Entravision Communications Corp (EVC) 2004 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Entravision Communications second-quarter 2004 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded Thursday, August 5, 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 second-quarter 2004 teleconference. With me today is Philip Wilkinson, our President and Chief Operating Officer, and John DeLorenzo, our Executive Vice President and Chief Financial Officer.

Before starting the call, I have to inform you that this 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.

Overall, results for the second quarter exceeded our guidance, and patents (ph) for the third quarter are strong. In the second quarter, pro forma revenue increased 8 percent, pro forma broadcast cash flow increased 18 percent, and pro forma EBITDA increased 19 percent. Free cash flow increased 50 percent to $15.2 million. Our television group exceeded our expectations, with revenue growth of 11 percent in the second quarter, matching the 11 percent gain we posted in the second quarter of 2003. Results were driven both by national and local sales, which both increased 11 percent in the quarter. These gains were primarily a result of increases in automotive, banking and finance, retail and product brands. These results were driven by the continued ratings success of both our Univision and Telefutura television stations. In the May 2004 Nielsen survey, our Univision television station group held its 18 to 34 share sign-on to sign-off, and ranked number one or two in primetime in any language, in seven key markets among adults 18 to 34.

Our local news markets increased their 18 to 34 share delivery 14 percent, while ranking as the number one or two newscast, regardless of language, in the their time period in nine important markets.

Our metered markets Telefutura television stations increased their household share 33 percent over May 2003, and our Univision television stations in our duopoly markets maintained their adult 18 to 34 share sign-on to sign-off.

Our sales teams continued to do a great job of transforming these ratings gains into revenue, as we attracted new advertisers to our television stations and further penetrate existing markets. Strong growth trends in our television business are continuing into the third quarter, and as a result, we are guiding revenue increase of 12 percent and broadcast cash flow growth from our television division of 19 to 20 percent. This increase represents substantial core advertising growth, considering our limited exposure to political advertising.

Looking at our rating group, we once again outpaced the industry with pro forma 8 percent revenue growth in the quarter. The radio industry, according to the Radio Advertising Bureau, grew revenue 2 percent in the quarter.

Our impressive revenue growth was on top of the 15 percent growth recorded in the second quarter of last year. These increases continue to be generated by a concentrated effort in each of our marketplaces to focus on local sales.

In the second quarter, national revenue decreased by 3 percent and local revenue increased by 12 percent. This compares to radio industry increases of 3 percent for local and flat for national revenue, according to the Radio Advertising Bureau. Local revenue increased in each month of the quarter. We saw a 12 percent increase in local revenue in April, a 2 percent increase in May and a 25 percent increase in June.

In the just-released spring book, our Los Angeles cluster continued to deliver increased listing shares. In spring 2004, our Los Angeles cluster earned an 8.1 share in persons 18 to 34, our key demographic, up 14 percent over spring 2003. This share increase in this most important demo represents the largest increase in share of any of the major Spanish-language radio operators in Los Angeles.

Our flagship L.A. radio station, KSSE-FM, delivered a 4.4 share in persons 18 to 34, equaling its highest performance ever. Super Estrella now ranks as the number five radio station in the Los Angeles Metro, the number three Spanish language radio station in the market and the number one radio station in its format. Our morning show on Super Estrella, La Regadera, has seen an increase of over 81 percent in average quarter-hour share in adults 18 to 34, year over year, and currently is the number two morning show in Spanish. Our focus on converting ratings gains to revenue continues according to plan in this $1 billion radio revenue market.

Across our rating division in markets for the spring 2004 book has been released, and we are seeing continued ratings momentum. In persons 12 plus, our radio group has seen 7 percent growth in spring 2004 versus spring 2003, and in our most important demo, 18 to 34 years, we are seeing 11 percent share growth over last year's spring book.

Based on current pacings, we are seeing this operating momentum continue into the second half of the year, which is reflected in our guidance for the third quarter, with radio pro forma revenue growth of 7 to 8 percent and radio pro forma broadcast cash flow growth of 15 to 17 percent. The radio industry is guiding 1 to 3 percent revenue growth for the third quarter.

During the second quarter, we closed on the sale of our Chicago radio assets for $28.8 million. This divestiture is part of our declared strategy to exit markets where we do not believe we can build strong clusters.

Finally, at our outdoor division, revenue was down 1 percent, continuing our sequential revenue improvement trend, and in line with guidance. Businesses improved steadily throughout the year at our outdoor properties, and pacings remain strong for the second half of the year. We expect to see a healthy 7 to 8 percent revenue increase in the third quarter, and better than 30 percent operating cash flow growth for the outdoor division in the quarter.

In conclusion, all of our divisions are showing improved topline growth, as we capitalize on rating gains and a strong effort by our sales teams. Our outlook for the third quarter is highlighted by a television group that is group that is posting double-digit growth, in line with its peers. We are benefiting from substantial political revenue, by a radio division that is significantly outpacing the general market and an outdoor division which has significantly improved its performance.

At the foundation of this growth is our commitment to our operating strategy, which is focused on the fastest-growing and most densely populated Hispanic market in the United States. Supported by cost-efficient operating structure, our television group, radio stations and outdoor division are delivering strong operating leverage. We remain committed to our expansion strategy, and continue to explore opportunities to enhance our asset base by entering new markets or strengthening our existing clusters.

Now, I'd like to turn the call over to Philip Wilkinson, our President and Chief Operating Officer.

Thank you, Walter. Good afternoon, ladies and gentlemen. I'd like to cover some performance areas for our three operating divisions, starting with television.

Our second-quarter revenues for our television stations increased 11 percent, as mentioned, our BCF growing a very strong 26 percent. Our revenue growth was driven both by national and local equally; they both increased 11 percent. Our TV margins had significant improvement, to 49 percent from 43 percent prior year. TV revenue came in at 52 percent local, 48 percent national, same as a year ago, and was driven by increases in 8 of our top 10 advertising categories. TV's biggest gain in the advertising categories were automotive, once again, up 15 percent year over year based upon increases from spending from Ford, GM, Hundai and Toyota. And increases were across all of the three tiers -- factory, dealer group and local dealers. Automotive, which represents 26 percent of second-quarter TV revenue, had strong growth, and continues to have strong growth going into the third quarter.

Our fastest-growing category on a percentage basis in Q2 was banking and finance, due to primarily new campaigns from BofA and Washington Mutual. Political spending for TV in Q2 was less than 2 percent of our TV revenue, with presidential candidates and the NDN 527 (ph) activity in five key Hispanic battleground states. Overall, though, the key to TV's second-quarter growth was new business, with several new accounts added, including Advance Auto Parts, National Pork Board, Robinsons-May, Greyhound Bus Lines and a local advertiser in a few markets, Pacific Law Center.

Switching to our ratings performance, our Univision affiliates maintained share in many key demos and dayparts, and as a group we did hold our adults 18 to 49 sign-on to sign-off share from May '03 to May '04. Individual primetime adults 18 to 49 market stories were El Paso, where KINT attained a 3.8 rating, which is its highest May delivery since 2000; in Orlando, where WVEN delivered a 1.1 rating or a 37 percent increase over May '03, and its highest May performance since 2001; and in San Diego, where KBNT delivered a 2.1 rating, an increase of 40 percent over May 2003, and I think that was the second-highest May primetime rating ever for the station.

As a group, our news markets increased, as well, among adults adults 18 to 49. That's the NSI share performance --we were up 17 percent. Individual adults 18 to 49 news stories in some of our biggest revenue markets such as McAllen, where KNVO earned a 5.5 in the early news, its second-best May performance; El Paso, where KINT garnered a 4.5 rating, its highest May news rating since 1998; and in San Diego, where KBNT delivered a 2.0 rating, 122 percent growth over May 2003 and its highest May performance ever.

Note we are focusing on the fact that, based on our current share of adults 18 to 49 audience, we have approximately 30 percent upside to get to our fair share of revenue. So, while ratings are important, we still have tremendous upside.

Turning to radio now for a moment, in our radio division, we posted pro forma revenue gains of 8 percent, significantly outperforming the market. BCF in the quarter increased 14 percent, and our BCF margins for the quarter increased 2 points, up to 40 percent. Local sales increased 12 percent, which represents 74 percent of our total revenue, and national sales decreased 3 percent off a very tough comp second quarter last year, which was up 32 percent.

Our top three categories in the quarter were automotive, grocery stores and telecom. Our category growth was led by grocery stores, which increased 33 percent over the second quarter of last year. Banking and financial services increased 61 (ph) percent, and retail department stores increased 25 percent in spending. In addition, we saw increased spending from telecom, entertainment, fast food restaurants and retail hardware stores, to mention a few.

Our top five advertisers spent 47 percent more than the same quarter last year, and they were led by Bank of America, Lowe's and Verizon Wireless. We were successful in attracting several new advertisers during the second quarter, such as Sprint PCS, Olive Garden Restaurants, Sunkist Orange Soda, and Conoco Petroleum. We experienced audience share increases of 11 percent for all of our properties combined in radio, and in our markets at Arbitron -- those are in our markets at Arbitron, has released data to date. That's spring 2004 versus spring 2003, in average quarter-hour for adults 18 to 34.

Here are some examples of that key demo, which we believe is adults 18 to 34, Monday through Sunday, 6 AM to midnight, in average quarter-hour share. In Dallas, our cluster increased its share to an 8.1 in spring 2004 from a 5.2 a year ago; that's a 55 percent increase. In Sacramento, our cluster recorded an increase of 11 percent over spring 2003, with a 5.7 share. In Vegas, our cluster generated a 5.8 share, and that's up 74 percent over prior year. And again, in Los Angeles, our cluster achieved an 8.1 share among adults 18 to 34, up 14 percent year over year, surpassing the age share point mark for the last two ratings periods.

Now, Walter is switching (ph) the boards, but Walter did cover the billboard division. But I would like to add that, while Q2 was difficult, signs of improvement are evident based on the current pacing trends. In fact, New York is key, because it represents 76 percent of billboard revenue, and national in New York for us is 72 percent of the mix for New York. So with New York national pacing plus 10 percent in Q3, we're very confident in our 7 to 8 percent revenue growth guidance for Q3.

In summary, we have great assets, a great team that is consistently growing revenue while holding expenses, which results in tremendous leverage for the Company.

Now, I would like to turn the call over to John DeLorenzo for our company's financial review.

Thank you, Philip, and good afternoon, everyone. As Walter and Philip have discussed, we reported pro forma results above our original guidance. For the quarter, pro forma net revenue was 68.8 million, up 8 percent. Pro forma broadcast cash flow increased 18 percent to 20.9 million, and pro forma EBITDA as adjusted was 24.8 million, up 19 percent.

Free cash flow -- which we define as EBITDA as adjusted minus capital expenditures, cash interest, cash taxes plus interest income -- was 15.2 million or 12 cents per share, up from 10.1 million or 8 cents per share in the second quarter of 2003.

Pro forma operating expenses for the quarter increased 2 percent. However, included in the increase is a one-time recovery of prior-year expenses of $1 million, in accordance with the terms of an amendment to our Telefutura marketing and sales agreement with Univision. Excluding this recovery, operating expenses would have been 5 percent, at the low end of expense guidance.

In the quarter, 1.5 percent of the increase represented variable expenses such as sales commissions and national rep fees, 1 percent of the increase was associated with salary increases, and the remaining 2.5 percent of the increase includes increased expenses for news, rent and promotions. The pro forma broadcast cash flow and EBITDA increase over 2003, adjusted for the one-time recovery, is 14 percent and 15 percent, respectively.

Overall, our margin for the quarter was 42 percent, up from 39 percent last year. TV and radio margins for the quarter were 49 percent and 40 percent, respectively, up from 43 and 38 percent, respectively. Excluding the one-time recovery of prior-year expenses of $1 million, our overall margin for the quarter was 41 percent, up from 39 percent last year, and our TV margin was 46 percent, up from 43 percent. Our margin improvement is the result of increasing revenue while moderating operating cost increases.

For the second half of the year, we expect operating expenses to increase between 4 and 6 percent. Corporate expenses, excluding a net reimbursement of $300,000 in the second quarter of 2003 for costs related to the merger between Univision and the Hispanic Broadcasting Corporation increased 3 percent to 4.1 million for the quarter. The increase was primarily attributable to higher wages and legal expenses, partially offset by lower insurance expenses.

Turning to our balance sheet, as of June 30, 2004, our total net debt was $314.7 million, and our trailing 12-month EBITDA as adjusted was 70.3 million. Our trailing 12-month ratio of debt to EBITDA was 4.5 times. During the quarter, we closed on the sale of our Chicago radio stations for $28.8 million, and used the proceeds to pay down debt.

On July 6, 2004, we repurchased 2.5 million shares of our Series A preferred stock from TSG Capital for $55 million, funded by an additional borrowing of $50 million under our bank credit facility and available cash on hand of $5 million. Under our revised share repurchase agreement with TSG Capital, subject to the approval of our Board of Directors and subject to entering into a senior bank refinancing transaction of at least 400 million on terms acceptable to us in our sole discretion, we agreed to repurchase the remaining 3.3 million shares of Series A preferred stock from TSG capital by June 30, 2005.

As we announced on July 23, 2004, we currently anticipate refinancing our existing bank credit facility with a new $400 million senior secured facility expected to consist of a 6.5-year revolver and a 7.5-year year term loan fee. We intend to use the proceeds of loans made under the new facility to refinance outstanding borrowings under our existing bank credit facility and for general corporate purposes, as well as to fund the anticipated repurchase of the remaining shares of our Series A preferred stock.

Turning to our outlook for the third quarter 2004, we are once again providing pro forma guidance information. With the sale of the our radio assets in Fresno and Chicago this year, we no longer have broadcasting operations in those markets. As a result, we have provided guidance on a pro forma basis, eliminating broadcasting results from those markets in the prior period, presented so that comparisons between the periods will be meaningful.

Combined net revenues and operating expenses for those markets consisted of 806,000 and 583,000, respectively, for the third quarter ending September 30, 2003. Based on the current pacings we are seeing, we expect to report third-quarter net revenues of $69.5 to $70.2 million, an increase of 9 to 10 percent. As Walter has noted, our television division is expected to be up 12 percent, radio up 7 to 8 percent and outdoor up 7 to 8 percent. Operating expenses are expected to increase 41.9 to 42.4 million, an increase of 4 to 5 percent.

For the third quarter, we expect corporate expenses to be in the range of 4.35 to 4.45 million, an increase of 5 to 7 percent. Depreciation and amortization is expected to be between 11 million and 11.5 million. Interest expense is expected to be between $7 and $7.5 million, the cash portion of interest expense is expected to be between 6.3 and 6.8 million, and capital expenditures are expected to be in the $4.3 to $4.8 million range.

Third-quarter income per share is expected to be negative 3 to 4 cents per share, including $4.1 million of additional accretion expense associated with the repurchase of approximately 2.5 million shares of Series A preferred stock. It should be noted that if we complete the refinancing of our senior bank credit facility in the third quarter, an additional amount of $4 million of non-cash interest expense will be recorded to reflect the write-off of capitalized loan cost for the existing senior credit facility. This will increase the loss per share for the quarter to 6 to 7 cents per share.

On July 1, 2004, we exchanged Univision's approximately 369,000 shares of Class U preferred stock for 36.9 million shares of Class U common stock. Debt to this increase in common stock, we estimate that the third-quarter weighted average shares outstanding will be 124.2 million shares.

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

(OPERATOR INSTRUCTIONS). Victor Miller, Bear Stearns.

When you talk about your radio being up 8 and the industry up 2, can you break down for us what you are seeing -- we are seeing this universally, with all the Spanish broadcasters. Are you seeing of rotation of dollars, do you think, out of general market radio? Are you seeing more advertisers? Is it pricing driven? Are you able now to increase your oversell, your percentage of revenue relative to your percentage of audience? That's the first question, just kind of breaking that down.

And secondly, what is accounting for the acceleration in outdoor from being negative 1 to plus 7 to 8, specifically? And then I noticed you are also suggesting the TV business will accelerate -- modestly, but accelerate -- in the third quarter. Why are you confident on that?

I guess we'll take the radio question first, and then the outdoor and then the television questions. I think there are a few reasons why our radio business is outperforming general market. Number one, our sellouts are higher than in the past. Number two, our average unit rate is up. And number three, as I mentioned in my remarks, we put a greater emphasis on local sales in our markets, and we've been driving local sales for the last 12 months, at least. And we continue to get better at it, and certainly, that is what supported the growth of our radio business in the second quarter, because the national was a minus 3 but local was a plus 12. And then, the plan that we put in place for the growth of our L.A. radio cluster continued to perform at the level that we anticipated when we did the Big City radio acquisition back at the beginning of '03.

As for the outdoor division and what have we done to -- why has that division improved, I think there are a few reasons to support the improvement, actions that we have taken. Number one, we appointed a new president to that division. We consolidated all of the sales management under this individual. We added a new local sales manager in Los Angeles. We relocated our L.A. sales staff with our L.A. radio staff; we think that the outdoor benefited from the exchange of information. We've added new account executives in both Los Angeles and in New York, and accelerated the plan improvement in both markets.

I'm going to turn the television question over to Philip.

As far as TV third quarter, we're having -- we're strong paced (ph). It's a lot of the reasons that Walter talked about in radio are similar to television. Our auto category, which is a big focus for us, has continued to grow. We're pacing up even stronger than where we finished in the second quarter, with the revenue in the auto business. And again, it's been a big focus for us, not just factory and dealer group, but local is a big focus.

Supermarkets, grocery store chains -- Albertson's came in with double the spending so far for third. Telco is back. SBC is back, after a hiatus of 4 to 5 months (indiscernible). But generally, most of all the top categories are healthy, and the pace is very strong to support the guidance that we've given. So just a lot of new business development, and particularly focused in those two big categories of automotive and retail, again.

Walter, what was your sellout rate for radio in the quarter, relative to last year?

The sellout rate for radio in the second quarter? (multiple speakers) percent.

How much?

83 percent.

And then last year was?

79.

Michael Russell, Morgan Stanley.

I was wondering, can you just break down the TV performance, in terms of what ratings growth you saw maybe collectively, and what was pricing and what was sellout?

Well, the sellouts in the television division second quarter were relatively flat, down a point; we were 70 percent this second quarter. The prior year we were 71 percent sold out. It was all pretty much driven on rate, getting a better rate and selling value, which were up. The average unit rate was up about 10.5, 11 percent. And we continue to convert the ratings. We don't typically go book to book, because most books are improvements over the prior year. Sometimes we have an off market, off book. And generally, as a result of where we see significant undercounts or Hispanic in-tab sampling problems, but if you carve those out, collectively our ratings were up. But we typically go on a four-book rolling average, and when you show improvement every year, and we've been converting those into higher rates. So we are pretty comfortable in that 70-75 percent sellout. So it's all about rate now.

I'm just wondering -- on the ratings themselves, there is some growth on a four-book average, but the way you're describing the rate being up 10 to 11 percent doesn't leave room for the ratings to have grown. What am I missing? I'm sorry; I'm confused.

I'm not sure I understand the question. Our cost per point (ph) is going up, even if we are at flat to slightly up ratings. (multiple speakers) point, which is getting us closer to the competitive market rate for what we're delivering in terms of audience.

Okay. I just didn't get the flat to up ratings, but that's kind of what was implied -- because I thought, with the ratings being so strong in news collectively, ratings would have been better than that.

Our news was up, but book to book, year over year, we maintain the same share of adults 18 to 49 in television in sign-on and sign-off.

And one other ratings question. I know your focus is 18 to 34 for radio, but folks at Univision and others sometimes focus also on the 25 to 54. I think that's still a good story for you. Can you give us kind of what would be the share growth -- you said 11 percent for 18 to 34 for the spring books you had reporting. Do you have something similar for 25 to 54?

We don't have that handy. 66 percent of the Hispanic market is under 34 years, and that certainly is -- that 18 to 34 demo in our markets is a demo that we target, particularly given our formats, our young formats. So that's a demo, 25 to 54, that we are not really that active in.

And then last question, for John. On the taxes, your booked taxes actually spiked up a bit. Could you just repeat what you said about the third quarter, and what should we think about kind of your tax rate in terms of cash and book taxes, on average?

Okay. Let me pull back to that. We are looking at -- we run taxes somewhere in the area of 300,000, somewhere 300 to 1 million a quarter. It varies. So it's really all state taxes, the cash taxes. We are not paying any federal taxes. Our tax rate we use in our calculation of our book and taxes (ph) is 40 percent, but on the actual cash taxes, we are looking at somewhere in the area of somewhere between 300 and $1 million.

Paul Sweeney, CSFB.

A couple things. The L.A. radio market seems to be particularly in flux, with a lot of talent moving around, particularly in the morning. You had a great book in the spring with the morning show. I'm just wondering if you've seen any impact since the switch at some of your competitors?

Number two, can we expect any political coming into your business for the remainder of the year?

Number three, the financial services -- some of those financial services advertisers were interesting for me to see come into your business; that's been a tough category for the Spanish media to get into. What are the next big key categories, other than financial services, that you guys would like to target?

Okay. Paul, the first question relates to our L.A. cluster and the success we've enjoyed there. However, our share of listening in the spring book, 18 to 34, went from a 6.2 to a 6.0. So very little impact on our -- and that's our morning show, yes, on Super Estrella, the pop rock format. So very little, if any, impact on the changes that took place in Los Angeles as a result of Ranan (ph) moving over to KLAX from KSCA. So we continue to drive the rates at our radio stations. We've got a very strong position in the market, with our pop rock format, and continuing to have great success in Los Angeles.

As far as (technical difficulty).

What do we see coming in the back half of the year?

Back half of the year -- we are probably looking at maybe another $1 million of revenue in political.

We are still on target for what I believe we mentioned to you, 2.5 to 3. We may have modified that a little bit, pushed it up to 3 to 3.5 in total political revenue for the year. The first half of the year, the first two quarters, about 1.4 million of that is in. So you can take it from there. But, as I mentioned earlier, it's less than 1.5 points -- most of it was on TV in the second quarter, and that's less than 1.5 points of the 11 percent growth.

I think the third part of your question had to do with finance and backing and the success that we've enjoyed in that category, in both television and radio?

Exactly. It's kind of a new category for the sector.

Right. I think it's just an indication of how advertisers continue to learn more about the Hispanic market, and continue to become more sophisticated about the characteristics of the market. And I think we're going to see other categories grow in our business. Pharmaceutical, for example, is a place where -- it's a category that we haven't seen a lot of business from. But I'm sure Philip will have some other comments on (multiple speakers).

It's a good question. Kind of a subcategory to the bank and finance, and has helped grow this business for us, in addition to the campaigns from Washington Mutual and from BofA. We also have seen a great deal of activity on the western side of the United States, in our markets with mortgage and home lending -- interest rates for home lending. So that has helped fuel that.

But we also look at -- besides the pharmaceutical that Walter mentioned, another good category that we have looked at, in addition to the auto and retail targets, is healthcare. We're trying to do a better job with clinics, hospitals, chiropractors, dentists -- the entire health-related care field is a big focus for us, and we've had some decent success.

Jim Boyle, Wachovia Securities.

Philip, when you look at your station's power ratio for just Hispanic TV ad budgets alone, versus your typically trailing competitors' power ratio, does it look like the advertisers are somewhat subsidizing your weaker competition by giving them a higher percentage of Hispanic budgets than they deserve, given their audience ratings?

No. I think more of it is the general market stations that are over-indexing what they deserve vis-a-vis revenue share to what they deliver in an audience. And it's a catch-up for Spanish-language media; it has been since I got in the business -- Walter and I got in the business 20-something years ago.

But we run power ratios off of four-book rolling averages -- the best market data we can gather, in terms of the total revenue in the market, from Hungerford or Miller Kaplan. And unadjusted, there's still that big CPP gap, 25-30 percent. Adjusted, it's much greater than that. And of course, I feel we need to adjust it, because of the undercount that Nielsen does and Arbitron does.

But it's more of the general market stations getting more than their fair share than it is some of our competitors getting a bump above their fair share.

And would you happen to know roughly what percentage of revenue -- and not (ph) your TV or radio both -- came from new advertisers, new ad clients?

Good question. Typically, we run about 30 percent, 30 to 35 percent new business, and then the balance returning. And we do have some -- unfortunately, like most of the media, we have mid-20's in attrition. So it roughly runs about one-third new business; that's historical.

And has that changed much in the last two years?

No. We have been doing -- because we have been getting incremental dollars from returning clients that we don't necessarily categorize as new. And we've been doing a good job of new business in and around that third of the revenue. So that hasn't changed much, I would say, in the last year. But we will definitely look at it and try to get you a tighter number, if you need it.

And John, finally, last Q2 last year, you did about 48 percent EBITDA to free cash flow conversion. You did about 61 percent this Q2. Is there sort of a target or range for your EBITDA free cash flow conversion?

No. I think, particularly, there will still be certain events that's going to skew it. For example, upon closing this new bank deal, we will be converting a pick (ph) preferred into senior debt, which will obviously reduce free cash flow; it will be current pay (ph) as opposed to pick. But on the other side of that, it will be accretion. An 8.5 percent pick against our senior rate, which is expected to be somewhere around 3.5 percent at today's rates. So a significant accretion by converting the preferred to the senior bank, but it's adding an additional $125 to $130 million to debt on a current per-pay basis.

But on a general, aside from that specific event, I think basically we keep our CapEx pretty steady at 16 to 17 million. Sure, there's going to be digital over the next three or four years (ph) an additional 17 million. But that stays pretty steady.

We talked about the interest. We're not paying cash taxes, so really the conversion rate will be completely about how much we increase our EBITDA, because the other factors pretty much stay pretty close to the same.

James Dix, Deutsche Bank.

A couple questions. First, you commented a little bit on the difference between national and local growth in the second quarter on the radio side, and mentioned the very tough comp you had from second quarter of last year. If you could just remind us of what the comps were for the third quarter of last year in national and local, on the radio side, and just generally to what extent do you think the difference between your national and local growth represents underlying trends, versus just different comps for national and local?

We'll have to get that information for you on the third-quarter historical. But the national -- or, I should say, the revenue for the third quarter, the pacing is similar to second quarter, with local being stronger than national. And we've kind of seen that throughout the last couple of quarters, where our local is -- we're continuing to drive local, and national is sluggish.

And just with regard to either TV or radio, are there any particular local markets where you see Hispanic media gaining more share than others? I'm not talking specifically about your clusters, but just markets where you seem to see that Hispanic operators on the TV or radio side are gaining a lot of share.

James, just real quickly, some of our fastest-growing markets, that we were chipping away at general market dollars and overall TV share, are in markets that are real opportunity markets for us, like Orlando, Tampa, Denver, Vegas, Monterey, San Diego. So I don't think you can point to any given region of the country; I think it depends on a lot of factors, but we've had great, great success in a lot of our what we call midsize markets on the television side, and we're experiencing the greatest growth there.

And on the radio side, I'll let Walter mention, but we've had great success, of course, in Southern California.

We've had strong growth in our radio group in Los Angeles and Dallas; certainly, those two markets stand out with exceptional growth.

Back to your earlier question, James, the third-quarter 2003 results were as follows -- we grew national 29 percent in that quarter and local 11 percent. I'm talking about radio.

Right, right, right. I just have two other things. Philip, you mentioned that typically like on the TV side there is roughly a 20 percent attrition rate for advertisers on a year over year. Do you have any sense as to how that compares to general market operators, whether that's higher or lower?

Well, we operate a couple of general market (multiple speakers) and it's similar, to mid-20's, 25 percent attrition. I think, if you went historically the last four quarters, it may be 22, 23 percent. But the last three times I looked at it, it was in the mid-20's to low 20's.

And finally, I guess, maybe for you, Philip, as well -- do you have any sense as to where we are going to finally end up went local people meters get rolled out to more of your markets? Do you have a sense as to like what the timing is? Right now, they are rolling them into Los Angeles. But where do you think that's ultimately -- what you think the impact is ultimately going to be on Spanish-language ratings versus general market?

Well, we were the first Spanish-language TV station or group to sign up in Boston, where the meters -- we were not actually shown any numbers whatsoever, didn't even meet the minimum reporting standards in the unassigned metered market. As you know, a year and a half ago it switched to an LPM market, the first one of its kind that Nielsen introduced to the LPMs. And you know, the results have been fairly good. We're doing 1's where we weren't doing any ratings prior to the service.

Today, the L.A. service launches without an assigned parallel (ph), meaning LPMs only -- the only service here in Los Angeles. I think Chicago and New York are in parallel for another month. But we don't have a market that will be affected until the middle of next year. The next launch for us where we operate television stations is DC, so it's quite a ways off.

I think fundamentally we believe it's a better service, a more accurate service. The problem has been -- and I don't want to comment too much on it, based on the current situation. But the problem has been getting the sample right and getting an accurate, representative sample with all the characteristics that Nielsen looks at that go into that sample. And the hope is that they will continue to improve the Hispanic sample, in particular, and make it a much more accurate representative service by the time they get to our next market, which will be the middle of next year in DC.

Recognize that the only data I've looked at recently in this market -- Spanish-language Univision affiliates still is number one in all key dayparts and demos. But I think that it's a work in progress, and it's improving.

Lee Westerfield, Harris Nesbitt.

I've got questions on the radio and then the outdoor division to follow up. I want to drill a little bit more deeply, following Paul's question, on the L.A. radio market and also on Dallas. At Super Estrella, the 18 to 34 year olds, and if you could refresh me again, where did you stand in the spring book on 18 to 34's? And very specifically, at the morning show La Regadera, was that the source of all gains, or were other dayparts strong as well? And following that, do you see anything in the trend books that affect the morning show outlook going forward?

El Gato in Dallas was number one in winter in just about every demo you could look at. How has the revenue conversion been there? And then I'll follow up with a question on outdoor.

The rating results in the spring book in L.A. were very good. We increased our share from spring '03 to spring '04 28 percent. We increased our share 18 to 34 or 35 (ph) percent over the last survey. The conversion of our ratings to revenue continues as we planned. We had an excellent quarter in Los Angeles, so we're very pleased with the way Los Angeles has performed, and particularly the success of Super Estrella.

The morning program, La Regadera, I believe I said earlier we were up 81 percent in ratings in that program, and that is now the number-two Spanish morning program in the market. And of course, your morning program is what sets up your day. So all of the dayparts have benefited from the strong morning show that we are currently producing in Los Angeles.

As far as Dallas is concerned, we did have an excellent book in the winter book in Dallas. Our ratings have slipped slightly with El Gato in the spring book from winter, but our revenue is exceptionally strong. Our revenue growth is exceptionally strong in Dallas as we speak.

And then in outdoor, as I recall -- and refresh me on the detail if I'm mistaken -- there was the New York municipal contract component that left your outdoor division. When does that anniversary occur, and does that account for some of the growth characteristics you're seeing in outdoor at this stage?

That was the second and third quarter of last year. That was right after the budget crisis of New York, which I think was last summer, is when they pulled that advertising.

Right, right. Yes, it was second and third quarter and some of fourth. As I said earlier, I think it was Victor that asked the question, we attribute the strong performance in our outdoor division to a lot of the changes that we've made in outdoor over the last six months. Certainly, the New York economy is strengthening continuously after the events of 9/11. So that probably has also helped our outdoor business, but I think a lot of it is internal, the changes we have made to improve the business.

Congratulations again on the Dallas and L.A. radio. Well done.

Keith Fawcett, Merrill Lynch.

I was wondering if Copa America was a bit of a windfall for you in July, and if your TV pacings have sort of held up in August against Telemundo's Olympics?

The question was revenues related to Copa? Both ratings -- ratings did extremely well. In revenue, we did sellout, we did well. We gave up a lot of inventory as a result, regularly schedule programs. So we're really didn't gain on the inventory side.

So you think on a program-preempted basis that it was not really sort of much of a lift on revenue in the month?

Correct. We had a little bit of a bump, but not much, because we were giving up so many avails (ph) in regularly schedule programs that it superceded.

And then the second half of that question --?

-- was whether or not August had sort of held in, whether or not you're seeing any dip due to the Olympics on Telemundo?

Olympics is out there, with NBC and Telemundo -- much more, probably, as a result of NBC's revenue gain from it. It does affect the national business; it takes money off the table -- both in English and in Spanish. And we have high-teen growth in national in both July and September, but not in August. Our national August business is single-digit growth on national for the month. So I've got to believe that is having somewhat of an impact, but we have overall, on a blended three-month third-quarter pace, we are in midteens. So we're in great shape.

You know, Keith, as Philip said, the Olympics always take a lot of money out of the market. I think we all are challenged by it in television. But, given our third-quarter guidance of 12 percent and the diversity of our television group, it's an indication of how strong a television group we own and operate.

Absolutely. My nefarious question is actually whether or not I should be using a higher number in the fourth quarter because of the Olympics, but I'll leave that up to my calculator.

In terms of the pro forma balance sheet, your net debt of 315 -- do I simply have to add the -- I think you had mentioned, John, 125 for the preferred retirement to get to a 440 --?

That depends on whether we close the deal. We did borrow an additional $50 million to take out 2.5 million shares versus about 43 percent of the total TSG preferred. And that (indiscernible), so that will move into total debt, where it wasn't before, because it was preferred.

I guess S&P just rated your facility, right? So it sounds like it's close to being a done deal?

Yes. It obviously has other ratings (ph) before we can go out and market it, and we're in the process of marketing it right now. It's doing (ph) very well. I heard today that our Term B is almost three or four times oversubscribed, so we are on our way to getting that deal done.

However, we have a (indiscernible) Term B that is available to us until April 1st to take out the remaining TSG preferred. So I wouldn't assume that we would take out the rest of the preferred in the third quarter.

Not even with the positive carry?

It all depends. We are looking at our cash availability, and our covenants, potential acquisitions -- nothing serious that we are looking at, but we are looking at a couple of things, so we have some flexibility there. Certainly, if that's the best use of our capital, we will do it that way.

Gordon Hodge, Thomas Weisel Partners.

I'm all set. Thank you.

Kit Spring, Stifel Nicolaus.

You guys have strung together a couple good quarters of operating leverage, with revenues exceeding expenses by a fairly wide margin. Do you anticipate having to do any unusual reinvestment into any of your stations, either on the radio or TV side over the next six to nine months?

We guided -- I tried to give an indication in my remarks that we would be somewhere between 4 and 6 percent between now and the end of the year. And certainly, that's baked in (ph) a little bit of reinvestment. But we don't expect any variations of any great significance there, no.

And now is your news doing versus Telemundo? Have they made any inroads at any of the local levels there? Are you still maintaining a very strong new share?

Our new share continues to be exceptionally strong in all of our news markets. The Telemundo news that we compete against in our markets is not very strong.

Philip, do you have anything to add to that?

No, that's very accurate. Our share is over 80 percent of news viewers in Spanish-language TV -- not in aggregate, but very successful in all of our markets.

Alissa Goldwasser, William Blair & Co.

I just wonder if you could explain what gave rise to the $1 million recovery related to Telefutura?

As you know, we have what we call our MSA agreement, which is where we operate Telefutura stations in six of our markets that are owned by Univision. That's where we have Univision stations, so we operate those stations on their behalf. We have a profit-sharing situation with the Telefutura stations. Historically, we've recorded the profit share based on cash revenues less (indiscernible) accrued expenses to come up with a profit, and we split it.

As we mentioned before, we're in the process of reinventing the affiliation agreement, most notably to extend that to coincide with the life of our Univision affiliation agreement. And part of that process is converting, just for simplicity's sake, the cash receipt portion of the formula to an accrued revenue (ph), so that we can monitor stations on the same basis that we monitor our Univision in the market. So this is a one-time catch-up to convert from cash receipts basis to accrued revenue basis, and it came out to $1 million, and we instituted that change in the agreements this quarter coming up (ph) -- this past (ph) quarter.

Bill Meyers, Lehman Brothers.

John, as you look out sort of three to five years, where do you expect your margins to be across the various divisions?

You know, I typically say that broadcast-wise, we should be at 50 percent broadcast, meaning television and radio. And we expect to get there in outdoor just by nature of the business.

And then that would be within three to five years?

Yes.

Randy Parrish (ph), ING Investment Management.

Just a quick follow-up. On the preferred issue, do you currently have room under the restricted payments test in the bond indenture to take that out, or is that something -- I know you have until April under the finance bank facility --

We have room right now.

(OPERATOR INSTRUCTIONS). David Joyce, JB Hanauer.

Two question. Related to that margin question, what is the current range of your BCF margins across your markets? Are all of them BCF positive yet?

Are all of the markets BCF positive? Well, we don't go out and give individual market results. The answer is no; there are some markets that are not BCF-positive, but the majority are. They range from, as you see in our presentation, from somewhere less than 20 percent margins to somewhere over 60 percent margins. But across the board, our radio margins are in the mid-30's range, and our television margins are in our upper 30's range, sometimes. I think we just popped over 40 now in television.

Almost all of our stations for TV and radio are BCF-positive. Maybe there is one out there that's not, one or two, but (multiple speakers) are BCF-positive.

And kind of a bigger-picture question. Some of the shock, perhaps, to the radio industry this year was the strengthening of some other localized advertising mediums, such as cable interconnects and Internet advertising. What sort of impact have you seen from incremental competitors like that?

Very little, particularly in our demographic. But generally, I haven't heard effect (ph). There's a lot of speculation about it, but I haven't heard much of even satellite radio, if you want to add that to the list of items that could be competing with radio. But we haven't seen it. I don't hear much in the general market, either.

Gentlemen, we have no further questions at this time. I'll now turn the call back over to you.

Thank you, operator. Thank you again, everyone, for participating on the call. We look forward to meeting with you again on our third-quarter teleconference.

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