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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
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 Incorporation) (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 August 13, 2001, 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
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................... 13
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RADIO UNICA CORP.
CONSOLIDATED BALANCE SHEETS
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<Table>
<Caption>
JUNE 30, DECEMBER 31,
ASSETS 2001 2000
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(UNAUDITED)
Current assets:
Cash and cash equivalents $ 393,210 $ 143,619
Accounts receivable, net of allowance for doubtful accounts of
$818,436 and $824,261, respectively 10,258,364 8,120,254
Prepaid expenses and other current assets 4,758,538 4,098,210
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Total current assets 15,410,112 12,362,083
Property and equipment, net of accumulated depreciation of $5,696,925
and $4,464,924, respectively 22,998,052 22,369,517
Broadcast licenses, net of accumulated amortization of $8,527,658
and $6,685,734, respectively 100,009,686 101,969,501
Other intangible assets, net of accumulated amortization of
$4,037,518 and $3,504,074, respectively 9,738,089 7,711,404
Other assets 3,258,960 2,186,517
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$ 151,414,899 $ 146,599,022
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LIABILITIES AND STOCKHOLDERS' DEFICIT
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Current liabilities:
Accounts payable $ 1,569,213 $ 946,267
Accrued expenses 3,728,000 2,431,903
Current portion of notes payable 994,386 44,217
Deferred revenue and fees 1,225,768 262,440
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Total current liabilities 7,517,367 3,684,827
Other liabilities 25,000 165,000
Notes payable 1,180,091 45,707
Due to parent, net 75,611,515 65,129,936
Deferred taxes 1,066,496 1,144,531
Senior discount notes 139,725,884 131,972,501
Commitments and contingencies
Preferred stock; $.01 par value; 5,000,000 shares authorized;
no shares issued and outstanding -- --
Stockholders' deficit:
Common stock; $.01 par value; 1,000 shares authorized,
100 shares issued and outstanding 1 1
Additional paid-in-capital 59,556,278 59,556,278
Deferred compensation expense (746,932) (1,102,546)
Accumulated deficit (132,520,801) (113,997,213)
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Total stockholders' deficit (73,711,454) (55,543,480)
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$ 151,414,899 $ 146,599,022
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</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2
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RADIO UNICA CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
- ------------------------------------------------------------------------------------------------------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Net revenue $ 9,923,227 $ 7,745,933 $ 15,544,556 $ 13,963,636
Operating expenses:
Direct operating 2,424,287 1,603,605 4,092,283 3,234,059
Selling, general and administrative 4,246,408 4,017,614 8,358,988 7,880,712
Network 3,964,496 3,133,847 7,702,038 6,805,723
Corporate 852,626 809,152 1,686,310 1,686,644
Cost of promotion services 700,507 -- 700,507 --
Depreciation and amortization 1,592,253 1,445,778 3,259,793 2,869,018
Stock option compensation 177,806 753,373 355,614 1,506,746
------------ ------------ ------------ ------------
13,958,383 11,763,369 26,155,533 23,982,902
------------ ------------ ------------ ------------
Loss from operations (4,035,156) (4,017,436) (10,610,977) (10,019,266)
Other income (expense):
Interest expense (4,163,348) (3,711,074) (8,226,361) (7,356,848)
Interest income 10,135 46,223 19,669 59,350
Other 208,338 5,535 216,046 9,223
------------ ------------ ------------ ------------
(3,944,875) (3,659,316) (7,990,646) (7,288,275)
------------ ------------ ------------ ------------
Loss before income taxes (7,980,031) (7,676,752) (18,601,623) (17,307,541)
Income tax benefit 78,035 -- 78,035 --
------------ ------------ ------------ ------------
Net loss $ (7,901,996) $ (7,676,752) $(18,523,588) $(17,307,541)
============ ============ ============ ============
Net loss per common share - basic and diluted $ (79,020) $ (76,768) $ (185,236) $ (173,075)
============ ============ ============ ============
Weighted average common shares
outstanding - basic and diluted 100 100 100 100
============ ============ ============ ============
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
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RADIO UNICA CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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<Table>
<Caption>
SIX MONTHS ENDED JUNE 30,
-------------------------------
2001 2000
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OPERATING ACTIVITIES
Net loss $(18,523,588) $(17,307,541)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 3,259,793 2,869,018
Provision for bad debts (25,825) 266,013
Accretion of interest on senior discount notes 7,753,383 6,916,788
Amortization of deferred financing costs 385,820 385,416
Stock option compensation expense 355,614 1,506,746
Loss on investment in unconsolidated company 131,677 --
Deferred income taxes (78,035) --
Other (653,683) (332,940)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable (696,282) (3,124,236)
Prepaid expenses and other current assets (339,272) (881,152)
Other assets (67,847) (566,538)
Accounts payable 524,127 (895,942)
Accrued expenses 611,450 906,512
Deferred revenue 78,816 --
Deposit payable 25,000 --
------------ ------------
Net cash used in operating activities (7,258,852) (10,257,856)
------------ ------------
INVESTING ACTIVITIES
Acquisition of property and equipment (1,603,352) (1,440,041)
Restricted cash-escrow account -- (650,000)
Acquisition of wholly owned subsidiary, net of cash received (1,342,687) --
Acquisition of radio stations -- (6,145,041)
Investment in unconsolidated company -- (2,000,000)
------------ ------------
Net cash used in investing activities (2,946,039) (10,235,082)
------------ ------------
FINANCING ACTIVITIES
Intercompany payable, net 10,481,578 19,610,134
Repayment of notes payable (27,096) (155,000)
------------ ------------
Net cash provided by financing activities 10,454,482 19,455,134
------------ ------------
Net decrease in cash and cash equivalents 249,591 (1,037,804)
Cash and cash equivalents at beginning of period 143,619 2,396,044
------------ ------------
Cash and cash equivalents at end of period $ 393,210 $ 1,358,240
============ ============
Issuance of note payable in connection with acquisition of
wholly owned subsidiary $ 2,078,561 $ --
============ ============
Investment in unconsolidated company in exchange for
advertising $ -- $ 1,000,000
============ ============
Reclassification of other assets to broadcast license upon
consummation of the acquisition of radio stations $ -- $ (4,544,301)
============ ============
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
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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 six months ended June 30, 2001 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2001. 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 2000 consolidated financial
statements and notes thereto.
The Company's revenues and cash flow are 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.
Certain amounts appearing in the 2000 consolidated financial statements
have been reclassified to conform with the 2001 presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations". The statement discontinues the use of the pooling of interest
method of accounting for business combinations. The statement is effective for
all business combinations after June 30, 2001. Management has completed an
evaluation of the effects of this statement and believes that it will not have
an effect on the Company's consolidated financial statements.
In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets". The statement will require discontinuing the amortization of goodwill
and other intangible assets with indefinite useful lives. Instead, these assets
will be tested periodically for impairment and written down to their fair market
value as necessary. The Company will adopt this statement effective January 1,
2002. Management is currently evaluating the effect of the adoption of the
statement on the Company's consolidated financial statements.
5
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RADIO UNICA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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2. ACQUISITIONS
On April 30, 2001, the Company entered into an asset purchase agreement
with Marketing Advertising & Sales Services, Inc. and related companies ("MASS")
to acquire MASS' marketing and promotions businesses for a purchase price of
approximately $4.2 million. In connection with this transaction, the Company
acquired approximately $1.5 million in working capital, which included
approximately $0.7 million in cash. The purchase price was comprised of a cash
payment of approximately $2.1 million and a promissory note of approximately
$2.1 million. The promissory note bears interest at a rate of 8% per annum.
Principal and interest on the promissory note is payable concurrently. Principal
payments are scheduled to be made as follows:
<Table>
April 30, 2002 $ 953,561
April 30, 2003 625,000
April 30, 2004 500,000
------------
$ 2,078,561
============
</Table>
The acquisition was accounted for as a purchase and, accordingly, the
purchase price was allocated to the assets acquired and liabilities assumed
based on estimates of their underlying values, subject to final adjustments.
The pro forma unaudited results of operations of the Company for the six
months ended June 30, 2001 and 2000 assuming the MASS acquisition had been
consummated as of January 1, 2000 is as follows:
<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30,
-------------------------------
2001 2000
------------ ------------
(UNAUDITED)
Net revenue $ 18,460,479 $ 20,224,390
============ ============
Net loss $(18,135,472) $(15,101,303)
============ ============
Net loss per common share - basic and diluted $ (181,355) $ (151,013)
============ ============
</Table>
The unaudited pro forma results do not purport to be indicative of the
results of operations which actually would have resulted had the acquisition of
MASS occurred on January 1, 2000, or of future results of operations of the
consolidated entities.
3. INVESTMENTS
In 2001, the Company guaranteed a $3.5 million loan for Estrellamundo LLC.
The loan was guaranteed through the issuance of a letter of credit and reduces
the Company's borrowing capacity under the revolving credit facility. In
exchange for this guarantee, the Company received an additional 10.5% equity
interest in Estrellamundo LLC valued at approximately $1.2 million. In
connection with this transaction, the Company recorded $1.2 million in deferred
income which is being amortized over the life of the guarantee.
6
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RADIO UNICA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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4. SEGMENT OPERATING RESULTS
BUSINESS SEGMENTS
Pursuant to SFAS No. 131, "Disclosure About Segments of a Business
Enterprise and Related Information", the Company is required to report segment
information. As a result of the MASS acquisition, during the second quarter of
2001 the Company classified its businesses into two reporting segments: Radio
Broadcasting and Promotion Services. The Radio Broadcasting segment includes the
operations of the Company's radio network and all owned and/or operated radio
stations. The Promotion Services segment includes the operations of the
Company's recently acquired marketing and promotions business, MASS. The Company
evaluates performance based on several factors, of which the primary financial
measures are business segment net revenue, operating income (loss) and operating
income (loss) before depreciation and amortization, ("EBITDA").
Results by segment are as follows:
<Table>
<Caption>
THREE MONTHS SIX MONTHS
ENDED ENDED
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JUNE 30, 2001
---------------------------------
(UNAUDITED)
Net revenue
Radio broadcasting $ 8,729,605 14,350,934
Promotion services 1,193,622 1,193,622
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Consolidated $ 9,923,227 $ 15,544,556
============= =============
Operating income (loss)
Radio broadcasting $ (4,230,907) $ (10,806,728)
Promotion services 195,752 195,752
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Consolidated $ (4,035,155) $ (10,610,976)
============= =============
EBITDA
Radio broadcasting $ (2,660,649) $ (7,568,930)
Promotion services 217,747 217,747
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Consolidated $ (2,442,902) $ (7,351,183)
============= =============
Total Identifiable Assets
Radio broadcasting $ 148,248,048 $ 148,248,048
Promotion services 3,166,851 3,166,851
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Consolidated $ 151,414,899 $ 151,414,899
============= =============
</Table>
7
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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 2001 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 local marketing agreements (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 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"). EBITDA is defined as operating income (loss) plus
depreciation and amortization. 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).
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
2000
NET REVENUE. Net revenue increased by approximately $2.2 million or 28% to
approximately $9.9 million for the three months ended June 30, 2001 from
approximately $7.7 million for the comparable period in the prior year. The
increase in net revenue relates to increased network sales and revenue
associated with the acquisition of MASS, offset in part by lower sales for the
O&Os.
OPERATING EXPENSES. Operating expenses increased by approximately $2.2
million or 19% to approximately $14.0 million for the three months ended June
30, 2001 from approximately $11.8 million for the comparable period in the prior
year. The increase in operating expenses is due to increased direct operating
expenses of approximately $0.8 million, increased selling, general and
administrative expenses of approximately $0.2 million, increased network
expenses of approximately $0.8 million, increased depreciation and amortization
of approximately $0.2 million and costs associated with the operations of MASS
of approximately $0.7 million, offset by a reduction in stock option
compensation expense of approximately $0.6 million..
Direct operating expenses increased by approximately $0.8 million or 51%
to approximately $2.4 million for the three months ended June 30, 2001 from
approximately $1.6 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
8
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increased spending relating to the promotion and marketing of the Company's
O&Os.
9
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RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
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Selling, general and administrative expenses increased by approximately
$0.2 million or 6% to approximately $4.2 million for the three months ended June
30, 2001 from approximately $4.0 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 as well as administrative cost
associated with MASS.
Network expenses increased by approximately $0.8 million or 27% to
approximately $3.9 million for the three months ended June 30, 2001 from
approximately $3.1 million for the comparable period in the prior year. The
increase in network expenses is mainly due to the increase in cost of network
programming, including sporting events, increased sales commissions associated
with the increase in network sales as well as increased spending associated with
the promotion and marketing of the network.
Corporate expenses increased by approximately $0.1 million or 5% to
approximately $0.9 million for the three months ended June 30, 2001 from
approximately $0.8 million for the comparable period in the prior year. The
increase in corporate expenses is mainly due to increased costs of legal and
professional fees and other costs associated with the growth of the Company.
Cost of promotion services of approximately $0.7 million for the three
months ended June 30, 2001 relates to the revenues generated by MASS.
Depreciation and amortization increased by approximately $0.2 million or
10% to approximately $1.6 million for the three months ended June 30, 2001 from
approximately $1.4 million for the comparable period in the prior year. The
increase in depreciation and amortization is due to the additions of fixed and
intangible assets arising from the acquisitions and buildout of O&Os.
Stock option compensation expense decreased by approximately $0.6 million
or 76% to approximately $0.2 million for the three months ended June 30, 2001
from approximately $0.8 million for the comparable period in the prior year.
Stock option compensation expense represents a non-cash charge relating to the
vesting of stock options granted to employees to purchase shares of Radio Unica
Communications Corp's ("RUCC") common stock. These stock options were granted
prior to October 19, 1999, the date of RUCC's initial public offering. The
decrease in stock option compensation expense is due to a large portion of the
stock options granted becoming fully vested during 2000.
OTHER INCOME (EXPENSE). Other income (expense) decreased by approximately
$0.3 million or 8% to approximately $(3.9) million for the three months ended
June 30, 2001 from approximately $(3.6) million for the comparable period in the
prior year. Other income (expense) for the three months ended June 30, 2001 is
mainly comprised of interest expense of approximately $(4.2) million and other
income of approximately $0.2 million. Interest expense primarily relates to the
interest on the outstanding balance of the Senior Discount Notes. The Company
had approximately $(3.7) million in interest expense during the three months
ended June 30, 2000.
INCOME TAX BENEFIT. The Company recorded an income tax benefit of
approximately $0.1 million for the three months ended June 30, 2001. The benefit
results from the Company's ability to utilize a portion of its net operating tax
loss carryfowards to offset existing deferred tax liabilities.
10
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RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
NET LOSS. Net loss increased by approximately $0.2 million or 3% to
approximately $7.9 million for the three months ended June 30, 2001 from
approximately $7.7 million for the comparable period in the prior year. The
increase in net loss is mainly the result of the increased costs associated with
the promotion and marketing of the Company's network and O&Os, increased sales
costs associated with the increase in revenue, increased depreciation and
amortization resulting from the increase in the number of O&Os and buildout of
O&Os, and increased interest on the outstanding balance of the Senior Discount
Notes.
EBITDA. EBITDA less the non-cash charge relating to the stock option
compensation expense of approximately $0.2 million increased by approximately
$0.5 million or 25% to approximately $(2.3) million for the three months ended
June 30, 2001 from approximately $(1.8) million for the comparable period in the
prior year. EBITDA increased by approximately $0.1 million or 5% to
approximately $(2.4) million for the three months ended June 30, 2000 from
approximately $(2.5) million for the comparable period in the prior year. The
increase in EBITDA is mainly a result of the increase in the Company's revenue
offset by increased costs associated with the operations of the Company's
network and O&Os as well as the reduction of approximately $0.6 million in
non-cash stock option compensation expense.
SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2000
NET REVENUE. Net revenue increased by approximately $1.5 million or 11% to
approximately $15.5 million for the six months ended June 30, 2001 from
approximately $14.0 million for the comparable period in the prior year. The
increase in net revenue relates to increased network sales and revenue
associated with the acquisition of MASS, offset in part by lower sales for the
O&Os.
OPERATING EXPENSES. Operating expenses increased by approximately $2.2
million or 9% to approximately $26.2 million for the six months ended June 30,
2001 from approximately $24.0 million for the comparable period in the prior
year. The increase in operating expenses is due to increased direct operating
expenses of approximately $0.9 million, increased selling, general and
administrative expenses of approximately $0.5 million, increased network
expenses of approximately $0.9 million, increased depreciation and amortization
of approximately $0.4 million and the costs associated with the operations of
MASS of approximately $0.7 million, offset by a reduction in stock option
compensation expense of approximately $1.2 million.
Direct operating expenses increased by approximately $0.9 million or 27%
to approximately $4.1 million for the six months ended June 30, 2001 from
approximately $3.2 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 and
marketing of those O&Os.
Selling, general and administrative expenses increased by approximately
$0.5 million or 6% to approximately $8.4 million for the six months ended June
30, 2001 from approximately $7.9 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 as well as administrative costs
associated with MASS.
Network expenses increased by approximately $0.9 million or 13% to
approximately $7.7 million for the six months ended June 30, 2001 from
approximately $6.8 million for the comparable period in the prior year. The
increase in network expenses is mainly due to the increase in cost of network
programming, including sporting events, increased sales commissions associated
with the increase in network sales as well as increased spending associated with
the promotion and marketing of the network.
11
<Page>
RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
Corporate expenses remained constant at approximately $2.0 million for the
six months ended June 30, 2001 and 2000. Corporate expenses are comprised of the
cost of corporate management as well as legal and professional fees.
Cost of promotion services of approximately $0.7 million for the six
months ended June 30, 2001 relates to the revenue generated by MASS.
Depreciation and amortization increased by approximately $0.4 million or
14% to approximately $3.3 million for the six months ended June 30, 2001 from
approximately $2.9 million for the comparable period in the prior year. The
increase in depreciation and amortization is due to the additions of fixed and
intangible assets arising from the acquisitions and buildouts of O&Os.
Stock option compensation expense decreased by approximately $1.1 million
or 76% to approximately $0.4 million for the six months ended June 30, 2001 from
approximately $1.5 million for the comparable period in the prior year. Stock
option compensation expense represents a non-cash charge relating to the vesting
of stock options granted to employees to purchase shares of RUCC common stock.
These stock options were granted prior to October 19, 1999, the date of RUCC's
initial public offering. The decrease in stock option compensation expense is
due to a large portion of the stock options granted becoming fully vested during
2000
OTHER INCOME (EXPENSE). Other income (expense) decreased by approximately
$0.7 million or 10% to approximately $(8.0) million for the six months ended
June 30, 2000 from approximately $(7.3) million for the comparable period in the
prior year. Other income (expense) for the six months ended June 30, 2001 is
mainly comprised of interest expense of approximately $(8.2) million and other
income of approximately $0.2 million. Interest expense primarily relates to the
interest on the outstanding balance of the Senior Discount Notes. The Company
had approximately $(7.4) million in interest expense during the six months ended
June 30, 2000.
INCOME TAX BENEFIT. The Company recorded an income tax benefit of
approximately $0.1 million for the six months ended June 30, 2001. The benefit
results from the Company's ability to utilize a portion of its net operating tax
loss carryfowards to offset existing deferred tax liabilities.
NET LOSS. Net loss increased by approximately $1.2 million or 7% to
approximately $18.5 million for the six months ended June 30, 2001 from
approximately $17.3 million for the comparable period in the prior year. The
increase in net loss is mainly the result of the increased costs associated with
the promotion and marketing of the Company's network and O&Os, increased sales
costs associated with the increase in revenue, increased depreciation and
amortization resulting from the increase in the number of O&Os and buildout of
O&Os, and increased interest on the outstanding balance of the Senior Discount
Notes.
EBITDA. EBITDA less the non-cash charge relating to the stock option
compensation expense of approximately $0.4 million decreased by approximately
$1.4 million or 24% to approximately $(7.0) million for the six months ended
June 30, 2001 from approximately $(5.6) million for the comparable period in the
prior year. EBITDA decreased by approximately $0.2 million or 3% to
approximately $(7.4) million for the six months ended June 30, 2001 from
approximately $(7.2) million for the comparable period in the prior year. The
decrease in EBITDA is mainly a result of the increased costs associated with the
operation of the Company's network and 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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LIQUIDITY AND CAPITAL RESOURCES
The Company has had negative cash flows since inception. Working capital
and financing for the Company's acquisitions to date have been provided
primarily by the proceeds from RUCC's initial public offering, the issuance of
the 11 3/4% Senior Discount Notes due August 1, 2006 and the issuance of
promissory notes, common stock and preferred stock to RUCC's shareholders.
The Company's primary source of liquidity is the remaining proceeds from
RUCC's initial public offering.
Net cash used in operating activities decreased by approximately $3.0
million or 29% to approximately $7.3 million for the six months ended June 30,
2001 from approximately $10.3 million for the comparable period in the prior
year. Net cash used in investing activities was approximately $3.0 million and
$10.2 million for the six months ended June 30, 2001 and 2000, respectively. The
decrease of approximately $7.2 million from 2001 to 2000 is primarily due to
there being no radio station acquisitions during 2001. Net cash provided by
financing activities was approximately $10.5 million and $19.5 million for the
six months ended June 30, 2001 and 2000, respectively. The decrease of
approximately $9.0 million from 2001 to 2000 is due to fewer borrowings from
RUCC due to the lack of radio station acquisitions during 2001.
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 $1.6
million and $1.4 million for the six months ended June 30, 2001 and 2000,
respectively. The increase in capital expenditures is primarily due to station
buildouts and signal upgrades that are taking place during 2001.
The Company believes that its current cash position and the remaining
proceeds from RUCC's initial public offering, 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. There can be no assurance that such
business strategy will be successfully implemented or that the future cash flows
of the Company will be sufficient to meet all of the Company's obligations and
commitments. The failure to generate such sufficient cash flow could
significantly adversely affect the market value of the Company's Senior Discount
Notes, and the Company's ability to pay the principal of and interest on the
Senior Discount Notes.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the FASB issued SFAS No. 141, "Business Combinations". The
statement discontinues the use of the pooling of interest method of accounting
for business combinations. The statement is effective for all business
combinations after June 30, 2001. Management has completed an evaluation of the
effects of this statement and believes that it will not have an effect on the
Company's consolidated financial statements.
In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets". The statement will require discontinuing the amortization of goodwill
and other intangible assets with indefinite useful lives. Instead, these assets
will be tested periodically for impairment and written down to their fair market
value as necessary. The Company will adopt this statement effective January 1,
2002. Management is currently evaluating the effect of the adoption of the
statement on the Company's consolidated financial statements.
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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) None
(b) 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 thereunto duly authorized.
Radio Unica Corp.
/s/ Steven E. Dawson
By: __________________________
Steven E. Dawson
Chief Financial Officer
Date: August 13, 2001
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