Entravision Communications Corp (EVC) 2006 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Entravision Communications Corporation fourth quarter and full year financial results conference call. [OPERATOR INSTRUCTIONS] I would now like to turn the conference over to Mr. Walter Ulloa, Chairman and Chief Executive Officer of Entravision Communications. Please go ahead, sir.

Thank you, operator. Good afternoon, everyone.

And welcome to our fourth quarter and full year 2006 earnings conference call, joining me is Philip Wilkinson, our President and Chief Operating Officer and John DeLorenzo our Executive Vice President and Chief Financial Officer.

Before we begin, I must inform you that this conference call will 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 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.

Also this call will include certain non-GAAP financial measures. These non-GAAP financial measures have taken into account the pro forma treatment for the company's sale of its radio assets in San Francisco and San Jose, California, in the first quarter 2006, its radio asset in Tucson in the third quarter, and its radio assets in Dallas, Texas in the fourth quarter of 2006. Where by the company has elected to eliminate its broadcasting results from those markets for the current and prior period so that year-over-year comparisons will be meaningful. Pro forma results also exclude non-cash stock-based compensation expenses related to the company's adoption of statement of financial accounting standards number 123R during the first quarter of 2006.

The company has provided a reconciliation of these non-GAAP financial measures through their most directly comparable GAAP measures in its press release reporting results for the fourth quarter and full year 2006. The press release is available on the company's web site and was filed with the SEC in a form 8K. Our record results for the fourth quarter and full year demonstrate the strength of our asset platform and the dedication of all our employees as we strengthen our brands, build audience share, and expand our advertising base.

In 2006, we once again effectively capitalized on our market leading ratings to drive solid year-over-year revenue and cash flow growth. Overall, for the fourth quarter and full year, we outpaced the general market with strength across all three of our operating divisions. We continue to benefit from the increasing population and purchasing power of the U.S. hispanic consumer, as well as the increased desire of local and national advertisers to target this growing market. Our results for the year also benefited from our broadcast of the World Cup and political advertising.

Finally, 2006 was a year of tremendous progress for our internal marketing and sales teams as our training and sales initiatives continue to bear fruit. I'm happy to report that much of our organic growth is attributable to our dedicated sales and marketing teams that come to work every day focused on driving ratings growth and broadening our relationships with the advertising community.

Looking at our consolidated results, for the fourth quarter, pro forma net revenue increased 6% to 73.8 million consolidated, adjusted EBITDA increased 9% to 25.6 million and free cash flow increased 14% to 13.2 million. For the full year, total pro forma revenue increased 8% to 286 million consolidated adjusted EBITDA increased 13% to 98.4 million and free cash flow increased 6% to 42.4 million. I'm proud to announce that on a GAAP basis the company delivered $100 million of consolidated adjusted EBITDA for the first time in its history.

Turning to our television division, fourth quarter revenues increased 4% versus an 8% increase in 2005. For the year, our television division also reached a new milestone with more than $150 million in sales. Revenues grew to $158 million in 2006. Our television increased its operating margins by 2 points in 2006.

For the fourth quarter, local revenues increased 11% while national revenue increased 1%. For the year, local revenues increased 7% while national revenue grew 15% led by World Cup spending. For the year, our television division generated $6.8 million in World Cup revenue.

Political revenues for the fourth quarter were 2.4 million and 4.5 million for the full year. 2006 proved to be a very exciting year for our television division. The World Cup broadcast once again placed our stations in the spotlight allowing us to attract new advertisers and viewers. Our sales and marketing teams drove pricing, monetized ratings, gains, and increased sellout rates, as advertisers continue to expand their overall spanish language TV budgets.

For the year, we brought in over 758 new clients who spent over $10,000 with our television group driven largely by the automotive and services categories. We have new advertisers in the year including Alltel, Car Express, JCPenney, Garden House, CVS Pharmacy, Chase Bank Corp, and Cricket Communications. Our strongest categories in our television division for the quarter and year included automotive, services, fast food, telecom and retail.

As a total percentage of television revenue, we did see a slight drop in the fourth quarter. As a result the weakness in our tier one automotive category.

However, our tier three local automotive category grew nicely in the quarter. For the year, our automotive business represented about 30% of total leverage and revenue and was up 7.7% over 2005. Our automotive business has bounced back nicely in the first quarter and through this week, the automotive category in our television business is pacing at plus 24% over last year's comparable quarter driven primarily by Ford, Toyota and Nissan. This growth in the first quarter is being driven across all three automotive tiers. Some of our highest growth advertisers for the year included General Motors, Toyota, Nissan, Fred Loya Insurance, Farmer's Insurance, Verizon Wireless, AT&T, McDonald's, Jack in the Box, More Furniture for Less, Texas State Lottery, Wells Fargo Bank, Western Union, Care Express, and King Ranch Markets in Las Vegas, Nevada.

Turning to our ratings performance, our Univision affiliate group continues to dominate ratings in their respective markets and Telefutura in many of our markets is the number two ranked spanish language television station. Our audience gains year-over-year were impressive. In the November book our Univision television group was up significantly., sign-on to sign-off across every demo. In adults 18 to 34 we were up 29%. In adults 18 to 49 we increased our ratings 14% over last November's book and in adults 25 to 54 we saw a 17% increase.

Overall, according to the November 2006 survey, 11 of our Univision television affiliates were ranked number one and two prime time. Adults 18 to 34 regardless of language. Our powerful south Texas affiliate, KNVO, delivered a whopping 167% increase in its primetime November rating. Our Tampa Univision affiliate also saw a huge increase over the prior November survey of 143%.

Other strong performers in the November book were Washington D.C. up 83%, San Diego, up 43% and our Boston Univision affiliate up 60%. Our early tracking for the February book indicates continued solid ratings growth in overall viewing. Prime time and early news based on household viewing. An important factor in our ratings growth is our prudent investment in local news programming.

Our stations have become a critical source for spanish language news and information in our markets. Local news enhances our value to the community and creates an attractive opportunity for advertisers. Looking at our local news franchises, we continue to generate strong ratings across our newscasts. 12 of our early news affiliates ranked -- Univision affiliates, ranked number one adults 18 to 34, regardless of language, with seven of those affiliates also ranking number one adults 18 to 49, regardless of language.

Overall, Entravision's early news ratings were up 27% in both adults 18 to 34 and adults 18 to 49 from a year ago. Our award winning local news product has played a critical role in our ability to track political advertising. We expect that strong position in local news to continue as we move into the 2008 presidential elections.

Our Telefutura television stations in our nine metered markets also had a strong November with an increase in ratings, sign-on to sign-off, of 32% over the prior comparable survey. Additionally, in six of our nine metered markets we're the number two rated spanish language television station behind our Univision affiliate. Entravision's Telefutura affiliates that delivered significant increases in prime time ratings were Las Vegas, up 80%, Orlando up 100%, and Tampa up 67% over the 2005 November survey.

Turning to our radio division, our results for the year significantly outpaced the general market. Our pro forma revenue increased 7% versus the general market, which was up 1%, according to the bureau. Local sales for the year increased 6%. While national sales increased 9%.

For the fourth quarter, revenue -- radio revenues increased 9% largely by an increase in our percentage of sellouts which for fourth quarter increased to 75% of our total sellable inventory. This compares to 70% in fourth quarter of 2005.

Fourth quarter was also positively impacted by political spending. For the quarter, we reported $514,000 in political spending and at our radio group. Total political spending for the year in our radio division was 854,000. Overall, local sales for the quarter increased 8% and national sales increased 9%.

As we focus on owning and operating radio stations in markets we own television properties, we continue to drive margin expansion at our radio division. Our divestitures of our San Francisco, San Jose and Dallas radio properties, reiterate our commitment to this strategy and our ability to successfully monetize nonstrategic assets. Our radio division improved its operating margins by 1 point over 2005.

In 2006, we welcomed the Entravision radio stations -- radio division to 132 new advertisers that spent more than $10,000, including Hyundai, Sony Electronics, Scion, Motorola, Jiffy Lube, and California Surgical Center. In the quarter, our top category in radio once again was auto which increased 24% and was led by a 48% increase in tier three local automotive dealer. Our top categories in the quarter were travel -- other top categories in the quarter were travel and leisure, which was up 40%, healthcare up 57% and media up to 33%.

For the year, the automotive category in our radio business was up almost 11% over 2005 and represented about 16% of our total radio revenue. And through this week, our automotive business at our radio division is pacing at an astounding plus 59%.

Our top advertisers in the quarter were Verizon Wireless, JCPenney, Anheuser Busch and McDonald's. These same four advertisers were among the top spenders for the year. Turning to the fall ratings book we saw an increase in listening in our key demo adults 18 to 34 year-over-year of 6% and some are compared to fall of 7%.

I'm happy to report some ratings highlights. You saw continued ratings success in our Piolín por la mañana markets. We carry the syndicated program in the eight markets we subscribe to Arbitron in only five markets of the eight.

In our key demo, adults 18 to 34, fall 2005 compared to fall 2006 and average quarter hour share, Piolín por la mañana saw a 580% increase in Denver. Palm springs experienced an increase of 47% and Sacramento saw a 279% increase. Piolín por la mañana, in Stockton, Modesto and Reno increased at 779%, 883%, and 38% respectively.

Piolín is the number one spanish language program in each of the markets mentioned above and number one in any language in Denver, Palm Springs, Modesto, and Reno. In fact, KXPK, the Peak, in Denver was rated the number one station in the market regardless of language, among adults 18 to 34, 18 to 49, 25 to 49, and 25 to 54. This is the first time a spanish language radio station finished number one in the Denver market.

Looking at year-over-year fall ratings for our Denver cluster, we saw a 57% increase to adults 18 to 24 and a 54% increase in adults 25 to 54. We also saw double digit growth in our key demo adults 18 to 34, fall 2005 compared to fall 2006 for our clusters in 9 of the 13 markets in which we subscribed to Arbitron. In El Paso, our Jose format helped fuel our ratings increase of 27% for our five stations El Paso clustering. Each of our California, San Joaquin Valley clusters Stockton, Modesto and Sacramento saw share increases of 252%, 101% and 15% respectively.

Turning to the Los Angeles market, we continue to invest in our morning show and programming. We have seen some initial improvements from the summer book and are confident that we'll start to see increased audience share in the first part of the year. Los Angeles remains a very large but competitive market and we have a great team working hard to execute our strategy to regain share. It is important to note that although we saw a slight decline in Los Angeles in the fall Arbitron survey, we have not seen any adverse effect in revenue as we move through the first quarter.

Moving over to our outdoor division, we saw strong top line growth in the fourth quarter of 12% with local revenue up 25% and national revenue up 4%. For the year, our outdoor division reported 7% growth over the prior year. Driven again primarily by local growth of 19% while national revenue for outdoor was flat. Top advertising categories for the quarter in the year included entertainment, services, health care and automotive.

The automotive category increases spending with our outdoor advertising business by 36% over fourth quarter 2005. And it was also the category that delivered the highest percentage increase over the prior year, plus 49%. We are optimistic about our prospects in 2007 as billboard earned -- billboards earned renewed attention from national buyers while we continue to strengthen our local advertising efforts.

In conclusion, at Entravision, we remain focused on our core strengths and the execution of our strategy. We are a leader in spanish language media positioned in the fastest growing and most densely populated U.S. Hispanic markets. This places us in an ideal position to capitalize on the growth of the Hispanic market and leverage all of our asset base to maximize shareholder returns over the long term.

We have strengthened our marketing and sales effort, with the appointment of David Burke as director of local sales for all three of our divisions. Dave is a terrific and experienced media executive, great motivator and is already having an impact on our local sales effort. Additionally, we promoted Eddie Melendez to the head of national sales for our television and radio business. Eddie is another outstanding Entervision executive, is now entirely focused on our national sales effort for both television and radio.

We are optimistic about 2007. We're off to a strong start and expect our assets will continue to outperform the general market.

Now I'll turn the call over to John DeLorenzo, our Chief Financial Officer.

Thank you, Walter. And good afternoon everyone.

As Walter has discussed we reported in line with our guidance for the quarter. Pro forma net revenue was $73.8 million, up 6%. Pro forma operating expenses increased 5% to 44.1 million. And pro forma consolidated adjusted to EBITDA, increased 9% to 25.6 million. Free cash flow, which we defined as consolidated adjusted EBITDA minus capital expenditures, cash interest, cash taxes plus interest income was $0.13 per share.

For the full year, pro forma net revenue was 286 million, up 8%. Pro forma consolidated adjusted EBITDA increased 13% to 98.4 million and free cash flow was $0.40 per share. Operating expenses for the quarter increased to $44.5 million an increase of $200,000 or 1%.

Excluding the 2006 and 2005 operating expenses incurred by our radio divisions in the San Francisco/San Jose market, Tucson and Dallas, that we sold in 2006, operating expenses would have increased to 2.2 million or 5.2%. Of the 5.2% expense increase, 0.2% relates to additional non-cash stock based compensation expense. 2.7 relates to variable expenses associated with the increase in net revenue and the remaining 2.3 is core expenses, such as, increased salary expense and increased rent and utility expense associated with DTV.

Operating expenses for the year increased 175.8 million an increase of 3.8 million or 2%. Excluding the 2006 and 2005 operating expenses incurred in our radio division in the San Francisco, San Jose, Tucson, and Dallas, that we sold in 2006, operating expenses would have increased to 9.6 million or 5.9%. Of the 5.9% increase, 0.6% relates to additional non-cash based compensation expense, 0.3% relates to new initiatives, 2.3% relates to variable expenses associated with the increase in net revenue.

The remaining 2.7 % is core expenses such as increased salary expenses, increased rent and utilities expenses associated with DTV, increased syndication, amortization, and increased outdoor leasing expenses. Corporate expenses for the quarter increased 4.9 million, of the 4.5 million, an increase of 0.4 million. The increase was primarily attributable to increased professional fees, wages, and non-cash stock-based compensation. For the year corporate expenses increased to 18.9 million from 17.5 million an increase of 1.4 million. The increase is primarily attributable to increased non-cash stock-based compensation of 800,000. The remaining increase is primarily attributable to increased professional fees and wages. Free cash flow was 13.2 million or $0.13 per share in the fourth quarter of 2006 up from $0.09 per share in the fourth quarter of 2005.

For the full year, free cash flow was 42.4 million or $0.40 per share up from 40.1 million or $0.32 per share in 2005. The EPS for Q4 '06 was $0.20 per share compared to $0.03 per share in 2005. For the year, EPS was negative $1.27 per share compared to a negative $0.08 a share in '05. But of the negative 1.27, most of it reflects -- just about all of it relates to the impairment charge net of tax taken in Q3 for the write-down of radio assets.

On November 1, 2006, the company board of directors approved the repurchase up to $100 million of its outstanding and common stock. To date,the company has repurchased approximately 1.5 million shares at an average price of $7.50 for an aggregate purchase price of approximately $11.3 million.

Effective February 16, 2007, the company entered into a new interest rate swap agreement with an initial note of $62.7 million of quarterly increases. That will expire on October 1, 2010.

The new agreement is structured to cover the amortized portion of the company's original interest rate swap dated 2005. This new swap agreement will convert the remaining part of our term loan into a fixed rate obligation of 6.56% which includes a margin of 1.5 times.

Turning to -- or 1.5%. Turning to our balance sheet as of December 31, 2006, our total debt was 498 million and our trailing 12 month consolidated adjusted EBITDA was 100.1 million. Our net debt to consolidated, adjusted EBITDA was 3.8 times. Cash on the books $118.5 million as of December 31, '06.

Turning to our outlook for the first quarter 2007, we are once again providing pro forma guidance information. The sale of the company's radio assets in the Tucson and Dallas markets in the third and fourth quarters of 2006 respectively, the company will no longer have any remaining broadcasting operations in those two markets.

As a result, in accordance with company policy, the company has elected to present its guidance on a pro forma basis by eliminating its broadcasting results from those markets for the current and prior period so that the comparison between the periods will be meaningful. The amounts excluded from net revenue and operating expenses for the first quarter of 2006 was 1.47 million and $1.224 million respectively. Expenses for 2007 will include non-cash stock based compensation to comply with SFAS number 123, share based payment.

The company expects approximately 400,000 in operating expenses and 600,000 in corporate expenses related to stock option compensation in the first quarter of 2007. For the first quarter we expect net revenues to increase by high single digit percentages and operating expenses to increase by mid single digit percentages as compared to the first quarter 2006. Excluding the non-cash stock based compensation corporate expenses are expected to increase by low single digit percentages as compared to the first quarter of 2006. Depreciation and amortization is expected to be between 11 and 11.4 million. That interest expense for free cash flow purposes is expected to be between 7.5 and 8 million. And we currently anticipate a reduction to non cash interest expense of approximately $1 million related to an increase in the value of our interest rate swap agreements.

We expect Cap Ex to be between 3.7 and 4.2 million for the first quarter of 2007, as anticipated we finished the majority of our digital television upgrades in 2006, concerning our 2007 Cap Ex budget, there will be 5.4 million in digital expenses and approximately 10.3 million of maintenance Cap Ex for a total of 15.7. The digital expenses include the remaining digital television conversions, HD upgrades at our radio division, and digital board upgrades at outdoor. First quarter earnings per share is expected to be in the range of negative $0.02 to negative $0.03 per share and free cash flow to $0.03 per share based 104,200,000 shares outstanding. This concludes our formal remarks. Walter Phillip and I would be happy to take your questions. Operator.

Thank you, sir. [OPERATOR INSTRUCTIONS] Our first question comes from the line of Victor Miller from Bear Stearns. Please go ahead, sir.

Good afternoon. Thank you for taking my questions. The first one is when the Univision deal is completed, are there any potential changes in the relationship between Univision and Entravision terms of affiliations, programming, you know, ad inventory splits that we might need to watch out for? And secondly, just on the retrans, the real victors in retrans lately have been the ones that have [Inaudible] strong local positions. You have both of those things. And is there any reason why ultimately you could not, you know, print some pretty good retrans dollars? And where does the retrans agreements sit with your cable operators at this point? Thanks.

Victor it's Walter. As to the first question, we don't anticipate any changes in our relationship with Univision as it relates to programming, inventory or any other issue related to our relationship.

Okay. Thank you.

As to the second part of that question, we, you know, we will not be negotiating any retransmission agreements until late 2008. So we don't think we gain anything by discussing our expectations, but I believe it's important to note that we will be working closely with Univision in this area and probably starting 2008 and as we move through the year.

Thank you very much.

I'd like to just clarify on the Univision question, all of our agreements will be fully assumed in their present form by the new buyers so there will be no contractual changes whatsoever between our company and Univision.

Thank you, John. Thank you, Walter.

Thank you, Victor.

And our next question comes from the line of Marci Ryvicker from Wachovia Securities. Please go ahead.

Thank you. Can you talk about the discrepancy in national advertising with national up only 1% on the television side and up 9% on the radio side? And then for the outdoor segment, expenses were up 10% which seemed high. Is this expense growth related to higher revenue growth or is this just additional investments in the business?

John, you want to take the expense -- Hi, Marci. This is Phillip.

Hi.

As Walter had mentioned, our national business was up 15% for the year in TV. It was only up a point there in fourth quarter, and our pay fee actually for TV for first quarter on the national is very strong. We had some slowdown as I think he eluded to on the domestic auto side. And despite our growth in seven or eight of the top ten categories, that was enough to pull the national down. The tier one advertising from automotive, you know, mostly went away in the busy political clutter months of October and the first week of November. So with that, we didn't see much of a bounce back, but that has or much of the a growth on the auto side. But that has completely changed and reversed itself in the first quarter and we have significant growth on the auto side and significant pacing on first quarter for TV and it is driven by auto, fast food and healthcare. On the radio side, our fourth quarter local grew 8 to our national grew nine for the year. Radio business was up 6, local, national 9 again. And our first quarter pacing is very strong. But as you know, on the radio side, the national represents only about 23% of our total radio revenue so it's a little easier to grow a percentage gain over a smaller base. But our pace is local plus 17. We are having a little bit of softness in national up until this week, but we are waiting on a lot of pending orders, there's a lot in the pipeline right now. Overall, our radio's pacing plus 13% and we are at about 88% of our B.O.B. to forecast right now at of today. So we did have a little slowdown on the TV side in summary, national primarily due to the auto business and that was primarily due to the slow down in domestics, the three big domestics. So though the imports were still strong. And that's turned itself around on national and first quarter for TV with actually Ford up in spending and the imports continuing to do quite well for us.

Marci, regarding your outdoor question on the expense side, of that, probably almost 3 or 4% of that relates to our new initiative for buses in Tampa. The rest of it is really associated with additional leasing and sales and commission expense related to the larger sales number.

Great. Thank so you much.

Our next question comes from the line of Jonathan Jacoby from Banc of America Securities. Please go ahead.

America Securities, whatever works. Firstly, on the Univision going private, it seems that they're going to be interested in selling some radio stations. Any interest there? Second question, is there any other assets in the portfolio perhaps that can be monetized. And then lastly, it sounds like actually just the general tone of your business both radio and television are at equal strength if not stronger in the first quarter than the fourth quarter and I was wondering if you think that is sort of the overall market where there's something specific to Entravision and/or Hispanic media. Thanks.

Jonathan, with regard to the question about the Univision assets that, radio assets that may be divested, you know, we don't know. We don't have a list of those assets. I don't think anybody does, but certainly if they do decide to divest some of the radio assets that they own, we would be interested in looking at them. As far as any other assets that we might monetize at this time, you know, I can't say that we have anything to talk about at this time. And finally, the final question was related to?

Just it sounds like that your radio TV segment specifically the tone of business is either at the same level if not stronger in the first quarter than the fourth quarter, wondering if there's anything specific to Entravision, hispanic media or just the overall sort of just the general market trends.

Well, as we indicated from the information that we've given you so far, you know, our radio and television business are quite strong as we move into the first quarter and we're certainly pleased with the growth. That was a little different in the first quarter where our radio division was stronger than our television division by about 4 points. So as Phillip pointed out, automotive has bounced back after having a bit of a slow fourth quarter and in our television business so that's fueling our growth. As well as telecom. And our radio business is also has strong automotive growth. So, we're quite pleased with the way first quarter's proceeding. I can't say if this is -- I look at the other groups and the industry information that I get and that appears to be quite lower than what we're seeing. So I think it probably is particular or to our company. I mean, I think we're doing a terrific job of growing our assets. Our sellers are just outstanding and I think a lot of that has to do with how we prepared over the last few years for where we are today.

Thank you.

And our next question comes from the line of Eileen Furukawa from Citigroup.

Thanks. Thanks for taking the question. A couple of questions. You talked about your radio sellout going up to 75% from 70% in the fourth quarter and I just wanted to know what's primarily driving this increase, is it more from new advertisers or current advertisers and do you expect this type of incremental increase to sell out to continue into '07? I also wanted to know if you could give us a little bit more color on sort of this strength in the auto category you're seeing in radio and outdoor? You're talking about 59% out pacing the radio and you had a 36% auto and outdoor [Inaudible]. And the last thing is, can you give us a little more details on the tax benefit you have in the fourth quarter?

Okay. Thank you, Eileen. This is Phillip. The sellouts for TV were 77% up four points on Q4. And then the sellouts for radio, I think you were asking about were 75% for Q4. And actually 75% on average for the entire year. They were up about 5 points in fourth quarter but in both cases that's indicative of having any significant amount of political. That'll squeeze your inventory. And then the question related to auto --

Yes.

You want a little bit more color on the auto. You know, we talked about a bounce back. We had the big three domestics in fourth quarter on television pretty much stayed away from those clotter weeks, October, first week November on the political side and that's softened the whole quarter for us. But we've had continual strength from all tiers in radio and significant strength has carried over from fourth into first in tier two. In tier three on the auto side for TV. In addition to that, we've had some significant growth for corporate in first quarter on TV. So I think it's generally, we're doing a better job of putting more auto advertisers on the air in first quarter. A lot of what we've been working and farming for the last six, eight, nine months, is -- we're starting to harvest here. Particularly in first quarter and local dealership and dealer groups. Nissan's been a big growth story for us. On the dealers side. Toyota dealers has been a big growth story. That pace for auto, is strong on the TV and strong on the radio side. We expect that to continue. And then I think you had a question about the billboard we're at a 10% pace on the tier one on the billboard side as well.

And then just a quick question the tax benefit.

Sure. I mean basically, good old days when you used to just take your quarterly income and multiply it by your effective tax rate is no longer around. We have to basically annualize our tax benefit going forward. And as you recall in the third quarter, we had a write-off in the radio assets which created a tax benefit. Instead of just taking the entire amount in that third quarter, we had to spread it over the subsequent three quarters beyond that. So that was approximately half of the benefit. The other half of the benefit was state tax rate changes primarily in Texas and in New York that created additional benefits as a result of increases in those rates.

Do you expect -- so how should we model that into '07?

Boy, sometimes I wish I could guide you on that. That's a tough one. Really have to, you know, we spend a significant amount more time than we ever did preparing our provision on a quarterly basis. If I were to give you my best guess right now, I'd say probably flat to $1 million of benefit going into the first quarter.

Okay. Thanks a lot.

That's a guess.

And our next question comes from the line of David Joyce from Miller Tabak. Please go ahead sir.

Thanks. Just with this really strong outlook for the first quarter was that overall radio pacing up 13%? Just wanted to verify I heard that correctly. Also, are you seeing any other trends in the format changes? It may be in relation to how the overall music businesses week last year, i.e., the regional mixing formats and then going by the wayside as well as regular tone. Thank you.

Yes, we did say that our radio business is pacing the plus 13% as of this week. As for any perspective format changes, we don't see any at this time, as you know, we're always looking at our ratings and our performance of our radio stations and our different formats. And if we see that a format is starting to lag, then of course it will do things to either improve it or perhaps change it.

Thanks. And what was the number of the new -- number of new clients coming to TV in the fourth quarter.

I believe that the number I gave you was -- oh, in the fourth quarter? I gave you a year number.

Okay.

It was over 700.

Okay, right. Okay.

For the year.

Okay. Thank you.

Okay.

Our next question comes from the line of Gordon Hodge from Thomas Weisel & Partners. Please go ahead sir.

Hi, good afternoon. A couple of things. One, just a follow-up on Victor's question about the Univision contract. Is it written into the contract and forgive me for not having dredged it up. But is it written in there that you split the air time 50/50 in which case, you know that would be that contractually wouldn't change. Then it looked as though the growth in the fourth quarter was really driven through increased sell out. I'm just wondering if you're seeing increased pricing power as you move into the first quarter given the strength in pacings and then lastly, I'm wondering if you, John, had made any effort or can help us kind of normalize earnings per share excluding the gain and excluding the tax benefit what, you know, what would EPS have been using more normalized rates if you have that?

On your first question on Univision contract, the original contract does have the ability for Univision to take a different amount of inventory and its various situations that it could occur over, but that's always been the case and we've been in this agreement for ten years and we've never changed from 50/50. But the answer is there are circumstances where they can potentially reclaim inventory. It doesn't make sense to do it because they'd have to sell it nationally and certainly don't need that inventory. They're not sold out nationally and secondly -- or to networks and they're not sold out to networks, and secondly, they would have to take that inventory simultaneously away from their O&Os which would hurt their local sales efforts. So --

Got it.

It's possible but not probable because of that situation.

But I think John's also referring to special event programming where they have the right to take more inventory to subsidize the costs of the programming.

Okay, got it. Thanks.

The World Cup and the Grammys and other major events. [Inaudible] Even the national news.

But it sounds like if they do it to you, they do it to themselves as well.

Of course. Of course.

Okay. Got it. Perfect.

And then there was -- what was the other part of why you are question, Gordon?

I was just wondering if, it sounded like price increases wasn't the real driver in the fourth quarter, I'm curious, are you starting to see an ability to push price into the first quarter given how strong your pacings are or is that a function of the continued increases in sellout?

No. The pricing has gotten better in the first quarter. But you know we did have a bit of political and that doesn't help the pricing integrity [Inaudible] on the TV side and so the bulk of the growth was driven by inventory sellouts, which is consistent with a heavy political month in a given quarter but we're back to driving rate in first quarter. And that's hopefully we'll get a great deal through.

Your last question, Gordon, was about normalizing the EPS. The bottom line is we have $8 million of tax benefit, about $7 million of Dallas gain. That equates to about $0.14 a share. If you subtract that from the 20, we're at 6 and that's pretty much where the consensus is.

Yep, perfect. Thank you.

And our next question comes from the line of David Miller from Sanders Morris and Harris. Please go ahead.

Hey, guys. A couple questions. John, what was the tax basis exactly on the Dallas cluster that you sold in the quarter? I'm not sure I see that reconciled here in the press release. And then Phillip, you mentioned that there was a sales slowdown due to, you know, the tier one auto category not performing in the way you guys had thought prior to the quarter starting. What exactly do you mean by tier one? Is it as simple as the big three automakers here domestically or is it more complicated than that?

Tier one is the factory business. Tier two is the dealer group business and tier three is the individual dealership in the local market.

I'm sorry, your voice faded. I couldn't hear.

Tier one is the factory business. Two is the dealer group business and three is the individual local car dealer, and we had indicated to you that the fourth quarter we saw a U.S. domestic tier one slowdown again, a lot of it can be related to this you know they'll go on hiatus or they'll get bounced in the high political cluster months or weeks if you will. They're all looking for the same inventory. They're all looking for early news, local, and national and they're looking for prime and we can support. So we've gotten great deal of demand. So a lot will go on hiatus. But that has completely turned for us in first quarter, in our pacing in January and February, actually for auto on the TV is up double digits and the radio side were seeing over 50%. As Walter had mentioned. But that's across all tiers, one, two and three for the pace, that's through yesterday, February 21 for radio. So, we're very bullish about our auto business. It's come back strong and I don't think the political area necessarily helps us. I mean it's a -- it may be mentioned a couple million dollars but net increase over last year is about 1.8 million and you could basically cut that in half because were turning away $5 by selling those political ads, and I think that's what you saw here in October -- past October early November. Our business is very strong and that was Eileen's question or Johnathan's point. It's not what we're seeing in the overall market, it's Hispanic media in our company. Your last question, David, tax basis on Dallas was 55 million so we used some N.O.L.s.

Okay. Wonderful, thanks.

Our next question comes from the line of John Klim from Credit Suisse. Please go ahead sir.

Hey, good afternoon, guys.

Sounds like you started to convert some of your billboards to digital. How many boards do you anticipate converting and do you know what type of revenue multiple the digital boards are generating? And then secondly, are your -- are you generating material revenues from streaming yet? And then what percent of your TV revenue comes from stations' web sites if any? Thanks.

To the first question, the conversion of our boards to digital, we have not started that process. I think John may have talked about it in his remarks. What he's referring to is capital investment or capital expenditure budget that we have allocated for 2007 in that budget there is some money for the digitization of some of our boards here in Los Angeles. It's an inventory that we call City Lights and then we have the right under our agreement with the city to add 150 boards to our existing 250 City Lights which are mostly on the west side and their vertical HE boards are back lit, very dramatic. And as we add these 150 boards, we expect to digitize them or at least build them with the ability to for digitization later on in the process of exploiting the particular display. As for streaming, we are -- our current streaming revenue is very small, mostly it's being driven by our 103.1 in Los Angeles as well as Super Straight in Los Angeles. And as for any, I'll call it revenue that's being generated by our web sites, we're still in the early stages of that process. It's certainly an area that we're spending a lot of time on as we move into 2007. We've begun the process of building out viewer web sites for all of our television markets. And that's going quite well. These are state-of-the-art viewer web sites. As we're doing that, we're also moving some of our clients over to web sites and we expect to accelerate that in the future. The same with our radio business. We have currently have several radio markets with web sites. We are in the process of improving all of those web sites with, again, state-of-the-art technology. Finally, as I stated last, I mean in other calls, we have a digital strategy that we started last year with Televista, a digital mobile strategy and we are continuing that as we move into 2007, that's going quite well, we also expect to add other features and programs to our joint venture with Televista on the digital side as we move into 2007.

Great. Thanks very much.

You're welcome.

And our next question comes from the line of Anthony DiClemente from Lehman brothers. Please go ahead, sir.

Hi. Thank you. Just wanted to get a better feel on line of questioning on retransmission fees. There's a school of thought that for Univision to win retransmission fees from the cable M.S.O. providers and the satellite providers that there needs to be a precedent set by a network, like a CBS, a heavyweight, that goes in there and is able to successfully renegotiate. So does that make it a tougher time that you're affiliated with Univision in order to obtain retrans or does the fact that you do have an affiliation with the network actually make it easier relative to the likes of like a Sinclair or Hearst Argyle? I'm just trying to get a feel for the dynamic there. Can you give me some color? Thanks.

Well, I'll say just a couple on a couple of points. And I'm sure John and Phillip can also add in with some other important information, but I mean as I said earlier, we plan to address this entire retransmission area with Univision. We've already talked to them about it, and we've agreed to work closely with them. So, you know, we think that the power of Univision and Entravision working together is pretty substantial and we think that our programming is unique, the best spanish language programming in the world. We operate in some of the highest density Hispanic markets in the country certainly many of the subscribers to the cable systems in our markets are Hispanics. We think it's important that the cable providers continue to deliver Univision programming in every one of our markets as well as the Univision markets.

Does the fact that your Hispanic audiences have higher proclivity towards over-the-air broadcasting versus non-hispanic audiences make it more difficult to negotiate those retrans fees?

We don't think so.

Meaning it would make it easier for a cable or satellite provider to say this is a signal that is, in fact, free, and by the way, you know, x-percent of the viewing audience that is Hispanic actually does receive this signal for free as opposed to the non-Hispanic audience where it's a lower percentage.

Anthony, this is Phillip. We -- nationally, the Hispanic cable penetration runs about 10 points below the total market.

Okay. Right.

The underlying factor here and what is we believe will bring a great deal of strength, not only the fact that you have 100 stations talking to a cable operator versus 60 stations if Univision were alone, but we will go hand-in-hand with them, or arm-and-arm with them if you will. The underlying fact is that we're the number one or number two rated station in the marketplace. And many of these markets that are 20, 25% or greater Hispanic density. These cable operators cannot afford to do without the Univision Telefutura station. And then it's the same thing for local and the DBS. And to your point about somebody setting a precedent on the network side that's already been done on the D.B. S. They're getting paid.

That's a great answer. Thanks for taking the question.

Thank you.

Our next question comes from the line of Lee Westerfield from BMO Capital. Please go ahead, sir.

Thanks, gentlemen. Good afternoon. All right. Just two questions if I could. The first one, to your comments about the pacings in the radio division. Are you stronger outside Los Angeles or in Los Angeles like I said specifically it is really the question about how well you've been monetizing Piolín outside of obviously outside of Los Angeles, lately. The second question is looking at the dynamics of the comparison versus World Cup last year. This year you have -- if you have it, to your or you can recall it, what kind of revenue you generated off of Copa America in 2003 if I can get some sense about the offset to World Cup comparisons?

Lee, the first part of your question, I think had to do with the pacings of our rated division and across our entire rated division, I would say almost every market with the exception of one or two has, you know, strong pace for the quarter. And what was the second part of the question?

The radio question was really how well you are monetizing the morning show outside of Los Angeles?

Well, I think what you are seeing in the first quarter is that monetization. I mean, we launched Piolín in, I believe it was March of 2006, and it's taken six to nine months to reach the point where we are today. We're seeing you know fantastic growth in several of almost every one of the Piolín markets as well as the markets that don't have Piolín. But as I pointed out earlier in, you know, give you an example in Denver, the Peak is the number one radio station in the market in any language and Denver is facing very strongly, so that's evidence of our ability to convert the ratings that I described to you in my remarks to revenue.

And, if you have it, about the World Cup America and Copa America revenues, 2002, 2003 and what we might be thinking about for this year some.

Well, optically it's very tough comps coming into the second quarter based on World Cup revenue last year, however that said, you know when we rake through it, about half of that was incremental and the other half was coming out of other budgets. That we already had. So we hope that the Copa, the League a Mexicana, particularly with friendly matches against some of the M.L.S. teams here in the United States which are generating a lot of excitement, the women's World Cup, et cetera, will be able to recoup a great deal of that, if not all of that, World Cup money and we've been working diligently to do so with packages on the street for all of our sporting events coming up particularly in the second and third quarter.

Gentlemen, thank you very much.

Thank you, Lee.

And our next question comes from the line of James Dix from Deutsche Banc. Please go ahead, sir.

Good afternoon, gentlemen. A couple questions. I guess first, you mentioned your radio was pacing up 13% for the first quarter. What do you have for TV and outdoor in terms of your pacing?

James, it's Phillip. Radio is 13, TV's at 11, and boards are at 5 mid single. Currently.

Okay. And in terms of the pro forma 2006 numbers, John, that are apples to apples with the 1Q '06 that you have, do you have what that is for just for revenue and EBITDA?

Yes, I do. Hang on. Full year '06. On the revenue side, on the pro forma basis, for '06 it's 285, 286.

Okay.

And on the expense side, 17568.

So that's pre corporate?

That doesn't include non-cash stock based compensation.

That does not include the non-cash comp?

That's right.

Okay. And then in terms of -- do you happen to have the, your power ratio in L.A. for '06 for the radio group?

It's 1.02.

Oh, okay, great. And then I guess, my last question is just kind of we kind of talked about it a little bit looking at the TV outlook. Just first, how did that 6.8 finally fall in your view in terms of by quarter in terms of the World Cup impact and what should we be looking for in terms of if you have huge rating gains in the November book? I mean, how should we be thinking that in terms of modeling your potential to grow the underlying business after wee' tried to, you know, factor out whatever incremental World Cup comps you're going against? And I guess finally, I mean, at any issue that you think is relevant in terms of the TV outlook but also, in terms of the political, do you have any expectation for political this year? Do you think there's going to be any impact of from California moving, potentially moving its primary on your group either late this year or next year?

I'm sorry. That quarter World Cup soccer was 80% of our revenue and that's 6.8. 20% was the third quarter. And as we indicated to you, you know, we figure about half of that is incremental. As far as your modeling on those ratings gains going forward monetizing that and revenue first, second quarter, I'd model it down very positively. and then who's the --

The political. Political growth.

Well, we're, you know, we're encouraged and optimistic that the presidential upcoming '08 elections, you know, will have an effect on our markets in California/Texas with the primaries moving up. I think we're going to see second half '07 dollars. Couldn't have told you that three, four months ago but I think that that may be a reality and certainly this campaign is going to move up and move quickly. Last night, you saw from Reno, Nevada the presidential debate. And that's the first time I've seen this type of candidate debate this early in the running for presidential election. So I think it's going to have a positive effect particularly in those states I mentioned.

What -- just for reference, do you remember what you had in '03 for political?

In television?

Yes, or if you have just a consolidated number but mostly would have been mostly from TV.

Okay in '03, we had -- it was a small number.

Yes, 592,000.

Okay. So I guess is your bet you will be at least that, this year?

In '07?

Yes.

I think we're going to beat that. As Phil pointed out, we anticipated we were going to see political revenue as a result of the 2008 presidential election starting today, in the fourth quarter. As you know, we've got Nevada's an early primary. I think it's mid January and we've got some very strong assets in Nevada. So we expect to see money, you know, political money coming into that market certainly in the fourth quarter. Then as Phil pointed out, California and Texas have now moved up. Those are gigantic states where we have a lot of assets and we expect we'll benefit from that as well and we think we'll see some money now in the fourth quarter. But the political revenue for us is a two edged sword. It comes in at a relatively low rate and it takes a lot of inventory, and, you know, that cuts into the growth of some of our other categories. So we do like to see it. We're particularly, I would say, impressed with the growth of the Hispanic voter base and the fact that the political industry sees this voter base as important to electing their candidates, and we think that's going to continue. We think that that scrutiny by the industry, political industry will continue in 2008. We'll probably see, you know, a lot more revenue in 2008 political than we saw in 2004, in the 2004 presidential election. So at the same time comes with a cost because it does take inventory from our other categories

One last thing, would you expect it to be more incremental though potentially for the primary just because it's coming earlier in the year when your sell out rates are lower?

You mean --

For next year

-- for the fourth quarter?

Yes, or really first of February primary.

That's a good point you make. It may be less incremental because it will come probably late in the fourth quarter perhaps right after the holiday season, and then it will go move into the early first quarter where we do have more inventory than throughout the rest of the year.

Okay. Okay, great. Thanks, guys.

And our final question is a follow-up question from the line of Victor Miller from Bear Stearns. Please go ahead, sir.

Hi this is actually Monica for Victor. We just had a couple of quick questions on pro forma numbers for the second quarter and third quarter. We're wondering if you could break that out. And then also we wanted to get the latest N.O.L. balance as of the end of the year. Thanks.

The N.O.L. balance is $77 million at the end of the year. Let me get the breakout for you. Do we have it handy here? You know what, let me get it to you after the call.

That's great, thanks.

All right, gentlemen, there are no further questions at this time.

Thank you, operator. And thank you, everyone, for participating on our fourth quarter and full year 2006 investor conference call. We do look forward to joining all of you in June on our June investor conference call when we will provide our first quarter 2007 results and second quarter guidance. Thank you for participating.

Ladies and gentlemen, that does conclude the conference call for today. We'd like to thank you for your participation, and ask that you please disconnect your lines. Thank you, and have a great day.