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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report pursuant to Section 13 or 15(d) of the
[X] Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
Transition Report Pursuant to Section 13 or 15(d) of
[ ] the Securities Exchange Act of 1934
COMMISSION FILE NO. 333-61211
RADIO UNICA CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 65-0776004
(State of Incorporaton) (I.R.S. Employer
Identification Number)
8400 N.W. 52ND STREET, SUITE 101
MIAMI, FL 33166
(Address of principal executive offices) (Zip Code)
305-463-5000
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
As of November 12, 1999, 100 shares of Common Stock, $.01 par value
were outstanding.
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RADIO UNICA CORP.
TABLE OF CONTENTS
Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements............................................................................. 2
Item 2. Management's Discussion and Analysis............................................................. 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk....................................... 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................................................. 14
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RADIO UNICA CORP.
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
ASSETS 1999 1998
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(Unaudited)
Current assets:
Cash and cash equivalents $ 75,698 $ 38,894,144
Restricted cash 135,674 12,600,000
Accounts receivable, net 4,428,971 1,232,402
Prepaid expenses 885,809 5,012,001
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Total current assets 5,526,152 57,738,547
Property and equipment, net 16,480,089 11,769,654
Broadcast licenses, net 85,400,281 43,729,708
Other intangible assets, net 9,846,936 9,894,522
Other assets 750,160 373,142
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$ 118,003,618 $ 123,505,573
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
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Current liabilities:
Accounts payable and accrued expenses $ 1,962,720 $ 4,121,411
Notes payable 15,100,000 750,000
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Total current liabilities 17,062,720 4,871,411
Other liabilities 314,358 --
Deferred taxes 1,641,990 1,641,990
Senior discount notes 114,435,585 105,029,128
Commitments and contingencies
Series A redeemable cumulative preferred stock of Radio Unica
Communications Corp. $.01 par value; 450,000 shares authorized;
353,907 and 353,560 shares issued and outstanding at September 30, 1999
and December 31, 1998, respectively 41,253,908 38,266,437
Stockholders' deficit:
Common stock $.01 par value; 1,000 shares authorized;
100 shares issued and outstanding 1 1
Additional paid-in-capital (deficiency) 14,036,848 (2,611,337)
Accumulated deficit (70,741,792) (23,692,057)
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Total stockholders' deficit (56,704,943) (26,303,393)
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$ 118,003,618 $ 123,505,573
============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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RADIO UNICA CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three months ended Nine months ended
September 30, September 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
Net revenue $ 4,733,967 $ 2,954,757 $ 11,081,249 $ 6,418,719
Operating expenses:
Direct operating expenses 995,572 414,341 2,704,039 1,302,715
Selling, general and administrative expenses 2,697,129 2,609,115 9,059,279 6,956,119
Network expenses 3,500,234 2,915,555 9,132,274 9,798,561
Corporate expenses 721,429 734,533 2,061,285 2,041,058
Depreciation and amortization 1,398,228 529,827 3,811,300 901,971
LMA termination fee -- -- 2,000,000 --
Stock option compensation expense 19,591,106 -- 19,591,106 --
------------ ------------ ------------ ------------
28,903,698 7,203,371 48,359,283 21,000,424
------------ ------------ ------------ ------------
Loss from operations (24,169,731) (4,248,614) (37,278,034) (14,581,705)
Other income (expense):
Interest expense (3,716,300) (2,382,812) (10,407,684) (2,848,214)
Interest income 47,540 519,713 635,983 831,765
Equity in loss of equity investee -- (17,749) -- (14,867)
------------ ------------ ------------ ------------
(3,668,760) (1,880,848) (9,771,701) (2,031,316)
------------ ------------ ------------ ------------
Net loss (27,838,491) (6,129,462) (47,049,735) (16,613,021)
Accrued dividends on Series A redeemable
cumulative preferred stock 1,007,159 914,065 2,942,921 1,917,079
------------ ------------ ------------ ------------
Net loss applicable to common shareholders $(28,845,650) $ (7,043,527) $(49,992,656) $(18,530,100)
============ ============ ============ ============
Net loss per common share applicable to
common shareholders - basic and diluted $ (288,457) $ (197) $ (499,927) $ (730)
============ ============ ============ ============
Weighted average common shares
outstanding - basic and diluted 100 35,839 100 25,389
============ ============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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RADIO UNICA CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 1998
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OPERATING ACTIVITIES
Net loss $ (47,049,735) $ (16,613,021)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 3,811,300 901,971
Equity in loss of equity investee -- 14,867
Interest on notes payable paid with the issuance of capital stock -- 261,227
Accretion of interest on senior discount notes 9,406,457 2,087,895
Amortization of deferred financing costs 578,124 117,014
Stock option compensation expense 19,591,106 --
Other (285,063) --
Change in assets and liabilities:
Accounts receivable (3,196,569) (2,619,999)
Prepaid expenses 1,626,192 457,828
Radio broadcasting rights (115,797) (1,750,000)
Other assets (424,006) (529,555)
Accounts payable and accrued expenses (1,573,108) 1,383,202
Radio broadcasting rights obligation -- 1,015,000
Deposit payable 165,000 --
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Net cash used in operating activities (17,466,099) (15,273,571)
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INVESTING ACTIVITIES
Acquisition of property and equipment (2,352,060) (3,406,218)
Restricted cash-escrow account 12,464,326 (2,500,000)
Repayment of advances to equity investee -- 1,000,000
Acquisitions of radio stations (44,723,582) (43,494,441)
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Net cash used in investing activities (34,611,316) (48,400,659)
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FINANCING ACTIVITIES
Proceeds from issuance of senior discount notes, net -- 95,845,651
Proceeds from borrowings under the revolving credit facility 14,350,000 --
Debt financing costs (1,135,581) --
Proceeds from issuance of Series A redeemable cumulative
preferred stock and common stock -- 15,000,000
Proceeds from issuance of notes payable to stockholders -- 21,795,000
Repayment of notes payable to stockholders -- (6,795,000)
Repayment on note payable issued in connection with
the acquisition of KIQI-AM San Francisco -- (5,250,000)
Proceeds from issuance of Series A redeemable cumulative
preferred stock of Radio Unica Communications Corp. 44,550 --
Redemption and cancellation of preferred and common stock -- (500,000)
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Net cash provided by financing activities 13,258,969 120,095,651
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Net (decrease) increase in cash and cash equivalents (38,818,446) 56,421,421
Cash and cash equivalents at beginning of period 38,894,144 1,126,862
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Cash and cash equivalents at end of period $ 75,698 $ 57,548,283
============= =============
Supplemental disclosures of cash flow information:
Reclassification of prepaid expenses to broadcast licenses upon
consummation of the acquisition of WWRU-AM, WJDM-AM,
KIDR-AM and KAHZ-AM $ 2,500,000 $ --
============= =============
Note payable issued in connection with the acquisition of
KIQI-AM San Francisco $ -- $ 6,000,000
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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RADIO UNICA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements of
Radio Unica Corp. and subsidiaries (the "Company") for the periods indicated
herein have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission and in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three and nine months ended September 30, 1999 and 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999. The consolidated financial statements include the accounts of
the Company and all majority owned subsidiaries over which the Company has
control. All significant intercompany accounts and transactions have been
eliminated. For further information, refer to the Company's 1998 consolidated
financial statements and notes thereto.
The Company's revenue and cash flow are expected to be typically lowest in
the first calendar quarter and highest in the fourth calendar quarter. Seasonal
fluctuations are common in the radio broadcasting industry and are due primarily
to fluctuations in consumer spending.
2. ACQUISITIONS
On October 27, 1998, the Company entered into an asset purchase agreement
with Children's Broadcasting Corporation to acquire certain assets of New York
City area radio stations WWRU-AM and WJDM-AM, Dallas/Ft. Worth radio station
KAHZ-AM and Phoenix radio station KIDR-AM for a purchase price of $29.25
million. In connection with this acquisition, the Company entered into a
two-year non-compete agreement with the seller for $750,000. Pursuant to this
agreement, the Company established escrow accounts totaling $10 million. The
Company operated these stations under an LMA for a monthly fee of $200,000 until
the transaction closed. On January 14, 1999, after receiving the Federal
Communications Commission (the "FCC") consent the Company completed the
acquisition. Based on current FCC guidelines, the license of either WWRU-AM or
WJDM-AM must be relinquished by the Company by March 12, 2003.
On February 22, 1999, the Company contracted to acquire substantially all
the assets used in the operation of radio station WNTD-AM, in Chicago, Illinois
from subsidiaries of One-on-One Sports, for a cash purchase price of
approximately $16.75 million. The Company funded a $1 million escrow account in
conjunction with this transaction. On May 14, 1999, after receiving the consent
of the FCC to assign the broadcasting licenses, the Company completed the
acquisition.
The acquisitions of the assets of WWRU-AM and WJDM-AM, New York, KAHZ-AM,
Dallas, KIDR-AM, Phoenix, and WNTD-AM, Chicago, were not the purchases of
businesses, as defined, as the format and language of the stations were changed
and the Company did not assume responsibility for any employees. The
acquisitions were accounted for as purchases and, accordingly, the purchase
price was allocated to the assets acquired and liabilities assumed based on
appraisals and other estimates of their underlying values.
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RADIO UNICA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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3. COMMITMENTS
On June 7, 1999, the Company entered into a time brokerage agreement
("TBA") with DEN-MEX L.L.C. for substantially all of the broadcast time on
Denver radio station KCUV-AM for a monthly fee of $25,000 through June 14, 2002.
In addition to the TBA, the Company had an option to purchase the assets of
KCUV-AM. On November 1, 1999 the Company exercised its option to acquire
substantially all the assets used in the operation of KCUV-AM for a cash
purchase price of approximately $2.8 million. The transaction is expected to be
finalized upon the receipt of the FCC's consent for the transaction.
On October 31, 1997, the Company entered into a local marketing agreement
("LMA") with Lotus Oxnard Corp. ("Lotus") to operate Simi Valley, CA radio
station KVCA, effective January 5, 1998. Simultaneous with the LMA, the Company
entered into an escrow agreement whereby the Company provided a $2.5 million
escrow account deposit on January 5, 1998 to secure compliance with the LMA
terms. In June 1999, the Company began negotiations on the termination of the
LMA. On July 30, 1999, upon an agreement reached by the Company and Lotus, the
LMA was terminated for a final payment of $2.0 million and the escrow funds were
released to the Company.
4. SUMMARIZED FINANCIAL INFORMATION
The senior discount notes issued by the Company are guaranteed by all of
the Company's Domestic Restricted Subsidiaries on a full, unconditional, joint
and several basis. The financial statements of the subsidiary guarantors are
omitted as management has determined that separate financial statements and
other disclosures concerning the subsidiaries is not material to investors.
Summarized financial information for the Company's Domestic Restricted
Subsidiaries follows:
AS OF OR FOR THE
NINE MONTHS ENDED SEPTEMBER 30,
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1999 1998
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Current assets $ 5,450,454 $ 6,094,261
Total assets 117,927,920 61,200,150
Current liabilities 39,125,665 19,160,061
Total liabilities (including due to parent of $36,412,945
and $14,921,169, respectively) 41,082,013 27,398,796
Net revenue 11,081,249 6,418,719
Operating expenses 23,685,059 17,117,624
Net loss (22,375,511) (12,730,221)
5. SUBSEQUENT EVENTS
On October 19, 1999, the Company's parent, Radio Unica Communications Corp.
("RUCC") (formerly "Radio Unica Holdings Corp.") completed an initial public
offering ("IPO") of 6,840,000 shares of its commons stock at an IPO price of
$16.00 per share. RUCC received net proceeds from the IPO of approximately $98.7
million on October 22, 1999. The net proceeds from the IPO will be used to repay
the indebtedness under the revolving credit facility, to acquire radio stations,
upgrade existing stations and for general corporate purposes.
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RADIO UNICA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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5. SUBSEQUENT EVENTS, CONTINUED
Upon the consummation of the IPO, all of RUCC's outstanding shares of
Series A redeemable cumulative preferred stock were exchanged for an aggregate
of 2,974,909 shares of RUCC's common stock. These shares were exchanged at the
liquidation value of the preferred stock at October 19, 1999 divided by the
midpoint of the proposed public offering price range $15.00, less the
underwriters' discount or $13.95 per share.
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RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
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This report contains "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements include, among others, statements concerning the
Company's outlook for 1999 and beyond, the Company's expectations, beliefs,
future plans and strategies, anticipated events or trends, and similar
expressions concerning matters that are not historical facts. The
forward-looking statements in this report are subject to risks and uncertainties
that could cause actual results to differ materially from those expressed in or
implied by the statements.
OVERVIEW
We generate revenue from sales of network advertising time, and sales of
local and national advertising time on radio stations that we own and those that
we operate under LMAs (collectively "O&Os"). Advertising rates are, in large
part, based upon the network's and each station's ability to attract audiences
in demographic groups targeted by advertisers. All revenues are stated net of
any agency commissions. We recognize advertising revenue when the commercials
are broadcast.
Our operating expenses consist of network programming expenses, marketing
and selling costs, including commissions paid to our sales staff, technical and
engineering costs, and general and administrative expenses.
As is true of other radio operators, the Company's performance is
customarily measured by its earnings before net interest, taxes, depreciation
and amortization ("EBITDA"). Although EBITDA is not a measure of performance
calculated in accordance with generally accepted accounting principles, EBITDA
is presented because it provides useful information regarding the Company's
ability to service debt. However, EBITDA should not be considered as an
alternative measure of operating results or cash flows from operations (as
determined in accordance with generally accepted accounting principles).
On October 19, 1999, the Company's parent Radio Unica Communications Corp.
("RUCC") completed an initial public offering of 6,840,000 shares of its common
stock, at an initial public offering price of $16.00. RUCC received net proceeds
from the initial public offering of approximately $98.7 million on October 22,
1999. The proceeds from the initial public offering will be used to repay the
indebtedness under the revolving credit facility, to acquire radio stations,
upgrade existing stations and for general corporate purposes.
Upon the consummation of the IPO, all of RUCC's outstanding shares of
Series A redeemable cumulative preferred stock were exchanged for an aggregate
of 2,974,909 shares of RUCC's common stock. These shares were exchanged at the
liquidation value of the preferred stock at October 19, 1999 divided by the
midpoint of the proposed public offering price range $15.00, less the
underwriters' discount or $13.95 per share.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998
NET REVENUE. Net revenue increased by approximately $1.7 million or 60.2%
to approximately $4.7 million for the three months ended September 30, 1999 from
approximately $3.0 million for the comparable period in the prior year. The
increase in net revenue relates to an increase in the Company's customer base
due to the development of the Company's network and O&Os and the increase in the
number of O&Os.
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RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION (CONTINUED)
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OPERATING EXPENSES. Operating expenses increased by approximately $21.7
million or 301.3% to approximately $28.9 million for the three months ended
September 30, 1999 from approximately $7.2 million for the comparable period in
the prior year. The increase in operating expenses is mainly due to the one-time
non-cash stock option compensation expense charge of approximately $19.6 million
as well as increased costs associated with the operation of the Company's O&Os.
Direct operating expenses increased by approximately $0.6 million or 140.3%
to approximately $1.0 million for the three months ended September 30, 1999 from
approximately $0.4 million for the comparable period in the prior year. The
increase in direct operating expenses is primarily due to the increase in the
number of O&Os as well as increased spending relating to the promotion of those
O&Os.
Selling, general and administrative expenses increased by approximately $0.1
million or 3.4% to approximately $2.7 million for the three months ended
September 30, 1999 from approximately $2.6 million for the comparable period in
the prior year. The increase in selling, general and administrative expenses
primarily relates to the increase in the number of O&Os.
Network expenses increased by approximately $0.6 million or 20.1% to
approximately $3.5 million for the three months ended September 30, 1999 from
approximately $2.9 million for the comparable period in the prior year. The
increase in network expenses is mainly due to the increase in the level of
spending to develop network programming as well as increased spending relating
to advertising campaigns to promote the network.
Corporate expenses were approximately $0.7 million for the three months
ended September 30, 1999, which was consistent with the comparable period in the
prior year.
Depreciation and amortization increased by approximately $0.9 million or
163.9% to approximately $1.4 million for the three months ended September 30,
1999 from approximately $0.5 million for the comparable period in the prior
year. The increase in depreciation and amortization is due to significant
additions of fixed assets and intangible assets arising from acquisition of
O&Os.
Stock option compensation expense relates to a one time non-cash charge of
approximately $19.6 million relating to the vesting of variable options granted
to employees of the Company to purchase approximately 1.3 million shares of the
RUCC's common stock at exercise prices ranging from $.03 to $1.72 per share.
These stock options vested on October 19, 1999, upon the completion of RUCC's
IPO. Stock option compensation expense was recognized at September 30, 1999 to
the extent that the market value of RUCC's shares exceeded the option price. The
market value of RUCC's stock at September 30, 1999 was deemed to be $16.00 per
share which was the initial public offering price.
OTHER INCOME (EXPENSE). Other income (expense) increased by approximately
$1.8 million or 95.1% to approximately $(3.7) million for the three months ended
September 30, 1999 from approximately $(1.9) million for the comparable period
in the prior year. Other income (expense) for the three months ended September
30, 1999 included interest income of approximately $48,000, and interest expense
of approximately $3.7 million. Interest expense primarily relates to the
interest on the outstanding balance of the senior discount notes. The Company
had approximately $0.5 million in interest income and $2.3 million in interest
expense during the three months ended September 30, 1998.
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RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION (CONTINUED)
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NET LOSS. Net loss increased by approximately $21.7 million or 354.2% to
approximately $27.8 million for the three months ended September 30, 1999 as
compared to a loss of approximately $6.1 million for the comparable period in
the prior year. The increase in net loss is mainly the result of the one-time
non-cash stock option compensation expense charge of approximately $19.6
million, increased costs associated with the operation of the Company's O&Os,
the increase in depreciation and amortization resulting from the significant
increase in the number of O&Os, as well as the increase in interest expense
resulting from the senior discount notes and borrowing under the revolving
credit facility
EBITDA. EBITDA decreased by approximately $19.1 million or 512.3% to
approximately $(22.8) million for the three months ended September 30, 1999 as
compared to approximately $(3.7) million for the comparable period in the prior
year. The decrease in EBITDA is mainly a result of the one-time, non-cash stock
option compensation expense charge of approximately $19.6 million as well as
increased costs associated with the operation of the Company's O&Os. EBITDA,
less the one-time charge relating to the stock option compensation expense,
increased by approximately $0.5 million or 14.5% to approximately $(3.2) million
for the three months ended September 30, 1999 as compared to approximately
$(3.7) million for the comparable period in the prior year.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
NET REVENUE. Net revenue increased by approximately $4.7 million or 72.6% to
approximately $11.1 for the nine months ended September 30, 1999 from
approximately $6.4 million for the comparable period in the prior year. The
increase in net revenue relates to an increase in the Company's customer base
due to the development of the Company's network and O&Os and the increase in the
number of O&Os.
OPERATING EXPENSES. Operating expenses increased by approximately $27.4
million or 130.3% to approximately $48.4 million for the nine months ended
September 30, 1999 from approximately $21.0 million for the comparable period in
the prior year. The increase in operating expenses is mainly due to the
one-time, non-cash stock option compensation expense charge of approximately
$19.6, increased costs associated with the operation of the Company's O&Os, the
increase in depreciation and amortization resulting from the significant
increase in the number of O&Os, as well as a one-time payment of $2.0 million to
terminate the LMA agreement for Los Angeles radio station KVCA-AM. The Company
now reaches the market through its radio station KBLA-AM in Los Angeles
Direct operating expenses increased by approximately $1.4 million or 107.6%
to approximately $2.7 million for the nine months ended September 30, 1999 from
approximately $1.3 million for the comparable period in the prior year. The
increase in direct operating expenses is primarily due to the increase in the
number of O&Os as well as increased spending relating to the promotion of those
O&Os.
Selling, general and administrative expenses increased by approximately $2.1
million or 30.2% to approximately $9.1 million for the nine months ended
September 30, 1999 from approximately $7.0 million for the comparable period in
the prior year. The increase in selling, general and administrative expenses
primarily relates to the increase in the number of O&Os.
Network expenses decreased by approximately $0.7 million or 6.8% to
approximately $9.1 million for the nine months ended September 30, 1999 from
approximately $9.8 million for the comparable period in the prior year. The
decrease in network expenses relates to non-recurring costs incurred during 1998
for programming rights and production expenses relating to the World Cup offset
in part by the increase in the level of spending to develop network programming
as well as increased spending relating to advertising campaigns to promote the
network.
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RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION (CONTINUED)
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Corporate expenses were approximately $2.0 million for the nine months ended
September 30, 1999, which was consistent with the comparable period in the prior
year.
Depreciation and amortization increased by approximately $2.9 million or
322.6% to approximately $3.8 million for the nine months ended September 30,
1999 from approximately $0.9 million for the comparable period in the prior
year. The increase in depreciation and amortization is due to significant
additions of fixed assets and intangible assets arising from the acquisition of
O&Os.
LMA termination fee relates to a one-time payment of $2.0 million to
terminate the LMA agreement for Los Angeles radio station KVCA-AM. If the LMA
agreement had continued pursuant to its terms the sum of the amounts due would
have been approximately $6.1 million. The Company now reaches the market through
its radio station KBLA-AM in Los Angeles.
Stock option compensation expense relates to a one time non-cash charge of
approximately $19.6 million relating to the vesting of variable options granted
to employees of the Company to purchase approximately 1.3 million shares of
RUCC's common stock at exercise prices ranging from $.03 to $1.72 per share.
These stock options vested on October 19, 1999, upon the completion of RUCC's
IPO. Stock option compensation expense was recognized at September 30, 1999 to
the extent that the market value of RUCC's shares exceeded the option price. The
market value of RUCC's stock at September 30, 1999 was $16.00 per share which
was the initial public offering price.
OTHER INCOME (EXPENSE). Other income (expense) increased by approximately
$7.7 million or 381.1% to approximately $(9.7) million for the nine months ended
September 30, 1999 from approximately $(2.0) million for the comparable period
in the prior year. Other income (expense) for the nine months ended September
30, 1999 included interest income of approximately $0.6 million, and interest
expense of approximately $10.4 million. Interest income primarily relates to
interest earned on the proceeds from the senior discount notes. Interest expense
primarily relates to the interest on the outstanding balance of the senior
discount notes. The Company had approximately $0.8 million in interest income
and $2.8 million in interest expense during the nine months ended September 30,
1998.
NET LOSS. Net loss increased by approximately $30.4 million or 183.2% to
approximately $47.0 million for the nine months ended September 30, 1999 as
compared to a loss of approximately $16.6 million for the comparable period in
the prior year. The increase in net loss is mainly a result of the one-time,
non-cash stock option compensation expense charge of approximately $19.6
million, increased costs associated with the operation of the Company's O&Os,
the increase in depreciation and amortization expense resulting from the
significant increase in the number of O&Os, the increase in interest expense
resulting from the senior discount notes and borrowing under the revolving
credit facility, as well as a one-time payment of $2.0 million to terminate the
LMA agreement for Los Angeles radio station KVCA-AM. This increase is offset in
part by a decrease in network expenses related to non-recurring costs in 1998
for programming rights and production expenses relating to the World Cup.
EBITDA. EBITDA decreased by approximately $19.8 million or 144.5% to
approximately $(33.5) million for the nine months ended September 30, 1999 as
compared to approximately $(13.7) million for the comparable period in the prior
year. The decrease in EBITDA is mainly due to the one-time, non-cash stock
option compensation expense charge of approximately $19.6 million, increased
costs associated with the operation of the Company's O&Os, as well as the
one-time payment of $2.0 million to terminate the LMA agreement for Los Angeles
radio station KVCA-AM. EBITDA, less the one-time charges relating to the stock
option compensation expense and the LMA termination payment mentioned above,
increased by $1.8 million or 13.1% to approximately $(11.9) million for the nine
months ended September 30, 1999 as compared to approximately $(13.7) million for
the comparable period in the prior year.
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RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION (CONTINUED)
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LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities increased by approximately $2.2
million to approximately $17.5 million for the nine months ended September 30,
1999 as compared to approximately $15.3 million for the comparable period in the
prior year. Net cash used in investing activities was approximately $34.6
million and $48.4 million for the nine months ended September 30, 1999 and 1998,
respectively. The decrease of $13.8 million from 1998 to 1999 is primarily due
to the release of funds held in escrow in connection with the acquisitions
taking place during 1999. Net cash provided by financing activities was $13.3
million and $120.1 million for the nine months ended September 30, 1999 and
1998, respectively. The decrease of $106.8 million from 1998 to 1999 is due to
the proceeds from the issuance of the senior discount notes as well as the
issuance of preferred and common stock received by the Company during 1998.
Capital expenditures primarily relate to the purchase of broadcast
equipment for the network and O&Os, leasehold improvements, computer equipment
and telecommunications equipment. Capital expenditures were approximately $2.4
million and $3.4 million for the nine months ended September 30, 1999 and 1998,
respectively. The decrease in capital expenditures is primarily due to the
significant capital expenditures made during 1998 related to the development of
the Company's network and O&Os.
The Company's primary source of liquidity will be the net proceeds from
RUCC's initial public offering and the borrowing availability under its
revolving credit facility. The revolving credit facility is a $20.0 million
senior secured revolver subject to certain conditions. As of September 30, 1999
there was $14.4 million outstanding under the credit facility.
The Company believes that its current cash position, the net proceeds from
RUCC's initial public offering and the borrowing availability under the
Revolving Credit Facility, will provide adequate resources to fund the Company's
operating expenses, working capital requirements, capital expenditures and
acquisitions until its business strategy provides the Company with sufficient
operating cash flow. However, there can be no assurance that such business
strategy will be successful or that the future cash flows of the Company will be
sufficient to meet all of the Company's obligations and commitments.
YEAR 2000 COMPLIANCE
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue and has
developed an implementation plan to resolve the issue. The Year 2000 issue is
the result of computer programs being written using two digits rather than four
to define the applicable year. Any of the Company's computer programs that have
time/date sensitive software and hardware may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in a major system failure
or miscalculation. The Company presently believes that based on the results of
recent investigations, the Company's primary information and communication
systems are believed to be compliant with Year 2000 requirements. The Company's
cost of compliance has been minimal and any future costs are not anticipated to
be material to the Company's financial position or results of operations.
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RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION (CONTINUED)
- -------------------------------------------------------------------------------
The Year 2000 issue creates risk for the Company from unforeseen problems in
its own computer systems and from third parties on which the Company relies.
Accordingly, the Company is requesting assurances from all software vendors from
which it has purchased or from which it may purchase software that the software
sold to the Company correctly processes all date information at all times. In
addition, the Company is querying its customers and suppliers as to their
progress in identifying and addressing problems that their computer systems will
face in correctly processing date information as the Year 2000 approaches and is
reached. However, there are no assurances that the Company will identify all
date handling problems in its business systems or that the Company will be able
to successfully remedy Year 2000 compliance issues that are discovered. To the
extent that the Company is unable to resolve its Year 2000 issues prior to
January 1, 2000, operating results could be adversely affected. In addition, the
Company could be adversely affected if other entities (e.g., vendors or
customers) not affiliated with the Company do not appropriately address their
own Year 2000 compliance issues in advance of their occurrence.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risk exposure with respect to financial instruments is to changes
in the "prime rate" in the United States. We may borrow up to $20 million under
our credit facility. Amounts outstanding under the credit facility bear
interest, at the Company's option, at the bank's prime rate plus 1.25% or LIBOR
plus 2.50%. At September 30, 1999 there was $14.4 million outstanding under our
credit facility.
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RADIO UNICA CORP.
PART II - OTHER INFORMATION
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 27.1 - Financial Data Schedule.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Radio Unica Corp.
By: /s/ Steven E. Dawson
-------------------------------------
Steven E. Dawson
Chief Financial Officer
Date: November 12, 1999
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