Entravision Communications Corporation
Q4 2007 Earnings Call Transcript

Published: 29 Feb 2008

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the Entravision Communications Corporation 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 28, 2008. I would now like to turn the conference call over to Mr. Walter Ulloa, Chairman and CEO. Please go ahead sir.

[Walter Ulloa:]

Thank You, Wayne. 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 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 the list of risks and uncertainties that could impact actual results. In addition, this call is a 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 quarters of 2006 respectively. Whereby the company has elected 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 of these non-GAAP financial measures to the 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 a strong first half, specifically in radio, which on a pro forma basis was up 11%, we faced tough comparable due to about $14 million of 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 continue to outperform the industry when you strip out the impact of nonrecurring events that occurred in 2006 such as the World Cup. We also continue 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 in 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 Hispanic markets. We have taken a prudent approach to transactions, adding stations where we believe we can further strengthen our position and exiting markets where growth maybe limited and where we believe we can achieve attractive returns on our investment. On December 1st, 2007, we announced our acquisition pending FCC approval and began LMA of WNUE-FM, Orlando, Florida for Mega Communications for $24 million. This is the 11th marketplace for Entravision's 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 view 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 decline 2% to $62.5 million consolidated adjusted EBITDA decline 10% to $23 million and free cash flow increased 1% to $13.4, 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 the World Cup advertising. In comparison, [TV-View] 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 was $200,000 and $400,000 respectively. This was significantly lower than 2006 when we benefited from a record number of political races occurring 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 phase 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 retails. 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 Mervin's. New advertisers included Mexicana Airlines, Quaker State, PacifiCare, and JPMorgan Chase. Turning to our ratings performance; our Univision Affiliates extended their ratings leadership positions with the November 2007 sweep. Our Univision Affiliate Group continues to dominate ratings in their respective markets. Our Univision audience continues to show strength in their respective markets with 10 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 at number one in prime time, adults 18 to 34 regardless of language. Year-over-year two of our Affiliates enjoy triple digit prime time increases, adults 18 to 34. Las Vegas increased 144% and Harford rose 133%. Three others shinning stars were Albuquerque growing 65%, Boston growing its prime time 50%, and Santa Barbara increasing its prime time 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 issues specific advertising and should represent an attractive platform for election spending in 2008. We believe based on our internal research on historical information, that States where Entravision has important media clusters like Colorado, New Mexico, Nevada, Florida and Arizona will become important data ground States of this year's upcoming presidential elections. Our local newscast in these markets will give 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 McAllen 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 ranges to 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 into a triple digit growth including Monterrey up 150%, Albuquerque up 142%, Boston, Tampa and Santa Barbara each increased their local late news rating by 100% over last year. Our Telefutura Affiliates in 18 of our Univision television markets continue 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 early and late local news based on household viewing. Turing to our radio division, our 2007 results outpaced the general market. With 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 the 7% increase 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%, a 137% increase by Helio, and AT&T increased it's 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 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 lead to a trickledown 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 falls' ratings release, we continue to grow our share within a number of our markets. We saw double-digit growth for our clusters in Albuquerque, Las Vegas and Stockton. Piolin por la Manana continues to perform well for us. Piolin por la Manana is a 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. Piolin 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 of 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 heard by the inexplicable drop off in October, but we are encouraged by the growth in November and December. We compared 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 Monday to Sunday 6 am to 12 midnight. KSSE grew 44%. To accelerate the growth on KSSE, we hired Maria Nava and named here Program Director for Super Estrella. Maria comes to Entravision with 20 of programming experience and during her 10 year at KSCA and KLVE, she was programmer that took both these radio stations to number in the Los Angeles market regardless of language. We also moved our very successful afternoon talent Oswaldo Diaz to morning show of Super Estrella. His afternoon show exploded in each marketplace in which it broadcasting 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, Las Vegas. Oswaldo performs the roles of the lead character of Chokolata, which joins Super Estrella's morning jockey Yssac for the all new La Regadera con La Chokolata which debuted on January 7th, is very entertaining and humor-centric show is truly unique and there is nothing else like it in the marketplace. La Regadera con La Chokolata will accelerate our ability to grow our listener base not only for KSSE, but all of our Super Estrella 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 US 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 market 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 the 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 forecast. In the first quarter, this tremendous growth in political advertising targeting the Latino market is due impart to our powerful television and radio programming as well as the continuing strength of the Latino market and the Latino electric. In 2007, we along with the other partners including Univision and NALEO launched Ya Es Hora, a multifaceted media campaign to increase Latino citizenship participation. The program has been tremendously successful. We believe that the Ya Es Hora 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 elections, 7.6 million Latinos voted. That was a 23% 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, a 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 past eight years and is a proven manger and leader. He served at the Outdoor division's CFO, and for the last three years he is 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 council, leadership and dedication to Entravision. For the past six years, 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 over to John for the financial review.

[John DeLorenzo:]

Thank you, Walter, and good afternoon everyone. The company announced today that it has entered into a definitive 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 or Disposal of Long-Lived assets, the Company reported the results of our outdoor operations and 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 into discontinued operations. This impairment charge brought the book value inline with the sales price. And in conjunction with the preparation of our financial statements for the three-month and twelve-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 and 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 to 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 Tucson and Dallas radio stations that we sold in 2006, partially offset by an increase in wages, bad debt expense and newscast 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 saw in 2006, operating expenses would have been 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 newscast related in addition to 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 of $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 a negative $0.49 per share compared to an EPS of $0.20 per share in the fourth quarter of 2006. 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 a negative $0.01 per share. The EPS for 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, EPS for the year was $0.18 per share. Turning to our balance sheet, as of December 31, 2007, total debt was $484 million and our trailing 12-month EBITDA has adjusted, it 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 repurchases 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 of 2007. Excluding non-cash stock-based compensation, corporate expenses are expected to be flat as compared to the first quarter of 2007. The Company expects approximately $200,000 in operating expenses, $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 aromatizing our outdoor assets as they have been classified and has 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 expense due to the 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 budgeted for a 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'll 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 company good luck and will miss them. I also wish to thank you, the investors of our company for a wonderful experience. This includes our formal remarks, Walter, Philip and I would be happy to take your questions. Operator?

[Operator:]

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

[Marci Ryvicker:]

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 worst than the other. And then to the extent that you can comment when you look at for the remainder of the year, are you seeing acceleration or deceleration at this point?

[Walter Ulloa:]

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

[Marci Ryvicker:]

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

[John DeLorenzo:]

Well, you did 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 are 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 our best quarters. But as I said earlier in our remarks, we expect to see strong growths in political based on what we've seen in the first quarter and also we've got five states where we have important media clusters, and we believe that we are going benefit from strong political growth in New Mexico, Nevada, Arizona, Florida and Colorado.

[Marci Ryvicker:]

Thank you.

[Operator:]

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

[Lee Westerfield:]

Thanks gentlemen and good evening. First John, I want to say I'll miss you dearly, on to the better things, I am sure; I want to ask a couple of questions here. First; specifics on the outdoor transaction and then also on relationship with Univision. The outdoor transaction, closing dates and what are the capital gains, taxes if any, and if there should be modeling in for net cash flow from that transaction?

[John DeLorenzo:]

Well, thank you for your remarks, really appreciate it. As far as the closing, certainly we have to go through Hart-Scott-Rodino; assuming everything goes on target. We are probably looking at the very end of the first quarter, maybe the beginning of the second quarter as far as a closing. In terms of capital gains tax, we are 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.

[Lee Westerfield:]

Perfect. And then Walter, if I can ask two things on Univision; first, in the past there has 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 this stock that Univision holds in you back; I don’t know where that may stand. Second, if you don't mind commenting on what the impact on Entravision might be vis-à-vis the upcoming court case date in the case Televisa versus Univision?

[Walter Ulloa:]

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

[Lee Westerfield:]

I'm sorry. I must have -- miss hearing. I apologize.

[Walter Ulloa:]

Right, actually this Walter and this transaction was a result of their Justice Department decree to stay below a certain percentage of ownership within our company. You know we’ve had discussion with Univision in the past about stock repurchases, and I'm sure we'll them again here in the future. So, we look forward to that and as you know we have done two or three transactions with them over the years -- back significant blocks of stocks 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 that it's been going on for a while and we are not directly involved in that matter and we continue to believe that at some point the matter will be resolved amicably between both parties.

[Lee Westerfield:]

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

[Walter Ulloa:]

Thank you, Lee.

[Operator:]

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

[David Miller:]

Hi good afternoon. Congratulations on the sale. You guys had sort of intimated to us, I think over the past couple of earnings call 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. Should you do that, I have you guys improving net debt-to-EBITDA by a full turn year, but in your prepared remarks Walter, it sounds to me like you're going to return this capital to shareholders in some way. I think that to meet stock buybacks or some sort of onetime [DVO]. I was just wondering if you guys would be willing to be a little bit more specific on what are you going to do with the proceeds? Thank you.

[John DeLorenzo:]

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 brings change quickly at one point to another. So it probably doesn't make any sense to definitely pinpoint what we are 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 and answer our existing clusters and we are always open to talking about the potential of returning cash to shareholders. So there is -- the answer to question is, all the options are open and we have sometime to see what unfolds over the next couple of months.

[David Miller:]

Okay, thank you.

[Operator:]

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

[Victor Miller:]

Good afternoon. Thanks for all your help John through the years. Can you talk a little bit about what quarter will actually reflect a re-trends negotiation? 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 are seeing there? And then John, could you just walk us through the free cash flow, pieces like what 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.

[Walter Ulloa:]

Hey Victor, this is Walter. We don't expect to see any results from any re-trends negotiations or discussions in '08. We elected [inaudible] 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 filled.

[John DeLorenzo:]

Yeah, thank you Walter. Hi, Victor.

[Victor Miller:]

Hey John, how are you?

[John DeLorenzo:]

It held up for the year, actually fourth quarter our auto on TV side was plus 13. We did see a little bit slowdown Tier 1, Tier 2 have been hanging on and pushing hard on Tier 3 which is done well. But 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 look -- if you broke it out, the entire 2007, Tier 1 was up about 12 points as was Tier 2 dealer group and then Tier 3 was actually off mid-single digits and that has turned around and that situation is reversed going here into the first quarter.

[Walter Ulloa:]

Victor, 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 way with the 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, and taxes run about $2 million a year, it's basically state and local taxes.

[Victor Miller:]

One last thought on, in terms of the real estate heavy markets where you have seen a lot of real estate compression in prices, how are those markets hanging in terms of the advertising side?

[John DeLorenzo:]

We've experienced obviously in the financial categories which includes the mortgage business, a significant slowdown since that subprime implosion in August, it's rippled through and we've seen a drop. But that said, let me just kind of bring things into perspective here. We've got a good business, we have to live with the industry, our TV finish as Walter said, a minus one but the industry was down 7 points. That was the fourth year in a row, our TV stations out delivered the market in 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 ad categories saw growth, auto was up, telecom was up, fast food was up, retail was up, and yeah, financial and the mortgage business was soft. It was down significantly, double digits.

[Walter Ulloa:]

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

[John DeLorenzo:]

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

[Victor Miller:]

Thank you.

[Operator:]

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

[David Miller:]

Yeah, John, just one follow-up, on your SG&A as if the outdoor unit have remain, what's called run rate of around $17 million year, what portion of that was generally allocated towards the outdoor units? Thanks.

[John DeLorenzo:]

We had about -- at the Hispanic you're talking about the corporate expense of the SG&A?

[David Miller:]

That's correct.

[John DeLorenzo:]

On the corporate side it about $2 million.

[David Miller:]

Okay, thank you.

[Operator:]

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

[Walter Ulloa:]

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

[Operator:]

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 yourself a nice day.