Good afternoon, and welcome to the Entravision Communication's Fourth Quarter and Full Year 2012 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Walter Ulloa. Please go ahead.

Thank you, Amy, good afternoon, everyone and welcome to Entravision's Fourth Quarter and Year End 2012 Earnings Conference Call. Joining me today is Chris Young, 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. This call is a property of Entravision Communications Corporation. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed 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 website and was filed with the SEC in a Form 8-K. Our fourth quarter results capped off an outstanding year for Entravision on all fronts. We generated a double-digit increase on our net revenues for both the fourth quarter and full year as we benefited from a more than 100% gain in our political revenue, as well as increased contributions from our core advertising business and retransmission consent revenue. At the same time, we continued to demonstrate improving operating leverage in our model as we grew our free cash flow substantially. Our operating results were among the best in the broadcasting business in 2012, highlighting our focus on providing advertisers and marketers with a comprehensive multimedia platform to reach Latino audiences and communities. The solid positioning of our television, radio and digital assets in the nation's most densely populated markets as well as Latino markets, as well as our…

Thank you, Walter, and good afternoon, everyone. As Walter has discussed, net revenue for the quarter was $63.8 million, up 28%. Operating expenses increased 5% to $33.7 million, and consolidated adjusted EBITDA increased 77% to $25.3 million. Net revenue for the year was $223.3 million, up 15%. Operating expenses increased 4% to $130.1 million, and consolidated adjusted EBITDA increased 39% to $76.9 million. As we announced in our 8-K filing during the fourth quarter of 2012, we entered into a new credit facility consisting of a 4-year $20 million term loan and a 4-year $30 million revolving credit facility. The new credit facility replaces our $50 million revolving credit facility. Proceeds from the term loan facility and cash on hand were used to repurchase $40 million in the aggregate principal amount of the company's 8.75% senior secured first lien notes, due 2017, pursuant to the optional redemption provisions in the indenture covering the notes. The redemption price for the redeem notes was 103% of the principal amount plus all accrued and unpaid interest. Approximately $324 million in principal amount of the notes remains outstanding. Also, during the fourth quarter of 2012, we declared and paid a special cash dividend of $0.12 per share to shareholders of the company's Class A, B and Class U common stock. The total amount of cash disbursed for the special dividend was $10.3 million. Net revenue for the quarter was up 28% to $63.8 million compared to $50 million in the same quarter of last year. Television net revenue was up 33% to $45.4 million for the quarter compared to $34.1 million in the same quarter of last year. Radio net revenue was up 16% to $18.4 million for the quarter compared to $15.8 million in the same quarter of last year. The increase in…

[Operator Instructions] Our first question comes from James Dix at Wedbush Securities.

Just a couple of things. As you look forward to this year compared to 2012, what are you seeing in terms of the breadth of your category growth? Are you expecting your auto to continue to lead the way in terms of where you're going to be getting your growth from across both the TV and the radio platforms? Or do you think that's going to become a more balanced category growth as you look out over the course of the year? And then I had 2 follow-ups.

Well Jim, or James, as it relates to automotive, we had significant growth in 2012 both in radio and television, and what we're seeing at least, through February, is strong automotive growth. We don't expect automotive to be as strong as last year, but it continues to grow here in the first quarter.

Okay. And are there any categories just on the flip side, which you are expecting to grow more than last year?

Well, I'd just say that certainly, health care is a category we expect to see strong growth from in the second half of the year. But retail is doing pretty well. Services has always been an important category for us. Groceries is showing some strength. Telecom has bounced back, not the way we'd like it, but certainly it's showing some momentum. So overall, I think we're pretty pleased with what we're seeing in the first quarter.

And I think I'd just add to that, you had 8 out of our top 10 categories that showed broad-based growth during last year, and I think the expectation is to see that continue into 2013.

Okay, great. And then you mentioned, Walter, the health care and then in your opening remarks, the Affordable Care Act. Just in terms of conceptualizing that, I mean how much of that spending potentially is coming fairly directly from the government or government-sponsored initiatives and then how much of that you expect to be just increased competition among providers, whether it's insurance or others in that sector? I'm just trying to get a sense as to where that potential money is being sourced from that might be going to campaigns that would show up on your stations starting the second half and then going beyond.

Well, let me just say, James, it's hard for us at least at this point to quantify what the opportunity looks like. But we believe it's big. We've always spent a lot of time on this and not only in the fourth quarter of 2012 but in the first quarter of 2013. In fact, we have a team of people right now in Washington meeting with the key members of the Department of Health Services that is going to execute this plan. But not only do you have each state that will have to create a market for health insurance for those people that are eligible and that don't have health insurance, but in the case where the state won't provide it, but at least up till now, looks like most states are going to move forward. Florida was saying they weren't going to do it. As you know, that's an important market for us. But the federal government has said that if the state won't do it, we'll step in. Now I will tell you that -- and I mentioned California in my remarks, but Texas is similar to the percentage of uninsured in that state. The numbers are big. But as they are in Colorado and Nevada and Florida, in every state we operate in, there's a significant population of Latinos that are underinsured or have no insurance. And they're eligible for insurance under the Affordable Care Act. So it is a large amount of money that's going to be spent to educate and inform the public in all the states in our country about the Affordable Care Act and a number -- in the states we operate, there's a significantly Latino population. That will be a significant number of Latino residents of these states who will be eligible to submit their application for health insurance. In addition, you've got the healthcare companies themselves that are going to be advertising their services. I know of one at this time who is in discussions with 2 of our important markets, and they'll probably be begin advertising or messaging in the third quarter of this year. And the numbers that are being talked about are significant. And that's just 1 or 2 markets that I'm referring to. But you've got the drug companies. They're going to be out there advertising, we believe, and any other provider of health care that deems it necessary to promote their products. So we can't tell you what the number is in terms of what the opportunity looks like, we might be able to have a better -- we should have a better grip on it on our next call. But we believe it's a big opportunity. And we're also working, as you might expect, we have an important task force working on this within Entravision. We're also working with Univision and their teams and we're all working together to maximize the opportunity.

You've also got on top of that, immigration reform, which is on the table, on the first -- front pages of the news, and that's working its way through the process. And that messaging could also benefit us down the year.

Well, not only that, but then if there is comprehensive immigration reform, then a lot of the people who are eligible for legal status will also be eligible for health care insurance. So -- there's a lot of interesting opportunities here that are moving forward. So we continue to focus on these opportunities and we expect to have good news for investors.

Great. And my last one, just turning the attention to the balance sheet, maybe for you, Chris. As you look forward to the rest of the year, what are your options in terms of potentially buying an additional debt or refinancing? Are there any windows that we should be thinking about as you look to address the balance sheet further in 2013?

Well, our bond indenture becomes fully callable on August 1. There is a way to go ahead into the market and call those bonds earlier. It becomes much more expensive, but it is possible. The high-yield market as most people who follow it know, is very active. And the terms right now are very favorable. So we're looking at it very carefully. 8/1 would be a date that we're looking at as far as a possible refinancing, if not sooner. So we're watching the market carefully and we'll keep everyone updated.

Okay so you have an option to refinance earlier than that?

We could go out to the market earlier. There's a provision for indenture.

It would cost more?

Right. You'd just have to prepay the interest along with a slight premium. So that's an option. It's an expensive option, but the market is hot, both the term loan B market and the high-yield market. Univision had a successful refi about 1.5 weeks ago. Salem's out of the market this week. So we're watching Salem and we're watching the market, and we'll make our decisions very carefully in the near term on that front.

Our next question comes from Michael Kupinski of Noble Financial.

I just wanted to chat a little bit about the telecom category. Obviously, in 2011 that kind of fell off. It didn't really come back I don't believe until starting to see some light in the third quarter, if I recall. It's kind of nice to see that come back in the fourth quarter. I was just wondering, is that momentum in the telecom category continuing? And if you can just paint that in relation as a category to where it was in terms of the peak for that category going back a few years.

Michael, we don't have the exact numbers from the past years, but we did see telecom as a category begin to drop significantly in 2010. And then it continued on to 2011 and most of 2012. We did see the category bounce back in the fourth quarter with telecom being up 36% in our television business and 48% in our radio business versus the fourth quarter of 2011. So that is certainly good to see, and it gives us at least the belief that we'll start to see this important category begin to improve. But it's still early to determine just how well we're going to do this year with telecom.

And on the expenses in both the TV and radio are just a little tad higher than what I was looking for. And I guess, as you mentioned, there's a variable cost in there certainly, because the revenues were a little bit better than I expected as well. So it goes to say that certainly you've had some conversation, sales commissions and things like that, that are going to be a factor there. Were there anything else in the numbers, like did you have an increase in the headcount? Any expenses related to some of your digital initiatives? Anything else in there that, looking forward, that we might need to adjust for our numbers?

Yes, Michael, there is an ongoing effort in the digital space to build out our group in that space. So there is an expense track on that front. We did announce also earlier, just a couple of weeks back, the promotion of a new level of management at the regional level who will be focused on market clusters and multiple markets, I should say. Historically, what we've tried to do from the top down is just manage every market individually, and this is the way we see of giving more attention to the revenue generation of regions as opposed to just at the single market level. So you've got a new layer of management in there that's going to have a slight impact on expenses, and I think that's the uptake [ph] part also what you saw in Q4. But the bulk of the expense increase for the fourth quarter in both divisions was the ramp-up in revenue.

Michael, just to add to what Chris said. We did, as you said, as you pointed out, we did reorganize our businesses, and we created regions to better manage our businesses. And in doing that, we promoted a number of people, gave them more responsibility. With that came new positions and even an increased compensation for the people that we promoted. And the goal with this new model is to separate operations from revenues so that our executives, certainly at the highest levels, are spending 100% of their time focused on revenue. And we're using this new structure to manage operations centrally through corporate and, therefore, relieving what we formerly referred to as our general managers who are now Senior Vice Presidents of Integrated Marketing Solutions and getting their focus 100% on revenues. So we will see expenses drift up a little bit. But by the same token, we saw revenues grow substantially as well in the fourth quarter.

On a core basis.

I'm just going to say that we believe our core growth in the fourth quarter was as good or better than any of our competitors, be it in Spanish or English.

Yes, that's for sure. And in terms of the headcount in the fourth quarter, what were the FTEs in the fourth quarter versus the year earlier? Do you have that?

Oh, off the top of my head, it's about 900. We're going to issue our K next week, and that number will be in our K as of 12/31. I'll give you the page number if you want once it's published.

And then also on your digital initiatives. Do you have a dedicated sales staff for that? Or is that just getting off the ground at this point where you're really not focused on that -- kind of having a dedicated staff?

What we've done is we've gone from having a dedicated staff initially as we introduced these new digital products to an integrated staff as we start the year. So we started to integrate better, actually in the fourth quarter, all of the products that we're offering to our advertisers across our entire platform. And we're pleased to see what -- the results. I talked about ENTRALEADS. I think that's going quite nicely. The Los Angeles team has embraced that product, and it's just doing -- creating wonderful growth using its radio platform and integrating ENTRALEADS with it. And across the country, we're promoting this product. So again, it's an integrated effort.

And then in terms of your corporate expenses, just a little bit of a jump there, was anything in there, like a true up in terms of bonuses and accruals, and things like that, -- if you can just give us some thought about how we should look at that number going forward in terms of a run rate?

Yes, the bulk of that number, Michael, was a bonus accrual for the quarter. That bonus accrual was about $850,000 and then the management reorg that we referenced before was about $0.5 million, and that's by and far the bulk of that corporate expense increase. Looking forward to next year, that corporate expense will be flat to down, low single digits, as far as your models are concerned.

I just want to add that in 2011, our bonuses were relatively low. And of course, this year we had a very strong year, so we felt it was important to reward the people who worked so hard to create our success.

[Operator Instructions] Our next question comes from Aaron Syvertsen at Sidoti.

I apologize if this is already asked, but do you have a number of what your political numbers were in 2010 and then kind of what you expect to see in 2014 after the record year you just had?

2010 political for TV was $5.1 million. For radio it was $1.9 million. All in it was about $7.1 million net-net.

We don't have -- yes, $7.1 million was the number for 2010, consolidated. We haven't again, sat down to put the numbers to what our goals might be in 2014. But I think it's safe to say here on this call that we're going to be looking at, at least plus 20% in 2014. And that is -- that number is being driven by the great success we had in 2012 and the increasing awareness around the power of the Latino vote.

Sure. Was there from one -- between Obama and Romney, kind of what party seemed to -- you get the majority of the revenue from?

Well, what we can tell you is that the Obama campaign outspent the Romney campaign. But what I think is the more important data is that the Obama campaign started in the second quarter and ran all the way through the election. And so they were laying in their messaging every week. Whereas the Romney campaign didn't start really until late third quarter. And of course, they were very heavy in the fourth. But different strategies. And of course, we know how it turned out.

Sure. And then just one more question for me. On the pretty significant increases in free cash flow. Kind of just looking ahead on what your primary uses of cash will be, whether it's still going to be a focus on delevering or there are some other options that could be a possibility.

Well, I think our first priority is we'd like to reinvest that free cash flow in our business. And if there are acquisition opportunities that are accretive to our current position, we'll take a hard look at those. We've always been pretty determined to get leverage below 5x. We're there now. We're in an odd year, which means that there will be some leakage with respect to that leverage, possibly as we try to overcome the political that we saw last year. But I think the first priority of that free cash flow is to reinvest in the business. Then we'll continue to look at debt reduction possibilities and then shareholder-friendly activities.

Yes, to Chris' point, we want to invest in our growing core business and, of course, create new growth drivers. And we invest in our growing core business by increasing the training of our revenue executives and sales teams as well as bringing stronger executives into our company.

The next question comes from John Kornreich at JK Media.

Yes, I have a few. Just real quick, at least I think they will be. Walter or Chris, should we plug in maybe $1 million for political this year?

John, that's fine. We're still trying to get our arms around the number. And if you want to plug in $1 million, we're okay with that.

We're in February and it's going to be a long year in the political front. So we honestly don't know, but that's probably a good place to start.

Okay. Chris, what did you say the cash was at the end of the year?

Cash was $36 million and change.

And the leverage number you gave of $4.3 million is using gross debt, right?

No, it's using just $10 million of our debt. So our new credit facility allows us to take $10 million and net it against the gross debt to get that $4.3 million. Otherwise it's $4.5 million on a gross basis.

Okay. So using $10 million against the gross?

That's right. It used to be we could net $20 million. Now we can only net $10 million.

Okay. When you report your $6.1 million of taxes on the income statement in the press release, that's all noncash, right?

Noncash. That's right. That's just a noncash expense. [indiscernible] NOL so we won't be cash impaired.

What is the NOL?

Well, the NOL is about $290 million at the federal level.

Okay. I won't ask that question again. The retrans of $20.2 million -- the next presumed bump will be 2015. So with the next 2013, '14, I would think it may be up $1 million [indiscernible]?

Retrans next year or this year should be about $21 million.

Okay. And then next year could be $20 million [indiscernible].

Yes, I'm not going to go on next year, but we'll stick to $21 million.

Okay. But '14 is still part of the 5-year agreement?

Yes it is.

Okay. I was guessing that overhead, you did that. The call price on the bond is 100?

The call price is 106.5 in August.

Okay. Right. Okay. Any soccer money this year to speak of?

Yes. We've got 2 tournaments, Copa de Oro and Confederaciones. One is in June, and one's in July.

I thought there was something going on right in this quarter.

Well, we have our Mexican soccer league, the Primera Liga or Liga Primera, that we run games, plus the national team, the Mexican national team. We're broadcasting those games as well, qualifying games.

I thought there was something very big going on because ESPN is playing it up very big. Messi versus Ronaldo and -- no?

It's just one game. That's in Barcelona probably and -- yes, yes. You're right.

Okay. So nothing really meaningful this year?

Well, The Copa de Oro is a big tournament, Confederaciones are important tournaments. Yes, so nothing like World Cup, which we'll have next year.

Okay. Utah had the great year that L.A. had. Yet entire radio divisions, excluding political, was up 2% for the year. So that would almost suggest that x L.A. radio didn't have a very good year?

Well, I mean I would answer that by saying that we had a slow start in radio, and we started to really turn it on in the second half. And by that, I mean our core business. And I think the results in the fourth quarter suggest that we're on the right track with that business. And based upon what I said about first quarter and 5% core revenue growth through February, I don't think there are too many radio companies with that kind of number.

Okay. I think you said in the fourth quarter, local core was up 1% and national was up some humongous number.

I think I said to you the local core was up 1% and national core was up 20% for television.

That's TV, right.

And consolidated was up 10% core.

But the local of 1% I would think suffered from inventory displacement from the political.

That's a pretty good assumption, yes. I mean, I think we did just a tremendous job over all of managing inventory given the fact that we grew our political by over 100%. And it was crunch time between August and November. But I think we did terrific work there in managing the inventory, and local may have -- probably was squeezed by political and national.

And remember, when...

But when I look at your first quarter pacings numbers of TV, up 7%, I mean, is it the same kind of thing -- 0 local and 15% national?

Actually, it's funny you bring that up. It's actually local is what's stronger and much stronger than national.

It flipped.

It flipped, which I'm a little -- we're a little surprised to see, but we'll take the growth.

Okay. And finally, I think I noted in an SEC filing that Walter and Chris together bought close to 400,000 shares. Was that due to the expiration options?

No. Those are options that just vested, and that were granted. So it's all -- it's not us being active in the market buying shares. It's just part of the company.

I see, okay. I misread that. Okay. And 2 suggestions for the future. One, especially at year end reporting, you should have a balance sheet on here, on the press release. And two, on Pages 3 and 5, you basically have the 3-month numbers and the 12-month numbers. But when it comes to Page 4, segment breakdown, you don't. And it will be helpful so we don't have to -- 20 minutes before the phone call have to dig into our numbers. It will be helpful to have the 3-month numbers for the segments, which you have, revenue and expenses, and the 12-month.

Okay, John, we'll take that under advisement.

John, you always give us good advice so we listen very carefully.

It's just a matter of saving us some time. You have the numbers, anyway.

Yes, right. Right now we'll look at that. We want to make it easier for everybody, to the people who read our press release.

Chris, you're going to be at DB and Walter is not, right?

We will both be there.

We will both be there, John. Will you be there?

I will definitely be there.

I look forward to seeing you.

Our next question comes from Davis Hébert of Wells Fargo.

Most of mine have been answered. So I was going to ask you about the balance sheet and taking out those notes, but I think you have that pretty well covered. I guess the only follow-up I might have would be, are you partial to bank debt only or bonds? I mean, how do you balance like covenants versus not having covenants? I mean, I just kind of wanted get your thoughts there.

Well, less covenants from our perspective is always more flexibility. So that's kind of our focal point right now. Term loan B market seems to have that optionality in hand. So we're looking at it. And again it's going to be a function of what the market has to offer so.

Okay, fair enough. And then on M&A, you mentioned you guys are interested in acquiring additional assets. Where would English-language TV stations fall under that umbrella? Because we've seen or we've seen and heard that a lot of stations are on the block right now. I just wanted to know your appetite for that kind of acquisition.

Well, we -- from time to time a number -- I mean, a lot of information comes through our doors in terms of potential acquisition opportunities. We're very careful at what we look at. It has to be accretive. It has to be assets that are complementary to our existing clusters. As for English-language assets, we do operate a few in some of our markets, particular our border markets. So we have 2 Fox affiliates, one in McAllen and one in Laredo. I think what's important to note about those 2 assets and those 2 markets is that they are 90% Latino. So it doesn't matter what language you're speaking in, there you're speaking to the Latino community. So it would have to be that kind of an asset -- English-language asset that fits one of our high-density Latino markets, and of course, it has to fit the financial criteria more importantly.

Okay, fair enough. And the retrans agreements. Univision currently negotiates that on behalf of Entravision. Correct?

Correct.

And that agreement, I believe it expires next year. Is that something you guys are looking to extend or just kind of cross that bridge next year?

Well, I think we'll just cross that bridge when we get there. Univision did renew 3 agreements in 2012. I believe it was Verizon, AT&T and DISH. And I believe one of those agreements runs beyond our proxy agreement with Univision. And so that agreement will be honored, certainly. But look, we believe it makes sense to continue to work with Univision. They're a great partner of ours. And we'll certainly address the proxy extension at the appropriate time.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you, Amy, and thank you, everyone, for participating on our fourth quarter and 2012 full year call. We look forward to providing you with our first quarter results in May. And again, I want to thank all of you for joining us on our fourth quarter and 2012 investor conference call. Goodbye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.