Entravision Communications Corp (EVC) 2003 Q4 法說會逐字稿

Welcome to the Entravision's Communication Corporation fourth quarter and full year 2003 conference call. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. At that time if you have a question please press the 1 followed by the 4 on your telephone. As a reminder this conference is being recorded Thursday, February 12, 2004. I would now like to turn the conference over to Mr. Walter Ulloa, Chairman and CEO. Please go ahead, sir.

Thank you, operator. Good afternoon everyone and welcome to our fourth quarter and full year teleconference. With me is Phillip 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 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 the property of Entravision Communications Corporation, any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Entravision Communications Corporation is strictly prohibited.

For the full year and the fourth quarter we continued to produce industry leading results. Our full-year revenue increased $19.5 million to $238 million, which is a 9% increase over 2002; broadcast cash flow increased $8.6 million to $80.9 million, which is a 12% increase; and EBITDA increased $9.6 million to $66.6 million, which is a 17% increase over 2002. Free cash flow increased $7.4 million to $23.5 million.

It is important to note that upon confirmation of the Big City Los Angeles radio acquisition in April of 2003, our debt to EBITDA ratio rose to 6.8 times. At the end of 2003, our debt to EBITDA leverage was at 5.4 times. In slightly over two quarters, we reduced our debt leverage almost a full turn 1/2 through EBITDA growth, free cash flow, and divestiture of a non-core asset. We expect to continue to reduce our leverage throughout 2004. For the fourth quarter revenue increased $3.8 million to $61.1million which is a 7% increase over fourth quarter '02; broadcast cash flow increased $1.1 million to $28.8 million, which is a 5% increase; and EBITDA increased $1.1 million to $16.7 million, a 8% increase in fourth quarter '03 over fourth quarter '02. Free cash flow increased $900 dollars to $4.9 million for fourth quarter '03 versus 2002. Our television group extended it's strong performance in the quarter posting a revenue gain of $1.4 million which is a 5% increase in an extremely tough quarter when the television industry reported negative results. Our television division produced strong growth in the fourth quarter despite the absence of $2.3 million in political advertising from the fourth quarter of '02, and on top of the excellent 20% revenue increase we posted in Q4 '02.

The impressive results by our television division were driven by strong national sales which increased 9% in the fourth quarter, and 20% if you exclude political Q4 '02 comparables. National sales in our television division grew 20% in 2003, as the national brands sought to increase their brand shares by expanding their budgets in U.S./Mexican border markets and Hispanic markets 15 through 50. Additionally strong national sales in our television division continues to be driven by new brands advertising with out media properties. For example, our television national sales managers added 42 new national accounts in the fourth quarter, over $2 million in new money for the quarter. Both our Univision and Telefutura television stations extended their strong ratings performance against our Spanish and English language peers for another quarter. In the November 2003 sweeps our television stations recorded a solid book. In primetime our Univision television stations held their adult 18 to 34 share versus November 2002. Our Univision television stations ranked first or second in primetime in eight of our markets regardless of language. Our metered market Telefutura affiliates increased their primetime share by 33% versus a November 2002 sweep.

Our local news programming which is a core part of our branding strategy also posted strong gains in the November survey among adults 18 to 34, with a ratings increase of 6% and a share increase of 14%. Our news ranked first or second in it's time period in 13 of our news markets regardless of language. In our metered markets we're seeing continued momentum as our combined television stations captured an 86% share of broadcast primetime Spanish language television viewing in the November Neilsen survey. Turning to our radio division we're clearly on a roll as we delivered double digit top and bottom line growth, and we continued to capitalize on our strong ratings. In the fall 2003 Arbitron book, our share of adults 18 to 34 increased 3.6% over summer and we maintained our total share compared to the fall 2002 survey.

Recently, an independent sales organization analyzed the fall Arbitron 2003 surveys from 92 continuous measured markets, and found that Spanish language radio in the United States saw it's best ever results; an 11.5% share in persons 12 plus versus 11.1% share in the fall of the 2002, and a 10.9% share in the summer of 2003. More evidence of the growing popularity of Spanish language radio and the significant future of our radio visit as we convert the ever increasing popularity to revenue. The year 2003 was an outstanding sales year for Lotus Entravision reps. Our radio division national revenue increased 25%, while the industry grew 6% according to the radio advertising bureau. We saw impressive growth in national radio sales in all four quarters; 25% in the first quarter, 32% in the second quarter, 29% in third quarter, and 16% in fourth quarter compared to 2002. Local sales also experienced growth in each quarter of 2003. Overall, our local radio revenue grew by 11% while the industry remained flat over 2002 according to the radio advertising bureau.

In Los Angeles we had a terrific year. In January we started operating the Big City L.A. stations with our very successful pop rock format, and simultaneously launched two new exciting formats in Mexican cumbia and rhythmic dance. We exceeded our year end consolidated share goal in persons 12 plus in the third quarter, and recorded a 4.2 share in the fall 2003 book. In our key demo adult 18 to 34 we generated a 7.9 share in the fall of 2003, compared to 2.8 share a year earlier representing an increase of 185%. We continued to outperform the market and our sales force has been focused on converting our ratings success into revenue share. We still have work to do and like all our peers, one of our main goals for 2004 is to continue to close the revenue gap in Los Angeles; as well as in all of our other markets.

We recently announced a format change in Los Angeles for KDL from rhythmic dance to alternative rock. We are continuously seeking ways to enhance the value of our clusters, and after carefully studying the market, we decided to make the switch to Indy 103.1; which will allow us to target young male listeners age 18 to 44. At the same time we entered into a joint sales agreement with Clear Channel communications. Clear Channel through the jsa has all the sales responsibility for Indy 103.1. Indy 103.1 is off to a great start, having been well-received by listeners and advertisers, and we'll keep you informed of our progress. In addition, we recently appointed Karl Alonzo Meyer as general manager of our Los Angeles cluster. He is an experienced Spanish language radio and television executive, in addition to being an excellent manager he's one of the most creative sales executives in media. He'll be instrumental in our efforts to continue to drive revenue share and ratings across our Los Angeles cluster.

We continue to evaluate our radio group, as evidenced by the recently announced sale of our Chicago cluster. We expect this transaction to close in second quarter and will use the proceeds to reduce debt. As we have stated before our strategy is to focus on the fastest-growing and highest density Hispanic markets. We are also looking to focus on market where we can build significant clusters to leverage operating costs and gain more revenue share. At our outdoor division our revenue decreased by 6%, an improvement over the 14% decline in the third quarter. We continue to expect the outdoor division to return to growth in 2004, although the recovery is taking slightly longer than anticipated. At present, first quarter pacings indicate that the division will be in negative territory although the first quarter will be an improvement over the third and fourth quarters of 2003. However, we are seeing improving trends in the second quarter and beyond, with pacings in the 4 to 5% range. Entertainment remains our strongest category and we continue to aggressively market this business to maximize our potential in this sector.

We are also seeing more interest from automotive, packaged good companies, fast-food and soft drinks at this point in the year compared to same time last year. We have also made some additional personnel changes at the unit. We've promoted Chris Young to president of Outdoor replacing Glen Emmanuel. Chris was previously CFO of our Outdoor division. The additional sales executives that came on board in 2003 are already making a difference and we believe the promotion of Chris Young to president of Outdoor will support continued improvement at the division. In conclusion, our television and radio divisions continue to show strong momentum which will be enhanced by the political advertising in 2004. We are delivering ratings gains while our sales force is aggressively working to close a revenue gap. The Hispanic market continues on it's growth curve, now over 40 million people and $600 billion of buying power. With our focus on the fastest growing and most densely populated Hispanic markets we'll be uniquely positioned to benefit from this ever expanding and important market.

Looking out into 2004, we remain positive and confident about our growth for the year despite a relatively soft first quarter. Our pacings for all three divisions beyond the first quarter are strong and business activity continues to build throughout the company as we enter the second half of the first quarter. We're committed to prudently expanding our asset base as we seek to strengthen our clusters and expand into new markets. We also continue to evaluate the sale of non-core assets in order to enhance our long-term growth potential. Cost controls are in place as evidenced by our expense growth in 2003, and we're driving additional operating efficiencies throughout our organization. Now at this time I'd like to turn the call over to Phillip Wilkinson.

Thank you, Walter, and good afternoon, everyone. I will expand on certain performance highlights at our company starting with television. Fourth quarter revenue for television stations grew 5%. Our BCF in the quarter increased 8%. For the full television posted an 8% revenue increase and BCF grew 12%, that's in a difficult economy. Excluding political advertising revenue we would have been up 13% for the quarter overall and 12% for the year. Results continue to be driven by national advertising, which increased 9% in the quarter; while local television ad spending was up 1%. For the year national was up 20% and local was up 1%. Our strong line up of Univision affiliates, with the number one brand in Spanish language television, continued to deliver strong ratings across all key demos and date bars. As they maintain their share of adults 18 to 34 for signon to signoff, and for primetime from November '02 to November '03 year-to-year. While our overall early local newscasts grew in it's share by 14%. Specifically we had the following ratings success stories for our television stations and these are all based on November Neilsen Station Index, or the NSI survey.

These are highlights or examples of success stories in larger billing stations as well as smaller more developing properties. In San Diego our largest billing Univision television station had it's highest news rating ever with a 3.2 rating, which is equal to all four English newscasts at 6:00 p.m. combined, and the station tied for number two on a Monday through Sunday primetime was three network affiliates. In El Paso, KINT was the number one station in early and in late news and was also the leading station in primetime, up 41% over the prior year. Denver ranked number two in all 5 p.m. early local newscasts, and was up 16% in prime; and in Santa Barbara, KPMR debuted as the number one Spanish language newscast in it's first book and the number two news overall. KLDO in Laredo had 90% of all early news viewers at 5:00 p.m.; and in Palm Springs, KVER still out delivers all four English language networks combined in adults 18 to 34. Our Univision stations in our Univision Telefutura Duopoly markets maintained their strong ratings performance in November 2003, as well, versus 2002. With stations in Tampa, Denver, Monterey and Yuma El Centro each delivering impressive double digit ratings growth in adults 18 to 34. Our Telefutura stations in metered markets were up 33% in primetime share, and we ranked as the number two Spanish language station behind our own Univision affiliates in Albuquerque, Denver, Tampa, Boston, and El Paso. We're in the best position that we have ever been in the history of our company to maximize these ratings into revenue.

Our key ad categories are performing very well. Automotive was up 16% for fourth quarter as were the number two and number three categories, our telecom and retail. Ford, Nissan, GM led the spending while Verizon, Qwest, and AT&T were the key advertisers in telecom; and Mervyn's, Wal-Mart, and Target led the retail categories in spending. Turning to our radio division we had an impressive revenue growth of 15% in the quarter and 14% for the full year. This compares with the radio industry, according RAB, of -1for the fourth quarter and +1for the entire year; so we had a 14% growth for the year, the industry was +1according to RAB. For the quarter, national sales increased 16% and local sales, which represents about 72% of our total sales, increased 15%. For the full year national was up 25% and local was up 11%. Of our top three categories for the year, they were automotive, telecom and retail; and in fourth quarter they were the same categories, these same categories plus grocery stores. For the year, automotive increased 10%, telecom was up 51%, and our retail business was up 5%.

Top advertisers for the fourth quarter included Verizon, Sears, JC Penneys, and Home Depot; and the radio division was successful attracting 32 advertisers that invested more than $10,000 each for the fourth quarter. They included Pacificare, GM Certified Used Vehicles, and Kaiser Permanente. We experienced an audience share increase of 3.6% for all of our radio properties combined in the fall Arbitron 2003 book versus the summer 2003. That's in average quarter hour, adults 18 to 34; our most important demo. Here are some of the examples of that 18 to 34-year-old demo. Monday through Sunday six to mid on average quarter hour Arbitron book from the fall. Our San Francisco cluster increased to a five share in the fall versus a 3.6 in the summer, that's a 37% increase. In Dallas our cluster recorded a increase of 7.3%, this cluster is now a 6.4 share. In Albuquerque our cluster generated a 2.9 share and that's up 28% over the summer '03 book; and in Denver our share grew to a 6.5, that ranks as number four among all station clusters in the market.

In Los Angeles we continued to outperform the market as we increased revenue by 44% in 2003 versus a market in L.A. that was up roughly 9% according to Miller Kaplan. We saw revenue gains in each month of the fourth quarter. In October revenue increased 75% versus 1% for the market, again, according to Miller Kaplan. In November and December our revenue increased of 64% and 90%, respectively, as the market was only up 2% and 12% for the same months.

Switching to ratings, in the fall Arbitron again 18 to 34 years of age, that demo Monday through Sunday six to midnight our Super Estrella generated a year-over-year growth of 43% and currently has a four share. Oye 97.5 FM, our cumbia format recorded a 2.1 share, this is an increase of 43% over the spring survey. KDL, our dance format, registered a 1.8 share, up 6% over the summer. That's a cluster that generated a 7.9 share adults 18 to 34 and 4.3 share in average quarter hour of persons 12 plus. Clearly over the past year we have grown our listener base more than any other Spanish language radio station in the Los Angeles market.

In summary, in what was a soft advertising market last year, Entravision posted results that were among the best in the broadcast industry. Our tv and radio divisions are industry leaders, and we're optimistic that we have started to turn the corner at Outdoor. But again we believe that we are better positioned than ever before to turn our ratings into greater revenues. Now I'd like to turn the call over to John for a financial review.

Thank you, Phillip and good afternoon, everyone. As Walter and Phillip have discussed, Entravision had a great 2003. For the full year, net revenues were $238 million up 9%, 11% pro forma for non-returning political advertising. Broadcast cash flow increased 12% to $80.9 million and EBITDA, as adjusted, was up 17% to $66.6 million. Free cash flow, which we define as EBITDA minus capital expenditure, cash interest, cash taxes, plus interest income; was $23.5 billion or 21 cents per share for the year, up from $16.1 million or 13 cents per share in 2002. Overall, our margin for the year was 34%. Tv and radio margins for the year were 39% and 33% respectively, all improved over of the prior year's margins. Operating expenses for the year increased 7%, and increased 7% in the quarter in line with our guidance. In the fourth quarter 1% of the increase of expenses was variable such as sales commissions, national representation fees, and bad debt expense; 3% of the increase was associated with new station costs, primarily the result of the Big City radio acquisition in Los Angeles.

The remaining 3% of the increase was due to increased expenses for news costs due to the addition or expansion of newscasts, rating service costs, bad debt costs, moving expenses, and rent expenses. For the full year, 1% of the increase in expenses was variable, primarily due to increased national representation fees, 3% of the expense were associated with new station costs the result of the Big City radio acquisition in Los Angeles. The remaining 3% of the increase was a result of news costs due to the addition or expansion of newscasts, and ratings service costs partially offset by a reduction in trade expense and the settlement of a contract dispute with our former national radio representation firm, Interep National Sales Inc., which accounted for $1.6 million in 2002. It should be noted that expenses for the first quarter 2004 will begin to provide a more normalized comparison to the prior year as the first anniversary of the Big City radio acquisition occurred in the first quarter 2003. Corporate expenses decreased 6% to $14.3 million for the year, and 4% in the quarter. The decrease in the quarter was primarily attributable to reductions in legal, accounting, and printing costs offset by increases in insurance expenses, salaries, and public relations expenses.

For the full year the decrease is primarily attributable to a $2 million reimbursement from Univision, offset by current period Univision related expenses for legal and other costs associated with the third-party information request that we received in connection with the recent merger between Univision and Hispanic Broadcasting Corporation. Approximately $.6 million and $.5 million of the reimbursement was attributable to out pocket expenses incurred with third-party providers in 2002, and the 12-month period ended December 31, 2003, respectively. The decrease is partially offset by increasing insurance costs, as well as, bonuses associated with the increase in EBITDA, as adjusted.

Turning to our balance sheet as of December 31, 2003, our total net debt was $362.8 million and our EBITDA as adjusted was $66.6 million. Our trailing 12 month ratio of debt to EBITDA was 5.4 times, if you adjust for the proceeds from the announced sale of our Chicago, Dallas, and Fresno radio stations, total net debt was $323.3 million, EBITDA as adjusted was $65.8 million and the trailing 12 month ratio of debt to EBITDA was 4.9 times. Turning to our outlook for the first quarter 2004, based on the current pacings we're seeing, we expect to report net revenues of $51.1 to $52 million; an increase of 6 to 8%. Our television division is expected to be up 6 to 8%, radio up to 10 to 13%, and Outdoor down 5 to 4%. Operating expenses are expected to be $38.6 to $38.8 million, an increase of 6 to 7%. For the first quarter we expect corporate expenses to be in the range of $4.1 to $4.2 million. Depreciation and amortization is expected to be between $10.5 and $11 million, interest expense is expected to be between $6.6 and $6.9 million, and capital expenditures will be in the $3.5 to $4 million range.

First-quarter loss per share is expected to be 10 to 11 cents. It should be noted that the sale of the Fresno radio station expected to close in the first quarter, is expected to result in a net book gain of $.9 million offsetting the loss by one cent per share. In September 2003, the company exchanged all of Univision's 36.9 million shares of common stock for .37 million stocks of the company's preferred stock, resulting in a reduction in common shares outstanding on a weighted average basis. Because diluted securities have been excluded from dilutive loss per share because it would have a anti-dilutive effect on loss per share, the projected loss per share for the first quarter is calculated on the weighted average of 87.1 million shares outstanding. This concludes our formal remarks. Walter, Phillip and I would be happy to take your questions. Operator.

Ladies, if you would like to register a question, please press the one followed by the four 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 one followed by the three. One moment please for the first question. Our first question comes from the line of Paul Sweeney with CSFB. Please proceed with your question.

Good evening. Couple questions, gentlemen. First on the television side, Phillip, local advertising you mentioned for the quarter and for the year was just up roughly 1%. I wonder if you could give a sense of what's holding that business back relative to your national business, and how you see it in the first quarter and the year '04; and then second, if you could talk about the L.A. radio market. Obviously great gains on the ratings side. Could you talk about perhaps where your power ratios are now, and where you can get them to in '04? Is '04 a time when you can continue capitalize on that, thank you.

Thanks, Paul. I'll take the first one and Walter can chime in on the second part of that. Local is something we've focusing on, we've seen improvement over the last several months, we did finish at a 1%. We did have some comps of about $1.5 million of political from prior year, which are difficult to overcome. It is a lot easier to get a larger rate increase from a national advertiser, than it is from some of the local advertisers that have been with us for many, many years. So it really comes down to putting more local new business on to get that percentage growth to increase the way we'd like to see it; and that's what we're working on and concentrating on with a number of initiatives locally, including putting a bounty or premium or new business development on our local side.

That said, if you looked at our first quarter, on local, January was a tough start. We were flat in local, but we've seen improvement of plus eight in a pace in February, and we're looking at improvement on the local side in March as that starts to firm up. The business has come in slower and slower, in terms of the visibility and the outfront as far as when they book it; but, you know, we are encouraged, we've really focused on our local business as well as our national. We've put a particular emphasis in the last two months, three months on our local television business and it's started to pay off. So I'm bullish on the year for 2004. You know, March and beyond, actually February and beyond, the month we're in, for both local and national. And for the radio L.A. question, I think Walter --

Hi, Paul. Let me just start out by saying that we had significant growth in revenue and cash flow from our L.A. cluster in 2003. The, you know, did we meet our expectations? No, but, you know, you can't grow revenue until you get the ratings. We significantly exceeded on an even faster timeframe our most optimistic ratings projection. Today we have the two strong Arbitron books behind us in L.A., and we're focused on converting those ratings to dollars. Some of the events that took place in '03 that prevented us from meeting our revenue expectations were the outbreak of the Iraq war; certainly the recession that he followed the war; two major labor strikes in Los Angeles which directly affected the Hispanic market, a mass transit strike and the grocery store strike which continues to this day; and then, of course, the California fires in Southern California in the fourth quarter.

These last three events caused major disruption to business in general, but particularly impacted automotive, food sales and entertainment. That said, we had a terrific 2003. Our Los Angeles cluster is performing very strongly in the first quarter. So we expect to continue down the path to convert our ratings share rate to revenue share. Our power ratio for the year was about .49 for '03.

Paul, let me just tack on to that first part of the question, you know, it's important to note and, you know, I'm constantly mindful of the fact that a lot of times we'll develop local business for our television group and it ends up going national. In many of the general market stations in our markets, what is regional or local to them is national to us. If it's outside our, placed outside our dma, or the check's written from outside our dma; we turn it over to the national rep, it goes into the national column as revenue growth. Typically the Toyota dealers, the McDonald's franchise group, multiple retailers will, in general market, be local to the station. In our case, we send in national. So that growth that you see the 20% growth in you see in national, a lot that in reality is local business. So maybe we should work on a blended rate for you to make it more of a comparison to how general market books it.

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

Two questions. Number one, can you talk a little bit more about the Outdoor business. When--I know last quarter you had said that you felt like you were getting your arms around that business. When do you now see that business starting to look a little bit better in 2004, and then my second question is, I think, John, you'd said that the expense growth had three points or so of new station contribution to the 7% year-over-year growth; and then I looked at -- I think you said that that starts to winds down in the first part of this year. And it looks like the first quarter is at 6 or 7%. When does that -- does it really start to trail off in the second quarter?

Well, the second question, I'll jump on that one. The 3% for new stations is primarily just the Los Angeles cluster for Big City from last year. And we lma'd the station in January of last year. We launched the cumbia format shortly after that. We had a period of time of building up our staff, our promotion costs, and then we actually closed on the station in April of last year. So even though we owned or we ran the station most of first quarter last year, the expenses were not really fully baked in. But I can say probably by the second half it'll be completely baked in, by the second quarter it'll be mostly baked in.

And so we should expect that you peel off something like three points of the expense growth then.

We say that we will -- naturalize to a 5 to 7% growth of expenses.

Okay.

On an ongoing basis of which 2% of that is considered to be incremental growth due to our rapid revenue growth compared to the general market.

Okay.

Lanny, this is Walter. With regards to the Outdoor business, as you recall, we had a strong first half in 2003 in Outdoor and a weak second half. We made some significant changes in the third and fourth quarter to strengthen our selling effort, particularly in New York and Los Angeles. We announced some more changes today. We have indicated that we will see some decline in first quarter, but we do expect to see our Outdoor continue to improve as it has in the first quarter. We see pacings right now beyond the first quarter of 4 to 5% growth, so we're optimistic that we're going to see our Outdoor business grow in 2004.

Okay. Thanks a lot.

Thank you.

Our next question comes from the line of Victor Miller with Bear Stearns, please proceed with your question.

Good afternoon, thanks for taking the call. Can you give us a progress report on some of, you know, just where you stand in terms of some of your newer television properties, newer radio properties. Some companies actually provide a sense of the buckets of what percentage of revenues is derived by stations that have less than 20% margins? Do you have anything like that that might be helpful? And then secondly, could you talk about some of the ratings, and I know we only have 12 plus ratings which is not a perfect science, but in markets like Dallas and Phoenix and Denver and Sacramento, San Jose and Monterey, on a year to year basis fall to fall that we've seen some ratings declines in those markets. Is that just where you've kind of peaked and now you're coming off your peak and coming to a normalized ratings, or do you think up need to tweak some of the formats in those stations? Just give us a sense of what you're seeing in those markets as opposed to why you're doing so well in Los Angeles. Thanks.

Victor, this is John DeLorenzo. I'll take the first question. We provide our margin buckets in our presentation that's on our website. That's the presentation that we generally do at investor conferences. But where they fall in the buckets versus 20%, 30%, 40%, 50%, is a product of not whether the station is new but the size of the market, how strong our cluster is in the respective market, whether we have a Telefutura full power with a Univision station. So the margins are not in our station group really tied to newer markets or older more established markets. As we always said all of our acquisitions, at least for almost two years now have all been additions to existing markets, whether it be Telefutura into a Univision market or adding a radio cluster. So most of our newer properties are add-ons into existing established markets for us, so I don't think there's really any correlation in our company between new markets and margins. The second question was --

Related to radio.

Radio.

Let me answer that question this way, Victor. As you recall, at the beginning of 2003, we lost one of our major radio talents, Peelien, and because we weren't prepared to pay the huge expense of keeping him. That said, we did see some decline in our ratings, but particularly in our Mexican regional, with our Mexican regional stations; but we have seen those ratings stabilize now, and we're starting to see some growth in all of those markets: San Francisco, Dallas, Monterey, and Phoenix. In fact, our ratings in San Francisco were up about 9% in November '03 versus November '02.

All right.

Another important point is that despite the decline in revenues-- in ratings, excuse me, that we saw from the loss of Peelien; we still managed to grow our revenues stronger than any other radio company in the industry.

Our next question comes from the James Dix with Deutsche Banc. Please proceed with your questions.

I have a couple of questions. First, I think for you Phillip. You spoke a little bit to the local market in tv going forward. If you could give a little bit more detail on what you're seeing on the national side, especially as annual budgets are being laid in. Where do you see the most potential for shifting of dollars from English to Spanish language, you know, thus far in the year? And then I have two more housekeeping questions. First, what political, if any, did you get in the first quarter? And finally for you, I guess, John, do you have a pro forma revenue and EBITDA number for '03, just factoring in the sale of your radio stations?

Okay. No particular order, political fourth quarter for '03 was approximately $300,000, $317,000. We're pushing $400,000 in first quarter this year, but we do expect most of the political for this year to come, over 75% that have business to come in Q3 and Q4 when the presidential races and the congressional races heat up in the swing states, and some of these propositions come to life in California and other markets. You know, as far as growing our national business, we have seen--absent of January which was off for us, minus pace for us in tv and national; we bounced right back in February, and we're stronger than February in March. And we see phenomenal second quarter pacing in national plus high double digits. We see a lot of the national business coming from existing clients that are increasing their spending with us both in television and in radio.

Last year 2003, I think the number was somewhere around 25% of our tv business and 35% of our radio business was new clients all together. But the overwhelming majority of our business is coming from existing clients that are expanding their budgets with us and expanding the markets that they advertise with us. And we still are counting on, and we're very bullish on the automotive, the telecom, the financial services, and the retailers in 2004 to add dollars to existing markets and add new markets to their existing budgets. So that's where the growth's going to come from. And it looks like it's playing out that way. We just got a slow start in January with some delays in start dates and some delays in receiving creative. And some of the business got pushed to February,;but, again, we're very, very bullish on national as well as local but particularly national to the February and on. And the third part of that question was John's.

Jay, I did the pro forma in my prepared remarks. Basically EBITDA reduced by $800,000, there's very little EBITDA associated with the three markets, the Fresno and Dallas and three stations in Chicago. And the net proceeds are just under $40 million after fees. So that's your pro forma for the sales of those three stations, $800,000 of EBITDA against $40 million of debts.

Did you have anything on the revenue side?

I can give it to you. I'll send them over to you.

Okay.

I'll send you the margins.

Great.

Our next question comes from the line of Lee Westerfield with Jefferies & Company. Please proceed with your question.

Thank you, good afternoon, everyone. I have two questions. First on leverage, you out, you exceeded your targets as far as deleveraging is concerned getting down, I guess now you say to 4.9 times on a pro forma basis. So far as I understand, there are a few acquisitions that are floating, or potential asset sales, that are floating out in the Hispanic marketplace in both tv and radio. What would be the upper bound be if you were to consider an acquisition in terms of releveraging. The second question is cost growth deceleration has been a key theme for you and you've gotten far along here. Setting aside the 3% that could be accounted for from the L.A. radio anniversary, I think there was also part of the cost that had risen last year and with the anniversary this year from the NSI books that you needed to buy for some additional stations. If so could you help us understand when and how much those comparisons come around to ease the cost growth throughout 2004?

First off the last question first. Basically on a pro forma basis our expense growth last year was 9% as opposed to the reported 7%, because as we've said over the course of the year we had the $1.6 million of the settlement with the Entravision reps. So when we say we're going to get down to the 5% to 7% range, that's coming from 9% last year. So that is encompassing a lot of the year-over-year comparisons for the Big City acquisitions; and, you know, we got the books becoming full year over full year. Then there's other expenses that we talked about that we included in future costs, which are increasing news stations or news time periods in various stations. So, long story short on that is we expect to come to about a 5% to 7% expense growth, of which 2% of that is our incremental revenue that we expect over what would be typical English language growth rates; and stay at that level pretty much going forward over the next couple of years. I think that --

As far as our debt leverage is concerned, Lee, this is Walter. As I stated earlier in the -- in our remarks, you know, our debt leverage was down to a 5.4 times by 12-31-03, which is what we told the market we would accomplish; and then John further stated that on a pro forma basis our debt leverage would be down to 4.9 times. As to your question with regards to any acquisitions, we've stated in the past that we want to keep our debt leverage between 5 and 5.5 times and that certainly is the goal and our commitment going forward.

All right. That's fabulous. Thank you very much.

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

Good afternoon. Phillip, January can often be a weird month but I believe Iraq sort of cost you folks maybe about $2 million in sales last year and if you've done maybe $400,000 in political to date and maybe you can get to a million by the end of the quarter, it looks to me like those two factors alone should basically account for almost the increase in your guidance year-over-year in the first quarter.

Well, actually we didn't have the $2 million hit on that Iraq war in March of last year. It was far less than that. And b, to date I said we'll have almost $400,000, but that's pretty much it by March 2nd, we're done; and that's pretty much already baked in that $400,000 as part of those revenue gains. But, you know, basically the way we're pacing today, again, January both local and national, you know, were tough. Tv flat and national off, but we've seen improved pacing each week since mid-January and the same for radio. We got some late starts in January and some pushes, but February's much, much improved and March is even stronger, and second quarter even stronger by twofold than the first, you know, quarter. But we didn't have that big of a drop or a comp as a result of a drop from the Iraqi war last March. A lot of that was made good at the end of March, some of it spilled into April, but it was nowhere near the $2 million number. We'll have to get that for you, but it was nowhere near that. I suspect it was far less than half of that.

Okay. Thank you.

Our next question comes from the line of Alissa Goldwassar from William Blair & Co., please proceed.

Two questions. First I was wondering how much business you had on the books right now versus your goal in tv and radio. And also you've been investing in local newscasts and it sounds like that you've had some early success with the new newscasts and existing newscasts the ratings continue to go out. How you do you reconcile that with the modest local revenue growth you've gotten on the tv side?

Well, answer the first question, regarding pacings to -- and rather than give you goals we'll give you guidance. To the low end of our guidance our tv is pacing at 80%, to the high end 79%. Radio is pacing at 80% at the low end versus 78% at the high end. Outdoor is 90% on the low end versus 89% on the high end. All in we're 81% pacing to the low end of our guidance and 80% to the high end of our guidance.

Yeah, thank you, Walter. And with regards to the question, we have had some great success in launching news, you know, some of us subscribe to the school of thought that as the news goes so goes the station. It's a very, very important element in branding our stations locally, and it gives us a whole different perspective from an advertiser's standpoint point of view in the local market; but, again, I go back to the fact that a lot of our business that typically in general market is regional local, for us it's national. And when we go out and develop one or two new car dealers, for example, the two new Ford dealers, the Ford Dealer Association which comes through the national rep spends three, four times that of the combined two new Ford dealers that we put on the air; and a lot of that in a case like that would be driven by the local sales force end up through the national billing. So you really have to take that and understand that that national local is really, if you were to blend it, would be more on a parity with the general market the way it comes in, is a higher local number and a lower national number. We have had some success with our local news and it has helped us with local advertisers, and political advertisers as well.

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

Thank you. A few questions. First I was wondering if there was any update on the Neilsen or Arbitron methodology changes. Secondly, are you selling for Copa America or would that be Univision, and do you have any color on that?

We're selling for Copa, and we have packages on the streets; we're selling for the Mexican national league games as well. They sell very well for us on a local and national basis. And the first part of the question --

Is there any updates on Neilsen Arbitron.

Our favorite subject. We talk about it daily. We talk with them daily. Weighting by language Arbitron not until 2006. It's been postponed unfortunately. We think it's a very, very important move in terms of methodology, and we do not believe that we will have an accurate measurement of listenership until they weight by language because they have an under representative sample. As far as Neilsen what's new, they're are in parallel with the local people meters here in Los Angeles, they're launching a service, I believe in April, and that means that shortly thereafter the stations here in L.A. will not be able to -- will no longer subscribe to the metered market service because it'll go away. It goes in parallel for about a year, then it'll go away and it will only be the lpm's; and Neilsen is currently testing a new diary.

I believe, don't quote, me on it, but I believe they are sending out in the February survey, as many as of 5,000 of the new and improved user-friendly diaries of the some 30,000 diaries that are going out or more nationally. So we believe that they continue to take steps to improve their sample both on the NSI metered and diary only markets, as well as the national metered sample for the NHTI and NTI; but we still have a beef with them in two or three markets where we are significantly under represented in terms of meters in hispanic dominant households, which hurts us the most. Those that are spanish only or spanish mostly, and when Neilsen does not have an equal number in terms of percent of meters in hispanic homes that are spanish dominant versus the universe estimates-- their own universe estimates it's difficult for us to get an accurate measurement of who's watching. So we're constantly working with them. It's a work in progress.

All right. Thank you.

Ladies and gentlemen, as a reminder to register for a question press the 1 4. Our next question comes from the line of Gordon Hodge with Thomas Weisel Partners.

This is Lauren calling in for Gordon Hodge. Going a little bit more into the political revenue for 2004, can you speak at all about your expectations and how they compare to the political you did in 2000 and 2002?

Okay. I'll take that one. In the year 2000, we had approximately $2.5 million in political revenue. In 2002 that grew to $5.5 million. Last year which really not much to speak of in terms of political year absent the recall here in California was about $700,000. And it's really tough to guesstimate in 2004, we're somewhere between $3 and $4 million. If you had to peg it, if we had to peg a number probably $3.5 million; with about $400,000 of that in already January and February. But it's really going to determine, be determined by whether or not these presidential candidates go into the -- how heavy they go into California and Texas; whether the democrats write-off Texas and the republicans write-off California. We hope that doesn't happen with recent events of the changing governorship here, and that the republicans will come into California and put money behind the Bush campaign.

We are seeing some money from early on here in first quarter. We got money from Lieberman, we got money from Kerry. We got money from Dean for three or four different state primaries, and we do expect some -- we also received some proposition money and some congressional seat races in Texas, Texas in particular. But we do, we do expect to see in California, if not the presidential elections, some local races as well as some propositions which are always heated whenever it involves legalized gambling at Indian gaming casinos, and if that's up on a ballot measure I think we're going to see some advertising from some of the casinos. Hopefully that answers your question.

Yeah. That was great. Thanks. And then also can you talk a little bit about Telefutura and the contribution both in the fourth quarter and what you're looking at from Telefutura in 2004?

Sure. It's still a relatively small percentage of our overall revenue. But it is improving. It's pace is actually a little bit stronger than the Univision affiliates for first quarter and a lot of that is driven on national as well as local. But we have, it's such a new start up for us still that we have -- we've seen-- over a small base from prior quarters we've seen significant percentage increases. But it's system a relatively small percentage of our overall revenue. It's roughly 3%, and we -- but we don't break out the EBITDA for Telefutura versus Univision. It's all together because, frankly, to John's earlier all these stations are operated in existing Univision markets; and we have a lot of synergies and a lot of personnel that are active and running both.

Okay. Thank you.

Thank you.

There are no further questions at this time. I will now turn the call back to you.

Thank you again, everyone, for participating on this call. We look forward to keeping you abreast of our progress on our first quarter conference call in May. Good-bye.

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