<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 2000 COMMISSION FILE NUMBER: 001-12223
------------------------
UNIVISION COMMUNICATIONS INC.
(Exact Name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE NO. 95-4398884
(State of Incorporation) (I.R.S. Employer Identification)
</TABLE>
UNIVISION COMMUNICATIONS INC.
1999 AVENUE OF THE STARS, SUITE 3050
LOS ANGELES, CALIFORNIA 90067
TEL: (310) 556-7676
(address and telephone number of principal executive offices)
------------------------
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 / /.
There were 67,329,625 shares of Class A Common Stock, 19,981,045 shares of
Class P Common Stock, 6,796,517 shares of Class T Common Stock and 8,918,582 of
Class V Common Stock outstanding as of July 18, 2000.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
PART I--FINANCIAL INFORMATION:
Financial Introduction...................................... 2
Item 1. Consolidated Financial Statements
Condensed Consolidated Balance Sheets at June 30, 2000
and December 31, 1999.................................. 3
Condensed Consolidated Statements of Operations for the
three and six months ended June 30, 2000 and 1999...... 4
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 2000 and 1999................ 5
Notes to the Condensed Consolidated Financial
Statements............................................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 11
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................. 17
PART II--OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of Security
Holders................................................... 18
Item 6. Exhibits and Reports on form 8-K.................... 18
</TABLE>
1
<PAGE>
PART I
UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
FINANCIAL INTRODUCTION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles. The
interim financial statements are unaudited but include all adjustments, which
are of a normal recurring nature, that management considers necessary to fairly
present the financial position and the results of operations for such periods.
Results of operations of interim periods are not necessarily indicative of
results for a full year. These financial statements should be read in
conjunction with the audited consolidated financial statements in the Company's
Annual Report on Form 10-K for December 31, 1999.
2
<PAGE>
PART I, ITEM 1
UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER-SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 29,918 $ 22,558
Accounts receivable, net.................................. 126,350 136,096
Program rights............................................ 7,283 7,847
Prepaid expenses and other................................ 16,072 11,409
---------- --------
Total current assets.................................... 179,623 177,910
Property and equipment, net................................. 227,962 205,181
Intangible assets, net...................................... 531,904 551,240
Deferred financing costs, net............................... 4,738 5,402
Deferred income taxes....................................... 10,209 13,315
Program rights, less current portion........................ 8,692 6,984
Note receivable--Entravision................................ 120,000 10,000
Other assets................................................ 3,753 4,425
---------- --------
Total assets............................................ $1,086,881 $974,457
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 86,393 $ 78,725
Income taxes.............................................. 23,233 6,026
Accrued interest.......................................... 408 373
Accrued license fee....................................... 9,857 9,567
Obligations for program rights............................ 1,144 946
Current portion of long-term debt......................... 84,618 46,264
---------- --------
Total current liabilities............................... 205,653 141,901
Long-term debt including accrued interest, less current
portion................................................... 172,464 225,684
Capital lease obligations, less current portion............. 83,768 77,454
Other long-term liabilities................................. 5,813 6,550
---------- --------
Total liabilities....................................... 467,698 451,589
---------- --------
Redeemable convertible 6% preferred stock, $.01 par value,
with a conversion price of $16.34375 to Class A Common
Stock (9,000 shares issued and outstanding at June 30,
2000 and December 31, 1999, respectively)................. 9,090 9,090
---------- --------
Stockholders' equity:
Preferred stock, $.01 par value (10,000,000 shares
authorized)............................................. -- --
Common stock, $.01 par value (492,000,000 shares
authorized; 102,995,769 and 102,141,436 shares issued
including shares in treasury, at June 30, 2000 and
December 31, 1999, respectively)........................ 1,030 1,021
Paid-in-capital........................................... 474,474 427,397
Retained earnings......................................... 156,782 102,762
---------- --------
632,286 531,180
Less common stock held in treasury (508,590 shares at cost
at June 30, 2000 and 464,051 shares at cost at December
31, 1999)............................................... (22,193) (17,402)
---------- --------
Total stockholders' equity.............................. 610,093 513,778
---------- --------
Total liabilities and stockholders' equity.................. $1,086,881 $974,457
========== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30,
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- ---------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenues.......................... $ 231,073 $ 172,432 $ 412,616 $ 310,471
Direct operating expenses............. 79,542 59,048 146,994 111,837
Selling, general and administrative
expenses............................ 63,249 47,063 114,240 89,551
Depreciation and amortization......... 16,439 15,377 32,187 30,618
------------ ------------ ------------ ------------
Operating income...................... 71,843 50,944 119,195 78,465
Interest expense...................... 6,796 6,940 13,113 14,647
Amortization of deferred financing
costs............................... 338 360 684 720
Equity loss in unconsolidated
affiliate........................... -- 134 -- 272
------------ ------------ ------------ ------------
Income before taxes and extraordinary
loss on extinguishment of debt...... 64,709 43,510 105,398 62,826
Provision for income taxes............ 31,221 22,900 51,108 32,983
------------ ------------ ------------ ------------
Income before extraordinary loss on
extinguishment of debt.............. 33,488 20,610 54,290 29,843
Extraordinary loss on extinguishment
of debt, net of tax................. -- -- -- (2,611)
------------ ------------ ------------ ------------
Net income............................ 33,488 20,610 54,290 27,232
Preferred stock dividends............. (135) (135) (270) (270)
------------ ------------ ------------ ------------
Net income available to common
stockholders........................ $ 33,353 $ 20,475 $ 54,020 $ 26,962
============ ============ ============ ============
BASIC EARNINGS PER SHARE
Income per share available to common
stockholders before extraordinary
loss................................ $ 0.33 $ 0.22 $ 0.53 $ 0.32
Extraordinary loss per share.......... -- -- -- (0.03)
------------ ------------ ------------ ------------
Net income per share available to
common stockholders................. $ 0.33 $ 0.22 $ 0.53 $ 0.29
============ ============ ============ ============
Weighted average common shares
outstanding......................... 102,318,559 92,310,092 102,140,658 91,483,902
============ ============ ============ ============
DILUTED EARNINGS PER SHARE
Income per share available to common
stockholders before extraordinary
loss................................ $ 0.28 $ 0.17 $ 0.45 $ 0.25
Extraordinary loss per share.......... -- -- -- (0.02)
------------ ------------ ------------ ------------
Net income per share available to
common stockholders................. $ 0.28 $ 0.17 $ 0.45 $ 0.23
============ ============ ============ ============
Weighted average common shares
outstanding......................... 119,587,594 117,928,845 119,490,739 117,490,766
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
--------- --------
<S> <C> <C>
Net income.................................................. $ 54,290 $27,232
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation.............................................. 12,821 11,029
Loss on sale of fixed assets.............................. 3 197
Equity loss in unconsolidated subsidiary.................. -- 272
Amortization of intangible assets and deferred financing
costs................................................... 20,050 20,309
Extraordinary loss on extinguishment of debt.............. -- 2,611
Changes in assets and liabilities:
Accounts receivable....................................... 9,746 (5,755)
Intangible assets......................................... (30) (25)
Deferred income taxes..................................... 3,106 3,298
License fees payable...................................... 60,698 46,224
Payment of license fees................................... (60,408) (45,675)
Program rights............................................ (1,144) (2,039)
Prepaid expenses and other assets......................... (3,991) (5,585)
Accounts payable and accrued liabilities.................. 7,675 (6,736)
Income taxes.............................................. 17,207 10,829
Income tax benefit from options exercised................. 29,494 5,380
Accrued interest.......................................... 4,315 4,047
Obligations for program rights............................ (302) 49
Other, net................................................ (237) 721
--------- -------
Net cash provided by operating activities................... 153,293 66,383
--------- -------
Cash flow from investing activities:
Increased investment in Entravision....................... (110,000) --
Capital expenditures...................................... (27,084) (12,370)
Proceeds from sale of fixed assets........................ 9 1
Proceeds from sale of Albuquerque station................. -- 1,000
Investment in unconsolidated affiliate.................... -- (1,000)
--------- -------
Net cash used in investing activities....................... (137,075) (12,369)
--------- -------
Cash flow from financing activities:
Proceeds from issuance of long-term debt.................. 60,000 59,000
Purchase of Junior Subordinated Notes..................... -- (17,998)
Repayment of long-term debt............................... (81,369) (99,310)
Exercise of options....................................... 12,801 5,996
Preferred stock dividends paid............................ (270) (270)
Increase in deferred financing costs...................... (20) --
--------- -------
Net cash used in financing activities....................... (8,858) (52,582)
--------- -------
Net increase in cash........................................ 7,360 1,432
Cash beginning of year...................................... 22,558 12,966
--------- -------
Cash end of period.......................................... $ 29,918 $14,398
========= =======
Supplemental disclosure of cash flow information:
Interest paid............................................. $ 9,140 $10,560
========= =======
Income taxes paid......................................... $ 1,579 $14,088
========= =======
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
1. ORGANIZATION OF THE COMPANY
Univision Communications Inc. ("Univision" or the "Company") is the leading
Spanish-language television broadcast company in the United States. The Company
includes the Univision Network (the "Network"), the most-watched
Spanish-language television network in the United States; Univision Television
Group ("UTG"), which owns and operates 12 full-power and 7 low-power television
stations (the "O&Os"), including full-power stations in 11 of the top 15 U.S.
Hispanic markets; Galavision, the country's leading Spanish-language cable
network; and Univision Online, which operates the Company's Internet portal,
UNIVISION.COM. Our signal covers 92 percent of all U.S. Hispanic households
through our O&Os, affiliated stations and cable affiliates.
The Company's 11 full-power, Spanish-language television stations are
located in Los Angeles, New York, Miami, San Francisco, Chicago, Houston, San
Antonio, Dallas, Phoenix, Fresno, and Sacramento and the Company's one
English-language, full-power television station is located in Bakersfield. The
Company also owns and operates 7 low-power Spanish-language television stations
serving Austin, Bakersfield, Fort Worth, Hartford, Philadelphia, Santa Rosa and
Tucson. The Company's Spanish-language television stations are affiliated with
the Network, and the English-language station is affiliated with United
Paramount Network (UPN).
2. STOCK SPLIT
Univision's Board of Directors approved a two-for-one stock split for all
common stockholders of record as of July 28, 2000. The common stock split will
become effective in the form of a stock dividend payable on August 11, 2000.
Each stockholder will receive one new share of common stock for each outstanding
share of the Company's common stock held as of the record date. The dividend
will double the number of outstanding shares of Class A Common Stock to
approximately 134.7 million, the outstanding shares of Class P Common Stock to
approximately 40 million, the outstanding shares of Class T Common Stock to
approximately 13.6 million, and the outstanding shares of Class V Common Stock
to approximately 17.8 million. All references to the number of shares and to
per-share data included in this document have not been adjusted to reflect the
new stock split that will become effective August 11, 2000,
6
<PAGE>
UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
(UNAUDITED)
2. STOCK SPLIT (CONTINUED)
except for the pro forma earnings per share data presented below that has been
shown to give effect to the new stock split as if it happened on June 30, 2000
and 1999.
<TABLE>
<CAPTION>
PRO FORMA
---------------------------------------------------------
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- ---------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income per share available to common
stockholders before extraordinary
loss................................ $ 0.16 $ 0.11 $ 0.26 $ 0.16
Extraordinary loss per share.......... -- -- -- (0.01)
------------ ------------ ------------ ------------
Net income per share available to
common stockholders................. $ 0.16 $ 0.11 $ 0.26 $ 0.15
============ ============ ============ ============
Weighted average common shares
outstanding......................... 204,637,118 184,620,184 204,281,316 182,967,804
============ ============ ============ ============
DILUTED EARNINGS PER SHARE
Income per share available to common
stockholders before extraordinary
loss................................ $ 0.14 $ 0.09 $ 0.23 $ 0.13
Extraordinary loss per share.......... -- -- -- (0.01)
------------ ------------ ------------ ------------
Net income per share available to
common stockholders................. $ 0.14 $ 0.09 $ 0.23 $ 0.12
============ ============ ============ ============
Weighted average common shares
outstanding......................... 239,175,188 235,857,690 238,981,478 234,981,532
============ ============ ============ ============
</TABLE>
3. OPTIONS & TREASURY STOCK
During the three months ended June 30, 2000, options were exercised for
259,340 shares of Class A Common Stock, resulting in an increase to Common Stock
of $2,593 and an increase to Paid-in-capital of $14,371,000, which included a
tax benefit associated with the transactions of $8,958,000. During the six
months ended June 30, 2000, options were exercised for 854,333 shares of
Class A Common Stock, resulting in an increase to Common Stock of $8,543 and an
increase to Paid-in-capital of $47,077,000, which included a tax benefit
associated with the transactions of $29,494,000. During the six months ended
June 30, 2000, as a result of an option transaction, the Company received 44,539
Class A Common Stock shares as payment for the employee's cost of exercising the
options. The Company has retained the 44,539 shares, resulting in an increase to
Treasury Stock of $4,791,000, representing the fair value of the shares acquired
at the date of exercise.
4. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities." The Statement
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in
7
<PAGE>
UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
(UNAUDITED)
4. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (CONTINUED)
other contracts) be recorded in the balance sheet as either an asset or a
liability measured at its fair value. The Statement requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement and requires that a company must formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting.
In June 1999, the Financial Accounting Standards Board delayed the required
adoption of SFAS No. 133 for companies with fiscal years beginning after
June 15, 2000. The Company is currently evaluating the impact that SFAS No. 133
will have on the Company's consolidated financial position and results of
operations.
8
<PAGE>
UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
(UNAUDITED)
5. EARNINGS PER SHARE
The following is the reconciliation of the numerator and the denominator of
the basic and diluted earnings-per-share computations for "Income before
extraordinary loss on extinguishment of debt" required by SFAS No. 128 (Earnings
Per Share):
(Dollars in thousands, except for share and per-share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 2000 THREE MONTHS ENDED JUNE 30, 1999
--------------------------------------- ---------------------------------------
INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary
items......................... $33,488 $ 20,610
Less preferred stock
dividends..................... (135) (135)
------- ----------
Basic Earnings Per Share:
Income before extraordinary
items per share available to
common stockholders........... 33,353 102,318,559 $0.33 20,475 92,310,092 $0.22
===== =====
Effect of Dilutive Securities
Warrants........................ -- 13,711,416 -- 22,386,788
Options......................... -- 3,006,950 -- 2,681,296
Convertible Preferred Stock..... 135 550,669 135 550,669
------- ----------- ---------- -----------
Diluted Earnings Per Share:
Income before extraordinary
items per share available to
common stockholders........... $33,488 119,587,594 $0.28 $ 20,610 117,928,845 $0.17
======= =========== ===== ========== =========== =====
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 2000 SIX MONTHS ENDED JUNE 30, 1999
--------------------------------------- ---------------------------------------
INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary
items......................... $54,290 $ 29,843
Less preferred stock
dividends..................... (270) (270)
------- ----------
Basic Earnings Per Share:
Income before extraordinary
items per share available to
common stockholders........... 54,020 102,140,658 $0.53 29,573 91,483,902 $0.32
===== =====
Effect of Dilutive Securities
Warrants........................ -- 13,711,373 -- 23,094,092
Options......................... -- 3,088,039 -- 2,362,103
Convertible Preferred Stock..... 270 550,669 270 550,669
------- ----------- ---------- -----------
Diluted Earnings Per Share:
Income before extraordinary
items per share available to
common stockholders........... $54,290 119,490,739 $0.45 $ 29,843 117,490,766 $0.25
======= =========== ===== ========== =========== =====
</TABLE>
9
<PAGE>
UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
(UNAUDITED)
6. SUBSEQUENT EVENTS
On August 7, 2000, the Company converted its $120,000,000 convertible
promissory note into an approximate 20% equity interest, on a fully diluted
basis, in Entravision Communications Corporation ("Entravision"), which began
trading on the New York Stock Exchange on August 2, 2000. Furthermore, on
August 7, 2000, the Company invested an additional $100,000,000 to purchase
approximately an additional 6% equity interest in Entravision on a fully diluted
basis. The Company provided the funding for this transaction by borrowing
$60,000,000 from its Revolving Credit Facility and with cash from operations of
$40,000,000. Consequently, the Company has an investment in Entravision of
$220,000,000 and an approximate 26% equity interest in Entravision on a fully
diluted basis.
Effective August 7, 2000, Henry G. Cisneros resigned as President and Chief
Operating Officer of the Company and as a member of Univision's Board of
Directors. Mr. Cisneros will form a new company, American CityVista, to build
residential communities in the central areas of selected metropolitan regions.
A. Jerrold Perenchio, Chairman and Chief Executive Officer of Univision, will
assume Mr. Cisneros' responsibilities for the near-term.
10
<PAGE>
PART I, ITEM 2
UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The major assets of the Company are its investments in UTG and the Network,
from which substantially all of its revenues are derived. UTG's net revenues are
derived from the O&Os and include gross advertising revenues generated from the
sale of national and local spot advertising time, net of agency commissions. The
Network's net revenues include gross advertising revenues generated from the
sale of Network advertising, net of agency commissions and station compensation
to the Network's affiliates, as well as subscriber fees. Also included in net
revenues are Galavision's gross advertising revenues, net of agency commissions,
its subscriber fee revenues and miscellaneous revenues.
Direct operating expenses consist of programming, news and general operating
costs.
"Broadcast cash flow" is defined as operating income plus depreciation and
amortization and corporate charges, which are corporate costs that would be
duplicated and therefore eliminated if the Company were acquired by another
broadcasting company. "EBITDA" is defined as earnings before interest, taxes,
depreciation and amortization, and non-recurring charges and is the sum of
operating income plus depreciation and amortization. The Company has included
broadcast cash flow and EBITDA data because such data are commonly used as a
measure of performance for broadcast companies and are also used by investors to
measure a Company's ability to service debt. Broadcast cash flow and EBITDA are
not, and should not be used as, indicators of or alternatives to operating
income, net income or cash flow as reflected in the consolidated financial
statements, are not a measure of financial performance under generally accepted
accounting principles and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with generally
accepted accounting principles.
SIX MONTHS ENDED JUNE 30, 2000 ("2000"), COMPARED TO SIX MONTHS ENDED JUNE 30,
1999 ("1999")
REVENUES. Net revenues were $412,616,000 in 2000 compared to $310,471,000
in 1999, an increase of $102,145,000 or 32.9%. The Network accounted for
$47,592,000 or 46.6% of the increase, and the O&Os and Galavision accounted for
$48,437,000 or 47.4% and $6,116,000 or 6%, respectively. The Network's increase
is due primarily to an increase of approximately 26% in the average price of
advertising spots and an increase in volume of approximately 10%. The O&Os'
increase, on a same-station basis, after adjusting for the March 31, 1999, sale
of the Albuquerque station, would have been $47,972,000. This increase at the
O&Os is due primarily to an increase of approximately 8% in the number of spots
sold and a 15% increase in the price for advertising spots. While there were
increases at all the O&Os, the primary increases were derived from the Los
Angeles, New York, Miami, San Francisco and Houston stations.
EXPENSES. Direct operating expenses, which include corporate charges of
$190,000 and $168,000 in 2000 and 1999, respectively, increased to $146,994,000
in 2000 from $111,837,000 in 1999, an increase of $35,157,000 or 31.4%. License
fees paid or payable, under the Company's Program License Agreements, to
Televisa and Venevision increased by $14,603,000 as a result of higher net
revenues. The new program A QUE NO TE ATREVES increased programming costs by
$2,379,000 and purchased novelas increased programming costs by $1,313,000. The
increase in all other programming costs associated with entertainment programs
and movies was $2,395,000. Sports-related programming costs increased by
$1,917,000, which includes approximately $1,366,000 related to the new shows
REPUBLICA DEPORTIVA and the GOLD CUP 2000 soccer games. News costs increased by
$5,214,000, which includes $847,000 of costs for the new program ULTIMA HORA,
$646,000 of costs for increased airings of AQUI Y AHORA and $989,000 of net cost
increases due to the addition of early morning news at the Los Angeles station,
morning news at the New York and Miami stations and weekend news at the San
Antonio station. Technical costs increased by $2,165,000 due
11
<PAGE>
in part to the support required for increased news programming and higher repair
and maintenance costs. The incremental Internet business start-up costs in
direct operating expenses were $5,171,000. As a percentage of net revenues,
direct operating expenses decreased from 36.0% in 1999 to 35.6% in 2000.
Selling, general and administrative expenses, which include corporate
charges of $6,541,000 and $6,306,000 in 2000 and 1999, respectively, increased
to $114,240,000 in 2000 from $89,551,000 in 1999, an increase of $24,689,000 or
27.6%. The increase is due in part to compensation, severance and relocation
costs of $5,385,000, selling costs of $4,569,000 resulting from higher sales,
costs associated with Univision's national advertising campaign of $3,664,000,
employee benefit costs of $551,000 and incremental Internet business start-up
costs of $5,425,000. As a percentage of net revenues, selling, general and
administrative expenses decreased from 28.8% in 1999 to 27.7% in 2000.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased to
$32,187,000 in 2000 from $30,618,000 in 1999, an increase of $1,569,000 or 5.1%.
The increase is due to an increase in depreciation related to increased capital
expenditures that was partially offset by a decrease in goodwill amortization.
OPERATING INCOME. As a result of the above factors, operating income
increased to $119,195,000 in 2000 from $78,465,000 in 1999, an increase of
$40,730,000 or 51.9%. As a percentage of net revenues, operating income
increased from 25.3% in 1999 to 28.9% in 2000.
INTEREST EXPENSE. Interest expense decreased to $13,113,000 in 2000 from
$14,647,000 in 1999, a decrease of $1,534,000 or 10.5%. The decrease is due
primarily to lower bank borrowings offset in part by higher interest rates
during 2000 as compared to 1999.
PROVISION FOR INCOME TAXES. In 2000, the Company reported an income tax
provision of $51,108,000, representing $47,402,000 of current tax expense and
$3,706,000 of deferred tax expense. In 1999, the Company reported an income tax
provision of $32,983,000, representing $29,685,000 of current tax expense and
$3,298,000 of deferred tax expense. The total effective tax rate was 48.5% in
2000 and 52.5% in 1999. The Company's effective tax rate of 48.5% for 2000 is
lower than the 52.5% for 1999 since the Company's relatively fixed permanent
non-deductible tax differences have a smaller effect as book pre-tax income
increases.
NET INCOME. As a result of the above factors, net income in 2000 was
$54,290,000 compared to $27,232,000 in 1999, an increase of $27,058,000 or
99.4%. On a comparable basis, excluding the extraordinary loss on extinguishment
of debt of $2,611,000, net of tax, in 1999 and the incremental Internet business
start-up cost in 2000 of $6,389,000, net of tax, net income would have increased
by $30,836,000 or 103.3% to $60,679,000 in 2000 from $29,843,000 in 1999. As a
percentage of net revenues, net income increased from 8.8% in 1999 to 13.2% in
2000.
BROADCAST CASH FLOW. Broadcast cash flow increased to $158,113,000 in 2000
from $115,557,000 in 1999, an increase of $42,556,000 or 36.8%. As a percentage
of net revenues, broadcast cash flow increased from 37.2% in 1999 to 38.3% in
2000.
On a comparable basis, excluding the incremental Internet business start-up
costs of $10,596,000, broadcast cash flow would have increased by $53,152,000 or
46% to $168,709,000 in 2000 from $115,557,000 in 1999. As a percentage of net
revenues, broadcast cash flow would have increased from 37.2% in 1999 to 40.9%
in 2000.
CORPORATE CHARGES. Corporate charges increased to $6,731,000 in 2000 from
$6,474,000 in 1999, an increase of $257,000 or 4%. The increase is primarily due
to costs associated with compensation and benefits. As a percentage of net
revenues, corporate charges decreased from 2.1% in 1999 to 1.6% in 2000.
EBITDA. EBITDA increased to $151,382,000 in 2000 from $109,083,000 in 1999,
an increase of $42,299,000 or 38.8%. As a percentage of net revenues, EBITDA
increased from 35.1% in 1999 to 36.7% in 2000.
12
<PAGE>
On a comparable basis, excluding the incremental Internet business start-up
costs of $10,596,000, EBITDA would have increased by $52,895,000 or 48.5% to
$161,978,000 in 2000 from $109,083,000 in 1999. As a percentage of net revenues,
EBITDA would have increased from 35.1% in 1999 to 39.3% in 2000.
THREE MONTHS ENDED JUNE 30, 2000 ("2000"), COMPARED TO THREE MONTHS ENDED
JUNE 30, 1999 ("1999")
REVENUES. Net revenues were $231,073,000 in 2000 compared to $172,432,000
in 1999, an increase of $58,641,000 or 34%. The Network accounted for
$27,918,000 or 47.6% of the increase, and the O&Os and Galavision accounted for
$27,758,000 or 47.3% and $2,965,000 or 5.1%, respectively. The Network's
increase is due primarily to an increase of approximately 27% in the average
price of advertising spots and an increase in volume of approximately 13%. The
increase at the O&Os is due primarily to an increase of approximately 12% in the
price for advertising spots and approximately 10% in the number of spots sold.
While there were increases at all the O&Os, the primary increases were derived
from the Los Angeles, New York, Miami, San Francisco and Houston stations.
EXPENSES. Direct operating expenses, which include corporate charges of
$97,000 and $87,000 in 2000 and 1999, respectively, increased to $79,542,000 in
2000 from $59,048,000 in 1999, an increase of $20,494,000 or 34.7%. License fees
paid or payable, under the Company's Program License Agreements, to Televisa and
Venevision increased by $8,667,000 as a result of higher net revenues. The new
program A QUE NO TE ATREVES increased programming costs by $1,067,000 and
purchased novelas increased programming costs by $719,000. The increase in all
other programming costs associated with entertainment programs and movies was
$1,309,000. Sports-related programming costs increased by $409,000, which
includes approximately $166,000 related to the new show REPUBLICA DEPORTIVA.
News costs increased by $3,060,000, which includes $416,000 of costs for the new
program ULTIMA HORA, $501,000 of costs for increased airings of AQUI Y AHORA and
$531,000 of net cost increases due to the addition of early morning news at the
Los Angeles station, morning news at the New York and Miami stations and weekend
news at the San Antonio station. Technical costs increased by $1,285,000 due in
part to the support required for increased news programming and higher repair
and maintenance costs. The incremental Internet business start-up costs in
direct operating expenses were $3,978,000. As a percentage of net revenues,
direct operating expenses increased from 34.2% in 1999 to 34.4% in 2000.
Selling, general and administrative expenses, which include corporate
charges of $3,346,000 and $3,206,000 in 2000 and 1999, respectively, increased
to $63,249,000 in 2000 from $47,063,000 in 1999, an increase of $16,186,000 or
34.4%. The increase is due in part to severance and compensation costs of
$3,543,000, selling costs of $3,146,000 resulting from higher sales, costs
associated with Univision's national advertising campaign of $2,675,000,
employee benefit costs of $185,000 and incremental Internet business start-up
costs of $3,492,000. As a percentage of net revenues, selling, general and
administrative expenses increased from 27.3% in 1999 to 27.4% in 2000.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased to
$16,439,000 in 2000 from $15,377,000 in 1999, an increase of $1,062,000 or 6.9%.
The increase is due to an increase in depreciation related to increased capital
expenditures that was partially offset by a decrease in goodwill amortization.
OPERATING INCOME. As a result of the above factors, operating income
increased to $71,843,000 in 2000 from $50,944,000 in 1999, an increase of
$20,899,000 or 41%. As a percentage of net revenues, operating income increased
from 29.5% in 1999 to 31.1% in 2000.
INTEREST EXPENSE. Interest expense decreased to $6,796,000 in 2000 from
$6,940,000 in 1999, a decrease of $144,000 or 2.1%. The decrease is due
primarily to lower bank borrowings offset in part by higher interest rates
during 2000 as compared to 1999.
13
<PAGE>
PROVISION FOR INCOME TAXES. In 2000, the Company reported an income tax
provision of $31,221,000, representing $28,930,000 of current tax expense and
$2,291,000 of deferred tax expense. In 1999, the Company reported an income tax
provision of $22,900,000, representing $20,358,000 of current tax expense and
$2,542,000 of deferred tax expense. The total effective tax rate was 48.2% in
2000 and 52.6% in 1999. The Company's effective tax rate of 48.2% for 2000 is
lower than the 52.6% for 1999 since the Company's relatively fixed permanent
non-deductible tax differences have a smaller effect as book pre-tax income
increases.
NET INCOME. As a result of the above factors, net income in 2000 was
$33,488,000 compared to $20,610,000 in 1999, an increase of $12,878,000 or
62.5%. On a comparable basis, excluding the incremental Internet business
start-up cost in 2000 of $4,497,000, net of tax, net income would have increased
by $17,375,000 or 84.3% to $37,985,000 in 2000 from $20,610,000 in 1999. As a
percentage of net revenues, net income increased from 12% in 1999 to 14.5% in
2000.
BROADCAST CASH FLOW. Broadcast cash flow increased to $91,725,000 in 2000
from $69,614,000 in 1999, an increase of $22,111,000 or 31.8%. As a percentage
of net revenues, broadcast cash flow decreased from 40.4% in 1999 to 39.7% in
2000.
On a comparable basis, excluding the incremental Internet business start-up
costs of $7,470,000, broadcast cash flow would have increased by $29,581,000 or
42.5% to $99,195,000 in 2000 from $69,614,000 in 1999. As a percentage of net
revenues, broadcast cash flow would have increased from 40.4% in 1999 to 42.9%
in 2000.
CORPORATE CHARGES. Corporate charges increased to $3,443,000 in 2000 from
$3,293,000 in 1999, an increase of $150,000 or 4.6%. The increase is primarily
due to costs associated with compensation and benefits. As a percentage of net
revenues, corporate charges decreased from 1.9% in 1999 to 1.5% in 2000.
EBITDA. EBITDA increased to $88,282,000 in 2000 from $66,321,000 in 1999,
an increase of $21,961,000 or 33.1%. As a percentage of net revenues, EBITDA
decreased from 38.5% in 1999 to 38.2% in 2000.
On a comparable basis, excluding the incremental Internet business start-up
costs of $7,470,000, EBITDA would have increased by $29,431,000 or 44.4% to
$95,752,000 in 2000 from $66,321,000 in 1999. As a percentage of net revenues,
EBITDA would have increased from 38.5% in 1999 to 41.4% in 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of cash flow is its broadcasting operations.
Funds for debt service, capital expenditures and operations historically have
been provided by income from operations and by borrowings.
Capital expenditures, which include those of UTG, the Network, Univision
Online and Galavision, totaled $27,084,000 for the six months ended June 30,
2000. This amount excludes the capitalized lease obligations of the Company. In
addition to performing normal capital maintenance and replacing several towers
and antennas, the Company is also in the process of completing upgrades to its
management information systems infrastructure and the build-out of its
television station facilities in Bakersfield and Phoenix. During 2000, the
Company plans to incur approximately $15,000,000 in capital expenditures for the
launch of its Internet business and approximately $20,000,000 in broadcast
equipment and studio leasehold improvements for new Network programming.
Furthermore, the Company expects to make an investment in digital technology
totaling approximately $25,000,000 over the next three years. The normal
maintenance capital spending, the cost of certain projects and the Internet
launch will result in capital spending in 2000 of approximately $100,000,000.
The Company expects to fund its capital expenditure requirements primarily from
its operating cash flow and, if necessary, from proceeds available under its
Revolving Credit Facility (as defined below).
14
<PAGE>
The Company has a bank facility with a syndicate of commercial banks and
other lenders that consists of a $180,300,000 amortizing term loan (the "Term
Facility") with a final maturity of December 31, 2003, and a $185,000,000
reducing revolving credit facility (the "Revolving Credit Facility") maturing on
the same date. At June 30, 2000, the Company had no debt outstanding under its
Revolving Credit Facility, allowing the Company the ability to borrow
$185,000,000 from its Revolving Credit Facility.
The Term Facility amortizes quarterly, with $23,400,000 required to be
repaid in equal payments of $11,700,000 in September and December of 2000. The
Company was not required to make a quarterly payment in the first quarter of
2000 due to prepayments it made to the Term Facility in 1999. For the six months
ended June 30, 2000, the Company paid the required June 2000 payment of
$11,700,000 and made an $8,000,000 prepayment against its Term Facility as a
result of its annual "excess cash flow" calculation based on its 1999 operating
results. The payments were funded by cash from operations. The Revolving Credit
Facility has scheduled reductions in availability of $2,500,000 per quarter
during 2000.
Loans made under the bank facility bear interest, which includes interest
rate margin costs, determined by reference to the ratio of the Company's total
indebtedness to EBITDA for the four fiscal quarters most recently concluded (the
"Leverage Ratio"). The interest rate margins applicable to the Eurodollar
(Libor) loans range from 0.35% to 1.00% per annum. There are no interest rate
margins applicable to prime rate loans. At June 30, 2000, the interest rate
applicable to the Company's Eurodollar loans was approximately 7.00%, which
includes an interest rate margin cost of 0.35%, and the interest rate applicable
to all prime rate loans was 9.50%.
The Company's primary interest rate exposure results from changes in the
short-term interest rates applicable to the Company's Eurodollar loans. The
Company borrows at the U.S. prime rate from time to time but attempts to
maintain these loans at a minimum. Based on the Company's overall interest rate
exposure on its Eurodollar loans at June 30, 2000, a change of 10% in interest
rates would have an impact of approximately $1,300,000 on pre-tax earnings and
pre-tax cash flows over a one-year period.
Univision Online made a soft launch of its Internet portal on June 21, 2000,
for testing purposes and began to advertise UNIVISION.COM in the Los Angeles
market in the middle of July 2000. Univision Online expects to advertise
UNIVISION.COM nationally by the end of 2000. Due to the uncertainties
accompanying the launch of this new business, management is unable to predict
whether or when Univision's online services will become successful; the online
operations are expected to produce a loss in 2000 and no assurances can be given
that the Company's online operations will achieve profitability thereafter.
The Company expects to explore acquisition opportunities in both
Spanish-language television and other media to complement and capitalize on the
Company's existing business and management. The purchase price for such
acquisitions may be paid (a) with cash derived from operating cash flow,
proceeds available under the bank facility or proceeds from future debt or
equity offerings, (b) with equity or debt securities of the Company or (c) with
any combination thereof.
As a result of net operating loss carryforwards, tax consequences of the
reorganization of the Company in 1996 and other timing differences, the Company
has available a deferred tax asset of $10,209,000 to offset future taxes payable
arising from operations. In addition, at June 30, 2000, the Company had
$432,300,000 of net remaining intangible assets that will be expensed over the
next 19 years for financial reporting purposes and will not be deductible for
tax purposes.
On August 7, 2000, the Company converted its $120,000,000 convertible
promissory note into an approximate 20% equity interest, on a fully diluted
basis, in Entravision, which began trading on the New York Stock Exchange on
August 2, 2000. Furthermore, on August 7, 2000, the Company invested an
additional $100,000,000 to purchase approximately an additional 6% equity
interest in Entravision on a fully diluted basis. The Company provided the
funding for this transaction by borrowing $60,000,000 from its Revolving Credit
Facility and with cash from operations of $40,000,000. Consequently, the Company
has
15
<PAGE>
an investment in Entravision of $220,000,000 and an approximate 26% equity
interest in Entravision on a fully diluted basis.
On July 18, 2000, the Federal Communications Commission released a Public
Notice giving official notification that the Company was the winning bidder for
a construction permit for a new television station at Blanco, Texas, with a
winning bid of $18,798,000. On August 1, 2000, the Company made its required 20%
down payment of $3,759,600 pending final approval by the Federal Communications
Commission. The details and costs regarding the construction of the new station
are still in the planning phase.
SEASONALITY
The advertising revenues of the Company vary over the calendar year.
Historically, approximately 30% of total advertising revenues have been
generated in the fourth quarter and 20% in the first quarter, with the remainder
split approximately equally between the second and third quarters, exclusive of
special programming such as the 1998 World Cup Games. Because of the relatively
fixed nature of the costs of the Company's business, seasonal variations in
operating income are more pronounced than those of revenues.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor
for forward-looking statements (as defined under federal securities laws) made
by or on behalf of the Company. The Company and its representatives from time to
time may make certain oral or written forward-looking statements regarding the
Company's performance or regarding events or developments the Company expects to
occur or anticipates occurring in the future. Information in this report may
contain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, which can be identified by the use of
forward-looking terminology such as "will," "plans" or "expects," or the
negative thereof or other variations thereon or comparable terminology. All such
statements are based upon current expectations of the Company and involve a
number of business risks and uncertainties. Actual results could vary materially
from anticipated results described in any forward-looking statement. Factors
that could cause actual results to vary materially include, but are not limited
to, a lack of increase in advertisers' spending on Univision, a decrease in the
supply or quality of programming, an increase in the cost of programming, a
decrease in Univision's ratings or audience share, an increase in preference
among Hispanics for English-language television, competitive pressures from
other television broadcasters and other entertainment and news media (some of
which use Televisa programming), the potential impact of new technologies,
changes in regional or national economic conditions and regulatory and other
obstacles to making acquisitions. Results actually achieved thus may differ
materially from expected results in these statements.
16
<PAGE>
PART I
UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is included in the "Liquidity and
Capital Resources" section of the Company's Management's Discussion and Analysis
of Financial Condition and Results of Operations contained in this document.
17
<PAGE>
UNIVISION COMMUNICATIONS INC.
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders was held on May 24, 2000 at which
stockholders elected and reelected Directors and an Alternate Director, ratified
the Amended and Restated 1996 Performance Award Plan and also ratified the
appointment of Arthur Andersen LLP as the Company's independent public
accountant for the fiscal year 2000. The number of shares of the Company's
Class A, Class P, Class V and Series A Cumulative Convertible Preferred Stock
("Series A") present at the meeting, by proxy or in person, collectively
represented 96% of the voting interest of all shares of the aforementioned
classes of stock outstanding and eligible to vote at the Annual Meeting.
The holders of the Class A, Class P and Series A stock reelected all six
Class A/P Directors as follows:
<TABLE>
<CAPTION>
VOTES
NOMINEES VOTES FOR WITHHELD
-------- ----------- --------
<S> <C> <C>
A. Jerrold Perenchio 260,968,659 275,940
Henry Cisneros 260,831,473 413,126
Harold Gaba 260,967,772 276,827
Alan F. Horn 260,967,364 277,235
John G. Perenchio 260,725,084 519,515
Ray Rodriguez 260,848,660 395,939
</TABLE>
The holders of the Class V Common Stock elected Alejandro Rivera as the
Class V Director and Carlos E. Cisneros as the Class V Alternate Director. All
8,918,582 shares of Class V Common Stock present at the meeting were voted in
favor of their election. Carlos E. Cisneros and Henry Cisneros are not related.
Jose A. Baston Patino and Alfonso de Angoitia continue to serve as the
Class T Director and Class T Alternate until such individual's successor is
elected or until such individual's earlier resignation or removal.
The votes cast by the holders of Class A, Class P, Class V and Series A for
the ratification of the Amended and Restated 1996 Performance Award Plan were as
follows: 245,285,453 for, 17,402,967 withheld and 7,474,761 abstained.
The votes cast by the holders of Class A, Class P, Class V and Series A for
the ratification of the appointment of Arthur Andersen LLP as the Company's
independent public accountant were as follows: 270,114,549 for, 10,532 withheld
and 38,100 abstained.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The registrant did not file any reports on Form 8-K during the
quarter.
18
<PAGE>
UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
SIGNATURE
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.
<TABLE>
<S> <C> <C>
UNIVISION COMMUNICATIONS INC.
(Registrant)
By /s/ GEORGE W. BLANK
-----------------------------------------
George W. Blank
August 8, 2000 EXECUTIVE VICE PRESIDENT AND
Los Angeles, California CHIEF FINANCIAL OFFICER
</TABLE>
19
