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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 MARCH 31, 2000 COMMISSION FILE NUMBER: 001-12223
------------------------
UNIVISION COMMUNICATIONS INC.
(Exact Name of Registrant as specified in its charter)
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<S> <C>
DELAWARE NO. 95-4398884
(State of Incorporation) (I.R.S. Employer Identification)
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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 67,043,285 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 April 12, 2000.
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UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
INDEX
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PAGE
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PART I--FINANCIAL INFORMATION:
Financial Introduction...................................... 2
Item 1. Consolidated Financial Statements
Condensed Consolidated Balance Sheets at March 31, 2000
and December 31, 1999.................................. 3
Condensed Consolidated Statements of Operations for the
three months ended March 31, 2000 and 1999............. 4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 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..................... 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................. 12
PART II--OTHER INFORMATION:
Item 6. Exhibits and Reports on form 8-K.................... 12
</TABLE>
1
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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 for
interim financial statements. 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
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PART I, ITEM 1
UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER-SHARE DATA)
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MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 36,203 $ 22,558
Accounts receivable, net.................................. 108,130 136,096
Program rights............................................ 7,367 7,847
Prepaid expenses and other................................ 11,401 11,409
---------- --------
Total current assets.................................... 163,101 177,910
Property and equipment, net................................. 211,902 205,181
Intangible assets, net...................................... 541,588 551,240
Deferred financing costs, net............................... 5,076 5,402
Deferred income taxes....................................... 12,200 13,315
Program rights, less current portion........................ 7,797 6,984
Note receivable--Entravision................................ 120,000 10,000
Other assets................................................ 5,719 4,425
---------- --------
Total assets............................................ $1,067,383 $974,457
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 76,368 $ 84,751
Accrued interest.......................................... 639 373
Accrued license fee....................................... 9,134 9,567
Obligations for program rights............................ 551 946
Current portion of long-term debt......................... 82,091 46,264
---------- --------
Total current liabilities............................... 168,783 141,901
Long-term debt including accrued interest, less current
portion................................................... 244,074 225,684
Capital lease obligations, less current portion............. 76,615 77,454
Other long-term liabilities................................. 6,455 6,550
---------- --------
Total liabilities....................................... 495,927 451,589
---------- --------
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 March 31,
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; 102,736,429 and 102,141,436 shares issued
including shares in treasury, at March 31, 2000 and
December 31, 1999, respectively)........................ 1,027 1,021
Paid-in-capital........................................... 460,103 427,397
Retained earnings......................................... 123,429 102,762
---------- --------
584,559 531,180
Less common stock held in treasury (508,590 shares at cost
at March 31, 2000 and 464,051 shares at cost at
December 31, 1999)...................................... (22,193) (17,402)
---------- --------
Total stockholders' equity.............................. 562,366 513,778
---------- --------
Total liabilities and stockholders' equity.................. $1,067,383 $974,457
========== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
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UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
(IN THOUSANDS, EXCEPT SHARE AND PER-SHARE DATA)
(UNAUDITED)
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2000 1999
------------ ------------
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Net revenues................................................ $ 181,543 $ 138,039
Direct operating expenses................................... 67,452 52,789
Selling, general and administrative expenses................ 50,991 42,488
Depreciation and amortization............................... 15,748 15,241
------------ ------------
Operating income............................................ 47,352 27,521
Interest expense............................................ 6,317 7,707
Amortization of deferred financing costs.................... 346 360
Equity loss in unconsolidated affiliate..................... -- 138
------------ ------------
Income before taxes and extraordinary loss on extinguishment
of debt................................................... 40,689 19,316
Provision for income taxes.................................. 19,887 10,083
------------ ------------
Income before extraordinary loss on extinguishment of
debt...................................................... 20,802 9,233
Extraordinary loss on extinguishment of debt, net of tax.... -- 2,611
------------ ------------
Net income.................................................. 20,802 6,622
Preferred stock dividends................................... (135) (135)
------------ ------------
Net income available to common stockholders................. $ 20,667 $ 6,487
============ ============
BASIC EARNINGS PER SHARE
Income per share available to common stockholders before
extraordinary loss........................................ $ 0.20 $ 0.10
Extraordinary loss per share................................ -- (0.03)
------------ ------------
Net income per share available to common stockholders....... $ 0.20 $ 0.07
============ ============
Weighted average common shares outstanding.................. 101,962,757 90,648,528
============ ============
DILUTED EARNINGS PER SHARE
Income per share available to common stockholders before
extraordinary loss........................................ $ 0.17 $ 0.08
Extraordinary loss per share................................ -- (0.02)
------------ ------------
Net income per share available to common stockholders....... $ 0.17 $ 0.06
============ ============
Weighted average common shares outstanding.................. 119,393,884 117,043,503
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
4
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UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(DOLLARS IN THOUSANDS)
(UNAUDITED)
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2000 1999
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Net income.................................................. $ 20,802 $ 6,622
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation.............................................. 6,066 5,427
Loss on sale of fixed assets.............................. 3 197
Equity loss in unconsolidated affiliate................... -- 138
Amortization of intangible assets and deferred financing
costs................................................... 10,028 10,174
Extraordinary loss on extinguishment of debt.............. -- 2,611
Changes in assets and liabilities:
Accounts receivable....................................... 27,966 21,328
Intangible assets......................................... (30) (5)
Deferred income taxes..................................... 1,115 756
License fees payable...................................... 26,294 20,430
Payment of license fees................................... (26,727) (20,348)
Program rights............................................ (333) (84)
Prepaid expenses and other assets......................... (1,286) 6,936
Accounts payable and accrued liabilities.................. 12,158 (15,627)
Accrued interest.......................................... 2,406 2,130
Obligations for program rights............................ (395) 4
Other, net................................................ (94) 426
--------- --------
Net cash provided by operating activities................... 77,973 41,115
--------- --------
Cash flow from investing activities:
Increased investment in Entravision....................... (110,000) --
Capital expenditures...................................... (12,802) (4,944)
Proceeds from sale of fixed assets........................ 6 1006
Investment in unconsolidated affiliate.................... -- (1,000)
--------- --------
Net cash used in investing activities....................... (122,796) (4,938)
--------- --------
Cash flow from financing activities:
Proceeds from issuance of long-term debt.................. 60,000 24,000
Purchase of Junior Subordinated Notes..................... -- (17,998)
Repayment of long-term debt............................... (8,762) (42,022)
Exercise of options....................................... 7,385 4,655
Preferred stock dividends paid............................ (135) (135)
Increase in deferred financing costs...................... (20) --
--------- --------
Net cash provided by (used in) financing activities......... 58,468 (31,500)
--------- --------
Net increase in cash........................................ 13,645 4,677
Cash beginning of year...................................... 22,558 12,966
--------- --------
Cash end of period.......................................... $ 36,203 $ 17,643
========= ========
Supplemental disclosure of cash flow information:
Interest paid during the period........................... $ 4,163 $ 5,585
========= ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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; and Galavision, the country's leading Spanish-language cable
network. 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. OPTIONS & TREASURY STOCK
During the three months ended March 31, 2000, options were exercised for
594,993 shares of Class A Common Stock, resulting in an increase to Common Stock
of $5,950 and an increase to Paid-in-capital of $32,706,000, which included a
tax benefit associated with the transactions of $20,536,000. 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.
3. 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 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.
6
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UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(UNAUDITED)
4. 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):
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THREE MONTHS ENDED MARCH 31, 2000 THREE MONTHS ENDED MARCH 31, 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......................... $20,802 $9,233
Less preferred stock
dividends..................... (135) (135)
------- ------
Basic Earnings Per Share
Income before extraordinary
items per share available to
common stockholders........... 20,667 101,962,757 $0.20 9,098 90,648,528 $0.10
===== =====
Effect of Dilutive Securities
Warrants........................ -- 13,711,330 -- 23,801,396
Options......................... -- 3,169,128 -- 2,042,910
Convertible Preferred Stock..... 135 550,669 135 550,669
------- ----------- ------ -----------
Diluted Earnings Per Share
Income before extraordinary
items per share available to
common stockholders........... $20,802 119,393,884 $0.17 $9,233 117,043,503 $0.08
======= =========== ===== ====== =========== =====
</TABLE>
7
<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.
YEAR ENDED MARCH 31, 2000 ("2000"), COMPARED TO YEAR ENDED MARCH 31, 1999
("1999")
REVENUES. Net revenues were $181,543,000 in 2000 compared to $138,039,000
in 1999, an increase of $43,504,000 or 31.5%. The Network accounted for
$19,674,000 or 45.2% of the increase, and the O&Os and Galavision accounted for
$20,679,000 or 47.5% and $3,151,000 or 7.3%, respectively. The Network's
increase is due primarily to an increase of approximately 29% in the average
price of advertising spots and an increase in volume of approximately 8%. The
O&Os' increase, on a same-station basis, after adjusting for the March 31, 1999,
sale of the Albuquerque station, would have been $21,144,000. This increase at
the O&Os is due primarily to an increase of approximately 6% in the number of
spots sold and a 20% 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
$93,000 and $81,000 in 2000 and 1999, respectively, increased to $67,452,000 in
2000 from $52,789,000 in 1999, an increase of $14,663,000 or 27.8%. License fees
paid or payable, under the Company's Program License Agreements, to Televisa and
Venevision increased by $5,936,000 as a result of higher net revenues. The new
program A QUE NO TE ATREVES increased programming costs by $1,312,000. The
increase in all other programming costs associated with entertainment programs,
novelas and movies was $1,680,000. Sports-related programming costs increased by
$1,508,000, which includes approximately $1,193,000 related to the new show
REPUBLICA DEPORTIVA and the GOLD CUP 2000 soccer games. News costs increased by
$2,154,000, which includes $431,000 of costs for the new program ULTIMA HORA and
$458,000 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 $880,000 due in
part to the support required for increased news programming and higher repair
and maintenance costs. The incremental
8
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Internet business start-up costs in direct operating expenses were $1,193,000.
As a percentage of net revenues, direct operating expenses decreased from 38.2%
in 1999 to 37.2% in 2000.
Selling, general and administrative expenses, which include corporate
charges of $3,195,000 and $3,100,000 in 2000 and 1999, respectively, increased
to $50,991,000 in 2000 from $42,488,000 in 1999, an increase of $8,503,000 or
20%. The increase is due in part to selling costs of $2,412,000, resulting from
higher sales, employee relocation and other compensation costs of $1,842,000,
employee benefit costs of $366,000, costs associated with Univision's national
advertising campaign of $989,000 and incremental Internet business start-up
costs of $1,933,000. As a percentage of net revenues, selling, general and
administrative expenses decreased from 30.8% in 1999 to 28.1% in 2000.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased to
$15,748,000 in 2000 from $15,241,000 in 1999, an increase of $507,000 or 3.3%.
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 $47,352,000 in 2000 from $27,521,000 in 1999, an increase of
$19,831,000 or 72.1%. As a percentage of net revenues, operating income
increased from 19.9% in 1999 to 26.1% in 2000.
INTEREST EXPENSE. Interest expense decreased to $6,317,000 in 2000 from
$7,707,000 in 1999, a decrease of $1,390,000 or 18.0%. 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 $19,887,000, representing $18,472,000 of current tax expense and
$1,415,000 of deferred tax expense. In 1999, the Company reported an income tax
provision of $10,083,000, representing $9,327,000 of current tax expense and
$756,000 of deferred tax expense. The total effective tax rate was 48.9% in 2000
and 52.2% in 1999. The Company's effective tax rate of 48.9% for 2000 is lower
than the 52.2% 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
$20,802,000 compared to $6,622,000 in 1999, an increase of $14,180,000 or
214.1%. 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 $1,892,000, net of tax, net income
would have increased by $13,461,000 or 145.8% to $22,694,000 in 2000 from
$9,233,000 in 1999.
BROADCAST CASH FLOW. Broadcast cash flow increased to $66,388,000 in 2000
from $45,943,000 in 1999, an increase of $20,445,000 or 44.5%. As a percentage
of net revenues, broadcast cash flow increased from 33.3% in 1999 to 36.6% in
2000.
On a comparable basis, excluding the incremental Internet business start-up
costs of $3,126,000, broadcast cash flow would have increased by $23,571,000 or
51.3% to $69,514,000 in 2000 from $45,943,000 in 1999. As a percentage of net
revenues, broadcast cash flow would have increased from 33.3% in 1999 to 38.3%
in 2000.
CORPORATE CHARGES. Corporate charges increased to $3,288,000 in 2000 from
$3,181,000 in 1999, an increase of $107,000 or 3.4%. The increase is primarily
due to costs associated with compensation and benefits. As a percentage of net
revenues, corporate charges decreased from 2.3% in 1999 to 1.8% in 2000.
EBITDA. EBITDA increased to $63,100,000 in 2000 from $42,762,000 in 1999,
an increase of $20,338,000 or 47.6%. As a percentage of net revenues, EBITDA
increased from 31.0% in 1999 to 34.8% in 2000.
9
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On a comparable basis, excluding the incremental Internet business start-up
costs of $3,126,000, EBITDA would have increased by $23,464,000 or 54.9% to
$66,226,000 in 2000 from $42,762,000 in 1999. As a percentage of net revenues,
EBITDA would have increased from 31.0% in 1999 to 36.5% 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 $12,802,000 for the three months ended March 31,
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 expects to incur approximately $10,000,000 to $15,000,000 in capital
expenditures for the launch of its Internet business. 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 $80,000,000. 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).
The Company has a bank facility with a syndicate of commercial banks and
other lenders that consists of a $192,000,000 amortizing term loan (the "Term
Facility") with a final maturity of December 31, 2003, and a $187,500,000
reducing revolving credit facility (the "Revolving Credit Facility") maturing on
the same date. At March 31, 2000, the Company had $60,000,000 outstanding under
its Revolving Credit Facility, allowing the Company the ability to borrow
$127,500,000 from its Revolving Credit Facility.
The Term Facility amortizes quarterly, with $35,100,000 required to be
repaid in equal payments of $11,700,000 in June, 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. In the
first quarter of 2000, the Company 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 payment was 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 March 31, 2000, the interest rate
applicable to the Company's Eurodollar loans was approximately 6.50%, which
includes an interest rate margin cost of 0.35%, and the interest rate applicable
to all prime rate loans was 9.00%.
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 March 31, 2000, a change of 10% in interest
rates would have an impact of approximately $1,650,000 on pre-tax earnings and
pre-tax cash flows over a one-year period.
Univision Online expects to launch an Internet portal by the middle of 2000.
Due to the uncertainties accompanying the launch of this new business,
management is unable to predict whether or when
10
<PAGE>
Univision's online services will become successful, and as a result, no
assurances can be given that our online operations will achieve profitability in
2000 or 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 $12,200,000 to offset future taxes payable
arising from operations. In addition, at March 31, 2000, the Company had
$439,400,000 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 March 2, 2000, the Company lent $110,000,000 to Entravision
Communications Company, LLC ("Entravision"), which increased the Company's
convertible promissory note (the "Note") from $10,000,000 to $120,000,000. The
Company provided the funding for this transaction by borrowing $60,000,000 from
its Revolving Credit Facility and with cash from operations of $50,000,000. The
Note matures on December 30, 2021, and is convertible at the option of the
Company or upon an initial public offering by Entravision into a 40% equity
interest in Entravision without any further consideration from the Company. The
Company plans to convert the Note into an equity interest in Entravision prior
to its public offering. The Company believes the book value of the note
receivable approximates its fair value if converted.
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," "believes," "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.
11
<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.
PART II
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.
12
<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
May 3, 2000 EXECUTIVE VICE PRESIDENT AND
Los Angeles, California CHIEF FINANCIAL OFFICER
</TABLE>
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNIVISION
COMMUNICATIONS INC. AND SUBSIDIARIES STATEMENTS OF EARNINGS AND BALANCE SHEET
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 36,203
<SECURITIES> 0
<RECEIVABLES> 116,424
<ALLOWANCES> 8,294
<INVENTORY> 0
<CURRENT-ASSETS> 163,101
<PP&E> 296,403
<DEPRECIATION> 84,501
<TOTAL-ASSETS> 1,067,383
<CURRENT-LIABILITIES> 168,783
<BONDS> 320,689
9,090
0
<COMMON> 1,027
<OTHER-SE> 561,339
<TOTAL-LIABILITY-AND-EQUITY> 1,067,383
<SALES> 181,543
<TOTAL-REVENUES> 181,543
<CGS> 67,452
<TOTAL-COSTS> 67,452
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 451
<INTEREST-EXPENSE> 6,317
<INCOME-PRETAX> 40,689
<INCOME-TAX> 19,887
<INCOME-CONTINUING> 20,802
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,802
<EPS-BASIC> 0.20
<EPS-DILUTED> 0.17
</TABLE>
