Entravision Communications Corp (EVC) 2005 Q1 法說會逐字稿

Ladies and gentlemen thank you for standing by and welcome to the Entravision Communications Corporation first quarter 2005 conference call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question and answer session. (Operator Instructions). As a reminder, this conference is being recorded Tuesday, May 3, 2005. I would now like to turn the conference over to Walter Ulloa, Chairman and CEO of Entravision Communications. Please go ahead, sir.

Thank you, operator. Good afternoon everyone and welcome to our first quarter 2005 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 -- this afternoon's conference call may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ. Please refer to our SEC filings for a list of those risks and uncertainties that could impact actual results.

In addition, this call is the property of Entravision Communications Corporation. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Entravision Communications Corporation is strictly prohibited.

Results for the first quarter exceeded our issued guidance as all three divisions showed solid gains and were once again among the strongest in the industry. Pro forma revenue increased 11% to 57.2 million, pro forma broadcast cash flow increased 29% to 17.2 million and pro forma EBITDA increased 40% to 13 million. Free cash flow for the quarter improved to 1.8 million.

Our Television Group continues to post some of the strongest results in the industry with revenue improving 12% in the quarter. All of our top advertising categories, including Automotive, Retail, Services, Finance and Telecom showed strength in the quarter. Local and national advertising both contributed to the gains with local up 18% and national up 4% in the quarter. The number one category, Automotive, continues to be our fastest-growing because according to RL Polk Research, Hispanic customers are the fastest-growing segment of new car buyers. In fact on Cinco de Mayo, Ford is introducing the Ford 150 Local Edition Truck designed specifically for the Latino market.

The Service category also grows impressively in the first quarter as a result the more auto insurance being sold to Latino new car buyers and the Finance category also had strong growth in the quarter as more Latino households accessed the mortgage industry and purchased new homes or became first-time home buyers. Our Univision affiliates extended their strong range performance into the first quarter. In the February 2005 Nielsen sweep, our Univision Station Group delivered strong primetime ratings in all key adult demos and utilized (ph) the highest year-over-year percentages increases ever for our Univision Television Group for our February sweep with adults 18 to 34 increasing 38%, adults 18 to 49 gaining 29% and adults 25 to 54 experiencing a 31% jump. Among the key adult 18 to 34 demo, nine of our television stations ranked number one or two in primetime, regardless of language.

Our Univision affiliates in duopoly markets echoed this exceptional primetime ratings performance by increasing 31% in adults 18 to 34, 31% in adults 18 to 49 and 42% in adults 25 to 54, while our immediate market TeleFutura Group continued to deliver a solid performance by maintaining its year-to-year household ratings at share.

Our early local news continued the strong ratings story as 10 of our markets ranked as a number one or two early local news in their time period, regardless of language. In the quarter, we launched TeleFutura affiliates in the high density and rapidly growing border markets of McAllen, Brownsville and Laredo, Texas, markets where we have significant infrastructure. I'm pleased to say that in both of these markets, our new TeleFutura affiliates are pacing ahead of projections. We now operate Univision and TeleFutura affiliates in 18 of our television markets. In addition through an agreement with Time Warner, we recently expanded our little TeleFutura cable carriage in five of our television markets.

Our Radio Division continues to outpace the industry with a pro forma revenue increase of 11% in the quarter. This is on top of a 13% increase in the first quarter of 2004. Our 11% increase in pro forma revenue is compared to a 2% increase by the rating industry in revenue according to the Radio Advertising Bureau. Pro forma broadcast cash flow for our Radio Division increased 26% in the first quarter.

Pro forma results continue to be driven by local advertising which grew 15% in the quarter while national was down 3%. Gains continue to be driven by concentration on local ad sales and getting our management team in each market in front of our customers. Last year, we instituted a sales training program and this has helped the execution of our local salesforce.

In the winter 2005 book for markets that had been released to date, we extended our positive ratings performance. In adults 18 to 34, our share increased 18% over the fall 2004 book. Year-over-year, we saw increases in Los Angeles, San Francisco, Denver, Las Vegas, Phoenix and Monterey-Salinas. The addition of Cucuy de la Manana in 13 of our radio markets in February appears to be a terrific success. For example, in nearly every market that is released to date in our key demo adults 18 to 34 during the morning drive, we have seen a 21% increase in average quarter out persons (ph) winter 2005 compared with fall 2004. This trend should continue into the spring book, but we will see our first complete rating period within Cucuy de la Manana.

In Los Angeles, ratings for our Spanish-language radio stations are up 9% over last year winter 2004 compared to winter 2005 and up 6% over fall 2004 in our key 18 to 34 year-old demo. KLYY, our (indiscernible) Mexican dance station, saw significant ratings jump in midday and afternoon drive. Supra (indiscernible) continues to be the image leader in contemporary music and the leader in breaking new songs by leading artists in Spanish pop, rock and reggaeton. Our L.A. sales team remains focused on accelerating the conversion of these solid ratings increases to more revenue for the cluster. On April 1, our joint sales agreement with Clear Channel ended and we took over the sales responsibility of Indy 103.1 in Los Angeles. We appointed Don Gerarco (ph) a station manager and we have hired and continue to actively recruit top sellers within the market that already have a proven track record in adding revenue. Under Don's leadership, we are on pace to make our aggressive second quarter budget for this exciting radio station.

On February 10, we closed our acquisition of KIQ in Lubbock, Texas -- that's KAIQ FM in Lubbock, Texas -- and launched our Super Estrella format on this station. Besides KAIQ FM, we also operate Radio Tricolor on KBZO AM and the Spanish-language television leader in the market, our Univision television affiliate, Channel 51.

In our Outdoor Division, we posted revenue growth of 8% over the comparable period last year and in line with the high end of our guidance. We have now posted three consecutive quarters of strong revenue growth and our Outdoor Division is showing continued pacing momentum in the current quarter as evidenced by our guidance of 9 to 10% revenue growth.

On a product line basis, improved demand from our national advertisers coupled with a significant increase in local business resulted in an overall increase in average rate of 23% over first quarter 2004. As in our Broadcast divisions, our strategy in the Outdoor business is to encourage and motivate our sellers to focus more energy and resources on local advertisers.

In the quarter, we expanded our Outdoor business to Sacramento by signing a contract to sell advertising on the city's buses. Sacramento is the 12th largest Hispanic market in the country. Sacramento is an opportunity that made sense to us for three reasons. First, the transit program in Sacramento has been historically undermarketed by the previous owner on a national scale, thus presenting us an opportunity to package and place more national dollars in its important Hispanic market. Second, our Radio Division was already in the market with a strong (indiscernible) four FM's providing us with an opportunity to take advantage of a solid existing local advertiser base with a new medium and co-locate the outdoor salesforce within the radio infrastructure. And finally, the management of our existing outdoor business -- Outdoor Division's transit operation in nearby Fresno could easily cover both markets.

So in summary, we are seeing continued healthy revenue momentum across all divisions. Our Television and Radio Groups are delivering impressive ratings and posting industry-leading revenue growth. We continue to prudently expend our asset base as we capitalize on our existing operating infrastructure. We remain focused on providing advertisers with a unique and powerful platform from which to reach Hispanic America in the fastest-growing and most densely populated Hispanic markets in the United States.

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

Thank you, Walter, and good afternoon everyone. I will quickly review our Q1 broadcast highlights. First quarter indeed did have -- see a very strong revenue increase of 12% and our Bcf increased 24% while our margins increased improved 4 full percentage points to 38%. While the TV industry is expecting Q1 revenue losses of minus 3 to minus 8%, once again we've delivered twice the growth rate of the industry. In fact, excluding political revenue from first quarter of '04, our revenue grew 15% in the Television Division.

Local revenue was up 18% and national increased 4%. However if you just the account movements from national to local, we actually grew our local 16% and international was up 7%. Four of our top five ad categories grew significantly with the highest dollar increases coming from Auto, Telcom, Services and Retail. Ford and Toyota led the auto increases while Telcom saw Nextel add three markets and Verizon double its spending. New accounts included McBride Law, Cingular Wireless and Infinity Insurance and dozens of others totaling over $2 million.

On the TV ratings front in the most recent February Nielsen report, we clearly experienced an exceptional book. As Walter had mentioned, our Univision affiliate group increased 38% in primetime among adults 18 to 34 over the last February book. And a few examples of the power of the Univision programming were -- in San Diego KBNT ratings increased a tremendous 450% was one of only two stations that garnered ratings increases for that book. In Las Vegas, KINC increased 75% and ranked as number one in the market for the primetime and in El Paso, KINT increased 91% and ranked also number one in primetime by delivering its best ratings in over three years.

In Orlando WBEN, which gained 33% and delivered its highest adults 18 to 34 ratings in four February sweeps and in Santa Barbara, KPMR which delivered its highest performance in the history of the station ended up with a 5.1 rating in primetime.

In early local news among again our key demo, adults 18 to 34, for the February sweeps year-over-year McAllen continued its dominance by ranking number one in the time period and outperforming the combined ratings of the three competing newscasts at that time and El Paso also ranked number one in the time period and it delivered the station KINT its highest February 18 to 34-year-old rating since 1997. And in Las Vegas, we ranked number one in the time period in early news and nearly equaled the combined delivery of the three competing English language newscasts. Those are just three examples of our early local newscasts that ranked number one regardless of language.

Turning for a moment to our radio highlights, our Radio Division continued to be among the industry-leading performers with first quarter pro forma revenue increasing 11%. We outperformed the industry in each month of the quarter and our revenue in January was 12% while the industry grew only 3%. We saw an increase in revenue of 6% for Feb and an increase of 14% in March and the industry was flat in Feb and up only 3% in March for an overall plus 2% for the quarter according to RAB.

Our Bcf in the quarter increased 26% and our Bcf margins for the quarter were 29% and like television, increased 4 percentage points over the prior year. Results continue to be driven by local sales which as we mentioned in the past represent about 18% of our total revenue. Our local sales were up 15%. National was down 3% for the quarter. We attribute some of our local sales success to the implementation of our sales training programs and concentration -- our concentrated efforts by our management staff in each of our markets to join our account executives on sales calls and new business sales calls.

Our top advertisers for the quarter were Verizon Communications, which were up 37%; McDonald's was up 14% and Safeway, which was up 26%. We saw double-digit revenue growth in eight out of our top 10 advertisers. And our top ad categories for the quarter were Automotive, which was up 5%; Restaurants, which were up to 32% and Telcom, which was up 21%. We were successful in attracting 35 new advertisers that spent more than 10 grand in the quarter for the first time with us. New advertisers for the quarter included Chase Investments, KFC, Nestle's Coffee Mate and Earl Scheib.

On the ratings front for Radio as Walter mentioned earlier, our key demo of adults 18 to 34 for fall 2004 compared to winter 2005 -- this is for average quarter hours shared -- increased 8% in markets released to date. We saw double-digit growth -- ratings growth year-over-year in Denver, San Francisco and Monterey-Salinas. But just as important as the ratings are are the results that our clients experienced. In fact, an example of those results are in Las Vegas, United Nissan signed a long-term advertising contract with our station that included El Cucuy voicing their commercials. After only one week on the air, the dealership enjoyed the highest volume of units sold for any Saturday in history. In Monterey, our radio properties conducted a job fair that included 29 of our local clients at the Northridge Mall and the mall experienced an increase of traffic of over 50% compared to the same day of the previous year.

In Los Angeles, KLYY, our Cumbia (ph) station, conducted a remote in Riverside for a new homebuilder and the station attracted over a dozen pre-qualified new homebuyers. These are all proof of our radio stations' ability to drive traffic and results for our clients.

In summary, our Television added 12% increase versus minus 3 to minus 8 for the industry and our Radio Division revenue increasing by 11% in first quarter versus plus 2% for the industry clearly shows that we again are able to outperform the industry by a wide margin of growth. With a strong topline performance and prudent cost controls, we are delivering impressive Bcf growth. And although visibility is still limited, we are experiencing solid Q2 pacings. So with that, I would now like to turn the call over to John DeLorenzo and he will give us our financial review.

Thank you, Philip and good afternoon 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 net revenue was 57.2 million, up 11%. Pro forma broadcast cash flow increased 29% to 17.2 million and pro forma EBITDA as adjusted increased 40% to 13 million. Overall, our pro forma operating margin for the quarter was 30%, up from 26% last year. TV and Radio margins for the quarter were 38% and 29% respectively, up from 34% and 25% respectively.

Our margin improvement is a result of increasing revenue while moderating operating cost increases. Pro forma operating expenses for the quarter increased 4.6% slightly above the high end of expense guidance due to higher variable expenses on the overachievement of the high end of revenue guidance. In the quarter, 27% of the increase represents variable expenses, such as sales commissions, (indiscernible) and national representation fees. 0.6% of the increase was associated with salary increases, partially offset by non-recurring severance in the prior year. 1.6% of the increase was associated with higher leasing expenses, 0.8% of the increase was associated with higher news costs from the expansion of the morning news in San Diego and the remaining 0.9% of the increase includes increased expenses for rating services and promotions.

Corporate expenses increased 3% to 4.1 billion for the quarter. The increase was primarily attributable to expenses related to Sarbanes-Oxley compliance, partially offset by lower insurance expenses. Free cash flow, which we define as EBITDA as adjusted minus capital expenditures, cash interest, cash taxes, plus interest income was 1.8 million, or $0.01 in the first quarter of 2005, up from negative 3 million or $0.00 per share in the first quarter of 2004.

Turning to our balance sheet as of March 31, 2005, our total debt was $482.8 million and our trailing 12-month EBITDA as adjusted was 83.6 million. Our total debt to EBITDA as adjusted was 5.8 times, our net debt to EBITDA as adjusted was 5.3 times. Cash on the books was 42.3 million at March 31, 2005.

The EPS for the quarter ended March 31, 2005 was negative $0.04 per share compared to a negative $0.09 per share in 2004.

Turning to our outlook for the second quarter of 2005, we're once again providing pro forma guidance information. With the sale of our radio assets in Chicago last year, we are no longer -- have broadcasting operations in that market. As a result, we have provided guidance on a pro forma basis, eliminating broadcasting results from that market in the prior period presented so that the comparisons between the periods will be meaningful.

Net revenue and operating expenses consisted of 140,000 and 174,000 for the second quarter ending June 30, 2004. We have also (indiscernible) a radio station in Lubbock, Texas and TV stations in McAllen and Laredo, Texas. Because we currently operate TV and radio stations in both of those markets, we will not present those stations on a pro forma basis.

On a pro forma basis based on the current pacings we're seeing, we expect to report second quarter net revenues of 73.6 to 74.3 billion (ph), an increase of 7 to 8%. Our Television Division is expected to be up 6 to 7%, Radio up 8 to 9 and Outdoor up 9 to 10%.

Operating expenses are expected to be 43 to 43.2 million, an increase of approximately 8%. However, excluding the prior year recovery of $961,000 of expenses in accordance with the terms of an amendment to our marketing and sales agreement with Univision, expenses would have increased 5.7% instead of 8%. Of that 5.7%, 3.7% is attributable to expenses expanding our businesses such as the 103.1 in Los Angeles, the acquisition of KBNB in Sacramento and bus advertising in Sacramento at the Outdoor Division. The remaining 2% is core expenses attributable mostly to salaries, outdoor leasing and news.

For the second quarter, we expect corporate expenses to be approximately $4.2 million, an increase of 2%. Depreciation and amortization is expected to be between 12 and $12.5 million, interest expense is expected to be between 8.7 and 8.8 million and the cash portion of interest expense is expected to be between 8 and 8.1 million. We expect CapEx to be 5.6 million with approximately 1.5 million expected for transmission system upgrades for our new Matamoros, Mexico television station acquisition expected to close in Q2.

It should be noted that although we anticipate that the FCC would extend the deadline to convert television stations to full power digital, it does not now appear likely that it will occur. Therefore, we intend to spend an additional $12 million in CapEx for television digital between now and mid 2006. As we previously guided for calendar year 2005, we expected total CapEx to be approximately $15 million of which 1 million was for going to television and 14 million for maintenance. We now expect to spend 8 of the $12 million in digital expenditures in the second half of 2005 with the remaining in the first half of '06. We are currently reviewing our maintenance CapEx for the remainder of 2005 with the goal to reduce that number.

Second quarter earnings per share is expected to the $0.02 to $0.03 per share and free cash flow is expected to be $0.10 per share based on an estimate of 124.3 million shares outstanding.

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

(Operator Instructions). Victor Miller, Bear Stearns.

Good afternoon and thank you for taking the question. I have two questions. The first one is with TV likely to get worse and worse this year on the English language side because of the political comps and lack of Olympics and all of that, how much do you believe that Entravision can continue to outperform the business? Can it continue to have the trends that you've had and is the market distinct enough for the rest of the year?

Secondly a little convoluted question, but Univision has to do something with its stake by 3/26/06. About 15% of its stake has to -- or half of its existing stake has to be dealt with. You obviously last year disposed of more properties than you did acquire then in terms of dollar amount. Your leverage will be about 4.5 times at the of the year and to a certain extent, unfortunately your multiple and probably Univision's multiple has been held back somewhat because of the failure of some of the other media stocks to perform well. So you're really held to that standard. So you are at a part of your time where you're performing better than you've ever performed relative to the English language, the multiple's being held back, you have to deal with the shares, your leverage looks good and you're not acquiring much. Would you consider literally buying back some of that stake given the price that it is and the multiple that it's trading at to reduce that overhang going out? In other words, what will you do with that Univision stake? Thanks.

I'll take the second question first. Certainly the shares are not available to us. They haven't been put into the mix as far as being sold by Univision. However at any given time when we have an availability to make an investment, whether it be in our own shares or whether it be through acquisition of properties, we make a determination at that time what is the best use of our capital, and the answer is yes. If at that time we have availability and we determine through our models that purchasing the shares is a positive investment and will return a good return on invested capital for the company, we will be interested in buying the shares.

Hi, victor. This is Philip. We had a strong first quarter in TV, we were up 12% and that was against about $750,000 in political comp from the prior year's first quarter. We are showing second quarter strong pacing and we're up against about $790,000 in political. In third quarter, your question is -- can we keep it going? We believe we can but we are up against a higher political number of about $1.6 million in net revenue and 2.6 in the fourth quarter, which will be the toughest nut to crack on a comp basis. But remember, the first quarter and second quarter, that political was all incremental. By third quarter, we were stepping on some local spots and even some national spots even and it wasn't all incremental. It was a little more than half incremental. And in the fourth quarter, it was -- fell in all one month and it was about 50% incremental. We stepped on a lot of business. So really adjusted, we're only up against a little over 1 million in third and a little over 1 million 3 or 4 in the fourth.

So it's not as high of a hill to climb as one may think and we're seeing some strong growth year, certainly in April, although as I mentioned visibility is still kind of light. But we are hopeful that we'll be able to continue the momentum of the growth and stay well ahead of general market industry.

Thank you.

Lee Westerfield, Harris Nesbitt.

Thank you gentleman, good afternoon. I have two questions if I may. The first is, and I think it's rather specific if you could elaborate again about the cable carriage extension through Time Warner -- what did that provide for you, what were the terms and how has that improved those two areas, local market -- local ratings? And then much more broadly here, Philip at the Television unit, Verizon and Nextel as you pointed out late in the quarter stepped in and were very strong in driving the Telecom category. The question is this -- is that continuing in the second quarter?

Lee, I'll take the first part of the question and Phil will have the second part. As to the additional cable carriage that we negotiated with Time Warner, that was five markets -- Corpus Christi where we operate a Univision affiliate; South Texas or McAllen-Brownville; Laredo, Palm Springs and let's see -- did I leave one out? I'm sorry, it's four.

That is correct. We had actually (multiple speakers).

Corpus Christi and South Texas Laredo (multiple speakers).

(indiscernible) was a smaller system.

(indiscernible) was smaller. But the important thing about the four markets, the first four markets I identified is that that gives us complete cable coverage in those markets. So we're operating low powers in those four important television markets for us where we have a dominant Univision affiliate and then we then couple that with full cable carriage in the market which basically gives us I would say 90% of the coverage that we need in the market and certainly an opportunity to access all of the ad dollars in the market.

The contract -- it's a contract that consists of a couple of dollars per sub as well as some advertising promotion that we will provide to the cable systems.

And that goes through December of '08.

Right, that's a three-year contract, four-year contract.

Through the second cycle of '08.

In fact, that cable penetration helped us a great deal as we launched in South Texas, we already blew through our local budgets in McAllen for the TeleFutura affiliate largely due to the fact that we were able to put it on the cable system at such a high cable penetration down in South Texas and Laredo, for that matter, in many of our markets.

The second part was Telecom? Can we keep the momentum going? We had a great, great first quarter on Telcom. We had some new business from Cingular that we did not have Q1 of last year. We added three markets for Nextel -- D.C., Orlando and Tampa. I know that it was generally down for the industry, but it's not for us. We have SBC back, we have Qwest is back and sending more. So the Telcom business for TV was way up, almost 50% and our pacing for April is plus 22%. The answer to your question the answer is, yes, I think we can do it. And as you know, I mentioned the radio first quarter was very strong, plus 21 I believe, and April is very strong for radio pays pace Telecom. It's too early to tell for the first -- for the full quarter again given the visibility, but we feel very bullish on Telcom. And I know that's contrary to the rest of the industry, but we're very bullish on Telcom for Spanish language media and for Entravision.

And one of the big reasons is more and more of these Telcom companies, particularly the wireless companies, are targeting the Hispanic consumer. I saw a report recently that said that the average Hispanic cell phone user had spent $10 more a month than the non-Hispanic on their cell bill. And clearly, this is a consumer group that many of the wireless people want to go after and gain. So I think we're going to keep it up.

Very briefly, can you again in television what your national stop in Q1 is pacing in Q2?

The national spot for Q1, national spot, was up 4% but adjusted, it was really 6% because we had a big piece of Automotive business that went Q1 from national Q1 to local Q2. So adjust it for that, and our national spot on adjusted basis would be 6%. That's with political. It's even higher, it's almost 9.5% without political, 10%.

Okay, and making the same adjustment or similar adjustment in Q2, what would be the national spot trend for TV?

That's pretty hard to figure out, Lee. It's still early in the quarter and it changes week to week.

Thank you very much for answering the questions.

But we are positive on national spots (multiple speakers) in mid-single digits, but it -- as Walter said -- it is moving. We just added to the national spot pace this week alone.

But to Phil's point, it is positive. We're on the plus side national. Certainly we are making up for whatever slowness there is in national with our strong local sales, but it does change every week.

Okay. Gentleman, thank you very much.

Jonathan Jacoby, Banc of America Securities.

Afternoon. Just a few questions here to sort of follow-up on the national issue. It seems like national radio and TV are a little bit weaker. Do you think it is something specific, especially radio in the general market, they have some positive trends? Then looking at the expense guidance, you broke it down sort of between core investment and -- core and investment, but can you break it down sort of by segment, how we should think about it? Third question would be on the L.A. radio station that you guys put back from Clear Channel, is that revenue number and expense, is that in the pro forma number so we know from a modeling perspective? And then last on the Sacramento transit issue, can you give us some ideas sort of on cost and how we should be looking at that and when you sort of make a cash flow return to it? Thanks.

I'll start with the Outdoor. As far as the expense and expected the result of Sacramento outdoor, we expect that to break even in the, I would say by the third quarter, we should break even and have positive cash flow from that transaction. We think that's going to be a nice supplement to our operation up in Fresno that currently exists. And the other question was related to (MULTIPLE SPEAKERS) finish the expenses first. Yes. The answer to your question is, in the second quarter baked into there is the 103.1 that we're taking over from Clear Channel (indiscernible) as well as KPMB, as well as the Sacramento buses. They are all in the second quarter pro forma.

Can you break out sort of a revenue and expense from -- just as a bucket almost, just so we can model this?

In the bucket, we went from just those alone, as I had mentioned in my remarks, we were at 2.5, 5.7 (ph) down to the 3.7. 3.7 I think it was, was the result of the three items that we talked about. So in other words, our core expenses were only about 2% for the second quarter not related to either the adjustment for Univision's JSA last year or those three items I just mentioned. So you strip all of those out, our increases in expenses for the second quarter was (indiscernible) 2% on a core basis. Everything else was the acquisitions we talked about and the JSA, the $1 million adjustment from last year.

And without that, it's 5.6, right?

Just that alone, it was a little over 2 percentage points was the $1 million for the JSA. So that brought down the 5.7 and then 3.7 was the three additional items we talked about bringing the quarter rate down to 2%.

Last, if you can touch on sort of the national weakness that you're seeing both in TV and Radio. Perhaps you could -- is it anything specific on TV? Is it moving money to networks, just any color you can add to that.

Relative to the industry, we don't see weakness in terms of our business on the national side in second. In the first as we mentioned to you, we were (indiscernible) at three on the national for the radio but we're pacing on a plus 10 for second. On the TV side, our pace apples-to-apples absent political is plus 8.9. With political, we're at plus 4.5. And again, every day that we get a report and we check daily, we are seeing improved climate in terms of national business. So we're getting more and more optimistic than we were four or five weeks ago and it continues to improve.

Now that said, the industry is minus 7 for first and TV and it's predicted or estimated to be minus 7 for second. So put minus 7 against our plus 5 pace today, significantly a better situation.

Thank you.

Bill Meyers, Lehman Brothers.

Hi, thanks. How would you compare the 103.1 L.A. (ph) facility? It's a property that's Spanish broadcasting has (indiscernible) for that $120 million? And I guess along those lines, would you consider using that station as a use of proceeds of you repurchase the Univision (indiscernible)?

I think the question was -- how do we compare the coverage of the 103.1 with the 93.5's that were sold to Stiles Media (ph) at all?

Yes.

Is that the question?

Yes, signal strength, quality of facility, yes.

We think that the quality facility or the quality of the facilities and the signal strength are comparable to those (indiscernible) the 93.5. Therefore, we think the value, or certainly the stick (ph) value of the 103.1's is certainly comparable. In fact, our 103.1's cover all of the L.A. Metro and Orange County, whereas the 93.5's don't cover the entire L.A. market as well, as it was the 103.1's. And the question is about any potential divestiture of those 103.1's? I mean, we're constantly looking at all of our assets. Right now, we like the plan that we have for the 103.1's. We're pleased with the way we've progressed over the last month. We like the look of our pacings. The sales team we've put in place is effective and becoming more effective every day. So we're going to continue to run these radio stations as they are presently and we think we're going to push out a lot of cash flow as a result of the demand for -- of the inventory on these radio stations. And we'll take a look at the end of the year. We're constantly looking at our radio assets and our television assets and our outdoor assets to determine if they need adjusting in any form.

And is there any room in the L.A. market for another Spanish-language station? Would that be a possibility of a reformat for that facility?

It is possible. We have looked at some other formats for that facility that skew Hispanic or target the Hispanic market, but after weighing all of our options and looking at the growth of the radio station over the last 12 months, we determined that it was best to keep it in its current format. And we think we made the right decision.

Thank you very much.

Jim Boyle, Wachovia Securities.

Good afternoon. Walter, what do you think of the large Anglo radio groups flipping formats of their laggard Anglo stations to Hispanic formats in markets that are not exactly Hispanic market yet? And second question, do you have any view on the local people meter A.C. Nielsen sample mix since the initial rollout?

To your first question, we have seen some of our general market competitors converting their Spanish -- their English language radio stations to I will call them weaker English language radio stations to Spanish, but our business continues to grow. We continue to increase our local revenue as well as national. In San Francisco for example, both Clear Channel and SBS launched new Spanish-language radio stations in the market. In the first couple of months they did quite well, and then we saw their listings start to decline, whereas our cluster actually increased its share. We just learned that Clear Channel converted a station in Denver to Spanish, but there we have two television stations as well as three radio stations, so we're certainly well positioned in Denver.

I think what we're seeing here is, more importantly, what we're seeing is a validation of our business model. We have been big believers and supporters of the Hispanic market for many years. That's where we've built our expertise and when we see that these general market companies are converting to Spanish, we think it just validates what we've been saying all along, that the future really is about the Hispanic market. And I think what we're seeing in radio more importantly or as important as what I just said is that Spanish-language radio or its formats are just becoming another format, just like A.C., just like hip-hop, just like classical music, etc.

So that said, this underpricing of our formats we believe will discontinue at some point here soon as a result of more general market companies converting Spanish-language or converting their English radio stations to Spanish-language radio. And as far as the question about the PBM's?

You had a question about the LPM. You know, we have existing service in Boston. I'm not going to speak for the New York, Chicago, L.A.; that's Univision's market for TV. But we have shown significant improvement in the sample or Nielsen has and it has resulted of course in significant increases in ratings. We were -- Feb '05 this past most recently, we did 1.1 rating against a 0.6 a year ago so we are up in enormous gains. In adults 18 to 49, we're up 175%; 25-54, 125% as well. So we're showing increased gains based on the improved sample.

The next do LPM market that we have that's up is Washington D.C. and that goes live I believe in June. We've already seen two weeks -- actually just yesterday or today, we got the second week of sample data from the LPM. And as that sample improves, we have seen significant increases for our station WMDO over the previous NFI service. So we are encouraged by the direction that Nielsen is going, vis-a-vis the LPM sample which has a direct impact on Hispanic viewing, but we're taking it cautiously in terms of the LPM.

A quick follow-up question for John. John roughly about how much of your Q2 budget is already booked?

Sorry, say again? In the middle of our range of high and low, we're looking at Television is about 83%, Radio 77 for a total Company of 82%.

And that's an updated number for TV as of today. Overall, about 82%.

Thank you.

Gordon Hodge, Thomas Weisel Partners.

Good afternoon, couple of things. You mentioned the Univision JSA and I think an $1 million. And I gather, I assume that's a variable cost, depending on how you're doing in those stations. Is that right, so that would continue or was that a onetime thing?

(MULTIPLE SPEAKERS). That's a onetime only. Still working on it. Long story short, we extended the JSA's to coincide with the timing of the affiliation agreements, which is another 16 years. When we converted the accounting, there was a quasi cash accrual way of accounting for the profits. we converted over to accrual 100%, and that was a onetime adjustment.

It was a onetime, okay I just wanted to make sure, perfect. And then could you refresh my memory on the split of national versus local on the TV side? I think Philip you might have mentioned Radio is 18% local, but I think it's the other way around, if I'm not mistaken?

No, Radio is 80% local.

Well maybe I just misheard then.

40% (ph) national. TV has moved a little bit more towards the local side again. It's 57% local, 43% national. And as you know, it's the exact opposite; it's two-thirds local -- I'm sorry, two-thirds national and billboards and one-third local.

Gotcha. Thanks very much.

Sean Feeley (ph), Credit Suisse First Boston.

Hey, Walter. Can you talk about as you roll into the back half of the year, you have the second quarter is the last with where you face easy comparisons in the Outdoor side and to the extent that you can talk about whether or not you think the performance that you guys have delivered is sustainable? And then maybe also follow-up and just talk about whether you continue to consider that asset to be a core asset and when the inflection comes where you would consider possibly selling it?

Let me just start with the first part of your question, which is, is the current growth rate sustainable? And I will just speak about what remains of '05. We certainly think it is. When we looked at our pacings for the third quarter, they are double-digit -- we see double-digit growth and we have been looking at that kind of growth now for awhile. So we're very pleased with the way our Outdoor is improving. Certainly it is a result of a number of changes we made. And as I said in my remarks, we continue to place more emphasis on local sales in every one of our divisions, including Outdoor and we're seeing the results of that strategy in Outdoor as well.

Our fourth quarter is still early to kind of give you a sense of where that's going to wind up, but we expect the kind of growth that we've posted over the last three quarters to continue into the fourth quarter as well. So as far as what about those assets, we think that we have a good strategy, it's working. We have the right team in place. Chris Young (ph) and his people are doing an excellent job. Diane Baross (ph) in New York and Ellen Shavenovic (ph) in Los Angeles are leading their sales teams and putting up impressive growth. So we're just taking it one quarter at a time and as long as it continues to grow and we can produce the kind of results that we are showing, then we will continue to find ways to grow it.

Thank you.

(Operator Instructions) David Miller, Sanders Morris Harris.

Congratulations on the numbers. A couple of questions. With regard to Auto advertising, just kind of a philosophical question. The Auto category just continues to be a huge prime mover for you guys and for Univision and of course you know for anyone else involved in the Spanish-language O&O television space, yet pacings on the English language side are -- let's be polite and call them tepid at best. Besides Hispanic-Americans' penchant for buying used cars, what else is going on there? Is there something else secularly going on there besides what I just mentioned? And then I have a follow-up, thanks.

Thanks, good question. There are a lot of reasons why our Automotive business is strong. Domestic automotive has slowed down for most of the industry, but as we mentioned we saw 20% growth in the first quarter for TV. We were up mid-single digits in Radio. That category represents about 30% of our total TV business and about 16% of our total Radio business, but we continue to see more and more products being advertised and more markets being added.

I think one of the biggest drivers is as more and more of these auto dealers become more aware of the Hispanic consumer and the more we get our message out to these dealers, the better off we're going to -- the more we're going to continue to grow. We have done a couple of things. We have purchased the RL Polk data, which as you may know is the actual registrations of new cars by name, by surname, and we basically are able to buy it now by individual dealers in each market, and that data shows that Hispanic surnamed consumers are in many cases the only growing consumer segment of new car buyers. We looked at a total 2003 to 2004 and unit sales to Hispanics were up 6% and the non-Hispanic market only grew 0.5%, less than 1%. If you looked at total expenditures by Hispanics, it was up 10% versus non-Hispanic expenditures were up 5%, and that is directly related to the MSRP sticker price. We have had a lot of visibility with the National Auto Dealers Association called NADA. Through our friends at Univision, we've been able to get in and present to them and get in front of many, many more dealers. And if you look at the real core growth of our business, yes we're getting more national corporate dollars; Tier 1, Tier 2 corporate dollars from Ford and from Toyota and from GM, but we're also during a very good job and we've concentrated on this for over a year now of going out and calling on new car dealers as new business with the local account executives both in TV and radio and a lot of our growth has been based on putting on new dealers month after month.

So we see this continue to grow as this category for us. And it may not always grow 20, 25%, but it's always going to grow for us.

Terrific. And then a follow-up, you guys have a number of O&O's on the border cities -- Nogales, El Paso, I think McAllen, Laredo, Yuma come to mind where the over the air signal reaches the Mexican side of the fence. Have you guys ever done any studies on what that's worth? Is there a revenue contribution there or is there any kind of capital value that you record on the asset side of the balance sheet for the essentially doing that over the Mexican side of the fence? Thanks.

I will answer the operational questions first and then John can comment on the financial question. It depends on the market, but certainly a number of consumers on the Mexican side trade with businesses on the U.S. side in our border markets. A good example is El Paso where we actually maintain a sales office and a news facility there to supplement our news operation in El Paso. And that sales office generates a significant amount of revenue for our total Univision El Paso revenue. You know, in the neighborhood of 1 to 2 million a year comes out of that market, comes out of the Mexican side. And it differs. We have advertised in Tijuana that advertised in our San Diego properties. We have advertisers in Reynosa-Matamoros, they advertise in our South Texas property -- (indiscernible) Nuevo Laredo and Laredo. So certainly, we get I would say significant benefit from the fact that our signals reach into Mexico.

Terrific, thanks very much.

Regarding the part of the question about balance sheet, we book our acquisitions at cost. So therefore, there is no real correlation between (multiple speakers).

Right, so what I'm asking is there's no intangible asset value due to the fact that these signals extend over into Mexico?

Intangible asset value is nothing more than when you purchase price over the cost of hard assets (indiscernible), but it's not separated between Mexico or U.S. or anywhere else.

Okay, thank you.

James Dix, Deutsche Bank.

Good afternoon, gentlemen. Just one question as to how you go about forecasting the impact of these huge ratings gains you're getting on the TV side in terms of converting that to revenue. I know Victor asked earlier, Philip, like what you thought the prognosis was for outpacing on the TV side. I would assume at some going you think those ratings are going to start helping you do that as well. But what type of lag do you expect to see when the ratings gains are so large?

That's a much bigger factor on the national side. We typically see a book come out, we'll get more immediate reaction when we come to sit down with our national advertisers and negotiate CPP's a month to two. On the local side, it's not as great a factor. We're still delivering results in many of our markets. Rather than selling on cost per point, we're selling on cost per spot and how we can build the traffic. But it's very, very hard to say. If we're up 25, 30 in this case and at primetime, adults 18 to 34 in TV 38% as an aggregate group, we cannot turn around and tell your salespeople they need to be up 38% the next quarter in revenue. They would like to, but they won't buy that.

It does help the momentum that we've built, but we're all about delivering results and testimonials from clients that go a long way to get another new client in the same category on the air. And I suspect it will continue to be that way for a long time to come on the local side. Nationally, where a buyer has to as I mentioned, has to buy several markets in a short period of time and it's much more ratings driven and there's ups and downs based on the most recent book. But again, when there's only a couple of Spanish-language TV stations in the market, they don't have many places to go and we can be pretty aggressive.

Jim, we've had good books over the past several ratings periods, but this February book is and excellent for us and we're really pleased with they way it came in and we expect to certainly keep growing our revenues as we have in the past based upon the results of the February book.

Thank you.

Terry McGagney (ph), Standard & Poor's.

Hi. I wonder if I can get you to just run through the CapEx outlook, specifically to the digital TV upgrade?

Yes. We're looking at -- it's probably $12 million to upgrade our TV properties to full power digital that's required to be done by middle of next year, of which we expect to spend about 8 million, or two-thirds of that, in the third and fourth quarter of this year and the remainder of it in the first half of next year.

Okay, great, thanks.

There are no further questions at this time.

Okay operator, thank you. This concludes our first-quarter investor conference call. We thank all of you for participating and look forward to reporting our second quarter results to you in early August. Thank you.

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