Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Entravision Communications Corporation (NYSE:EVC)

Q3 2008 Earnings Call Transcript

November 5, 2008, 5:00 pm ET

Executives

Walter Ulloa – Chairman and CEO

Chris Young – EVP and CFO

Philip Wilkinson – President and COO

Analysts

David Miller – Caris & Company

Marci Ryvicker – Wachovia

Lee Westerfield – BMO Capital Markets

Linda Karn – Credit Suisse

Jessica Ford [ph] – Western Group [ph]

Paul Fitzpatrick [ph] – DC Bank [ph]

Troy Isaacson [ph] – Princeton Advisory Group

Operator

Welcome to the Entravision Communications Corporation third quarter 2008 earnings conference call. As a reminder, all participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation.

(Operator instructions) For your information, this conference is being recorded.

I would like to turn the conference over to Walter Ulloa, Chairman and Chief Executive Officer. Mr. Ulloa?

Walter Ulloa

Thank you, Amy. Good afternoon everyone and welcome to Entravision's third quarter 2008 earnings conference call.

Joining me today is Chris Young, our Executive Vice President and Chief Financial Officer and Philip Wilkinson, our President and Chief Operating 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. The company has provided a reconciliation of 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 web site and was filed with the SEC in a Form 8-K. In addition, with the announced sale of the company's Outdoor Division at March 31, 2008, Outdoor was classified as a discontinued operation and the results of operations are separately reported for all periods.

Our third quarter results reflect the impact of the economic downturn and related advertising market weakness across the majority of our markets. During the third quarter, advertisers continued to pull back on committing marketing dollars in the face of reduced outlays among consumers across a wide range of sectors. As a result, we saw a quarter of decline in our advertising revenue for both our TV and radio businesses. Fortunately these declines were partially offset by revenue from Reventon, Super Estrella, enormously popular concerts hosted by our Los Angeles based KSSE.

This year’s event attracted more than 22,000 people to the Home Depot center and these fans of Super Estrella saw performances from 10 artists including Juanes, Alejandro Fernandez and Julieta Venegas. It was our most successful Reventon in our history.

Notwithstanding the effects of the recessionary environment on our financials, our operating performance once again continued to be impressive as we continue to deliver strong audience shares across our markets.

Given the pressure on our top line since our last call, we took steps to reduce cost across all of our organization including reductions in personnel, insurance and other corporate expenses. We believe these cost cuts will lead to a reduction in our total operating expenses of approximately $6.5 million in 2009 compared to 2008. This will ensure that we are well-positioned to maximize profits when advertising revenue begins to improve. While we believe this is a prudent move at this time, we will continue to monitor expenses closely in 2009 and we are prepared to take additional steps to reduce expenses if necessary. It is important to note that these reductions will have no impact on the quality of our content or marketing efforts.

Finally, given our strong audience shares and the growing importance of Latino-America to advertisers, our sales teams continue to service existing accounts while actively courting new advertisers who have yet to directly participate in targeting our Spanish-speaking audiences. We have made notable progress on this front and we intend to continue to uncover additional opportunities and may reduce the negative effects of the current advertising slowdown. This includes expectations of additional revenue generated by political dollars being spent in some in of the swing states in which we have a strong media presence.

Turning to our financial results for the third quarter, our consolidated third quarter revenue fell 4.9% versus the same period in 2007 to $70 million. Consolidated adjustment EBIDTA decreased 16.4% to $21.1 million versus last year while free cash flow per share decreased 29%.

During the quarter, we benefited from $1.6 million of revenue received from Reventon, KSSE signature event, which continues to gain popularity in the Los Angeles area. These results were in line with the guidance we provided during our second quarter earnings conference call.

For our television division, the economic environment and ongoing uncertainty of creating new challenges for our industry and Entravision has not been immune to the effects. Our television division posted a 6% decline in third quarter 2008 ad revenues versus prior year. Local and national revenues fell 5% and 7% respectively. The drop was primarily due to continued softness in the domestic automotive category. Overall, our auto category slumped 34% as General Motors and Dodge, Chrysler, Jeep made significant cuts to their quarterly advertising media budgets.

It is important to note that no other top 10 advertising category declined by more than 5% and that we saw a growth of 20% or more within our healthcare, grocery store, and finance categories for our television division. Our focused efforts towards political advertising opportunities paid dividends as our television group attracted $1 million in the third quarter 2008 political revenue. Additionally, our local and national sales teams continued their new business development efforts and successfully added 58 new advertisers to our client roster, investing over $10, 000 in the quarter.

Moving forward, our plan is to develop a sales philosophy focused more on providing clients with customized traffic driving solution than media efficiencies. We will continue to focus on today’s hottest ad categories including insurance, healthcare, discount retailers, debt consolidation, and education to bridge the temporary effect on the automotive category.

Turning to our ratings performance, our Univision Affiliate extended their ratings leadership positions with the July 2008 sweeps. Our Univision Affiliate Group continues to dominate ratings in their respective markets, with 11 of our Univision affiliates at number one or number two, adults 18 to 34, sign on to sign off, regardless of language. TeleFutura, in many of our markets, is the number two ranked Spanish language television station. In the July 2008 survey, nine of our Univision affiliates were ranked number one or two in primetime, adults 18 to 34, regardless of language.

Year-over-year, four of our affiliates enjoyed exceptional growth including Lubbock up 367%, Midland/Odessa grew 325%, Santa Barbara saw its primetime ratings increase 322%, and El Paso one of our strong border stations saw its primetime rating increase 230%. Our local news programming continues to perform exceptionally well and enhances our value to the community and creates an attractive opportunity for advertisers. In addition, our local news programming played a critical role in our ability to attract political and issue-specific advertising and represented an attractive platform for election spending in 2008 and will continue to do so in the future.

Additionally in August, we partnered with Comcast and provided our television viewers and radio listeners with live, up-to-the-minute reports from the Democratic National Convention in one of our most important markets, Denver, Colorado. Our news division supported the production of this content.

In September, we launched Agenda Washington, a weekly public affairs show from our studios in Washington D.C. This important program airs on all of our Univision television affiliates and our Spanish language radio stations and covers the most pressing news and events that impact the Latino community. This program is hosted by Daniel Garza with production support from our news and public affairs department. In addition to one-on-one interviews with government officials, the program includes reports from our reporters in the field and important debate on issues between political and policy experts. This program is another example of the work we continue to do to educate and motivate our Latino viewers and listeners to play a greater role in our nation’s political process. And we can report that our work is producing terrific results.

Unofficially based on our internal research and other national sources, we estimate that approximately 9.5 million Latinos voted in yesterday’s presidential election. This impressive turn out of Latino voters represented about 8% of the total electorate. This turn out is approximately a 26% increase on Latino voters over the 2004 presidential election or about 2 million new Latino voters went to the polls in this year's presidential election. NALEO, the National Association of Latino Elected Officials released a press release this morning stating that early exit polls suggested that the Latino electorate had a significant impact on the presidential race in key swing states including Florida, Nevada, New Mexico, Colorado, and Virginia.

Entravision broadcasts important Spanish language television through its Univision affiliates in all of these states. Latinos clearly played a greater role in the political process this year and will increase their influence going forward.

Year-over-year, 11 of our local news television market stations were either number one or two, adults 18 to 34, regardless of language. Our local late news showed some of our success as eight of our Univision television stations were number one or two, adults 18 to 34, regardless of language with late local news.

Taking a look at national news, 13 of our Univision television stations rank number one or two with adults 18 to 34, regardless of language. TeleFutura also continued to post impressive rating gains and in the majority of our markets, they are the second most watched Spanish language television station right behind our Univision affiliate. In primetime, 4 of our TeleFutura affiliates enjoyed triple-digit growth among adults 18 to 34. Our early tracking for the November book indicates continued solid ratings growth in overall viewing primetime and early news based on household viewing.

Turning to our radio division, as economy continues to decline, our radio division experienced a soft quarter as revenues decreased 3%. This performance was enhanced by the positive impact of Reventon. Our performance will be well over the industry which is expected to fall approximately 8% according to the Radio Advertising Bureau.

National revenue increased 1% over the same period last year; while local radio advertising which represents about 75% of our total radio revenue, decreased 4% over the same period. For the industry as a whole, third quarter local revenue is expected to fall 9% while national revenue will fall by 12% as reported by the RAB.

Despite the weakened economy, our radio clusters in some of our key markets like Denver, Las Vegas, Palm Springs, and Sacramento are outperforming their markets according to Miller Kaplan.

For the radio division, net revenue in July was down 2%, August was up 11%, and September experienced a 17% decline. This compares to the industry which reported a 6% decrease in July, August down 11%, and September down at 8%.

Our top five categories for the quarter were automotive, services, travel and leisure, retail, and alcoholic beverages. We saw grew 6% in services and experienced 22% growth in restaurants and fast foods. Automotive was down 34% for the quarter.

On the political front, radio received more political spending in the third quarter than we originally expected and this spending continued into October and November. We operate radio properties in key presidential race battleground states such as Colorado, Nevada, and New Mexico. We also received spending in El Paso and Florida. We also operate state radio stations in New Mexico, Colorado, and Texas where there were key senatorial races. Political revenue in the quarter was $580, 000 as we have seen $807,000 for the first three quarters of 2008 in political spending.

For the quarter, we welcomed 21 new advertisers to Entravision radio who spent more than $10,000. First time advertisers included Avila Airlines, Gigante Mortgages, Fresh & Easy Grocery, State Farm Insurance, and Super Value Markets. Looking at the summer ratings release, we continue to grow our share within a number of our markets on a year-over-year basis. We saw double-digit growth of our clusters in Albuquerque and Monterey-Salinas. We are also experiencing the changes consistent with changing to electronic measurement in Los Angeles.

Piolin por la Mañana continues to perform well for us. Piolin por la Mañana is a number one ranked Spanish language radio morning show in adults 18 to 34 in both Denver and in Sacramento.

What is very exciting is the growth of our Jose format. Since May, we have added three more stations to our Jose lineup: KLYY here in Los Angeles, KVVA-FM, and KDVA-FM in Phoenix. There are now 13 stations that are playing our Jose format.

Los Angeles remains a very competitive market. In August 6, Arbitron changed the audience measurement currency to PPM. Our Los Angeles Spanish cluster faired better than our Spanish language counterparts with this change. The overall cume increase for all Spanish language radio stations was 45%. Our Spanish clusters cume increase was 84% according to the September 2008 PPM release.

As earlier mentioned, we converted KLYY to the popular Jose format on May 5. With the PPM conversion, KLYY's total weekly cume increased 266% for both persons 12+ and adults 18 to 34 in the Los Angeles data release.

To conclude, the third quarter was financially challenging for the company as we felt the impact of the advertising slowdown across our markets.

With regard to guidance, beginning with the fourth quarter, we will no longer be providing forward-looking guidance. Given the volatility and lack of visibility in the advertising market, we believe it would be unrealistic to attempt to provide an accurate range of results for the fourth quarter and beyond. What we can tell you is that unofficially, for the month of October, we anticipate our revenue will be down low single-digits compared to October 2007. We continue operating as efficiently as possible without sacrificing market share or content. We have taken the necessary steps to support our cash flows and maximize the profitability of our assets against a declining revenue base. We have also maintained a healthy balance sheet and have no liquidity issues. We have been through difficult economic periods before. We believe we will emerge from this recession as a stronger and more efficiently run broadcasting company. We remain focused on further growing audiences in the nation’s fastest growing and most densely populated Hispanic markets, maximizing our share of advertising dollars to the benefit of our shareholders.

I will now turn the call over to Chris Young for our financial analysis.

Chris Young

Thank you, Walter, and good afternoon everyone. The company sold the Outdoor Advertising business in May 2008 to Lamar Advertising for $101.5 million, including an adjustment for working capital and no longer has outdoor operations. In accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the company reported the results of the Outdoor operations and discontinued operations within the consolidated statements of operations. As the Outdoor unit has been included in discontinued operations, the following results do not include the Outdoor segment.

As Walter discussed, net revenue for the quarter was $61 million, down 5%. Operating expenses increased $1 million to $37 million, and consolidated adjusted EBITDA decreased 16% to $21.1 million. Free cash flow, which we define as consolidated adjusted EBITDA minus capital expenditures, cash interests, cash taxes, plus interest income, was $0.10 per share. Operating expenses increased to $37 million for the quarter from $35.9 million, an increase of $1.1 million or 2.9%. The increase was primarily attributable to an increase in the third quarter expenses associated with moving our annual Los Angeles promotional event from the second quarter to the third quarter in 2008, as well as an increase in wages, rating services and rent expense, largely offset by a decrease in expenses associated with the decrease in net revenue.

Excluding the impact of Reventon, operating expenses would have been flat in the third quarter versus the prior year period. Corporate expenses increased to $3.8 million for the quarter from $3.7 million, an increase of $0.1 million. The increase was attributable to an increase in non-cash stock-based compensation.

The company recorded an impairment charge of $440 million related to television and radio FCC broadcasting licenses and goodwill, as a result of an appraisal recently conducted on certain television and radio assets. The write-down was pursuant to SFAS 142, Goodwill and Other Intangible Assets, which requires the goodwill and certain intangible assets be tested for impairment at least annually or more frequently if events or changes in circumstances indicate the assets might be impaired.

As Walter mentioned earlier, the company has executed various cost-cutting measures to better position itself for a continued difficult business environment. As a result of these measures, annual fixed expenses are expected to be reduced by approximately $6.5 million beginning January 2009. Reductions will be realized from a mix of headcount reduction, insurance costs, and other various administrative expense reductions.

Free cash flow in the third quarter of 2008 was $8.8 million or $0.10 per share. The EPS for third quarter of 2008 applicable to common stockholders was negative $3.98 per share, compared to an EPS applicable to common stockholders of $0.01 per share in the third quarter of 2007. The negative $3.98 per share was lower than our guidance of $0.04 to $0.05 per share, primarily due to the television and radio non-cash impairment loss recorded in the third quarter of 2008. Excluding the non-cash impairment loss and related tax benefit, the EPS for the third quarter was $0.04 per share, in line with our guidance.

Turning to our balance sheet, as of September 30, 2008, our total debt was $473 million and our trailing 12-month EBITDA as adjusted was $82.4 million. Our net debt to EBITDA as adjusted was 4.3 times. Cash on the books was $117.6 million at September 30, 2008.

The company also announced that it repurchased 3.1 million shares of class A common stock for approximately $10.1 million in the third quarter of 2008. The company announced that it repurchased an additional 0.9 million shares of class A common stock for approximately $1.9 million as of October 31, 2008. As of October 31, 2008, the company had approximately 86.8 million total shares outstanding across all classes of shares.

As Walter mentioned during his opening remarks, due to the lack of visibility in this difficult business environment, beginning with the fourth quarter of 2008, the company will no longer be providing forward-looking guidance. This concludes our formal remarks. Walter, Philip and I would be happy to take your questions. Amy?

Question-and-Answer Session

Operator

(Operator instructions) Our first question comes from David Miller at Caris & Company. Mr. Miller?

David Miller – Caris & Company

Yes. Hi, good afternoon. You guys were pretty clear in your prepared remarks. I guess I just had a question about the headcount reduction. We followed you guys for a long time. I was always under the impression that you were already lean enough. I’m just curious as to where the headcount reduction will come from. Thanks.

Philip Wilkinson

Thank you, David, it is Philip. Thanks for joining us. Headcount, we just effectively laid off 100 employees, and I think about 20 of those are part-time, and 80 were around in full time. And a lot of that came from – we did away with weekend news and two major markets in Las Vegas and in San Diego. And then, we had – we found a couple of areas where we can, for example, have a national sales manager from one market to handle the business for an adjacent market because they’re very similar accounts of the same agencies, so we found some efficiencies there. But – and we also had a portion of that 80 full-time people came out of our radio operations in Los Angeles, both evenly from the network side and the station side in Los Angeles. But as Walter said early on, we think that we absent the loss of the weekend news in two markets, which was almost 20 people, we are able to maintain the quality in our news product and certainly we’ve been able to maintain the going forward effort on our sales and marketing side as well.

David Miller – Caris & Company

Okay. Thank you.

Philip Wilkinson

You’re welcome.

Operator

Our next question comes from Marci Ryvicker from Wachovia.

Marci Ryvicker – Wachovia

Thank you. Good afternoon. I have a couple of questions. The first one, anything you can tell us about retransmission consent negotiations, any conversations with Univision that you can share?

Walter Ulloa

As you know, we are lined with Univision on the retransmission negotiations, but at this time there’s nothing to report. And we do have something to report but certainly we’ll be out there with the information. But the negotiations continue.

Marci Ryvicker – Wachovia

Okay. And the numbers you gave for political and Reventon, were those net or gross?

Walter Ulloa

Those are net numbers.

Marci Ryvicker – Wachovia

Okay. And any expectations or what are your expectations for political in the fourth quarter, for both radio and television?

Walter Ulloa

Well, a couple of things. One, we expect our political revenue in both our television and radio divisions to surpass our performance in 2004. We certainly, as I said in my remarks, the Latino voter continues to become more important to the US political process, and we saw 2 million more Latino voters in this cycles than we saw four years ago. And the key states we operate in, Nevada, Colorado, Florida, New Mexico, Virginia, because Northern Virginia we reach with our Washington D.C. station, were so important to this year’s presidential election. So we expect not only this year to be a big success for us but also in the years to come.

Philip Wilkinson

Specifically, we finished fourth quarter which was mostly all October with the half week here in November at $1.2 million net on the radio and I believe the number is 3.1 on the TV on the net.

Marci Ryvicker – Wachovia

All right, I have one last question, Walter. Did you say that September radio revenue was down 17%?

Walter Ulloa

Yes, I did.

Marci Ryvicker – Wachovia

Is there a reason for that?

Walter Ulloa

No, I just saw the fact that we are in a very tough environment. We certainly saw – it’s a tough – as difficult as the first half of the year was, the second half has been even more difficult and we saw things tighten up in July and August and certainly more difficult in September.

Marci Ryvicker – Wachovia

Okay, thank you very much.

Walter Ulloa

But automotive was obviously the category there in terms of decline, as well as retail.

Marci Ryvicker – Wachovia

Okay, thank you.

Operator

Our next question comes from Lee Westerfield at BMO Capital.

Lee Westerfield – BMO Capital Markets

All right, thanks gentlemen and good evening. Three questions from me. First directed to Chris. Chris, can you walk us through how the leverage ratio is calculated and more specifically remind the audience and myself as to what the listening agreement speculate [ph] in terms of your flexibility to buy back shares and at what leverage levels? I was struck that you commented that you bought back stock in October for instance.

Second question is Philip, if this is a Philip question, but if you can elaborate on the PPM impact which you went in to the prepared remarks. Anyway, in Los Angeles, because if I understood the comments right, you may have represented substantially all of the Hispanic listenership gross as a matter of cume in any way in Los Angeles. I’m not sure about the precise number but I just want to understand how you observe the PPM impacting not only the cume listenership but also your revenue on a go forward basis.

And then Walter, I guess my question is this one, I think you commented that automotive in Q3 was down 34% and I think I heard you say, I’m sorry if I mistook it, in that October generally is down at low single-digits, of course that includes political. I wonder if you can, both in the third quarter, comment on things other than automotive and relatedly in October, if you could comment on how October had faired without political advertising? Thanks.

Chris Young

We've got a lot to cover here, so I’ll cover your first questions first. Our trailing 12 months EBITDA at the end of September 30 was $82.4 million. We have total debt of $473 million. We calculate the leverage as per our bank agreements that comes up to leverage of 5.46. That is against a senior leverage covenant of 5.75 and a total leverage covenant of seven times. Our ability to buy back our shares is predicated on – or as allowed for in our credit agreement, basically as long as on annual basis, we are under five times annual cash flow, we are allowed to continue with share repurchases. And at the senior leverage covenant, just to give a little more color behind that, the covenant currently at September 30, 2008 is 5.75 times. That ratchets down by two steps to 5.25 times at 12/31/2008.

Philip Wilkinson

And good afternoon Lee, this is Philip. Basically cume is up; times spent listening is down. That is pretty consistent with electronic measurement, where diaries [ph] prior to the PPM currency going live here in October and we faired extremely well. Here in Los Angeles where there is Spanish contemporary stations KSSE-FM, we are up October over September, if we look at persons 18 to 34 which is really our key demo, average share we are up to 4.9. That’s a close third in Spanish language radio stations ranking from a 2.9, so that is a 69% change up for the better on the PPM, again, since this became currency just this past month. We are very pleased thus far with the LA results on the PPM.

Walter Ulloa

Lee, with regards to the categories, I believe in Q3 and how they performed. As I indicated in television, automotive category was down 34%, services were down 5%, telecom was flat, fast food was up 3%, retail was up 4%, and travel and leisure was down 3%. So that is a snapshot of our TV business. And in our radio division, automotive was also down 34%, services were up 6%, travel and leisure down 17%, retail down 25%, and alcohol beverages down 2%, with fast food and restaurants up 22%.

Lee Westerfield – BMO Capital Markets

And October?

Walter Ulloa

Well, the only category that we had time to do any work on for October was automotive, so I believe

Lee Westerfield – BMO Capital Markets

I guess I’m just trying to get a feel, maybe we will take it offline, (inaudible) what nonpolitical advertising might have done in the month of October, that is the only thing I’m trying to get a feeling for. And in fair effect [ph] as far as calculation, we can move on.

Philip Wilkinson

First of all, there is very little visibility recently. I think as we said earlier, there is a lot – we saw back half of October a few cancellations but that's slowed down now that people seen the election over as of yesterday. And we just received two sizable unforecasted orders, one for Ford and one from Mervin, and both of those were unforecasted. So it’s a rollercoaster but it is a lot of the same we are seeing. It is a little difficult to project fourth quarter based on October because you had so much political. And as you know and everyone knows that a lot of traditional advertisers take a hiatus. They don’t want to deal with the higher rates, they don’t want to deal with the lower availabilities, and they fear the clutter. And we saw a lot of traditional advertisers cut back during October because of that political spending and they did not want to be in that fray. So it is difficult. But we are seeing – the similar slowdown on the auto side, particularly as Walter mentioned on the domestic. We are down significantly on domestic both TV and radio.

Inboards [ph] were down but not nearly as much and it was mainly driven by GM and Dodge. And that is continuing, that has continued into October. We probably won't see relief there. We just looked at the October sales numbers and they were down 34%, 35% overall for new cars sold.

So telecom is relatively flat. We are getting good spending out of cricket in both TV and radio. There are two big advertisers for us. One big advertiser for both mediums and now spending more than Verizon and twice out of AT&T. Financial was very positive for us in Q3 and then boom, WaMu went away and so that was a little bit strained in October. I think Walter mentioned FSR was up big, fast service restaurants, but they pulled back in October again because of what I mentioned with the fear of the clutter and the higher pricing. So October is a difficult one to judge the whole quarter on.

Lee Westerfield – BMO Capital Markets

Gentlemen, that’s helpful color, I appreciate it.

Philip Wilkinson

You’re welcome.

Operator

(Operator instructions) We’re going to take Linda Karn from Credit Suisse.

Linda Karn – Credit Suisse

Thank you. Could you just tell us what the status of the amendment is for the bank group? I believe you had the amendment out to buyback the bank debt at a discount.

Walter Ulloa

That is right, we did. The amendment was approved.

Linda Karn – Credit Suisse

Okay.

Walter Ulloa

So, the amendment allows us to go back in the secondary market and repurchase our term loan debt for face value of up to $75 million and we have until December 31 of next year to do so and it was approved.

Linda Karn – Credit Suisse

Okay. And in terms of the calculation for the covenant, how much cash were you allowed to net back?

Walter Ulloa

We are allowed to net back $20 million against our debt tolls.

Linda Karn – Credit Suisse

Okay and any restructuring costs that can be added to the EBITDA number?

Walter Ulloa

Restructuring cost with regard to?

Linda Karn – Credit Suisse

Well, if you – like an annualized number for any cost savings that you are putting in place from layoffs or any other charges?

Walter Ulloa

No because there is no head backs that we are allowed to call for in the credit agreement.

Linda Karn – Credit Suisse

Okay, thank you.

Walter Ulloa

Thank you.

Operator

Our next question comes from Jessica Ford [ph] of Western Group [ph].

Jessica Ford – Western Group

Hi just wanted to confirm, you said that the leverage step down, the senior leverage step downed 5.25 for Q4 and that the current leverage for the credit agreement was 5.46?

Walter Ulloa

That’s correct. 5.6 as of the end of September, then it does step down to 5.25.

Jessica Ford – Western Group

And given your – you did not provide specific guidance, but giving your tone on Q4, do you expect there to be a default?

Walter Ulloa

I do not expect there to be a default, no, not at all.

Jessica Ford – Western Group

Or is that the purpose of the prepayment amendment?

Walter Ulloa

No. The purpose of the amendment was simply to take advantage of the secondary market when the price of our term loan trading in the high 60s and low 70s and we have ample cash in the balance sheet, then go ahead and take advantage of such prices. We felt that was in our best interest to do so.

Jessica Ford – Western Group

Great, thank you.

Walter Ulloa

Thank you.

Operator

Our next question comes from Paul Fitzpatrick [ph] at DC Bank [ph].

Paul Fitzpatrick – DC Bank

I just wanted to confirm that the charge for the impairment, any cash component to that at all or is it all non-cash?

Chris Young

Paul, there is no cash component to the impairment.

Paul Fitzpatrick – DC Bank

Very good, thank you.

Chris Young

Thank you.

Operator

Our next question comes from Troy Isaacson [ph] from Princeton Advisory Group.

Troy Isaacson – Princeton Advisory Group

Thank you, just two quick questions. One, is there a large difference between the adjusted EBITDA and (inaudible)?

Chris Young

Hello, we can’t hear you on this side, I’m sorry. Would you mind speaking up?

Troy Isaacson – Princeton Advisory Group

Okay, how’s that?

Chris Young

A little better.

Troy Isaacson – Princeton Advisory Group

Sorry about that.

Chris Young

Try it again.

Troy Isaacson – Princeton Advisory Group

I’m just trying to get an idea, the adjusted EBITDA that’s reported on your 10-K, is that materially different than what your actual EBITDA is?

Walter Ulloa

No.

Troy Isaacson – Princeton Advisory Group

I'm just trying to get an idea of what the adjustment is.

Chris Young

You are talking about the adjustment, adjusted EBITDA as far as the 10-K versus what is calculated in our credit agreement?

Troy Isaacson – Princeton Advisory Group

Correct. Or is there a lot of adjustment in that? I guess I’m just trying to get an idea of why you wouldn't just report EBITDA as opposed to your adjusted EBITDA. Are they basically the same number?

Walter Ulloa

Our EBITDA as we report in our credit agreement and the EBITDA in the 10-K are identical. So when we say adjusted, the only thing we are talking about – the primary we are talking about as far as adjustment is concerned, there is a non-cash syndication amortization expense that we pull out of EBITDA and that is really the driving force behind what we define as adjusted. That is really it.

Troy Isaacson – Princeton Advisory Group

Okay, now that helps, I just want to get the clarification. Also, I was wondering if you could tell us what is the implication if the Televisa and Univision legal disposition does not go in Univision’s favor? You guys have other avenues for programming?

Walter Ulloa

We believe – we have said this before and we continue to believe that the parties, both Univision and Televisa, were called to reach a settlement but if – we have a long-term affiliation contract with Univision and we are confident that whatever the outcome of the Televisa litigation they will continue to supply us with the best Spanish language programming available.

Troy Isaacson – Princeton Advisory Group

Thank you.

Operator

(Operator instructions) There appear to be no further questions. I would now like to turn the call back over to management.

Walter Ulloa

Thank you, Amy. Ladies and gentlemen, this concludes our third quarter earnings call. We look forward to speaking to all of you in the first quarter of 2009 when we will report our fourth quarter results as well as our 2008 grand results. Thank you for participating.

Operator

That does conclude today’s event. Thank you for participating in the Entravision Communications Corporation conference call. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Entravision Communications Corporation Q3 2008 Earnings Call Transcript
This Transcript
All Transcripts