Univision’s Earnings Depressed by Charges

Spanish-language media giant Univision Communications Inc. reported a sharp drop in fourth-quarter profit Thursday as the company readied itself for a possible sale by laying off employees, writing down investments and paying a claim made by its Latin American programming partner.

The one-time charges caused the Los Angeles broadcaster’s profit to plunge 59% to $27.4 million, or 8 cents a share.

But Univision showed strength as its quarterly revenue grew 11%, to $513.5 million. And, before the charges, earnings came to 25 cents a share, exceeding the 23 cents estimated by Wall Street analysts polled by Thomson Financial.

“Univision’s fourth quarter was very strong,” said David Joyce, media analyst for Miller Tabak & Co. “They are doing all of the right things to maximize the value of the company.”

The company’s shares rallied in after-hours trading, rising as much as 80 cents a share. Univision released its earnings after the markets closed. Its shares had fallen 34 cents to $33.50 in regular trading.

Led by billionaire Chief Executive A. Jerrold Perenchio, Univision’s board last month said it was considering putting the company up for sale. Nearly $70 million in fourth-quarter charges stemmed from efforts to tidy up the company’s operations before it went on the block.

Charges included $30 million in costs associated with the layoffs of 270 employees, mostly in its television division. There also was a write-down of $33.6 million to account for the reduced value of some investments, primarily in Santa Monica-based Entravision Communications Corp.

As part of a federal agreement in 2003 for Univision to win approval of its acquisition of radio chain Hispanic Broadcasting Corp., the company reduced its stake in Entravision, a TV, radio and billboard company that owns TV stations that carry Univision programming. Univision now owns less than 15% of Entravision.

In addition, Univision said it paid its partner, Mexico City-based Grupo Televisa, $6 million “under protest” for some disputed programming fees. Univision and Televisa, which owns 11% of Univision, have been tussling over payments since Televisa sued a year ago, claiming that Univision was cheating it out of its share of programming profit.

Although Univision doesn’t believe that it owes the money, “we are making the payment out of an abundance of caution,” said Univision Chief Financial Officer Andrew Hobson.

He added that Univision planned to file a counterclaim to recover the $6 million from Televisa, which supplies Univision with its wildly popular telenovelas.

The fourth quarter was a banner one for Univision for another reason. After years of pressure, Nielsen Media Research began including the company’s broadcast networks in its overall TV rankings, showing that its flagship Univision is the nation’s fifth-largest network, behind ABC, CBS, Fox and NBC.

“There is no way that an advertiser now can ignore Univision,” said President Ray Rodriguez. The inclusion, he said, “allows everyone to see that not only is Univision the leader in Spanish-language television, but it is a powerful competitor of ABC, CBS, NBC and Fox.”

This summer, the company has the U.S. broadcasting rights to Latin America’s most popular event: soccer’s World Cup. Hobson said Univision expected at least $180 million in gross revenue or about $153 million in net revenue from the event.

Analysts said the alignment of events made this a particularly good year for Univision to put itself up for sale.

“It looks like their grand master plan is working very nicely for them this year,” Miller Tabak’s Joyce said.

Rodriguez and Hobson did not go into detail about Univision’s potential sale during a conference call with analysts. However, Rodriguez said the timing was right to explore options.

“Univision is currently in a uniquely strong position -- our performance is at record levels, attention to Spanish-language media keeps growing, and our industry-leading assets and connection with Hispanics simply cannot be duplicated,” he said.