Entravision Communications Corp (EVC) 2004 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to Entravision Communications Corporation's fourth quarter full-year 2004 earnings conference call.

[Operator Instructions].

I would now like to turn the call over to Walter Ulloa, Chairman and CEO of Entravision Communications. Please go ahead sir.

Thank you operator. Good morning everyone and welcome to our fourth 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 the list of those risks and uncertainties that could impact actual results. In addition, this call is the property of Entravision Communications Corporation. Any redistribution, retransmission or rebroadcast of this call in any form without express written consent of Entravision Communications Corporation is strictly prohibited.

Results for the full year and quarter for Entravision Communications were among the strongest in the industry. We closed the year with an impressive fourth quarter in which all three of our divisions exceeded guidance on both the top and bottom lines. Our full year pro forma revenue increased 10% to 258.4 million, pro forma broadcast cash flow increased 21% to 96.7 million and pro forma EBITDA as adjusted increased 21% to 79.9 million. Free cash flow for the year improved 65% to 38.9 million.

Our television group continued its strong performance in the fourth quarter, exceeding guidance with a revenue gain of 15%. Results were driven by continued growth in our top advertising categories, including automotive, retail services, fast-food restaurants, and political. Although political advertising accounted for only about 2% of Entravision's total revenue in 2004, the Latino vote continues to play a significant role in our nation's presidential election.

As a company, we generated over $6 million in political revenue in 2004 across our media platforms as the political industry expanded their targeting of Hispanic voters. This $6 million expenditure resulted in a 600% increase in political revenue for Entravision over the 2000 presidential election cycle. As a result of the increase in political advertising across the Entravision television and radio stations and other Spanish language media, the Latino voter turnout accounted for 7.6 million votes or a 26% increase in Latino voter turnout over the 2000 presidential election.

In the fourth quarter, we recorded improvements in both local and national television revenue of 13% for local revenue and 18% for national. For the year, total television revenue was up 12% with the local revenue up 12% and national revenue up 13%. Broadcast cash flow for the television group increased 29% in the fourth quarter and 24% for the year. Both our national rep from Univision and our local sales team are doing a outstanding job as they continued to focus on penetrating existing accounts and bringing in new clients.

Ratings continues to remain solid across our television station group. Results in the November 2004 survey showed that we again maintained our 18 to 34 primetime share and in nine of our markets are ranked number one or two primetime television station regardless of language.

Our local news also continues to perform. In 10 news markets, we ranked as the number one or two early local news regardless of language in their time period. Our late local news continues to contribute to our growing news presence. In seven news markets, we rank as the number one or two late local news regardless of language.

Our media market TeleFutura affiliates continues to steadily attract a targeted growing audience. In prime time, these station's increased in November 2004 household share by 25% over November 2003. Our revenue from our TeleFutura affiliates group continues to prosper in 2004 with a 43% increase over prior year. Although this contribution to revenue is relatively small when compared to our overall television revenue, it is an important source of future growth for the company.

In December 2004, we entered into an agreement to acquire television stations in South Texas and Laredo. We expect to close on this transaction in the next couple of weeks and launch TeleFutura affiliates alongside are dominant Univision's affiliates in these two important border markets before the end of the quarter. With the launch of these two TeleFutura affiliates, we will operate Univision, TeleFutura duoplies in 18 of our 23 television markets.

Also in the fourth quarter through our Mexican partner, we entered into a transaction to acquire XHRIO-TV, Channel 2, a full power V television station serving the northern cities of Matamoros and Reynoso Mexico and the McAllen-Harlingen-Brownsville, South Texas market. Our Mexican partner expects to close on this transaction early in the second quarter. Our staff in South Texas will manage the marketing and sales for this new television station, and the programming will be strategically focused on capturing more revenue for our existing powerful media cluster in the ninth largest Hispanic market in the nation.

Our radio division also had an incredible year. We significantly outpaced the industry, recording a 11% increase in pro forma revenues for the fourth quarter, an impressive performance considering we had revenue growth of 15% in the fourth quarter of last year. For the full year, pro forma revenues for our radio division increased 9% while the industry grew 1.8%. Broadcast cash flow for our radio division grew 24% in the fourth quarter and 20% for the year.

National took a turn in the fourth quarter, being up 4% as well as having our strong local performance continue as we posted a 13% increase. For the full year, our local revenue increased 13%, as we continue to see the benefits of our sales training initiatives. As part of this initiative, we recently promoted Gene Bryan to President of Lotus-Entravision reps. and hired Brian Reed as Vice President of Sales. These two executives will strengthen our sales effort on both the national and local sales front.

In the fall 2004 book, we extended our positive share performance for our radio group. In persons 18 to 34, our share increased 5.5% over the fall 2003 book and an impressive 9.3% over the summer 2004 book. During the fourth quarter of last year, we began the restructure of our programming department, which included the conversion of 10 radio stations, the promotion from within the company of two proven individuals to strengthen our programming management team, and the completion of the agreement to launch the acclaimed El Cucuy de la Manana on our Tricolor Mexican regional radio station.

We began our restructure by converting a total of five stations to the Super Estrella format. These include stations in El Paso, Phoenix, Denver, Sacramento, and Palm Springs. We also converted a total of 5 AMs and one FM station to a Spanish-language talk format through a network affiliation agreement with Radio Visa (ph)

In January, Nestor Rocha began his new role as Vice President of Programming. He oversees all programming and promotion for Entravision Radio's 55 radio stations nationwide. He is a member of Entravision's radio programming team since 1992. Mr. Rocha is one of the programming masterminds behind the creation of Entravision radio's innovative format; specifically Super Estrella, which was launched in the Los Angeles market in 1997.

On January 31st, we began broadcasting Renan Almendarez Coello's El Cucuy de la Manana on 13 of our radio stations. This also marks the return of El Cucuy de la Manana's program in Dallas, Phoenix, and Las Vegas, where his program was the number-one morning show in Spanish. We obtained the rights through a three-year network affiliation agreement with ABC Radio Networks. Mr. Coello emerged as a bonafide Spanish language radio star in the late 1990's and is known for both his witty comedic banter and his ability to attract support for a variety of causes. Additionally, we announced that Carlos Napoleon Sanchez has been appointed Format Director for the Radio Tricolor Network. Mr. Sanchez brings more than 12 years of Mexican regional radio programming experience to bolster that format.

This we closed on the purchase of KAIQ-FM in Lubbock, Texas. This strategic acquisition will enhance our existing radio station and television cluster in this market. Lubbock is a fast-growing Hispanic market in the United States and KAIQ-FM broadcasting our Super Estrella format is an excellent complement to our existing radio and Univision affiliates.

The strengthening of our radio programming department by solidifying an exceptional morning talent on our Mexican regional format Tricolor and the expansion of our Super Estrella format has created positive energy and momentum for our radio division in 2005. We believe the restructuring of our radio division will result in increased listenership that will lead to stronger revenue growth through 2005 and beyond.

At our outdoor division, we had a terrific second half of 2004 as we returned to top line revenue growth. The fourth quarter revenue increased 8% after a 8% increase in the third quarter. As a result, we posted positive revenue growth for the year.

Looking back at 2004 as a whole, we experienced a significant upturn in momentum during the second half of the year in our outdoor division compared to the first half as revenue during the second half was up 8%, while revenue during the first half was down 3%. We attribute our improvement in outdoor to several factors. In the first half of the year, we replaced the head of the division and sales management in New York, Los Angeles, and Chicago in order to execute a more aggressive and disciplined sales strategy throughout the division.

We also initiated a maintenance program during the first half of the year to significantly upgrade the presentation quality of our poster inventory, which resulted in more advertisers accessing our 80 and 30 sheet posters to promote their products. And we experienced an overall improvement in the national advertising market in both New York and Los Angeles in the second half.

Looking to 2005, we see the momentum in outdoor created during the second half of 2004 continuing as both local and national pacings for the entire year are showing significant improvements compared to last year.

In summary, we had an excellent 2004. Our television division posted impressive returns versus the industry when you consider our limited but growing exposure to political advertising. Our radio division significantly outperformed its industry and as our sales force continues to convert ratings into revenue. In outdoor, we finished with positive growth for the year.

The operating momentum we capitalized on last year is continuing into 2005. As a result, our guidance for the first quarter shows solid revenue growth across all divisions. Television is expected to grow 7% to 8%, radio 10% to 11%, and outdoor 6% to 7%. As we control costs and leverage our operating infrastructure, we believe these top line gains will continue to deliver increasing amount of cash flow.

We remain focused on the implementation of our strategic plan as we capitalize on the growth of the Hispanic population in the nation's fastest growing and most densely populated Hispanic markets. In addition, we continue to look for opportunities to expand our footprint and strengthen our existing media clusters. Now I would like to turn the call over to Philip Wilkinson, our President and Chief Operating Officer.

Thank you, Walter and good morning everyone. I'm going to expand on a few key performance areas of our three divisions and I would like to start with television.

Our fourth quarter revenue for our television stations increased 15%, and BCF in the quarter increased 30%. For the full year, revenue increased 12% and BCF was up 25%. Just as impressive, our BCF margins for the year was 44%,a very strong margin increase of five percentage points over the prior year.

Results continue to be driven by both national and local sales, which for the quarter increased 18 and 13% respectively. For the full year, national was up 13% and local was up 11%. Our top advertising categories in the quarter were automotive, retail services, and fast food. Automotive grew 22% due primarily to increases-- increased spending from Ford and GM and retail was up 14%. Services were off two percentage points mainly due to the hiatus that many law firms take during political windows. And fast food restaurants were up 7%. That was driven by Jack In The box and Subway.

Fourth quarter new business included Circuit City, Long Drugs, Levi Strauss, to name a few. The largest dollar increase came from the automotive category once again in 2004, which increased spending by over $5 million as a category. Banking and finance saw the strongest percentage increase over prior, it was up 35% over 2003 through spending by banks and mortgage brokers.

Political advertising for the quarter was $2.6 million, bringing our total, as Walter mentioned, for the year to $5.7 million for TV. Approximately 90% or $5.1 million of that annual political revenue was spent in six markets Albuquerque, Orlando, Vegas, Tampa, El Paso and McAllen. We are mindful that of the $2.6 million in Q4 political revenue only 50% of that was incremental as the six markets experienced 100% sellouts in month of October and the first week of November and therefore bumped over $1 million in local and national advertising revenue. So ex political -- incremental political, Q4 increased 11% and was up 10% for the year, again, ex-incremental political.

Turning to our ratings in our November survey for television. In the important primetime day part, several markets that deliver outstanding adult 18 to 34 audiences were the following, KLUC in Albuquerque garnered a 13 share, ranking number one in the market regardless of language and tied its actual highest November delivery ever. In Orlando, WVEN did a six share enabling the station to enjoy the highest November audience delivery that it ever had. In Corpus Christi, KORO captured its largest November audience ever with an outstanding 13 share. KBZO in Lubbock benefiting from our investment in stronger KVER in Palm Springs again ranked number one in the market regardless of language as its 30 share ties its largest delivery ever.

Most of our early local news markets continued their success in growing their adult 18 to 34 year-old audiences. Examples are in El Paso, we had a 19 share, which ranked number one in local news and its time period, and allowed the station to capture its largest November news viewing audience since 2001.

In Las Vegas, KINC experienced a phenomenal 57% growth in share versus last November, as its 11 share captured the number one local news ranking in the time period. In Tampa, WVEA with its 7 share ranked as the number one local news in the time period.

At our radio division, as mentioned, we continued to outperform the market with fourth quarter pro forma revenue increasing 11%. BCF in the quarter increased 24%. For the full year, pro forma revenue increased 9% and BCF was up 20%. Our BCF margins for the year was 36%, an increase of three percentage points as we increased margins every quarter in 2004.

Our revenue increase for the quarter and the year significantly outpaced the industry and our Q4 increase of 11% compared to 1% for the industry and our full year increase of 9% compared to 1.8% for the industry, shows we significantly outperformed our English-language broadcast competitors. Fourth quarter results were driven by both local and national sales, which increased 13% and 4% respectively.

For the full year local revenue was up 13%, national was flat. Throughout the year, we concentrate on increasing local sales through an aggressive sales training program and a focus by our management team to attend client meetings with their sales staff. We will continue our aggressive sales training program in 2005 and we have entered into an agreement with Burke Media Marketing to continue sales training for all of our account executives, TV and radio, as well as managers in each of our markets.

Our top categories in the quarter were automotive, telecom, and grocery stores. For the year, categories with the largest growth were grocery stores and banks financial services and entertainment. Our top five advertisers for the quarter were Verizon Wireless, JC Penney, Chevrolet, Wells Fargo, and Sears. New advertisers for the quarter on the radio side were Virgin Mobile, Lowes, Chase Bank, and Visa, just to name a few.

On the ratings front, as Walter in mentioned earlier in our key demo of adults 18 to 34, our year-over-year average quarter hour share increased 5.5% and fall 2004 compared to summer 2004 increased 9.3%.We saw double-digit ratings growth in Denver, Sacramento, El Paso, as well as Phoenix. In Los Angeles, we saw continued growth for our Spanish cluster with ratings growth of an additional 5.7% over the summer of 2004 book.

Just as important as ratings are results that our clients experience. In Phoenix, we conducted our first annual Dia de la Familia festival and this two day event drew over 120,000 listeners and was the most successful Hispanic market event to date in Phoenix. In Los Angeles, our client Mexibank has increased their advertising budget by over 30% based on the amount of qualified leads being generated on a daily basis from our local station KLYY.

In summary, once again we outperformed our English-language broadcast competitors, growing our 2004 TV revenue 12% and our radio revenue 9% for the year. We improved our margins by five percentage points in TV and by three percentage points in radio. And our BCF leverage is twice that of our revenue growth, increasing 25% for TV and 20 on radio as a result of moderating our expense growth. Now I would like to turn the call over to John for a financial review.

Thank you Philip and good morning everyone. As Walter and Philip have discussed we reported pro forma results that exceeded the high end of our guidance for the quarter. Pro forma revenue was $68 million, up 13%. Pro forma broadcast cash flow increased 28% to 26.4 million, and pro forma EBITDA as adjusted increased 34% to 22.2 million.

For the full year, pro forma net revenues were 258.4 million, up10%. Broadcast cash flow increased 21% to 96.7 million and EBITDA as adjusted increased 21% to $79.9 million. Overall ,our pro forma operating margin for the quarter was 39%, up from 34% last year. TV and radio margins for the quarter were 45% and 38% respectively, up from 39 and 33.

For the year, our pro forma operating margin was 37%, up from 34% last year. TV and radio margins for the quarter were 44% and 36% respectively, up from 39% and 33%. Our margin improvement is a result of increasing revenue while moderating operating cost increases.

Pro forma operating expenses increased 4.6%, slightly above the high end of expense guidance due to higher variable expenses related to the over-achievement of the high end of revenue guidance. In the quarter, 2.9% of the increase represents variable expenses such as sales commission, bonuses, and national representation fees, 1.5% of the increase was associated with salary increases and the remaining 0.2% increase includes increased expenses for promotions, news and rent offset by lower bad debt moving expenses and JSA (ph) expense.

Pro forma operating expenses for the year increased 4.4%. 1.7% of the increase in expenses was variable due to sales commissions and national representation fees and 3% of the expenses were the result of increased news costs due to the addition or expansion of newscasts, salary increases and rent increases, offset by lower JSA expenses and a one-time recovery of prior year expenses of $1 million in accordance with the terms of an amendment to our marketing and sales agreement with Univision.

Corporate expenses increased 4% to 4.2 million for the quarter. The increase was primarily attributable to higher legal expenses related to our outdoor division and expenses related to Sarbanes-Oxley compliance, partially offset by lower charge expenses. Corporate expenses including a net reimbursement of 1.5 million in 2003 for costs related to the merger between Univision and Hispanic Broadcasting Corporation increased 6% to 16.8 million. The increase was primarily attributable to higher legal expenses and financing to repurchase the Series A preferred stock, outdoor division legal costs, and expenses related to compliance for Sarbanes-Oxley partially offset by lower charge expenses.

Free cash flow, which we define as EBITDA as adjusted minus capital expenditures, cash interest, cash taxes plus interest income was 10.7 million or $0.09 per share in the quarter -- fourth quarter of 2004, up from 4.9 million or $0.06 per share in the fourth quarter of 2003. For the full year, free cash flow was $38.9 million or $0.37 per share, up from 23.5 million or $0.21 per share in 2003.

Turning to our balance sheet, as of December 31, 2004, our total debt was 482.1 million and our EBITDA as adjusted was 79.9. Our total debt to EBITDA was 6 times. Our net debt to EBITDA as adjusted was 5.4 times. Cash on the books was $47 million at December 31, 2004. The EPS for 2004 was negative $0.09 per share compared to a negative $0.08 per share in 2003. It should be noted that in 2003 we did have a positive $0.08 per share relating to a gain on the sale of the publishing division.

Turing to our outlook for the first quarter 2005, 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 broadcast operations in those markets, as a result we had provided guidance on a pro forma basis, eliminating broadcast results from those markets in the prior period presented, so the comparison between the periods will be meaningful. The combined net revenues and operating expense for those markets consisted of 480,000 and 434,000 respectively for the first quarter, ending March 31, 2004. We have also added a radio station last September in Sacramento, California and we have closed on a radio station in Lubbock, Texas, last week. Because we currently operate radio stations in both of those markets, we will not present those station on a pro forma basis.

On a pro forma basis based on the current pacings we are seeing, we expect to report first quarter net revenues of 55.7 million to 56.3 million, an increase of 8% to 9%. As Walter has noted, our television division is expected to be up 7% to 8%, radio 10 to 11, and outdoor 6 to 8%. Operating expenses are expected to be in the $39.75 to $39.9 million range, an increase of 4%. For the first quarter, we expect corporate expenses to be 4.1 to 4.15 million, an increase of 2% to 3%.

Depreciation and amortization is expected to be between 11.2 and 11.5 million. Interest expense is expected to be between 8.2 and 8.5 million. The cash portion of interest expense is expected to be between 7.7 and 8 million and capital expenditures are expected to be in the $3.2 to $3.5 million range.

First quarter earnings per share is expected to be negative $0.04 per share based on an estimated 124.2 million shares outstanding. This concludes our formal remarks, Walter, Philip and I will be happy to take your question. Operator.

Thank you.

[Operator Instructions].

And our first question for today comes from the line of Andrew Marcus, Deutsche Bank. Please proceed.

Hi, good morning everybody, it's actually James Dix. I wanted to drill down a little bit on radio, which seems to performing so well. I guess several things. First, just in terms of the structure of the deal with Renan if you could give any further color as to the economics of that. Is there any potential that you might see a ratings plump of programs but because there's a lag between revenue and ratings, you know that could hurt cash flow, at least in the short term? I guess also, how many stations are being centrally programmed now out of your LA studio now that you have completed your restructuring? And I guess John, on the radio expense side, you know with all these changes, is there any color you can provide us with you know concerning what you expect operating expense growth to be for radio under the new format?

And finally, any further update on your assessment of Clear Channel Viacom's moving to Spanish. They have announced a couple of more stations flips in the past quarter, have had a little bit sense to, you know, get a read as to what the impact is? You know what do think the likely impact is for you guys? And that's it. Thanks.

Okay Jim. There is a lot there you are asking.

I wrote them down, so I can remind you.

They are all good questions. First, the terms of the agreement with ABC Networks is that it is a three-year deal and they will provide programming to our stations that are participating in this programming from 4:00 a.m. to 11:00 a.m. Monday through Friday. And it's a deal that includes cash plus barter per week and there are 13 of our radio stations that are participating in the syndication of this programming. We are really excited about the distribution of this program. As you know Cucuy is a big star in our business and we think that with that, he is going to significantly lift the ratings in our Tricolor Mexican regional format.

As you know, we struggled with that format last year. We tried a number of things to improve it. And then we started negotiating with ABC NETWORK to bring in El Cucuy. We think this is going to be the fix we have been looking for. We have also done some things internally, which I mentioned to also strengthen our radio programming across all of our formats, including the promotion of Nestor Rocha, who was one of the programming masterminds behind our Super Estrella pop rock format, which has been so successful in Los Angeles. We have now expanded the distribution of that format to other markets and finally Napoleon Sanchez who is a veteran in Mexican regional, he's joined our staff.

So, we are really excited about our programming efforts and the changes that we have made to improve programming. Along with the addition of Brian Reed to our radio sales staff, which is going to help us convert these ratings that we anticipate to revenue.

Let me see, you had a question also about Clear Channel's entry into our market. And that's something that we certainly have been, you know, cognizant of. You know, we foresee that they will switch more stations to Spanish this year and also that includes Viacom. On the West Coast, Clear Channel has focused on to two different formats Spanish language oldies and bilingual hip-hop. On the East Coas,t the focus has been on Bilingual hip-hop and the Tropical. In Las Vegas, Clear Channel converted an unsuccessful English language urban radio station to their Spanish oldies format, which originates from Monterey. Their impact has been minimal since the launch in late Q4. This format is attempting to lure you know the audience from regional Mexican stations, though it sounds and is targeting an older audience.

We have just incredible results so far in Las Vegas. So, that will give you an idea how we feel about our position in that market. Both our forecast for revenue and cash flow in Las Vegas are, you know, very significant for the quarter. We have got a great management team there as well as staff. We're running two television stations in the market as well as the two radio stations. So, we think that we certainly are going to continue to be the dominant Spanish-language media cluster in that market.

As for San Francisco, we have done some things in San Francisco to improve our programming efforts there. And we think we are going to -- that market will also grow as well despite the entry of Clear Channel into the market. Were there any other questions that you have that I may have missed?

Yeah, just I think John just your sense as to what the impact of the restructuring on the radio group might have in terms of your operating expense growth guidance going forward. I guess just related to that, how many stations are being programmed centrally out of Los Angeles out of your LA studio now versus last year?

Coming out of Los Angeles on the network are about 29 stations amongst the three formats that we have in our network. Regarding the expenses, there are really two elements of expenses in the quarter, the first quarter. One is expenses will be increased as a result of the acquisition of KBMB in Sacramento. However, the cost associated with the stations converted over to Cucuy will actually decline. So, there will be a reduction in expense as a result of the agreement with ABC Networks but an increase because of KBMB. So, looking at the quarter, we are estimating about 3% on radio growth first quarter over first quarter.

Okay. Great. Thank you.

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

Good morning. I will try to find another one after that. Let's see, I would go through let's see. The first one, you talked about auto being up 23, retail up 14, fast food up 7. Clearly, the local TV station English language stations is pretty much the reserve. It's like declined in all those categories. Then you are talking about your national radio being up, I think you said 4% or so in fourth quarter. Obviously, the business the radio business hasn't been there on the national side either. Could you talk about what you are seeing in terms of changes in attitude in terms of the national advertisers in response to this space, which seems to be quite dramatic the difference?

And secondly on the expense side, historically, you have always had high -- you have had higher expense growth. That has been a concern. It's dropped all of last year. It is 5% in the fourth quarter, 4% in first quarter. John, it sounds like you told me about 33% of the increase in expenses is roughly associated with commissions. So, it sounds like first quarter cores down to 2.5% to 3% or so. Is that kind of where you guys are at as a run rate between what you've showed in the fourth quarter and first quarter? Thanks.

Well, the last part, I'll go to the last question and turn to Philip for the first question. On the variable, as you can see, the difference between fourth quarter and the first quarter was 1.7 in the first quarter as opposed to 2.9 being variable. As I've always explained the out-performance had a significant effects on increasing variable costs. Does that answer your question?

I think so.

Okay. And as it pertains, I think the question was attitudes vis-a-vis national advertisers in Hispanic TV and radio space.

And also I guess how your reps are doing so much better relative to some of the English language rep firms in both TV and radio.

Okay. If you go on the national side for radio, it did end up flat for the year. We had improvement in fourth. But this was over a 25% increase from prior year. We have strengthened, as Walter did mention, we made some significant moves by transferring Gene Bryan to president of our LAR Lotus-Entravision reps for the national rep on radio as President. And we hired Brian Reed, an ex-Univision executive who came over to help concentrate on increasing local sales for our radio group.

You know, we really contribute a lot of the success both in TV and in radio to better training for our account executives and our managers and we have and I think we have mentioned in several calls that we have had 100% focus on our local and national automotive category, and it shows. We have had success particularly on the TV side with the auto business. A lot of the business whether it's national and of course local, that comes to us in terms of new business is really in our opinion always driven locally. It's whether it is a regional manager for Chevrolet or Pontiac or Ford, but if we can get to the local and regional contacts of these major automotive nameplates, we are always successful on the national side for the factory money and for the dealer money.

So, we will continue to focus on that. We've still got a lot of work to do. Ford was our biggest advertiser in the auto category followed by GM Chevrolet. But we have still a lot of work to do with Dodge. We feel we really have a long way to go. Dodge Chrysler, we feel we have got a long way to. With Nissan, they had an agency switch from a Hispanic shop to buying through OMD. We lost a little bit of ground there. But we think that is still going to be a big upside for us certainly in 2005. It certainly has shown in Q1 '05 to be very strong again and we are going to continue to focus on that and we are going to continue to focus on retail.

With the advertising attitudes, you know I think if they continue to improve, viv-a-vis Hispanic marketing and you know we got a lot of exposure that came out of the recent elections with the amount of effort and money put against by both Republicans and Democrats put against the Hispanic market and that helped as well. You can't help but read it when you pick up a newspaper and see an article about the exploding Hispanic population in this country. All that is helping our momentum.

I guess to simplify it, how many more advertisers like, if you look at your list how many more advertisers are in your business now than they were a year ago?

Well, I don't have an exact number but I will tell you in terms of major advertisers, we have dozens of new advertisers that joined us last year over 2003. I mentioned a few of them. In terms of new business, Circuit City, GM's added, you know ,Vegas and McAllen for GM Corporate, Lowes picked up, visa, Chase Bank, Virgin Mobile and dozens on both radio and TV side. And not just auto, of course, to mention retail as well. Levi Strauss, Pacific Law Center, Leapfrog, which is a wireless, dozens we can get you a list if you like.

Thank you.

Our next question comes from the line of Jonathan Jacoby of Banc of America Securities. Please proceed with your question.

Thanks. Great quarter. Just first question is a bit of housekeeping. I just want to understand clearly that whether or not the new stations are just sort of incorporated in that pro forma guidance. Second question, is if you can give us little color on check trends. January clearly closed for you already. As you looked up for February and March, what are you seeing sort of I believe in the fourth quarter you saw very consistent demand both in radio and television. Has that continued? And the last question is you know for the year, is there anything in terms of expenses we should look for on the investment side that we might not be expecting today?

All right I will go with the first question and the third question. The first one is the radio station which closed last week is incorporated into the projections for the first quarter. The television station has not closed yet and that is not incorporated. As a matter of fact, we have not completely confirmed the format of the television station yet or the affiliations. So, the television is not there. We expect that to close probably within the next two weeks. Two to three weeks but the radio station is there.

The other question, on the expenses, I think you can be comfortable where we have been in the last two or three quarters in projecting the first quarter on a run rate on expenses. What would drive expenses higher would be things like the acquisition. So, for instance this year we will add about $1.5 million in expenses as a result of KBMB. Their annual expense is about $2 million a year and that was closed there beginning of the fourth quarter and then clearly the television station will have expense related to that as well. So, the run rate should be what you've seen over the last few quarters.

Jon, then given the guidance that we believe is out there for general market television, of you know minus 5 to minus 10 and radio to be plus 1 we think that our you know the guidance we put forth is significantly stronger than the industry. That said, January was a relatively strong month for our television business. February, also March is a little more challenging. For radio, January was also strong, February a little more challenging, and March is exceptionally strong.

One follow-up question. Univision has been obviously negotiating with cable operators to get better TeleFutura coverage. Are you seeing any benefit to that?

Benefit from the cable operators in negotiating with Univision to improve cable distribution for TeleFutura?

Yes.

Yes, we are. We've seen, in fact, we entered into agreements to expand our cable coverage with our TeleFutura affiliates in South Texas where I mentioned that we're launching TeleFutura affiliates in that market later in the quarter. Also that agreement includes Corpus Christi, where we have a low power that will also be on the cable system. Laredo is another market where we are going to launch TeleFutura in Laredo on the cable system, also later in this quarter. And that's also as a result of the agreement that Univision struck with Time Warner. And the other market is San Diego, two other markets are San Diego and Palm Springs. Both markets that will launch TeleFutura affiliates on their cable systems.

So that's four incremental markets.

Five.

We added Cox in Los Angeles.

That was in the fourth quarter, right? We launched Las Vegas on the Cox system in the fourth quarter, which was also a result of Univision's negotiations with Cox Cable.

Thank you.

Our next question comes from the line of Lee Westerfield from Harris Nesbitt

Thank you gentlemen. Good morning. I have three questions. First will involve outdoor. The second involves the L.A. radio station and the third I will come back to pro forma cost if I may. First the outdoor unit. I have two questions here, the LA versus the New York, what was the mix of the revenue in the quarter? Secondly, I believe you entered into a new agreement with the Los Angeles Municipal Authorities to put up some city light displays, taking down some lower- priced poster sheets. What will be the revenue impact of that and when can we expect it?

The first part of your question was the revenue as it relates to New York and Los Angeles? Is that correct?

Yes.

That would be about 72% of our revenue, which was produced by our New York outdoor business and about 28% coming out of Los Angeles and Fresno.

The second part of that is the Los Angeles--

The agreement we entered into with the City of Los Angeles.

I think it is premature to talk about that, although it has been struck. The court hasn't approved the settlement and therefore we think it's premature to talk about the details and terms and the anticipated impact. But it's generally a situation where we would remove some boards and at the same time get an agreement to make some boards our city lights, to operate some city lights. Deal has to be approved by the court, hasn't been done yet.

Okay, terrific. In L.A. radio, you have two stations that are JSA'd with Clear Channel, I guess both them are ND103. Clear Channel would be out of bounds in terms of the new market definitions. You get those stations back if I am correct in December? What would you do with them?

We have not announced what we're going to do with the stations yet. We're looking at a number of alternatives.

But you do get them back, is my point?

Yes, at some point we will get them back.

I want to make sure this is clear in my mind and probably for everyone else. When you calculate your pro forma cost growth, if you have made an acquisition in market, how does that impact your cost? I think this reflects actually favorably on how you calculate your pro forma costs. Can you explain that?

It is favorable if in fact if a new radio cluster or television duopoly or television station where we do not have existing stations. If we're buying an additional station in a market where we currently have properties, for instance, Sacramento. So last September when we closed on KBMB that was our fourth FM in that market. So that station although it is going to add costs and revenues, it is not pro forma. Our policy on pro forma is if you're going into a brand-new market or out of the market completely, that would be pro forma. So in the case of what you're seeing pro forma,the fact we sold our only radio station in Fresno is -- results in that station being pro forma and the same thing with Chicago.

Got you. Gentlemen, thank you very much and congratulations on executing very well.

Thank you.

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

John, One question for you just on free cash flow priorities for this year. Maybe talk about what those are and then also talk about some of the M&A environments and specifically as it relates to the non-duopoly markets.

As far as free cash flow, what we've said when people ask the question, what is the optimum debt to cash flow, we've always said probably in the low to mid 5s. And as you see on a net debt basis we closed this year at that point. Certainly any opportunity to lower our debt we will look at. Obviously, we just refinanced, so if we start paying off debt, we'd lose capacity in our new $250 million, term loan line. So we'll be looking at potential M&A activity before we make a decision to start terminating portions of that term loan. But certainly either reduction in debt or reduction of net debt would probably be where we're heading with our free cash flow.

Okay, just one follow-up on the television side, as you look at the organic business growth, as you run up against the more difficult political comps, I know it is probably early on to start speculating, but do you suspect that strength may continue or do you feel you are, that kind of high single digit number is going to contract?

As you know, we do not guide beyond the quarter that we're in. It is premature to talk about the rest of the year, although we are certainly cognizant that there is more difficult comps in the second half of the year comes about. We are confident and we're hoping that we will be able to maintain this level of growth.

Thanks.

Our next question comes from the line of Bill Meyers from Lehman Brothers.

Thanks, a quick question. Univision has until about March of '06, to reduce its stake down to 15%. I guess John, given your projected year-end leverage, would you consider buying a piece of the stake directly from Univision. Or are you even aware of any - of their kind of thought process in terms of how to monetize their investment?

We have not had any conversations with Univision regarding of selling their 16.5 millions shares to get down to the 15% level. What you mentioned is on the table along with everything. Every option is open to us. Certainly, if we had the capacity, we would consider buying back some of those shares. But as you know, the more shares we buy back as we buy them back it's kind of a circular calculation, their stake increases. I do not foresee at the end of the year us having that much free cash flow availability to be able to do it. Maybe we can do it partially. That is certainly on the table.

Thank you.

[Operator Instructions].

Our next question comes from David Miller.

Also related to the Univision overhang. Actually a couple of questions, but related to Univision overhang, do you know for sure or can you speculate or actually factually determine the Univision has disposed of any Entravision shares in the open market or they waiting for the law to change? If you could give us a feel for that, that would be great. And also Walter, of your total TV guidance for Q1, on order of magnitude, what percentage of that would you say will be auto related advertising? I'm going to assume 20%, but I would like to hear that from you.

We have no knowledge that Univision has sold any shares to date. Now as to what their plans are, we do not know but we don't know of any shares being sold.

The question you asked, was in terms of our guidance for our first quarter television business what percentage is from the gasoline and oil business?

No, what percentage do you believe will be auto related advertised?

It will be more than 20%.

This is Philip, David. It finished 22% in the fourth quarter as it related to out total TV revenue. It averaged about 21 for the year. We expect it will be around 21% for first quarter. That's what our books on the books shows us to date.

Okay, great. And also John, I just missed the cash balance figure that you issued in your prepared remarks as of the end of Q4. Could you repeat that?

37 Million, and David, we can definitely say that Univision has not sold any shares to date.

Okay, wonderful. Thank you.

Your next question from comes from the line of Gordon Hodge from Thomas Weisel Partners. Your line is open.

Good morning. This is Lauren calling in for Gordon this morning. Just a couple quick questions, you gave some detail on the three-year deal for Renan. If you could speak at all to the possible revenue opportunity there, that would be great. I was also just wondering what percentage of revenue Telecom category acounts for. Thanks.

I will answer the first question Lauren. The - you know we anticipate significant increase in revenue with our Mexican regional stations as a result of Renan now being part of our programming. We probably will not see much increase in the first quarter, but we certainly expect to see growth in the second quarter revenue and probably at least a 0.5 share growth in all of our markets that are programming Renan. When we did our budgets in late 2004, we did not even include any increase as a result of our syndication of Renan's programming to our Entravision radio stations. So we're bullish about the prospect for being able to drive revenue off of an increase in ratings due to the Renan - to Renan's programming.

Okay, great. And then the telecom category?

The question about telecom was?

If you could give us a sense for how large a percentage of the business the category accounts for.

It is about 6% of television and radio.

6%, great. Thank you.

We have a follow-up question from Victor Miller from Bear Stearns. Please proceed with your question.

Just a couple of housekeeping. One, how much in terms of dollars have you not spent in terms of acquisitions that we should model in for 2005? And then let's start with that.

I'm sorry, how much--

How much in acquisitions, in other words do you have acquisitions committed. How much have you not spent yet and will spend in 2005?

Right now, I think, what is committed is probably between $15 and $20 million.

And then John, the CapEx for the year and how much of that is digital?

Virtually little is digital and we are looking at 15 million, and maybe 1 million is digital. Maintenance and digital. Maintenance and that 1 million digital all total about 15.

Okay. Thank you.

We have no further questions at this time. Please continue with your presentation and closing remarks.

Thank you operator. This concludes our presentation. Thank you all of you for joining us on this call. We look forward to May, when we will provide our results for the first quarter and give our second quarter guidance. Thank you.

Thank you.

Ladies and gentlemen, this does conclude our conference call for today. We thank you for your participation and I ask you to please disconnect your lines. Thank you.