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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report pursuant to Section 13 or 15(d) of the
[X] Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
Transition Report Pursuant to Section 13 or 15(d) of
[ ] the Securities Exchange Act of 1934
COMMISSION FILE NO. 333-61211
RADIO UNICA CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 65-0776004
(State of Incorporation) (I.R.S. Employer
Identification Number)
8400 N.W. 52ND STREET, SUITE 101
MIAMI, FL 33166
(Address of principal executive offices) (Zip Code)
305-463-5000
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
As of August 6, 1999, 100 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............................................ 2
Item 2. Management's Discussion and Analysis............................ 7
PART II. OTHER INFORMATION
Item 3 Quantitative and Qualitative Disclosures about Market Risk....... 12
Item 6. Exhibits and Reports on Form 8-K................................. 12
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RADIO UNICA CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1999 1998
- -------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 284,896 $ 38,894,144
Restricted cash 2,635,553 12,600,000
Accounts receivable, net of allowance for doubtful accounts of
$215,960 and $116,031, respectively 3,697,089 1,232,402
Prepaid expenses 1,409,990 5,012,001
------------- -------------
Total current assets 8,027,528 57,738,547
Property and equipment, net 16,214,652 11,769,654
Broadcast licenses, net of accumulated amortization of $1,994,365 86,134,690 43,729,708
and $752,775, respectively
Other intangible assets, net of accumulated amortization of
$1,384,764 and $570,956, respectively 10,360,613 9,894,522
Other assets 321,967 373,142
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$ 121,059,450 $ 123,505,573
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
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Current liabilities:
Accounts payable $ 940,243 $ 922,064
Accrued expenses 3,286,757 3,199,347
Notes payable 10,950,000 750,000
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Total current liabilities 15,177,000 4,871,411
Other liabilities 244,520 --
Deferred taxes 1,641,990 1,641,990
Senior discount notes 111,199,589 105,029,128
Commitments and contingencies
Series A redeemable cumulative preferred stock of Radio Unica
Communications Corp. $.01 par value; 450,000 shares authorized;
353,907 and 353,560 shares issued and outstanding at June 30, 1999
and December 31, 1998, respectively 40,246,750 38,266,437
Stockholders' deficit:
Common stock $.01 par value; 1,000 shares authorized;
100 shares issued and outstanding 1 1
Capital deficiency (4,547,099) (2,611,337)
Accumulated deficit (42,903,301) (23,692,057)
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Total stockholders' deficit (47,450,399) (26,303,393)
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$ 121,059,450 $ 123,505,573
============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2
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RADIO UNICA CORP.
CONSOLIDATED STATEMENTS OF OPERATION (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
- -------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenue $ 4,581,368 $ 2,902,379 $ 6,347,282 $ 3,463,962
Operating expenses:
Direct operating expenses 976,557 670,200 1,708,467 888,374
Selling, general and administrative expenses 3,384,742 2,606,555 6,362,150 4,347,004
Network expenses 2,392,803 5,260,840 5,632,040 6,883,006
Corporate expenses 668,643 667,115 1,339,856 1,306,525
Depreciation and amortization 1,329,151 125,957 2,413,072 372,144
LMA termination fee 2,000,000 -- 2,000,000 --
------------ ------------ ------------ ------------
10,751,896 9,330,667 19,455,585 13,797,053
------------ ------------ ------------ ------------
Loss from operations (6,170,528) (6,428,288) (13,108,303) (10,333,091)
Other income (expense):
Interest expense (3,416,524) (457,848) (6,691,384) (465,402)
Interest income 139,587 277,764 588,443 312,052
Equity in (loss) earnings of equity investee -- (7,986) -- 2,882
------------ ------------ ------------ ------------
(3,276,937) (188,070) (6,102.941) (150,468)
------------ ------------ ------------ ------------
Net loss (9,447,465) (6,616,358) (19,211,244) (10,483,559)
Accrued dividends on Series A redeemable
cumulative preferred stock 977,209 521,302 1,935,762 1,003,014
------------ ------------ ------------ ------------
Net loss applicable to common shareholders $(10,424,674) $ (7,137,660) $(21,147,006) $(11,486,573)
============ ============ ============ ============
Net loss per common share applicable to
common shareholders - basic and diluted $ (104,247) $ (344) $ (211,470) $ (570)
============ ============ ============ ============
Weighted average common shares
outstanding - basic and diluted 100 20,736 100 20,162
============ ============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
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RADIO UNICA CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------
1999 1998
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<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(19,211,244) $(10,483,559)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 2,413,072 372,144
Provision for bad debts 99,929 --
Equity in loss of equity investee -- (2,882)
Interest on notes payable paid with the issuance of capital stock -- 261,227
Accretion of interest on senior discount notes 6,170,461 --
Amortization of deferred financing costs 385,416 --
Barter revenue from radio broadcasting rights (487,400) --
Change in assets and liabilities:
Accounts receivable (2,564,616) (1,861,490)
Prepaid expenses 1,102,011 435,331
Radio broadcasting rights -- 1,752,188
Other assets 36,738 (416,143)
Accounts payable 18,179 879,169
Accrued expenses 672,993 1,390,057
Radio broadcasting rights obligation -- (1,590,000)
Deferred revenue -- 369,000
Deposit payable 165,000 --
------------ ------------
Net cash used in operating activities (11,199,461) (8,894,958)
------------ ------------
INVESTING ACTIVITIES
Acquisition of property and equipment (1,717,121) (2,594,093)
Restricted cash-escrow account 9,964,447 (4,600,000)
Radio broadcasting rights (42,500) --
Investments and advances to equity investee -- (5,448,375)
Note receivable from stockholder -- (163,600)
Acquisition of WNTD-AM (16,782,140) --
Acquisition of WWRU-AM and WJDM-AM, KIDR-AM and KAHZ-AM (27,941,442) --
Acquisition of WNMA-AM -- (9,317,000)
Acquisition of KIQI-AM -- (6,211,521)
------------ ------------
Net cash used in investing activities (36,518,756) (28,334,589)
------------ ------------
FINANCING ACTIVITIES
Proceeds from borrowings under the revolving credit facility 10,200,000 --
Debt financing costs (1,135,581) --
Proceeds from issuance of Series A redeemable cumulative
preferred stock and common stock -- 15,000,000
Proceeds from issuance of note payable to stockholder -- 21,795,000
Proceeds from issuance of Series A redeemable cumulative
preferred stock of Radio Unica Communications Corp. 44,550 --
------------ ------------
Net cash provided by financing activities 9,108,969 36,795,000
------------ ------------
Net decrease in cash and cash equivalents (36,609,248) (434,547)
Cash and cash equivalents at beginning of period 38,894,144 1,126,862
------------ ------------
Cash and cash equivalents at end of period $ 284,896 $ 692,315
============ ============
Reclassification of prepaid expenses to broadcast license upon
consummation of the acquisition of WWRU-AM and WJDM-AM,
KIDR-AM and KAHZ-AM $ 2,500,000 $ --
============ ============
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.
4
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RADIO UNICA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements of
Radio Unica Corp. and subsidiaries (the "Company") for the periods indicated
herein have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission and in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three and six months ended June 30, 1999 and 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999. The consolidated financial statements include the accounts of
the Company and all majority owned subsidiaries over which the Company has
control. All significant intercompany accounts and transactions have been
eliminated. For further information, refer to the Company's 1998 consolidated
financial statements and notes thereto.
The Company's revenue and cash flow are expected to be typically lowest in
the first calendar quarter and highest in the fourth calendar quarter. Seasonal
fluctuations are common in the radio broadcasting industry and are due primarily
to fluctuations in consumer spending.
2. ACQUISITIONS
On October 27, 1998, the Company entered into an asset purchase agreement
with Children's Broadcasting Corporation to acquire certain assets of New York
City area radio stations WWRU-AM and WJDM-AM, Dallas/Ft. Worth radio station
KAHZ-AM and Phoenix radio station KIDR-AM for a purchase price of $29.25
million. In connection with this acquisition, the Company entered into a
two-year non-compete agreement with the seller for $750,000. Pursuant to this
agreement, the Company established escrow accounts totaling $10 million. The
Company operated these stations under an LMA for a monthly fee of $200,000 until
the transaction closed. On January 14, 1999, after receiving the consent of the
Federal Communications Commission (the "FCC") to assign the broadcasting
licenses, the Company completed the acquisition. Based on current FCC
guidelines, the license of either WWRU-AM or WJDM-AM must be relinquished by the
Company by March 12, 2003.
On February 22, 1999, the Company contracted to acquire substantially all
the assets used in the operation of radio station WNTD-AM, in Chicago, Illinois
from subsidiaries of One-on-One, for a cash purchase price of approximately
$16.75 million. The Company funded a $1 million escrow account in conjunction
with this transaction. On May 14, 1999, after receiving the consent of the FCC
to assign the broadcasting licenses, the Company completed the acquisition.
The acquisitions of the assets of WWRU-AM and WJDM-AM, New York, KAHZ-AM,
Dallas, KIDR-AM, Phoenix, and WNTD-AM, Chicago, were not the purchases of
businesses, as the format and language of the stations were changed and the
Company did not assume responsibility for any employees. The acquisitions were
accounted for as purchases and, accordingly, the purchase price was allocated to
the assets acquired and liabilities assumed based on appraisals and other
estimates of their underlying values.
5
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RADIO UNICA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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3. COMMITMENTS
On June 7, 1999, the Company entered into a time brokerage agreement
("TBA") with DEN-MEX L.L.C. for substantially all of the broadcast time on
Denver radio station KCUV-AM for a monthly fee of $25,000 through June 14, 2002.
In addition to the TBA, the Company has an option to purchase the assets of
KCUV-AM, which is exercisable from June 15, 1999 through June 14, 2002.
On October 31, 1997, the Company entered into a local marketing agreement
("LMA") with Lotus Oxnard Corp. (Lotus) to operate Simi Valley, CA radio station
KVCA, effective January 5, 1998. Simultaneous with the LMA, the Company entered
into an escrow agreement whereby the Company provided a $2.5 million escrow
account deposit on January 5, 1998 to secure compliance with the LMA terms. In
June 1999, the Company began negotiations on the termination of the LMA. On July
30, 1999, upon an agreement reached by the Company and Lotus, the LMA was
terminated for a final payment of $2.0 million and the escrow funds were
released to the Company. The $2.0 million termination payment was reflected in
operations in the accompanying consolidating condensed financial statements.
4. SUMMARIZED FINANCIAL INFORMATION
The Senior Discount Notes issued by the Company are guaranteed by all of
the Company's Domestic Restricted Subsidiaries on a full, unconditional, joint
and several basis. The financial statements of the subsidiary guarantors are
omitted as management has determined that separate financial statements and
other disclosures concerning the subsidiaries are not material to investors.
Summarized financial information for the Company's Domestic Restricted
Subsidiaries follows:
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS ENDED JUNE 30,
------------------------------
1999 1998
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<S> <C> <C>
Current assets $ 7,742,632 $ 7,598,445
Total assets 120,774,554 43,821,772
Current liabilities 35,264,176 22,773,198
Total liabilities (including due to parent of $30,287,176
and $11,884,933, respectively) 37,150,686 32,861,933
Net revenue 6,347,282 3,463,962
Operating expenses 14,820,634 11,169,407
Net loss (14,576,293) (7,855,913)
</TABLE>
5. SUBSEQUENT EVENTS
On July 9, 1999, the Company's parent, Radio Unica Communications Corp.
(formerly Radio Unica Holdings Corp.), filed a registration statement with the
Securities and Exchange Commission for a proposed initial public offering of its
common stock.
6
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RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
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This report contains "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements include, among others, statements concerning the
Company's outlook for 1999 and beyond, the Company's expectations, beliefs,
future plans and strategies, anticipated events or trends, and similar
expressions concerning matters that are not historical facts. The
forward-looking statements in this report are subject to risks and uncertainties
that could cause actual results to differ materially from those expressed in or
implied by the statements.
OVERVIEW
We were incorporated on September 12, 1996 (inception), for the purpose of
producing, broadcasting and distributing Spanish-language radio programming in
the United States. Our strategy is to develop a radio network as a national
advertising platform that is attractive to national advertisers. The network is
comprised of radio stations that we own, radio stations that we operate under
local marketing agreements or LMAs and affiliated radio stations. From inception
through the year ended December 31, 1997, we had no revenue and had not
commenced operations. We launched our network on January 5, 1998 with 30
affiliated stations and three stations operated under LMAs. We expect to incur
operating losses for the foreseeable future as we develop our network and
stations and establish our base of advertising revenues.
We generate revenue from sales of network advertising time, and sales of
local and national advertising time on radio stations that we own and those that
we operate under LMAs (collectively "O&Os"). Advertising rates are, in large
part, based upon the network's and each station's ability to attract audiences
in demographic groups targeted by advertisers. All revenues are stated net of
any agency commissions. We recognize advertising revenue when the commercials
are broadcast.
Our operating expenses consist of network programming expenses, marketing
and selling costs, including commissions paid to our sales staff, technical and
engineering costs, and general and administrative expenses.
As is true of other radio operators, the Company's performance is
customarily measured by its earnings before net interest, taxes, depreciation
and amortization ("EBITDA"). Although EBITDA is not a measure of performance
calculated in accordance with generally accepted accounting principles, EBITDA
is presented because it provides useful information regarding the Company's
ability to service debt. However, EBITDA should not be considered as an
alternative measure of operating results or cash flows from operations (as
determined in accordance with generally accepted accounting principles).
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
NET REVENUE. Net revenue increased by approximately $1.7 million to
approximately $4.6 for the three months ended June 30, 1999 from approximately
$2.9 million for the comparable period in the prior year. The increase in net
revenue relates to an increase in the Company's customer base due to the
development of the Company's network and O&Os.
7
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RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION (CONTINUED)
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OPERATING EXPENSES. Operating expenses increased by approximately $1.4
million to approximately $10.7 million for the three months ended June 30, 1999
from approximately $9.3 million for the comparable period in the prior year. The
increase in operating expenses is mainly due to the increase in the number of
O&Os, as well as a one-time payment of $2.0 million to terminate the LMA
agreement for Los Angeles radio station KVCA-AM. If the LMA agreement had
continued pursuant to its terms the sum of the amounts due would have been
approximately $6.1 million. The Company now reaches the market through its radio
station KBLA-AM in Los Angeles. The increase in operating expenses is offset in
part by non-recurring network expenses in 1998 for programming rights and
production expenses relating to the World Cup.
Direct operating expenses increased by approximately $0.3 million to
approximately $1.0 million for the three months ended June 30, 1999 from
approximately $0.7 million for the comparable period in the prior year. The
increase in direct operating expenses is primarily due to the increase in the
number of O&Os.
Selling, general and administrative expenses increased by approximately $.8
million to approximately $3.4 million for the three months ended June 30, 1999
from approximately $2.6 million for the comparable period in the prior year. The
increase in selling, general and administrative expenses primarily relates to
the increase in the number of O&Os.
Network expenses decreased by approximately $2.9 million to approximately
$2.4 million for the three months ended June 30, 1999 from approximately $5.3
million for the comparable period in the prior year. The decrease in network
expenses is due to non-recurring costs in 1998 for programming rights and
production expenses relating to the World Cup.
Corporate expenses were approximately $0.7 million for the three months
ended June 30, 1999 which was consistent with the comparable period in the prior
year.
Depreciation and amortization increased by approximately $1.2 million to
approximately $1.3 million for the three months ended June 30, 1999 from
approximately $0.1 million for the comparable period in the prior year. The
increase in depreciation and amortization is due to the significant addition of
fixed assets and intangible assets arising from acquisitions of O&Os.
LMA termination fee relates to a one-time payment of $2.0 million to
terminate the LMA agreement for Los Angeles radio station KVCA-AM. The Company
now reaches the market through its radio station KBLA-AM in Los Angeles.
OTHER INCOME (EXPENSE). Other income (expense) for the three months ended
June 30, 1999 included interest income of approximately $0.1 million, and
interest expense of approximately $3.4 million. Interest income primarily
relates to interest earned on the remaining proceeds from the Senior Discount
Notes. Interest expense primarily relates to the interest on the outstanding
balance of the Senior Discount Notes. The Company had approximately $0.3 million
in interest income and $0.5 million in interest expense during the three months
ended June 30, 1998.
8
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RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION, (CONTINUED)
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NET LOSS. Net loss increased by approximately $2.8 million to approximately
$9.4 million for the three months ended June 30, 1999 as compared to a loss of
approximately $6.6 million for the comparable period in the prior year. The
increase in net loss is a result of increased costs associated with the
operation of the Company's O&Os, the increase in interest expense resulting from
the Senior Discount Notes and the $2.0 million charge related to the termination
of the LMA for Los Angeles radio station KVCA-AM. This increase is offset in
part by a decrease in network expenses related to non-recurring costs in 1998
for programming rights and production expenses relating to the World Cup.
EBITDA. EBITDA increased by approximately $1.5 million to approximately
$(4.8) million for the three months ended June 30, 1999 as compared to
approximately $(6.3) million for the comparable period in the prior year. The
increase in EBITDA is due to an increase in net revenue as well as a decrease in
network expenses related to non-recurring costs in 1998 for programming rights
and production expenses relating to the World Cup. This was offset in part by
costs incurred during 1999 associated with the increase in the number of O&Os as
well the termination of the LMA for Los Angeles radio station KVCA-AM.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
NET REVENUE. Net revenues increased by approximately $2.8 million to
approximately $6.3 for the six months ended June 30, 1999 from approximately
$3.5 million for the comparable period in the prior year. The increase in net
revenue relates to an increase in the Company's customer base due to the
development of the Company's network and O&Os.
OPERATING EXPENSES. Operating expenses increased by approximately $5.7 to
approximately $19.5 million for the six months ended June 30, 1999 from
approximately $13.8 million for the comparable period in the prior year. The
increase in operating expenses is mainly due to the increase in the number of
O&Os, as well as a one-time payment of $2.0 million to terminate the LMA
agreement for Los Angeles radio station KVCA-AM. If the LMA agreement had
continued pursuant to its terms the sum of the amounts due would have been
approximately $6.1 million. The Company now reaches the market through its radio
station KBLA-AM in Los Angeles. The increase in operating expenses is offset in
part by non-recurring network expenses in 1998 for programming rights and
production expenses relating to the World Cup.
Direct operating expenses increased by approximately $0.8 million to
approximately $1.7 million for the six months ended June 30, 1999 from
approximately $0.9 million for the comparable period in the prior year. The
increase in direct operating expenses is primarily due to the increase in the
number of O&Os.
Selling, general and administrative expenses increased by approximately $2.0
million to approximately $6.4 million for the six months ended June 30, 1999
from approximately $4.4 million for the comparable period in the prior year. The
increase in selling, general and administrative expenses primarily relates to
the increase in the number of O&Os.
Network expenses decreased by approximately $1.3 million to approximately
$5.6 million for the six months ended June 30, 1999 from approximately $6.9
million for the comparable period in the prior year. The decrease in network
expenses relates to non-recurring costs incurred during 1998 for programming
rights and production expenses relating to the World Cup.
9
<PAGE> 11
RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION, (CONTINUED)
- --------------------------------------------------------------------------------
Corporate expenses were approximately $1.3 million for the six months ended
June 30, 1999 which was consistent with the comparable period in the prior year.
Depreciation and amortization increased by approximately $2.0 million to
approximately $2.4 million for the six months ended June 30, 1999 from
approximately $0.4 million for the comparable period in the prior year. The
increase in depreciation and amortization is due to the additional fixed and
intangible assets from acquisitions of O&Os.
LMA termination fee relates to a one-time payment of $2.0 million to
terminate the LMA agreement for Los Angeles radio station KVCA-AM. The Company
now reaches the market through its radio station KBLA-AM in Los Angeles.
OTHER INCOME (EXPENSE). Other income (expense) for the six months ended June
30, 1999 included interest income of approximately $0.6 million, and interest
expense of approximately $6.7 million. Interest income primarily relates to
interest earned on the remaining proceeds from the Senior Discount Notes.
Interest expense primarily relates to the interest on the outstanding balance of
the Senior Discount Notes. The Company had approximately $0.3 million in
interest income and $0.5 million in interest expense during the six months ended
June 30, 1998.
NET LOSS. Net loss increased by approximately $8.7 million to approximately
$19.2 million for the six months ended June 30, 1999 as compared to a loss of
approximately $10.5 million for the comparable period in the prior year. The
increase in net loss is a result of increased costs associated with the
operation of the Company's O&Os, the increase in interest expense resulting from
the Senior Discount Notes as well as the termination of the LMA for Los Angeles
radio station KVCA-AM. This increase is offset in part by a decrease in network
expenses related to non-recurring costs in 1998 for programming rights and
production expenses relating to the World Cup.
EBITDA. EBITDA decreased by approximately $0.7 million to approximately
$(10.7) million for the six months ended June 30, 1999 as compared to
approximately $(10.0) million for the comparable period in the prior year. The
decrease in EBITDA is due to costs incurred during 1999 associated with the
increase in the number of O&Os as well the termination of the LMA for Los
Angeles radio station KVCA-AM. This decrease was offset in part by an increase
in net revenue as well as a decrease in network expenses related to
non-recurring costs in 1998 for programming rights and production expenses
relating to the World Cup.
LIQUIDITY AND CAPITAL RESOURCES
Due to the developmental 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
the Senior Discount Notes and preferred stock.
The Company's primary source of liquidity will be the Revolving Credit
Facility. The Revolving Credit Facility is a $20.0 million senior secured
revolver subject to certain conditions. As of June 30, 1999 there was $10.2
million outstanding under the credit facility.
10
<PAGE> 12
RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION, (CONTINUED)
- --------------------------------------------------------------------------------
Net cash used in operating activities increased by approximately $2.3
million to approximately $11.2 million for the six months ended June 30, 1999 as
compared to approximately $8.9 million for the comparable period in the prior
year. The increase in cash used in operating activities during the six month
period ended June 30, 1999 is primarily due to the increase in the loss from
operations partially offset by non-cash items consisting of depreciation and
amortization of approximately $2.4 million, interest expense of approximately
$6.2 million and amortization of deferred financing cost of approximately $0.4
million.
Net cash used in investing activities increased by approximately $8.2
million to $36.5 million for the six months ended June 30, 1999 as compared to
approximately $28.3 million for the comparable period in the prior year. The
increase in cash used in investing activities during the six month period ended
June 30, 1999 is primarily due to the acquisition of substantially all the
assets of radio stations WWRU-AM and WJDM-AM New York, KIDR-AM, Phoenix,
KAHZ-AM, Dallas and WNTD-AM Chicago.
Capital expenditures primarily relate 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, 1999 capital
expenditures were approximately $1.7 million as compared to approximately $2.6
million for the comparable period in the prior year. The decrease in capital
expenditures is primarily due to the significant capital expenditures made
during the six-month period ended June 30, 1998 related to the development of
the Company's network and O&Os.
Net cash provided by financing activities for the six months ended June 30,
1999 was approximately $9.1 million as compared to approximately $36.8 million
for the comparable period in the prior year. The decrease in cash provided by
financing activities is primarily due to the proceeds from the issuance of
preferred and common stock during the six months ended June 30, 1998 partially
offset by borrowings under the revolving credit facility during the six months
ended June 30, 1999.
The Company believes that its current cash position, 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.
YEAR 2000 COMPLIANCE
We have conducted a comprehensive review of our computer systems to identify
the systems that could be affected by the "Year 2000" issue and have developed
an implementation plan to resolve the issue. We presently believe, based on the
results of recent investigations, that our primary information and communication
systems are compliant with Year 2000 requirements. Our costs of compliance have
been minimal and any future costs are not anticipated to be material to our
financial condition and results of operations.
We are in the process of working with our software vendors to ensure that
the software that we have licensed from third parties will operate properly in
the year 2000 and beyond. In addition, we are working with our suppliers,
service providers and corporate partners to ensure that they and their systems
will be able to support our needs and, where necessary, operate with our server
and networking hardware and software infrastructure in preparation for the year
2000. However, significant uncertainty exists concerning the potential costs and
effects associated with any year 2000 compliance.
11
<PAGE> 13
RADIO UNICA CORP.
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risk exposure with respect to financial instruments is to changes
in the "prime rate" in the United States. We may borrow up to $20 million under
our credit facility. Amounts outstanding under the credit facility bear
interest, at Radio Unica's option, at the bank's prime rate plus 1.25% or LIBOR
plus 2.50%. At June 30, 1999 there was $10.2 million outstanding under our
credit facility.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 27.1 - Financial Data Schedule.
(b) On May 28, 1999 the Company filed a current report on Form 8-K
reporting the acquisition through certain of its subsidiaries of
substantially all the assets of radio station WIDB (AM) (now know as
WNTD (AM)) licensed to Chicago, Illinois, from certain subsidiaries of
One-On-One Sports.
12
<PAGE> 14
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 6, 1999
13
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