Entravision Communications Corp (EVC) 2004 Q3 法說會逐字稿

Welcome to the Entravision Communications Corporation Third Quarter 2004 Conference Call.

(OPERATOR INSTRUCTIONS.)

As a reminder, this conference is being recorded, Thursday, November 4th, 2004. I would now like to turn the conference over to Mr. Walter Ulloa, Chairman and Chief Executive Officer at Entravision Communications. Please proceed, sir.

Good morning, everyone, and welcome to our third 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 morning'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 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.

Once again, our performance in the quarter was among the strongest in the media industry. Our television and radio divisions continue to post revenue increases well ahead of the general market, and our outdoor division has continued to turn the corner in producing positive top-line growth. And most importantly, our operating leverage across our media platforms continues to expand as we convert revenue growth to margin expansion and double-digit cash flow growth.

The results were once again in line with guidance. In the third quarter, pro forma revenue increased 10 percent; pro forma broadcast cash flow increased 20 percent; and pro forma EBITDA increased 23 percent. Free cash flow improved 56 percent to $12.8m. Our television group exceeded guidance with revenues improving 13 percent over third quarter 2003.

Results were driven by advertising revenue growth in top categories, including automotive, services, fast food/restaurants, retail stores, telecommunications, and political. Local television revenue was up 12 percent, and national revenue was up 14 percent in the quarter. We are particularly proud of our growth of local television revenue, as we continue to emphasize and invest in more and better sales training efforts for our sellers.

In the July Nielsen survey, our metered market Univision television stations ranked as the number 1 Spanish language television station in primetime, based on household ratings, and our TeleFutura television stations ranked as the number 2 Spanish language television station in primetime in 5 of our metered markets. In our combined metered markets, our Univision TeleFutura duopolies captured 84 percent of the Spanish language primetime television viewing among Latino households. And in over half of our duopoly metered markets, we topped a 90 percent share of Spanish language television viewing.

Our sales teams are executing and successfully converting our ratings performance into top-line gains. Local news, which is broadcast in 18 markets, continues to be a key driver for our television group, and has seen strong demand from viewers and advertisers. As a newsgroup, we maintained our fixed share among adults 18 to 34, versus July of 2003, making this the number 1 or 2 ranked news program in 10 of our markets.

In addition, we are the top-ranked television station sign-on to sign-off, regardless of language, in 8 of our markets, and in primetime, we rank number 1 in 7 markets in any language.

Our outlook for our television division remains solid, as we have guided 9 to 10 percent revenue growth in the fourth quarter.

Turning to radio. We continue to outpace the industry as we posted a 7 percent increase in pro forma third quarter revenue, compared to no growth for the industry. This increase comes on top of a very strong third quarter in 2003, which had revenue growth of 15 percent. Top advertising categories in the radio division for the quarter included automotive, telecommunications, groceries, entertainment, and restaurants. As in our television division , these gains were driven by our strategic focus on local sales initiatives across our radio group.

In the quarter, national was down 4 percent, but local improved 11 percent. According to the Radio Advertising Bureau, local revenue for the industry grew only 2 percent in the quarter. For the fourth quarter, the radio industry is forecasted to be negative 2 to flat or positive 2. We are guiding 7 to 8 percent revenue growth for our radio division in the fourth quarter.

At the end of last year, we began to implement a monthly sales training program with both our management team and our local sellers. This training has generated increased local revenue in each quarter of the year. In the first quarter, our local revenue increased 14 percent; second quarter saw local radio sales revenue increase 12 percent, and as I noted earlier, sales for the third quarter -- local sales for the third quarter increased 11 percent. The sales training has also helped generate 39 new advertisers in the third quarter. These accounts represent over $1.3m in new business within the quarter.

Across our radio group, ratings in the summer book continue to show positive momentum. As an example, in Los Angeles we continue to deliver impressive ratings for our cluster. In persons 18 to34, our Spanish language cluster increased its share 6 percent over summer 2003. Our morning show on Super Estrella, La Regadera, has seen an increase of 6 percent, and is very competitive day part (ph), year-over-year and currently is the number 3 morning show in Spanish.

On October the 5th, our Los Angeles station, KLYY, Oye!, signed an agreement to be the exclusive home to the prestigious 2006 FIFA World Cup, and to broadcast all World Cup qualifying matches that the Mexican National Team participates in. With the combination of play-by-play coverage of the Mexican National Team, the 2006 World Cup, and Cumbia music, Oye! is now the leading destination for Los Angeles-based Latinos seeking sports and music that mirrors the Latino culture.

On October the 1st, we closed on the purchase of KBMB FM in Sacramento for 17.6m. This strategic acquisition will enhance our existing radio station clusters. Sacramento is one of the fastest growing Hispanic markets in the United States, and KBMB FM is an excellent fit with our 3 existing radio stations in this important California market.

At our outdoor division, revenue was up 8 percent, in line with the high end of our guidance. Top 10 categories for the quarter included entertainment, health, and services.

Outdoor has seen improving business trends since the beginning of the year, and this quarter marks our return to positive top-line growth. New management at the outdoor division continues to work towards enhancing the performance of the division.

Among the changes implemented during the past quarter that we believe contributed to improved results include new sales management in Los Angeles, more effective incentive programs to motivate our sellers, and a continued focus on improving the quality of our diverse outdoor advertising products. Our pacing for fourth quarter remains strong, based on our guidance of 6 to 7 percent revenue growth, and despite the slow first half, we expect to post positive revenue growth for the full year.

In summary, all of our divisions are posting strong financial results, driven by impressive ratings and a focused sales effort. Our television division will end the year with double-digit top-line growth. Our radio division is significantly outpacing the industry, while outdoor -- while the outdoor division has turned the corner. We are successfully executing on our business plan as we capitalize on the growth of the Hispanic market, while continuing to maintain costs. We remain committed to our expansion strategy as we seek opportunities to strengthen existing clusters, and look to enter new markets that fit our growth metrics.

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

Good morning, everyone. It's early out here in California.

I'm going to expand on some key performance areas for our 3 divisions, starting with television. As Walter mentioned, our third quarter revenue for our television stations increased 13 percent, and our BCF for the quarter showed a strong increase of 22 percent. Our BCF margin increased by 4 points, and it was at 45 percent. Our overall performance was driven by both national and local sales, which increased 14 and 12 percent, respectively.

Television revenue was split approximately 50 percent local and 50 percent national. Our local television revenue finished up double-digits in all 3 months of the quarter, while national averaged increases in the high teens during July, and then in September, with single-digit growth during August, due to the Olympics.

Our top advertising categories with the strongest increases were automotive, which is up 17 percent, due to increases from both Ford and GM, and, in fact, 4 of the top 5 auto advertisers had increases of more than 20 percent. Finance was up 16 percent on increases from the banking sector, and retail was up 3 percent over prior year. Telecom, which was up 7 percent, has -- was helped by the new spending from Leap Wireless, and increases from Verizon and Cingular.

Political advertising topped $1.6m in Q3, which was 1.4m net increase over the prior year third quarter political spending, and which contributed approximately 2 points to the overall Q3 TV growth, as an estimated $600,000 to $700,000 in political ads preempted local non-political advertising dollars. The political advertising was concentrated in the 4 battleground states where we participated in Florida, Nevada, New Mexico, and Colorado. Very important Hispanic demographics, coupled with our commitment to political news coverage, and our news rating success, has resulted in unprecedented political spending.

Turning to television ratings, in the July Nielsen survey in the key primetime day part, our Univision affiliated stations also maintained a 5 share among adults 18 to 34. And with the very successful finale of the 9:00 p.m. novella, and the premier of the new novella, Amor Real, last week, we expect our primetime rating success to continue throughout the fourth quarter.

Our local news markets held their average 6 share among adults 18 to34, and ranked number 1 or number 2 in 10 markets. Clearly, the success of our local news is fueling the growth of our top billing stations, as in the July Nielsen survey, we ranked number 1 or number 2 in San Diego, El Paso, McAllen, Las Vegas, and Denver, among adults 18 to34 in early news.

And although our TV stations enjoy strong ratings, results are really what matters most to advertisers. One example of how we were able to deliver results for our clients is in El Paso, where a first-time advertiser on our Univision station, a local Ford dealer, sold more cars in September than in that dealer's -- dealership's history, ranking them as one of the top 50 volume dealers in the country. The dealer attributed their success to their Univision television campaign that month, which was the only television advertising they did that month.

Turning to our radio division, once again we outperformed the market with a pro forma revenue gain of 7 percent, as Walter mentioned. Pro forma BCF in the quarter increased 16 percent, and our BCF margins increased 3 percentage points to 40 percent. Margins have expanded now every quarter this year. Local sales, which represent 76 percent of our total revenue, increased 11 percent. As mentioned, national is off 4 percent in the quarter, but that was compared to a prior year where national increased 29 percent.

Our top 3 categories in the quarter were automotive, telecom, and grocery stores, and the categories with the largest growth within the quarter were entertainment, which increased 50 percent, food products, that grew 57 percent, and retail department stores, which increased 61 percent. An impressive 8 out of the top 10 advertising categories on the radio division increased spending, and 5 of those categories had double-digit growth. Some new advertisers in the quarter included Kevin Jewelers in Los Angeles, Nextel Cellular Phones , and Dannon Yogurt, to name a few.

On the ratings front, we did experience significant average quarter-hour share increases among adults 18 to34 in San Francisco, Dallas, Denver, Vegas, and Albuquerque, all 5 of which are very important revenue-generating markets for our radio division.

Turning to quickly to outdoor. As Walter mentioned earlier, our billboard revenue in Q3 was up 8 percent, and that was in line with our high end of the guidance. New billboard advertisers for the quarter included Energizer, New York Magazine, and Cushman Wakefield. The top 10 categories for the quarter included entertainment and movies, which were up 2 percent, health, which was up over 80 percent, and services, which was slightly off. While rates were generally flat, occupancy did improve during Q3, up from 58 percent to 67 percent sell-outs.

The signs of the continued improvement at the outdoor division is evidence, based on our current pacing, that we're in for a very encouraging and strong fourth quarter.

In summary, top-line revenue growth is strong, and margins are definitely improving, and that trend will continue in Q4 and beyond.

Now I'd like to turn the call over to John DeLorenzo and for financial review.

Good morning, everyone. As Philip and Walter have discussed, we reported pro forma results at the high end of our original guidance. For the quarter, pro forma net revenue was $70m, up 10 percent. Pro forma broadcast cash flow increased 20 percent to $28m, and pro forma EBITDA as adjusted was 23.6m, up 23 percent.

Free cash flow, which we define as EBITDA as adjusted, minus capital expenditures, cash interest, cash taxes, plus interest income, was $12.7m, or 10 cents per share in the third quarter of 2004, up from 8.2m, or 7 cents per share.

Pro forma operating expenses for the quarter increased 4 percent at the low end of expense guidance. In the quarter, 1.3 percent of the increase represents variable expenses such as sales commissions and national representations fees; 1.4 percent of the increase is associated with salary increases, and the remaining 1.3 percent of the increase includes increased expenses for news and rent.

Overall, our margin for the quarter was 40 percent, up from 37 percent last year. TV and radio margins for the quarter were 45 percent and 40 percent respectively, up from 41 and 37 percent respectively. Our margin improvement is a result of increasing revenue while moderating operating cost increases.

Corporate expenses increased 7 percent to 4.4m for the quarter. The increase was primarily attributable to higher legal expenses related to financing to purchase the Series A Preferred Stock, partially offset by lower insurance expenses.

Turning to our balance sheet, as of September 30th, 2004, our total debt was $482.5m, and our trailing 12-month EBITDA as adjusted was 74.4m. Our trailing 12-month ratio of debt to EBITDA was 6.5 times. Cash on the books was 36.8m at September 30th, 2004. Cash was not netted against debt for the calculation of the debt to EBITDA ratio.

On July 6th, 2004, we repurchased approximately 2.5 million shares of our Series A Preferred Stock from TSG Capital Fund III, L.P. for $55m, funded by additional borrowings of $50m under our old bank credit facility, and available cash on hand of 5m. We repurchased the remaining approximately 3.3 million shares of Series A Preferred Stock from TSG Capital on September 30th, 2004, for 73.2m. The amount includes premiums paid to TSG Capital related to the repurchase agreement.

As we announced on August 25th, 2004, we refinanced our old bank credit facility with a new $400m senior secured facility, consisting of a 6.5 year revolver, and a 7.5 year term loan B. We used the proceeds of the term loan B made out of the new facility to refinance outstanding borrowings under our existing bank credit facility, to fund the purchase of the remaining shares of our Series A Preferred Stock, and for general corporate purposes.

It should be noted that the EPS for the third quarter of 2004 was negative 5 cents per share. The pro forma EPS, excluding the $7.3m of costs consisting of additional accretion due to a beneficial conversion and premiums associated with the redemption of the Series A Preferred Stock, would have been a positive 1-cent per share.

Turning to our outlook for the fourth quarter of 2004, we are once again providing pro forma guidance information. With the sale of 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. The combined net revenues and operating expenses for those markets consisted of 722,000 and 569,000, respectively, for the fourth quarter ending December 31st, 2003.

We have also added a radio station in Sacramento, California, and we anticipate adding a radio station in Lubbock, Texas. Because we are currently -- operate radio stations in both of these markets, we are not -- we will not present those stations on a pro forma basis.

On a pro forma basis, based on the current pacings we are seeing, we expect to report fourth quarter net revenues of $65.2m to $65.9m, an increase of 8 to 9 percent. As Walter has noted, our television division is expected to be up 9 to 10 percent, radio up 7 to 8 percent, and outdoor up 6 to 7 percent.

Operating expenses are expected to be 41.3m to 41.4m, an increase of 4 percent. For the fourth quarter, we expect corporate expenses to be 4.2m to 4.25m, an increase 4 to 5 percent. Depreciation and amortization is expected to be between $10.5m and $11m. Interest expense is expected to be between 7.8m and 8.2m. The cash portion of interest expense is expected to be between 7.2m and 7.6m. And capital expenditures are expected to be $4.5m to $5m range. For the quarter, earnings per share is expected to be 0 cents per share. On July 1st, 2004, we exchanged Univision's approximately 369,000 shares of Class U Preferred Stock for approximately 36.9 million shares of Class U Common Stock. As a result, we estimate that the fourth quarter and full year weighted average shares outstanding will be 124.2 and 105.8 million shares, respectively.

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

(OPERATOR INSTRUCTIONS.)

Victor Miller, Bear Stearns.

A couple things. First of all, on the revenue question, what has been, in your mind, the greatest change in the outdoor side of your business to grow the business at a high single-digit rate after suffering through basically a year of seeing, you know, some significant decreases or mild decrease in that business? You know, what has changed so much there, especially in this quarter for you?

And then secondly, on the operating expense side, on the radio side, it was plus 2, and if you really look at the commission -- increased commission expenses you'd have on the kind of growth you had top-line, it really suggests that radio expenses are basically flat. Could you give us a sense of how you're able to accomplish that, and whether that should change, you know, in the fourth quarter? In other words, your operating expenses should be similar by division in fourth quarter as they are in third.

It's Walter. I'll take the first part of the question, and then John will respond to the operating expense question. You know, we've made some material changes in outdoor over the past year, including management changes at the operating level, including the President of the Company, as well as management changes related to our sales effort. In Los Angeles, we have a better and improved sales team, led by the former National Sales Manager of our outdoor team in Chicago. She's a veteran outdoor sales executive, and she's already done a terrific job at inspiring and motivating our local sales team in Los Angeles to produce stronger sales.

I think overall though, we're doing a better job of, across our outdoor platform, of selling our outdoor products. We've made improvements in New York. We've made improvements in Chicago. So, we are very pleased with the results of our outdoor business. But it's been, you know, the result of a lot of work that we've all involved ourselves in.

Additionally, we've done a better job of improving our different advertising products. The maintenance of these -- of our advertising products in Los Angeles and New York has improved. And we think that certainly has also contributed to better sales in outdoor. Again, we've given strong guidance for fourth quarter, so I think that just is indicative of the strength of our outdoor business, and how it will continue to improve in the future. John?

Victor, regarding your -- the operating expenses on the radio, year-over-year the one issue that stands out is the fact that we lowered our rep commission rate. As you're aware, we have LER, which is our national rep, which Entravision owns 50 percent of. We lowered that from 15 percent to 11 percent, and therefore, that attributes to a significant amount of savings that will lap itself in the first quarter of next year. Also, we've been able to consolidate some cost relatives to moving the network together with the Los Angeles radio operation as well. So, they're the reasons basically why the third quarter came in at 2 percent on a pro forma basis.

As far as the fourth quarter, we're going to see lower expenses there as well, because we had a significantly larger amount of expenses last year relative to the move that we did, and the costs associated with the move from San Jose down to Los Angeles for the radio network. So, that's going to be sort of a one-time only in the fourth quarter. And also, the fourth quarter still reflects commission changes. The last item is, in both quarters, third and fourth quarter, is that we are under on the bonus side, you know, due to the -- our expectations of radio from a fledgling perspective compared to last year, on what we paid in bonuses to the radio group. Does that --?

No, that's great.

Okay.

Paul Sweeney, CSFB.

Two questions. First on the radio business in L.A., you know, your acquisition you made there, your -- the additional stations you acquired last year have come on board. I think they've done very well relative to previous expectations, and the ratings seem to be trending right. Is that where you need to be in L.A.? Do you need to own more assets in L.A. to compete against what continues to be a very competitive market from arguably larger players in the market? Or, you know, can you compete effectively with what you have?

And second, on the outdoor business, now that the business is beginning to turn around, could you just update us on how you view that asset, whether it's, you know, something that you'd be looking to keep, or still something that might be considered a non-core asset for you?

On the first question related to radio, Paul, you know, we've got 2 unique formats in Los Angeles. As you know, Los Angeles is over a $1b advertising revenue market for radio. We are very pleased with our performance in '04. We are -- certainly, our progress in '04 is in line with the models that we created when we did the acquisition of the Big City L.A. radio stations. Furthermore, we think that our growth in L.A. radio will continue into '05. And, you know, it's a result of the unique formats, as well as the excellent management team that we've assembled in Los Angeles, led by Karl Meyer, General Manager of our Radio -- L.A. Radio Sales.

With regard to outdoor, I think the question was what is the future? You know, we are all very pleased with the progress of our outdoor business. We've done a lot of work, every one of us, to improve that business, and right now, the focus is on continuing to grow that business. And that's pretty much it.

James Siggs (ph), Deutsche Bank.

A couple questions. First, just regarding political expectations now for the year, now that the election is over, just by segment. I think, Philip, you gave what you've got in the third quarter. Just if you could round out what you expect by segment for the full year? And then just, John, just as a follow-up on the operating expense growth, just if you could provide any color as to what you expect TV and outdoor to grow vis-à-vis the 4 percent overall expense growth? And then finally, any particular growth initiatives we should be expecting for 2005 , especially on the TV side, given, you know, you will be replacing some political?

This is Philip. On the political side, as we mentioned, we topped 1.6m in the third on TV. We had approximately 200 -- a little over $200,000 on the radio side. And for the full year, we just finished, as you know, 2 days ago. For the full year, we're approximately 6.3m on the net for political, which is our best political year ever. That was mainly --.

Is that TV plus radio?

That's TV plus radio. The TV was approximately 5.7m rounded, and the radio was roughly 600,000. Okay?

Right.

And the second half of that question -- the second question was, I think, expense on TV outdoor growth?

Yes. Well, actually there was a third question that you could probably followup on, which was expectations of -- to next year's television growth without the political. And then I'll go into the operating expenses.

Right. Well, we are not giving guidance for next year at this point. But we are confident we can replace that revenue. Now mind you, a lot of this -- a lot is political, particularly in third and fourth quarter with bumping up against 100 percent sell-outs was swapping dollars. A lot of it was swapping dollars with local advertisers that were preempted. So, do we have to replace $6m out of the gate next year? No, we do not.

But we're very confident with our initiatives in place, particularly the strength and the momentum we've seen in our local sales growth, and the teams we put in place. We're very confident in going into next year in terms of our revenue growth. And we're very confident in all of the major key categories, which we've seen success in this year. We've already got things in the works for next year that give us the -- again, that confidence that we will have strong growth into the next year.

Jim, this is Walter. You know, just to kind of add to what Philip has said, you know, we're putting together some aggressive budgets for 2005, like we always -- like we have in the past. We're currently in the middle of that process. You know, we expect to enter 2005 with the kind of growth that we've demonstrated in the past. We think we've done a better job in 2004 in local sales across all our platforms. We think that'll help us with our budgets for 2005. So, we're very confident that 2005's going to be a good year for us.

Great.

James, regarding the operating expenses, as I've always said, we strive to be within the 5 to 7 percent range. But from a practical purpose, we always intend to try to keep our operating expenses, you know, the day-to-day, down to about 4 percent, which is what we -- we have a difficulty to a certain extent because we have a significant amount of growth at high commissions, particularly in television that is complementary to our growth. So, while we're striving to be at 4, the reason why I guided on a long-term basis 5 to 7 is because we always believe that we'll be adding a station.

For instance, into next year, we're going to be looking at the result of adding the Sacramento radio station. That radio station we don't pro forma, for example, because we already own stations in that market. Lubbock is another one. They will add to the expense increases above what we try to keep as the base of 4 percent. So, therefore, we're -- we want to consistently guide 5 to 7. We've been able to keep, you know, in the 4 to 5 percent range over the last 3, 4, or 5 quarters. That's a positive, but when you start pro formaing new stations, it is possible to go above that. And that would be the reason why.

Okay, great.

Lee Westerfield, Harris Nesbitt.

I have two questions actually. All year long, you've stated that one of your big goals was to bring cost growth down quarter-by-quarter. You accomplished that in the third quarter, and at least based upon the indication for the fourth quarter, you would be on track for below 5 percent. Is that -- that meets what you were saying you were going to do earlier on in the year?

My question is this, in the -- specifically in the television business, you will -- you are coming around the anniversaries of a number of expenses on -- that you put in place a year ago, Nielsen and otherwise. Have we fully lapped the anniversary of those 2003 bump-ups in the television cost arena? I'm trying basically to target what sustained cost growth would be in TV. And then I have one follow-up question on the outdoor business in a moment.

Well, I think you've got -- the one -- like I said, the one difficulty that we have in our television business, and that is national continues to grow as it is, it becomes an issue that we continually have to deal with, which is we have a 50 percent commission rate on national sales. And now we have our national sales that are greater than our local sales. So, that will always add 1.25 to 1.5 percent to our overall growth.

The other issue that is a positive, but will hurt our operating expenses -- I don't want to get too complicated, but as you are all aware, we had an MSA agreement with 6 major market stations that Univision owns that we operate. In those stations, we don't consolidate those results into our financial in terms of revenue and expense. It is -- if it's profitable, it is revenue. If it is an expense, our portion of the profit is -- if it's negative, it's an expense. Historically, through the growth of those stations when they were first put on the air 2 years ago, we've accumulated losses. And they've been part of our operating expenses.

So, what will happen is, we convert those stations to a gain. The revenue goes to -- the profit goes to revenue, and therefore, we're lapping against those losses the previous year, which basically have increased losses. So, therefore, that is one thing that we have to lap and get over. But like I said, we don't expect to be any higher than 5 to 7. That's our goal. That's our stated goal. That's where we always wanted to be. So, I would be comfortable at that level.

Okay. That's terrific, because that was certainly one of the outlined goals. And can I turn our attention to the radio side, specifically in L.A. at Super Estrella? If I got the detail right, and tell me whether I missed this, the 18 to34 share was up 16 percent in the summer book, with a number 3 rating in the morning show among Spanish stations? Did I get that correct? And then the logical follow-up here is what, if anything, you're doing especially to promote that for the fall book, and how is the revenue conversion at Super Estrella?

Well, I'll start with the second part of the question first. The revenue conversion from rating success has been terrific all year. Last year, we had substantial ratings improvement in Los Angeles, but we weren't as satisfied with the -- with our conversion of those ratings to revenue as we would have liked to be. But we made some changes in our management team at the beginning of the year, as I mentioned earlier. And we are more than pleased about the way we've succeeded this year in converting our rating success to revenue.

As for the ratings question, our Super Estrella station, KSSE FM, garnered a 4.7 share in persons 18 to34 in the summer book, its highest performance ever. This 4.7 share is 7 percent above spring 2004, and 9 percent higher than summer 2003. We now rank as the number 7 rated station in the Los Angeles metro out of a reportable 50 radio stations, the number 3 Spanish language radio station in the market, and the number 1 radio station in its format. Our morning show, just to highlight that on Super Estrella, which we're all very proud of, La Regadera, delivered a 5.7 share from spring 2004, but up 6 percent over summer 2003.

Gordon Hodge, Thomas Weisel Partners.

A couple of questions. Just curious if you could quantify for us how much benefit you got from Copa America, which, I gather, helped a little bit in July? And then also, at 6 times leverage, I'm just curious what your acquisition appetite is? I mean, are you actively pursuing opportunities at that leverage level? Are you going to pay that -- you know, wait to pay that down before you get more aggressive?

And then lastly, I think, John, you mentioned something about bonuses, and I didn't understand if you said bonuses were under-accrued for the year, and would be trued-up in 4Q, or are they -- of have you trued that up already? I just didn't understand the comment.

I'll answer your last one very quickly, and then we can get into the more revenue-related question. What I'm saying is last year compared to this year, this year's bonuses will be less than last year, and therefore, that's part of the decrease in expenses in radio for third and fourth quarter.

Okay. Got you .

As to the, you know, our acquisition appetite, as you know, we did lever up to do the Big City L.A. Radio acquisition and we have delevered through EBITDA growth throughout the year. With the purchase of the Preferred, we're now at about 6.5, but we do expect to focus on delevering . We want to get back down to the low 5s in 2005. And certainly, that would -- really, our strategy right now is not to get aggressive with acquisitions. We want to focus on strengthening our clusters where we can, but certainly, we're running some pretty strict models in order to justify any acquisition that we might enter into. I think there was a --

If I could just add to that. What we've done historically is we've had the ability historically to net cash against our ratio. Under the new credit agreement,we don't do that. And the cash that we have sitting on the books actually is a half a turn of leverage. So, when we reported the second half, we are -- .

Six --

-- 6 times we (indiscernible) that cash against it.

Okay. 6 --

We see ourselves getting into the 5s very quickly.

Absolutely. Good point, John. There was a question on Copa America, Phil?

Yes. I think the question was how did this impact? Copa America, we did very well. We had sell-outs in the majority of our markets in July. It did help bump our national a little bit there in July. We finished at a plus 20 over the prior year. And it was probably 7, 8 points of that. As I've said, we had -- we came back absent August, where it was a little bit softer on the national side as a result of the Olympics. That blew money off the national table there. We bounced back in September to plus 17. So, it helped. It helped, and -- as does the Liga Mexicana games. But we had good sellouts on the Copa America.

Jim Boyd (ph), Wachovia,

Good morning. What are your thoughts about Clear Channel's announcement to convert perhaps as many as 25 radio stations over to the Hispanic format, as well as the Viacom and Spanish Broadcasting joint venture?

Well,I'll respond to that question, Jim. You know, we expect Clear Channel and Viacom to -- Clear Channel first, to enter markets where there's been little competition in Spanish language radio -- assets, and the opportunity that they have to take a non-performing assets in English and switch it into Spanish; so little impact on us there. Viacom's entry seems to be, you know, more of a large or big market splash for its debut, but it's too early to tell what impact that will have on other markets.

You know, we think that the new entrants , specifically Clear Channel and Infinity, their entry into Spanish language radio, you know, it's going to take them a while, I think, to really understand the opportunities that exist in Spanish language radio. We have the advantage, as does Univision, of getting up every morning and focusing on Spanish language radio only. And we think that certainly is a -- has a great deal to do with our success. But I would say to you, you know, we've looked at our radio portfolio, and so far, we see little impact from the entry of Clear Channel and Infinity into Spanish language radio.

On the other hand, I would say to you that the value of our radio division has increased substantially as these big, you know, gorilla media conglomerates enter into Spanish language radio.

Were there any ad categories, either in Q3, or now in Q4, that were surprisingly weak, or surprisingly strong?

We had a little softness in fast food on the TV side. It was the only category of the top -- the top categories that we mentioned to you that was off a couple of points, single-digits. And we had -- you know, we experienced a little bit of pull-back from a couple of specific advertisers. On TV, for the automotive we had -- which is 27 percent of our overall revenue -- we had very, very strong growth, 17 percent, but we did have a little softness in 1 of the top 5 autos, which is Nissan. And Nissan was in the throes of an agency review, so that can be expected. Wireless was slightly off. Was a little bit surprised; it was slightly off on the radio side. Telecom-wireless was down. And that's about it.

Anything else, Jim?

On both the local people meter and the portable people meter, are there any challenges that you're concerned about at this point?

No, not at this point. Our first rollout for the actual Hispanic are the overall local people meters. Our second rollout, I should say, is not until mid to late next year in D.C. So our markets aren't being impacted in there. They've made tremendous strides, Nielsen has, in terms of the issues that needed to be addressed, in our opinion, so far. There's still a lot of work to be done in the major markets, but they are making significant improvements as a result of that issue they have currently with Univision; so no impact for us until late next year in D.C. And we should see an improvement over our current meter numbers, because that market will be a Hispanic-controlled market at 10 percent.

David Joyce, JB Hanower (ph)

A couple questions. Can you quantify how many of the top 300 advertisers are allocating some ad spend on one of your platforms? You're roughly at half, like Univision has mentioned, or is it something different, a different type of makeup of advertiser?

Out of the top 3, I don't know that they go up to top 300, top 200. But it's roughly half. For the nat, it's the same for us, in terms of how many are active and participating. I will say that we have -- we always have our issues about the level of spending, and how deep many of these major advertisers go in terms of the number of products they're advertising with us. And that's our constant battle in trying to improve the number of models for an automaker, the number of products for a P&G, et cetera; but roughly half.

Okay. And are there any markets in particular where your ad growth was vastly greater than the general market?

We had -- on the TV side, we had phenomenal growth in our Denver market. We had strong growth, even if you factor out the political in Vegas. There are a handful of markets where we way outpaced the general market industry, both in television and in radio. L.A. and Dallas we way outperformed the industry.

Okay.

Keith Foss, Merrill Lynch.

Philip, you mentioned twice, I guess, that the automotive category was up 17 percent, which seems like a phenomenal growth rate, considering that it's a fairly mature category for you. I was wondering if you could talk a little bit about, you know -- I mean, you mentioned GM and Ford being particularly strong, but, you know, how you're able to keep those growth rates going in a fairly mature category, and whether or not any of this business is putting on a full-year basis, and if you can (indiscernible) into '05 in this category?

It's a little difficult to hear the last part of the question. You may be losing your voice, like I am, but related to the automotive on the television side, I did indicate that the increase Q3 over prior year was plus 17 percent. It represents 27 percent of our total revenue for the television division in third quarter. It is our number 1 category, obviously. It continues to grow. We've seen growth every quarter. We will continue to see growth in fourth and on into next year; the reason being is that what I mentioned earlier, I think that we have a long way to go in terms of adding the number of brands, and the number of models within the brand, and we have expansion in terms of markets still to go. An example, in Las Vegas, where we do fairly well with auto dealers, we still only have roughly half of all the dealers on the television station. And we do not have all the dealer associations.

In fact, one of our targets was the Toyota Dealers Association, comes out of Sachi (ph) in Denver. We're working very hard to put them on the air for an annual next year. That account alone will grow the auto business for that market double-digits next year, and we will get them on. That's just one example of many across the country where we're adding -- we're still adding dealer associations, and more models of existing dealer -- nameplates, that is. Unlike general markets that are mature, we are not mature in this category, and we have a lot of growth still to go.

Great. I was wondering if you could give us the fourth quarter political? You gave us calendar year and third quarter, but --

Yes, fourth quarter, all, as you know, in October, 2 days of November, is approximately 2.6m on the TV side, and is just a shade under 300,000 on the radio side -- 285,000. Those are net dollars.

Michael Russell, Morgan Stanley.

Just a couple of clarifications. John, could you just give us the basic and diluted share count for 2004? I think you said 108 million. I just wanted to clarify what that was. And also --

I think it was 105.8. Let me look it up again. It's either 105.8 or 108.5. Hang on. 105.8 will be the full year, 124.2 will be the same as this quarter, and the fourth quarter as well.

And that's common or diluted?

It's diluted.

Diluted. Okay. And do you have a common number?

Well, now we're pretty much -- now that we have the Series A gone, it's pretty much the same number.

Okay, great. And then when you mentioned about the rep firm lowering the fee from 15 percent to 11 percent on the radio side, is there any plan or opportunity to have a similar change in the Univision side, or you're just kind of stuck with the 15 percent?

Well, the Univision side really, I mean, it's obviously high comparatively, but it's all part of an entire package encompassing the 25-year affiliation agreement, which, you know, as we talk about it, is probably the best model in the country to be an affiliate, where you have 24 hour a day programming, and no cash compensation, a 50/50 split. So, it's all part of our entire agreement with Univision. So, I don't suspect that we'll be changing that number.

Okay. And then John, in your 0 per -- 0 cent EPS guidance for fourth quarter, what's the provision for taxes, and what's the statutory tax rate that we should be looking at?

Statutory is 40 percent, and the provision for the fourth quarter that we're looking at is -- hang on one second, I'm digging that one up.

Okay . Maybe just while you look at that, the TV guidance with political being 2.6m, comparisons of 4.6 percent, the fact that you have been so strong in the past couple of quarters against tougher comparisons, what's going on with TV at the core level in the fourth quarter? It would seem like it would -- should be even a little bit stronger than the 10 percent number that you're giving us, given political, given the fact that consumer staples seems to be interested in spending more money in advertising. Just wondering what's going on underneath the hood there?

Well, I think, yes, it will be stronger than 10. That's our guidance, but -- well, 9 to 10. We're hoping that it will be stronger, or at the top. But the 2.6m in political, all October, first 2 days of November, you know, I'd submit to you that close to half of that was swapping dollars and preempting local advertisers, non-political advertisers, and national non-political advertisers. So, it doesn't -- when you do the math, it doesn't represent but half of what it's showing you on the numbers, in terms of the -- of what it represents of our growth. So, we still have very, very strong growth in fourth, and that is helping us in the area of 2, 3 points in fourth.

Because your guidance has usually been, you know, pretty solid, pretty defendable. And so, I guess I take some comfort in the fact that you think 10 percent is a number that could be a little bit more conservative, if I'm hearing what you're saying right.

We're being conservative. We see -- we've had a good October. Obviously, the political has helped that. We've had a strong November. We're still waiting to see. Visibility hasn't changed much. We're still waiting to see what's happening this week and next week with December. We're trying to shore up our national for December, and local looks great. So, we were a little conservative here.

Okay, great.

And in answer to your guidance question, we're using a million dollars in the fourth quarter to get us to 0 cents a share.

Great.

David Miller, Sanders Morris Harris.

A couple questions, and maybe this is appropriate for Philip. You guys continue to see very nice material ratings increases at most of your television stations. Excluding population growth, and all things being equal, do you feel like you've hit the wall there? Is there a case to be made for, you know, sustainable ratings increases, say, into the next year or do you really feel like you've hit the wall on that side of the fence?

And then also, on the radio side, you guys are doing very well with your Super Estrella format, especially here in Los Angeles. The Radio Romantica format continues to work very well. Any plans on any format changes in the new quarter? And then I have a follow-up.

You know, we have had a number -- a lot of competition in the last year, increased competition in -- along the borders and with the introduction of TBS (ph) Becca (ph) in a number of our markets; very little effect. You know, Telemundo, as a competitor, has been struggling at best. They can only improve. Will it impact our ratings growth? Yes. Will we still see ratings growth? Are we confident of that? Are we seeing ratings growth in the overnights in the last 4 weeks? Absolutely. I think it'll moderate in terms of -- vis-à-vis the numbers that we showed in the last year or 2 . But we're still confident, and we're still expecting to see ratings growth on into the future. But it will slow as a result of all these other factors.

As to the format question in radio, David, you know, we don't disclose any format changes that we might employ in our radio division. I'm sure you understand.

Certainly.

That would not be good for us from a competitive standpoint. But that said, we're always conducting research across our radio platform to determine how effective our different formats are performing in each of our markets. So, that's something that we're always doing, and obviously, if we see something, you know, we'll make a change based on that research.

Okay. And then just a follow-up, if I may? Walter, in past earnings calls, and also in one-on-one conversations, you know, between you and I, you know, when I've come over there, you've tended to say, at least rhetorically, that you've always seen Entravision as a TV and radio-centric company, and not a company that is really -- that really considers the outdoor business as core, you know, to your overall philosophy. And yet this morning, and again, at least rhetorically, you seem to be backing off from that, and if -- you know, correct me if I've wrong, recommitted to the overall outdoor business. Am I reading that the right way? Or am I making too much about it?

Well, I think you're making too much about it, frankly. But, you know, I think maybe your interpretation of our remarks is based upon the fact that, you know, about 88 percent of our revenue comes from our broadcast divisions, and only 12 percent from our outdoor division.

Sure.

So, certainly just given, you know, the structure of our Company, the emphasis would be on broadcasting. But we're particularly proud of the way we performed in outdoor over the past, you know, year. As I said earlier, we've done a lot of work to improve our performance in outdoor. It certainly has paid off. We're pleased about our fourth quarter guidance. And, as I suggested, we expect our success in outdoor to continue.

Okay.

David, let me just add to that -- circle back to this ratings issue. You know, even if we wanted to grow our ratings, you know, 1 point, off into the future, we still have approximately an estimated 30 percent gap between where we should be in terms of share of revenue --

Right.

-- versus what we're delivering in terms of audience. So, we've got a lot of great upside. Are we not going to grow our ratings? That's not likely. We're going to grow our ratings, and the population growth is going to help fuel that ratings growth. But we still have that big -- as we talk about -- revenue gap, an upside in this company, and in all 3 divisions.

Okay.

(OPERATOR INSTRUCTIONS.)

Alex Rosenstein (ph), William Blair.

Just had a question on visibility in the fourth quarter, specifically for the TV and radio division. What are you guys seeing? How late is business being placed? Maybe how much of your inventory have you sold, and how does that compare to historic levels?

Alex, we -- as we said earlier, we haven't seen a whole lot of improvement in terms of visibility. Here it is, we have the first week of November, and we're still working on December business nationally, and certainly will be for the next 3 to 4 weeks on local. We are, you know, approximately 86 percent on the TV and radio both, BOB to guidance, mid-range guidance there. And we have about 95 percent of our billing on the books to guidance in the outdoor division. We're seeing relatively strong pacing for the October and November. In December, we're still waiting for it -- again, as we've said, we're still waiting for that to come together on the national for TV. Local is strong. And equally on radio, both local and national are strong.

Okay.

Kit Spring, Stifel, Nicholas.

My question is regarding the less-is-more inventory reduction program that's going on in radio. Just wondering where your inventory is on minutes per hour, whether you think you need to reduce inventory, or whether you can grow inventory? I assume that you're at a much lower level. Then also, what do you think about the potential impact of technology on Hispanic listening as far as TiVo and satellite radio goes? I would assume that would be 2 or 3 years behind the English language population because of lower incomes, but perhaps given the lower age of Hispanics, maybe that's not the case. What do you guys think?

Well, on the question of inventory, I think I understand it. We're pretty comfortable, Kit, with our current, you know, inventory structure. I think we've done a pretty good job throughout the past quarters in implementing strict controls over inventory, and not letting our inventory dilute the impact of our content. So, you know, we allot about 12 minutes per hour for our radio commercials, and that will probably continue.

As for the question of technology, although there may be some impact of these different devices that we've all heard about in the general market, we see very little impact on our business, as Spanish language radio. There's still a lower penetration of these computers, you know, Internet devices, in the Hispanic community. So, at this time, I would suggest to you that the different changes in technology will have little impact on our business, our regular business, going forward.

Gordon Hodge, Thomas Weisel Partners.

Yes, just a quick follow-up. John, I was just curious if you could tell us what the working capital needs were in the quarter?

In the third quarter?

Yes.

What are you looking at, for just a breakdown, Gordon, of the components?

If that's easiest, yes, that would be great.

All right. In the -- let me dig out that page so I can give it to you line-by-line.

It just looked like cash flow from operations might have been a little --.

Yes. I mean, basically, you know, from our view down the line, you know, there's a lot of items. But depreciation and amortization, the add-back, was about 10.4.

Yes.

Interest about 6.7.

Yes

We had a gain on the sale of a (indiscernible) of about $1.5m, and that was related to just a chewing up of our working capital in your end of the deal As we previously reported, we had a book loss of assets of Dallas, the AM, of $240,000. All that comes to almost about 6.7 add-back. Then you have the increase here in Preferred Stock, which is 2.5. Income tax was 3m. And that, you know, they're basically all your --

Well, what about like receivables and payables and stuff?

You know, I don't have that. I don't have the balance sheet right here with me at the moment, but I can give that to you after the call.

Okay. Fair enough.

I know you guys plug that in into your model. So, I'll be happy to give that to you. Like I said, as you know, it's not part of our calculation of working capital, which is the difference between payables and receivables.

Perfect.

But we'll give it to you.

Sounds good. I'll follow up.

Okay.

Mr. Ulloa, there are no further questions at this time. I will now turn the call back to you.

Ladies and gentlemen, this concludes our third quarter earnings conference call. We thank all of you for participating. And we look forward to reporting to you in the new year on our fourth quarter and complete 2004 results.

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