Spanish Broadcasting System (SBSAA) 8-K Other events

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): October 2, 2003

SPANISH BROADCASTING SYSTEM, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-27823	13-3827791
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

2601 South Bayshore Drive, PH II, Coconut Grove, Florida
(Address of principal executive offices) 33133
(Zip Code)

(305) 441-6901
(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Item 5. Other Events and Regulation FD Disclosure.

(1)  On October 9, 2003, Spanish Broadcasting System, Inc. (“SBS”) issued a press release announcing its proposed private offering of $75.0 million of cumulative exchangeable redeemable preferred stock and its proposed entry into senior secured credit facilities consisting of a $125.0 million term loan facility and a $10.0 million revolving credit facility. A copy of the press release is attached to this report as Exhibit 99.1.

(2)  On October 2, 2003, SBS entered into an asset purchase agreement with 3 Point Media-San Francisco, LLC for the sale of certain assets, including the FCC license, of SBS radio station KPTI-FM, serving the San Francisco, California market, for a cash purchase price of $30.0 million. The agreement contains customary representations and warranties and the closing of the sale is subject to the satisfaction of certain customary conditions, including receipt of regulatory approval from the FCC. A copy of the asset purchase agreement is attached to this report as Exhibit 10.1.

Item 7. Financial Statements and Exhibits.

     (c) Exhibits

10.1	Asset Purchase Agreement dated as of October 2, 2003 between Spanish Broadcasting System, Inc., Spanish Broadcasting System-San Francisco, Inc., KPTI Licensing, Inc. and 3 Point Media-San Francisco, LLC.
99.1	Press Release of Spanish Broadcasting System, Inc. dated October 9, 2003.

Item 9. Regulation FD Disclosure.

     In connection with the proposed financings described in Item 5 above, SBS intends to provide potential investors with the following unaudited pro forma financial information, which has not been previously disclosed.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA

     The following unaudited pro forma condensed consolidated balance sheet as of June 30, 2003 and the unaudited pro forma condensed consolidated statements of operations for the fiscal year ended December 29, 2002, the six months ended June 30, 2003 and the last twelve months ended June 30, 2003 are based on the historical consolidated financial statements to give effect to the following transactions (and any other adjustments described in the accompanying notes to the unaudited pro forma condensed consolidated financial data):

• The closing of the acquisition of radio station KXOL-FM in Los Angeles;

• The sale of our San Francisco and San Antonio stations;

• The closing of the senior secured credit facilities; and

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• The closing of the offering of cumulative exchangeable redeemable preferred stock.

     The pro forma last twelve months (LTM) financial information was derived by adding historical financial information for the fiscal year ended December 29, 2002 to the unaudited historical information for the six months ended June 30, 2003, and subtracting unaudited historical financial information for the six months ended June 30, 2002, and giving pro forma effect to the transactions as if they had occurred at the beginning of the period presented.

     The unaudited pro forma condensed consolidated balance sheet as of June 30, 2003 has been derived from the historical unaudited balance sheet as of June 30, 2003, to give pro forma effect to the transactions as if they occurred on June 30, 2003. The unaudited pro forma condensed consolidated statements of operations for the fiscal year ended December 29, 2002, the last twelve months ended June 30, 2003 and the six months ended June 30, 2003 give pro forma effect to the transactions as if they occurred at the beginning of the period presented. The pro forma financial condensed consolidated statements of operations exclude historical discontinued operations and cumulative effect of a change in accounting principle, which were recorded in the historical consolidated financial statements.

     The unaudited pro forma condensed consolidated financial data are based on preliminary estimates and assumptions set forth in the notes to such information. Pro forma adjustments are necessary to reflect the estimated purchase and sales price of stations, the new debt structure and to adjust amounts related to acquired intangible assets to a preliminary estimate of their fair values. Pro forma adjustments are also necessary to reflect the amortization expense related to amortizable deferred financing cost, changes in depreciation and amortization expense resulting from adjustments to property and equipment, interest expense, elimination of non-cash programming expense for warrants related to the KXOL acquisition, and the income tax effect related to the pro forma adjustments.

     The pro forma adjustments and allocation of the KXOL purchase price are preliminary and are based on management’s estimate of the fair value of the assets to be acquired. The final purchase price allocation will be completed after asset valuations are finalized. This final valuation will be based on the actual intangible assets that exist as of the date of the completion of the transactions. Any final adjustments may change the allocations of the purchase price which could affect the fair value assigned to the assets and could result in a change to the unaudited pro forma condensed consolidated financial data. In addition, the impact of the timing of the completion of the transactions and other changes in intangible assets prior to completion of the transactions could cause material differences in the information presented.

     The unaudited pro forma condensed consolidated financial data are presented for informational purposes only and have been derived from, and should be read in conjunction with, the historical consolidated financial statements including the notes thereto. The pro forma adjustments, as described in the notes to the unaudited pro forma condensed financial data, are based on currently available information and certain adjustments that we believe are reasonable. They are not necessarily indicative of our consolidated financial position or results of operations that would have occurred had the transactions taken place on the dates indicated, nor are they necessarily indicative of our future consolidated financial position or results of operations.

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Pro Forma Condensed Consolidated Balance Sheet (Unaudited)

								Pro Forma Adjustments
														Pro Forma
														Condensed
					Historical As of June 30, 2003			Financing and Acquisition (a)			Station Sales (b)			Combined As of June 30, 2003
								($ in thousands)
Assets
Current assets:
	Cash and cash equivalents				$	31,681		$	2,000		$	25,500		$	59,181
	Net receivables					26,840			—			—			26,840
	Other current assets					2,696			—			—			2,696
		Total current assets				61,217			2,000			25,500			88,717
Property and equipment, net						25,944			500			(881	)		25,563
Intangible assets						539,149			191,000			(26,276	)		703,873
Deferred financing costs, net						8,118			3,396			—			11,514
Other assets						1,305			—			—			1,305
				Total assets	$	635,733		$	196,896		$	(1,657	)	$	830,972
Liabilities and Stockholders’ Equity
Current liabilities:
	Current portion of long-term debt				$	217		$	—		$	—		$	217
	Accounts payable and accrued expenses					16,310			—			—			16,310
	Accrued interest					5,403			—			—			5,403
	Deferred commitment fee					230			—			—			230
		Total current liabilities				22,160			—			—			22,160
9 5/8% senior subordinated notes, net						324,683			—			—			324,683
Other long-term debt, less current portion						3,837			—			—			3,837
Senior secured credit facilities									125,000			(25,500	)		99,500
Deferred income taxes						56,018			—			(1,093	)		54,925
Series A preferred stock						—			75,000			—			75,000
Stockholders’ equity:
	Class A common stock					3			—			—			3
	Class B common stock					3			—			—			3
	Additional paid-in capital					446,216			(3,104	)		—			443,112
	Accumulated deficit					(217,187	)		—			24,936			(192,251	)
		Total stockholders’ equity				229,035			(3,104	)		24,936			250,867
			Total liabilities and stockholders’ equity		$	635,733		$	196,896		$	(1,657	)	$	830,972

(a) Represents estimated sources of funds and the use of funds from the new senior secured credit facilities and the offering of the Series A preferred stock as if they had occurred on June 30, 2003, as follows (in thousands):

PIK preferred stock		$	75,000
New senior secured credit facilities			125,000
	Sources of Funds		200,000
Intangible assets (KXOL-FM FCC license)			189,500
Intangible assets (KXOL-FM brokerage fee)			1,500
Property and equipment (KXOL-FM equipment)			500
Deferred financing fees			3,396
Additional paid in capital (cost of issuing preferred stock)			3,104
Excess cash			2,000
	Use of Funds	$	200,000

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(b) Represents estimated proceeds, uses of proceeds and the book gain from the sale of our San Antonio and San Francisco radio stations as if they had occurred on June 30, 2003, as follows (in thousands):

Proceeds and usage from sale of stations
Sales price of stations		$	54,400
Repayment of senior secured credit facilities			25,500
Brokerage fees and others			500
Estimated cash income taxes to be paid			2,900
	Net cash proceeds from sale of stations	$	25,500
Estimated book value of assets sold and book gain realized
Intangible assets (FCC licenses and goodwill)		$	26,276
Property and equipment		$	881
Accumulated deficit (book gain on sale, net of book taxes)		$	24,936
Deferred income taxes liability		$	(1,093	)

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Pro Forma Condensed Consolidated Statements of Operations (Unaudited)

								Pro Forma Adjustments
					Historical Fiscal Year Ended December 29, 2002			Financing and Acquisition			Station Sales (d)			Pro Forma Condensed Combined Fiscal Year Ended December 29, 2002
								($ in thousands, except share data)
Gross revenue					$	159,548		$	—		$	(5,076	)	$	154,472
Less agency commissions						19,303			—			(519	)		18,784
				Net revenue		140,245			—			(4,557	)		135,688
Operating expenses:
			Engineering			3,793			—			(242	)		3,551
			Programming			20,714			—			(805	)		19,909
			Non-cash programming			—			—			—			—
			Selling			42,157			—			(1,476	)		40,681
			General and administrative			14,616			—			(978	)		13,638
			Corporate expenses			13,546			—			—			13,546
			Depreciation and amortization			3,005			50	(b)		(134	)		2,921
				Total operating expenses		97,831			50			(3,635	)		94,246
				Operating income from continuing operations		42,414			(50	)		(922	)		41,442
Other (income) expenses:
	Interest expense, net					34,118			5,416	(c)		28			39,562
	Other, net					720			—			—			720
			Income (loss) from continuing operations before income taxes, discontinued operations and cumulative effect of a change in accounting principle			7,576			(5,466	)		(950	)		1,160
	Income tax expense (benefit)					53,863			6,933	(e)		(769	)(e)		60,027
			Loss from continuing operations before discontinued operations and cumulative effect of a change in accounting principle		$	(46,287	)	$	(12,399	)	$	(181	)	$	(58,867	)
	Loss per common share before discontinued operations and cumulative effect of a change in accounting principle:
		Basic and diluted			$	(0.72	)	$	(0.32	)(f)	$	—		$	(1.04	)
	Weighted-average common shares outstanding:
		Basic and diluted				64,670			64,670			64,670			64,670

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Pro Forma Condensed Consolidated Statements of Operations (Unaudited)

								Pro Forma Adjustments
					Historical Six Months Ended June 30, 2003			Financing and Acquisition			Station Sales (d)				Pro Forma Condensed Combined Six Months Ended June 30, 2003
								($ in thousands, except share data)
Gross revenue					$	76,774		$	—			$	(2,677	)	$	74,097
Less agency commissions						9,958			—				(318	)		9,640
			Net revenue			66,816			—				(2,359	)		64,457
Operating expenses:
			Engineering			1,991			—				(143	)		1,848
			Programming			10,411			—				(467	)		9,944
			Non-cash programming			1,622			(1,622	)(a)			—			—
			Selling			18,815			—				(944	)		17,871
			General and administrative			7,932			—				(592	)		7,340
			Corporate expenses			9,181			—				—			9,181
			Depreciation and amortization			1,535			25	(b)			(70	)		1,490
				Total operating expenses		51,487			(1,597	)			(2,216	)		47,674
			Operating income from continuing operations			15,329			1,597				(143	)		16,783
Other (income) expenses:
			Interest expense, net			17,424			2,708	(c)			4			20,136
			Other, net			(223	)		—				—			(223	)
				Loss from continuing operations before income taxes		(1,872	)		(1,111	)			(147	)		(3,130	)
	Income tax expense (benefit)					(1,860	)		(12,073	)(e)			161	(e)		(13,772	)
				(Loss) income from continuing operations	$	(12	)	$	10,962			$	(308	)	$	10,642
(Loss) income per common share:
		Basic and diluted			$	—		$	0.10	(f)		$	—		$	0.10
Weighted-average common shares outstanding:
		Basic				64,682			64,682				64,682			64,682
		Diluted				64,682			64,773				64,682			64,773

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Pro Forma Condensed Consolidated Statements of Operations (Unaudited)

								Pro Forma Adjustments						Pro Forma Condensed
					Historical LTM									Combined
					for the period									LTM for the
					ended			Financing and						period ended
					June 30, 2003			Acquisition			Station Sales (d)			June 30, 2003
								($ in thousands, except share data)
Gross revenue					$	159,177		$	—		$	(5,303	)	$	153,874
Less agency commissions						20,402			—			(593	)		19,809
		Net revenue				138,775			—			(4,710	)		134,065
Operating expenses:
		Engineering				3,924						(276	)		3,648
		Programming				20,997						(890	)		20,107
		Non-cash programming				1,622			(1,622	)(a)					—
		Selling				38,314						(1,827	)		36,487
		General and administrative				15,570						(1,141	)		14,429
		Corporate expenses				16,777			—			—			16,777
		Depreciation and amortization				3,088			50	(b)		(139	)		2,999
				Total operating expenses		100,292			(1,572	)		(4,273	)		94,447
		Operating income from continuing operations				38,483			1,572			(437	)		39,618
Other (income) expenses:
		Interest expense, net				34,354			5,416	(c)		20			39,790
		Other, net				763			—			—			763
			Loss from continuing operations before income taxes and discontinued operations			3,366			(3,844	)		(457	)		(935	)
Income tax expense (benefit)						7,348			10,287	(e)		(769	)(e)		16,866
			Loss from continuing operations before discontinued operations		$	(3,982	)	$	(14,131	)	$	312		$	(17,801	)
Loss per common share before discontinued operations:
	Basic and diluted				$	(0.06	)	$	(0.35	)(f)	$	—		$	(0.41	)
Weighted-average common shares outstanding:
	Basic and diluted					64,678			64,678			64,678			64,678

(a)	Represents the elimination of the non-cash programming expense related to the warrants issued pursuant to the amended KXOL-FM asset purchase agreement.
(b)	Represents adjustments for the increase of property and equipment depreciation associated with acquired assets in connection with the acquisition of KXOL-FM.
(c)	Represents interest expense adjustment of $5.4 million, $2.7 million and $5.4 million for the fiscal year ended December 29, 2002, the six months ended June 30, 2003 and the twelve months ended June 30, 2003, respectively, resulting from the aggregate impact of the increase in interest expense attributable to (i) the new senior secured credit facilities and (ii) the related amortization of deferred financing costs.
(d)	Represents the elimination of results of operating income from continuing operations of the San Antonio and San Francisco radio stations.
(e)	Represents income tax effect of adjustments.
(f)	The calculation of net (loss) income per common share includes the pro forma effect of dividends on the preferred stock of $8.3 million, $4.1 million and $8.3 million for the fiscal year ended December 29, 2002, the six months ended June 30, 2003 and the twelve months ended June 30, 2003, respectively.

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     We are furnishing the information contained in this Item 9 pursuant to Regulation FD, promulgated by the Securities and Exchange Commission (“SEC”). This information is furnished pursuant to Item 9 of Form 8-K and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, unless we specifically incorporate it by reference in a document filed under the Securities Act of 1933, as amended, or the Exchange Act. By filing this report on Form 8-K and furnishing this information, we make no admission as to the materiality of any information in this report that is required to be disclosed solely by Regulation FD or that the information includes material investor information that is not otherwise publicly available.

     The information contained in this report is summary information that is intended to be considered in the context of our SEC filings and other public announcements that we may make, by press release or otherwise, from time to time. We disclaim any current intention to revise or update the information contained in this report, although we may do so from time to time as our management believes is warranted. Any such updating may be made through the filing of other reports or documents with the SEC, through press releases or through other public disclosure.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SPANISH BROADCASTING SYSTEM, INC. (Registrant)
October 9, 2003	By: /s/ Joseph A. Garcia
	Joseph A. Garcia Chief Financial Officer Executive Vice President and Secretary

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