed so to speak in the period before.

And Walter, just on broadcasting cable I had written a small Article 2 weeks ago implying that you had made concessions in order to help the D.O.J. get comfortable with the hispanic Univision deal. That didn't seem to ever be on the table. Was it ever on the table and is there any truth to that?

No. There's no truth to that little blush in the broadcasting magazine. -- that little blurb. I didn't know how to react to that article. I laughed when I read it, certainly because there was no truth to it at all. I don't know where they possibly could have reached that kind of information.

Thank you.

You're welcome.

Our next question is from the line of Bill Meyers Lehman Brothers. Please go ahead.

Thanks. A few questions, John. Starting with you. Can you provide us pro-forma results by segment for the first quarter and update last year's pro forma base so we can better understand the guidance and I'll provide followups.

Yes. Let me pull that. All right. On the revenue guidance, we'll start there.

Sure.

Television. We're at 26.3 to 26.8. Radio -- is that what you're referring to?

No, I was referring to pro-forma from last year if you can actually give us pro-forma by segment for the current fourth quarter.

Okay.

The release didn't have segment breakouts on a pro-forma basis for the quarter.

Okay. Okay. All right. Revenue, we're looking at approximately 29.7. Radio, 19.4. Outdoor, 8.2. And print, 5.2. Just to repeat that, Bill, 29.7 was a plus 20% in 19.376 for the radio was plus 18%. The 8.197 was plus 15%. For the outdoor and finally the 5.197 is minus 1 for the print.

Great. And on the cash flow?

On the broadcast cash flow? I'll give you percentages first. TV, 16, radio 11, outdoor 83, print 8. Do you want the absolute numbers?

Yes, that would be helpful, thank you.

TV, 11.650. Radio, 6.9. Outdoor approximately 1.7, and print, $625,000.

Okay. Also just sticking within this then we can move away from the numbers. In terms of first quarter guidance you had given numbers off last year's first quarter actuals. Do you have pro-forma so we can turn the models that way?

Yes. Let me give you year ago looking for first quarter actual. I'll give you the absolute numbers on the revenue first. 24 million for TV, 14.8, radio. 5740, 59740 on outdoor, and print 46. The B.C.F. numbers are 79, 4 million radio, 100,000 outdoor, and 230 print.

Great. Thank you. And maybe just walking away from pro-forma so we can leave on a better note if you can just sort of talk about what happened in terms of the -- are you there?

Yes.

I'm sorry. I thought I got disconnected. I guess in the first quarter of 2002, you took a 46 million dollar impairment charge which seemed to have been reversed in the third quarter. If you can explain the rationale and walk us threw the process.

I'll do my best as that was completed before I joined the company in December. But that 142 as I mentioned when I talked about the changes we made there, is a new pronouncement that went into effect in 2002 and is very little interpretive guidance as to how it works and quite honestly from my opinion there's ambiguity, for instance when they are calculating cash flows for impairment. It's discounted, and when you're doing it for recoverability it's not discounted. So that's basically where -- without trying to get too deep in it where we had the change. Although it was determined under the fact that we had an impairment. In fact, on a further test we had a recoverability and because of the recoverability the cash flows were determined on undiscounted cash flows. That asset was in fact recoverable and that's what constituted why it changed and we returned it to to the balance sheet.

On an at the time-net basis there are no impairment changes you've taken under 142.

There are no impairment changes.

One last question can you give us the full year losses on the Telefutura stations?

Telefutura on a cash flow basis was about I think a million 420 for all the Telefutura including the ones that we J.S.A. with the Univision.

Thanks very much.

Thank you.

The next question comes from the line of Keith Fawcett with Merrill Lynch. Please proceed with your question.

Good evening, guys.

Hi, Keith.

You've put up extraordinary numbers in TV for as long as I can remember. Looks like first quarter guidance may be a little softer year over year than your quarterly results over the past year. I was wondering if you could talk a little bit about that dynamic.

Well, Keith, we really are looking at an adjusted 18% growth. We had 1.3 million dollars in nonreturning political revenue for the first quarter '02. We were guiding at 12 was the number we gave you. 10-12, but again, that 1.3 is another 6 points on our growth so adjusted we're about 18%. I don't think we've slowed down from our -- the way we've been pacing. We've had a little more difficult comp from the political in the first quarter last year.

It's one of the pleasures of success. I was wondering if maybe you could help us and give you political by quarter.

Oh, boy. That's somewhere here.

That's probably the first time you've gotten that kind of question. It's actually a standard question for your partners over in the Anglo industry.

I'll get that answer for you but it was a total of roughly 5.2 for the year, 1.3 if it was within first. We'll get you that.

Thanks.

Thank you.

Another question, I was wondering if you could perhaps clarify the L.M.A. fee on big city. Is that -- when you're talking about the L.M.A. fee strictly a fee that's actually going into cost of sales or are you looking that into...

There's no fee attached to the L.M.A. Keith.

Okay.

There's costs, though. There's expenses attached to the assumption of the L.M.A., including rent, century city offices, Arbitron, auto leases.

As of January 15, you're basically consolidating it fully both know sales and cost of sales?

As of January 15th we own it. Only thing is we won't pay for it until the S.E.C. approves and we're not paying a fee or revenue share through big city.

Correct.

Okay.

Let me give you the breakout for political. As I mentioned first quarter was a million three, last year '02. We had roughly 485 in second quarter. 835 in third quarter, and 2 million 570 in fourth quarter. We haven't done fourth quarter.

Are those gross numbers or net?

Those are -- good question. I believe they are gross numbers, 5 million 182. 5 million 2 is gross number and it's all commissionable. So it would be 15% off of that.

Walter, can you talk a little about the radio and the dance formats? Obviously, it's an English format and I don't know if it's bilingual for you guys or not but you're sort of moving out of your core format there and if you could talk a little more about your strategy and how you perceive these stations longer term?

Well, we're not necessarily out of our forum. We serve the hispanic market and in other high density hispanic markets that we operate in, we have English language stations that compliment our Spanish language cluster. We believe that the format we chose is for the 103.1 compliments our two Spanish language formats. Our pop rock format, as you know in Spanish, we are the exclusive provider for that format in the market. Our demographics there is a young demo. We are -- we believe that our 103.1 also compliments that same demo. It's a format that is rhythmic dance. You've got a market that is almost 50% Latino so we believe that when we reach out to the market with the format, we're talking to the Latino market be they speak Spanish or English. And then we'll launch the 97.5 which is another Spanish format that will be out thereby some time next week, and that will also compliment the two formats that we are currently operating, 97.5 will be -- will be a little bit older than our 103.1, rhythmic dance, and our 107.1, the pop rock in Spanish.

Super. Thanks.

Okay.

The next question comes from the line of Alissa Goldwassar with William Blair. Please proceed with your question.

Good afternoon.

Hi.

You already sliced up the operating expenses a little bit and I hope can you could that one more way for me. In the press release you had projected revenue growth by division. Could you do that the expense growth too by division?

Yeah, sure. For the first quarter?

Right.

We're running in a range of -- we're going to give you operating expenses and they are certainly tight ranges. Television, 17.6-17.675. Radio 12.9-13. Outdoor, 6.1-6.150. In print, 4.775-4.850. And obviously, you can calculate from there.

Okay. Thanks. And can you also tell me how much barter represents of your total revenue?

Less than 2% last year.

Less than 2% last year. Pardon me. Less than -- it will be dropping from that. Our goal is to eliminate all the outdoor division on our stations. The only part we're accepting in our television and radio division are for promotion and marketing of our television or radio station. That's it.

Okay. And then a question on Telefutura. I don't think that Telefutura reached your initial goals at least for it and perhaps because you added more stations than you expected during 2002, but can you talk a little bit about how that endeavor is going? You say you're going to hopefully reach break even in 2003. What makes you optimistic enough to spend more capital acquiring stations to affiliate?

Well, we're going to acquire Telefutura stations opportunistically. We signaled to the market that when we launched our 14 -- began to launch our 14 Telefutura stations -- 15, I should say -- in first quarter of '02, that we expected to have these stations cash flow positive within a slow month cycle. Frankly, we didn't really get this group organized until late second quarter of '02. We're on track, we believe, to be cash flow positive sometime around the end of the second quarter. If we do add any more Telefutura stations, it will be done in a very prudent manner and we will strive to make sure that we can turn these stations' cash flow back positive even back to the 15 we just launched here in '02.

Okay. Thanks a lot.

The next question comes from the line of David Miller with Sanders, Morris and Harris. Please proceed with your question.

Hey, guys.

Hi.

Couple questions. Hi. Walter, given that the Univision merger looks on track to be approved although I think the D.O.J. is still taking a hard look at it have you made any programming stations in any of the stations in markets where you'll essentially be competing against hispanic and if you haven't yet what will be the timing in doing so then I have a quick follow-up? Thanks.

We don't have any plans to reformat any of our radio stations as a result of in a merger being approved. We're already competing, in fact, in several of the markets.

Right.

We're not -- we'll reformat and change station as we see fit in terms of how the market changes, and adjusts, and people adjust, but not in view of any merger between Univision and H.P.C.

Right. Then also John of the guidance you just revealed what percentage of that would you say is already in the books for Q1 for both TV and radio? Thanks.

A little further ahead in terms of our call this quarter than we were in previous quarters when we gave you our billing on the books to forecast roughly mid-80s but we're on track for that right now in terms of we're two weeks ahead of the last time we gave it to you, and two weeks from now we'll be roughly in the mid-80s. 85%. Home billing on the books the TV-radio division of the forecast numbers. So we're very confident in our numbers.

Wonderful. Thanks very much.

Ladies and gentlemen, as a reminder, to register a question please press the 1 followed by the 4 on your telephone. The next question comes from the line of David Joyce with Guzman and Company. Please proceed with your question.

Thank you. Just a couple quick questions. When do the affiliate agreements with Univision and Telefutura mature and secondly, what stations or I guess it's impossible to say for sure, but what percentage of your markets would you still look to make duopolies on the TV side?

We had duopolies in 15 markets right now so that leaves approximately 7 markets that we'd be looking to add a second station. At some time in the future. And as far as our Univision affiliation contracts are concerned, we have approximately 17 years left on those contracts.

All right. Thank you.

The next question comes from the line of Gordon Hodge with Thomas Weisel Partners.

Two questions. One, I think you were, after the L.A. acquisition, I think you were in the midst of renegotiating your bank lineup. If you could update us on the status of that, if it's been done and sort of what's your -- if there was any change in the rates in terms there, and then also on the -- just a continuation on the visibility question on the first quarter, could you give some specifics about pacings for TV and radio in February and March then relate that to January? Thanks.

Okay. On the bank debt, yes, we are completed. We have the approvals in place. There are no costs associated with any amendment on the agreement. At all. There was a -- certainly there was an amendment fee but there were no rate changes.

Great.

As far as the pacing, I'll take that one. First quarter pacing of the TV side we're up 8% as of last Wednesday. And we were pacing up 8% local, 41% national. National continues to be very strong on the TV side, for a total of plus 19, but please recognize that it's a little bit quicker this January-February, end of first quarter versus prior year where we were just -- still had a little bit of that hangover from the 9-11. And on the radio side, our local station about the same as TV, plus 7 and our national station, plus 40, about the same as TV So there's a little difference in the revenue numbers, so it averages out to a plus 14 on the radio side. But we have healthy growth, and I would add to that, our biggest category on both TV and radio is automotive, and we haven't seen any slowdown or pushback on the automotive side. In fact, our biggest TV-automotive advertising just became Nissan where in the past quarters it's been G.M. or Ford. So we're getting a lot of new business, new added markets from the import automakers which has helped fuel our growth on the auto side. Hope that helps.

Thank you.

Thank you.

Gentlemen, there are no further questions. I would now like to turn the conference back over to Mr. Ulloa.

Thank you for your calls. We look forward to keeping you abreast of our progress in our next conference call. Thank you.

Thank you.

Ladies and gentlemen, that does conclude your conference call for today. We thank you for your participation and ask that you please disconnect your line.