Entravision Communications Corp (EVC) 2007 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Entravision Communications Corporation's fourth quarter earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded Thursday, February the 28th, 2008. I would now like to turn the conference over to Mr. Walter Ulloa, Chairman and CEO. Please go ahead, sir.

Thank you. Good afternoon, everyone, and welcome to our fourth quarter and full year 2007 earnings conference call. Joining me today 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 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 Tucson and Dallas during the fourth quarter of 2006 respectively. Whereby the Company has selected to eliminate its broadcasting results from those markets for the prior year periods so that year-over-year comparisons will be meaningful. The Company has provided a reconciliation to these non-GAAP financial measures to their most directly comparable GAAP measures in today's press release. The press release is available on the Company's website and was filed with the SEC in a Form 8-K.

2007 proved to be a challenging year for our television and radio businesses. While we had had a strong first half, specifically in radio, which on a pro forma basis was up 11%, we faced tough comparables due to about $14 million non returning World Cup and political revenue in the prior year and a difficult advertising market in the second half of the year. As a result, our pro forma revenues finished flat for the year while our fourth quarter revenues excluding political increased by 3%. Despite these challenges we continued to outperform the industry when you strip out the impact of non recurring events that occurred in 2006 such as the World Cup. We also continued to manage our costs and for the full year we delivered double-digit free cash flow growth. We are delivering solid audience shares and are focused on effectively capitalizing on our market leading positions. Our sales teams are working diligently to deepen and broaden our advertising base and our management is committed to driving operating efficiencies.

We continue to benefit from the increased population and purchasing power of the U.S. Hispanic consumer as local and national advertisers recognize the potential of this market. In addition to focusing on improving the performance of our portfolio, we have also continued to review avenues to maximize our asset base in the M&A market. Our strength lies in our ability to operate both television and radio in the nation's most densely populated markets, Hispanic markets. We've taken a prudent approach to transactions adding stations where we believe we can further strengthen our position and exiting markets where growth may be limited and where we believe we can achieve attractive returns on our investment.

On December 1, 2007 we announced our acquisition pending FCC approval and began LMA of WNUE FM, in Orlando, Florida from Mega Communications for $24 million. This is the 11th marketplace where Entravision owns both television and radio. WNUE FM will complement the television stations that are already a part of our broadcasting portfolio in Orlando. Also, earlier in November following a thorough review of our business with our Board of Directors and advisors we decided that the sale of our outdoor business would be in the best interest of our shareholders.

Today we announced the sale of our outdoor division to Lamar advertising company for $100 million. We believe this sale will unlock significant value for shareholders. The proceeds will strengthen our ability to invest in our core television and radio businesses while improving our financial flexibility. As in the past we will carefully review all options for utilizing our cash and returning value to our shareholders.

Looking at our consolidated results for the fourth quarter, pro forma revenue declined 2% to $62.5 million, consolidated adjusted EBITDA declined 10% to $23 million, and free cash flow increased 1% to $13.4 million, or $0.14 per share. Excluding political advertising of $2.9 million in 2006 and $200,000 in 2007, revenue was up 3% in the quarter. For the full year, total pro forma revenue was flat at $250 million. Pro forma consolidated adjusted EBITDA declined 4%, to $94.1 million, and free cash flow increased 20% to $50.9 million. Earnings per share for continuing operations for the fourth quarter and full year were $0.21 and $0.39 per share respectively.

Turning to our television business, fourth quarter revenues decreased 2% versus a 4% increase in 2006. Excluding political revenue our pro forma fourth quarter revenue increased 3%. For the year, our television division posted a revenue of $156 million, 1% lower than the $158 million in sales generated in 2006 when the Company received record political revenues of $4.5 million, and $6.8 million from World Cup advertising. In comparison, TV reported that the general market television industry was minus 12% in the fourth quarter and minus 7 for the full year. In total, political revenues for the fourth quarter and full year -- for the fourth quarter and full year was $200,000 and $400,000 respectively. This was significantly lower than 2006 when we benefited from a record number of political races occuring in the markets and generated about $2.4 million of political revenue in the fourth quarter and about $4.5 million of political revenue in the full year for our television business.

Our sales and marketing teams drove pricing, monetized ratings gains and increased sellout rates all in the face of a difficult advertising environment. In the fourth quarter, 27 new clients advertised with our television division and spent over $10,000 each. For the year, we brought in over 200 new clients who spent over $10,000 with our television group driven largely by the auto and service categories. Our strongest categories for the year included fast food, telecom, auto, and retail. Categories that saw a decline in 2007 included grocery, finance, and political. Our largest advertisers for the year included Ford, General Motors, McDonald's, AT&T, and Mervyn's. New advertisers included Mexican Airlines, Quaker State, Pacific Care and JPMorgan Chase.

Turning to our ratings performance, our Univision affiliates extended their ratings leadership positions with a November 2007 sweep. Our Univision affiliate group continues to dominate ratings in their respective markets. Our Univision audience continued to show strength in their respective markets with ten of our Univision affiliates number one or number two in their markets, adults 18 to 34 sign on to sign off regardless of language. Telefutura, in many of our markets the number two ranked Spanish language television station. In the November survey seven of our Univision affiliates were ranked number one in primetime, adults 18 to 34 regardless of language. Year-over-year, two of our affiliates enjoyed triple digit prime time increases. Adults 18 to 34. Las Vegas increased 144% and Hartford rose 133%. Three other shining stars were Albuquerque growing 65%, Boston growing its primetime 50% and Santa Barbara increasing its primetime 43%.

Our local news programming continues to perform extremely well, it enhances our value of the community and creates an attractive opportunity for advertisers. In addition it has played a critical role in our ability to attract political and issue specific advertising and should represent an attractive platform for election spending in 2008. We believe based on our internal research and historical information that states where Entravision has important media clusters like Colorado, New Mexico, Nevada, Florida, and Arizona will become important battleground states in this year's upcoming presidential elections. Our local newscasts in these markets will be effective outlets for the messaging of the two presidential campaigns.

In 12 of our local news markets our stations were either number one or two in their respective markets adults 18 to 34 regardless of language. This again places us in a favorable position entering the presidential election cycle. Locally our Boston affiliate enjoyed 100% growth in its local newscast over last year, additionally, Albuquerque rose 47%, San Diego grew 42%, and and Macau has increased 24%. Our local late news showed similar success as seven of our affiliates were either number one or two adults 18 to 34 regardless of language. The group ratings grew 18% for adults 18 to 49 and adults 25 to 54 and 9% for adults 18 to 34. Locally year-over-year several of our local late newscasts enjoyed triple digit growth including Monterey, up 150%, Albuquerque, up [142%], Boston, Tampa, and Santa Barbara each increased their local late news rating by 100% over last year.

Our Telefutura plants and 18 of our Univision television markets continued to post impressive ratings gains and in the majority of our markets they are the second most watched Spanish language television station right behind our Univision affiliate. Year-over-year our Telefutura group increased its ratings 50% sign on to sign off. Prime time also held steady for Telefutura over last year at this time. Our early tracking for the February book indicates continued solid ratings growth for our Univision and Telefutura affiliates in overall viewing, prime time, and early and late local news based on household dealing.

Turning to our radio division, our 2007 results outpaced the general market. Our pro forma revenue increased 3%. The general market is estimated to be down mid single digits according to the Radio Advertising Bureau. This is on top of a 7% increase that we experienced in 2006 which included a total of $2.9 million of World Cup and political dollars. Local sales for the year were up 4%, while national sales were up 1%. Overall for the year we saw growth in four of our five top categories with Automotive up 6%, which represents 20% of our total revenue, travel and leisure saw a 9% increase, services were up 2% and our largest increase was from telecommunications which was up 39%.

The tremendous growth in the Telecom category was propelled by the increased spending by Sprint which increased its advertising budget 196%, 137% increase by Helio, and AT&T increased its spending by 20%. For the fourth quarter, radio revenues decreased 1% due in large part to the soft overall advertising environment and difficult comps from last year, when we finished up 9%. Local revenue which represents 76% of total revenue was down 1%, and national revenue ended up flat for the quarter. We are expecting the RAB to announce that the fourth quarter will see a revenue decline of mid single digits. They have already released a monthly data that showed October decreasing 2% and November and December were down 6 and 5% respectively. For the quarter, for the fourth quarter, we reported $12,000 in political spending at our radio group, down from $514,000 in 2006.

In the quarter we welcomed 33 new advertisers to Entravision radio that spent more than $10,000 each, including Geico, Ace Cash Express, Living Spaces, and MGM Mirage. For the year we welcomed 105 new advertisers to our radio group who spent over $10,000 each with us. In the fourth quarter, we saw strength in the telecommunications category which experienced growth of 51%. We saw an 8% increase in fast food restaurant and an increase in brand name products of 93%. However, the subprime debacle and the weak housing market led to a trickle down effect on categories such as auto, which saw a decrease of 13%, service travel and leisure, healthcare and most notably the financial category which was down 21% versus fourth quarter of 2006.

Looking at the fall's ratings release we continue to grow our share within a number of our markets. We saw double digit growth for our (inaudible) in Albuquerque, Las Vegas, and Stockton. (Inaudible - spoken in Spanish) continues to perform well for us. (Inaudible) is the number one ranked morning show in adults 18 to 34 regardless of language in Denver, Stockton, Modesto, Reno and Palm Springs and number one in Spanish in Sacramento and number two overall. (Inaudible) saw double digit growth in both Palm Springs up 18%, and Modesto which increased 25% in average quarter persons in our key demo, adults 18 to 34, summer 2007 compared to fall 2007.

Los Angeles remains a very competitive market and we believe the programming changes we initiated are starting to generate results. Since making the musical adjustments we have seen five months of consecutive growth. The fall book was hurt by an inexplicable drop off in October but we are very encouraged by the growth in November and December. When we compare December monthly numbers to October, we experienced a 3% increase in morning drive, a 37% gain in midday, afternoon drive, and midday afternoon drive increased 110% for the entire week of Monday through Sunday 6 a.m. to 12 midnight. KSSE grew 44%.

To accelerate the growth on KSSE we hired Maria Nova, and named program director for (inaudible). Maria comes to Entravision with 20 years of programming experience and during her tenure at KSCA and KLUV she was a programmer that took both these radio stations to number one in the Los Angeles market regardless of language. We also moved our very successful afternoon talent (inaudible) to the morning show of (inaudible). His afternoon show exploded in each marketplace in which broadcasted including a year-over-year increase in average quarter hour share of 19% in Los Angeles, an increase of over 50% in Sacramento, Modesto, Stockton, and Las Vegas. (Inaudible) performs the role for the lead character Chocolata, which joins morning jockey (inaudible) for the all new (inaudible) which debuted on January 7. This very entertaining and humorous centric show is truly unique and there is nothing else like it in the marketplace. (Inaudible) will accelerate our ability to grow our listener base not only for KSSE but all of our super stations.

To conclude despite an extremely tough advertising market we continue to execute on our business plan. We have a proven business model that has made us a leader in the Spanish language television and radio industry as we have positioned our assets in the fastest growing, most densely populated U.S. Hispanic regions. The sale of our outdoor assets allows us to focus on this core strength as we review opportunities to expand existing clusters and enter into new markets with attractive growth characteristics.

We will also continue to review plans for returning cash to our shareholders as we did in 2007. We are cautiously optimistic about 2008 and expect to benefit from record political spending in some of our key markets including Nevada, Colorado, Arizona, New Mexico, and Florida. In fact, our political revenue on the books has already surpassed our earlier forecasts in the first quarter. This tremendous growth in political advertising targeting the Latino market is due in part to our powerful television and radio programming as well as the continuing strength of the Latino market and the Latino electorate. In 2007, we along with the other partners, including Univision and Mileo launched, (inaudible) a multi faceted media campaign to increase Latino citizenship participation. The program has been tremendously successful.

We believe that the (inaudible) campaign has been responsible for over 1 million Latinos applying for citizenship so they can vote in this year's presidential election. In addition, the Latino community has registered to vote and voted in this year's primary in record numbers. In the 2004 presidential election 7.6 million Latinos voted, that was a 20% increase over 2000. We expect that this year's Latino voter turnout, based on what we've seen so far in the primaries will reach over 9.5 million, an 25% increase in Latino voter turnout over the 2004 election.

Finally, today we announced the appointment of Chris Young to Chief Financial Officer of the Company. Chris has been an integral part of our management team for the after eight years and is a proven manager and leader. He served as the outdoor division's CFO and for the last three years as President of that division. We expect this to be a very smooth transition as Chris already knows the business and our internal functions. In addition, he has worked closely with John DeLorenzo since 2002. Before turning the call over to John, I would like to take this opportunity to thank him for his counsel, leadership and dedication to Entravision. John has been a valuable resource to the Company and the Board and we wish him well in his future endeavors. And now I will turn this portion of the presentation to John for the financial review.

Thank you, Walter, and good afternoon, everyone. The Company announced today that it has entered into an agreement to sell its outdoor advertising division to Lamar Advertising Company for $100 million. The transaction which is subject to customary closing requirements is expected to close in the second quarter of 2008. Upon closing of the transaction the Company will no longer have outdoor operations. In accordance with SFAS 144, accounting for the impairment for disposal of long lived assets, the Company reported the results of our outdoor operations in discontinued operations within the statement of operations.

As part of the Company's annual impairment testing and the decision to sell the outdoor segment the Company reported an $80.5 million impairment charge of outdoor intangible assets in the fourth quarter of 2007 that is included in the discontinued operations. This impairment charge brought the book value in line with the sales price. In conjunction with the preparation of our financial statements for the three and 12 month period ended December 31, 2007, we are currently in the process of finalizing discontinued operations as it relates to the outdoor unit and related income taxes. Accordingly, certain numbers presented herein are subject to change upon the conclusion of such assessment. Any change would only affect income tax expense, discontinued operations and net loss which does not affect operating income. We intend to complete the assessments described above in time to permit a timely filing of our annual report for the period ending December 31, 2007.

As the outdoor unit has been included in discontinued operations, the following results do not include the outdoor segment. As Walter has discussed, pro forma net revenue for the quarter was $62.5 million down 2%. Pro forma operating expenses increased 1% to $36.1 million pro forma consolidated adjusted EBITDA decreased 10% to $23 million. Free cash flow which we define as consolidated adjusted EBITDA minus capital expenditures, cash interest, cash taxes plus interest income was $0.14 per share, up 8%.

Pro forma net revenue for the year was $250 million, or flat for the year. Pro forma operating expenses increased 2%, to $143.9 million, and pro forma consolidated adjusted EBITDA decreased 4% to $94.1 million. Free cash flow which we define as consolidated adjusted EBITDA minus capital expenditures, cash interest, cash taxes plus interest income, was $0.50 per share, which was up 25%. Operating expenses for the quarter decreased to $36.1 million, a decrease of $100,000, excluding the 2006 operating expenses incurred by our radio stations in the Tucson and Dallas markets that we sold in 2006, operating expenses would have increased 1%. The decrease was primarily attributable to a decrease in operating expenses from our Tucson and Dallas radio stations that we sold in 2006, partially offset by an increase in wages, bad debt expense, and news costs related to the addition or expansion of our newscast operations.

Operating expenses for the year decreased to $143.9 million, a decrease of $700,000. Excluding the 2006 operating expenses incurred by our radio stations in the Tucson and Dallas markets that we sold in 2006, operating expenses would have increased by 2%. The decrease was primarily attributable to a decrease in operating expenses from our Tucson and Dallas radio stations, partially offset by an increase in wages, bad debt expense, and news costs related to the addition and expansion of our newscast operations. Corporate expenses for the quarter increased to $4.7 million from $4.6 million an increase of $100,000. The increase was primarily attributable to an increase in wages. Corporate expenses for the year decreased to $17.4 million from $17.5 million, a $100,000 decrease. The decrease is primarily attributable to a decrease in bonuses.

Free cash flow in the fourth quarter was $13.4 million or $0.14 per share. Up from $0.13 per share in the fourth quarter of 2006. For the full year free cash flow was $50.9 million or $0.50 per share up $0.40 per share from 2006. The EPS for fourth quarter of 2007 was negative $0.49 per share compared to an EPS of $0.20 per share in the fourth quarter of 2006. A negative $0.49 per share was lower than our guidance of $0.02 per share primarily due to impairment on the outdoor division and a decrease in value of our swap agreements as interest rates have declined. Excluding the impact of the impairment in the outdoor division and related tax effects, the EPS for the fourth quarter was negative $0.01 per share. The EPS for the year was negative $0.43 per share, compared to an EPS of negative $1.27 per share for 2006. Excluding the impact of the impairment in the outdoor division and related tax effects, the EPS for the year was $0.18 per share.

Turning to our balance sheet, as of December 31, 2007, total debt was $484 million on our trailing 12 month EBITDA as adjusted was $94 million. Our net debt to EBITDA as adjusted was 4.2 times cash on the books, $86.9 million at December 31, 2007. The Company also announced today that it repurchased 2.1 million shares of Class A common stock for approximately $15.5 million in the fourth quarter of 2007. The Company repurchased 7.2 million shares of Class A common stock for approximately $60.7 million in all of 2007. The Company Board of Directors had approved the repurchase of up to 100 million of its outstanding common stock on November 1, 2006. The Company has repurchased a total of 10.6 million shares of Class A common stock for approximately $84.2 million since the inception of the stock repurchase plan. Additionally, in February 2008 the Company purchased 1.5 million shares for approximately $10.4 million from Univision Communications.

For the first quarter of 2008 the Company expects net revenues to decrease by low to mid single digit percentages and operating expenses to increase by low single digit percentages as compared to the first quarter 2007. Excluding non-cash stock based compensation, corporate expenses are expected to be flat as compared to the first quarter 2007. The Company expects approximately $200,000 operating expenses and $400,000 in corporate expenses related to the stock option compensation in the first quarter of 2008. Depreciation and amortization is expected to be between 5.5 million and $6 million. We are no longer depreciating or amortizing our outdoor assets as they have been classified as held for sale. Net interest expense for free cash flow purposes is expected to be between 7.5 million and $7.8 million. We expect to have increased non-cash interest expenses decrease in the value of our swap agreements as interest rates decline.

We expect CapEx to be approximately $4 million, for the first quarter of 2008. We have a budgeted for total of $16 million of CapEx in 2008. The $16 million CapEx figure includes CapEx for the remaining digital television conversion and HD upgrades at our radio division. First quarter earnings per share is expected to be flat or $0.00 per share and free cash flow to be $0.04 per share based on 98 million shares outstanding.

As Walter has mentioned I will be leaving my position as Chief Financial Officer for the Company this spring in order to move back to the East Coast to be closer to family. I wish my colleagues at the Company good luck and will miss them. I also wish to thank you the investors of our Company for a wonderful experience. This concludes our formal remarks. Walter, Philip, and I would be happy to take your questions. Operator.

Thank you. (OPERATOR INSTRUCTIONS) Our first question comes from the line of Marci Ryvicker of Wachovia Securities. Please go ahead.

Thank you. I have two questions related to your outlook. For guidance for the first quarter, do you know how much is being impacted by the advertising environment, how much is tough comps, and then is one division performing substantially worse than the other? And then to the extent that you can comment, when you look out for the remainder of the year, are you seeing acceleration or deceleration at this point?

A couple of comments. One, we're being impacted by the soft economy, no question about it. And our television and radio divisions are -- neither one is I'll say being impacted more than the other. They're about the same across the board. What was the third part of the question, Marci?

Just when you look out for the rest of the year, do you see acceleration or deceleration deceleration from here.

Well, you didn't ask a question about last year's quarter. Last year's first quarter was our best quarter of the year. We grew the top line, top single digits. But we believe that we're going to see stronger quarters as we move through the year, particularly the third and fourth quarters, as well as the second quarter traditionally is always one of of our best quarters. But as I said earlier in our remarks, we expect to see strong growth from political, based on what we've seen in the first quarter and also the -- we've got five states where we have important media clusters and we believe that we're going to benefit from strong growth, political growth in New Mexico, Nevada, Arizona, Florida, and Colorado.

Thank you.

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

Thank you, gentlemen. Good evening. First, John, I want to say I'll miss you dearly but on to better things, I'm sure. I want to ask a couple questions here. First, specifics on the outdoor transaction and then also on your relationship with Univision. The outdoor transaction, a closing date and what are the capital gains taxes, if any, that we should be modeling in for net cash flow from that transaction?

Well, thank you for your remarks, Lee. Appreciate it. As far as the closing, certainly we have to go through HartScottRodino. Assuming everything goes on target, we're probably looking the very end of the first quarter, maybe the beginning of the second quarter, as far as the closing. In terms of capital gains tax, we're completely sheltered within the basis of the Company so therefore there will be no taxes as well as the fact that we'll probably generate somewhat of a capital loss and certainly won't be using any NOLs.

Perfect. And then Walter, if I can ask two things with Univision. First, in the past there's been some thought that you may be able to use the cash proceeds from an asset sale like outdoor to buy some of the, or all of the stock that Univision holds in you back. Where that may stand. Second, if you don't mind commenting on what the impact of Entravision might be vis-a-vis the upcoming court case date between -- in the case of Televisa versus Univision.

Well, as to the first point, Lee, when John reported that we bought 1.5 million shares from Univision in the first quarter.

I'm sorry, I must have missed hearing that, I apologize.

Right. Actually this month. And then this transaction was the result of the Justice Department decree to stay below a certain percentage of ownership within our Company. We've had discussions with Univision in the past about stock repurchases and I'm sure we'll have them again here in the future. So we look forward to that and as you know, we've done two or three transactions with them over the years when we bought back significant blocks of stock and I'm sure we'll be talking again to them soon. As for the court case, I don't really know much about it although I know it's been going on for a while and we're not directly involved in that matter. And we continue to believe that at some point the matter will be resolved amicably between both parties.

Gentlemen, thank you so much. Have a good evening.

Thank you, Lee.

Our next question comes from the line of David Miller of SMH Capital Markets. Please go ahead.

Yes, hi. Good afternoon. Congratulations on the sale. You guys had sort of intimated to us I think over the past couple earnings calls that if this deal had happened your first priority in terms of what to do with the net proceeds would be to pare your debt. I have that, should you do that, I have you guys improving net debt to EBITDA by a full turn here but in your prepared remarks, Walter, it sounds to me like you're going to return this capital to shareholders in some way. I take that to mean stock buybacks or some sort of one time. I was just wondering if you guys would be willing to be a little bit more specific on what you're going to do with the proceeds. Thank you.

David, this is John. Well, one thing that we have is a couple of months to make that decision. The closing will probably be at the end of March, early April. So things change quickly, one point to another. It probably doesn't make any sense to definitively pinpoint what we're going to do with the proceeds. But certainly paying down debt is an option as well as continuing our buyback. We have additional money left on our $100 million Board approved buyback plan. There are a couple of acquisitions that could come up to help us enhance our existing clusters and we're always open to talking about the potential of returning cash to shareholders. The answer to the question is all the options are open and we have some time to see what unfolds over the next couple months.

Thank you.

(OPERATOR INSTRUCTIONS) Our next question comes from the line of Victor Miller of Bear Stearns. Please go ahead.

Good afternoon. Thanks for all your help, John, through the years. Can you talk a little bit about what quarter will actually reflect retrans negotiations. Do you think we're actually going to see any of that money in 2008? Secondly, if I remember, the auto category I think was up in the plus 20% range for the first two quarters. Could you maybe comment on what you're seeing there? And then John, could you just walk us through the free cash flow pieces, like what do you expect for CapEx in '08, what's your average interest cost right now and what we should expect in terms of tax rate as we look for cash taxes this year? Thanks.

Victor, this is Walter, we don't expect to see any results from any retrans negotiations or discussions in '08. Our -- we elected, must carry in '05 and those agreements are in place until the end of this year. But we do expect to begin some discussion with the cable companies at some point here in 2008, regarding 2009 and beyond. And the question about the auto, Phil?

Yes, thank you, Walter. Hi, Victor.

How are you.

It held up for the year. Actually, fourth quarter, our auto on TV side was plus 13. We did see a bit of a slowdown tier one, tier two, been hanging on and pushing hard on tier three which has done well. Overall, it's the general -- the category has gotten softer here towards the turn. At the end of the year and I think if you looked -- if you broke it out entire 2007, tier one was up about 12 points as was tier two dealer group and then tier three was actually off mid single digits and that has turned around and that situation has reversed going here into the first quarter.

Last question about free cash flow. We reported that we'll have about $4 million of CapEx in the first quarter. You can probably assume it will be annualized to about $16 million total. Same thing with interest. We reported about $7.5 million for the first quarter. It will probably be 30 million for the year. As you know we have swaps and therefore our interest rate is fixed. Taxes run about 2 million a year, basically state and local taxes.

One last follow-up, in terms of the real estate heavy markets, where you've been seeing a lot of real estate compression and prices, how are those markets hanging in in terms of the advertising side?

We've experienced obviously in the financial categories, which includes the mortgage business, a significant slowdown since that subprime implosion in August that rippled through and we've seen a drop. That said, let me just kind of bring things into perspective here. We've got a good business. We out-delivered the industry. Our TV finished as Walter said a minus 1 but the industry was down 7 points. That was the fourth year in a row our TV stations outdelivered the market and the industry and we tend to do that on an annual basis about 6 percentage points better. Last year, four out of our five largest add categories saw growth. Auto was up, Telecom was up, fast food was up, retail was up. And yes, financial and the mortgage business was soft, it was down significantly, double digits.

And to add, we had really tough comps in '07 as well.

Exactly. And to Walter's point we had the non returning political and the non-returning World Cup which is $8 million and $6 million of incremental. But our business held up very well and in first quarter we're seeing that political business basically replacing some of the softer categories.

Thank you.

Gentlemen, we have a follow-up question from the line of David Miller of SMH Capital Markets. Please go ahead.

Yes, John, just one follow-up. On your SG&A, as if the outdoor unit had remained, let's call it a run rate of around 17 million a year, what portion of that was generally allocated towards the outdoor unit? Thanks.

I'm looking that up. We had about -- I think you're talking about the corporate expense, not the SG&A.

That's correct.

On the corporate side it's about $2 million.

Okay. Thank you.

Gentlemen, there are no further questions on the audio bridge. I'll turn the call back over to you for your final remarks.

Thank you. This ends our fourth quarter and full year 2007 investor conference call. We thank all of your for participating and we look forward to reporting our first quarter 2008 results in early May. Thank you.

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