Entravision Communications Corp (EVC) 2003 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Entravision Communications Corps third quarter 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 1, followed by the 4 on your telephone. As a reminder, this conference is being recorded Thursday, November 13th, 2003. I would now like to turn the conference over to Mr. Walter Ulloa, chairman and Chief Executive Officer of Entravision Communications.

Thank you, operator. Good afternoon, everyone, and welcome to our 2003 third quarter teleconference. With me is Philip Wilkinson, our president and COO, and John DeLorenzo, our executive vice president and Chief Financial Officer. Before starting the call. 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 SEC filings for a list of those risks and uncertainties that could impact actual results. In addition, this call is a the property of Entravision Communications Corporation, any redistribution or retransmission or rebroadcast of this call in any form without the express written consent of Entravision communication corporation is strictly prohibited.

Our financial and operating performance during the third quarter and year to date has been exceptional as we continue to post strong top line revenue and EBITDA gains, well above the industry average. For the third quarter revenue increased 8%, broadcast cash flow increased 11%, and EBITDA increased 15%. Free cash flow increased 46%, to 8,190,000, versus last year's third quarter precash flow 5,616,000. These results were led by television group testify which grew revenue 10% exceeding guidance. This comes on top of an excellent third quarter in 2002, when we grew television revenue 28%, including about 600,000 of non-returning political advertising. Results were driven by strong national sales from automotive, financial services, food services, and rate increases as we continue to close the revenue gap. Our national revenues grew 21% in the third quarter.

In addition, the rating strength of our Univision and television station and efforts of our sales organizations have allowed us to continue to expand the expanding advertising base through the addition of new accounts and the further penetration of existing advertisers. With our television assets in the most dynamic and highest growing Hispanic markets and expanding influence of the Hispanic consumer we are able to influence advertisers. Television results continue to be driven by Univision television affiliates which extended their market ratings driven by Univision and our strong news programming leading another quarter. Our strong local news product. In July Nielsen Survey group held prime time share in adult 18 to 34 versus last July. In our metered markets. Telefutura increased prime time share 50% versus last year's July survey. Our local news programming continues to be well received by viewers and advertisers as we increased our news household range by 14% in the July 2003 survey, over July 2002.

Local news is a key part of our television strategy as we brand our Univision television affiliates with quality local news and are committed to roll-out of news programming in every one of our 22 news markets. In October we launched a local half hour newscast in Santa Barbara, California, the initial result are outstanding and expect to report substantial gains in ratings in the time period of our Santa Barbara affiliate in the 2003 Nielsen Survey. In the July 2003 Nielsen Survey our metered (inaudible) markets continued to perform well with our Univision and Telefutura capturing a combined 89% share of the broadcast Spanish language prime time television audience, among all our (inaudible) markets Univision television markets held prime time share performance in July 2003 versus July 2002. Our radio group had strong quarter with industry leading revenue growth of 15%. National advertising continues to be the key driver with national sales increasing 29% as compared to an overall increase of 10% in national radio revenue according to the radio according to the advertising bureau. Our local revenue was up 11%.

Overall, our radio group tipped to string average quarter share increases in Arbitron our share increased 24.4% versus summer of 2002, among adults 18-34. And for persons 12-plus, we increased our share 24.6% versus summer of 2002. In Los Angeles, our radio cluster continues to outperform the market as increased third quarter revenues by 37% versus the market which was up only about 7% according to Miller Kaplan. On a consolidated basis our Los Angeles cluster generated shares of 4.4 in persons 12+ which exceeds our goal of a 4 share Which we committed to achieve upon the announcement of the acquisition of the big city Los Angeles assets at the beginning of the year. In the key 18-34 demo, KSSE, our Superestrella pop rock achieved 4.3 up from 3.4 in Spring book, a whopping 26% share increase in this dynamic demo. Only 97.5 our new format in world's number one radio market recorded a 1.8 share in adults 18-34, and KDL, 103.1 dance format registered 1.7 share in 18-34 adults. Increased in this coveted demo over the Spring book. We anticipated strong revenue gains in Los Angeles in the fourth quarter and expect the momentum from our Las Salas cluster to fuel company's revenue and cash flow growth in 2004 as we accelerate the conversion of our audience share to greater revenue share. At our outdoor vision we had disappointing quarter, revenues down 14%. As noted in second quarter conference call, we had a significant amount of public initiative advertising over $700,000 that was non-returning due to fiscal challenges in New York. We also started to see some weaknesses in our outdoor markets during the last half of the second quarter in local and national sales. This office in our outdoor advertising revenue continued into the third quarter. Other major categories saw sharp dryness declines were financial services, fashion and packaged goods.

As mentioned in last quarter's conference call, we're working diligently to strengthen our sales staff in New York and Los Angeles. In Los Angeles, we have restructured the sales department and added two additional sellers to drive local revenue. In New York, we added a proven senior account executive, and sales staff in the process of engaging another local retail seller. Furthermore, we have hired an established executive seller in order to effectively serve national clients and drive new national business. While we have made substantial progress in improving out outdoor performance, we continue to see signs of softness in national advertising in the near term. However, we do anticipate a return to growth in outdoor in 2004.

In summary, we are delivering strong financial results with our television and radio divisions producing industry leading gains. In a challenging economic environment we are forecasting revenue growth in the fourth quarter of 5 to 6%, which is some of the strongest revenue growth of any media company. Excluding non-returning political revenue of about 2.5 million, our revenue growth for the fourth quarter is estimated to be 9 to 11%. Our management team remains focused on capturing top line growth while continuing to control costs and drive operating efficiencies throughout our operating structure. In addition, we remain committed to expanding our asset base by strengthening existing clusters, divesting non-core assets and entering new markets that meet our growth characteristics. I want to close my remarks by noting that at the beginning of the year, after completing the big city Los Salas acquisition, we stated that we were committed to reducing our debt to EBITDA leverage to the low to mid 5 times by the end of 2003, from a then-high of 6.9 times. Through the delivery of some of the strongest revenue growth of any media company in the country, coupled with management's diligent attention to expenses and selective sale of non-core assets, we expect to deliver on that commitment. Now I'd like to turn the call over to Philip Wilkinson.

Thank you, Walter, and good afternoon, ladies and gentlemen. I would like to expand on some performance areas in our television, radio and outdoor divisions and beginning with television. Our third quarter TV revenues as Walter mentioned grew 10% which was substantially outpaced a flat to slightly down TV industry as a whole. I am pleased to report that our 10% revenue growth was 1 percentage point better than our guidance, and our TBBCF grew 21% which helped push our margin up 4 points to 41%. Our TV overall would have grown to 12%, when we exclude political spending from current and prior year Q3. National advertising revenue increased 21% while local was flat, however, our national revenue actually grew 26% when you exclude that political spending and our local advertising would have grown almost 3% and if you look at the top -- in fact, if you look at the top 5 billion stations, we were up 6% in third quarter in local business, for big revenue stations. Our Univision affiliate TV group continues to post strong gains in all key demos and day parts as we increase their adult 18-34 shares by 17%, that's from sign-on to sign-off, July 2003 versus July 2002 while maintaining our adult 18-49 share. Local newscast again delivered strong ratings growth. We ranked number one in nine markets among adults 18-34, against all stations, English or Spanish, and we ranked number one or two in ten of the 15 markets where we produce news. And as of this quarter, as Walter mentioned earlier, we have news in 16 markets with the addition of Santa Barbara. Our TV news investment continues to pay off particularly in the several of our key revenue-producing markets like McAllen, where we ranked number one with a 4.5 rating among adults 18-34 this past July. This is beating the combined rating of both ABC and CBS newscast in this time period in McAllen, or El Paso which posted 4.7 rating up 81% since July 2002, and Albuquerque, which was number one in local news up 89% with a 3.4 rating in adults 18-34. And finally, in San Diego, our biggest TV billing market, we were number one in any language in early local news among all stations for adults. again adults 18-34, in July NSI. Some of the key ad categories performed well.

Automotive, which now represents 25% of our total revenue for TV was up 21%, our food services retail and telecom all showed strong gains, and the auto category, that was up 21% as I mentioned, Nissan and Dodge had the largest spending increase while Ford and GM remained the two largest auto advertisers. Kmart came back on the air to lead the retail store category spending during Q3, significant new business from Comp U.S.A. helped push our retail category up over 9% and telecom spending was up over 50%, that was actually fueled by five new advertisers, and banking to round out the fifth category, was another real bright spot, up over 40% in category spending. So, it was a very good Q3 for TV. And once again, much better than the industry.

Now turning to our radio division we had a strong revenue growth of 15%. That was in line with our guidance as Walter mentioned. Our national sales increased 29%, and local sales which represent 73% of the revenue increased 11%. Our top three categories once again led by automotive, financial services, and entertainment. Automotive increased by 12% over the third quarter of last year, while financial services were up 68%, and entertainment was up 18%. Top advertisers for third quarter included B of A, Verizon, , Anheuser-Busch and Wells Fargo. Radio was successful in attracting 24 new advertisers that invested with us over $25,000 each in third quarter and included among others, Safeway in Dallas, Chevrolet in San Francisco, Quest which came back in Albuquerque and Phoenix and Kaiser Permanente then at this in Denver which is also a TV advertiser of ours. We experienced an audience share increase of 24.4% for all of our properties combined. Summer 2003 versus the previous summer, 2002. And average quarter hour that's adults 18-34, which is really our key demo.

Here's some examples of our key demo, Monday through Sunday, 6 am to midnight, average quarter hour again 18-34. Our Dallas cluster increased its share to 6.0 in summer 2003 from a 5.2 in summer 2002. That's a 14% increase. And Las Vegas our cluster recorded increase of 79% from summer '03 versus summer '02 that cluster share is now a 4.4, and in Sacramento our cluster generated a 6.0 share, a 17% increase. Of those worth repeating that are L.A. radio stations about 4.4 shares of persons 12-plus. That's the summer 03 Arbitron survey up from spring '03 by 11%.

Now turning to our billboards. The billboard revenue totaled 7.7 million in Q3, down 14% over comparable period last year. On a market by market, revenue for fork operations down 12%, L.A. down 19%. National off 16, local off 10. Our decline in revenues this quarter was driven by reduction in a number of categories that Walter mentioned earlier. In particular, the local municipality advertising both New York and L.A, that did not come back in third quarter, as well as the fashion and the financial categories that lost revenue. The drop in advertising demand did reflect an inventory sellout drop. While the progress is being made from our personnel moves, during the past several months, in both of our outdoor markets, we're still seeing signs of softness in the national advertising arena in Q4, and that's particularly in New York. However, local pacing is up and collectively for New York and L.A. we're up 8% in fourth quarter and that's a very positive sign for our billboard division.

In summary, in a difficult economic environment, Entravision has produced strong results in the first nine months of this year and we continue to execute on our business plan of driving top line revenues through aggressive new business sales development, sales development efforts while holding operating expenses down, and with the goal of holding those operating expenses down, to below 7%. And to drive strong positive leverage. We did have, in the first half of this year, a combined TV and radio power ratio adjusted for underrepresented ratings of a .6 which demonstrates that we do have a lot of upside next year in the fourth quarter as well, and next year and beyond. And that just in the first half of this year, that .6 in our markets collectively for TV and radio, represents a potential of additional $50 million in revenue again in the first half. So, with that I'll turn it over to John DeLorenzo for a financial report.

Thank you, Phillip, and good afternoon, everyone. As Walter and Philip have outlined we had a great quarter. Net revenues were up $4.8 million, increase of 8%. Broadcast cash flow up 2.4 million, increase of 11%, and EBITDA as adjusted up 2.5 million, 15% increase over prior year. Free cash flow which we define as EBITDA adjusted minus capital expenditures, cash interest, cash taxes, plus interest income, was 8.2 million, or 7 cents per share, for the third quarter of 2003, up from 5.6 million or 5 cents per share in 2002. Overall, our margin for the quarter was 37%. TV and radio margins for the quarter were 41% and 37% respectively. Operating expense for the quarter increased 6%, 1.5% of the increase is variable expenses such as sales commission, music license fees, and national rep fees. 2.7% of the increase was associated with new station start-up costs which were primarily in the Los Angeles market. The remaining increase in operating expenses primarily includes increased expenses for TV newscasts, contractual rating services, salaries, and insurance expense. Corporate expenses decreased 3% to 4.1 million, a decrease of .2 million dollars while insurance costs increased reduced accounting and legal expenses resulted in the reduction in corporate expenses.

Turning to our balance sheet, as of September 30, 2003, our total net debt was $374 million and our trailing 12-month EBITDA as adjusted was $65 million. Our trailing 12-month ratio of debt to EBITDA was 5.7 times as compared to 6.1 times in the prior quarter. At year end we expect the ratio of debt to EBITDA to be approximately the mid to low 5 times. Turning to our outlook fourth quarter 2003, based on the current pacings we are seeing, we expect to report net revenues of 59.9 to 60.7 million, an increase of 5 to 6%. As Walter noted, our outdoor division is having a difficult quarter with revenues expected to be .6 to .7% however the television division is expected to be up 3 to 4% and the radio division expected to be up 13 to 15%. In the company recorded $2.7 million of political advertising in the fourth quarter last year, mostly television revenues. While that revenue is not expected to return this quarter, with the exception of approximately .22 million dollars of political advertising associated with the California gubernatorial recall election, our guidance for revenue on a pro forward basis excluding political is 9 to 11%. Robust revenue growth in a quarter where the broadcasting industry is expected to grow flat to low single digits. Adjusted for political.

Operating expenses are expected to be 39.9 to 40.3 million, increase of 6 to 7%, compared to 11% in the first quarter of 2003, 10% pro forma for a one-time payment for radio rep firm in the second quarter of 2003 and 6% in the third quarter of 2003. Operating expense in the fourth quarter include a one-time expense of .37 million for moving radio network and radio corporate to Los Angeles. For the fourth quarter, we expect corporate expenses to be around 4.1 million, this is a 2% decrease over the prior year. Fourth quarter and full year loss per share are expected to be negative 5 to 4 cents and negative 9 cents respectively. In September, 2003, the company exchanged all of Univision's 36.9 million shares of common stock for .37 shares of the company's new class U preferred stock resulting in a reduction in common shares outstanding on a weighted average basis. Because dilutive securities have been excluded from dilutive loss per share because it would have an anti-dilutive effect on loss per share, the projected loss per share for the fourth quarter and full year is calculated based on 87.1 million and 112.6 million shares outstanding respectively. This concludes our formal remarks. Walter, Philip and I would 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 the 1 followed by the 3. If you're using a speaker phone, please lift your handset before entering your request. One moment please for the first question. Our first question comes from the line of Victor Miller with Bear Stearns. Please proceed with your question.

Good afternoon, thank you. You've had four consecutive quarters now where your expenses have basically been between 40 and $41 million. Are you settling in, now, to an expense range which we should expect is very typical quarter to quarter? And secondly, your sequential growth, Q3 revenues that you recorded versus your guidance for fourth quarter, suggest that fourth quarter revenues will be 6.4% below that of third quarter. Is that typical for your business, where fourth quarter is that much below third quarter? Because in a lot of media we see fourth quarter being the biggest quarter. Thanks.

Well, Victor, on your first question about expenses, as we said, that we expect the company to settle into 5 to 7% expense growth by the second quarter of '04, and that's going to be our steady state growth rate. So, we're getting there more quickly than we thought, and we have been able to look at expenses and control them much better. So, you're correct in a sense that yes, this is the base that we're working off of and we're looking to be in the 5 to 7% range on a go-forward basis on our expenses.

from the 40 million to 41 million range we've got for this year we should expect next year it would still be plus 5 to 6?

5 to 7, yes. But bear in mind that 2 percentage of that 5 to 7 is because we expect incremental growth over our English language industry.

Thank you.

by having double-digit growth.

and for the second part of the decree question, Victor, you know, this is now the second year we've seen our third quarter revenues greater than our fourth quarter. It used to be in our industry that typically 4Q revenues were stronger than third, but that has not been the case the last few years, so, you know, we're where third is outperforming fourth. Somebody want to add to that comment?

the only thing I would add is that obviously the impact of the October, November political prior year calm makes a big difference on our -- this year's fourth quarter revenue. It's about 2.1 on TV in that revenue political and almost 300,000 in radio, so that has an impact on the difference between the two.

Okay, thank you.

Our next question comes from the line of Lanny Baker with Smith Barney. Please proceed with your question.

Thanks a lot. I was wondering, looking at the guidance last quarter, that you gave for the third quarter and the guidance you're giving fourth quarter, it seems like you are looking at an acceleration in the overall growth rate when we X out the political, unless there was some political skewing the third quarter numbers as well. I was wondering, you know, if you gave us what your growth rate looks like in the fourth quarter, normalized for political, is the 8% number in the third quarter pretty clean number from political? If not, could you give us what that was? And if my analysis here is right, as I penciled out, there's some acceleration, what's the key thing that is boosting the growth rate in the TV business from the third quarter to fourth quarter?

Well, first off, we said 9 to 11 is the net number of political, and that's the growth rate. But there was an increase over the guidance if we had X.ed political, it was in Philip's script, so I'll --

Well, we actually had -- as Walter mentioned, there was over $600,000 between Q3 political last year and Q3 political this year.

Okay.

It pushed our national from a 21 actual to a pro forma without political to 26.

Okay. But is it safe to say you're looking at a fourth quarter where the year to year X. political is stronger in the television business than it was in the third quarter actual?

the revenue growth in television in fourth quarter --

Yeah.

-- is greater this year than last year without political?

Yeah. I'm curious.

$2.4 million political in television in the prior year.

That's right. So, if I remove that from the guidance this year, or from last year's base, and divide that by the guidance, --

4 points are paid in the fourth quarter.

Okay. Okay. And then, can you just quickly, John, go through one more time the share count on the full year, sort of the last minute of your script I missed.

Last minute of my -- oh, the shares. Absolutely. Based on today's shares outstanding and adjusted because of the Univision shares moving to the preferred, to the U. preferred, we will have at the end of the quarter, 87.1 million shares outstanding, on a full year basis 112.6 million shares outstanding. On a fully diluted and basic basis.

Okay, thanks a lot.

Okay.

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

Yeah, hi, a couple questions. Philip or Walter, on the television guidance for the fourth quarter, if you guys can just kind of ballpark what portion of that is already in the books, that would be very help.. My guess is somewhere around 80% but I would like to hear it from you. And also on the outdoor situation, you know, everything is still soft there for the fourth quarter, the guidance came in lower than we expected. Is this more of a fundamental problem as you described in our script, or how much of this is a result of the personnel situation that you guys had detailed in your second quarter conference call? Thanks very much.

Yeah, let me answer the first part of the question. We're approximately 87% of the mid range of the guidance. That is that we currently have billing on the books for the television division. It's also 87% on the radio division, billing on the books to mid range of the guidance, and we're about 3 points to go to finish up at the mid range of the guidance for the billboard subdivision, so we're quite far along.

As to the second part of the question, David, as Phil pointed out, we do see our local pacing up in fourth quarter, but certainly the softness in national and both L.A. and New York are what are causing our guidance to be at a minus 6 -- 7 for fourth quarter. We do expect the -- our results in our outdoor division to improve. As I said, we've made personnel changes in Los Angeles and New York. We think we strengthened -- we believe we strengthened our selling effort by addition of sales people. We've also added someone in Dallas to manage our national accounts in Dallas, so we believe the business is headed in the right direction.

, so in other words, you're not blaming the personnel situation now?

No, we're not.

Okay, fair enough. Thanks very much.

We have fixed whatever personnel issues we had in third quarter, are fixed and we now expect as I said, to return to growth in 2004.

Putting into context, I want to remind everyone that our outdoor revenues are about 12% of the total company's revenue.

Correct.

Because we certainly want to fix it, we want to return to growth of our outdoor division, but at the same time it's a very small part of our overall business.

Thanks very much.

Thanks.

Our next question comes from the line of Kit Spring with Stifle Nicholas. Please proceed with your question.

Yes, can you give an update on how many start-ups you have currently in your portfolio. And what the same store or same station growth might have been in both radio and TV or pro forma, however you want to do that. Thank you.

Kit, this is John DeLorenzo. We don't do -- our policy on same station is that if the company enters into a segment in a brand-new market where it currently doesn't have a station or it sells out of a market entirely, we will show on a pro forma basis, same station. But, 29 months running, for the last 29 months, we have not done one acquisition that's been outside of a market that we've currently have in operation either television or radio. Therefore what we basically do is put the new acquisition integrated into the existing infrastructure on an operating basis, operating expense basis, therefore with that -- without arbitrarily allocating expenses amongst various signals, there's really no logic to try to do same station in existing markets. But like I said, 29 months we have not done an acquisition that hasn't been within an existing market.

Okay. Can you tell us what the revenue contribution from stations that have been added inside your markets has been this year?

We don't do that.

Okay, thanks.

Our next question comes from the line of Drew Marcus, with Deutsche Banc. Please proceed with your question.

Thank you, I have a question and I'm going to hand off to James Dick who also has a question. First, there's been lots of talk with Nielsen, whether they're getting their households right, or the other -- NBC is even blaming it what on Hispanic households skewing, do you have any comment on the Nielsen ratings?.

Yeah, Drew. This is Philip. There's been a lot of controversy, obviously in the press recently, and it's 11% drop in male adults 18-34 viewing. And I've read the comments from the NBC research director. I think it's really kind of too soon to look at only two weeks of the sweep and try to dissect the information. Perhaps it has 3, 4 point impact given the fact that Nielsen has done a better job and publicly said they're going to try to fix the (inaudible) simple among Hispanics and improve it. You have to believe it's going to have some impact on general market and television viewing. I don't think that's the whole story. And it's really kind of too early to tell. You 92 need a full four weeks of information and (inaudible) before they can draw any kind of specific conclusions.

Have you seen your ratings get hurt or helped more than you have -- would have expected?

No. You know, remember, we don't operate in New York, in terms of Spanish TV. We have Spanish radio, but we don't the TV in those markets where the bulk of that panel comes from. We actually, as we indicated, we're up sign on, sign-off July over previous July. And typically, July we experience lower hub levels. So we're very encouraged to see that increase. As we were very encouraged to see our news increase as much as it did.

Okay, I'm going to hand it off to James who has an additional question.

Yeah, I just have three questions. One, Philip, you indicated there was rate increases driving the TV revenue growth. If you could just give us what those increases were, or what that increase was. Secondly, John, I think you gave an estimate -- if I heard correctly, of around $400,000 for the expense of the radio studio move in Q4. I wanted to see if you could confirm that. And is any expense being pushed to 1 Q, and I guess finally, you gave an interesting power ratio analysis for your TV markets. Have you done any similar type of analysis for your radio markets? There's been some publicity recently of efforts to improve Spanish language radio power ratios, and I want to see if you have any comments on that.

James, this is John. To answer your question, we're slightly under 400,000 and that will be the all-in cost of moving the radio network and the radio corporate down to Los Angeles, all occurring in the fourth quarter, about $370,000.

Great.

Just a qualification clarification . The question was asked and I was calculating numbers when Philip was speaking but our third quarter television growth net of the political year over year would have been 12 versus 10 for that -- without political. Philip, you have a question to that?

Yeah, thanks John. As far as the rating increases for TV, it was the revenue increase. We had the same sellouts as third quarter prior year. We were up 10% in rate, which is equal to our revenue increase. And the same thing occurred on the radio side. We were relatively flat in terms of our sellouts, but our rate is where we got our revenue increase, our rates were up approximately 15% on the radio side. And the last part of that question, if could you repeat it.

Yeah, sure. You went through kind of an analysis of where your power ratios stood with the TV group for the first half. You know, and what the revenue potential might be if you approved those. Have you done anything similar on the radio side and just generally do you have any comment as to the likelihood for improving power ratios in Spanish radio?

We have, and what I was trying to communicate is the tail end of the -- my formal remarks was that we ran a power ratio both on the television side and on the radio side for the first half of this year on TV we utilized a three-book average for audience share 18-49 sign-on, and signoff and on the radio side it was persons 2-plus and we have the spring and summer booked of blended average for the average quarter hour share. And we took the total obviously the total revenue in our market collectively versus the total revenue that we booked the first half of the year, and we came out with a blended power ratio adjusted for what we believe our undercount is on from Arbitron on the radio audience and Nielsen on the television audience, which is roughly 20% undercount and we got a .6 power ratio. Now, the first half of the year, that equates to roughly $50 million of upside, $51 million of upside. Just in the first half of the year. So, my comment was that -- and thank you for catching it, is that we have a lot of upside in this company. And that's just the first half of '03, if we were to get an equal dollar share to that of our audience share. Hopefully that answers your question.

Yes, it does, thank you.

: and I think we also need that add that our audience share continues to grow. That pie will get bigger.

Absolutely.

Our next question comes from the line of Paul Sweeney with Credit Suisse First Boston. Please proceed with your question.

Thank you very much. Good afternoon. A couple questions. First, just, you know, on the particularly I guess on the TV side and if you have any color on the radio side, but do you have any visibility yet into the 04 any buys coming from an annual percentage of your. business comes out at this time of this year. Number one. And number 2, as you think about the outdoor business, John obviously mentioned it's a relatively small part of your business, but it's clearly been a source of disappointment several times over the past couple of years. How do you view that asset strategically and how much longer are you willing to invest time and effort into that business given that it's fairly small? Thanks.

Paul, it's Walter. I'll answer the second part of that question, maybe John has something to add to it, and Philip will respond to the television question. As for the outdoor division, we believe that it's an important part of your business strategy. The outdoor assets are located in high density Hispanic urban markets, New York and Los Angeles were the number one and two Hispanic markets in the country. And so strategically, it is a right fit. We have the first half of '03, we are up 12% in our outdoor revenue. It was this last third quarter when we had the decline that we talked about earlier, as well as fourth quarter. But we do expect to return to growth in 2004, and it will remain part of our strategy going forward.

Yeah, thanks, Walter. As part of the -- or in answer to your visibility question for '04, we really haven't seen marked improvement in terms of visibility. However, I will say that as a result of what we're seeing in terms of December pace, which is very much improved over previous months, we're encouraged as we turn the corner here into '04, we're encouraged in many of our areas of ad categories insofar as the developmental effort that we have made vis-a-vis new business, automotive, retail and telecom and have really started to payoff and we expect that trend to continue into '04.

if I could follow up, if I can, if you can give us a sense of how the fourth quarter by month is looking, number one. And number two, just as a follow-up, how big -- I guess how big do you think political could be for you guys next year versus, say, '02?

a lot part of that question, we haven't publicly put out an estimate in terms of our views of what we can do in political. We did roughly 6 million, a little over 6 million in '02, presidential year. Next year, another -- I'm sorry, big governor's race in Texas, in '02. Presidential year coming up in '04. And we see activity for our stations, particularly in the Florida, Arizona, New Mexico, perhaps now with the newly elected governor in California, there will be more of an emphasis from the national standpoint, RNC, DNC. We're encouraged, we think it's going to be pretty strong. But we really haven't predicted a number for anybody to hang their hat on. And last part of that question?

Just about the fourth quarter, how the months progress for you.

It's improved. Well, nonadjusted for political, which was big in October, and first week of November, but we've improved October to November, on a blended TV radio, and November was improved, December improved significantly over November, so we're tracking the right direction, and it goes back to my comments about we're encouraged about '04 as a result.

Great, thanks very much.

Our next question comes from the line of Michael Russell with Morgan Stanley. Please proceed.

Thank you. a lot of visibility in the fourth quarter. Just wondering, not going to ask you for the first quarter guidance, but what visibility do you have for first quarter at this point?

We just tried to answer that earlier question, but we don't see a great deal of change in terms of the improved visibility in any of our divisions. But we can say that again, December improved over November and it improved over October, so we're encouraged and we have had either put op the books or are in final discussions with annuals and first quarter business from a lot of the new business development that we've put on there in fourth that will return in the first. So we're very encouraged about the first and throughout the whole year of 04.

and strategically, how many markets do you plan to have TV news in? You mentioned you have it in 16 markets. Is there some kind of out there goal that you have?

Well, we believe we're committed to expanding our news product to all of our 22 television markets. As we've said earlier we've got it in 16 markets but news is a very important part of our strategy it's the most important part of our programming, we distribute to our viewers on a daily basis and it brands our television stations, creates loyalty. It's a point of information, for our viewers. So it's very important part of our strategy. We expect to increase our rating in restaurant Barbara as a result of just having launched our news market.

Expense guidance how much came from variable and how much came from start-ups, that was helpful. I'm just wondering, do you have as a budget of part of your 5 to 7% as you look out that includes kind of a regular investment in news? Is that part of the guidance or is that over and above?

That anticipates as we roll out news. We're not -- we haven't produced a timetable to get to the 22 markets. And we're not saying it's going to happen next year or not even maybe the year after to get there, but we made the assumption that all the additional news will be included in our expense growth of 5 to 7%.

Just to add to that comment of mine earlier, Mike, as far as the importance of news, it's also very important to our revenue strategy. It is particularly attractive to national advertisers, the automotive industry particularly, you know, wants news for their advertising. So, it drives revenue as well as produces a better programming product for our viewers.

and last question. You mentioned your radio in Los Angeles was up 37% versus 7% for the market. Is that 7% for the general market, because we have Spanish broadcasting gave a comment I guess about 24% market share they were up 58%.

That would be the general market.

That would be the general market. Do you have any idea of what the Spanish language is up in Los Angeles?

At this point we don't. We don't have --

but historically it's been trailing the general market.

This year it's been trailing the general market, that's correct.

It seems to have clearly turned up so probably have some easy comparisons.

Right.

Who do the easy comparisons end on that? Because it did kind of underperform with a lot of competition for a while. L.A. has been a strong market for a while and now it's a strong market for Spanish. Do you have any quarters of outperformance you're getting from L.A?

Just from our radio cluster center?

from Spanish language in L.A. in general. I'm trying to understand the competitive nature of the industry seems to have become less destructive and more accretive to everyone.

Well, we expect to, if I understand your question, we expect the audience share of Spanish language radio listening to grow. Absolutely. With the growth of the Los Angeles Hispanic market, the billion dollars being invested in radio advertising, so clearly we expect to benefit from that growth in 2004 and beyond as a result of our strong cluster their we've assembled in the market.

Maybe I'm not being clear. I apologize. I'm just trying to understand, is there a particular quarter where maybe the L.A. Spanish language market kind of normalizes, because I know it was very competitive for the past couple of quarters, and underperformed general market and now it seems to be outperforming the general market.

Maybe --

We know that as of August, it underperformed the general market significantly.

Right, it was up two and a half while the general market was up eight and a half, and we need to really see where the third quarter came in to seat turnaround in third quarter, but as you say, we're noticing there is a turnaround, but once we get our arms around the third quarter number Spanish versus English and see the (inaudible) quarters see the turn happening and hopefully it is happening.

That's perfect. Thank you.

Our next question comes from the line of David Joyce with Guzman & Company. Please proceed with your question.

Thank you. A few items. Pardon me if I missed it, but do you have guidance on cap ex for the fourth quarter would be expected to be along the lines of this quarter?

No, it will be $7 million, which will equate to 18, about 18-3 to 18-5 for the year.

Okay. To remind me of the remaining acquisitions and what the timing would be on their closings?

At this time we have no acquisitions that we've announced. So, there are no closings in the future.

Okay.

At this time.

Okay. And when do the start-up costs become normalized, if you could discuss that, for the L.A..

for L.A. in well, we actually launched L.A. mid-January of last year, so in the first quarter we're looking at a year over year basis. I mean, certainly we ran (inaudible) in the first three or four months, but year over year, January 16th is the date we started operating in the new cluster.

Okay, thank you.

Our next question comes from the line of Lee Westerfield with Jeffries. Please proceed with your question.

Thanks, good afternoon. I have two questions, if I may. First, I want to get a better understanding about the outdoor business, particularly in New York, if you can remind us when we hit the anniversary of when New York started pulling advertising on the PVAs there. The second question relates to Los Angeles radio. What Los Angeles radio might have grown by excluding (inaudible) city stations. And third question is, now that you're getting your balance sheet down to the target you had outlined at the start of the year, will you be committed to lowering the leverage ratio further or is this a comfort level as far as leverage would be for you?

Yes, the very last question first. Yeah, this is our area the low to mid 5 is where we feel comfortable. Certainly we're willing to go above that as we did with big city if we see a terrific opportunity. But we'll get ourselves back, we're getting ourselves back, will be there by the fourth quarter. I think the answer to your question is so long as we're not doing strategic acquisitions, we see the opportunity to continue to reduce debt. As a company, our goal is to continue to try to stay within the low to mid 5, range and strategically acquire television and radio stations, particularly in clusters where we currently have radio and television and to finish up Telefutura and developing out markets where we don't have Telefutura. It was the third quarter where we saw the steep drop-off in the public service advertising in New York.

and Los Angeles radio X. big city?

I'm sorry, the question again? That question, Lee?

Sorry. Los Angeles radio would have grown by excluding big city?

We don't break out in market. It was acquisition integrated into existing cluster, in the operating expenses are mixed in together, so we're not talking about breaking specific markets up for radio. That's just a signal. One operation for radio, one cluster with differentials signals.

Okay, fair enough. Gentlemen, thank you very much.

Thank you, Lee.

Our next question comes the line of Gordon Hodge with Thomas Wiesel Partners. Please proceed with your question.

Good afternoon, I'll keep it quick. On the share count I gather if you make money, the U. shares count in the base?

)) That's consistent, isn't it? Yeah, I find that kind of odd myself. But yes, if you made money, you include the preferred shares on a fully diluted basis which have the effect of reducing our income per share but on the opposite side if you have a loss you don't include the preferred shares which increases your loss.

Great. And on any chance you could comment on the contribution that the Telefutura stations made both top line and on a profitability basis in the quarter.

Profitability, once again, that's probably virtually impossible to do because we just have existing television stations operating general sales manager, basically all we do is pay the cost of distributing the signal and make a couple selling but the operation is completely integrated into the existing operation.

So, how about revenue, then?

1% of total revenue.

I'm sorry?

1%.

1% in got it. Thank you.

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

Keith Fawcett Thank you. This is kind of a question of a problem of success more than anything else. But you mentioned that automotive was about 25% of your total TV revenues at this point. Does that concern you that level of concentration? And secondly, do you actually sort of reach a physical limit in terms of auto pods .

the second part of that question was?

Keith Fawcett Whether or not you actually would hit sort of a limit in terms of auto clutter, in terms of your pods.

That's a very good question. That's a very good question. We do have requirements, minimum separation typically 10 minutes between the same auto nameplate manufacturer advertiser. But we, like general market TV, have no qualms of putting, you know, different competitors in the same pod. And the same break. We have roughly 25% of our total revenue is made up of automotive advertising on the TV side and I think it's about 14, 15% and growing on the radio side. It's our single biggest growth category as -- in terms of dollars, and we continue to see that to continue to grow. But that said, we're also growing the retail. We're also growing the food services, we're also growing the health care category. So, we do have a great deal of success in the last several months by adding new markets like Nissan, Ford, GM, as well as Dodge, and we have -- we will 10 see, you know, that new business development in adding markets payoff into '04, but we are concentrating on other categories as well. So, I'm not concerned about it, because there's still a lot of market that we don't receive business for the many nameplates and I'm not concerned about it in terms of creeping up as a percent of our total business, because we are growing other categories as well. In fact, in the banking category, we had five new advertisers and that was probably our biggest percentage growth in any category, and B, of A, led that, Wells Fargo, B of A led that category. Hopefully that answers your question. But we're real proud of how well we've done on the automotive new business development.

Keith Fawcett Great, thank you.

Our next question comes from the line of Alissa Goldwasser with William Blair.

Alissa Goldwasser I'll try to ask this in a quick and straightforward way. My question is political advertising incremental or does it replace other advertising? Because in the fourth quarter of last year, your revenue was up 20%, which was not unlike the growth in the first part of year and my impression at that time was it actually replaced other categories so is the comparison really that much more difficult this year?

Good question. When you're running at 75, 80% sellouts, it's bumping up replacement. It's a, you know, a little bit of both. A little bit of replacement mostly incremental for us. Because of our sellout levels. Last year, I can't tell you that it will be -- it won't be more replacing advertising first, second quarter, and certainly November election next year. I suspect that it will be. And that's why we've already been proactive in getting our rates up, because as you know, the primary, the windows are up front and many of our markets start in January in terms of lowest unit rate so we've already addressed that to get the rate up anticipating it will be replaced, , bouncing some of those advertisers.

Great, thank you.

Ladies and gentlemen, as a reminder to enter for a question press 1-4. Our next question comes from the line of Victor Miller with Bear Stearns.

Thanks for taking a follow-up. I wanted to ask you, can you tell us the amount of revenue that's associated with radio stations and TV stations that are still losing money in terms of the cash flow, and what that cash flow level is? Thanks.

At this stage, I can't. I can get it to you, but it will be a low number because I'm not going to specifically --

We don't believe we have -- you know, as John said earlier, we look at our, you know, radio assets as clusters, we look at our television efforts as clusters. We don't believe we've got any of our television or radio clusters that are losing money.

There's no cluster losing money. The question is, you know, every place where there's a new radio station, there's an existing radio station that's profitable.

or vs. television.

the only way to get there is arbitrarily allocating expenses.

Correct.

Thank you.

Okay, thank you.

Mr. Ulloa, there are no further questions at this time. I will now turn the call back to you. Please continue with your presentation or closing remarks.

Thank you, operator. Thank you again, everyone for participating on the call. We look forward to meeting with you on our fourth quarter conference call in 2004, and then announce our actual 2003 results.

Thank you.

Bye bye.

Thank you.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.--- 0