Entravision

Nothing in this document should be construed as investment advice. It is intended only to provide a snapshot of a radio company to help radio listeners understand who owns and runs the radio stations they listen to, and provide a few items of financial data related to the 2008/2009 economic downturn.

Entravision  (Website) is a publicly traded (NYSE: EVC) large TV and Radio conglomerate that primariy targets the Spanish speaking audience in the United States.  It is closely affiliated with Univision, which has a 10% ownership stake (reduced to 10% by the order of the U.S. Department of Justice).   It operates 51 TV stations that carry the Univision and Telefutura programming and 48 radio stations.  Entravision’s headquarters are located in Santa Monica, California.     Entravision has about 1,000 full time employees.

Their radio stations are mostly in smaller media markets in states that border Mexico, and Florida.   Many of the stations are in fringe coverage areas of larger cities.  (“rimshot” stations in radio biz slang).  It can be cheaper to run 3 lower power stations than to try to buy one big station.    There is also a temptation to say you have a station in a major market when the rating services say the station is too far away to be counted “in” that market.

Most of the Entravision is distributed from a centralized production facility.

Entravision also operates TV stations in the Boston, Hartford CT and Washington, DC area.

History

Entravision was founded in 1996 by Walter F. Ulloa and Philip C. Wilkinson.

Walter F. Ulloa is a lawyer.  He had worked at KMEX-TV and moved into TV sales.  He left KMEX-TV in 1989 to go to work for Univision, which at that time was owned by Hallmark. Philip C. Wilkinson worked at Univision from 1982 to 1990.  His background in the media business is also in Sales.

When the FCC relaxed TV and radio ownership limits in 1996, Univision provided $10 million in capital in exchange for a 25% stake in Entravision and Entravision was launched.

Entravision started buying up TV stations, some of them from Univision, using a $150 million credit line provided by Union Bank of California, which was the result of the merger of  Union Bank and Bank of California.  Entravision continued to mainly acquire TV stations in the 1990s.

in 2000, Entravision acquired Latin Communications Group Inc. for $256 million.  Latin Communications Group owned 17 radio stations and a group of Spanish language newspapers.  In 2000, Entravision decided to “Go Public”, and the founders converted their ownership interest in the private Entravision, LLC into Class “B” shares, and other investers were offered Class “A” shares.  Univision’s interests were made into class “C” Shares.  46.44 million shares of Class A stock was sold to the public at $16.50 a share, and Univision also bought about $100 million of the Class A shares.  In all, about $816 million was raised in the IPO.  Time to go shopping.

First was Z-Spanish Media, which owned 33 radio stations, and a large number of billboards.  They then acquired a large group of billboards from Infinity Broadcasting for $168 million (Viacom had just taken over Infinity/CBS) .  The billboards are located primarily in Hispanic neighborhoods in New York

They bought radio stations from Citicasters and Sunburst media and several more TV stations that carried Univision’s programming.

Entravision Radio has three main “brands” it operates –  Super Estrella, a pop and alternative Spanish rock format; Radio Tricolor, a Mexican country-style format (the Tricolor is the Mexican Flag, like calling an English Language  station “The Stars and Stripes”); and Jose (Nothing at all like Jack FM), a mix of Spanish-language Adult Contemporary hits.

Radio Stations in large markets

Los Angeles

| KDLD FM     | SANTA MONICA      | CA     (El Gato - "The Cat")
| KSSE FM     | ARCADIA           | CA     (Super Estrella)
| KSSC FM/HD1 | VENTURA           | CA     (Super Estrella)
| KLYY FM/HD1 | RIVERSIDE         | CA      (Jose)

Phoenix

| KDVA FM     | BUCKEYE           | AZ     (Jose)
| KLNZ FM/HD1 | GLENDALE          | AZ     (La Tricolor)
| KVVA FM/HD1 | APACHE JUNCTION   | AZ     (Jose)
| KMIA AM     | BLACK CANYON CITY | AZ     (Spanish ESPN)

Denver, CO

| KMXA AM/HD  | AURORA            | CO     (La Tricolor)
| KJMN FM/HD1 | CASTLE ROCK       | CO     (Jose)
| KXPK FM     | EVERGREEN         | CO     (La Tricolor)

Sacramento, CA

| KBMB FM/HD1 | SACRAMENTO        | CA     (the Bomb)
| KRCX FM/HD1 | MARYSVILLE        | CA     (La Tricolor)
| KNTY FM/HD1 | SHINGLE SPRINGS   | CA     (Country - The Wolf)
| KXSE FM/HD1 | DAVIS             | CA     (Jose)

Las Vegas/Reno, NV

| KQRT FM/HD1 | LAS VEGAS         | NV     (La Tricolor)
| KRRN FM     | DOLAN SPRINGS     | AZ     (Jose)
| KRNV FM     | RENO              | NV     (La Tricolor)

McAllen, TX

| KNVO FM/HD1 | PORT ISABEL       | TX     (Jose)
| KFRQ FM     | HARLINGEN         | TX     (Rock 94.5)
| KKPS FM     | BROWNSVILLE       | TX     (Que Pasa)
| KVLY FM/HD1 | EDINBURG          | TX     (Mix 107.9)

Albuquerque, NM

| KRZY AM/HD  | ALBUQUERQUE       | NM     (La Tricolor)
| KRZY FM/HD1 | SANTA FE          | NM     (Jose)

El Paso

| KSVE AM     | EL PASO           | TX     (Jose)
| KINT FM     | EL PASO           | TX     (Jose)
| KOFX FM     | EL PASO           | TX     (the Folx - Oldies)
| KHRO AM     | EL PASO           | TX     (El Paso)
| KYSE FM     | EL PASO           | TX     (El Gato)

Ownership

There are three classes of stock:

Class A –  45.8 million shares outstanding.   This is the stock you buy on the NYSE.  Each share gives you one vote.  The NYSE has notified Entravision their stock will be delisted for falling below $1/share for more than 30 trading days.   The NYSE has temporarily stopped delisting companies for that reason, but plans to lift the relaxed standard at the end of June 2009.

Class B – 22.8 mllion shares outstanding .  These are the shres representing the ownership interest of the founders.  Each Class B share gets 10 votes. So even though they only own 1/4th of the stock, but control 83% of the votes that elect the board who decides how much money they make.

Class U – (originally Class C) – 15.6 million shares outstanding (2008 year end) – Univision’s 15% ownership, which carries special veto rights over Entravision’s operations    Since they cannot be publicly traded, Entravision  exchanged radio stations and cash for stock to get the Class U ownership down under the 10% limit required for Univision’s acquisition of Hispanic Broadcasting Company.  The Class U stock has only limited voting rights, and does not get a vote on electing the Board of Directors.

Management

Walter F. Ulloa is Chairman of the Board and CEO. Philip C. Wilkinson is the President and COO.  They were the co-founders of Entravision and had previously worked for Univision.

Jeffery A. Liberman is the President of the Radio division.   He was president of Latin Communications Group from 1992 until it was acquired by Entravision in 2000.   He does not appear to be related to Jose and Lenard Liberman, who operate Liberman Broadcasting –  another radio statiobn owner that targets the Hispanic audience.

Institutional Owners:

Because the stock is below $1 per share and threatened with delisting, virtually no institutional investors are permitted to invest in the stock.  It’s a logical inference that some of the “owners” may be the banks on the hook for the credit facility – and they may be selling the stock into the current upward price trend – making money on the stock after they renegotiate the terms on the credit facility.  [But of course that is NOT insider trading, is it?]

Class A Owner Location Approx
# Shares
Goldman Sachs New York 6.4 million
Columbia Wanger Asset Management Chicago 4.7 million
Dimensional Fund Advisors Austin, TX 4.5 million
Barclay’s Global Interestmens London, England 2.7 million
Wells Fargo San Francisco 2.2 million
Highland Capital Management Dallas TX 1.9 million
Vangaurd Valley Forge, PA 1.7 million
Northern Trust Chicago 1.1 million

Financial Condition as of 2008 (10-K)

Key Balance Sheet Items: (2008)

Total Assets:  $591 Million

  • Value of TV/Radio Station licenses:  $298 million
  • Goodwill and other intangible Assets:  $45 Million
  • Cash:  $64 Million
  • Accounts Receivable: $44 Million  (69 days of revenue)
  • Land, Buildings, Equipment (net) $91 Million

Debt:

  • Current Liabilities:  $35 million
  • Long Term Debt:  $405 Million

Stockholder Equity:  $112 Million

Credit Facility

The company has an $750M credit facility from a group of bank that was created in 2005.    $500 million is a term loan facility that carries LIBOR+1.5%.  The other $150 million is a revolving credit facility that carries LIBOR +1 to +2% depending on the company’s financial condition.

In late 2008, the company repaid $66 on the facility to avoid being in breach of its requirements.   $405 million is currently borrowed against the facility.   The terms of the facility were renegotiated in March 2009.   The new terms carry a higher interest rate (up to LIBOR + 5.25%), and allow the lender to grab 75% of the cash flow generated by the business to repay the loan balance.   The company is undergoing a cost reduction program, but thinks there is still a risk they may not be able to meet the terms of the credit facility.

Swap transactions

The company had 3 interest rate swaps for a total of $285 million, hedging about half of the outstanding LIBOR credit facility balance – protecting the company (and indirectly the lender) if the LIBOR interest rate starts to go up.

10-k Notes

Profitability

All numbers in $million 2008 2007 2006 2005 2004
TV + Radio Revenue $232 250 255 246 228
Radio Only $86 $93 $96 ?
License Impairment $610 $189
Operating Income
(Without Impairment)
47 66 97 63 59
Long Term Debt Balance 406 484 497 506 482
Debt Service Cost 43 49 29 30 28

Stock Performance

Entravision did its IPO in class A shares in 2000 at $16.50 and closed trading the first day at $18.75.    The stock hit its low point of $.22 a share in March of 2009 just before the changes to the credit facility were announced.

As of May 22, 2009, the stock closed at $.48 per share.  If you had bought at the first day of trading IPO price, you have lost 97.5% of your investment.  If you had bought the stock in March 2009 knowing that the banks were going to revise the credit facility, you have a theoretical profit of 118% in 2 months.

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