Entravision Communications Corp (EVC) 2003 Q2 法說會逐字稿

Please stand by. The Entravision conference will begin in a moment.

Good morning and Welcome to the Entravision Communication Corporation's 2nd quarter 2003 earnings teleconference call.

Copies of the release have been sent to you for your information and reference during this call. If you have not received the release, call Brainard Communicators at 212-986-6667. If you become disconnected during the teleconference, hang up and dial 212-346-6403 to be reconnected. All participants are in a listen-only only mode.

We will conduct a question and answer session later in the conference. At that time, if you have a question, press 1 followed by 4 on your touch tone phone. This conference is being recorded today, Thursday, August 7, 2003.

I would like to turn over to Walter Ulloa, Chairman and Chief Executive Officer of Entravision.

Thank you, operator, and good morning everyone and welcome to the 2003 2nd quarter teleconference.

With me today is Philip Wilkinson, our President and Chief Operating Officer, and John DeLorenzo, our Executive Vice President and Chief Financial Officer.

Before starting the call, I have to inform you that this conference call may contain forward looking statements subject to risks and uncertainties that could cause actual results to differ. Please refer to the SEC Filings for a list of those 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 express written consent from Entravision Communications Corporation is strictly prohibited.

Our 2nd quarter results once again confirm that even in what has been a lackluster advertising market, Entravision continues to produce industry-leading growth. For the 2nd quarter revenue increased 13%, and broadcast cash flow increased 25%, and EBITDA increased 29%. Free cash flow improved from 5 cents a share in 2002, to 8 cents a share in the 2nd quarter of 2003. These results were led by a double-digit growth at all three of our divisions.

Our television group had an exceptional 2nd quarter as we replaced over $2.5 million nonreturning world cup and political advertising from last year and managed to grow total revenue 11%. This impressive increase in television revenue was supported by a significant increase in sell off levels and average unit rate. Our television business was aided by the tremendous growth in national sales, specifically the telecommunication and automotive advertising categories.

The growth of the Hispanic market and continued success of the univision and programming continued to expand the advertising base of national advertisers beyond the top 10 Hispanic markets. Entravision television stations are located in the fastest growing and in the highest density of markets of the Hispanic market. As a result of this strategy, we continue to beat the direct beneficiary quest by national advertisers to grow their market share. Television results continue to be driven by our univision television stations which extended their markets for another quarter, driven by univision programming and our strong local news product. In the May 2003 Neilson Survey, as a group, our univision prime time household ratings were up 15% versus last year. While our prime time ratings doubled that was last year's May survey. Additionally, in the May 2003 Nielsen Survey, our local news household ratings increased 13% over May 2002. Our strategy continues to pay significant dividend. Through out and television stations, we are capturing additional shares of the market while leveraging the operating infrastructures of our univision affiliates.

We continue to operate with virtually no . In fact in our market, the univision prime time household ratings increased 23% in May 2003 versus May 2002. In the May 2003 Neilson Sweeps in the markets, the univision and affiliates captured a combined 89% share of Spanish language television viewing. Our radio group exceeded expectations with revenues increasing 15% as we drove both local and national advertising. Sales increased 10%. Entravision reps increased our national sales by a whopping 32%. By comparison, according to Miller Kaplan, the over all increase in national revenue in our radio market was with 13.7%. Combined rate efficient group saw an increase in ratings.

In the just released , the listing share was up 21.2% versus the spring of 2002 ratings and average quarter hour in adults 18-34. The average quarter hour persons increased 18.6% in spring 2003, versus spring 2002. In addition, this was the first full quarter operation for the ratings group in Los Angeles. We are off to an exceptional start.

Over all for the quarter, our cluster increased by 37.3% while the market was up 10% according to Miller Kaplan. In the in our key 18-34-year-old demo, , our Spanish pop rock radio station generated a 3.4 in average quarter our share up from the 3 share , this is an increase of 13%. Only at 97.5 station the format continued to go up 2.5, in adults 18-34. This is an increase of 92% over winter 2003, and our cue total people listening to the station increased by 92%. The dance format 103.1 dance format station had 1.2 average. 93.1 had a 1.2 share in average quarter hour in adults 18-34

On a consolidated basis, the Los Angeles cluster generated a 3.9 share average quarter hour for persons 12 plus. In the spring, we are well underway for projected share in persons 12 plus for our Los Angeles cluster for the close of the year.

The outdoor division, we posted the second consecutive quarter of double-digit revenue growth. The 2nd quarter revenue was up 12% driven by strong national advertising in New York and Los Angeles. We are pleased with the 2nd quarter first half results in our outdoor division, however we began to see softness in the New York and Los Angeles outdoor advertising business that will be reflected in the 3rd quarter. New York, because of the local government difficulties, a significant amount o public initiative advertise suggest nonreturning. While our New York staff has been working to replace the business, a complete substitute of a large piece of business is not expect within the 3rd quarter time frame.

In Los Angeles in the 2nd quarter, we had some personnel changes that is significantly impacted our ability to aggressively pursue local business. Those personnel issues have been addressed and corrected. We are cautiously optimistic that we will report an improved performance in our outdoor division the 4th quarter of this year.

In line with our strategy, in early July, we announced the sale of our new for approximately $20 million. With this announcement, we exited the publishing business. Cash from the sale will be used to reduce debt.

In summary, despite the soft ad environment, we continue to significantly out perform the general market and capitalize on the strength of the Hispanic marketplace and are seeing solid growth in local and national advertising across the division as we expand and secure new advertisers and show improved operating leverage as revenues increase and expense growth moderates. We are taking a , but disciplined approach to extending by strengthening current radio station clusters and expanding the television markets and we remain committed to entering new markets that meet growth characteristics, specifically the fastest growing and most densely populated Hispanic markets in the United States.

Now I would like to turn the call over to Philip Wilkinson.

Thank you, Walter, and good morning everyone.

I would like to expand on some of the specific performance areas in our television, radio, and outdoor divisions.

Starting with television, the 2nd quarter revenues for our television stations jumped 11% rose by 15%. This is truly remarkable growth when you consider that last year's world cup broadcast in 2nd quarter along with political advertising, as Walter mentioned, generated $2.5 million in revenue. That was nonreturning. Our stations are performing very well and advertiser interest in Spanish language media expands as does audience interest as shown by growth in ratings. Our univision affiliates grew significantly in all key demos increasing among adults 18-49 by 28% in sign-on to sign-off.

Our stations are number 1 and number 2 in early news in 11 of the 15 markets where we produce news, up 25% in ratings increase. That ratings increase is carried over into prime time, also up 25% among adults 18-49. We saw remarkable audience increases all over the country in May of '03 from our Denver station to DC and from Vegas to Monterey. In fact, in Denver we posted a 3.6 rating in prime time in the main Nielsen book, among adults 18-34, and that's up 140% over the prior year. Monterey's prime time was up 52% to a 7.6 rating, adults 18-34, over May prior year. That solidifies the number 1 rank in any language.

In DC we're up 112% a strong book . In Vegas we were number 2 in prime this past May in adults 18-34. Our McCowan station catapulted its local news 49% . That increase brought it to a 5.8 rating in adults 18-34 to lead that market's early news competition in local news. stations have shown growth, up 33% in prime time over a year ago in adults 18-49 and up 39% from sign-on to sign-off. Therefore, after you can see after a year and a half since launched in January of 2001, there has been no erosion of the univision audience in the market. But it's clear the strategy created more Spanish television audience for both stations. These audience increases carry over the ratings momentum from February, a good booking for us which helped fuel revenue in 2nd quarter. For the TV group over all, 2nd quarter national advertising increased 27%. That's national up 27% while local up 2% excluding trade. Advertisers continue to increase spending.

The key ad categories remain strong. Automotive which represents 25% of the TV revenue was up 20% in Q2 over a year ago. Telecom rose up 31%. In fact, when we look at the top five advertisers in each top five categories, auto, services, retail, food stores and telecom, 23 of the 25 advertisers showed gains.

Now turning to the radio division, we had strong revenue growth of 15% in 2nd quarter. National sales increased 32% and local sales which represent 71% of the total revenue increased 10%. Our top three categories were led by automotive. This category increased by 22% over 2nd quarter of last year. Telecom increased by 57% over prior year and department stores increased spending by 32%. Our top five advertisers for 2nd quarter were Anheuser Bush, Home Depot, JC Penney, McDonald's and SBC. Our radio division in 2nd quarter added over 60 new advertisers and spent a minimum of $5,000 each. Our new advertisers included Washington Mutual, Bank, Comcast Cable, Nestle, ATA Airlines and DSW Shoes.

We experienced an audience increase of 21% for all of the properties combined in the spring 2003 versus spring 2002, an average quarter hour of adults 18-34. Here are some of the samples of key of that adult 18-34, Monday through Sunday, 6 to mid, in average quarter hours. Our El Paso cluster increased share to 16.1 from a 13.2 share in winter 2003. That's a 22% increase. In Denver, our cluster, all stations together, recorded an increased share of 37% from spring '02 versus spring '03. This increase in share was up 37% from a year ago. This cluster share is now a 9.3. The clusters in Monterey received a 14.2 share, that's a 28% increase over winter book 2003. And the Phoenix cluster, an important market for us, and all of the radio stations increased 24% from spring 2003 compared to spring 2002. In Dallas they generated a 5.2 share, a 78% increase over the spring 2002 book. Very important market for us.

Turning to billboards, billboard revenue in Q 2 was up 12% compared to last year. Market to market base revenues for our New York cluster was up 5% and L.A. revenue was up 8%. The primary driver behind billboard divisions continue growth was the strengthening of national advertising in most of the major billboard markets, New York and L.A. Slightly offset by softness in New York. The national revenue was up 23%, and that represents 73% of our total revenue for the quarter versus just two thirds, 56%, last year. Major advertisers increased their billboard spending with us which included Disney, Warner Brothers and P&G. Our new billboard advertisers included, among others, Jaguar, Rock Star, Vice City, The Video Game and Payless Shoes.

Top ten categories for the quarter were entertainment movies up 39% over last year 2nd quarter, retail, which is a big category for us, up 20% and services group by 22% over prior year. Total revenue for those three categories alone represent almost half of the business of $4 million versus just a little over $3 million prior year. On a product basis, a healthy return in demand from the national advertisers enabled us to drive rates in both markets. Rates improved approximately 12% while the occupancy is relatively flat in the period.

In summary, our TV revenue grew 11% and radio grew 15% and our billboard division revenue grew 12% for the total revenue gain of the company of 13% over 2nd quarter prior year. That's a pretty remarkable quarter and significantly ahead of the 2nd quarter industry growth.

Now I would like to turn this over to John DeLorenzo for the financial review.

Thank you Philip and good morning everyone. As Philip and Walter outlined, we had a great quarter.

Revenues up $7.1million, increase of 13%. Broadcast cash flow up $4.9 million, increase 25% and EBITDA up $4.7 million, 29% increase over prior years. we replaced $2.5 million in world cup and political advertising in an ad market that remained soft due to the war with Iraq and the current economic environment. Free cash flow which we define as EBITDA as adjusted minus captialexpenditures, cash interest and cash taxes was $10.1 million, or 8 cents a share for the 2nd quarter of 2003, up from $5.6 million, or 5 cents a share in 2002.

Over all the margin for the quarter was 39%. Television and radio for the quarter were 43% and 38% respectively. Operating expenses for the previous quarter decreased 6%. On a normalized basis, excluding a $1.6 million settlement charge from last year, operating expenses increased 10%, down from 11% in the 1st quarter. 2% increase is variable expenses such as sales commissions, music license fees, and national rep fees. 4% increase was associated with new station start up costs, primarily in the Los Angeles market. The remaining 4% includes increased expenses for new TV newscast, ratings service increases and increases and charges.

Corporate expenses increased 8% to $3.7 million. It was primarily attributable to increase in costs with bonuses based on the increase in EBITDA as adjusted. Corporate expenses included a reimbursement for legal and other costs associated with the third party information request that we received in connection with the close merger between univision and Hispanic broadcasting corporation. The reimbursement and net of actual expenses incurred in the quarter was $300,000 dollars.

Turning to the balance sheet, as of June 30, 2003, the total net debt was $390 million and EBITDA as adjusted was $63.9 million. Trailing 12 month of debt to EBITDA with 6.1 as compared to 6.7 in the prior quarter. This does not include the recent sale of . A proforma calculation, including the sale of the publishing segment, results in debt to EBITDA of 5.9 times and net debt of $372 million. At year end, we expect to be in the low five times range.

Turning to the outlook for the 3rd quarter 2003, based on the we are seeing, we expect net revenues of $63.7 to $64.7 million, increase of 79%. As Walter noted, the outdoor division is having a difficult quarter with revenues expected to be down 6-7%. The television division expects to be up 7-9% and the radio division expects to be up 13-15%. the company recorded $1.1 million in political advertising in the 3rd quarter last year. Mostly television revenues. Most of the that revenue is not expected to return, but the potential California recall election may as a result in some political advertising dollars in the 3rd quarter of 2003.

Operating expenses are expected to be in $40.7 to $41.3 million, increase of 6-7% compared to 11% in the and 10% in the 2nd quarter of 2003. Broadcast cash loads expected to be $23.1 million to $23.4, an increase of 9-11%. Free cash flow is expected to be approximately $7.1 to $7.5 million, or 6 cents per share. EBITDA as adjusted is expected to be $18.6 to $18.9 million, increase of 10-12%. For the 3rd quarter, we expect corporate expenses to be around $4.5 million, a 5% increase over the prior year due to salary increases . Appreciation and amortization expected to be $11-12 million and interest expenses $7-7.5 million and capital expenditures $3.6-$3.9 million range.

This concludes formal remarks. Walter, Philip and I will be happy to take your questions.

If you would like to register a question, press 1 and then 4 on your telephone. You will hear a three tone prompt. If you would like to withdraw, press the 1 followed by the 3. You are using a speaker phone, lift your hand set before entering your request. One moment for the first question.

Gentlemen, the first call is coming from the line of Paul T. Sweeny from CS First Boston.

Three questions. First on the television side. It looks like top lines are slowing into the 2nd quarter. Can you give us a sense of what's going on there. Is that just simply the political comparison?

Second, expense growth, John, the company has done a great job as you summarized reducing the expense growth and driving operating leverage. How should we think for the remainder of the year? 6-7% - something we should be thinking about?

Last, as the outdoor business starts the struggle once again, it raises the question is this a core asset and given what you have done disposing of the publishing, at what point do you think of this may be an asset that might be for sale.

Thanks.

Good morning, Paul.

This is Philip and I will start with the first one and pass it to John.

The TV business top line slightly slowing on the pace. We can pinpoint it to one thing and that's August national. We had strong national July. We see strong national September. We are off a few points in August. As of the two days ago, however yesterday we just learned we had a large piece of business from a bank that came in pending for mid-August start. That should bring us up a few ticks. It does have to do with that million or million 1. It's tough to come back from that. We feel pretty strong about our over all television business in 3rd quarter. Obviously we are giving you what we believe we can do. We have had a record of out performing that. It would be national August which is a little bit soft. We think that's going to turn around.

Paul, regarding the expense growth, we maintain as we have been telling people we will be in the 6-7% range, typical growth of 4.5 plus -- an extra 2 percentage points for expenses related to the fact that we expect to have stronger revenue growth. We expect to be there by mid-next year which is about this time next year.

To answer your question more specifically, no, I don't think we will see 6-7 through the end of the year. Maybe it will definitely be below 10. Probably 8 or 9. We will make our way to 6 or 7.

All of the comparisons are straight forward once we got past the 2nd quarter with the settlement with the radio ad firm, expenses quarter to quarter are pretty much comparable. We expect to be in the high single digits through the end of the year and moderate to 6-7 next year.

Paul, in answer to your question about the outdoor business, it's a core asset to the company. We believe that outdoor media is an important component for advertisers that want to target the Latino communities and the top 10 Hispanic markets particularly in Los Angeles and New York.

Thanks very much.

The next question is from Lee Westerfield from Jeffries and Company.

Thank you.

Good morning.

Several questions if I can tick them off in order. For the 3rd quarter, your cost growth picked up what Paul said and stepping down according to the outlines you had given earlier in the year. I wonder if you can help us understand by division how the cost growth is proceeding into Q3 and for Q4.

Relatedly, the you made a strong point of the 23% ratings gains of the stations that are . What do you see as far as revenues and margins on the stations and one follow-up please.

In regard to the expense question, we don't typically break expenses down between the various segments on the call, but I can give you an idea. Most of the expense growth increase relates to radio. We are looking in this quarter 3-5 on television. Pretty much flat on outdoor.

Really the growth is attributable to the big city acquisition that was in the financial this time last year. The reason why we talk about being in the upper single digits for the 4th quarter is based upon the move of the radio group and the network down to Los Angeles from San Jose.

Good morning, Lee. This is Philip.

On the question regarding the . We have an increase in audience on the property. Actually we were quite happy with the results. I mentioned up 33% over prime time a year ago. Adults 18-49 which is key demo for us. Up 33% as well in sign-on, sign-off. I made the comment that is we were not seeing erosion of the univision audience in the markets. That's a very good thing. We are seeing in fact the two stations help create larger Spanish television audience in the market.

As far as the rev news to follow the audience share, as you know it's a process that takes some time. These are developing station and therefore the margins are developing from low double digits and we expect that they will get to increase more rapidly than some of the univision more established stations.

As a comparison we have several markets, univision stations developing in the low 30% margins. Mid-20s to low 30s. Where as we expect are more developed stations on the side to exceed 55 and push 60% margins. We will eventually get there on the side because we have the cost structure and infrastructure in place that will ease the expense on the side. They are developing and it will take some time to get the margins up to where we expect them.

Quick follow-up relates to the radio and particularly in Los Angeles.

Walter mentioned that you achieved a 3.9 share in P12 plus. Back at the time of the acquisition I think that puts you ahead of plan in terms of ratings. If so, where might you take that and secondly how is the revenue specifically tracking as far as the big city properties relative to your plan?

As I mentioned on the call, we are extremely pleased with the way our Los Angeles cluster is progressing. We did announce to investors upon the big city acquisition that our goal was to achieve a four share of persons 12 plus by the close of the year. As you can tell we're well on our way to achieving that goal. Our revenues continue to grow substantially as our ratings have grown through the first half.

As I said, we were up 37% in the 2nd quarter. Our 3rd quarter is also pacing quite well. We expect to have a very strong year in Los Angeles. Both in ratings and revenue.

Thank you.

The next question is from the line of David Miller from Sanders Morris Harris.

A few questions.

John or Philip, you mentioned that the L.A. cluster radio-wise increased 37% year over year. I assume that includes the effects of big city if you have an organic number that would be helpful.

Also, on the outdoor line, you said you are getting hurt by personnel changes in Los Angeles. Can you expound?

Do you mean star sales people who left the company or management figure that is left or what exactly is going up? And I have a follow-up.

Thanks.

David, this is John.

In regards to the big city question, we gave it proforma to the street on where we expected the L.A. market to be. $11.5 million of revenue with close to $5 million in cash flow. Once the acquisition was done and everything was integrated and two new formats were implemented. Therefore it's impossible to determine how much was the original assets as far as what is putting on the books versus how much is related to the new formats or the switch formats.

The best we can do is monitor how we are doing relative to what we said we would do on a proforma basis. We are expecting to hopefully increase double our revenue over the year and therefore doubling our cash flow from the station. There is no real ability to split out what was organic versus what was based on the acquisition.

David, this is Walter. And in response to your question about the outdoor as it relates to personnel changes, we have done things over all in the division in the last 30-45 days to strengthen the outdoor division sales staff in New York. We added a couple of key account executives to our team. In Los Angeles we reshape and restructured a local sales desk and we believe these changes will put us back on the road to growth.

Then as a follow-up, what are your thoughts on possibly divesting, call it nonscale-oriented radio assets? Radio stations in places like Modesto, McCowan, Fresno and places where you don't have a telefuturea or univision television station or for the purposes of .

In answer to your question, David, in McCowan, it's not a market that we look to the best. We have gotten a univision and it's a strong radio group there. Modesto/Stockton is also a strong performer for us with regards to the radio cluster.

There are markets that we are looking at within our radio group to see if perhaps we might divest of assets in order to strengthen our clusters in other markets. As well as invest in emerging Hispanic markets. We don't go into that at this time.

Thanks very much.

The next question is from the line of Victor Miller from Bear Stearns.

Good morning.

A couple of questions.

First of all, can you talk about the new rules, SEC rules, in terms of the eight-voice test. A lot of your markets are with the smaller TV markets and large in the Hispanic world, they are not big in the over all DMA world. They were restricted in a lot of cases because there weren't eight voices in the market and can you talk about the opportunities you might see and the properties available for you to did you to some of those markets now that you can.

In 2 Q, you had net revenue of 64-1 on the mid-point guidance is about 64-2 and you have flat revenue 3rd quarter relative to 2nd. The expenses are a million and a half higher and they were given the same revenue .

Can you talk about why you think the revenue expenses will escalate and accelerate versus that? I have one follow-up.

Victor, this is Walter.

In regards to your question about increasing the eight-voice test.

There have been markets that are freed up as a result of the FCC's latest rule change for . Specifically for example McCallen for south Texas is a market where we can acquire a second station and before it would have been difficult if not impossible. ElCentro is another market where we can acquire a second station. Corpus Christie is another market where we can acquire a second station. Those three markets come to mind. That's with regard to a possible .

Victor, this is John. Regarding the expenses, like I said, the majority of the expense increases, 50% of the expense increase results to the big city acquisition. You are looking at close to over $1 million in the expense growth for the 3rd quarter related to the fact that we didn't have those asset this is time last year. Like I said, television we expect to have an operating expense increase of 3-5 be flat on outdoor and all of the increase really is related to the radio acquisitions that will get a full year comparison by 1st quarter of next year.

Okay. The increase, you did have big city in the 2nd quarter yet the expenses are a million and a half higher in 2nd quarter rather than 3rd quarter. That's really my question.

There is an increase. 6-7% that we project and half of that was big city and the other half a typical 3% increase. The radio on top of that had a big promotion that they do annually and that was about 600,000 as well in the 3rd quarter.

Thanks and then on San Diego, what can you do in the market? It's a big TV market yet the ratings are only 2 share point and it's a low power station. Can you do anything to improve that univision affiliate, Walter, to make that more in line with the shares that you snake most other of your markets?

I'm going to turn that over to Philip, Victor, and let him comment on your San Diego question.

Are you referring to we actually have owner operator manage four television stations. Two in Spanish affiliate and the Telemundo afilliates under one roof and UPN and Fox under another roof. Collectively, in the last book I looked at, we were near a third of the entire television audience in prime time of those four properties. We do extremely well.

On the Spanish side, we have well over 75% of the combined Spanish television audience viewing. That's in the market place. We do extremely well.

Penelope has been upgraded and moved it to channel 17. It's a high cable penetration market with over 75% cable subscription. We are on every one of the systems. It does extremely well. We are about to add a station to the market in the next few months that we are building we just closed down a CP.

Thank you.

The next question is from the line of Michael Russell from Morgan Stanley.

Thank you.

I was wondering if you can give us more inside as to the outdoor business and its reliance on New York City on the public initiative revenue. It's not only down, but probably will be for a while. Give us an idea, ballpark.

It's on the revenues. This is Walter, by the way. The total revenues that went away in the 3rd quarter from local government is about $500,000.

Do you think it's fair to say that that's probably gone for the 3rd and the 4th quarter and maybe after that you can replace it?

That's correct. That's correct. We may see some in late 3rd, but we are not counting on it.

When you said the L.A. station, what big city was up 37% or L.A. cluster versus 10% market growth. That was 10% market growing for the general market. What was Hispanic market growth?

About 4%.

If we heard that consistently that the Spanish market is lower than the general market and you did excellent within it, what do you think is going that explains why Hispanic market in L.A. is under performing given the competitive environment?

There seems to be a, you know, a rate battle in Los Angeles among the Hispanic competitors. We have not fallen victim to that, but other competitors have. It has not helped the over all rate for the Spanish language industry.

Great. Thanks very much.

The next question is from the line of Gordon Hodge from .

Was there any change in inventory . You had personnel issues to deal with, but did you lose inventory or I guess alternatively, did you lose a large account that could account for a sudden drop. If you could, tell us whether your guidance for TV reflects any assumed political contribution in the 3rd quarter if the governor recall boat here if that is incremental.

Gordon, this is Walter.

With regards to the question on outdoor, it's known that both questions. We have seen a softening in New York with regards to local. I spoke with the public initiative advertising. Local softened up and in Los Angeles the softening has been mostly local and some national.

With regards to the television question, what was that question, Gordon?

It was whether California recall --.

The answer is no. No political revenue that's in our 3rd quarter estimates.

In your plans.

There is no revenue in the estimates.

If you got some, that would be a bonus.

Exactly. There is a possibility that the recall may be postponed. They vote on a court date today. We don't want to presuppose.

That is prudent.

Do you have a sense that what you are experiencing is true for the industry or competitors or is it company-specific do you think?

This has been a tough environment for all media. We believe that the industry as a whole is seeing a softening in national advertising in both Los Angeles and New York.

Got it. Thank you.

The next question is from the line of Kip Spring from Stifle Nicholaus.

I'm wondering if you are considering acquisitions. I know Spanish broadcasting has a couple things for sale.

Secondly, a number of companies have been scaling back on nontraditional revenues. Is there any of that in either your 2nd quarter or 3rd quarter which would mean that your under lying guidance is a little bit stronger. And I will stop at two questions.

Thanks.

In response to the first question, we don't have any plans to approach SBS with regards to any of the assets that they may be divesting.

With regards to acquisitions in general, we continue to look at assets that strengthen our radio clusters and assets that allow us to television markets that we currently don't have affiliates. We are doing it on a case by case basis and we have a model we run to justify the acquisition.

This is Philip.

As far as the NTR question, we don't have the 2nd quarter or the 3rd quarter, any new NTR initiatives or business that hasn't been successful in prior years. We mentioned we put on a big concert and done it for seven years in a row and proven a successful money maker and we have a host of health fairs and job fairs, but those have been ongoing for sometime and are profitable and successful. Not new NTR initiatives going on.

Thanks, guys.

The next question is from the line of Alyssa Goldwaser from William Blair and Company.

Hi, forgive me. I just want to go back to organic revenue growth in Los Angeles.

If you look at what the stations did last year, how does the combined cluster compare this year in the 2nd quarter?

It blows it away. They were selling $50 rates when we took over the station.

What we are doing there, look at the combined. They had a 1-know who we took it over and now we have a combined 3.9 our assets alone were doing about a 1.3. Look how much more we are doing with the ratings by combining the two than they were doing individually.

What about the revenue comparison?

The revenue, we are cautiously optimistic that we will achieve our goal that we set out when we did the acquisition. That's trying to double the revenue and cash flow for the year.

Okay, but nothing specific in the Q2 comparison?

In Q2, we can't pull out the organic. We said we were up 37% in the market. I don't see any possible way to say how much was attributable. When you think about it, from last year was upon a much inferior signal than today. There was that transition. I don't see how you could do any kind of comparison and split our performance this quarter between organic and a result of the acquisition.

Okay.

Then in the past, you talked about how your bookings or what percentage of your goal you are at for both PD and radio. Can you give us that number this quarter?

Yes.

On the television side, we are hovering between 82 and 83% of business on the books today, or actually yesterday when we pulled it. Versus our forecast guidance. The radio side, we were higher, about an average of 85%. Smack in the middle of guidance.

Thank you.

Ladies and gentlemen, as a reminder to register for additional questions, press 1, 4.

The next question is from David Joyce from Guzman and Company.

Do I have any markets where you need to add a news product?

We do. We do. We actually have planned to add local half hour newscasts in three of our markets next year. One actually we believe will be able to launch by November this year in Santa Barbara. Two other markets where we are currently doing news updates during and prime. They are . We have targeted those three and just launched as you may know a news webcast that is doing extremely well in Boston.

Thanks.

The next question is from the line of Keith Faucet from Merrill lynch.

Thank you and good morning.

Given your strong radio growth in radio, it looks like the morning personality that you lost in San Jose was really sort of a minimal disruption. I wonder if you can talk about that briefly and secondly, the extraordinary ratings game you got 30% on the univision and stations. Is there a share shift and does that come, for example, Telemundo or the English market? Can you talk about that in context to your -- you would think your revenue growth would be accelerating going down the line with that audience again.

Keith, this is Walter.

The response to the radio question and the loss of the radio personality, we did see some decline in ratings with the replacement of , but we made changes in the staff. We are on the road to recovery.

Regarding revenues, we have been able to maintain or increase the current revenue share on the national side despite the talent change. On the local side, we continue to maximize our shares of and beyond the industry. I will turn the questions regarding television over to Philip.

I will answer in the general way.

All the markets are. In general the additional of the stations in the markets as grown with the viewing audience and that growth has not come from univision. It's come from new viewers and or viewers of the English language television.

The ratings that we discussed, the strong ratings performance in May, there is a time lag there because the May Sweep occurs and then it's not until late June that the books come out and get in the hands of the buyers and typically they are putting together a plan for the fall with the May books by mid-July. We should start to harvest the benefits in this month and the next few months. So there is a lag time.

Also recognize we have goat a large portion of revenue in the early new and in prime time. In the key adult 18-34 demo which has shown that strong, strong odd audience increase. We again expect to turn that into stronger shares coming in the latter part of the 3rd quarter and certainly in the 4th quarter.

This is John.

We want to add on the general perspective.

When you compare or projected performance in the 3rd quarter compared to the second, we find that the 3rd quarter is a much more difficult quarter over all business wise than was in the 2nd quarter. If you are trying to compare the over performance to the general market in the 2nd quarter and say why isn't it here in the 3rd quarter, there is an over all difficulty in the environment. After the war ended, the 2nd quarter had a pretty strong demand on the advertising side. That's starting to wane in the 3rd quarter.

As I was thinking about this, I thought if it was a share shift coming out of Telemundo, you might be able to grab the dollars faster. That we'd be able to see them in 3rd quarter, 4th quarter, and rather than developing new business.

From the 3rd quarter, the dollars are not there over all in the general market, coming in.

Two follow-ups here.

I remember the Santa Barbara news launch and I thought you were going to do something in Vegas in the current year. Is that delayed?

We have localized news in Las Vegas five days a week, Monday through Friday. We had perhaps referring to many of our larger markets we expand to a weekend news when we get to the point where we can support it. Certainly we are always looking for more inventory and news. It's one of the stronger sell out and highest demand from local advertisers. We have looked at that, but at this point we aren't anticipating launching a weekend news in that market. For a few months.

Can you remind me of the political dollars in the 4th quarter a year ago?

It was strong. Over $2 million a year ago. I don't have the exact number. I believe it was $2.1, but I will check that.

Great. Thank you.

Just television.

Thank you.

The next question comes from the line of Bill Myers from Lehman Brothers.

Just a quick question.

In terms of price discounting in Los Angeles, would you characterize it as better or worse or fairly steady and if it continues is it difficult to hit the-year revenue target? How do you price that environment?

Bill, with regard to the first part of the question, we believe that the rate competition or rate discount is pretty steady from the 2nd and 3rd quarter. We don't see a change in the 3rd quarter. Perhaps that will subside in the 4th.

What was the second part of the question?

I was going to say to the extend of the discounting, does it become more difficult and will there be pressures on you?

I guess it could have pressure on us. We have a tremendous sales desk. Sales people have been there for a long time and the demand on all our stations is strong. Despite whatever price war there is with the competitors, we have overcome that issue and continue to drive our rate and revenue in third and into fourth.

Thanks.

This is a follow-up. This is Philip again. Regarding the 4th quarter political, over $2.6 million. Not $2.1.

The next question is a follow up from the line of Michael Russell from Morgan Stanley.

I wanted to clarify a couple of things.

The guidance that you're giving on cost for seemingly picking up in the 4th quarter, maybe I misread. That's probably including the Santa Barbara newscast, including the fuller impact from the moves in L.A. and in radio. Is that fair to say and when we talk about 6 or 7% cost guidance for run rate for next year, does that include the additional two newscasts?

What I said was everything is considered, but what I said was by 2nd quarter of next year, we should be at a run rate going forward 6-7%. We modeled out everything that's coming down the line as far as additional newscasts and the move and everything's been included in there.

It's fair to say that the 6-7% were seen?

Yes.

It will pick up in the fourth and the first quarters?

Maybe not. I'm being conservative. We are expecting to get down to a go forward run rate of 6-7%. That's by the 2nd quarter of next year. I don't want to be tied into exactly what the 4th quarter will do and the 1st quarter will do. We went from 11% in the 1st, 10 in the 2nd. We are at 6-7 in the 3rd and pick up a little bit in the 4th. No reason I believe anything of great significance in the 1st. The 2nd quarter will be 6-7 and getting there we analyzed all the additional newscasts and the acquisition on full year comparison. We do an acquisition that will change, but we will provide pro forma for that.

One other follow-up. What percentage of the outdoor is national? If you mentioned it, I didn't catch it.

75%.

I heard 78. With that up 23%, local was down in New York. It was also down in L.A.?

Local is predominantly low.

Local is down in Los Angeles as well.

Right.

Thanks.

Gentlemen. at this time I will turn the call back to you. Please continue with your presentation or closing remarks.

Thank you, operator. This concludes our remarks. Thanks to all of you for participating on the call. We look forward to keeping you abreast of our properties.

Ladies and gentlemen this concludes the conference call for today. Thank you for your participation today. We ask that you please disconnect your lines.