EXHIBIT 99.2
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 1
SPBROAD
SPANISH BROADCASTING FIRST QUARTER 2003 EARNINGS
MAY 13, 2003
1:00 PM CT
Conference Coordinator: Welcome to the Spanish Broadcasting System First
Quarter 2003 Teleconference Call.
With us today from Spanish Broadcasting are Raul
Alarcon, Jr., Chairman, President and Chief
Executive Officer and Joseph Garcia, Executive Vice
President and Chief Financial Officer.
Copies of the earnings release have been sent to you
for your information and reference during this call.
If you did not receive this release, please call
Brainerd Communicators at (212) 986-6667. If you
become disconnected during the teleconference,
please hang up and dial (785) 832-1508 to be
reconnected.
At this time, all participants are in a listen-only
mode. We will be conducting a question and answer
session later in the conference. At that time, if
you have a question, you will need to press the star
and 1 on your phone. The conference is being
recorded today.
At this time, I would like to turn the call over to
Mr. Alarcon. Please go ahead, sir.
Raul Alarcon, Jr.: Thank you. Good morning, ladies and gentlemen and
welcome to the SBS First Quarter 2003 Teleconference
Call.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 2
Joining me today to discuss our operating results are
Joseph Garcia, our Chief Financial Officer and Bill
Tanner, who is joining us from Los Angeles, our
Executive Vice-President of Programming.
Before we begin, allow me to say that this
afternoon's conference call may contain
forward-looking statements that are subject to risks
and uncertainties that could cause actual results to
differ. Please refer to our most recent perspectives
for a list of those factors that could impact actual
results.
I'll begin today by summarizing our financial
results. Then we're going to review some key
operating highlights in some markets including the
recent Winter-book ratings result.
Bill Tanner is then going to provide some brief
comments on the current programming matters.
Afterwards, Joe Garcia will then review the results
for the first quarter in more detail as well as
comment on our expectations for the current second
quarter after which we will then take any questions
you may have.
As you may have seen in our press release this
morning, our first quarter results came in better
than our previous guidance for net revenues and
station operating income formally known as broadcast
cash flow.
Overall, excluding AOL Time Warner barter sale, we
ended the first quarter with net revenue growth of
9%.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm C
Page 3
Our station operating income for the first quarter
was 10.7 million excluding any warrants connected
with the purchase of our LA station, KXOL FM.
During the first quarter, our core markets
experienced net revenue and station operating income
growth with notable gains in Los Angeles and Miami.
On a core market composite basis, SBS outpaced the
general market in the first quarter by 10%.
Let me turn now to a review of some selected
markets. Let's begin with Los Angeles.
The latest Arbitron Winter book continues to reflect
the increase in ratings traction our LA cluster has
been achieving.
Our LA cluster experienced year over year increases
across all demos and all day parts.
Comparing our full market FM signals to our
competitors, our cluster achieved higher ratings in
three of the six-day parts in its target demographic
of 18 to 34.
KLAX garnered a 4.9 share in their target demo of 18
to 34, an impressive 40% increase over last year,
which places it in the No. 1 slot for Hispanic
listening and the fourth most listened to station in
Los Angeles regardless of format or language.
KXOL experienced a 15% increase in the 18 to 34 demo
and a notable 29% increase in the 25- to 54-year-old
demo.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 4
We are pleased with the initial results of KZAB, our
new addition in Los Angeles. As many of you know,
KZAB debuted on March 1st with the unique music mix
targeting LA's huge Central American population.
During its first month on the air, KZAB captured a
1.8 share of the 18 to 34 demo in the last two weeks
of the survey.
Most importantly, KZAB gives us our third FM format
in the all-important Los Angeles market. And our LA
properties continue to outpace the marketplace as
well as capture their fair share of LA's Hispanic
radio dollars.
In the first quarter, our rates have increased 25%
to 40% over last year.
Looking at cash sales, our LA cluster wrapped up the
first quarter with a generous 44% increase over last
year.
Some of our categories in the first quarter include
automotive, fast food, wireless communications, and
department stores.
Turning briefly to our other markets -- New York,
Chicago, and Miami -- in New York, WSKQ displayed
ratings gains across all demos in the Arbitron
Winter book.
WPAT experienced year over year ratings gains in all
demos as well.
In the 12 plus demo, WPAT increased from a 25 to a
28, a 12% increase year over year. Eighteen to
thirty-four, WPAT displayed a 15% increase as well
as a 7% jump in the 25 to 54 demo.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 5
Our flagship, WSKQ, continues to be ranked the
second most listened to morning show in the New York
market, English or Spanish, in their targeted
demographic of 25 to 54 year olds.
I want to stress that with WSKQ and WPAT, SBS enjoys
the No. 1 and No. 2 in Hispanic ranking in listeners
12 plus, 18 to 34, and 25 to 54 in New York City.
New advertising entrants in New York include Liberty
Science Center, Time Warner Cable, and Toyota of
Manhattan.
Turning to Chicago, WLEY continues to lead the
Hispanic market in the important 18 to 34 demo. WLEY
gangrened a big 5.7 share, placing them as the third
highest ranked radio station in Chicago regardless
of language or format.
Here again, our Chicago outlet is ranked No. 1 among
12 plus, 18 to 34, and 25, 54 Hispanic listeners.
We're also pleased with the performance of Onda 92,
our new simulcast addition in Chicago. In their
first book, Onda 92 garnered a 1.2 share in the
important 18 to 34 demo.
Besides benefiting from clustering efficiencies, the
new station, Onda, will further solidify and
consolidate our leadership position in Chicago's
Spanish radio.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 6
New advertisers in Chicago for the quarter included
Toyota, Mitsubishi, Subway's, Dairy Queen, and
(Taquita).
The most active categories for the quarter were
automotive, wireless communications, and financial
institution.
Moving along to the Miami market, WRMA continues to
be the No 1 in the all-important 18 to 34 demo among
Hispanic competitors.
In the Winter book, the 18 to 34 year old audience
has ranked WRMA FM the eighth most listened to
station regardless of format or language.
WRMA and WCNQ managed to retain or increase their
rating shares across all demos.
In their target demographic of 25 to 54, WCNQ FM
received a 4.2 share increasing 45% over last year.
Looking at sales, our cluster outpaced the Miami
radio market by an impressive 10%.
In addition, our stations continue to successfully
increase rates even in an uncertain economy.
New accounts for the quarter, included (General)
Tires, Wachovia Bank, and Lexus, and BMW
dealerships.
Advertising categories remain strong in Miami -- our
automotive, retail, and direct response products.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 7
So to summarize, we continue to see the results of
our investment strategy as evidenced by our improved
ratings and revenue growth.
In the LA market, our new addition of KZAB in Los
Angeles reinforces our leadership position and
solidifies our presence in the No. 1 Hispanic
market.
We are excited about our addition of radio stations
in Chicago and look forward to benefiting from the
synergies created by that cluster.
Our operations are solid. We continue to focus on
supporting our ratings, maintaining expense
controls, and driving the top line.
We are cautiously optimistic that the general
economy as well as the advertising market will turn
around in the second half of the year. Moreover, I'd
like to reiterate that we are very confident about
the long-term growth potential of our audience in
the Spanish language advertising market as well as
our ability to position the company to take
advantage of this growth.
The ratings in all of our core markets -- New York,
Los Angeles, Chicago, and Miami -- remains strong,
thereby demonstrating our success in establishing
our brands and increasing awareness among Hispanic
consumers.
We're in this business, as I've said many times, for
the long term. By combining aggressive sales
strategies and cost controls with opportunistic
acquisitions, our shareholders will be rewarded.
And with those comments I'd like to turn the call
over to Bill Tanner for some programming analysis.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 8
Bill?
Bill Tanner: Thanks, Raul. Just to give you a little bit of color
behind some of the rating stories that Raul told you
about, in Los Angeles, KZAB - we think La Sabrosa is
on track to reach a whole new group of people that
have not had a favorite radio station.
These people are called in the research business
"settlers," meaning that they didn't really have a
favorite station but they sort of settled for a
radio station that wasn't exactly what they wanted
but it was closest to it.
In the case of Central Americans in Los Angeles,
that was KLVE in Los Angeles.
KLVE has been under pressure from both our KXOL
radio station and now from KZAB and we expect that
pressure the continue as KZAB establishes itself as
a brand and as it gets more and more known which
takes a while for a radio station to accomplish
that.
Having said that, the performance of La Sabrosa in
the first two weeks it was on the air, which is the
last two weeks of the Winter survey period, is very
impressive but we all want everyone to know that
this is still a very young brand that we're just
developing and we do think it has a substantial
amount of way to go.
We're very pleased with, particularly KLAX, which is
showing some competitive increases and is really
stronger than it ever has been in the 18 to 34
demographic.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 9
There have an awful lot of change that's going on in
the Los Angeles market -- not with our stations but
with other stations in the market.
The Entravision radio station, KSSE, switched
frequencies and some of the multiple frequencies
that it was transmitting on had changed to other
formats.
Also, the long time morning ratings leader, Renan
Almendarez Coello, has moved his show to afternoons
on KSCA and a new gentleman has been brought in from
San Jose.
Our first indications are that KSCA has taken a
substantial drop when Renan switched to the
afternoon show. His audience is following him --
some of them -- to afternoons but they're confronted
with the fact that there's just not as much tune in,
in afternoon radio as there is in morning radio and,
therefore, there are an awful lot of listeners up
for grabs.
Our indication is that Piolin, the morning guy who
has replaced Renan on KSCA, is not as favorably
regarded as Renan was. So, we think there's a great
opportunity existing in Los Angeles.
We'll continue growth as we program competitively
against the HBC radio stations and all other radio
stations in the market. They are good radio stations
and we think that we have an excellent opportunity
to improve our position.
In New York, we're particularly happy with the
performance of WSKQ, which continues to be the
leading radio station - the leading Hispanic radio
station in America.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 10
And in particular, our morning show, "El Vacilon de
la Manana," the - Luis Jimenez and his crew is
hitting the ball out of the park in rating book
after rating book.
This radio station in the mornings now is the No. 2
radio station overall both 12 plus and with adults
25 to 54. It is up substantially in the ratings and
our indications are that it is going to continue to
build.
This is a very, very strong radio station provided -
presided over by a gentleman who knows his business
really well, Luis Jimenez, and his crew of crazies
in the morning in New York and we think there's
substantial growth opportunity left in (mega).
And the other thing is WPAT is showing some very
nice growth year to year and we expect that to
continue as we move our station, Amore, in New York,
WPAT to a somewhat younger sounding format -- not
dramatically younger but just a little bit younger
than it had been before. Probably the difference
between targeting a station, say, of 40 to 45 year
olds as it was previously and more now it's 35, 40
year old, so, a little younger there and its paid
off for us.
In Chicago, as Raul told you, our new station, La
Onda, has added definitely to WLEY.
WLEY has been the winning station in the format for
quite a while now in Chicago and we think La Onda is
going to give us yet another edge in the Chicago
market.
We're very proud in Miami of the performance of both
WCNQ and WRMA.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 11
WRMA as the No. 1 Spanish station in the 18 to 34
demography is very significant. This is a big
improvement for this radio station.
It's also doing very well 25 to 54 and WCNQ, as Raul
told you also, is making good progress in the 25 to
54 demo and we think that it's a song and radio
station. Radio doesn't compete in the category with
any other radio station. It's a combination of
English and Spanish and also has - it's primarily an
oldies radio station. It is an oldies radio station
and it's doing very well.
The one other market that I wanted to mention to you
that we're very happy with is Puerto Rico where our
Estero format - Estero Tempo station is the No. 1 25
to 54 format in the market and in the No. 3 position
is La Zeta which is also a radio station in Puerto
Rico.
So we have a total of 11 stations, five different
formats in Puerto Rico and they are performing
really, really well.
I think the word in SBS is that we want to
aggressively compete more than ever now and that's
what we think we do really well and with that, I'll
turn it over to Raul and Joe Garcia.
Joseph Garcia: Thank you, Bill. Good afternoon.
First I'd like to discuss some non-GAAP disclosure
issues and then I'll comment on the first quarter
results and provide our outlook for the current
second quarter.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 12
Recently, the SEC issued Regulation G, which affects
the way companies disclose non-GAAP financial
information.
Station operating income replaces broadcast cash
flow or BCF as the metric used by us to access the
performance of its stations.
Although it is calculated in the same manner as BCF,
we believe that using the term "station operating
income" provides a more accurate description of the
performance measure.
Station operating income and same station results
are not measures of performance or liquidity
calculated in accordance with generally accepted
accounting principles.
However, the Company believes that these measures
are useful in evaluating its performance because
they reflect a measure of performance for its radio
stations before considering costs and expenses
related to its specific corporate and capital
structure.
In addition, the Company believes same-station
results provide a useful measure of performance
because they present station operating income before
the impact of any acquisitions or dispositions
completed during the relevant periods, which allow
it to measure only the performance of radio stations
it owned and operated during the entire relevant
periods.
These measures are widely used in the broadcast
industry to evaluate a radio company's operating
performance and are used by management for internal
budgeting purposes as well as to evaluate the
performance of the Company's radio stations.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 13
However, these measures should not be considered as
a substitutes for operating income or loss, cash
flows from operating activities, net income or loss,
or any other measure for determining financial
performance or liquidity that is calculated in
accordance with generally accepted accounting
principles.
Please refer to this morning's press release for
further information, definitions of non-GAAP
results, and reconciling schedules pertaining to our
first quarter results.
To provide better comparability of net revenue and
station operating income, I will discuss pro forma
results excluding the prior year's no return and
significant non-cash impact, the AOL barter
agreement.
Looking at the first quarter, net revenues were
$28.8 million compared to $28.9 million for the same
period a year ago -- a decrease of $100,000 or less
than 1%.
Excluding the AOL agreement, net revenues were 28.8
million compared to 26.4 million, an increase of 9%
or $2.4 million.
First quarter revenues primarily increased by the
result of substantial revenue base in our Los
Angeles and Miami markets.
The station operating income, excluding warrants was
10.7 million compared to 11 million for same period
last year. This is a decrease of 300,000 or 3%.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 14
Excluding the agreement with AOL, station operating
income, excluding warrants, was 10.7 million
compared to 11 million, a decrease of 300,000 or 3%.
The station operating income decrease was not
favorable to the status quo related to our new
format launch (independent) and our new stations in
Chicago as well as a 78% increase in marketing
expenditures.
Excluding early start up cost, our station's
operating income will have been 11.7 million or 6%
increase over last year.
(Not taking) expenditures for the quarter were 1.3
million.
Our corporate expenses for the first quarter were at
4.5 million compared to 2.9 million for the same
period last year, an increase of 1.6 million.
The increase is attributable to higher insurance
costs and labor fees.
Also, capital expenditures for the first quarter
were $1.2 million. Depreciation for the quarter was
$743,000.
On a same station basis, net revenues were 28.5
million compared to 28.6 million for the same period
last year, a $100,000 decrease (unintelligible).
Excluding the AOL deal, same station net revenues
were 28.5 million compared to $26.4 million or a
$2.4 million increase or 9%.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 15
Excluding the AOL Time Warner agreement and any
warrants pertaining to the KXOL acquisition, same
station operating income was 12.1 million, a 5%
increase over last year.
As of the end of the first quarter, we had $65.1
million of cash at hand.
Net debt is 263.4 million, giving us at average
EBITDA of 6.1 times.
Now I'd like to provide second quarter 2003 outlook.
The guidance would be excluding prior year's annual
results and any potential non-cash expense related
to warrants that may be issued as part of the - of
our acquisition of KXOL.
In addition, the guidance will include the revenue
and operating cost of the new stations in Chicago
and Los Angeles.
Factoring in the current status of the economic
environment and uncertainties from advertisers, we
expect second quarter 2003 revenues to be flat the
slightly negative with last year.
Station operating income for the second quarter is
expected to be in the range of $14 to $14.5 million.
Projected capital expenditures for the second
quarter would be approximately $1.2 million.
We also anticipate spending nearly $3.4 million in
advertising expenditures during this second quarter.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 16
Due to the increase of insurance and professional
fees, we expect our corporate expenses to be
approximately $4.5 million in the second quarter.
As Raul mentioned, we are optimistic that the second
half of the year would bring a bucket of turnaround
in advertising sales as well as the general economy.
With that being said, I would like to turn over the
call if there are any questions.
Operator?
Conference Coordinator: Once again, if you would like to ask a question
today, please press the star and 1 on your touchtone
telephone.
The first question we'll take today comes from Bill
Meyers of Lehman Brothers. Go ahead, sir.
Bill Meyers: Hi, Raul and Joe. A couple of quick questions.
First of all on the asset sales. Is there anything
you could talk about with respect to San Francisco
and San Antonio? Also, is Puerto Rico still
strategic or is that available for sale and the
updates in terms of the efforts or the progress of
the strategic partner. And then I'll come back with
anther one.
Raul Alarcon, Jr.: Oh, Bill, we'll continue our conversations regarding
some sales of non-core stations that you delineated.
Our conversations are ongoing. We haven't made any
decisions yet.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 17
We're looking at the level of interest from specific
parties. We will be informing you as soon as
anything concrete materializes or anything
acceptable or anything negotiable materializes with
respect to the - to those assets -- specifically you
mentioned San Francisco and San Antonio.
Puerto Rico is a market, as you know, Bill that we
have a lot of faith in. We have a lot of hope for
it. We believe that we have a very strong position
in Puerto Rico. The recent ratings show us No. 1. In
those - in that demo I believe it was 25, 54, No. 1
and 3 in the market.
Puerto Rico presents an opportunity for us as we
consolidate the market hopefully raising rates and
standardizing commission. Our levels at the agency
has been an inherent problem in the island.
We don't see major changes competitively in Puerto
Rico radio. We continue to think it's going to be a
growth market for us going forward so we're
absolutely excited about the opportunities in Puerto
Rico.
And if I could have the second part, Bill?
Bill Meyers: That's right. In terms of strategic partner or
financial partner, anything that you are interested
(at in) discussions?
Raul Alarcon, Jr.: As you know, Bill, we - we're open to discussing any
type of permutation or possibility that exist with a
strategic partner. Our conversations are - have been
always ongoing and they will continue.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 18
We absolutely will - our priority for the company,
of course, as you know is completing the financing
of KXOL later this year and we're looking at not
only the two items that you mentioned but also we
believe that the indications are that the dead
market, the high yield market is very healthy now so
we're taking a look at some proposals from some of
our banking friends on that front and we'd hope to
be able to be in a position to take advantage of all
of these opportunities as they arise -- the
appropriate ones obviously.
Bill Meyers: Great. And Bill, before you'd mentioned how your
primary competitor had some changes about the
morning show and the afternoon show. Do you expect
there to be more programming changes in the
marketplace? Do you expect other talents to move
from company to company? And how do you see that
shaking out?
Bill Tanner: Well, from what I can tell right now, it's now set
up. There have been such tremendous changes with
some radio stations as I said moving from one
frequency to another, and then the large issue of
Renan moving from morning drive to afternoon drive
and the fact there's just not as many people
listening to the radio in afternoon as they were in
mornings. But I think pretty much what I see is
we're set at the moment.
We're very happy with our lineups that we have on
our stations there in the same - at - our primary
day part people have been in the same slots for --
going on three years now and we could see it
beginning to pay off so I'm not privy to what other
companies are going to do but as far as our stations
are concerned, we're pretty happy with what we have.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 19
Raul Alarcon, Jr.: And I think it would be safe, Bill, to add that, you
know, in a market as important as Los Angeles, yes,
there has been a lot of shakeup and there's been a
lot of movement in the market.
I think, Bill, that you would agree with me if I
mentioned to Bill Meyers that the important thing
for us was to establish a strong position in Los
Angeles.
Bill Tanner: Yes.
Raul Alarcon, Jr.: And as you know, short two years ago, a year and a
half ago, we were really behind the eight ball in
that market and I think you've - you, Bill Tanner,
have done a wonderful job in putting together
formats that are successful, also taking on that
third format back from the church and programming it
in what I consider to be a very potentially very
successful niche -- open niche -- in Los Angeles.
I think, Bill Meyers, I think the answer to your
question is we're very excited about what we've
accomplished so far and, yes, there's going to be
movement in the market. There's going to be
fluctuation but I think we're set with three major
FM formats, each of them niched, each of them very
focused on the direction of Bill Tanner and I think
we're, you know, I think we're very expectant, very
hopeful about the future of LA for the company.
Bill Meyers: And then just one last question so I can (show) some
other people.
You know, after the LA close, whether it's a
function of credit facility or high yield or asset
sales, where would you want your debt leverage to be
maybe one or two years out? Kind of what's your
longer term comfort level?
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 20
Raul Alarcon, Jr.: I think we've always stated that we're comfortable
in five times or lower. Bill, that's where we would
like to be.
I think that's going to be aided tremendously by the
cash flow generation and growth in Los Angeles. Los
Angeles we have targeted as a tremendous cash flow
(growth) of course going forward but to answer your
question, that's where we ideally would like to be
-- five or less.
Bill Meyers: Great. Thanks very much.
Raul Alarcon, Jr.: Thank you.
Conference Coordinator: We'll take our next question from the site of Keith
Faucett with Merrill Lynch. Go ahead, sir.
Keith Fawcett: Good afternoon, gentlemen.
Raul Alarcon, Jr.: Hi, Keith.
Man: Hi.
Keith Fawcett: I missed the opening. There were all the - was it
audience or advertising that was up 44% in your
cluster in the first quarter?
Raul Alarcon, Jr.: I believe that was sales.
Keith Fawcett: The sales?
Raul Alarcon, Jr.: Yes.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 21
Keith Fawcett: Just to dwell a little bit more on LA, you know,
when I look at the ratings there it strikes me that
the morning audience for Renan really hasn't, like,
showed up anywhere. It's sort of has disappeared and
I'm wondering if you'd take that as just an Arbitron
problem or where that audience might gravitate to.
And in addition, I know that you've cut a deal, I
think, with Infinity to improve your geographic
coverage on DAB. I was wondering if you could give
us an update on the status of that deal and perhaps
an approximation of how much it might improve your
reach in the Hispanic community in LA when you
switch antenna sites.
Raul Alarcon, Jr.: Okay. With the first part of your question, Keith, I
think Bill had mentioned that - I think the safe
thing to say that this fellow's departure from
morning drive was a surprise, I think, for everyone
in the market -- it may have been a surprise for SBC
too, I'm not sure.
In any case, that's less a lot of - we feel, are our
reading of the ratings of a lot of this is franchise
listeners.
The fellow (happened would have been) Central
American. I think that that was a large component of
their audience on that station. That's my own
particular belief, and so I think that you have a
lot of audience now having tuned into this fellow
for the morning for many years and now they tuned in
and there's another guy there and they don't know
him and he isn't promoted and, "Who is this guy?"
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 22
And I think that Bill stated it correctly that that
is a - I think a huge opportunity for the
competitors in LA seeing that this guy was, you
know, so strong in the morning.
Now, we came up with the (nitched) format on KZAB
independent of that happening. They both happened
almost simultaneous and this guy went of the air
mid-February, whatever, and we launched on March 1st
but I know, I could tell you, that we saw - I know
that I had discussed it with Bill and our people -
programming people in Los Angeles for our new
station which is a Central American focused station.
A huge opportunity precisely because we felt that
there had been (listening) franchised listeners as a
result of those changes.
So, yes, I hope we answered your question. I think
we're very focused in our approach to the market. I
think there has been a lot of movement, as Bill
mentioned, particularly in the morning. And with
some frequency changes in LA we've tried to be as
consistent as we can with our two mainstays, you
know, KLAX and KXOL, and I think this new format
which we thought about long and hard, you know,
nobody had the desire to target the Central American
audience specifically before. And so that was a risk
that we took and I felt it was a warranted risk
because of the huge population that was there and
because we felt, I felt, we felt that there were
listeners that were available to us.
Now, the very early indications of Arbitron showed
that we were right but I want to also emphasize what
Bill said and that was, you know, this station is
just out of the gate. You know, we need to brand the
station, we need to promote the station, we need to
do everything right, but I think the main thing that
we're doing right, Keith, and I don't want to, you
know, I don't want to elaborate too much on this but
I think the main thing
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 23
that we're doing right is that we're focusing it
right in terms of a niche market, a niche population
that didn't have, as Bill mentioned, a favorite
station before.
So I think that's going to give us, you know, three
very variable formats. I'm very excited about the
third one -- the addition of the third one.
With respect to the transmitter relocation, that's
correct. We have signed a lease with Infinity. I
believe that we've been pending at the SEC. I don't
know if the transmitter relocation has been
approved. I think it has been and so we will
hopefully and I think the target date was July or
August, I think. We're going to be at a new site
which is going to bring us about 8 kilometers closer
-- roughly 5 miles closer -- to the heart of our
population, Central American population, in Los
Angeles.
Someone calculated, some ingenious engineer
calculated that to be about 1,000,000 people. I
think it was 8 - 900,000 people more that will be
served by that move.
So, you know, in terms of improving KZAB's
penetration and signal, I think that was the right
thing to do. It had been planned way before but I
think it's going to hit just at the right moment
when the station is taking off and obviously we
would want to have the best signal possible.
As you know, Keith, that's only half of the equation
because you've got the other simulcast on 93.5 out
of Ontario, so I think with both of them we're going
to have wide coverage of the market, again, in a
niche format and I think we're going to do very well
with it.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 24
Bill Tanner: Raul, I want to mention also that KLAX has a huge
outdoor showing up for our morning show that just
went up, I guess, probably in April. So, we're very
actively promoting our morning show on KLAX and we
expect - we've also made some personnel changes and
brought some new comedy into the show so we think
it's in a position to acquire audience.
Raul Alarcon, Jr.: All right, Keith, anything else?
Hello?
Conference Coordinator: We'll take our next question from the site of Kit
Spring with Stiefel Nicholas. Go ahead.
Kit Spring: Hi, good afternoon.
First, I have a question on your guidance. It was
flat to minus. It's a little bit below where your
peers had been. I would have thought you would have
been a little bit above peers. I'm wondering, one,
is it same store? Are you being conservative why you
might be growing slower than your peers or do you
think the market has just slowed down since your
peers kind of reported guidance a week or two ago?
That's my first question.
Second question is on legal expenses. When do you
expect them to drop and are you still active on the
lawsuit (unintelligible)?
Raul Alarcon, Jr.: I'll take the second part first. I'm sorry, your
name is Kit, I think?
Kit Spring: Kit Spring, yes.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 25
Raul Alarcon, Jr.: Yes. The legal expense is of course we consider them
to be non-recurring as - say, once we've finished
with the matters that are on the table now. We don't
expect them to reoccur. We do have a pending legal
action -- as many of you may know -- which is now
under reconsideration at the Miami Court. It is
basically static until the Judge decides whether
reconsideration is warranted or not. So, we don't
want to comment further on that until the Court in
Miami makes its decision.
With respect to guidance, Joe, I don't know. He said
that we had projected a little bit lower than our
peers.
Joseph Garcia: Yes. Let me just comment on that. First of all, our
guidance of flat to slightly negative. It's all in
including our estimated revenues in both for the
startups in Chicago and Los Angeles.
The - in addition to that, I'd like to comment that
there is - right now the map out there shows that
the big markets, namely New York and Chicago but
especially in New York, continues to show local
economic weaknesses, very prevalent in the New York
City economy at this moment and that tampers my
guidance.
I also like to say that we tend to be conservative
in our outlook and try to be able to go beyond that
when the final numbers are in.
Kit Spring: Okay.
Joseph Garcia: Thank you.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 26
Kit Spring: Thank you.
Conference Coordinator: The next question today comes from the side of
Bishop Cheen with Wachovia Securities. Go ahead.
Bishop Cheen: Hey, good afternoon, Raul, Joe, and Bill. The - my
question is in Chicago where you've made a - it's
certainly more than a dent certainly an investment,
success (bridged) to competition your good friends
down the block had acquired maybe 93.5 in (Juliet)
yet, Bill, how much a factor is that station going
to be in the competitive mix?
Bill Tanner: I can't tell you because we're not exactly sure what
they're doing. At the moment, their station is sort
of a pop station and it depends on whether they
decide to simulcast that or whether they decide to
program it in a different format.
We believe that our stations that we've gotten are
positioned with the format that is - available
format in the market, which is Romantica. And that's
why we're very enthusiastic about our stations. It
will just depend on what they do with it.
Raul Alarcon, Jr.: I would add, Bishop, that, I think, overall, a safe
statement could be made regarding Chicago. It's an
enormously underserved radio market. So, that, I
think, that there is - I think you have over a
million people - Hispanic people - in Chicago and
you have really, from my take, of the two real
formats.
This station that you're referring to, I think,
needs to be subject to a transmitter relocation in
order to make it more viable. And we'll see, I
think, I would defer to Bill on seeing exactly what
they do with the signal and what
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 27
they do with the format before I can give you a more
elaborate or precise answer.
Bishop Cheen: Fair enough. Let me ask in start-up cost because you
mentioned that that is one of the reasons that
realistically you can't talk about going to the moon
in Q2. Will those startup costs be more driven by
Los Angeles or Chicago?
Joseph Garcia: I would say that they are equally divided.
Bishop Cheen: Oh, sorry.
Joseph Garcia: Equally divided. With perhaps a little bit more in
Chicago since we already have about two stations. We
have already a significant cluster in LA so,
operating expenses there incremental will be - will
tend to be less than in the stage on growing ongoing
stations prior to this acquisition.
Bishop Cheen: Bravo. And then lastly a little housekeeping. We had
- I think, as we entered the start of the year a 205
million balance on LA acquisition with a 15 million
payment scheduled in March. So, the balance should,
be as we speak today, about 190.
Raul Alarcon, Jr.: That is correct.
Bishop Cheen: Okay. I get to go on to the next level. And that's
it? There's no other contingencies on that final
acquisition and as far you can tell the timing in
that would still be yearend 2003?
Raul Alarcon, Jr.: The timing, Bishop, the timing contractually is by
the end of 2003.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 28
Bishop Cheen: Right.
Raul Alarcon, Jr.: The number will be 190. It will not go up. We're
going to look and see and investigate and study the
alternatives as to whether it would be convenient
for us to close prior to December. There's some
arguments to say that we should close prior to
December, take advantage of the marketplace, et
cetera. So - but, yes. Contractually, the closing
must take place before December 31st of this year.
Bishop Cheen: Yes. All right. Thank you.
Raul Alarcon, Jr.: Thanks, Bishop.
Conference Coordinator: The next question today comes from Michael Weiseburg
with ING. Go ahead.
Michael Weiseburg: A couple of questions if I could. First of all,
could you tell us how April came in, Joe, in
revenue?
Joseph Garcia: April came in revenues, I - let me - if I - I'd like
to help you out by giving you some basics.
Michael Weiseburg: Okay.
Joseph Garcia: I prefer to do it that way.
Michael Weiseburg: Okay.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 29
Joseph Garcia: Basically - I'll give it you by stations. The
general market for April in New York, as well as our
stations, are pretty much in line with the market.
The New York market is down in the range of 3% to 5%
in general market radio. So, that's pretty much our
experiences for our own stations there.
In Los Angeles, the market in April was up by 11%.
Our stations were up 50%.
In Chicago, unfortunately, I don't have any
forward-looking data regarding the general market
from Chicago and Miami - not in Miami. I'll stay
with Chicago for a second. There is no
forward-looking numbers in Chicago. The data shows
that the marketing has been consistently low in
negative numbers in the 1% to 2% negative. Our
numbers are in that range as well for Chicago. So,
there's some softness in April there.
Miami, The market is up by 4% in the April and in
the month of May our number - excuse me - April, our
numbers are up by 5%.
You did not asked but I would also like to provide
some color slightly on May and June. May shows some
characteristics very similar to the month of April.
And that said, June basis right now reflect a much
better look - outlook in terms of basing of
revenues.
Michael Weiseburg: Great. So, June is pacing up then?
Joseph Garcia: June is pacing up. June is pacing up for us and -
well, June is pacing up in LA, Chicago. And right
now looks flattish in New York and Miami. The
general market for June, New York is pacing
downwards by 6%. LA market is up by 6, and I don't
have information with Chicago and Miami.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 30
Michael Weiseburg: Okay. So, New York is pacing down overall but your
pacing is flat. Is that right?
Joseph Garcia: That is right. The market is pacing downwards,
pacing flat.
Michael Weiseburg: Okay. Great. Did you - can I ask you a question
about legal expenses? Did you mention how big your
legal expenses were in the first quarter, Joe?
Joseph Garcia: Overall, my legal expenses were approximately $1.7
million.
Michael Weiseburg: In the first quarter?
Joseph Garcia: In the first quarter.
Michael Weiseburg: Okay. Is that - I guess, that would explain the
increase in corporate expenses. Because I was
looking at my notes, I guess, your guidance was -
well, maybe you didn't got it. But that's a big step
up from what it was in the fourth quarter. Is that
right?
Joseph Garcia: You're correct.
Michael Weiseburg: And what - is (David Boyce) making more money at our
expense here?
Joseph Garcia: I'm sorry. I can't hear your question. Again?
Michael Weiseburg: We're - what's causing the increase in the
expenditures there?
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 31
Raul Alarcon, Jr.: During the first quarter we had significant legal
outlay due to, among other things, the series of
depositions regarding the lawsuit that I mentioned
before in Miami. That took place during mid-January.
And that was a considerable amount of deposition
testimony that was taken from my (big) six
individuals. So, that was...
Michael Weiseburg: And will it stay at that kind of level on the second
quarter?
Raul Alarcon, Jr.: No, I don't believe so. You know, as I said, we're
now waiting for the Judge to decide on motion for
reconsideration. Depending on what the Judge decides
and we'll be able to give you a little bit more
guidance on that.
Michael Weiseburg: Okay. And in terms of the corporate expenses with -
I think, you mentioned were 4 million in change. Do
you think it will stay there for the second half or
could it come down some? Or, I mean, which will you
be looking for?
Joseph Garcia: I think the safe thing to do is to assume that we've
got so far expenditures will continue - may continue
for the second quarter until June.
Michael Weiseburg: No - I guess - I'm sorry, what about the second
half? What would you say there?
Joseph Garcia: The second half - I - our bidding is that they're
going to go down.
Michael Weiseburg: Okay.
Joseph Garcia: Yes.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 32
Michael Weiseburg: Great. And did you mention - you said you're
spending 3.4 million in advertising in the second
quarter. Is that right?
Joseph Garcia: In the second quarter we are estimating - we're
projecting $3.4 million in advertising.
Michael Weiseburg: And what was that in the first quarter?
Joseph Garcia: In the first quarter it was 1.3 and I quoted a
percentage of 78% increase. That is an incorrect
number. It's 1.3 versus last year 900,000. So, the
incremental was 34%.
Michael Weiseburg: Okay. And the big increase is because of Chicago and
LA from all the new stations?
Joseph Garcia: We continue to brand aggressively our stations in
Los Angeles.
Michael Weiseburg: Great. And I don't have - I guess, one of the other
questions - my final question - I don't have all the
ratings data but you didn't see much of a change in
the morning ratings in LA in terms of, you know,
picking up anything that Renan might have, you know,
might have been lost from his movement.
Joseph Garcia: I'd defer to Bill on that but I'll only say that
it's, I think, a little recent. The change was
relatively a reason that took place, I think, in
mid-February if I'm not mistaken.
Bill, do you want to add to that?
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 33
Bill Tanner: Yes. I would just say not yet. I think, that we -
that's an area where we intend to be very aggressive
particularly on air. And we do expect to have some
benefit from that change.
Michael Weiseburg: Great. Thanks a lot.
Man: Thank you.
Conference Coordinator: Our next question today comes from Robert Andrade
with Caxton. Go ahead, sir.
Robert Andrade: Good afternoon, guys.
Raul Alarcon, Jr.: Good afternoon.
Robert Andrade: Two questions. The first one is balance sheet
related. Is the quarter ending balance sheet number
of 65 million reflective of the $22 million cash
payment for big cities and the funding for KXOL of
50 million?
Joseph Garcia: No, it is not. It - that's the Chicago funding
current in April.
Robert Andrade: Okay.
Joseph Garcia: And then there was a subsequent interest payment of
$60 million, which also occurred in April.
Robert Andrade: Okay. And secondly, when do you expect the LA and
Chicago stations to breakeven on the station cash
flow basis?
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 34
Joseph Garcia: I think they're both - they're going to be breakeven
by yearend -- December. Or slightly negative maybe
by $500,000 both - in combined stations.
Robert Andrade: Did you already say, and I apologize if you did,
what you expect their loss to contribute as far as
on the second quarter?
Joseph Garcia: On the second quarter the - we're expecting - we are
estimating losses of roughly $500,000.
Robert Andrade: From both? Or combined?
Joseph Garcia: From both stations.
Robert Andrade: At the combined basis. Right?
Joseph Garcia: At the combined basis, right.
Robert Andrade: Okay. Great. Thank you.
Joseph Garcia: Thank you.
Conference Coordinator: We'll move next to the side of Richard Rosenstein
with Goldman Sachs. Go ahead.
Richard Rosenstein: Thank you. Raul, I guess, a little over a year ago I
had asked you on one of the earnings calls if you
had an unlimited amount of capital available to
operate your stations, how you might spend that
differently on operating expenses. And you said at
that time, if I remember correctly, without question
you'd spend on promotion. And I'm just wondering, do
you still feel that
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 35
way? And how, if at all, does that change your view
when taking about competing against Hispanic
combined with (Univision)?
Raul Alarcon, Jr.: Richard, the promotion of a radio station and the
branding of a radio station is always important.
Obviously, it's more important right after the
launch. After the launch could be determined by some
people to be a quarter, a year, couple of years, you
know. I think, that's a very important time when you
need to brand the station, when you need to let
people know from external media what you're doing on
the air.
I think, when you asked me that question last time
we had just launched or we had just finished
launching sometime previously on our LA station. We
were in the thick of a branding campaign.
I think, if you ask Bill Tanner, you know, he would
tell you that branding is important all the time.
And, you know, to hammer into the heads of the
listeners with - especially in a market like Los
Angeles where you have so many - so much input
regarding advertising for competing radio stations,
it's always an important factor.
Yes, to answer your question truthfully, you know,
after the station has stabilized, I think, you can
go into a maintenance mode on promotion which would
be certainly at a lower level than launches or
startups. But, you know, given your question as you
asked it before on limited budget, yes, I think,
promotion is very important. You know, as important,
you know, I think, as important as having the right
album, having the right music on the air where, you
know, in research we spend quite a bit of money also
to get - make sure we have the right music mix, the
right format, the right hold, and the right on-air
talent.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 36
So, you know, with respect to that question, I
think, if you - in the timeframe that you'd ask it
before it was obviously, I think, a point in time
where we were branding aggressively. We continue to
promote stations. We have, as we've discussed, two
start-ups, Chicago and LA. I have high hopes for
both of them particularly Los Angeles and we're
going to continue to see, as Joe mentioned,
advertising expenditure in order to continue our
branding of these startup facilities.
Richard Rosenstein: And, I mean, you've, obviously, done an admirable
job thus far. I just wondered if the maintenance
level of spending might get elevated as a result of
Univision's ownership of Hispanic.
Raul Alarcon, Jr.: You know, a lot of people have speculated about
that. I don't - if your question is as to
maintenance now as opposed to maintenance after this
merger happens, if it happens, I would have to say
that I don't - I really don't - I haven't looked at
it that way. You know, maintenance level on
promotion of a radio station to establish a mature
the radio station. Bill Tanner may disagree, I don't
know, but, I think, it would probably be half on an
annualized basis as to what it is compared to when
you launch.
With respect to, you know, looking at this through
the lens of having had the merger happened and the
combination of radio and television in the Hispanic
market I think, we would need to be a little bit
more careful. I think it would be a little bit more
prudent. I think, we would need to be a little bit
more targeted in how we're going to promote and
really conserve our dollars and do it in a very
strategic way.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 37
But otherwise, you know, I think, the more important
side of that formula is programming and that we have
what the listeners want to hear in respective of
whether our competitor is owned by a TV company or
not. And we're going to continue to focus on that
pre-merger, post merger, if there is a merger, if
there's no merger, we're going to continue looking
at, you know, developing our stations, program them
properly, and maintenance promotion or start-up
promotion as the case maybe.
Richard Rosenstein: That's very helpful. Thank you.
Raul Alarcon, Jr.: Thank you, Richard.
Conference Coordinator: Once again, if you would like to ask a question
today, please press the star and 1 on your touchtone
phone.
The next question comes from Laura Sloate with
Sloate Weisman. Go ahead.
Raul Alarcon, Jr.: Yes. Hello, Laura?
Laura Sloate: Hello.
Conference Coordinator: Laura, your line is open. Go ahead.
Laura Sloate: Oh. Hi, Raul...
Raul Alarcon, Jr.: Hi.
Laura Sloate: ...Joseph.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 38
Let me go back to this legal case. Since there seems
to be no grounds and it was tossed out, if the Judge
will not hear it on the (pellet) division, which I
hope he has good sense not to and keep - stop
wasting shareholder money. Then, what are you going
to do? Are you going to go forward? Can you go
forward? Is there another recourse?
Raul Alarcon, Jr.: Laura, just so that we understand each other, we're
in front of the Court of Miami on reconsideration of
her initial decision which she took in, I guess, it
was in January or February.
Laura Sloate: Okay. So, this - you're still at the first instance?
Raul Alarcon, Jr.: You should.
Laura Sloate: You're not at the (pellet)?
Raul Alarcon, Jr.: Exactly. That was my answer. That's right.
Laura Sloate: Okay. And what would you do if she throws you out
again?
Raul Alarcon, Jr.: I think that I have stated before, I believe very
strongly in the merits of the case. We will
prosecute them vigorously. We believe she heard in
her decision. We hope that she recognizes her error.
But if she doesn't, we're fully prepared. We'll take
a look at it, obviously. But we're fully prepared to
continue the appeal.
Laura Sloate: And so, you intend to continue to waste shareholder
money on this. Is there any limit?
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 39
Raul Alarcon, Jr.: We will continue to study in light of our opinion of
the merits of the case. As to your question of
whether there are limits, obviously, there are
limits. And we're not going to pursue this if the
proper venue in courts and appeals says that we are
wrong. We believe and our legal experts believe that
we are not wrong.
Laura Sloate: (Unintelligible) hasn't won a case since (Michael)
(unintelligible). It looks like he's got another
loser.
Now, let's go back to your financing. This is going
to press on the stock until you guys make up your
mind and get it done. And the longer you take, the
less options you have. So, when do you think you're
going to have an announcement on the kind of
financing? And, you know, when and if - when it'll
be done for the Los Angeles stations.
Raul Alarcon, Jr.: Well, Laura, let me say - as I said before, we're
looking at different alternatives. I don't agree
with your assessment that the longer it takes, the
worst it's going to be. My experience has been the
longer you study something and the more you look at
it the more carefully, look at it the more, the more
you investigate the options available, and the more
you negotiate whatever the ultimate solutions will
be, the better you turned out - you turn out to be
at the end.
Laura Sloate: Yes, but don't you have a stop (out) at the end of
December?
Raul Alarcon, Jr.: We have a closing date at the end of December. I
would try to truthfully answer your question and
that we are very heavily involved in negotiations
regarding this financing and I would hope that we
could before third quarter is
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 40
over. I think we would be in a position to either
announce or complete the transaction.
Laura Sloate: Okay. So, you're going to do it as late as late
summer?
Raul Alarcon, Jr.: Yes. That was what I was thinking as now assuming
all the conversations continue what they have to the
present date.
Laura Sloate: Okay. And in terms of other opportunities, are there
any other markets, if you had all flexible financing
available, that you would go into if you didn't have
the - your current market?
Raul Alarcon, Jr.: We - Laura, as you may know, we're interested in the
top ten markets -- Hispanic markets in the US. We
look opportunistically to see what's available or
what comes on. And can we, you know, can we take
advantage of whatever comes across our table in
terms of - obviously, if something comes across our
table, we take a look at the market, the
competitors. If there is a hole, if there is not a
hole, how much will it cost, you know. What kind of
audience share can we project that - of that
facility? I would answer your question by saying we
would look at all opportunities get - you know, your
question implied, you know, and unlimited ability to
pounce on an opportunity. I would limit by looking
at alternatives to probably the top ten markets. We
really had...
Laura Sloate: Is Puerto Rico one of the top-ten markets?
Raul Alarcon, Jr.: Excuse me?
Laura Sloate: Is Puerto Rico one of the top ten or?
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 41
Raul Alarcon, Jr.: Yes, in our opinion, it is. But in Puerto Rico we're
not going to be acquiring. It would be more than
that because we've got our full compliment (applies)
FMs in that market.
Laura Sloate: And how does Puerto Rico pace in the first quarter?
And what does it look like in the second quarter?
Joseph Garcia: Puerto is pacing roughly about 6 - 7% below last
year. Puerto Rico is a major gauge on how the
economy is fairing in the United States or it's a
mirror of that. And I'm expecting this - I'm
expecting our basis for the second quarter appear to
be about the same level.
Laura Sloate: You mean down 6% to 7%?
Joseph Garcia: Down to 6% to 7%, yes.
Laura Sloate: So, you see your market peer in Puerto Rico unlike
your other market?
Joseph Garcia: Market peer in what sense? I'm trying to understand
your point.
Laura Sloate: Well, market peer means that you're pacing what the
market's pacing while in the and the other markets
you've been outperforming.
Joseph Garcia: Oh, absolutely, yes.
Laura Sloate: Okay. And San Francisco, the music format, is that
working at all?
Joseph Garcia: Bill, you want to take that?
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 42
Bill Tanner: Yes. The San Francisco station was up in the overall
ratings in the Winter book. It's a smaller station
and it doesn't have a big signal and it doesn't have
a huge format position but it's performing about
what we think it should do.
Laura Sloate: Thanks very much.
Bill Tanner: Thank you.
Conference Coordinator: Our last question today comes from Bill Meyers with
Lehman Brothers. Go ahead, sir.
Bill Meyers: Joe, just a quick - two quick follow up questions on
the financial side. In terms of the taxes, it looks
like you had a book tax refund in the first quarter.
What should we assume in terms of book and cash
taxes for the year? And then, Joe, also, if you can
walk us to the warrant accounting for the stations
in Los Angeles, how we can model that? Thank you.
Joseph Garcia: Okay. Let me start with your second question while
we put together your first question on the - (go
back in) going forward in cash taxes.
Regarding the accounting for the warrants, the
church is entitled to receive up 100,000 warrants
price at the end of the month market date. It's
accountant as an expense in our programming line
under the KXOL station. The estimate there is, from
month-to-month depending, of course, on the price of
the stock and the volatility. As you know, the
standard practice is to use the black (shows model).
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 43
For the month of March, which is the actual that I
have is $345,000 in expenses to 343,000, you may -
we can estimate that for the quarter ending June
assuming that this goes all the way through the
month of June, the estimate maybe in the range of
$1.2 million for those three months.
Regarding your...
Bill Meyers: And Joe, it's a non-cash expense, correct?
Joseph Garcia: These are - yes. These are non-cash expenditures and
that's why I excluded from my guidance.
Bill, I'm trying to answer your other question.
Bill Meyers: The alternative at positive cash flow.
Joseph Garcia: Did you ask for the tax rate -- our book tax rate,
Bill?
Bill Meyers: Yes. Just so we could better project that book in
cash taxes for the balance of the year.
Joseph Garcia: Assume a range of 70% to 80%. And for...
Bill Meyers: I'm sorry.
Joseph Garcia: ...the book tax rate, 70% to 80%. And regarding cash
taxes, (pay) cash taxes in less than $500,000.
Bill Meyers: Great. Thanks very much.
Spanish Broadcasting First Quarter 2003 Earnings
Moderator: Raul Alarcon, Jr.
05-13-03/1:00 pm CT
Page 44
Joseph Garcia: Thank you.
Conference Coordinator: We have no further questions at this time. I'll turn
it back over to management for any concluding
comments.
Raul Alarcon, Jr.: Okay. Thank you very much, ladies and gentlemen. We
look forward to our next teleconference call.
Conference Coordinator: That does conclude today's conference. You may
disconnect your lines at any time. Thank you for
your participation. And have a nice day.
END