<PAGE> 1
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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, 1998
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 100
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 [ ] NO [X]
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 28, 1998, 35,876 shares of Common Stock, $.01 par value were
outstanding.
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RADIO UNICA CORP.
TABLE OF CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.............................................. 3
Item 2. Management's Discussion and Analysis.............................. 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................. 17
Item 2. Changes in Securities............................................. 17
Item 3. Defaults upon Senior Securities................................... 17
Item 4. Submission of Matters to a Vote of Security Holders............... 17
Item 5. Other Information................................................. 17
Item 6. Exhibits and Reports on Form 8-K.................................. 17
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RADIO UNICA CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................... $ 692,315 $ 1,126,862
Restricted cash ......................................................... 4,600,000 --
Accounts receivable, net ................................................ 1,957,539 --
Prepaid expenses ........................................................ 143,094 554,000
Radio broadcasting rights ............................................... 897,812 2,650,000
------------ ------------
Total current assets ....................................................... 8,290,760 4,330,862
Property and equipment, net ............................................. 4,342,651 1,221,995
Covenant not to compete ................................................. 483,334 --
Goodwill ................................................................ 4,066,019 --
Broadcast licenses ...................................................... 20,175,092 --
Investments and advances to equity investee ............................. 6,467,847 1,016,590
Other assets ............................................................ 688,384 108,641
------------ ------------
$ 44,514,087 $ 6,678,088
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable ........................................................ $ 1,250,187 $ 354,120
Accrued expenses ........................................................ 1,679,078 179,549
Radio broadcasting rights obligation .................................... 795,000 2,385,000
Deferred revenue ........................................................ 369,000 --
Note payable to stockholders ............................................ 6,795,000 365,000
------------ ------------
Total current liabilities .................................................. 10,888,265 3,283,669
Note payable ............................................................... 6,000,000 --
Deferred tax liability ..................................................... 4,088,735 --
Commitments and contingencies
Series A redeemable cumulative preferred stock, $.01 par value, 450,000
shares authorized; 355,175 and 51,975 issued and outstanding at
June 30, 1998 and December 31, 1997, respectively ...................... 36,639,969 5,316,990
Stockholders' deficit:
Common stock $.01 par value; 100,000 shares authorized; 35,876 and
5,250 shares issued and outstanding at June 30, 1998 and
December 31, 1997, respectively ...................................... 359 53
Capital deficiency ...................................................... (764,101) (67,043)
Accumulated deficit ..................................................... (12,339,140) (1,855,581)
------------ ------------
Total stockholders' deficit ................................................ (13,102,882) (1,922,571)
------------ ------------
$ 44,514,087 $ 6,678,088
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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RADIO UNICA CORP.
CONSOLIDATED STATEMENTS OF OPERATION (Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------- -------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenue ................................. $ 2,902,379 $ -- $ 3,463,962 $ --
Operating expenses:
Direct operating expenses ................ 670,200 -- 888,374 --
Selling, general and administrative
expenses................................ 2,606,555 -- 4,347,004 --
Network expenses ......................... 5,260,840 -- 6,883,006 --
Corporate expenses ....................... 667,115 302,419 1,306,525 440,338
Depreciation and amortization ............ 125,957 -- 372,144 --
------------ ------------ ------------ ------------
9,330,667 302,419 13,797,053 440,338
------------ ------------ ------------ ------------
Loss from operations ........................ (6,428,288) (302,419) (10,333,091) (440,338)
Other income (expense):
Interest expense ......................... (457,848) -- (465,402) --
Interest income .......................... 277,764 -- 312,052 --
Equity in (loss) earnings of equity
investee ............................... (7,986) -- 2,882 --
------------ ------------ ------------ ------------
(188,070) -- (150,468) --
------------ ------------ ------------ ------------
Net loss .................................... (6,616,358) (302,419) (10,483,559) (440,338)
Accrued dividends on Series A redeemable
cumulative preferred stock ............... 521,302 -- 1,003,014 --
------------ ------------ ------------ ------------
Net loss applicable to common
shareholders ............................. $ (7,137,660) $ (302,419) $(11,486,573) $ (440,338)
============ ============ ============ ============
Net loss per common share applicable to
common shareholders - basic and
diluted .................................. $ (344.22) $ (30.24) $ (569.71) $ (67.94)
============ ============ ============ ============
Weighted average common shares
outstanding - basic and diluted .......... 20,736 10,000 20,162 6,481
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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RADIO UNICA CORP.
CONSOLIDATED STATEMENT OF CHANGES IN SERIES A REDEEMABLE CUMMULATIVE PREFERRED
STOCK AND STOCKHOLDERS' DEFICIT (Unaudited)
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<TABLE>
<CAPTION> Series A
Redeemable
Cumulative
Preferred Stock Common Stock
------------------------------- ------------ ------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at December 31,1996 ......... -- $ -- 3,000 $ 300
Issuance of common stock ......... -- -- 7,000 700
Conversion of Predecessor
Company common stock to
Radio Unica Corp. Series A
redeemable cumulative
preferred stock and common
stock ......................... 4,950 495,000 (9,500) (995)
Issuance of Series A
redeemable cumulative
preferred stock and common
stock ......................... 47,025 4,702,500 4,750 48
Accrued dividends in arrears
on Series A redeemable
cumulative preferred stock ....... 119,490
Net loss .........................
------------ ------------ ------------ ------------
Balance at December 31, 1997 ........ 51,975 5,316,990 5,250 53
Issuance of Series A
reedemable cumulative
preferred stock and common
stock ............................ 148,500 14,850,000 15,000 150
Conversion of notes payable
and promissory notes payable
to stock holders to Series A
redeemable cummulative preferred
stock and common stock ........... 154,700 15,469,965 15,626 156
Accrued dividends in arrears
on Series A redeemable
cumulative preferred stock ....... -- 1,003,014 -- --
Net loss ......................... -- -- -- --
------------ ------------ ------------ ------------
Balance at June 30, 1998 ............ 355,175 $ 36,639,969 35,876 $ 359
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION> Additional
Paid-in
Capital Accumulated
(Deficiency) Deficit Total
------------ ------------ ------------
<S> <C> <C> <C>
Balance at December 31,1996 ......... $ 44,700 $ (40,000) $ 5,000
Issuance of common stock ......... 454,300 -- 455,000
Conversion of Predecessor
Company common stock to
Radio Unica Corp. Series A
redeemable cumulative
preferred stock and common
stock ......................... (494,005) -- (495,000)
Issuance of Series A
redeemable cumulative
preferred stock and common
stock ......................... 47,452 -- 47,500
Accrued dividends in arrears
on Series A redeemable
cumulative preferred stock ....... (119,490) (119,490)
Net loss ......................... (1,815,581) (1,815,581)
------------ ------------ ------------
Balance at December 31, 1997 ........ (67,043) (1,855,581) (1,922,571)
Issuance of Series A
reedemable cumulative
preferred stock and common
stock ............................ 149,850 -- 150,000
Conversion of notes payable
and promissory notes payable
to stock holders to Series A
redeemable cummulative preferred
stock and common stock ........... 156,106 -- 156,262
Accrued dividends in arrears
on Series A redeemable
cumulative preferred stock ....... (1,003,014) -- (1,003,014)
Net loss ......................... -- (10,483,559) (10,483,559)
------------ ------------ ------------
Balance at June 30, 1998 ............ $ (764,101) $(12,339,140) $(13,102,882)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
5
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RADIO UNICA CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30 1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss ....................................................................... $(10,483,559) $ (440,338)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization .............................................. 372,144 --
Equity in loss of equity investee .......................................... (2,882) --
Interest on notes payable paid with the issuance of capital stock .......... 261,227 --
Change in assets and liabilities:
Accounts receivable ....................................................... (1,861,490) --
Prepaid expenses .......................................................... 435,331 --
Radio broadcasting rights ................................................. 1,752,188 --
Other assets .............................................................. (416,143) (19,400)
Accounts payable .......................................................... 879,169 --
Accrued expenses .......................................................... 1,390,057 --
Radio broadcasting rights obligation ...................................... (1,590,000) --
Deferred revenue .......................................................... 369,000 --
------------ ------------
Net cash used in operating activities .......................................... (8,894,958) (459,738)
------------ ------------
INVESTING ACTIVITIES
Acquisition of property and equipment .......................................... (2,594,093) --
Restricted cash-escrow account ................................................. (4,600,000) --
Investments and advances to equity investee .................................... (5,448,375) --
Note receivable from stockholder ............................................... (163,600) --
Investment in WNMA-AM Miami .................................................... (9,317,000) --
Investment in KIQI-AM San Francisco ............................................ (6,211,521) --
------------ ------------
Net cash used in investing activities .......................................... (28,334,589) --
------------ ------------
FINANCING ACTIVITIES
Proceeds from issuance of Series A redeemable cumulative preferred stock
and common stock ........................................................... 15,000,000 455,000
Proceeds from issuance of promissory note payable to stockholder ............... 21,795,000
------------ ------------
Net cash provided by financing activities ...................................... 36,795,000 455,000
------------ ------------
Net decrease in cash and cash equivalents ...................................... (434,547) (4,738)
Cash and cash equivalents at beginning of period ............................... 1,126,862 5,000
------------ ------------
Cash and cash equivalents at end of period ..................................... $ 692,315 $ 262
============ ============
Supplemental disclosures of cash flow information:
Note payable issued in connection with the acquisition
of KIQI-AM San Francisco ................................................. $ 6,000,000 $ --
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
6
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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 six months
ended June 30, 1998 and 1997 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1998. 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 1997 consolidated financial statements and notes thereto.
2. ACQUISITIONS
On January 26, 1998, the Company entered into an asset purchase agreement with
One-on-One Sports License of Florida, L.L.C. and One-on-One Sports Radio of
Florida L.L.C to acquire Miami radio stations WNMA-AM and WCMQ-AM for a cash
purchase price of $9.0 million. On May 13, 1998, upon receiving the FCC's
consent to transfer the broadcasting licenses, the Company completed the
acquisitions. The Company operated the stations under a Time Brokerage Agreement
("TBA") for a monthly fee of $72,500 from February 1,1998 to May 13, 1998.
On February 20, 1998, the Company entered into a stock purchase agreement with
Oro Spanish Broadcasting, Inc. to acquire San Francisco radio station KIQI-AM
for $12 million. On April 30, 1998, upon receiving the consent of the Federal
Communication Commission ("FCC") to transfer the broadcasting license, the
Company completed the acquisition of all the common stock of Oro Spanish
Broadcasting, Inc.. The purchase price was comprised of a $6 million cash
payment and a $6 million promissory note payable. The promissory note payable
bears interest at 8% and is payable monthly. On July 2, 1998 the Company revised
certain terms and paid down $5.25 million against the promissory note payable.
The remaining $750,000 is due on or before October 31, 1998. In connection with
this acquisition, the Company entered into a five year non-compete agreement
with the seller. The Company operated the station under a TBA for a monthly fee
of $58,000 from March 2, 1998 to April 30, 1998.
On May 20, 1998, the Company entered into an asset purchase agreement to acquire
the assets of the Los Angeles radio station KBLA-AM with Sinclair Radio of Los
Angeles, Inc. and Sinclair Radio of Los Angeles Licensee, Inc. for $21 million
in cash. On July 30, 1998, upon receiving the FCC's consent to transfer the
broadcasting licenses, the Company completed the acquisition.
7
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RADIO UNICA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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2. ACQUISITIONS, CONTINUED
The pro forma unaudited results of operations of the Company for the six months
ended June 30, 1998 and 1997 assuming the Oro Spanish Broadcasting Inc.
acquisition and the TBA and equity investment in Blaya, Inc. (see Note 3) had
been consummated as of January 1, 1997 and assuming Blaya, Inc. had acquired 13
Radio as of January 1, 1997 are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
----------------------------------
1998 1997
---------------- -----------
<S> <C> <C>
Net revenue ................................... $ 3,463,962 $ 1,924,366
================ ===========
Net loss applicable to common shareholders .... $ (11,792,398) $(1,126,215)
================ ===========
Net loss per common share applicable to
common shareholders - basic and diluted ....... $ (584.88) $ (173.77)
================ ===========
</TABLE>
3. INVESTMENTS AND ADVANCES TO EQUITY INVESTEE
On October 27, 1997, the Company obtained 49.9% of the ownership and voting
rights of Blaya, Inc., a newly formed company. The remaining ownership interest
was held by one of the stockholders of the Company.
On December 24, 1997, Blaya, Inc. entered into an asset purchase agreement with
13 Radio Corporation (13 Radio), a CBS Broadcasting (CBS) subsidiary, to acquire
Houston radio station KXYZ-AM, for a cash purchase price of $6.4 million (the
Acquisition). In connection with this Acquisition, the Company advanced
$1,016,590 to Blaya, Inc., which is reflected in investments and advances to
equity investee. Also on December 24, 1997, Blaya, Inc. entered into a TBA with
13 Radio effective as of January 5, 1998. The TBA made available to Blaya, Inc.
substantially all of the broadcasting time of the station, pending the
completion of the acquisition, which was subject to FCC consent. The Company
entered into a TBA with Blaya, Inc. for substantially all of the broadcasting
time of the station for a fee of $165,000 per quarter. The Company began
operating the station under its TBA on January 5, 1998. Blaya, Inc. did not have
any operations during 1997.
On March 6, 1998, the Company acquired 800 shares of Blaya, Inc.'s Class B
common stock, representing 49.9% of the voting rights and 80% of the economic
ownership rights in Blaya, Inc., in exchange for its 499 shares of common stock
in Blaya, Inc. and $640,000. On the same day, the Company loaned the majority
voting stockholder of Blaya, Inc. $160,000 in the form of a 10 year 9%
promissory note. These proceeds were used by the majority voting stockholder to
purchase 200 shares of Blaya, Inc.'s Class A common stock representing 50.1% of
the voting rights and 20% of the ownership rights in Blaya, Inc. In connection
with this equity investment, the stockholders of Blaya, Inc. entered into a
stockholders agreement that provides the Company the first right of refusal if
the majority voting stockholder decides to sell any interest in Blaya, Inc. The
Company accounts for its investment in Blaya, Inc. under the equity method of
accounting since the minority owner of Blaya, Inc. has operating control of
Blaya, Inc.
8
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RADIO UNICA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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3. INVESTMENTS AND ADVANCES TO EQUITY INVESTEE, CONTINUED
On March 10, 1998, the Company entered into a promissory note payable of $5.7
million with Blaya, Inc. The proceeds were used to complete the asset purchase
agreement with 13 Radio and to pay related closing costs. The promissory note
payable bear's interest at 9% compounded quarterly and payable annually. The
entire principal amount outstanding under the promissory note payable shall be
due and payable in full on the earliest to occur of (i) the termination of the
TBA, (ii) fifteen days following the date when 50% of the voting stock is
transferred to any party or substantially all the assets of Blaya, Inc. are
sold, or (iii) March 10, 2008. The promissory note payable is secured by
substantially all of the assets of Blaya, Inc.
On March 11, 1998, Blaya, Inc. completed the Acquisition of certain assets of 13
Radio for $6.4 million pursuant to the Asset Purchase Agreement dated December
24, 1997. The allocation of the purchase price is preliminary and subject to
change.
On June 9, 1998, the Company entered into a stock purchase agreement with the
majority voting stockholder of Blaya, Inc. to purchase his remaining 50.1%
voting rights and 20% ownership interest in Blaya, Inc. The FCC has granted its
consent for the transaction, which is expected to close in August 1998.
4. SENIOR DISCOUNT NOTES AND SENIOR SECURED REVOLVING CREDIT FACILITY
SENIOR DISCOUNT NOTES
On July 27, 1998, the Company sold in an unregistered offering to qualified
institutional buyers and accredited institutional investors $158,088,000
aggregate principal amount at maturity of the Company's 11 3/4% Senior Discount
Notes due August 1, 2006 (the "Notes"). Cash Interest on the Notes will not
accrue or be payable prior to August 1, 2002. Thereafter, cash interest will
accrue at a rate of 11 3/4% per annum on the principal amount at maturity of the
Notes through and including the maturity date and will be payable semi-annually
on August 1 and February 1 of each year. In connection with this transaction,
the Company received net proceeds of approximately $95 million, after issuance
expenses of approximately $5 million. The net proceeds will be used to fund
existing and future acquisitions of radio stations, repay amounts borrowed
under the Company's Revolving Credit Facility and for general working capital
purposes.
The Notes will be general senior unsecured obligations of the Company and will
rank PARI PASSU in right of payment with all existing and future unsecured and
unsubordinated indebtedness of the Company and senior in right of payment to any
subordinated indebtedness of the Company. The Notes are, unconditionally
guaranteed, on a senior unsecured basis, as to payment of principal, premium if
any, and interest, jointly and severally by the Guarantors which consist of the
Company's Domestic Restricted Subsidiaries, as defined. The Notes will be
redeemable at any time and from time to time at the option of the Company, in
whole or in part on or after August 1, 2002, plus accrued and unpaid interest
thereon to the date of redemption. In addition, on or prior to August 1, 2001,
the Company may redeem, at its option, up to 35% of the aggregate principal
amount at maturity of the Notes with the net proceeds of one or more Equity
Offerings, as defined, at 111.75% of the Accreted Value thereof, as defined, as
long as Notes representing at least $65.0 million of the aggregate initial
Accreted Value of the Notes originally issued remains outstanding after each
such redemption and that such redemption occurs within 90 days of the closing of
any such Equity Offering.
Upon a Change of Control, as defined, the Company will be required to offer to
repurchase the Notes at a purchase price equal to (i) 101% of the Accreted Value
thereof, if the purchase date is on or prior to August 1, 2002, or (ii) 101% of
the principal amount at maturity thereof, plus accrued and unpaid interest
thereon, if any, to the purchase date, if such date is after August 1, 2002.
9
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RADIO UNICA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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4. SENIOR SECURED NOTES AND SENIOR SECURED REVOLVING CREDIT FACILITY, CONTINUED
SENIOR DISCOUNT NOTES, CONTINUED
The Notes restrict, among other things, the Company's ability to incur
additional indebtedness, pay dividends or make certain other restricted
payments, consummate certain asset sales, create liens on assets, enter into
transactions with affiliates, make investments, loans or advances, consolidate
or merge with or into any other person or convey, transfer or lease all or
substantially all of its assets or change the business conducted by the Company.
SENIOR SECURED REVOLVING CREDIT FACILITY
On July 8, 1998, the Company entered into a credit agreement for a senior
secured revolving credit facility (the "Revolving Credit Facility") providing
for up to $20.0 million of availability with Canadian Imperial Bank of Commerce
("CIBC"). The Revolving Credit Facility will mature on the earlier of 91 days
before the first cash interest is due on the Notes or June 30, 2002. Amounts
outstanding under the Revolving Credit Facility bear interest at a rate of
either (i) the higher of CIBC's prime rate plus 1.25% or (ii) LIBOR plus 2.50%.
The obligations under the Revolving Credit Facility are guaranteed by the
Company and secured by substantially all the assets of the Company. The Company
will pay certain fees in connection with the Revolving Credit Facility,
including a commitment fee of 0.50% per annum on the aggregate unused portion of
the Revolving Credit Facility.
The Revolving Credit Facility contains certain financial and operational
covenants and customary events of default, including, among others, payment
defaults and default in the performance of other covenants, breach of
representations or warranties, cross-default to other indebtedness, certain
bankruptcy or ERISA defaults, the entry of certain judgments against the Company
or any subsidiary, and any security interest or guarantee that ceases to be in
effect. The Revolving Credit Facility also provides that an event of default
will occur upon the occurrence of a "change of control", as defined.
5. PROMISSORY NOTES PAYABLE
In April, May and June 1998, the Company entered into four promissory notes
payable to Warburg Pincus Ventures L.P. ("WPV") in the aggregate amount of
approximately $21.8 million. Such notes bear interest at 10% per annum and are
due on demand. On June 30, 1998 the Company converted $15 million of the
promissory notes payable to preferred stock (see Note 6). The Company paid the
remaining $6.8 million on July 15, 1998.
6. PREFERRED AND COMMON STOCK
On January 5, 1998, WPV purchased 148,500 shares of preferred stock and 15,000
shares of common stock in exchange for $15,000,000.
On April 17, 1998 the Company converted $365,000 in notes payable to
stockholders plus accrued interest of $22,323 into 3,835 shares of Series A
redeemable cumulative preferred stock and 387 shares of common stock valued at
$383,450 and $3,873, respectively.
On June 30, 1998, the Company converted $15 million in promissory notes payable
to WPV plus $238,904 in accrued interest into 150,865 shares of Series A
redeemable cumulative preferred stock and 15,239 shares of common stock valued
at $15,086,515 and $152,389, respectively.
7. COMMITMENTS
TIME BROKERAGE AGREEMENT FOR KDFT-AM DALLAS
On April 27, 1998, the Company entered into a TBA with The Freedom Network, Inc.
to operate the Dallas radio station KDFT-AM through May 18, 2000 for a monthly
fee of $44,786 and $56,546 through May 18, 1999 and 2000, respectively. An
advance payment of $146,903 was made to The Freedom Network, Inc. in connection
with the execution of the TBA.
10
<PAGE> 11
RADIO UNICA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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7. COMMITMENTS, CONTINUED
TIME BROKERAGE AGREEMENT FOR WBAH-AM NEW YORK
On June 1, 1998, the Company entered into a TBA with Children's Radio of New
York, Inc. for substantially all of the broadcast time on the New York radio
station WBAH-AM through August 31, 1998 in exchange for a fee in the amount of
$175,000.
TIME BROKERAGE AGREEMENT AND OPTION TO PURCHASE OF WYPA-AM CHICAGO
On June 9, 1998, the Company entered into a TBA with Achievement Radio Holdings,
Inc. for substantially all of the broadcast time on the Chicago radio station
WYPA-AM for a monthly fee of $118,000 through June 8, 1999. The term of the TBA
may be extended at the Company's option through June 9, 2000 (Renewal Term). In
addition to the TBA, the Company has an option to purchase the assets of
WYPA-AM, which is exercisable from June 9, 1998 through June 9, 1999 and will be
exercisable for the Renewal Term if the TBA is extended.
8. SUBSEQUENT EVENTS
See Note 2 in connection with the $5.25 million payment made towards the $6
million promissory note payable issued in connection with the acquisition of
KIQI-AM San Francisco and the acquisition of KBLA-AM Los Angeles on July 30,
1998.
See Note 4 in connection with the issuance of the Notes on July 27, 1998 and
Note 5 in connection with conversion and payments towards the promissory notes
payable on July 15, 1998.
11
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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 1998 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
Radio Unica Corp., incorporated on September 12, 1996 (inception), was organized
for the purpose of producing, broadcasting and distributing Spanish-language
radio programming in the United States. The Company's strategy is to develop its
radio network as a national advertising platform that is attractive to national
advertisers. The network is comprised of owned and operated stations; stations
operated under TBA's and affiliated stations. From inception through the year
ended December 31, 1997, the Company had no revenue and had not commenced
operations. The Company launched its network on January 5, 1998 with 30
affiliated stations and three stations operated under TBAs. The Company expects
to incur operating losses for the foreseeable future as the Company develops its
network and stations and establishes its base of advertising revenues.
The Company generates revenue from sales of network advertising time and sales
of advertising time on the Company-owned stations and stations operated under
TBAs (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.
The Company's operating expenses consist of network programming expenses,
marketing and selling costs, including commissions paid to the Company's sales
staff, technical and engineering costs, and general and administrative expenses.
As is true of other radio operators, the Company's performance is customarily
measured by its earnings before net interest, taxes, depreciation and
amortization ("EBITDA"). Although EBITDA is not a measure of performance
calculated in accordance with generally accepted accounting principles, EBITDA
is presented because it provides useful information regarding the Company's
ability to service debt. However, EBITDA should not be considered as an
alternative measure of operating results or cash flows from operations (as
determined in accordance with generally accepted accounting principles).
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
NET REVENUE. Net revenue for the three month period ended June 30, 1998 were
approximately $2.9 million relating to sales of network advertising and sales of
advertising on the Company's O&Os. The Company was not operating its network or
stations during the period ended June 30, 1997 and as a result had no revenues.
12
<PAGE> 13
RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
OPERATING EXPENSES. Operating expenses for the three month period ended June 30,
1998 were approximately $9.3 million as compared to approximately $302,000 for
the three months ended June 30, 1997. Operating expenses during the three months
ended June 30, 1998 related to the ongoing operations of the business. Operating
expenses during the three month period ended June 30, 1997 consisted of
corporate costs incurred during the development stage.
Direct operating expenses for the three months ended June 30, 1998 related to
engineering and programming costs for the Company's O&Os.
Selling, general and administrative expenses of approximately $2.6 million
related to the operations of the Company's O&Os. Network expenses of
approximately $5.3 million related to the operations of the Company's network
including engineering, programming, sales and administration.
Network expenses of approximately $5.3 million related to the operations of the
Company's Network including engineering, programming, sales and administration.
Corporate expenses for the three months ended June 30, 1998 of approximately
$667,000 related to the costs of executive management, legal and professional
fees and other costs, an increase of approximately $365,000 over the comparable
period in the prior year. Corporate expenses for the three month period ended
June 30, 1997 included primarily legal and professional fees, promotional costs
and travel expenses incurred during the development stage.
LOSS FROM OPERATIONS. Loss from operations for the three month period ended June
30, 1998 was approximately $6.4 million as compared to approximately $302,000
for the comparable period of the prior year. The increase in the loss is a
result of the increased costs associated with the commencement of operations of
the Company's network O&Os.
EBITDA. EBITDA was approximately $(6.3) million for the three months ended June
30, 1998 and approximately $(302,000) for the three months ended June 30, 1997.
The decrease in EBITDA is a result of the increased cost associated with the
operations of the Company's network and O&Os.
OTHER INCOME (EXPENSE). Other income (expense) for the three month period ended
June 30, 1998 included interest income of approximately $278,000, interest
expense of approximately $458,000 and equity loss of approximately $8,000.
Interest income primarily relates to interest earned on amounts held in escrow
related to pending station acquisitions. Interest expense relates primarily to
the interest on the promissory notes due to stockholders. Equity loss is the
Company's share of losses in Blaya, Inc., an equity investee, which owns KXYZ-AM
Houston. The Company had no other income or expense during the three month
period ended June 30, 1997.
NET LOSS. The Company had a net loss of approximately $6.6 million in the three
month period ended June 30, 1998 as compared to an approximate $302,000 net loss
for the comparable period of the prior year. The increase in the net loss is a
result of the increased costs associated with the operations of the Company's
network O&Os.
13
<PAGE> 14
RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997
NET REVENUE. Net revenue for the six months ended June 30, 1998 were
approximately $3.5 million relating to sales of network advertising and sales of
advertising on the Company's O&Os. The Company was not operating its network or
stations during the six month period ended June 30, 1997 and as a result had no
revenues.
OPERATING EXPENSES. Operating expenses for the six months ended June 30, 1998
were approximately $13.8 million as compared to approximately $440,000 for the
six months ended June 30, 1997.
Direct operating expenses for the six months ended June 30, 1998 related to
engineering and programming costs for the Company's O&Os.
Selling, general and administrative expenses of approximately $4.3 million
related to the operations of the Company's O&Os.
Network expenses of approximately $6.9 million related to the operations of the
Company's network including engineering, programming, sales and administration.
Corporate expenses for the six months ended June 30, 1998 of approximately $1.3
million related to the costs of executive management, legal and professional
fees and other costs, an increase of approximately $866,000 over the comparable
period in the prior year. Corporate expenses for the six months ended June 30,
1997 included primarily legal and professional fees, promotional costs and
travel expenses incurred during the development stage.
EBITDA. EBITDA was approximately $(10.0) million for the six months ended June
30, 1998 as compared to approximately $(440,000) for the six months ended June
30, 1997. The decrease in EBITDA is a result of the increased cost associated
with the operations of the Company's network and O&Os.
OTHER INCOME (EXPENSE). Other income (expense) for the six months ended June 30,
1998 included interest income of approximately $312,000, interest expense of
approximately $465,000 and equity earnings of approximately $3,000. Interest
income primarily relates to interest earned on amounts held in escrow related to
pending station acquisitions. Interest expense relates primarily to the interest
on the promissory notes due to stockholders. Equity earnings is the Company's
share of earnings in Blaya, Inc., an equity investee, which owns KXYZ-AM
Houston. The Company had no other income or expense during the six months ended
June 30, 1997.
NET LOSS. The Company incurred a net loss of approximately $10.5 million for the
six months ended June 30, 1998 as compared to approximately $440,000 for the six
months ended June 30, 1997. The increase in the net loss is a result of the
increased costs associated with the operations of the Company's network and
O&Os.
14
<PAGE> 15
RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Due to the development nature of the Company, 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 issuance of Promissory
Notes, Company Common Stock and Company Preferred Stock to the Company's
principal shareholder.
The Company's primary sources of liquidity will be the Revolving Credit Facility
and the net proceeds from the 11 3/4% Senior Discount Notes issued on July 27,
1998 (see Note 4 to Financial Statements). The Revolving Credit Facility is a
senior secured revolver with $20.0 million of available borrowings subject to
certain conditions.
Net cash used in operating activities was approximately $8.1 million for the six
months ended June 30, 1998 as compared to approximately $460,000 for the six
months ended June 30, 1997. The increase in cash used in operating activities
during the six month period ended June 30, 1998 is due to the increased costs
associated with the operations of the Company's network and O&Os.
Net cash used in investing activities for the six months ended June 30, 1998 was
approximately $28.3 million as the Company acquired radio stations, funded
escrow accounts related to acquisitions, made investments in and advances to an
equity investee and acquired property and equipment for its O&Os. No cash was
used in investing activities for the comparable period in the prior year.
Capital expenditures primarily related to the purchase of broadcast equipment
for the network and O&Os, leasehold improvements, computer equipment and
telecommunications equipment. For the six months ended June 30, 1998 capital
expenditures were approximately $2.6 million. The Company expects to spend in
the aggregate approximately $2.5 million over the next two years for planned
equipment purchases and for upgrades of existing stations.
Net cash provided by financing activities for the six months ended June 30, 1998
was $36 million as compared to $455,000 for the six months ended June 30, 1997.
The increase in cash provided by financing activities during the six months
ended June 30, 1998 is partially due to additional capital which was raised
through the issuance of preferred and common stock. In addition, the Company
entered into promissory notes payable with WPV of approximately $21.8 million.
The funds were mainly used to acquire radio stations, fund escrow accounts
related to acquisitions, make investments and advances to an equity investee and
acquire property and equipment.
The Company believes that its current cash position and the proceeds from the
issuance of the 11 3/4% Senior Discount Notes on July 27, 1998 and the borrowing
availability under the Revolving Credit Facility will provide adequate resources
to fund the Company's operating expenses, working capital requirements, capital
expenditures and acquisitions until the implementation of its business strategy
provides the Company with sufficient operating cash flow. However, 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.
15
<PAGE> 16
RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
YEAR 2000 COMPLIANCE
The Company is currently assessing its exposure to the Year 2000 issue. All
aspects of the business are under review, including correspondence with vendors,
suppliers and customers regarding their Year 2000 compliance status. Based upon
the results of recent investigation, the Company's primary information and
communications systems are believed to be compliant with Year 2000 requirements.
The Company's cost of compliance has been minimal and any future costs are not
anticipated to be material to financial condition or results of operations.
The Company currently has limited information concerning the Year 2000
compliance status of its suppliers of goods and services, other than those
related to the Company's information systems. In the event that any of the
Company's significant suppliers do not successfully and timely achieve Year 2000
compliance, the Company's business or operations could be adversely affected.
16
<PAGE> 17
RADIO UNICA CORP.
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or any of
its subsidiaries is a party to.
ITEM 2. CHANGES IN SECURITIES
* On January 5, 1998, the Company issued 148,500 shares of preferred stock
and 15,000 shares of common stock to Warburg, Pincus Ventures L.P. for
$15,000,000.
* On April 17, 1998, the Company converted $365,000 in notes payable to
stockholders plus accrued interest of $22,323 into 3,835 shares of Series
A redeemable cumulative preferred stock and 387 shares of common stock
valued at $383,450 and $3,873, respectively.
* On June 30, 1998, the Company converted $15 million in promissory notes
payable to Warburg, Pincus Ventures, L.P., plus $238,904 in accrued
interest into 150,865 shares of Series A redeemable cumulative preferred
stock and 15,239 shares of common stock valued at $15,086,515 and
$152,389, respectively.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the security holders of the
Company during the period covered by this report.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 27.1 - Financial Data Schedules.
(b) No reports on Form 8-K were filed by the Company for the quarter
ended June 30, 1998.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Radio Unica Corp.
By: /s/ Steven E. Dawson
-----------------------------
Steven E. Dawson
Chief Financial Officer
Date: August 28, 1998
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RADIO UNICA CORP FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 692,315
<SECURITIES> 0
<RECEIVABLES> 1,957,539
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,290,760
<PP&E> 4,342,651
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<TOTAL-ASSETS> 44,514,087
<CURRENT-LIABILITIES> 10,888,265
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36,639,969
<COMMON> 359
<OTHER-SE> (13,103,241)
<TOTAL-LIABILITY-AND-EQUITY> 44,514,087
<SALES> 3,463,962
<TOTAL-REVENUES> 3,463,962
<CGS> 0
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