<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 9, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
RADIO UNICA COMMUNICATIONS CORP.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 4832 65-0856900
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
8400 N.W. 52(ND) STREET, SUITE 101
MIAMI, FLORIDA 33166
(305) 463-5000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
------------------------------
STEVEN E. DAWSON
RADIO UNICA COMMUNICATIONS CORP.
8400 N.W. 52(ND) STREET, SUITE 101
MIAMI, FLORIDA 33166
(305) 463-5000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
MARTIN H. NEIDELL, ESQ. ALLAN G. SPERLING, ESQ.
STROOCK & STROOCK & LAVAN LLP CLEARY, GOTTLIEB, STEEN & HAMILTON
180 MAIDEN LANE ONE LIBERTY PLAZA
NEW YORK, NEW YORK 10038-4982 NEW YORK, NEW YORK 10006
(212) 806-5400 (212) 225-2000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE OFFERING AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value..................... shares $ $97,750,000 $27,175
</TABLE>
(1) Includes shares issuable upon exercise of over-allotment option granted to
the Underwriters.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act of 1933, as amended.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED , 1999
P R O S P E C T U S
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
[COMPANY LOGO]
SHARES
RADIO UNICA COMMUNICATIONS CORP.
COMMON STOCK
$ PER SHARE
---------
Radio Unica is selling shares of its common stock. The
underwriters named in this prospectus may purchase up to additional
shares of common stock from one of our stockholders, Warburg, Pincus Ventures,
L.P., under certain circumstances. Radio Unica will not receive any proceeds
from the sale of the shares by this stockholder.
This is an initial public offering of common stock. Radio Unica currently
expects the initial public offering price to be between $ and $ per
share, and has applied to have the common stock included for quotation on the
Nasdaq National Market under the symbol "UNCA".
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 9.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
--------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- ---------
<S> <C> <C>
Public Offering Price......................................... $ $
Underwriting Discount......................................... $ $
Proceeds to Radio Unica (before expenses)..................... $ $
</TABLE>
The underwriters are offering the shares subject to various conditions. The
underwriters expect to deliver the shares to purchasers on or about
, 1999.
--------------
SALOMON SMITH BARNEY
BEAR, STEARNS & CO. INC.
CIBC WORLD MARKETS
DONALDSON, LUFKIN & JENRETTE
, 1999
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. RADIO UNICA HAS NOT AUTHORIZED ANYONE TO PROVIDE
YOU WITH DIFFERENT INFORMATION. RADIO UNICA IS NOT MAKING AN OFFER OF THESE
SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME
THAT THE INFORMATION PROVIDED BY THIS PROSPECTUS IS ACCURATE AS OF ANY DATE
OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary......................................................................................... 1
Risk Factors............................................................................................... 9
Use of Proceeds............................................................................................ 15
Dividend Policy............................................................................................ 15
Capitalization............................................................................................. 16
Dilution................................................................................................... 17
Unaudited Pro Forma Combined Financial Data................................................................ 18
Selected Consolidated Financial Data....................................................................... 23
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 25
Business................................................................................................... 31
Management................................................................................................. 49
Certain Stockholders....................................................................................... 53
Certain Transactions....................................................................................... 55
Description of Capital Stock............................................................................... 56
Description of Indebtedness................................................................................ 58
Shares Eligible for Future Sale............................................................................ 59
Underwriting............................................................................................... 62
Legal Opinions............................................................................................. 64
Experts.................................................................................................... 64
Where You Can Find More Information........................................................................ 64
Index To Financial Statements.............................................................................. F-1
</TABLE>
Until , 1999 (25 days after the date of this prospectus), all
dealers that buy, sell or trade the common stock, whether or not participating
in this offering, may be required to deliver a prospectus. This delivery
requirement is in addition to the obligation of dealers to deliver a prospectus
when acting as underwriters and with respect to their unsold allotments or
subscriptions.
i
<PAGE>
FORWARD-LOOKING STATEMENTS
When used in this prospectus, the words "believes," "anticipates," "expects"
and other words of similar import are used to identify "forward-looking
statements." All statements other than statements of historical fact included in
this prospectus, including, without limitation, the statements under "Summary,"
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere herein, regarding us or any of
the transactions described in this prospectus, including the timing, financing,
strategies and effects of such transactions, are forward-looking statements.
Although we believe that the expectations reflected in such forward-looking
statements are reasonable, we can give no assurance that such expectations will
prove to have been correct. Important factors that could cause actual results to
differ materially from expectations are disclosed in this prospectus, including,
without limitation, in conjunction with the forward-looking statements in this
prospectus and/or under "Risk Factors." We do not intend to update these
forward-looking statements.
ii
<PAGE>
PROSPECTUS SUMMARY
This summary contains a general discussion of our business and this
offering. We encourage you to read the entire prospectus, including "Risk
Factors" and the financial statements, for a more complete understanding of
Radio Unica and this offering.
RADIO UNICA
OUR COMPANY
Radio Unica is the only national Spanish-language radio network in the
United States. Our network reaches over 80% of the Hispanic population through
our 13 owned and/or operated and 36 affiliate stations. Our owned and/or
operated radio stations are located in ten markets, including eight of the top
ten Hispanic markets. Through these stations, we control 73% of our network
distribution. Our proprietary programming is focused on a news/talk format,
which is the most popular radio program format in both the United States and, we
believe, Mexico. We produce 19 hours of live and first-run, celebrity based
programming each weekday and 23 hours of such programming each weekend. This
network programming is broadcast by our operated stations 24 hours a day, seven
days a week and by our affiliate stations a minimum of eight hours a day, each
weekday. Many of our affiliates have branded themselves as Radio Unica stations
and broadcast a significant portion of our available programming.
Radio Unica's network strategy is differentiated from other Spanish-language
radio groups by delivering uniform, national programming to our stations 24
hours a day. Importantly, our nationwide distribution allows us to produce high
quality programming and spread the cost of that programming over our large base
of stations. Our network offers advertisers the only Hispanic radio platform
capable of delivering a consistent and controlled message to a national
audience. Additionally, our network allows national advertisers to reach a large
portion of the Hispanic population more effectively and at a lower cost than
would be the case if they had to purchase advertising separately in each market.
We believe that our high quality, original programming gives us a
competitive advantage over other Spanish-language radio broadcasters in
marketing to the Hispanic audience. Our programs are hosted by popular Hispanic
television personalities whose broad appeal extends beyond any particular
Hispanic cultural or geographical boundaries. These national personalities
include Pedro Sevcec, Dr. Isabel Gomez-Bassols, Jorge Ramos, Charytin and
Mauricio Zeilic. We also air segments featuring Cristina, the most popular
Hispanic talk show host in the U.S., and Maria Elena Salinas, the most
recognized Hispanic female news anchor. Our programming includes contemporary
talk, entertainment and information programs, news programs, hourly local and
national newscasts, sports talk programs, sports broadcasting, and other
programming relevant to our national Hispanic audience. Many of our radio
programs are fully-interactive talk shows that allow listeners nationwide to
call in as active participants in the on-air dialogue. These programs continue
to grow in popularity, as demonstrated by an increase in call volume from 5,000
weekday telephone calls in early 1998 to over 25,000 calls today.
Live sporting events are an integral part of Radio Unica's network
programming, and we have acquired the broadcast rights in the United States to
numerous marquee sporting events. We have acquired the exclusive
Spanish-language radio rights for several of the most popular sporting events
among Hispanics, including the World Cup 1998, Copa America 1999 and 2001, Copa
Oro 2000 and 2002, the Summer Olympics in 2000 and 2004, the World Cup 2002
qualifying matches, the NBA Finals in 1999 and 2000 and various Mexican soccer
league games. In addition to being an important part of our programming, major
sporting events are an important means of attracting first-time listeners. To
capture these first-time listeners, we sponsor major promotional events in
conjunction with our sports programming which serve to solidify listener loyalty
and raise awareness of the Radio Unica network.
1
<PAGE>
We were formed in 1996 by Joaquin F. Blaya, the former President of
Univision Holdings, Inc. and former CEO of Telemundo Group, Inc. In these roles,
Mr. Blaya was instrumental in establishing Spanish-language television in the
United States and developed some of the most popular personalities in Hispanic
television. Mr. Blaya is also responsible for many of today's most successful
Spanish-language programs on Univision and Telemundo, including SABADO GIGANTE,
CRISTINA, PRIMER IMPACTO, SEVCEC and the national news for both networks.
Additionally, he launched TELENOTICIAS, the most widely distributed
Spanish-language cable news channel in the Americas. He established Radio Unica
based upon the belief that nationwide advertisers would support a national
Spanish-language radio network with appealing, original programming reaching
large numbers of Hispanics. Prior to Radio Unica's formation, Univision and
Telemundo were the only national network alternatives for companies seeking to
cost-effectively advertise to a large portion of the Hispanic population
throughout the United States. Our network began broadcasting in January 1998.
THE HISPANIC MARKET OPPORTUNITY
We believe that Spanish-language radio targeting the Hispanic market will
continue to benefit from the following trends:
- Strong projected growth and high concentration of the Hispanic population
- Use of Spanish among Hispanics
- Attractive profile of Hispanic consumers
- Increasing Hispanic buying power
- Growing use of Spanish-language media by advertisers
STRONG PROJECTED GROWTH AND HIGH CONCENTRATION OF THE HISPANIC
POPULATION. Hispanics represent the most rapidly growing segment of the U.S.
population. From 1989 to 1998, the Hispanic population increased from 23.7
million to 30.5 million, a 29% increase. The strong growth of the Hispanic
population is expected to continue, increasing approximately 50% by 2010, five
times the growth rate of the U.S. population as a whole. Additionally, the
Hispanic population is highly concentrated, with over 60% of all Hispanics
located in the top ten Hispanic markets. This concentration allows us to cost
effectively reach the majority of Hispanics through our existing network
platform.
USE OF SPANISH AMONG HISPANICS. Spanish is the language spoken at home by
the majority of Hispanics, regardless of income or education. The number of
Hispanics who speak Spanish at home is expected to increase substantially from
over 21 million today. We believe that the continued use of Spanish among
Hispanics indicates that Spanish-language media has been and will continue to be
an important source of news, sports, information, advice and entertainment for
Hispanics.
ATTRACTIVE PROFILE OF HISPANIC CONSUMERS. The demographic profile of the
Hispanic audience makes it attractive to advertisers. We believe the larger size
(3.6 persons per household compared to the general public's average of 2.6
persons per household) and younger age of Hispanic households leads Hispanics to
spend more per household on many categories of consumer goods and services. For
example, Hispanic households spend more each year on food to be eaten at home,
children's clothing, footwear, phone services, and laundry and household
cleaning products than the average U.S. household.
INCREASING HISPANIC BUYING POWER. The Hispanic population will spend an
estimated $421 billion in 1999 on consumer goods and services, an increase of
98% since 1990. Hispanics are expected to spend $965 billion by 2010, an
increase of 129%. This increase is five times the expected growth rate in
expenditures by all consumers in the United States.
2
<PAGE>
GROWING USE OF SPANISH-LANGUAGE MEDIA BY ADVERTISERS. Expenditures on
advertising to Hispanics grew from $730 million in 1992 to $1.7 billion in 1998,
a compound annual growth rate of 15%. Although Hispanic consumers represent
approximately 7% of U.S. consumer spending, advertising targeting Hispanics
represents only 1% of total advertising expenditures. We believe that the lack
of Spanish-language media outlets relative to the size of the Hispanic
population has historically caused the differential between Hispanic consumer
spending and Spanish-language advertising expenditures. For example, in the
radio segment, there are approximately 474 Spanish-language commercial stations,
which constitute only 4.6% of all commercial radio stations in the United
States, although the Hispanic population comprises approximately 11% of the
United States population. With the increasing media access to this population,
we believe advertising expenditures will move closer towards parity with
Hispanic consumer spending. We also believe that advertisers who re-direct a
portion of their English-language budgets to Spanish-language media are able to
increase overall audience reach without incurring additional cost. Furthermore,
we believe that advertisers have found Spanish-language radio advertising to be
a particularly effective means to reach the growing Hispanic audience. As a
result, approximately 26% of Hispanic advertising expenditures in 1998 were
directed to radio, a substantially higher percentage than radio's overall share
of national advertising expenditures.
OUR BUSINESS STRATEGY
Our strategy is to provide a third national Spanish-language broadcast
network (Univision and Telemundo television networks are the other two). To this
end, we have employed the following business strategy:
PROVIDE POPULAR, NATIONAL, HIGH-IMPACT PROGRAMMING. Radio Unica's
programming is differentiated from other radio groups by its focus on topics and
issues relevant to today's Hispanic audience, its strong line-up of top Hispanic
personalities and its national reach. Radio Unica takes advantage of its
management's established relationships with talent, built over numerous years of
industry experience, to secure top personalities and to create high-impact
programming. In addition, management draws upon its expertise and established
track record of having created some of the most well-received Spanish-language
television programs, including SABADO GIGANTE and CRISTINA. We believe that our
access to talent and the programming expertise of our senior management will
continue to serve as a strong competitive advantage in attracting advertisers
and listeners.
FOSTER STRONG BRAND IDENTITY. We continue to build a strong brand identity
for our radio stations and network by promoting the Radio Unica name on-air,
using music that listeners associate with our radio stations and programs and by
engaging in a wide array of marketing and promotional activities. Our marketing
strategy includes personal appearances by on-air personalities, promotional
tie-ins with sporting events covered on our network and advertising on
Spanish-language television and billboards and in Spanish-language print media.
We believe a strong brand identity will allow us to retain and increase our
listening audience, continue to grow our advertiser base, and attract and retain
top talent.
FOCUS ON THE NEWS/TALK RADIO FORMAT. We will continue to focus on the
news/talk radio format which has broad listener appeal and is the most popular
radio format in both the United States and, we believe, Mexico. News/talk
programming typically allows twice as many minutes of commercials per hour as
music-based formats. As a result, the news/talk format permits stations to
capture a larger share of advertising revenue relative to audience share. We
believe that a news/talk format is a more effective advertising medium than a
music based format, since the audience is actively listening and more attentive
to the programming. The news/talk format also enables on-air personalities to
mention the names of their station, program and network more frequently, which
promotes a high degree of name recognition and listener loyalty leading to
higher ratings and higher advertising revenue.
SELL ADVERTISING TO THE TOP 50 SPANISH-LANGUAGE ADVERTISERS. Our sales
strategy is to target the top 50 national Spanish-language advertisers who
collectively purchase the majority of Spanish-language
3
<PAGE>
network and national advertising in the United States. We employ 15 in-house
national sales people in ten sales offices nationwide, as well as 60 local sales
people situated throughout the markets where we own and/or operate stations. Our
large, in-house sales force allows us to maintain better control and
accountability over the sales process. We also believe that our sales force is
important in maintaining relationships with key advertisers and agencies and
identifying new advertisers. The combination of our commitment to pursue the
largest Spanish-language advertisers and our captive sales force has enabled us
to secure many premier national advertisers, including Procter & Gamble, Sears,
Walmart, Chevrolet, American Airlines, Honda, Americatel, Corona and Moneygram.
MAINTAIN MODERN TECHNOLOGY AND REDUCE OPERATING COSTS. We operate
technologically advanced and automated nationwide production and delivery
systems which provide live programming via satellite to our owned and/or
operated and affiliate stations. At our modern production studios in Miami, we
produce substantially all of our radio programs, commercials and promotional
recordings which are delivered to stations 24 hours a day via satellite and our
computer-based wide-area network. By employing modern technology and producing
and coordinating our programming from a centralized location, we are able to
operate with minimal staffing at our stations, thereby reducing operating costs
and increasing both quality of delivery and efficiency. For example, our network
is capable of simultaneously broadcasting different versions of commercials in
different regions which allows our advertisers flexibility in targeting their
messages.
OUR EXPANSION STRATEGY
MAXIMIZE NETWORK REACH THROUGH OWNED/OPERATED AND AFFILIATE STATIONS. We
currently own and/or operate radio stations in eight of the top ten Hispanic
markets and in two other U.S. markets. Our owned and operated stations reach
markets where almost 60% of the Hispanic audience resides and our network
(including affiliates) reaches markets where over 80% of the Hispanic audience
resides. We seek to enter into agreements with affiliate stations in smaller,
less concentrated Hispanic markets so as to broaden the reach of our network and
increase its appeal to national advertisers while reducing the amount of capital
required to do so. We will continue to acquire stations which help achieve our
goal of owning stations in the largest, most concentrated Hispanic markets while
maintaining affiliates in other markets.
PURSUE STRATEGIC INFRASTRUCTURE UPGRADES. We continue to pursue signal and
other operational upgrades at our existing stations that will allow us to
enhance our market coverage. We are currently pursuing upgrades at our radio
stations in New York, Miami and Dallas. By expanding our market coverage at
existing and acquired stations, we believe we can further increase the Radio
Unica audience and enhance the value of our radio stations.
INTERNET STRATEGY
We are seeking to exchange our radio programming, promotional capabilities
and celebrity and sports based content for equity ownership in a
Spanish-language Internet portal. We intend to use audio streaming technology to
broadcast our network programming through this Web portal and thereby further
increase the reach of our radio network. In addition, such a Web site would
contain information and resources for the Hispanic community, links to Web pages
relating to Radio Unica's programs and celebrities, links to other entertainment
related sites, the ability to purchase merchandise on-line and the opportunity
to interact with other Hispanics worldwide. Aligning ourselves with such a
company will provide Radio Unica with a larger base over which to amortize the
costs of our programming, enhance our name recognition, and create significant
opportunities to cross-sell and cross-promote our radio and Internet properties.
For example, we intend to promote our Web site on the air, jointly advertise our
radio and Internet properties in Spanish-language television, billboard and
print media campaigns and jointly sponsor promotional events. We believe that
with the combination of Radio Unica's existing content, other well-known Latin
celebrities and our promotional capabilities, we
4
<PAGE>
will be able to attract a large number of visitors to such a Web site and create
an attractive and successful Internet enterprise.
Our principal executive offices are located at 8400 N.W. 52(nd) Street,
Suite 101, Miami, Florida 33166, and our telephone number is (305) 463-5000.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered..................... shares
Common stock to be outstanding after this
offering............................... shares
Use of proceeds.......................... We intend to use the net proceeds of this
offering:
- to repay all indebtedness outstanding under
our credit facility; and
- for general corporate purposes, including
acquisitions and working capital
requirements.
Proposed Nasdaq National Market symbol... "UNCA"
</TABLE>
This information and other information in this prospectus, unless otherwise
specifically stated, are based on the number of shares of common stock
outstanding on June 30, 1999. The number of shares:
- excludes 3,416,284 shares issuable upon the exercise of outstanding
options (of which 2,670,431 are exercisable), at an average exercise price
of $0.48 per share
- excludes shares available for issuance upon the exercise of options which
may be granted in the future under our stock option plan
- excludes any shares issuable upon the exercise of the underwriters'
over-allotment option
- gives effect to the conversion of 353,906.62 shares of preferred stock
into shares of common stock, which will occur immediately prior to
the closing of this offering
- has been adjusted to reflect the 370-for-one split of our common stock
which is expected to occur prior to the closing of this offering
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table presents (a) summary historical consolidated financial
data of Radio Unica as of the date and for the periods indicated and (b) summary
unaudited pro forma as adjusted financial data of Radio Unica as of the date and
for the periods indicated giving effect to the events described in the
"Unaudited Pro Forma Combined Financial Data" included elsewhere in this
prospectus as though they had occurred on the dates indicated therein. The
summary unaudited pro forma as adjusted financial data are not necessarily
indicative of the operating results or the financial condition that would have
been achieved had these events been consummated on the date indicated and should
not be construed as representative of future operating results or financial
condition. The summary historical consolidated and unaudited pro forma financial
data should be read in conjunction with the consolidated financial statements
and related notes, with the "Unaudited Pro Forma Combined Financial Data" and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
SEPTEMBER 12, PRO FORMA AS ADJUSTED
1996 ----------------------------
(INCEPTION) THREE MONTHS ENDED THREE MONTHS
THROUGH YEAR ENDED YEAR ENDED MARCH 31, YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------------ DECEMBER 31, MARCH 31,
1996 1997 1998 1998 1999 1998 1999
------------- ------------ ------------ ----------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue.............. $ -- $ -- $8,218,043 $ 561,583 $ 1,765,914 $ $
Operating expenses:......
Stock option
compensation
expense.............. -- -- -- -- --
Other.................. 40,000 1,802,816 28,196,736 4,466,386 8,703,689
------------- ------------ ------------ ----------- ----------- ------------ --------------
Operating loss........... (40,000) (1,802,816) (19,978,696) (3,904,803) (6,937,775)
Interest income
(expense), net......... -- (12,765) (4,289,658) 26,734 (2,826,004)
Other income (loss)...... -- -- (14,867) 10,868 --
------------- ------------ ------------ ----------- ----------- ------------ --------------
Loss before income
taxes.................. (40,000) (1,815,581) (24,283,221) (3,867,201) (9,763,779)
Income tax benefit....... -- -- (2,446,745) -- --
------------- ------------ ------------ ----------- ----------- ------------ --------------
Net loss................. (40,000) (1,815,581) (21,836,476) (3,867,201) (9,763,779)
Accrued dividends on
preferred stock........ -- 119,490 2,850,608 481,712 958,553
------------- ------------ ------------ ----------- ----------- ------------ --------------
Net loss applicable
to common
stockholders........... $ (40,000) $(1,935,071) ($24,687,084) $(4,348,913) $(10,722,332) $ $
------------- ------------ ------------ ----------- ----------- ------------ --------------
------------- ------------ ------------ ----------- ----------- ------------ --------------
Net loss per common share
applicable
to common
stockholders--
basic and diluted...... $ $
------------ --------------
------------ --------------
Weighted average common
shares outstanding--
basic and diluted......
OTHER FINANCIAL DATA:....
Depreciation and
amortization........... $ -- $ -- $1,696,376 $ 252,244 $ 1,083,921 $ $
Broadcast cash flow(1)... -- (843,778) (15,511,113) (3,019,207) (5,182,641)
EBITDA(2)................ (40,000) (1,802,816) (18,282,320) (3,652,559) (5,853,854)
Adjusted EBITDA(2)....... -- -- -- -- --
After tax cash flow(1)... (40,000) (1,815,581) (20,140,100) (3,614,957) (8,679,858)
Net cash used in
operating activities... (40,000) (2,209,553) (21,689,140) (3,521,529) (5,031,455)
Net cash used in
investing activities... -- (2,238,585) (60,605,902) (11,214,624) (19,691,264)
Net cash provided by
(used in) financing
activities............. 45,000 5,570,000 120,062,324 15,000,000 (290,458)
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
AS OF PRO FORMA AS
MARCH 31, ADJUSTED AS OF
1999 MARCH 31, 1999
----------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................... $13,880,967
Working capital......................................................................... 16,057,280
Total assets............................................................................ 116,134,178
Long-term debt.......................................................................... 108,085,559
Series A redeemable cumulative preferred stock.......................................... 39,269,540
Stockholders' equity (deficit).......................................................... $(37,027,403)
</TABLE>
- ------------------------------
(1) Broadcast cash flow is defined as operating loss before corporate expenses
and depreciation and amortization. We define after tax cash flow as net loss
plus depreciation and amortization and stock option compensation expense.
Although broadcast cash flow and after tax cash flow are not measures of
performance calculated in accordance with generally accepted accounting
principles ("GAAP"), we believe that they are useful to an investor in
evaluating Radio Unica because they are measures widely used in the radio
broadcast industry to evaluate a radio company's operating performance.
However, you should not consider broadcast cash flow and after tax cash flow
in isolation or as substitutes for net loss, cash flows from operating
activities and other statement of operations or cash flow data prepared in
accordance with GAAP. These measures are not necessarily comparable to
similarly titled measures employed by other companies since all companies do
not calculate these non-GAAP measures in the same fashion.
(2) EBITDA is defined as operating loss plus depreciation and amortization.
Adjusted EBITDA is defined as EBITDA plus stock option compensation expense.
EBITDA and Adjusted EBITDA are presented not as alternative measures of
operating results or cash flow from operations (as determined in accordance
with GAAP), but because they are widely accepted supplemental financial
measures of a company's operating performance. Radio Unica's calculation of
EBITDA and Adjusted EBITDA may not be comparable to similarly titled
measures reported by other companies. Radio Unica's EBITDA and Adjusted
EBITDA calculations are not intended to represent cash used in operating
activities, since they do not include interest, taxes and changes in
operating assets and liabilities, nor are they intended to represent the net
increase or decrease in cash, since they do not include cash provided by
(used in) investing and financing activities.
8
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AND OTHER INFORMATION IN
THIS PROSPECTUS BEFORE DECIDING TO INVEST IN SHARES OF OUR COMMON STOCK.
OUR SUBSTANTIAL LEVEL OF DEBT COULD LIMIT OUR ABILITY TO GROW AND COMPETE.
As of June 30, 1999, we had outstanding long-term indebtedness of
approximately $111.2 million.
Our substantial level of indebtedness could have adverse consequences to the
holders of our common stock, including the following:
- it may be difficult for us to obtain additional financing in the future
for working capital, capital expenditures, acquisitions, general corporate
or other purposes;
- our bank credit facility is secured by substantially all of our assets;
- we may be less able to compete with competitors which have less debt than
we do; and
- we may be more vulnerable to economic downturns, limited in our ability to
withstand competitive pressures and less flexible in adjusting rapidly to
changing business and economic conditions.
Our ability to satisfy all of our debt obligations depends upon our future
operating performance. Our operating performance will be affected by general
economic conditions and financial, business and other factors, many of which are
beyond our control. We expect our annual interest expense related to our debt
obligations to be approximately $12 million to $19 million through August 1,
2006, although interest on our senior discount notes is not payable in cash
prior to February 2003. We believe that our operating cash flow will be
sufficient to meet our operating expenses and to service our debt requirements
as they become due. However, if we are unable to pay our debts we may be forced
to adopt one or more alternatives, such as reducing or delaying the acquisition
of radio stations, attempting to refinance or restructure our indebtedness,
selling material assets or operations or seeking additional equity capital. We
cannot be certain that we can successfully complete any of these strategies on
satisfactory terms or that any of these strategies would enable us to satisfy
our debt service requirements or that they would not violate the covenants
contained in the bank credit facility and indenture governing our indebtedness.
WE HAVE A HISTORY OF LOSSES WHICH IF CONTINUED INTO THE FUTURE COULD ADVERSELY
AFFECT THE MARKET PRICE OF OUR COMMON STOCK AND OUR ABILITY TO RAISE CAPITAL.
Since our inception, Radio Unica has not generated significant revenue, has
incurred substantial net losses and has never generated positive cash flow from
operations. We had net losses from operations of $1.8 million and $20.0 million
for the years ended December 31, 1997 and 1998, and a net loss of $6.9 million
for the three months ended March 31, 1999. We believe that losses will continue
while we pursue our strategy of acquiring radio stations and developing our
network. We will also incur losses during the initial reformatting and
assimilation process with respect to the radio stations that we acquire. We
cannot be certain that we will achieve an adequate revenue base or that our
radio stations will become profitable or generate positive cash flow. If we are
unable to become profitable this may adversely affect the market price of our
common stock, which in turn may adversely affect our ability to raise additional
equity capital and to incur additional debt.
9
<PAGE>
OUR RESULTS DEPEND UPON THE SUCCESS OF THE SPANISH-LANGUAGE NEWS/TALK, SPORTS
AND INFORMATION FORMAT.
Our strategy is to broadcast Spanish-language news/talk, sports and
information to a national audience on AM radio. Accordingly, our results of
operations depend significantly upon the following, among other factors:
- the popularity of the news/talk, sports and information format with a
national audience;
- the desire of Spanish-speaking persons in the United States to listen to
talk programming;
- the desire of advertisers to market in Spanish to the demographics
represented by our audience;
- the growth of the Spanish-speaking audience by continued immigration and
the continued use of Spanish among Hispanics in the United States; and
- the continued availability and reasonable cost of broadcast rights in the
United States of programming, including sporting events.
THE LOSS OF KEY PERSONNEL AND TALENT COULD DISRUPT OUR BUSINESS.
Our business depends on the continued efforts, abilities and expertise of
our senior officers, key employees and on-air radio talent. We do not have
employment agreements with any of our senior officers. The loss of our key
personnel or talent could have a material adverse effect on our business. We
believe that our future success will depend on our ability:
- to attract and retain highly skilled and qualified management personnel;
- to expand, train and manage our employee base; and
- to develop, attract and retain our on-air radio talent.
THE TERMS OF OUR DEBT RESTRICT US FROM ENGAGING IN CERTAIN ACTIVITIES AND
REQUIRE US TO SATISFY VARIOUS FINANCIAL TESTS.
Our bank credit facility and indenture governing our other outstanding debt
contain covenants that restrict our ability to incur additional indebtedness,
pay cash dividends, purchase our capital stock, consummate 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, convey,
transfer or lease all or substantially all of our assets or change the business
conducted by Radio Unica. In addition, our bank credit facility requires us to
maintain financial ratios. A breach of any of these covenants could result in a
default under the bank credit facility or the indenture. Upon the occurrence of
an event of default under the bank credit facility, the lenders could elect to
declare all amounts outstanding thereunder, together with accrued and unpaid
interest, to be due and payable, and could terminate their commitments to make
further extensions of credit. If we were unable to repay our indebtedness under
the bank credit facility, the lenders could proceed against the collateral
securing the indebtedness. If the indebtedness under the bank credit facility
were accelerated, there could be no assurance that our assets would be
sufficient to repay in full such indebtedness and our other indebtedness.
Substantially all of our assets are pledged as security under the bank credit
facility.
WE COMPETE FOR ADVERTISING REVENUE AGAINST OTHER RADIO STATIONS AND OTHER MEDIA
COMPANIES, MANY OF WHICH HAVE GREATER RESOURCES THAN WE DO.
Radio broadcasting is a highly competitive business. The financial success
of each of our radio stations will depend, to a significant degree, upon our
audience ratings, our share of the overall radio advertising revenue within each
geographic market and the economic health of the market. In addition, our
advertising revenues depend upon the desire of marketers to reach our audience
10
<PAGE>
demographic. Our radio stations compete for audience share and advertising
revenue directly with other FM and AM radio stations and with other media within
their respective markets, such as newspapers, broadcast and cable television,
magazines, billboard advertising, transit advertising, and direct mail
advertising. Some of these radio stations and networks also broadcast
Spanish-language talk radio. Many of these entities are larger and have
significantly greater resources than Radio Unica. Additionally, since we are in
the early stages of our operations, our network has not yet been rated by
Arbitron. If a competing station converts to a format similar to that of one of
our stations, or if one of our competitors strengthens its operations, our
stations could suffer a reduction in ratings and advertising revenue. The
audience ratings and advertising revenue of our individual stations are subject
to change and any adverse change in a particular market could have a material
adverse effect on our operations.
The Telecommunications Act of 1996 facilitates the entry of other radio
broadcasting companies into the markets in which we operate or may operate in
the future, some of which may be larger and have more financial resources than
Radio Unica. In addition, certain of our stations compete, and in the future
other stations of Radio Unica may compete, with combinations of stations
operated by a single operator. There can be no assurance that our radio stations
will be able to develop, maintain or increase their current audience ratings and
radio advertising revenue.
OUR BUSINESS DEPENDS ON MAINTAINING OUR LICENSES WITH THE FCC.
Radio broadcasters depend upon maintaining radio broadcasting licenses
issued by the FCC. These licenses are ordinarily issued for a maximum term of
eight years and may be renewed. Our broadcast licenses expire at various times
in 2004 and 2006. Although we may apply to renew these licenses, third parties
may challenge our renewal applications. Although we are not aware of facts or
circumstances that would prevent us from having our current licenses renewed,
there can be no assurance that the licenses will be renewed. In addition, if
Radio Unica or any of our officers, directors or significant stockholders
violates the FCC's rules and regulations or the Communications Act of 1934, is
convicted of a felony, or is otherwise found to be disqualified from being a
party to a FCC license, the FCC may commence a proceeding to impose sanctions
against us. Examples of possible sanctions include the imposition of fines, the
revocation of our broadcasting licenses, or the renewal of one or more of our
broadcasting licenses for a term of fewer than eight years.
The radio broadcasting industry is subject to extensive and changing federal
regulation. Among other things, the Communications Act and FCC rules and
policies limit the number of stations that one individual or entity can own
(directly or by attribution) in a market, and require FCC approval for transfers
of control of FCC licensees and assignments of FCC licenses. The filing of
petitions or complaints against Radio Unica or any FCC licensee from which we
are acquiring a station could result in the FCC delaying the grant of, or
refusing to grant or imposing conditions on its consent to the assignment or
transfer of FCC licenses. The Communications Act and FCC rules also impose
limitations on non-U.S. ownership and voting of the capital stock of Radio
Unica. FCC rules also require, in certain circumstances, prior approval for
changes in voting rights of our common stock and changes in our board of
directors.
Furthermore, the Communications Act prohibits the assignment of a FCC
license or the transfer of control of a corporation holding such a license
without the prior approval of the FCC. Applications to the FCC for such
assignments or transfers are subject to petitions to deny by interested parties
and must satisfy requirements similar to those for renewal and new station
applications. The FCC and the Department of Justice ("DOJ") evaluate
acquisitions to determine whether they serve the public interest and whether
they should be challenged under federal antitrust laws. We are aware that the
FCC and DOJ have been more active in the review of radio station acquisitions,
particularly when a radio broadcast company proposes to acquire additional
stations in its existing markets.
11
<PAGE>
REGULATION OF RADIO ADVERTISING BY THE FCC COULD ADVERSELY IMPACT REVENUE.
In addition to regulating the licenses of our radio stations, the FCC has
jurisdiction over the regulation of radio advertising. Some of our advertisers,
especially during sporting events, market liquor and beer. The FCC has regulated
or prohibited advertising of some types of products, such as tobacco. If the FCC
were to restrict the ability of marketers, such as liquor and beer marketers, to
advertise on radio, we cannot assure you that such regulation would not have an
adverse impact on our revenue, financial condition and results of operations.
WE MUST RESPOND TO TECHNOLOGY CHANGES TO REMAIN COMPETITIVE.
The radio broadcasting industry is subject to technological change, evolving
industry standards and the emergence of new media technologies. The FCC is
considering ways to introduce new technologies to the radio broadcast industry
which would significantly enhance the sound quality of AM broadcasts. We cannot
assure you that we will have the resources to acquire new technologies or to
introduce new services that could compete with these new technologies. There are
several new media technologies that are currently under development including
the following:
- audio programming by cable television systems, direct broadcast satellite
systems, Internet content providers and other digital audio broadcast
formats;
- satellite digital audio radio service, which could result in the
introduction of several new satellite radio services with sound quality
comparable to that of compact discs; and
- in-band on-channel digital radio, which could provide multi-channel,
multi-format digital radio services in the same bandwidth currently
occupied by traditional AM and FM radio services.
YEAR 2000 ISSUES COULD RESULT IN MAJOR SYSTEM FAILURES OF OUR COMPUTERS OR THE
COMPUTERS OF OUR SUPPLIERS.
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21(st) century dates from 20(th) century dates. As a result,
computer systems and software used by many companies need to be upgraded to
comply with such "Year 2000" requirements. There is a risk that the computers
and other systems on which we depend to conduct our operations are not yet Year
2000 compliant. Failure to achieve Year 2000 compliance could cause a system
failure or miscalculations in our broadcast and corporate locations which could
cause disruptions of operations, including a temporary inability to produce
broadcast signals, process financial transactions, or engage in similar normal
business activities. Other areas where there is a risk that devices are not yet
Year 2000 compliant include products purchased from third parties, computers,
software, telephone systems and other equipment used internally.
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.
WE DO NOT INTEND TO PAY CASH DIVIDENDS.
We do not expect to declare or pay any cash dividends in the near future. We
are a holding company and perform all of our operations through our
subsidiaries. Should we change our policy of not paying dividends, our sole
source of cash from which to make dividend payments will be dividends
12
<PAGE>
paid or payments made to us by our subsidiaries, which may be restricted in
their ability to pay cash to us. Our credit facility prohibits the payment of
cash dividends.
ONE PRINCIPAL STOCKHOLDER WILL HAVE A MAJORITY INTEREST AND THE POWER TO CONTROL
RADIO UNICA.
Upon completion of this offering, Warburg, Pincus Ventures will hold
approximately % ( % if the underwriters exercise their over-allotment
option) of Radio Unica's outstanding common stock. Accordingly, Warburg, Pincus
Ventures will be able to exercise control over all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions, and over our dividend policy and access to capital. This
concentration of ownership may also have the effect of delaying or preventing a
change in control of Radio Unica. In addition, covenants in our bank credit
facility require Warburg, Pincus Ventures to maintain specified ownership
interests in Radio Unica.
MILLION, OR %, OF OUR TOTAL OUTSTANDING SHARES ARE RESTRICTED FROM
IMMEDIATE RESALE BUT MAY BE SOLD INTO THE MARKET IN THE NEAR FUTURE. THIS COULD
CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO DROP SIGNIFICANTLY, EVEN IF OUR
BUSINESS IS DOING WELL.
After this offering, we will have outstanding shares of common stock.
This includes the shares we are selling in this offering, which may be
resold in the public market immediately. The remaining %, or shares, of our
total outstanding shares will become available for resale in the public market
as shown in the chart below.
As restrictions on resale end, the market price could drop significantly if
the holders of these restricted shares sell them or are perceived by the market
as intending to sell them.
<TABLE>
<CAPTION>
NUMBER OF SHARES/%
OF TOTAL OUTSTANDING DATE OF AVAILABILITY FOR RESALE INTO PUBLIC MARKET
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
/ % 180 days after the date of this prospectus due to an agreement these
stockholders have with the underwriters. However, the underwriters can
waive this restriction and allow these stockholders to sell their shares at
any time.
/ % Between 90 and 365 days after the date of this prospectus due to the
requirements of the federal securities laws.
</TABLE>
INVESTORS WILL PAY A PRICE FOR OUR COMMON STOCK THAT WAS NOT ESTABLISHED IN A
COMPETITIVE MARKET AND THE MARKET PRICE MAY BE LOWER.
Prior to this offering, there has been no public market for our common
stock. We have applied to list the common stock for trading on the Nasdaq
National Market. After this offering, an actual trading market might not develop
or continue. If you purchase shares of common stock in this offering, you will
pay a price that was not established in a competitive market. The price being
paid in this offering was negotiated with our underwriters, which is
substantially greater than that paid by our existing stockholders. The price of
the common stock that will prevail in the market after this offering may be
higher or lower than the price you pay. Even if an active trading market does
develop, the market price of our common stock is likely to be highly volatile
and could be subject to wide fluctuations in response to factors such as:
- actual or anticipated variations in quarterly and annual operating
results;
- changes in financial estimates by securities analysts;
- technological innovations;
- additions or departures of key personnel;
13
<PAGE>
- sales of common stock; and
- general market conditions and other factors, many of which are beyond our
control.
INVESTORS WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.
The initial public offering price per share will significantly exceed the
net tangible book value per share. Therefore, based upon an assumed initial
public offering price of $ per share, if you purchase our common
stock in this offering, you will incur immediate and substantial dilution of
approximately $ per share in the net tangible book value per share of
common stock from the initial public offering price.
PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND LAW COULD PREVENT OR DELAY A
CHANGE IN CONTROL.
Our certificate of incorporation and federal and Delaware law, contain
provisions that could have the effect of discouraging a third party from
attempting to acquire Radio Unica. This may prevent a transaction in which the
holders of common stock might receive a premium for their shares over then
existing market prices. These provisions include:
- Radio Unica's certificate of incorporation authorizes the board of
directors to issue preferred stock and to determine the terms of this
preferred stock without stockholder approval.
- Delaware law could prohibit us from engaging in a business transaction
with any affiliated stockholder for three years.
- The Communications Act and FCC rules require the prior consent of the FCC
to any change in control of Radio Unica and restrict ownership by non-U.S.
persons.
14
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of the shares of
common stock will be approximately $ million, at an assumed initial public
offering price of $ per share and after deducting the estimated
underwriting discounts and commissions and offering expenses. We intend to use
the net proceeds of this offering to:
- Repay all indebtedness outstanding under our credit facility.
- Provide for general corporate purposes, including acquisitions and working
capital requirements.
Indebtedness under our credit facility accrues interest at variable rates
and must be repaid in full on September 30, 2002. At June 30, 1999, borrowings
under our credit facility aggregated approximately $10.2 million and the
interest rate of such indebtedness was approximately 7.9%.
Until we use the net proceeds of this offering as described above, we will
invest them in short-term, interest-bearing, investment grade securities.
DIVIDEND POLICY
We have never paid or declared any cash dividends on our common stock and
have no plans to do so in the foreseeable future. We currently intend to retain
future earnings, if any, to finance the expansion of our business. Future
dividends, if any, will depend on, among other things, our results of
operations, capital requirements and on such other factors as our Board of
Directors may, in its discretion, consider relevant. Our credit facility
prohibits the payment of cash dividends.
15
<PAGE>
CAPITALIZATION
The following table describes our capitalization as of March 31, 1999, (a)
on an actual basis, (b) on a pro forma basis giving effect to the events
described in the "Unaudited Pro Forma Combined Financial Data" included
elsewhere in this prospectus and (c) as adjusted to give effect to our receipt
of the estimated net proceeds from the sale of shares of common
stock offered by us at an assumed initial public offering price of $ per
share, after deducting the estimated underwriting discounts and commissions and
offering expenses.
When you read this table, it is important that you also read "Use of
Proceeds," "Unaudited Pro Forma Combined Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our financial statements and their related notes.
<TABLE>
<CAPTION>
MARCH 31, 1999
----------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------------- -------------- --------------
<S> <C> <C> <C>
Cash and cash equivalents....................................... $ 13,880,967 $ 5,298,827 $
-------------- -------------- --------------
-------------- -------------- --------------
Long-term debt:
Notes payable................................................. $ 817,233 $ 9,017,233 $
Senior discount notes......................................... 108,085,559 108,085,559
-------------- -------------- --------------
Total debt...................................................... 108,902,792 117,102,792
Series A redeemable cumulative preferred stock, $.01 par value,
450,000 shares authorized and 353,907 shares issued and
outstanding on an actual and pro forma basis; 450,000 shares
authorized and shares outstanding on a pro forma as
adjusted basis................................................ 39,269,540 39,269,540
Common stockholders' deficit
Common stock, $.01 par value, 40,000,000 shares authorized and
13,226,760 shares issued and outstanding on an actual and
pro forma basis; 40,000,000 shares authorized and
shares issued and outstanding on a pro forma as adjusted
basis....................................................... 132,268 132,268
Capital deficiency............................................ 3,703,836 3,703,836
Accumulated deficit........................................... (33,455,835) (33,455,835)
-------------- -------------- --------------
Total common stockholders' equity (deficit)..................... (37,027,403) (37,027,402)
-------------- -------------- --------------
Total capitalization............................................ $ 111,144,930 $ 119,344,929 $
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
16
<PAGE>
DILUTION
The pro forma net negative tangible book value of our common stock as of
March 31, 1999 was $ , or $ per share of common stock. Pro forma
net negative tangible book value per share is equal to our pro forma total
assets less intangible assets and less total liabilities, divided by the pro
forma number of shares of common stock outstanding as of March 31, 1999.
Assuming that we sell the shares offered by this prospectus at an
initial public offering price of $ per share (the mid-point of the
estimated range set forth on the cover page of this prospectus), after deducting
the estimated underwriting discounts and commissions and offering expenses
payable by us, our pro forma as adjusted net negative tangible book value as of
March 31, 1999 would have been $ , or $ per share. This
represents an immediate increase in our pro forma as adjusted net negative
tangible book value of $ per share to existing stockholders and an
immediate dilution in our pro forma as adjusted net negative tangible book value
of $ per share to investors purchasing shares in this offering. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share................. $
---------
Pro forma net negative tangible book value per share
as of March 31, 1999................................ $
Increase per share attributable to new investors......
---------
Pro forma as adjusted net negative tangible book value
per share after this offering.........................
---------
Dilution per share to new investors..................... $
---------
---------
</TABLE>
The following table shows at March 31, 1999 on a pro forma as adjusted basis
the number of shares of common stock purchased from us, the total consideration
paid to us and the average price per share paid by existing stockholders for
their common stock and by new investors purchasing common stock in this
offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------ ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......................................... $ $
New investors..................................................
----------- --- --------- --- -----------
Total...................................................... $ $
----------- --- --------- --- -----------
----------- --- --------- --- -----------
</TABLE>
At March 31, 1999, there were outstanding options to purchase 3,416,284
shares of common stock at an average exercise price of $0.48. Additionally,
there were 1,583,716 options available for future grant under our stock option
plan. To the extent we issue additional shares or the option holders exercise
these outstanding options or any options we grant in the future, there will be
further dilution to new investors.
17
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The pro forma amounts in the column "Pro Forma" are adjusted to give effect
to the following transactions as if they had occurred (a) on March 31, 1999 with
respect to the Unaudited Pro Forma Condensed Combined Balance Sheet, (b) on
January 1, 1999 with respect to the Unaudited Pro Forma Condensed Combined
Statement of Operations for the three months ended March 31, 1999 and (c) on
January 1, 1998 with respect to the Unaudited Condensed Combined Statement of
Operations for the year ended December 31, 1998:
- the purchase of all of the common stock of Oro Spanish Broadcasting Inc.
(KIQI (AM) in San Francisco);
- the purchase of assets of WNMA (AM) and WRNU (AM) in Miami;
- the purchase of assets of KBLA (AM) in Los Angeles;
- the purchase of all of the common stock of Blaya, Inc. (KXYZ (AM) in
Houston);
- the purchase of assets of KAHZ (AM) in Dallas;
- the purchase of assets of KIDR (AM) in Phoenix;
- the purchase of assets of WJDM (AM) and WWRU (AM) in New York;
- the purchase of assets of WNTD (AM) in Chicago;
- the issuance of our senior discount notes; and
- the conversion of promissory notes and stockholders' notes into preferred
stock.
The pro forma amounts in the column "Pro Forma as Adjusted" are further
adjusted to give effect to the completed transactions described above and to the
following transactions as if they had occurred (a) on March 31, 1999 with
respect to the Unaudited Pro Forma Condensed Combined Balance Sheet, (b) on
January 1, 1999 with respect to the Unaudited Pro Forma Condensed Combined
Statement of Operations for the three months ended March 31, 1999 and (c) on
January 1, 1998 with respect to the Unaudited Condensed Combined Statement of
Operations for the year ended December 31, 1998:
- this offering;
- the repayment of our bank credit facility; and
- the conversion of our outstanding preferred stock.
The Unaudited Pro Forma Condensed Combined Statement of Operations for the
year ended December 31, 1998 is based on the audited statement of operations of
Radio Unica for the year ended December 31, 1998 and the unaudited statement of
operations of Oro for the four months ended April 30, 1998. The Unaudited Pro
Forma Condensed Combined Statement of Operations for the three months ended
March 31, 1999 is based on the unaudited statement of operations of Radio Unica
for the three months ended March 31, 1999. The Unaudited Pro Forma Condensed
Combined Balance Sheet has been derived from the unaudited balance sheet of
Radio Unica as of March 31, 1999.
Our acquisitions described above have been accounted for using the purchase
method of accounting. The total consideration of each such acquisition has been
allocated to the tangible and intangible assets acquired and liabilities assumed
based upon their respective estimated fair values.
The Unaudited Pro Forma Combined Financial Data should be read in
conjunction with the financial statements of Radio Unica and Oro, including the
notes thereto, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations," appearing elsewhere in this prospectus. We believe
that the assumptions used in the following statements provide a reasonable basis
on which to present pro forma financial data. The Unaudited Pro Forma Combined
Financial Data is presented for illustrative purposes only and is not
necessarily indicative of what our actual financial position or results of
operations would have been had these transactions been consummated as of the
above-referenced dates or the financial position or results of operations of
Radio Unica for any future period.
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<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF MARCH 31, 1999
<TABLE>
<CAPTION>
PRO FORMA OFFERING PRO FORMA
RADIO UNICA ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
-------------- -------------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....... $ 13,880,967 $ 8,200,000(1) $ 5,298,827 $ $
(16,782,140 (2)
Restricted cash................. 3,635,553 -- 3,635,553
Accounts receivable, net........ 1,541,750 -- 1,541,750
Prepaid expenses................ 1,163,502 -- 1,163,502
-------------- -------------- -------------- ----------- -----------
Total current assets.............. 20,221,772 (8,582,140) 11,639,632
Property and equipment, net....... 13,540,346 2,037,430(3) 15,577,776
Broadcast licenses and other
intangibles, net................ 82,099,853 14,994,710(2) 97,094,563
Other assets...................... 272,207 -- 272,207
-------------- -------------- -------------- ----------- -----------
Total assets...................... $ 116,134,178 $ 8,450,000 $ 124,584,178 $ $
-------------- -------------- -------------- ----------- -----------
-------------- -------------- -------------- ----------- -----------
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable................ $ 352,437 $ -- $ 352,437 $ $
Accrued expenses................ 2,994,822 250,000(3) 3,244,822
Notes payable................... 817,233 8,200,000(1) 9,017,233
-------------- -------------- -------------- ----------- -----------
Total current liabilities......... 4,164,492 8,450,000 12,614,492
Deferred taxes.................... 1,641,990 -- 1,641,990
Senior discount notes............. 108,085,559 -- 108,085,559
Commitments and contingencies
Series A redeemable cumulative
preferred stock................. 39,269,540 -- 39,269,540
Common stockholders' equity
(deficit):
Common stock.................... 132,268 -- 132,268
Additional paid-in capital
(capital deficiency).......... (3,703,836) -- (3,703,836)
Accumulated deficit............. (33,455,835) -- (33,455,835)
-------------- -------------- -------------- ----------- -----------
Total stockholders' equity
(deficit)....................... (37,027,403) -- (37,027,403)
-------------- -------------- -------------- ----------- -----------
Total liabilities and
stockholders' equity (deficit).. $ 116,134,178 $ 8,450,000 $ 124,584,178 $ $
-------------- -------------- -------------- ----------- -----------
-------------- -------------- -------------- ----------- -----------
</TABLE>
19
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
RADIO PRO FORMA OFFERING PRO FORMA
UNICA ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
-------------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Net revenue.......................... $ 1,765,914 $ -- $ 1,765,914 $ $
Operating expenses:
Direct operating expenses.......... 731,910 -- 731,910
Selling, general and administrative
expenses......................... 2,977,408 -- 2,977,408
Network expenses................... 3,239,237 -- 3,239,237
Corporate expenses................. 671,213 -- 671,213
Depreciation and amortization...... 1,083,921 258,549(4) 1,342,470
Stock option compensation
expense.......................... -- -- --
-------------- ----------- -------------- ------ -----------
8,703,689 258,549 8,962,238
-------------- ----------- -------------- ------ -----------
Loss from operations................. (6,937,775) (258,549) (7,196,324)
Interest expense, net................ (2,826,004) (145,140)(5) (2,971,144)
-------------- ----------- -------------- ------ -----------
Loss before income taxes............. (9,763,779) (403,689) (10,167,468)
Income taxes......................... -- -- -- --
-------------- ----------- -------------- ------ -----------
Net loss............................. (9,763,779) (403,689) (10,167,468)
Accrued dividends on Series A
redeemable cumulative preferred
stock.............................. 958,553 -- 958,553
-------------- ----------- -------------- ------ -----------
Net loss applicable to common
stockholders....................... $ (10,722,332) $(403,689) $ (11,126,021) $ $
-------------- ----------- -------------- ------ -----------
-------------- ----------- -------------- ------ -----------
Net loss per share applicable to
common stockholders--basic and
diluted............................ $ (0.81) $ (0.84) $
-------------- -------------- -----------
-------------- -------------- -----------
Weighted average common shares
outstanding--
basic and diluted.................. 13,223,430 13,223,430
-------------- -------------- -----------
-------------- -------------- -----------
</TABLE>
20
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
RADIO PRO FORMA OFFERING PRO FORMA AS
UNICA ORO(6) ADJUSTMENTS PRO FORMA ADJUSTMENTS ADJUSTED
-------------- ----------- -------------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Net revenue................. $ 8,218,043 $ 727,840 $ -- $ 8,945,883 $ $
Operating expenses:
Direct operating
expenses................ 1,852,832 97,204 -- 1,950,036
Selling, general and
administrative
expenses................ 10,064,219 617,729 -- 10,681,948
Network expenses.......... 11,812,105 -- (460,167 (7) 11,351,938
Corporate expenses........ 2,771,207 -- -- 2,771,207
Depreciation and
amortization............ 1,696,376 32,400 116,377(7) 4,958,902
3,113,749(4)
Stock option compensation
expense................. -- -- -- --
-------------- ----------- -------------- -------------- ------------ -------------
28,196,739 747,333 2,769,959 31,714,031
-------------- ----------- -------------- -------------- ------------ -------------
Loss from operations........ (19,978,696) (19,493) (2,769,959) (22,768,148)
Other income (expense):
Interest expense, net..... (4,289,658) (129,166) (264,230 (7) (11,846,782)
(7,163,728 (5)
Equity in loss of equity
investee................ (14,867) -- 14,867(7) --
-------------- ----------- -------------- -------------- ------------ -------------
Loss before income taxes.... (24,283,221) (148,659) (10,183,050) (34,614,930)
Income tax benefit.......... 2,446,745 -- -- 2,446,745
-------------- ----------- -------------- -------------- ------------ -------------
Net loss.................... (21,836,476) (148,659) (10,183,050) (32,168,185)
Accrued dividends on Series
A redeemable cumulative
preferred stock........... 2,850,608 -- 848,967(8) 3,699,575
-------------- ----------- -------------- -------------- ------------ -------------
Net loss applicable to
common stockholders....... $ (24,687,084) $ (148,659) $ (11,032,017) $ (35,867,760) $ $
-------------- ----------- -------------- -------------- ------------ -------------
-------------- ----------- -------------- -------------- ------------ -------------
Net loss per common share
applicable to common
stockholders--basic and
diluted................... $ (2.39) $ (3.48) $
-------------- -------------- -------------
-------------- -------------- -------------
Weighted average common
shares outstanding--basic
and diluted............... 10,308,570 10,308,570
-------------- -------------- -------------
-------------- -------------- -------------
</TABLE>
21
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(1) Represents the borrowings on our bank credit facility made in connection
with the acquisition of WNTD (AM) in Chicago, which closed on May 14, 1999.
(2) Reflects the allocation of the purchase price for the acquisition of WNTD
(AM) in Chicago.
<TABLE>
<S> <C>
Aggregate Purchase Price:
Cash................................................................... $16,782,140
Less:
Fair value of net tangible assets acquired............................. 1,787,430
Broadcast licenses..................................................... 14,994,710
----------
$ --
----------
----------
</TABLE>
(3) Adjustment to record the estimated fair value of net tangible assets
(liabilities) acquired in the acquisition of WNTD (AM) in Chicago:
<TABLE>
<S> <C>
Property and equipment................................................. $2,037,430
Other liabilities...................................................... (250,000)
----------
$1,787,430
----------
----------
</TABLE>
(4) Represents amortization and depreciation of the broadcasting licenses,
goodwill, property and equipment, and covenant not to compete acquired in
connection with the acquisitions. The assets are amortized or depreciated
over a five to thirty year period.
(5) Represents the additional interest expense that would have been incurred if
our senior discount notes and the borrowings under our bank credit facility
had been outstanding for the entire period:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1998 MARCH 31, 1999
----------------- --------------
<S> <C> <C>
Interest expense on our senior discount notes....................... $ 6,663,699 $ --
Bank credit facility unused commitment fee.......................... 59,000 (10,250)
Interest expense on existing indebtedness........................... (573,972) --
Debt issuance cost amortization..................................... 393,441 --
Interest expense on borrowings on our bank credit facility.......... 621,560 155,390
----------------- --------------
Net increase in interest expense.................................... $ 7,163,728 $ 145,140
----------------- --------------
----------------- --------------
</TABLE>
(6) Represents Oro's results of operations for the four months ended April 30,
1998.
(7) Reflects the adjustment to record the acquisition of the remaining 50.1% of
the voting rights and 20% of the ownership rights of Blaya, Inc.:
<TABLE>
<S> <C>
Eliminate LMA charge...................................................... $ 460,167
Eliminate income in equity investee....................................... 14,867
Depreciation and amortization............................................. (116,377)
Eliminate interest income from equity investee............................ (264,230)
---------
$ 94,427
---------
---------
</TABLE>
(8) Represents accrued dividends on our preferred stock into which the
promissory notes and the stockholder notes were converted. These dividends
have not been declared.
22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below for, and as of the
end of the period from September 12, 1996 (inception) through December 31, 1996,
for, and as of the years ended December 31, 1997 and 1998 and for, and as of the
three months ended March 31, 1998 and 1999 have been derived from the
consolidated financial statements of Radio Unica, of which (a) the consolidated
financial statements for, and as of the end of the period from September 12,
1996 (inception) through December 31, 1996 and, for, and as of the years ended
December 31, 1997 and 1998 are included elsewhere in this prospectus, (b) the
consolidated financial statements for, and as of the period from September 12,
1996 (inception) through December 31, 1996 and, for, and as of the years ended
December 31, 1997 and 1998 were audited by Ernst & Young LLP, independent
certified public accountants and (c) the consolidated financial statements for,
and as of the three months ended March 31, 1998 and 1999 are unaudited, and are
included elsewhere in this prospectus. In the opinion of management, the
consolidated financial statements for, and as of the three months ended March
31, 1998 and 1999 include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations for,
and the financial position at the end of each of such periods. The results of
operations for the three months ended March 31, 1999 are not necessarily
indicative of the results to be expected for the full year or any future period.
The selected historical financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Radio Unica's consolidated financial statements, including the
notes thereto, appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
SEPTEMBER 12, 1996
(INCEPTION) THREE MONTHS ENDED
THROUGH YEAR ENDED YEAR ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, DECEMBER 31, -----------------------
1996 1997 1998 1998 1999
------------------ ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue................................. $ -- $ -- $8,218,043 $ 561,583 $ 1,765,914
Operating expenses.......................... 40,000 1,802,816 28,196,739 4,466,386 8,703,689
-------- ------------ ------------ ---------- -----------
Operating loss.............................. (40,000) (1,802,816) (19,978,696) (3,904,803) (6,937,775)
Interest income (expense), net.............. -- (12,765) (4,289,658) 26,734 (2,826,004)
Other income (loss)......................... -- -- (14,867) 10,868 --
-------- ------------ ------------ ---------- -----------
Loss before income taxes.................... (40,000) (1,815,581) (24,283,221) (3,867,201) (9,763,779)
Income tax benefit.......................... -- -- (2,446,745) -- --
-------- ------------ ------------ ---------- -----------
Net loss.................................... (40,000) (1,815,581) (21,836,476) (3,867,201) (9,763,779)
Accrued dividends on preferred stock........ -- 119,490 2,850,608 481,712 958,553
-------- ------------ ------------ ---------- -----------
Net loss applicable to common
stockholders.............................. $ (40,000) $(1,935,071) ($24,687,084) $(4,348,913) $(10,722,332)
-------- ------------ ------------ ---------- -----------
-------- ------------ ------------ ---------- -----------
OTHER FINANCIAL DATA:
Depreciation and amortization............... $ -- $ -- $1,696,376 $ 252,244 $ 1,083,921
Broadcast cash flow (1)..................... -- (843,778) (15,511,113) (3,019,207) (5,182,641)
EBITDA (2).................................. (40,000) (1,802,816) (18,282,320) (3,652,559) (5,853,854)
After tax cash flow (1)..................... (40,000) (1,815,581) (20,140,100) (3,614,957) (8,679,858)
Net cash used in operating activities....... (40,000) (2,209,553) (21,689,140) (3,521,529) (5,031,455)
Net cash used in investing activities....... -- (2,238,585) (60,605,902) (11,214,624) (19,691,264)
Net cash provided by (used in) financing
activities................................ 45,000 5,570,000 120,062,324 15,000,000 (290,458)
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------------------- -----------------------
1996 1997 1998 1998 1999
--------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 5,000 $1,126,862 $38,894,144 $1,390,709 $13,880,967
Working capital................................... 5,000 1,047,193 52,867,136 5,380,597 16,057,280
Total assets...................................... 5,000 6,678,088 123,503,442 19,439,966 116,134,178
Long-term debt.................................... -- -- 105,029,128 -- 108,085,559
Series A redeemable cumulative preferred stock.... -- 5,316,990 38,266,437 20,648,702 39,269,540
Stockholders' equity (deficit).................... $ 5,000 $(1,922,571) $(26,305,524) $(6,121,484) $(37,027,403)
</TABLE>
- ------------------------------
(1) Broadcast cash flow is defined as operating loss before corporate expenses
and depreciation and amortization. We define after tax cash flow as net loss
plus depreciation and amortization and stock option compensation expense.
Although broadcast cash flow and after tax cash flow are not measures of
performance calculated in accordance with generally accepted accounting
principles ("GAAP"), we believe that they are useful to an investor in
evaluating Radio Unica because they are measures widely used in the radio
broadcast industry to evaluate a radio company's operating performance.
However, you should not consider broadcast cash flow and after tax cash flow
in isolation or as substitutes for net loss, cash flows from operating
activities and other statement of operations or cash flow data prepared in
accordance with GAAP. These measures are not necessarily comparable to
similarly titled measures employed by other companies since all companies do
not calculate these non-GAAP measures in the same fashion.
(2) EBITDA is defined as operating loss plus depreciation and amortization.
EBITDA is presented not as an alternative measure of operating results or
cash flow from operations (as determined in accordance with GAAP), but
because it is a widely accepted supplemental financial measure of a
company's operating performance. Radio Unica's calculation of EBITDA may not
be comparable to similarly titled measures reported by other companies.
Radio Unica's EBITDA calculation is not intended to represent cash used in
operating activities, since it does not include interest, taxes and changes
in operating assets and liabilities, nor is it intended to represent the net
increase or decrease in cash, since it does not include cash provided by
(used in) investing and financing activities.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
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.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
NET REVENUE. Net revenue increased by approximately $1.2 million to
approximately $1.8 for the three months ended March 31, 1999 from approximately
$0.6 million for the comparable period in the prior year. The increase in net
revenue relates to a significant increase in our customer base due to the
development of our network and O&Os. We launched our network on January 5, 1998
with 30 affiliated stations and three O&Os. As of March 31, 1999, we had 38
affiliated stations and twelve O&Os.
OPERATING EXPENSES. Operating expenses increased by approximately $4.2
million to approximately $8.7 million for the three months ended March 31, 1999
from approximately $4.5 million for the comparable period in the prior year. The
increase in operating expenses is primarily due to the costs associated with the
network and the increase in the number of O&Os.
Direct operating expenses increased by approximately $0.5 million to
approximately $0.7 million for the three months ended March 31, 1999 from
approximately $0.2 million for the comparable period in the prior year. The
increase in direct operating expenses is primarily due to the increase in the
number of O&Os.
Selling, general and administrative expenses increased by approximately $1.3
million to approximately $3.0 million for the three months ended March 31, 1999
from approximately $1.7 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 increased by approximately $1.6 million to approximately
$3.2 million for the three months ended March 31, 1999 from approximately $1.6
million for the comparable period in the prior year. The increase in network
expenses primarily relates to the increased costs associated with the operations
of our network including engineering, programming, sales and administration.
25
<PAGE>
Corporate expenses increased to approximately $0.7 million for the three
months ended March 31, 1999 from approximately $0.6 million for the comparable
period in the prior year. The increase in corporate expenses primarily relates
to the costs of legal and professional fees and other costs.
Depreciation and amortization increased by approximately $0.8 million to
approximately $1.1 million for the three months ended March 31, 1999 from
approximately $0.3 million for the comparable period in the prior year. The
increase in depreciation and amortization is primarily due to the significant
additions of fixed assets for the network and O&Os as well as the addition of
intangible assets arising from acquisitions of O&Os completed during fiscal year
1998.
OTHER INCOME (EXPENSE). Other income (expense) for the three months ended
March 31, 1999 included interest income of approximately $0.4 million and
interest expense of approximately $3.3 million. Interest income primarily
relates to interest earned on the remaining proceeds from our senior discount
notes. Interest expense primarily relates to the interest on the outstanding
balance of our senior discount notes. We had approximately $27,000 in interest
income during the three months ended March 31, 1998 associated with interest
earned on amounts held in escrow related to pending station acquisitions.
NET LOSS. Net loss increased by approximately $5.9 million to approximately
$9.8 million for the three months ended March 31, 1999 as compared to a loss of
approximately $3.9 million for the comparable period in the prior year. The
increase in net loss is a result of the increased costs associated with the
operation of our network and O&Os as well as the increase in non-cash interest
expense resulting from our senior discount notes.
EBITDA. EBITDA decreased by approximately $2.2 million to approximately
$(5.9) million for the three months ended March 31, 1999 as compared to
approximately $(3.7) million for the comparable period in the prior year. The
decrease in EBITDA is a result of the increased costs associated with the
operations of our network and O&Os.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997
NET REVENUE. Net revenue for the year ended December 31, 1998 was
approximately $8.2 million relating to the sales of network advertising and
sales of advertising on our O&Os. Radio Unica was not operating its network or
O&Os during the year ended December 31, 1997 and as a result had no revenues.
OPERATING EXPENSES. Operating expenses for the year ended December 31, 1998
were approximately $28.2 million as compared to approximately $1.8 million for
the year ended December 31, 1997.
Direct operating expenses of approximately $1.9 million related to
engineering and programming costs of our O&Os.
Selling, general and administrative expenses of approximately $10.1 million
related to the operations of our O&Os, an increase of approximately $10.0
million over the year ended December 31, 1997. Selling, general and
administrative expenses for the year ended December 31, 1997 primarily related
to sales personnel hired for our stations operated under LMAs.
Network expenses of approximately $11.8 million related to the operations of
our network including engineering, programming, sales and administration, an
increase of approximately $11 million over the year ended December 31, 1997.
Network expenses for the year ended December 31, 1997 included costs related to
the developing and launching of the network including programming, sales,
engineering and administration.
Corporate expenses for the year ended December 31, 1998 of approximately
$2.8 million related to the costs of executive management, legal and
professional fees and other costs, an increase of
26
<PAGE>
approximately $1.8 million over the year ended December 31, 1997. Corporate
expenses for the year ended December 31, 1997 included primarily legal and
professional fees, promotional costs and travel expenses incurred during the
development stage.
Depreciation and amortization for the year ended December 31, 1998 of
approximately $1.7 million related to the depreciation of our fixed assets as
well as the amortization of our intangibles. We placed a majority of our
property and equipment as well as our broadcast licenses and other intangibles
into service on or about December 31, 1997; therefore, there was no depreciation
and amortization expense recorded for the year ended December 31, 1997.
OTHER INCOME (EXPENSE). Other income (expense) for the year ended December
31, 1998 included interest income of approximately $1.7 million, interest
expense of approximately $6.0 million and equity in loss of equity investee of
approximately $15,000. Interest income primarily related to interest earned on
the remaining proceeds from our senior discount notes. Interest expense related
primarily to the interest on the outstanding balance of our senior discount
notes. We had approximately $13,000 in interest expense during the year ended
December 31, 1997 associated with promissory notes due to stockholders.
INCOME TAX BENEFIT. We recorded an income tax benefit in 1998 of
approximately $2.4 million. The benefit results from our ability to utilize a
portion of our net operating loss to offset existing deferred tax liabilities.
NET LOSS. We incurred a net loss of approximately $21.8 million for the
year ended December 31, 1998 as compared to a loss of approximately $1.8 million
for the year ended December 31, 1997. The increase in the net loss is a result
of the increased costs associated with the operation of our network and O&Os as
well as the increase in interest expense resulting from our senior discount
notes.
EBITDA. EBITDA was approximately $(18.3) million for the year ended
December 31, 1998 as compared to approximately $(1.8) million for the year ended
December 31, 1997. The decrease in EBITDA is a result of the increased costs
associated with the operations of our network and O&Os.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE PERIOD FROM SEPTEMBER 12, 1996
(INCEPTION) THROUGH
DECEMBER 31, 1996
NET REVENUE. During the year ended December 31, 1997 and for the period
from inception through December 31, 1996, we had no revenue and had not begun
operations.
OPERATING EXPENSES. Operating expenses for the year ended December 31, 1997
were approximately $1.8 million as compared to $40,000 for the period from
inception through December 31, 1996. The increase in costs was associated with
our planned launching of our network and operations.
Selling, general and administrative expenses of $31,124 for the year ended
December 31, 1997 primarily related to sales personnel hired for our stations
operated under LMAs.
Network expenses of $812,654 for the year ended December 31, 1997 included
costs related to the developing and launching of the network including
programming, sales, engineering and administration.
Corporate expenses of $959,038 for the year ended December 31, 1997
primarily related to the costs of personnel, legal and professional fees and
travel associated with our development. Corporate expenses for the period from
inception through December 31, 1996 were primarily related to legal and
professional fees and travel expenses.
INTEREST EXPENSE. Interest expense for the year ended December 31, 1997
related to certain promissory notes due to stockholders.
27
<PAGE>
NET LOSS. We incurred a net loss of approximately $1.8 million for the year
ended December 31, 1997 and $40,000 for the period from inception through
December 31, 1996. The increase in the net loss was related to the increased
costs incurred in 1997 associated with our planned launching of our network and
operations.
EBITDA. EBITDA was approximately $(1.8) million for the year ended December
31, 1997 as compared to $(40,000) for the period from inception through December
31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Due to our developmental nature, we have had negative cash flows since
inception. Working capital and financing for our acquisitions to date have been
provided primarily by the issuance of our senior discount notes.
Our primary source of liquidity will be our credit facility. Our credit
facility is a senior secured revolver with $20.0 million of available borrowings
subject to certain conditions. At June 30, 1999, $10.2 million was outstanding
under our credit facility.
Net cash used in operating activities increased by approximately $1.5
million to approximately $5.0 million for the three months ended March 31, 1999
as compared to approximately $3.5 million for the comparable period in the prior
year. The increase in cash used in operating activities during the three-month
period ended March 31, 1999 is primarily due to the increase in the loss from
operations partially offset by noncash items consisting of depreciation and
amortization of approximately $1.1 million, interest expense of approximately
$3.1 million and amortization of deferred financing cost of approximately $0.2
million.
Net cash used in operating activities was approximately $21.7 million for
the year ended December 31, 1998 as compared to approximately $2.2 million for
the year ended December 31, 1997. The increase in cash used in operating
activities during the year ended December 31, 1998 is due to the increased costs
associated with the operations of our network and O&Os. Net cash used in
operating activities for the period from inception through December 31, 1996 was
approximately $40,000. Net cash used in operating activities increased during
1997 as compared to 1996 as a result of our planned launching of our network and
programming.
Net cash used in investing activities increased by approximately $8.5
million to $19.7 million for the three months ended March 31, 1999 as compared
to approximately $11.2 million for the comparable period in the prior year. The
increase in cash used in investing activities during the three month period
ended March 31, 1999 is primarily due to the acquisition of substantially all
the assets of radio stations WWRU(AM) and WJDM(AM) New York, KAHZ(AM) Dallas and
KIDR(AM) Phoenix.
Net cash used in investing activities for the year ended December 31, 1998
was approximately $60.6 million as compared to approximately $2.2 million for
the year ended December 31, 1997. The increase in cash used in investing
activities during the year ended December 31, 1998 is due to the acquisition of
radio stations, funding of escrow accounts related to acquisitions and
acquisitions of property and equipment. Net cash used in investing activities
for the year ended December 31, 1997 was due to our advancing funds to an equity
investee and acquiring property and equipment related to our network and
stations operated under LMAs. No cash was used in investing activities in 1996.
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 three months ended March 31, 1999 capital
expenditures were approximately $0.7 million as compared to approximately $1.2
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 three-month period ended March 31, 1998 related to the development of
our network and O&Os. For the year
28
<PAGE>
ended December 31, 1998, capital expenditures were approximately $5.3 million as
compared to approximately $1.2 million for the year ended December 31, 1997. We
expect to spend, in the aggregate, approximately $2.0 million over the next two
years for planned equipment purchases and for upgrades of existing stations.
Net cash used in financing activities for the three months ended March 31,
1999 was approximately $0.3 million as compared to net cash provided by
financing activities of $15 million for the comparable period in the prior year.
The increase in cash used in financing activities is due to payments of debt
financing cost made during the three month period ended March 31, 1999.
Net cash provided by financing activities for the year ended December 31,
1998 was approximately $120.1 million as compared to approximately $5.6 million
for the year ended December 31, 1997. The increase in cash provided by financing
activities during the year ended December 31, 1998 is primarily related to the
net proceeds from the issuance of our senior discount notes as well as
additional capital which was raised through the issuance of preferred and common
stock. In addition, we entered into promissory notes payable with Warburg,
Pincus Ventures of approximately $21.8 million. Net cash provided by financing
activities for the year ended December 31, 1997 primarily related to the
issuance of $5.2 million in preferred and common stock. 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.
We believe that our current cash position and the borrowing availability
under our credit facility will provide adequate resources to fund our operating
expenses, working capital requirements, capital expenditures and acquisitions
until our business provides us with sufficient operating cash flow. When we have
implemented our business strategy, we believe that cash from operating
activities should be sufficient to permit us to meet required cash interest
obligations, capital expenditures and operating obligations. In the event that
we are unable to generate the cash flow that is sufficient to service our
obligations, we may be forced to adopt one or more alternatives, such as
refinancing or restructuring our indebtedness, selling material assets or
operations or selling equity.
There can be no assurance that our business strategy will be successfully
implemented. Furthermore there can be no assurance that any such actions could
be effected on satisfactory terms or at all, that they would enable us to
satisfy our debt service requirements or that they would be permitted by the
terms of our senior discount notes or our credit facility. The failure to
generate such sufficient cash flow or to achieve such alternatives could
significantly adversely affect the market value of our senior discount notes and
our ability to pay the principal of and interest on the senior discount notes.
SEASONALITY
We expect that our revenue and cash flow will typically be 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.
YEAR 2000 ISSUES
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21(st) century dates from 20(th) century dates. As a result,
computer systems and software used by many companies need to be upgraded to
comply with such "Year 2000" requirements. There is a risk that the computers
and other systems on which we depend to conduct our operations are not yet Year
2000 compliant. Failure to achieve Year 2000 compliance could cause a system
failure or miscalculations in our broadcast and corporate locations which could
cause disruptions of operations, including a temporary inability to produce
broadcast signals, process financial
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transactions, or engage in similar normal business activities. Other areas where
there is a risk that devices are not Year 2000 compliant include products
purchased from third parties, computers, software, telephone systems and other
equipment used internally.
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.
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 March 31, 1999 there were no amounts outstanding under our credit
facility.
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BUSINESS
OUR COMPANY
Radio Unica is the only national Spanish-language radio network in the
United States. Our network reaches over 80% of the Hispanic population through
our 13 owned and/or operated and 36 affiliate stations. Our owned and/or
operated radio stations are located in ten markets, including eight of the top
ten Hispanic markets. Through these stations, we control 73% of our network
distribution. Our proprietary programming is focused on a news/talk format,
which is the most popular radio program format in both the United States and, we
believe, Mexico. We produce 19 hours of live and first-run, celebrity based
programming each weekday and 23 hours of such programming each weekend. This
network programming is broadcast by our operated stations 24 hours a day, seven
days a week and by our affiliate stations a minimum of eight hours a day, each
weekday. Many of our affiliates have branded themselves as Radio Unica stations
and broadcast a significant portion of our available programming.
Radio Unica's network strategy is differentiated from other Spanish-language
radio groups by delivering uniform, national programming to our stations 24
hours a day. Importantly, our nationwide distribution allows us to produce high
quality programming and spread the cost of that programming over our large base
of stations. Our network offers advertisers the only Hispanic radio platform
capable of delivering a consistent and controlled message to a national
audience. Additionally, our network allows national advertisers to reach a large
portion of the Hispanic population more effectively and at a lower cost than
would be the case if they had to purchase advertising separately in each market.
We believe that our high quality, original programming gives us a
competitive advantage over other Spanish-language radio broadcasters in
marketing to the Hispanic audience. Our programs are hosted by popular Hispanic
television personalities whose broad appeal extends beyond any particular
Hispanic cultural or geographical boundaries. These national personalities
include Pedro Sevcec, Dr. Isabel Gomez-Bassols, Jorge Ramos, Charytin and
Mauricio Zeilic. We also air segments featuring Cristina, the most popular
Hispanic talk show host in the U.S., and Maria Elena Salinas, the most
recognized Hispanic female news anchor. Our programming includes contemporary
talk, entertainment and information programs, news programs, hourly local and
national newscasts, sports talk programs, sports broadcasting, and other
programming relevant to our national Hispanic audience. Many of our radio
programs are fully-interactive talk shows that allow listeners nationwide to
call in as active participants in the on-air dialogue. These programs continue
to grow in popularity, as demonstrated by an increase in call volume from 5,000
weekday telephone calls in early 1998 to over 25,000 calls today.
Live sporting events are an integral part of Radio Unica's network
programming, and we have acquired the broadcast rights in the United States to
numerous marquee sporting events. We have acquired the exclusive
Spanish-language radio rights for several of the most popular sporting events
among Hispanics, including the World Cup 1998, Copa America 1999 and 2001, Copa
Oro 2000 and 2002, the Summer Olympics in 2000 and 2004, the World Cup 2002
qualifying matches, the NBA Finals in 1999 and 2000 and various Mexican soccer
league games. In addition to being an important part of our programming, major
sporting events are an important means of attracting first-time listeners. To
capture these first-time listeners, we sponsor major promotional events in
conjunction with our sports programming which serve to solidify listener loyalty
and raise awareness of the Radio Unica network.
We were formed in 1996 by Joaquin F. Blaya, the former President of
Univision Holdings, Inc. and former CEO of Telemundo Group, Inc. In these roles,
Mr. Blaya was instrumental in establishing Spanish-language television in the
United States and developed some of the most popular personalities in Hispanic
television. Mr. Blaya is also responsible for many of today's most successful
Spanish-language programs on Univision and Telemundo, including SABADO GIGANTE,
CRISTINA, PRIMER IMPACTO, SEVCEC and the national news for both networks.
Additionally, he launched TELENOTICIAS, the most widely distributed
Spanish-language cable news channel in the Americas. He established Radio Unica
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based upon the belief that nationwide advertisers would support a national
Spanish-language radio network with appealing, original programming reaching
large numbers of Hispanics. Prior to Radio Unica's formation, Univision and
Telemundo were the only national network alternatives for companies seeking to
cost-effectively advertise to a large portion of the Hispanic population
throughout the United States. Our network began broadcasting in January 1998.
THE HISPANIC MARKET OPPORTUNITY
We believe that Spanish-language radio targeting the Hispanic market will
continue to benefit from the following trends:
- Strong projected growth and high concentration of the Hispanic population
- Use of Spanish among Hispanics
- Attractive profile of Hispanic consumers
- Increasing Hispanic buying power
- Growing use of Spanish-language media by advertisers
STRONG PROJECTED GROWTH AND HIGH CONCENTRATION OF THE HISPANIC
POPULATION. Hispanics represent the most rapidly growing segment of the U.S.
population. From 1989 to 1998, the Hispanic population increased from 23.7
million to 30.5 million, a 29% increase. The strong growth of the Hispanic
population is expected to continue, increasing approximately 50% by 2010, five
times the growth rate of the U.S. population as a whole. Additionally, the
Hispanic population is highly concentrated, with over 60% of all Hispanics
located in the top ten Hispanic markets. This concentration allows us to cost
effectively reach the majority of Hispanics through our existing network
platform.
USE OF SPANISH AMONG HISPANICS. Spanish is the language spoken at home by
the majority of Hispanics, regardless of income or education. The number of
Hispanics who speak Spanish at home is expected to increase substantially from
over 21 million today. We believe that the continued use of Spanish among
Hispanics indicates that Spanish-language media has been and will continue to be
an important source of news, sports, information, advice and entertainment for
Hispanics.
ATTRACTIVE PROFILE OF HISPANIC CONSUMERS. The demographic profile of the
Hispanic audience makes it attractive to advertisers. We believe the larger size
(3.6 persons per household compared to the general public's average of 2.6
persons per household) and younger age of Hispanic households leads Hispanics to
spend more per household on many categories of consumer goods and services. For
example, Hispanic households spend more each year on food to be eaten at home,
children's clothing, footwear, phone services, and laundry and household
cleaning products than the average U.S. household.
INCREASING HISPANIC BUYING POWER. The Hispanic population will spend an
estimated $421 billion in 1999 on consumer goods and services, an increase of
98% since 1990. Hispanics are expected to spend $965 billion by 2010, an
increase of 129%. This increase is five times the expected growth rate in
expenditures by all consumers in the United States.
GROWING USE OF SPANISH-LANGUAGE MEDIA BY ADVERTISERS. Expenditures on
advertising to Hispanics grew from $730 million in 1992 to $1.7 billion in 1998,
a compound annual growth rate of 15%. Although Hispanic consumers represent
approximately 7% of U.S. consumer spending, advertising targeting Hispanics
represents only 1% of total advertising expenditures. We believe that the lack
of Spanish-language media outlets relative to the size of the Hispanic
population has historically caused the differential between Hispanic consumer
spending and Spanish-language advertising expenditures. For example, in the
radio segment, there are approximately 474 Spanish-language commercial stations,
which constitute only 4.6% of all commercial radio stations in the United
States, although the Hispanic population comprises approximately 11% of the
United States population. With the increasing media
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access to this population, we believe advertising expenditures will move closer
towards parity with Hispanic consumer spending. We also believe that advertisers
who re-direct a portion of their English-language budgets to Spanish-language
media are able to increase overall audience reach without incurring additional
cost. Furthermore, we believe that advertisers have found Spanish-language radio
advertising to be a particularly effective means to reach the growing Hispanic
audience. As a result, approximately 26% of Hispanic advertising expenditures in
1998 were directed to radio, a substantially higher percentage than radio's
overall share of national advertising expenditures.
OUR BUSINESS STRATEGY
Our strategy is to provide a third national Spanish-language broadcast
network (Univision and Telemundo television networks are the other two). To this
end, we have employed the following business strategy:
PROVIDE POPULAR, NATIONAL, HIGH-IMPACT PROGRAMMING. Radio Unica's
programming is differentiated from other radio groups by its focus on topics and
issues relevant to today's Hispanic audience, its strong line-up of top Hispanic
personalities and its national reach. Radio Unica takes advantage of its
management's established relationships with talent, built over numerous years of
industry experience, to secure top personalities and to create high-impact
programming. In addition, management draws upon its expertise and established
track record of having created some of the most well-received Spanish-language
television programs, including SABADO GIGANTE and CRISTINA. We believe that our
access to talent and the programming expertise of our senior management will
continue to serve as a strong competitive advantage in attracting advertisers
and listeners.
FOSTER STRONG BRAND IDENTITY. We continue to build a strong brand identity
for our radio stations and network by promoting the Radio Unica name on-air,
using music that listeners associate with our radio stations and programs and by
engaging in a wide array of marketing and promotional activities. Our marketing
strategy includes personal appearances by on-air personalities, promotional
tie-ins with sporting events covered on our network and advertising on
Spanish-language television and billboards and in Spanish-language print media.
We believe a strong brand identity will allow us to retain and increase our
listening audience, continue to grow our advertiser base, and attract and retain
top talent.
FOCUS ON THE NEWS/TALK RADIO FORMAT. We will continue to focus on the
news/talk radio format which has broad listener appeal and is the most popular
radio format in both the United States and, we believe, Mexico. News/talk
programming typically allows twice as many minutes of commercials per hour as
music-based formats. As a result, the news/talk format permits stations to
capture a larger share of advertising revenue relative to audience share. We
believe that a news/talk format is a more effective advertising medium than a
music based format, since the audience is actively listening and more attentive
to the programming. The news/talk format also enables on-air personalities to
mention the names of their station, program and network more frequently, which
promotes a high degree of name recognition and listener loyalty leading to
higher ratings and higher advertising revenue.
SELL ADVERTISING TO THE TOP 50 SPANISH-LANGUAGE ADVERTISERS. Our sales
strategy is to target the top 50 national Spanish-language advertisers who
collectively purchase the majority of Spanish-language network and national
advertising in the United States. We employ 15 in-house national sales people in
ten sales offices nationwide, as well as 60 local sales people situated
throughout the markets where we own and/or operate stations. Our large, in-house
sales force allows us to maintain better control and accountability over the
sales process. We also believe that our sales force is important in maintaining
relationships with key advertisers and agencies and identifying new advertisers.
The combination of our commitment to pursue the largest Spanish-language
advertisers and our captive sales force has enabled us to secure many premier
national advertisers, including Procter & Gamble, Sears, Walmart, Chevrolet,
American Airlines, Honda, Americatel, Corona and Moneygram.
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MAINTAIN MODERN TECHNOLOGY AND REDUCE OPERATING COSTS. We operate
technologically advanced and automated nationwide production and delivery
systems which provide live programming via satellite to our owned and/or
operated and affiliate stations. At our modern production studios in Miami, we
produce substantially all of our radio programs, commercials and promotional
recordings which are delivered to stations 24 hours a day via satellite and our
computer-based wide-area network. By employing modern technology and producing
and coordinating our programming from a centralized location, we are able to
operate with minimal staffing at our stations, thereby reducing operating costs
and increasing both quality of delivery and efficiency. For example, our network
is capable of simultaneously broadcasting different versions of commercials in
different regions which allows our advertisers flexibility in targeting their
messages.
OUR EXPANSION STRATEGY
MAXIMIZE NETWORK REACH THROUGH OWNED/OPERATED AND AFFILIATE STATIONS. We
currently own and/or operate radio stations in eight of the top ten Hispanic
markets and in two other U.S. markets. Our owned and operated stations reach
markets where almost 60% of the Hispanic audience resides and our network
(including affiliates) reaches markets where over 80% of the Hispanic audience
resides. We seek to enter into agreements with affiliate stations in smaller,
less concentrated Hispanic markets so as to broaden the reach of our network and
increase its appeal to national advertisers while reducing the amount of capital
required to do so. We will continue to acquire stations which help achieve our
goal of owning stations in the largest, most concentrated Hispanic markets while
maintaining affiliates in other markets.
PURSUE STRATEGIC INFRASTRUCTURE UPGRADES. We continue to pursue signal and
other operational upgrades at our existing stations that will allow us to
enhance our market coverage. We are currently pursuing upgrades at our radio
stations in New York, Miami and Dallas. By expanding our market coverage at
existing and acquired stations, we believe we can further increase the Radio
Unica audience and enhance the value of our radio stations.
INTERNET STRATEGY
We are seeking to exchange our radio programming, promotional capabilities
and celebrity and sports based content for equity ownership in a
Spanish-language Internet portal. We intend to use audio streaming technology to
broadcast our network programming through this Web portal and thereby further
increase the reach of our radio network. In addition, such a Web site would
contain information and resources for the Hispanic community, links to Web pages
relating to Radio Unica's programs and celebrities, links to other entertainment
related sites, the ability to purchase merchandise on-line and the opportunity
to interact with other Hispanics worldwide. Aligning ourselves with such a
company will provide Radio Unica with a larger base over which to amortize the
costs of our programming, enhance our name recognition, and create significant
opportunities to cross-sell and cross-promote our radio and Internet properties.
For example, we intend to promote our Web site on the air, jointly advertise our
radio and Internet properties in Spanish-language television, billboard and
print media campaigns and jointly sponsor promotional events. We believe that
with the combination of Radio Unica's existing content, other well-known Latin
celebrities and our promotional capabilities, we will be able to attract a large
number of visitors to such a Web site and create an attractive and successful
Internet enterprise.
PROGRAMMING
Radio Unica's network programming is broadcast 24 hours a day, seven days a
week and is designed to appeal to the general Hispanic audience, including
Hispanics located in different geographic regions of the United States and from
varying cultural backgrounds. The news/talk radio format is a proven format used
by several major networks, including ABC Radio Networks, Westwood One and
Premiere Radio Networks. The share of the audience listening to stations with
this format
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has increased over the last several years and news/talk is currently the most
listened to format in both the United States and, we believe, Mexico.
Radio Unica currently produces 19 hours per day of live and first-run
programming, Monday through Friday, at our network production studios in Miami.
A typical 24 hour schedule during the week of network programming is as follows:
<TABLE>
<CAPTION>
WEST COAST EAST COAST
<S> <C> <C>
6:00 AM SEVCEC EN VIVO AM 9:00
7:00 Host: Pedro Sevcec 10:00
8:00 Talk show with contemporary themes 11:00
and topical discussions of current events
(Live)
9:00 DRA. ISABEL PM 12:00
10:00 Host: Dr. Isabel Gomez Bassols 1:00
11:00 Talk show on family issues and personal relationships 2:00
(Live)
12:00 PM CHARYTIN UNICAMENTE DE NOVELAS 3:00
Host: Charytin
Discussions of daily novelas
(Live)
1:00 INMIGRACION PREGUNTAS Y RESPUESTAS 4:00
Host: Fulvia Peimbert
Talk show on immigration issues
(Live)
2:00 ESTA TARDE EN UNICA 5:00
3:00 Hosts: Jose Luis Arenas, Eduardo Ibarrola, India 6:00
Edelmira & Mauricio Zeilic
Comedy show
(Live)
4:00 UNICA EN DEPORTES 7:00
5:00 Host: Jorge Ramos 8:00
6:00 Talk/Sports show 9:00
7:00 (Live) 10:00
8:00 ESTA NOCHE EN UNICA 11:00
9:00 Host: Olga Palmer AM 12:00
Talk show covering relationships and romantic
interests
(Live)
10:00 ESTA TARDE EN UNICA 1:00
11:00 Hosts: Jose Luis Arenas, Eduardo Ibarrola, India 2:00
Edelmira & Mauricio Zeilic
(Repeat)
12:00 AM SEVCEC EN VIVO 3:00
1:00 Host: Pedro Sevcec 4:00
2:00 (Repeat) 5:00
3:00 ESTA MANANA EN UNICA 6:00
4:00 Host: William Restrepo 7:00
5:00 News/Talk 8:00
(Live)
</TABLE>
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Our daily schedule features programs hosted by celebrities, many of whom
also host or appear on popular shows on the Univision and Telemundo networks.
These on-air personalities create radio shows exclusively for Radio Unica.
Cristina and Maria Elena Salinas also host daily segments on the network.
Our programming includes:
SEVCEC EN VIVO. Hosted by Pedro Sevcec, this three-hour talk show is
devoted to in-depth coverage of the top news stories of the day, other issues of
importance to the Hispanic population and interviews with prominent figures,
Pedro Sevcec was a senior reporter for Telemundo's popular TV news magazine,
OCURRIO ASI, and currently hosts his own talk show called SEVCEC which is one of
Telemundo's highest rated shows.
DRA. ISABEL. This advice program hosted by Dr. Isabel Gomez-Bassols focuses
on such topics as family issues and personal relationships. Dr. Isabel
Gomez-Bassols is a noted psychologist and educator and makes frequent
appearances on such popular television shows as CRISTINA, SEVCEC and MIAMI
AHORA.
CHARYTIN. Charytin is a well-known singer and performer who has frequently
appeared on Univision's and Telemundo's programs. This one-hour program hosted
by Charytin discusses novelas (i.e., Spanish-language soap operas) and the lives
of soap opera stars.
INMIGRACION . . . PREGUNTAS Y RESPUESTAS. This program, hosted by Fulvia
Peimbert, focuses on the rules of the U.S. immigration system. This program
features lawyers and immigration experts as guests.
ESTA TARDE EN UNICA. Hosted by Mauricio Zeilic and others, this afternoon
entertainment program features comedians, entertainment-world news, gossip and
interviews with major Hispanic celebrities. Mauricio Zeilic has been hosting
entertainment shows for more than 20 years and is currently the host of an
entertainment segment on Telemundo's daily afternoon magazine show.
UNICA EN DEPORTES. This sports talk show hosted by Jorge Ramos features
sports, talk, news and interviews appealing to Hispanic audiences. Jorge Ramos
has served as sports anchor for Telemundo since 1994 and in his career has
broadcast four World Cups.
SPORTS. During our major sporting events, we broadcast live, play-by-play
coverage and daily programs and interviews with players and participants. We
have obtained the exclusive United States Spanish-language radio broadcasting
rights for a number of popular sporting events including the following:
SUMMER OLYMPICS 2000, 2004 AND 2008. Radio Unica has acquired the
Spanish-language radio broadcast rights in the United States for the 2000
and 2004 Summer Olympics and has a right of first refusal for the 2008
games. The Olympic games are the highest profile sporting event in the
world. Radio Unica's broadcasts will highlight soccer, boxing and other
events and athletes that interest Hispanics. We will also utilize the
universal awareness of the Olympics to continue to promote our brand and
attract new listeners.
COPA AMERICA 1999 AND 2001. Copa America is the most popular international
soccer event for Hispanics after the World Cup and is held every other year.
This event is the oldest international soccer tournament and is a forum for
Latin Americans to listen to their teams compete against neighboring
countries. With South America and Mexico participating, this event offers
the soccer fan the opportunity to listen to some of the best soccer stars
playing for their national teams.
COPA ORO 2000 AND 2002. Copa Oro tournaments are held in the alternate
years from Copa America. Similar to Copa America, Copa Oro is an
international soccer event with countries in North and Central America
participating.
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WORLD CUP 2002 QUALIFYING MATCHES. The World Cup is the most popular soccer
event in the world. These matches are of interest to the Hispanic audience
since they pit Latin American countries against each other in the qualifying
rounds in their quest for a World Cup trophy.
MEXICAN NATIONAL SOCCER. Radio Unica has the U.S. Spanish-language radio
rights to some of the most popular Mexican soccer league team games and the
Mexican national team games.
NBA FINALS 1999 AND 2000. Radio Unica has the rights to broadcast the 1999
and 2000 NBA Finals and the 2000 All Star Game.
NEWS. We produce a three-hour national morning news and talk program,
Monday through Saturday, which allows local stations the opportunity to insert
local segments of news, weather, sports and other information. We also produce
newscasts on the hour, 24 hours a day, which focus on events of interest to
Hispanic audiences.
ADVERTISING REVENUE
Substantially all of our revenue is generated from the sale of network,
national and local advertising on our radio stations. The classes of advertising
are described in the following table:
CLASSES OF RADIO ADVERTISING
<TABLE>
<S> <C>
Network....................... Represents commercial air time sold directly by a network to
a national advertiser to be aired during "network"
programming.
This unique type of advertising is sold by a "networked"
group of stations airing uniform programming simultaneously
over a significant portion of the United States. English
language networks with capabilities similar to Radio Unica
include ABC Radio Networks, Westwood One and Premiere Radio
Networks.
Radio Unica sells this advertising time through its own
national sales force.
National Spot................. Represents commercial air time sold to a national advertiser
within a specific local market.
Most radio stations and station groups sell this time
through third party independent representatives. Radio Unica
sells this advertising time through its own national sales
force.
Local Spot.................... Represents commercial air time sold to an in-market
advertiser or advertising agency. Local advertisers consist
primarily of local merchants and service providers.
Radio Unica sells this time generally through its station's
local sales staff.
</TABLE>
Sales of network and national advertising are made by our in-house national
sales force located in ten regional sales offices. Sales of local advertising
are made by our sales staffs located at each of our stations. We do not use
third party national representatives or "rep" firms. As a result, we have more
control over and greater accountability from our sales force. We also believe
that our sales force is important in maintaining relationships with key
advertisers and agencies and identifying new advertisers. We do not pass along
any of our network advertising revenue or pay cash compensation to our
affiliates.
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Advertising rates charged by a radio station or network are based primarily
on the station's or network's ability to attract listeners and on the
attractiveness to advertisers of the station's or the network's listener
demographics. Rates vary depending upon a program's ability to increase sales
and popularity among an advertiser's target audience, the number of advertisers
seeking similar time slots, and the availability of alternative media in the
market. Radio advertising rates are generally highest during the morning and
afternoon drive-time hours.
RADIO UNICA NETWORK
Radio Unica's 13 owned and/or operated AM stations in ten markets and 36
affiliate stations comprise a network that reaches over 80% of the Hispanic
population. We are the only national radio network available to advertisers
targeting the fast growing Hispanic market. We are one of only three national
Hispanic advertising platforms in the U.S., the other two consisting of the
Univision and Telemundo television networks. Radio Unica's network is
differentiated from other Spanish-language radio broadcasters by its ability to
deliver uniform programming to the national Hispanic audience over a 24 hour
period. We believe that advertisers prefer this delivery as it allows them to
reach a national audience in a consistent and controlled manner. With one
contract, advertisers can reach a large portion of the Hispanic population at a
cost lower than if they had to purchase advertising separately in each market.
Radio Unica offers advertisers the opportunity to associate their advertising
message with a particular program that will consistently be aired at a specific
time. No other Spanish-language broadcasters have this capability on a national
level.
ADVANTAGES TO RADIO UNICA. Although our owned and/or operated stations
reach markets where almost 60% of Hispanics reside, through our affiliates we
are able to increase our reach to over 80%. Our 36 affiliates have allowed us to
cost-effectively enter an additional 30 markets and expand our reach and appeal
to advertisers. Affiliates allow us to enter a market without the capital
expenditures that would be required in buying or building a station. Many of our
affiliates have branded themselves as Radio Unica stations which helps build
brand awareness and listener loyalty. Additionally, the network enables us to
share the cost of programming over a larger base. We believe that this sharing
of expenses allows us to invest a larger amount in programming compared to our
competitors.
ADVANTAGES TO AFFILIATES. Affiliate stations benefit by gaining access to
Radio Unica's high-impact programming, including programs hosted by some of the
most popular Hispanic personalities and live sporting events, which would be
prohibitively expensive to create or purchase on their own. In addition,
affiliates benefit from our national advertising campaigns and promotional
materials. Affiliates also have access to our sales, marketing and operating
managerial expertise.
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RADIO STATIONS
The following table lists information concerning all of our owned and/or
operated and selected affiliate stations and their respective markets:
<TABLE>
<CAPTION>
HISPANIC
HISPANIC POPULATION
OWNED BY HISPANIC POPULATION AS A % OF
RANK BY RADIO UNICA, POPULATION IN AS A % OF HISPANICS
HISPANIC MARKET LMA OR MARKET TOTAL IN THE
POPULATION SERVED STATION AFFILIATE (IN THOUSANDS) MARKET UNITED STATES
- --------------- ---------------- ----------------- --------------- --------------- ----------- -----------------
<C> <S> <C> <C> <C> <C> <C>
1 Los Angeles KBLA(AM) Owned 6,326 38.7% 20.8%
KVCA(AM) LMA
2 New York WWRU(AM) Owned 3,645 18.1% 12.0%
WJDM(AM) Owned
3 Miami WNMA(AM) Owned 1,423 38.1% 4.7%
WRNU(AM) Owned
4 San Francisco/ KIQI(AM) Owned 1,243 18.4% 4.1%
San Jose
5 Chicago WNTD(AM) Owned 1,198 12.7% 3.9%
6 Houston KXYZ(AM) Owned 1,141 24.2% 3.7%
7 San Antonio KZDC(AM) LMA 1,065 51.6% 3.5%
8 McAllen/ KVJY(AM) Affiliate 824 89.5% 2.7%
Brownsville/
Harlingen
9 Dallas/Ft. Worth KAHZ(AM) Owned 787 14.9% 2.6%
10 San Diego XEMMM(AM) Affiliate 706 25.3% 2.3%
11 Fresno KGST(AM) Affiliate 680 41.6% 2.2%
12 El Paso KSVE(AM) Affiliate 667 74.5% 2.2%
13 Phoenix KIDR(AM) Owned 667 18.7% 2.2%
14 Albuquerque KALY(AM) Affiliate 656 38.4% 2.2%
15 Sacramento KTTA(FM) Affiliate 612 17.9% 2.0%
KLNA(FM) Affiliate
16 Denver KCUV(AM) LMA 398 13.0% 1.3%
------ ------
22,038 72.4%
------ ------
------ ------
All other
affiliates (29) 2,406 7.9%
------ ------
------ ------
Totals 24,444 80.3%
------ ------
------ ------
</TABLE>
OWNED STATIONS
LOS ANGELES. Radio Unica's radio station KBLA(AM), broadcasting on 1580
kHz, serves the Los Angeles market. This market has a population of
approximately 16.3 million, of which approximately 6.3 million or 38.7% are
Hispanic. Los Angeles has more Spanish-speaking persons than any other market in
the United States. In 1998, Spanish-language radio advertising spending in the
market was approximately $119 million. In July 1998, Radio Unica acquired KBLA
for approximately $21 million. KBLA is licensed at 50,000 watts during the
daytime. KBLA's transmitter is located in Los Angeles and enables this station
to reach substantially all of the Los Angeles market. We also broadcast on KVCA
in Los Angeles under an LMA.
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NEW YORK CITY. Radio Unica's radio station WWRU(AM), broadcasting on 1660
kHz in the expanded band, serves the New York City market. The expanded band
consists of the radio spectrum from 1605 kHz to 1705 kHz which most radios
manufactured after 1990 can receive. The New York City market has a population
of approximately 30.5 million, of which approximately 3.6 million or 18.1% are
Hispanic. In 1998, Spanish-language radio advertising spending in the market was
approximately $47 million. In January 1999, Radio Unica acquired WWRU, along
with WJDM, KAHZ, Dallas/Fort Worth, and KIDR, Phoenix, for a purchase price of
approximately $30 million. WWRU is authorized at 10,000 watts during the
daytime. WWRU's transmitter is located in Carlstadt, New Jersey and enables this
station to reach substantially all of the New York City market during the day.
We have received FCC approval to upgrade our night signal in New York City which
will provide us with significantly improved market coverage at night.
In connection with the acquisition of WWRU, Radio Unica also acquired
WJDM(AM), broadcasting on 1530 kHz. WJDM is licensed at 1,000 watts during the
daytime. Broadcast time on this station has been sold to a third party. WJDM's
transmitter is located in Elizabeth, New Jersey. Based on current FCC guidelines
regarding the expanded band, Radio Unica must relinquish the license of either
WWRU or WJDM by March 12, 2003.
MIAMI. Radio Unica's radio station WNMA(AM), broadcasting on 1210 kHz,
serves the Miami market. This market has a population of approximately 3.7
million, of which approximately 1.4 million or 38.1% are Hispanic. In 1998,
Spanish-language radio advertising spending in the market was approximately $62
million. In May 1998, Radio Unica acquired WNMA for approximately $9 million.
WNMA is licensed at 25,000 watts during the daytime. WNMA's transmitter is
located in Miami Springs, Florida and enables this station to reach
substantially all of the Miami market. We are currently pursuing a signal
upgrade which will increase our coverage of this area's Hispanic population by
approximately 10%.
In connection with the acquisition of WNMA, Radio Unica acquired WRNU(AM),
broadcasting on 1700 kHz. Broadcast time on this station has been sold to a
third party. Based on current FCC guidelines, Radio Unica must relinquish the
license of either WNMA or WRNU by October 8, 2002.
SAN FRANCISCO/SAN JOSE. Radio Unica's station KIQI(AM), broadcasting on
1010 kHz, serves the San Francisco/San Jose market. This market has a population
of approximately 6.8 million, of which approximately 1.2 million or 18.4% are
Hispanic. In 1998, Spanish-language radio advertising spending in the market was
approximately $18 million. In April 1998, Radio Unica acquired Oro Spanish
Broadcasting, Inc., the licensee of KIQI, for approximately $12 million. Prior
to the acquisition, Oro operated the station for approximately 17 years with a
Spanish-language format. KIQI is licensed at 10,000 watts during the daytime.
KIQI's transmitter is located in Oakland, California and enables this station to
reach substantially all of the San Francisco/San Jose market during the day.
CHICAGO. Radio Unica's radio station WNTD(AM), broadcasting on 950 kHz,
serves the Chicago market. This market has a population of approximately 9.4
million, of which approximately 1.2 million or 12.7% are Hispanic. In 1998,
Spanish-language radio advertising spending in the market was approximately $25
million. In May 1999, Radio Unica acquired WNTD for approximately $16.75
million. WNTD is licensed at 1,000 watts during the daytime. WNTD's transmitter
is located in Chicago, Illinois and enables this station to reach substantially
all of the Chicago market.
HOUSTON. Radio Unica's station KXYZ(AM), broadcasting on 1320 kHz, serves
the Houston market. This market has a population of approximately 4.7 million,
of which approximately 1.1 million or 24.2% are Hispanic. In 1998,
Spanish-language radio advertising spending in the market was approximately $32
million. In March 1998, Radio Unica acquired an 80% economic interest in KXYZ
and acquired the remaining interest in September 1998 for a total of
approximately $6.4 million. Prior to the acquisition, the station was operated
for approximately 13 years with a Spanish-language format.
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KXYZ is licensed at 5,000 watts during the daytime. KXYZ's transmitter is
located in Pasadena, Texas and enables this station to reach substantially all
of the Houston market.
DALLAS/FORT WORTH. Radio Unica's station KAHZ(AM), broadcasting on 1360
kHz, serves the Dallas/Fort Worth market. This market has a population of
approximately 5.3 million, of which approximately 787,000 or 14.9% are Hispanic.
In 1998, Spanish-language radio advertising spending in the market was
approximately $13 million. KAHZ is licensed at 5,000 watts during the daytime.
KAHZ's transmitter is located in Fort Worth, Texas and enables this station to
reach a significant portion of the Dallas/Forth Worth market. We are considering
various opportunities to improve both our day and night signals. The upgrade in
Dallas will increase day time population coverage by 23% and will expand the
night time signal reach from Fort Worth to Dallas.
PHOENIX. Radio Unica's station KIDR(AM), broadcasting on 740 kHz, serves
the Phoenix market. This market has a population of approximately 3.6 million,
of which approximately 667,000 or 18.7% are Hispanic. We estimate that in 1998
Spanish-language radio advertising spending in the market was approximately $6.0
million. KIDR is licensed at 1,000 watts during the daytime. KIDR's transmitter
is located in Phoenix, Arizona and enables this station to reach substantially
all of the Phoenix market.
LOCAL MARKETING AGREEMENTS (OPERATED STATIONS)
We have time brokerage agreements, also known as local marketing agreements
or LMAs, with radio stations in Los Angeles, San Antonio and Denver. Under these
agreements, we operate and supply all programming for these stations.
LOS ANGELES. Radio Unica operates station KVCA(AM), broadcasting on 670
kHz, in Los Angeles under an agreement with Lotus Oxnard Corp. The term of the
agreement ends on December 31, 2001. Radio Unica's annual payment under this
agreement is $2.2 million in 1999 and increases $200,000 per year thereafter.
Radio Unica has an option to purchase KVCA. The option is exercisable from June
24, 2001 through September 30, 2001. KVCA is licensed at 5,000 watts during the
daytime. KVCA's transmitter is located in Simi Valley, California and enables
this station to reach a significant portion of the Los Angeles market.
SAN ANTONIO. Radio Unica operates station KZDC(AM), broadcasting on 1250
kHz, in San Antonio under an agreement with Lotus Oxnard Corp. In 1998,
Spanish-language radio advertising spending in the market was approximately $20
million. The term of the agreement ends on December 31, 2001. Radio Unica's
annual payment under this agreement ranges from $225,000 in 1999 to $275,000 in
2001. Radio Unica has an option to purchase KZDC. The option is exercisable from
June 24, 2001 through September 30, 2001. KZDC is licensed at 5,000 watts during
the daytime. KZDC's transmitter is located in San Antonio and enables this
station to reach substantially all of the San Antonio market.
DENVER. Radio Unica operates KCUV (AM) broadcasting on 1150 kHz, in Denver
under an agreement with Den-Mex LLC. We estimate that in 1998, Spanish-language
radio advertising spending in the market was approximately $6 million. The term
of the agreement ends on June 14, 2002. Radio Unica's annual payment under this
agreement is $300,000 throughout the term. Radio Unica has an option to purchase
KCUV throughout the term. KCUV is licensed at 5,000 watts during the daytime.
KCUV's transmitter is located in Englewood, Colorado and enables the station to
reach substantially all of the Denver market.
AFFILIATE STATIONS
Radio Unica has 36 affiliate radio stations. Under our arrangements with
these stations, they are generally required to carry a minimum of eight hours
per day of our network programming. Currently,
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our affiliates are substantially exceeding this minimum, broadcasting an average
of 14 hours of our programming each weekday. Our arrangements typically provide
that our programming will include a certain number of minutes per hour of
network advertising to be sold by us. We do not pass along any of our network
advertising revenue or pay cash compensation to our affiliates. We also provide
our affiliates with marketing, sales and promotional support. The terms of these
arrangements are generally one to two years, but may be terminated earlier for
certain reasons. Some of these arrangements give us a right of first refusal to
buy the station if the station owner offers to sell it.
COMPETITION
Radio broadcasting is a highly competitive business. The financial success
of each of our radio stations will depend, to a significant degree, upon our
audience ratings, our share of the overall radio advertising revenue within each
geographic market and the economic health of the market. In addition, our
advertising revenue depends upon the desire of marketers to reach our audience
demographic. Our radio stations compete for audience share and advertising
revenue directly with other FM and AM radio stations and with other media within
their respective markets, such as newspapers, broadcast and cable television,
magazines, billboard advertising, transit advertising, and direct mail
advertising. Some of these radio stations and networks also broadcast
Spanish-language talk radio. Many of these entities are larger and have
significantly greater resources than Radio Unica. Additionally, since we are in
the early stages of our operations, our network has not yet been rated by
Arbitron. If a competing station converts to a format similar to that of one of
our stations, or if one of our competitors strengthens its operations, our
stations could suffer a reduction in ratings and advertising revenue. The
audience ratings and advertising revenue of our individual stations are subject
to change and any adverse change in a particular market could have a material
adverse effect on our operations.
The Telecommunications Act of 1996 facilitates the entry of other radio
broadcasting companies into the markets in which we operate or may operate in
the future, some of which may be larger and have more financial resources than
Radio Unica. In addition, certain of our stations compete, and in the future
other stations of Radio Unica may compete, with combinations of stations
operated by a single operator. There can be no assurance that our radio stations
will be able to develop, maintain or increase their current audience ratings and
radio advertising revenue.
The radio broadcasting industry is subject to rapid technological change,
evolving industry standards and the emergence of new media technologies. The FCC
is considering ways to introduce new technologies to the radio broadcast
industry which would significantly enhance the sound quality of AM broadcasts.
We cannot assure you that we will have the resources to acquire new technologies
or to introduce new services that could compete with these new technologies.
There are several new media technologies that are currently under development
including the following:
- audio programming by cable television systems, direct broadcast satellite
systems, Internet content providers and other digital audio broadcast
formats;
- satellite digital audio service, which could result in the introduction of
several new satellite radio services with sound quality comparable to that
of compact discs; and
- in-band on-channel digital radio, which could provide multi-channel,
multi-format digital radio services in the same bandwidth currently
occupied by traditional AM and FM radio services.
In addition to the competition faced by our radio stations, we face
competition from other providers of radio programs, including other radio groups
that offer Spanish-language programming. Our network also competes with other
radio networks and individual radio stations for the services of talk show
personalities. Competition from existing and new radio networks may limit the
growth and profitability of our network.
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PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND CONCESSIONS
In the course of our business, we use various trademarks, names and service
marks, including our logos, in our advertising and promotions. We believe the
strength of our trademarks, trade names and service marks are important to our
business and intend to continue to protect and promote our marks as appropriate.
We do not hold or depend upon any material patent, government license, franchise
or concession, except the broadcast licenses granted by the FCC.
FEDERAL REGULATION OF RADIO BROADCASTING
The ownership, operation and sale of radio stations are subject to
regulation by the FCC. The FCC regulates radio broadcast stations under
authority granted by the Communications Act. Among other things, the FCC:
- assigns frequency bands for broadcasting;
- determines the particular frequencies, locations and power of stations;
- issues, renews, revokes and modifies station licenses;
- determines whether to approve changes in ownership or control of station
licenses;
- regulates equipment used by stations;
- imposes regulations and takes other action to prevent harmful interference
between stations;
- adopts and implements regulations and policies that directly or indirectly
affect the ownership, management, programming, operation and employment
practices of stations; and
- has the power to impose penalties for violations of its rules or the
Communications Act.
In February 1996, Congress enacted the Telecommunications Act of 1996 to
amend the Communications Act. The Telecommunications Act, among other measures,
directed the FCC to:
- eliminate the national radio ownership limits;
- liberalize the local radio ownership limits as specified in the
Telecommunications Act;
- issue broadcast licenses for periods of up to eight years; and
- eliminate the opportunity for the filing of competing applications against
broadcast license renewal applications.
In the Balanced Budget Act of 1997, Congress authorized the FCC for the
first time to conduct auctions for the awarding of construction permits for
commercial radio and television stations. To settle already pending mutually
exclusive applications without auctions, Congress directed the FCC to waive
existing rules as necessary. The FCC has begun to implement these provisions.
While Radio Unica is not a participant in any implementation proceeding, this
recent action should result in the awarding of construction permits for
additional radio stations, some of which might compete with Radio Unica's radio
stations.
LICENSE GRANTS AND RENEWALS. The Communications Act provides that a
broadcast license may be granted to an applicant if the grant would serve the
public interest, convenience and necessity, subject to limitations referred to
below. In deciding whether to grant a license, the FCC considers the legal,
technical, financial and other qualifications of the applicant, including
compliance with the Communications Act's limitations on alien ownership,
compliance with various rules limiting common ownership of broadcast, cable and
newspaper properties, and the "character" of the licensee and those persons
holding "attributable" interests in the licensee. Broadcast licenses are granted
for specific periods of time and, upon application, are renewable for additional
periods of time. The
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Telecommunications Act amended the Communications Act to provide that broadcast
licenses be granted, and thereafter renewed, for successive terms of up to eight
years each, if the FCC finds that the public interest, convenience, and
necessity would be served thereby.
Generally, the FCC renews broadcast licenses without a hearing. The
Telecommunications Act requires the FCC to grant an application for renewal of a
broadcast license if:
- the station has served the public interest, convenience and necessity;
- there have been no serious violations by the licensee of the
Communications Act or the rules and regulations of the FCC; and
- there have been no other violations by the licensee of the Communications
Act or the rules and regulations of the FCC which, taken together, would
constitute a pattern of abuse.
Accordingly, the FCC does not entertain competing applications against
broadcast license renewal applications. The Telecommunications Act provides that
if the FCC, after notice and an opportunity for a hearing, decides that the
requirements for renewal have not been met and that no mitigating factors
warrant lesser sanctions, it may deny a renewal application. Only after denying
an application for renewal may the FCC accept applications by third parties to
operate on the frequency of the former licensee. The Communications Act
continues to authorize the filing of petitions to deny against the renewal of
broadcast license applications during particular periods of time following the
filing of renewal applications. Petitions to deny can be used by interested
parties, including members of the public, to raise issues concerning the
qualifications of the renewal applicant.
There are no renewal applications currently pending for any of Radio Unica's
broadcast licenses. Radio Unica does not anticipate any material difficulty in
obtaining license renewals for full terms in the future, however, there can be
no assurance that the licenses of each of our stations will be renewed or will
be renewed without conditions or sanctions.
The FCC or its staff may reconsider its renewal of an application during
specified time periods on their own motion or by request of the petitioner, and
the petitioner may also appeal within a certain period actions by the FCC to the
U.S. Court of Appeals. If the FCC does not, on its own motion, or upon a request
by an interested party for reconsideration or review, review a staff grant or
its own action within the applicable time periods, and if no further
reconsideration, review or appeals are sought within the applicable time
periods, an action by the FCC or its staff becomes a "Final Order."
LICENSE ASSIGNMENTS AND TRANSFERS OF CONTROL. The Communications Act
prohibits the assignment of an FCC license or the transfer of control of a
corporation holding such a license without the prior approval of the FCC.
Applications to the FCC for such assignments or transfers are subject to
petitions to deny by interested parties and must satisfy requirements similar to
those for renewal and new station applications. Many transactions involving
radio stations provide, as a waivable pre-condition to closing, that the FCC
consent to the transaction has become a "Final Order."
OWNERSHIP RULES. Rules of the FCC limit the number and location of
broadcast stations in which one licensee may have an attributable interest.
"Attributable interests" are discussed in greater detail below. The FCC,
pursuant to the Telecommunications Act, eliminated the previously existing
"national radio ownership rule." Consequently, there now is no limit imposed by
the FCC on the number of radio stations one party may own nationally.
The "local radio ownership rule" limits the number of stations in a radio
market in which any one individual or entity may have a control position or
attributable ownership interest. Under the Telecommunications Act, the FCC
revised its rules to set the local radio ownership limits as follows:
- in markets with 45 or more commercial radio stations, a party may own up
to eight commercial radio stations, no more than five of which are in the
same service (AM or FM);
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- in markets with 30-44 commercial radio stations, a party may own up to
seven commercial radio stations, no more than four of which are in the
same service;
- in markets with 15-29 commercial radio stations, a party may own up to six
commercial radio stations, no more than four of which are in the same
service; and
- in markets with 14 or fewer commercial radio stations, a party may own up
to five commercial radio stations, no more than three of which are in the
same service, provided that no party may own more than 50% of the
commercial stations in the market.
FCC cross-ownership rules also prohibit one party from having attributable
interests in a radio station as well as in a local television station or daily
newspaper in the same market, although such limits may be waived by the FCC. In
addition, the FCC has a "cross interest" policy that may prohibit a party with
an attributable interest in one station in a market from also holding either a
"meaningful" non-attributable equity interest (e.g., non-voting stock, voting
stock, limited partnership interests) or key management position in another
station in the same market, or which may prohibit local stations from combining
to build or acquire another local station. The FCC is presently evaluating its
radio/ television, radio/newspaper and cross-interest rules and policies as well
as policies governing attributable ownership interests. Radio Unica cannot
predict whether the FCC will adopt any changes in these policies or, if so, what
the new policies will be or how they might affect Radio Unica.
ATTRIBUTION RULES. All holders of attributable interests must comply with,
or obtain waivers of, the FCC's multiple and cross-ownership rules. Under the
current FCC rules, an individual or other entity owning or having voting control
of 5% or more of a corporation's voting stock is considered to have an
attributable interest in the corporation and its stations, except that banks
holding such stock in their trust accounts, investment companies, and certain
other passive interests are not considered to have an attributable interest
unless they own or have voting control over 10% or more of such stock. The FCC
is currently evaluating whether to raise the foregoing thresholds to 10% and
20%, respectively. An officer or director of a corporation or any general
partner of a partnership also is deemed to hold an attributable interest in the
media license. Currently, when a single shareholder holds a majority of the
voting stock of a corporate licensee, the FCC considers other shareholders of
the licensee, unless they are also officers or directors of the licensee, exempt
from attribution. The FCC has asked for comments as to whether it should
continue the single majority shareholder exemption. Holders of non-voting stock
generally will not be attributed an interest in the issuing entity, and holders
of debt and instruments such as warrants, convertible debentures, options, or
other non-voting interests with rights to conversion to voting interests
generally will not be attributed such an interest unless and until such
conversion is effected. The FCC is currently considering whether it should
expand its attribution rules to reach certain of these interests under certain
circumstances. Radio Unica cannot predict whether the FCC will adopt these or
any other proposals to change its attribution policies.
Under current FCC rules, any stockholder of Radio Unica with 5% or more of
the outstanding votes (except for qualified institutional investors, for which
the 10% threshold is applicable), will be considered to hold attributable
interests in Radio Unica. Such holders of attributable interests must comply
with or obtain waivers of the FCC's multiple and cross-ownership rules.
Currently, none of the attributable stockholders, officers or directors of Radio
Unica have any other media interests besides those of Radio Unica that implicate
the FCC's multiple ownership limits except that affiliates of Warburg, Pincus
Ventures hold interests in several daily newspapers none of which is published
in communities served by Radio Unica stations.
The FCC will consider a radio station providing programming and sales on
another local radio station pursuant to a LMA to have an attributable ownership
interest in the other station for purposes of the FCC's radio multiple ownership
rules. In particular, a radio station is not permitted to enter into a LMA
giving it the right to program more than 15% of the broadcast time, on a weekly
basis, of another local radio station which it could not own under the FCC's
local radio ownership rules.
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ALIEN OWNERSHIP LIMITS. Under the Communications Act, broadcast licenses
may not be granted, transferred or assigned to any corporation of which more
than one-fifth of the capital stock is owned of record or voted by non-U.S.
citizens or entities or their representatives or foreign governments or their
representatives or by foreign corporations (collectively, "Aliens"). Where the
corporation owning the license is controlled by another corporation, the parent
corporation cannot have more than one-fourth of its capital stock owned of
record or voted by Aliens, if the FCC finds it in the public interest to refuse
or revoke the license. The FCC has issued interpretations of existing law under
which the Alien ownership restrictions in slightly modified form apply to other
forms of business organizations, including general and limited partnerships. The
FCC also prohibits a licensee from continuing to control broadcast licenses if
the licensee otherwise falls under Alien influence or control in a manner
determined by the FCC to be in violation of the Communications Act or contrary
to the public interest.
PROGRAMMING REQUIREMENTS. While the FCC has relaxed or eliminated many of
its regulatory requirements related to programming and content, radio stations
are still required to broadcast programming responsive to the problems, needs
and interests of the stations' service areas and must comply with various rules
promulgated under the Communications Act that regulate political broadcasts and
advertisements, sponsorship identifications, indecent programming and other
matters. Failure to observe these or other FCC rules can result in the
imposition of monetary forfeitures, in the grant of a "short" (less than full
term) license term or, where there have been serious or a pattern of violations,
license revocation. Until last year, the FCC imposed equal employment
opportunity ("EEO") rules on licensees. The U.S. Court of Appeals for the D.C.
Circuit found that these requirements were unconstitutional. In light of the
D.C. Circuit's decision, the Commission is considering what EEO rules and
policies to adopt.
AGREEMENTS WITH OTHER BROADCASTERS. Over the past several years a
significant number of broadcast licensees, including Radio Unica, have entered
into cooperative agreements with other stations in their markets. One typical
example is an LMA between two separately or co-owned stations, whereby the
licensee of one station programs substantial portions or all of the broadcast
day on the other licensee's station, subject to ultimate editorial and other
controls being exercised by the latter licensee, and sells advertising time
during such program segments for its own account. The FCC has held that LMAs do
not per se constitute a transfer of control and are not contrary to the
Communications Act provided that the licensee of the station maintains ultimate
responsibility for and control over operations of its broadcast station. As is
the case with Radio Unica in certain circumstances the LMA is entered into in
anticipation of the sale of the station, with the proposed acquirer providing
programming for the station while the parties are awaiting the necessary
regulatory approvals to the transaction.
FCC rules also prohibit a radio licensee from simulcasting more than 25% of
its programming on other radio stations in the same broadcast service (i.e.,
AM-AM), whether it owns both stations or operates one or both through a LMA,
where such stations serve substantially the same geographic area as defined by
the stations' principal community contours. One exception to the simulcast rule
permits unlimited simulcasting on an expanded band AM station of the programming
of a corresponding commonly owned non-expanded band AM station in the same
market. Radio Unica takes advantage of the FCC's exception to the general rule
for simulcasting on an expanded band station (WRNU) in order to simulcast in
Miami. Radio stations operated by Radio Unica in the Los Angeles market do not
serve substantially the same geographic area as defined by the FCC.
LOW POWER RADIO BROADCAST SERVICE. The FCC recently adopted a Notice of
Proposed Rulemaking seeking public comment on a proposal to establish two
classes of a low power radio service both of which would operate in the existing
FM radio band: a primary class with a maximum operating power of 1 kW and a
secondary class with a maximum power of 100 watts. These proposed low power
radio stations would have limited service areas of 8.8 miles and 3.5 miles,
respectively. The FCC also has sought public comment on the advisability of
establishing a very low power secondary
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"microbroadcasting" service with a maximum power limit of one to ten watts.
These "microradio" stations would have a service radius of only one to two
miles. The service would target "niche markets" and be possibly supported by
advertising revenue. Existing licensees, like Radio Unica, would be prohibited
from owning or having a relationship with these new stations. Implementation of
a low power radio service or microbroadcasting would provide an additional audio
programming service that could compete with Radio Unica's stations for
listeners, but the effect on Radio Unica cannot be predicted.
PROPOSED REGULATORY CHANGES. The FCC has not yet formally implemented
certain of the changes to its rules necessitated by the Telecommunications Act.
Moreover, the Congress and the FCC have under consideration, and may in the
future consider and adopt, new laws, regulations and policies regarding a wide
variety of matters that could, directly or indirectly:
- affect the operation, programming, technical requirements, ownership and
profitability of Radio Unica and its radio broadcast stations;
- result in the loss of audience share and advertising revenues of Radio
Unica's radio broadcast stations;
- affect the ability of Radio Unica to acquire additional radio broadcast
stations or finance such acquisitions;
- affect cooperative agreements and/or financing arrangements with other
radio broadcast licensees; or
- affect Radio Unica's competitive position in relationship to other
advertising media in its markets.
Such matters include, for example:
- changes to the license, authorization and renewal process;
- proposals to revise the FCC's equal employment opportunity rules and other
matters relating to minority and female involvement in broadcasting;
- proposals to alter the benchmark or thresholds for attributing ownership
interest in broadcast media;
- proposals to change rules or policies relating to political broadcasting;
- changes to technical and frequency allocation matters, including those
relative to the implementation of digital audio broadcasting on both a
satellite and terrestrial basis;
- proposals to restrict or prohibit the advertising of beer, wine and other
alcoholic beverages on radio;
- changes in the FCC's cross-interest, multiple ownership, Alien ownership
and cross-ownership policies; and
- proposals to limit the tax deductibility of advertising expenses by
advertisers.
Although Radio Unica believes the foregoing discussion is sufficient to
provide the reader with a general understanding of all material aspects of FCC
regulations that affect Radio Unica, it does not purport to be a complete
summary of all provisions of the Communications Act or FCC rules and policies.
Reference is made to the Communications Act, FCC rules, and the public notices
and rulings of the FCC for further information.
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SUBSIDIARIES AND RELATED ENTITIES
Radio Unica Communications Corp. is a holding company, the sole asset of
which is all of the issued and outstanding stock of Radio Unica Corp. Radio
Unica Corp. owns stock of various subsidiaries, each of which owns the assets of
one of our radio stations. Each of these subsidiaries owns all of the issued and
outstanding shares of a subsidiary that owns the license for such radio station.
LEGAL PROCEEDINGS
We are involved from time to time in various routine legal and
administrative proceedings and threatened legal and administrative proceedings
incidental to the ordinary course of our business. We believe the resolution of
such matters will not have a material adverse effect on our business, financial
condition or results of operations.
EMPLOYEES
As of June 30, 1999, approximately 254 persons were employed full-time.
Although we refer to these persons as our employees, for administrative
convenience, substantially all of these persons are employees of record, for our
benefit, of a company that provides payroll and employee benefits services. As
of such date, none of our employees were represented by unions. We believe our
relations with our employees are good.
STATION AND OFFICE FACILITIES
Our corporate headquarters are located in Miami, Florida. The types of
properties required to support each of our owned and/or operated stations
include offices, studios and towers where broadcasting transmitters and antenna
equipment are located. We lease space in the building housing our corporate
headquarters under a lease expiring in 2004. The studios and offices of our
owned and operated stations and of the stations operated by us under LMAs are
located in leased facilities with lease terms expiring 2000 to 2007.
We own the transmitter, building and equipment and, in certain markets, the
building and land for each of our owned and operated stations. The transmitter
sites for our stations are material to our overall operations. We believe that
our properties are in good condition and are suitable for their operations;
however, we continually seek opportunities to upgrade our properties.
48
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of individuals who
are directors, executive officers and key employees of Radio Unica:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- ---------------------------------------------------------------------------
<S> <C> <C>
Joaquin F. Blaya.............. 53 Chairman of the Board and Chief Executive Officer
Jose C. Cancela............... 41 President and Director
Steven E. Dawson.............. 35 Executive Vice President, Chief Financial Officer, Secretary and Director
Andrew C. Goldman............. 52 Executive Vice President, Business Affairs and Director
Blaine R. Decker.............. 47 Executive Vice President, Network Sales
Omar Marchant................. 64 Vice President, Programming of Radio Unica Network, Inc.
Adriana Grillet............... 46 Vice President, Affiliate Relations of Radio Unica Network, Inc.
Roy Pressman.................. 45 Vice President, Engineering of Radio Unica Network, Inc.
John D. Santoleri............. 35 Director
Sidney Lapidus................ 61 Director
</TABLE>
Each director holds office until the next annual meeting of stockholders and
until his successor has been duly elected and qualified.
JOAQUIN F. BLAYA. Mr. Blaya has been our Chairman of the Board of Directors
and Chief Executive Officer since Radio Unica was founded in 1996. From 1995
through 1996, Mr. Blaya served as the President of Solomon International Latino,
the Latin American division of Solomon International Enterprises, an
international telecommunications company. From 1992 through 1995, Mr. Blaya was
the President, Chief Executive Officer and a member of the Board of Directors of
Telemundo, the second largest U.S. Spanish-language television network. Prior to
that, Mr. Blaya was employed by Univision since 1971 in various positions, the
latest being President and a member of Univision's Board of Directors. Mr. Blaya
is responsible for many of the most popular Spanish language programs on
Univision and Telemundo including SABADO GIGANTE, CRISTINA, PRIMER IMPACTO,
SEVCEC and the national news for both Spanish-language television networks.
Additionally, he launched TeleNoticias, the most widely distributed
Spanish-language cable news channel in the Americas.
JOSE C. CANCELA. Mr. Cancela has been our President since September 1998.
He initially joined us in July 1998 serving as President, Network. From 1992
through 1998, Mr. Cancela served as Executive Vice President of Telemundo,
responsible for the overall management of Telemundo's owned and operated
television stations in Puerto Rico and Miami. From 1990 to 1992, Mr. Cancela was
the Vice President of the Univision Southwest Station Group.
STEVEN E. DAWSON. Mr. Dawson has been our Chief Financial Officer,
Executive Vice President, Secretary and a Director since August 1997. From 1991
through 1997, Mr. Dawson was employed by Telemundo in several positions, the
most recent being Vice President, Finance and Controller. Prior to that, Mr.
Dawson was employed at Coopers & Lybrand since 1986. Mr. Dawson is a Certified
Public Accountant.
ANDREW C. GOLDMAN. Mr. Goldman has been our Director and Executive Vice
President, Business Affairs since August 1997. Mr. Goldman served in different
capacities for Univision from 1981 to 1993 including as Executive Vice President
and President of Galavision. Prior to joining Univision, Mr. Goldman was the
Senior Vice President of Marketing at Teleprompter Corporation. Mr. Goldman has
served as President and Director of Cable Television Administration and
Marketing Society (CTAM), and as Founder and Director of the Cable Advertising
Bureau (CAB).
49
<PAGE>
BLAINE R. DECKER. Mr. Decker has served as our Executive Vice President,
Network Sales since October 1997. He was previously employed by KWHY-TV--Los
Angeles as General Sales Manager from November 1995 through October 1997. From
February 1984 through February 1995, Mr. Decker was employed by Univision as
Senior Vice President, Network Sales and in other management positions. Prior to
joining Univision, Mr. Decker was employed by Arbitron Ratings Company as Vice
President of Sales and Marketing from January 1980 through February 1984.
OMAR MARCHANT. Mr. Marchant has served as Radio Unica Network, Inc.'s Vice
President, Programming and as Creative Director since September 1997. Mr.
Marchant has been employed in various media-related capacities including TV
host, radio disc jockey, radio director, producer and creator of jingles, and
producer of TV specials for the Latin and general market. Additionally, Mr.
Marchant served as Senior Vice President and Creative Director for Telemundo
from June 1992 through July 1994 and as Vice President and Director of
Promotions and Special Events or in other capacities for Univision from
September 1972 through July 1994.
ADRIANA GRILLET. Ms. Grillet has served as Radio Unica Network, Inc.'s Vice
President, Affiliate Relations since August 1997. Ms. Grillet had previously
served as Director of Affiliate Relations for Caracol (Latino Broadcasting
Company) from April 1996 through July 1997 and CBS--Americas from February 1992
through April 1996. From 1992 through 1996 Ms. Grillet also served as a program
production consultant at WADO-NY and from 1988 through 1992 as Senior Program
Producer.
ROY PRESSMAN. Mr. Pressman has served as Radio Unica Network, Inc.'s Vice
President, Engineering since December 1997. Mr. Pressman has over 20 years of
experience in building and managing radio station facilities. From August 1997
to December 1997, Mr. Pressman served as Director of Engineering at Clear
Channel Communications, Inc. He was employed as Vice President, Engineering at
Paxson Communications Corp., the predecessor to Clear Channel, from August 1993
to July 1997. Prior to that, Mr. Pressman was employed as Director of
Engineering at Gilmore Broadcasting, Inc.
JOHN D. SANTOLERI. Mr. Santoleri has been a Director since August 1997. Mr.
Santoleri is a Managing Director and a member of E.M. Warburg, Pincus & Co. LLC
("Warburg"), where he has been employed since 1989. Warburg is the managing
entity of Warburg, Pincus Ventures, our controlling stockholder. Prior to
joining Warburg, Mr. Santoleri was a Vice President of the New York based real
estate consulting firm, The Harlan Company, Inc. Mr. Santoleri is also a
director of Axxess Technologies, Inc., Grubb & Ellis Company and NexCycle, Inc.
SIDNEY LAPIDUS. Mr. Lapidus, a Director since September 1998, is a Managing
Director and a member of Warburg, where he has been employed since 1967. Mr.
Lapidus is also a director of Caribiner International, Inc., Four Media Company,
Grubb & Ellis Company, Information Holdings Inc., Knoll Inc., Lennar Corp. and
several private companies.
BOARD COMMITTEES
The Board intends to establish an Audit Committee and a Compensation
Committee.
The Compensation Committee will review and recommend for Board approval
grants of options pursuant to our stock option plan, decide salaries and
incentive compensation for our employees and consultants, and recommend
compensation for executive officers.
The Audit Committee will recommend to the Board the selection of independent
auditors, review the results and scope of the audit and other services provided
by our independent auditors, and review and evaluate our audit and control
functions.
50
<PAGE>
EXECUTIVE COMPENSATION
The following sets forth all compensation paid by Radio Unica for each year
since it began operations to its Chief Executive Officer and each of the four
other most highly compensated executive officers of Radio Unica as of the end of
1998, and to one executive officer whose employment terminated prior to the end
of 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
--------------------------------------- COMPENSATION
OTHER -------------
ANNUAL STOCK ALL OTHER
SALARY BONUS COMPENSATION OPTIONS COMPENSATION(1)
NAME AND PRINCIPAL POSITION YEAR $ $ $ # $
- -------------------------------------------- --------- --------- --------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Joaquin F. Blaya............................ 1998 350,000 160,000 -- 1,058,022 5,000
Chief Executive Officer 1997 145,834 -- -- -- 4,375
Jose C. Cancela............................. 1998 168,500 -- -- 323,743 438
President 1997 -- -- -- -- --
Steven E. Dawson............................ 1998 200,000 -- -- 323,743 4,006
Chief Financial Officer 1997 88,667 -- -- -- 2,065
Blaine R. Decker............................ 1998 165,000 65,100 -- 149,956 --
Executive Vice President 1997 52,500 -- -- -- --
Andrew C. Goldman........................... 1998 129,168 -- -- 340,470 --
Executive Vice President 1997 50,019 -- -- -- --
Herbert M. Levin(2)......................... 1998 183,312 -- -- -- --
Chief Operating Officer and President 1997 114,583 -- -- -- 2,005
</TABLE>
- ------------------------
(1) Consists of contributions under a 401(k) Plan.
(2) Mr. Levin resigned from his position as Chief Operating Officer, President
and Director in August 1998 and his options were terminated.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the previous two fiscal years, Radio Unica did not have a
compensation committee or other Board committee performing similar functions.
During that period, the entire board of directors had authority to consider
executive compensation matters.
DIRECTOR COMPENSATION
FEES. We intend to establish fees for all non-employee directors. We also
will reimburse our non-employee directors for reasonable expenses they incur in
attending Board or Committee meetings.
NON-COMPETE AGREEMENTS
Joaquin F. Blaya and Steven E. Dawson each entered into separate
Non-Competition and Confidentiality Agreements on August 13, 1997 pursuant to
which they have each agreed, among other things, that: (1) until the later of
(a) August 13, 2002 or (b) two years after the termination of their respective
employment (if terminated for cause or if they voluntarily resign) they will not
engage directly or indirectly in any competitive business; (2) during the two
year period after their respective termination (if terminated for cause or if
they voluntarily resign) they will not hire, offer to hire or entice away any of
our officers, employees, affiliates or agents; and (3) they will not at any time
divulge, furnish, use, publish or make accessible to others any of our
confidential information.
51
<PAGE>
STOCK OPTION PLAN
Our Board of Directors and stockholders approved our 1998 stock option plan
which provides directors, officers, key employees, consultants and independent
contractors with additional incentives by increasing their ownership interests
in Radio Unica. Individual awards under our plan may take the form of:
- incentive stock options,
- non-qualified stock options.
The compensation committee administers the plan and selects the individuals
who will receive options and the terms and conditions of those options. The
maximum number of shares of common stock that may be issued under the plan may
not exceed 5,000,000 shares. Shares of common stock subject to awards which have
expired, terminated or been canceled or forfeited are available for issuance or
use in connection with future awards.
The plan may be amended by the board of directors without the consent of the
stockholders, except that any amendment, although effective when made, will be
subject to stockholder approval if required by any federal or state law or
regulation or by the rules of any stock exchange or automated quotation system
on which the common stock may then be listed or quoted. To date, 3,416,284
options have been granted under our 1998 stock option plan.
OPTIONS GRANTED
The table below shows information regarding the grant of options made to the
executive officers named in the Summary Compensation Table during the fiscal
year ended December 31, 1998.
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------
% GRANTS TO EXERCISE GRANT DATE
NUMBER ALL PRICE PER EXPIRATION PRESENT
NAME GRANTED EMPLOYEES SHARE ($) DATE VALUE(1)
- ----------------------------------------------- ---------- --------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Joaquin F. Blaya............................... 1,058,022 31.0 .03 9/29/07 $ 10,580.22
Jose C. Cancela................................ 323,743 9.5 .03 9/29/07 $ 3,237.43
Steven E. Dawson............................... 323,743 9.5 .03 9/29/07 $ 3,237.43
Blaine R. Decker............................... 149,956 4.4 .03 9/29/07 $ 1,499.56
Andrew C. Goldman.............................. 340,470 10.0 .03 9/29/07 $ 3,404.70
Herbert M. Levin............................... 0 0.0 -- -- --
</TABLE>
- ------------------------
(1) The grant date present value per option was calculated using a modified
Black-Scholes option valuation model, using the assumptions set forth in
Note 11 to the notes to our consolidated financial statements.
52
<PAGE>
The table below sets forth information for the executive officers named in
the Summary Compensation Table concerning option exercises during 1998 and
outstanding options at December 31, 1998.
AGGREGATED OPTION/SAR EXERCISES IN 1998 AND
DECEMBER 31, 1998 OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF SECURITIES OPTIONS/SARS
UNDERLYING UNEXERCISED AT
OPTIONS/SARS AT DECEMBER
SHARES DECEMBER 31, 1998(#) 31, 1998($)
ACQUIRED ON VALUE -------------------------- -----------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE
- ----------------------------------------- ----------------- --------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Joaquin F. Blaya......................... 0 -- 511,221 546,800 0
Jose C. Cancela.......................... 0 -- 181,300 142,443 0
Steven E. Dawson......................... 0 -- 181,300 142,443 0
Blaine R. Decker......................... 0 -- 14,208 135,748 0
Andrew C. Goldman........................ 0 -- 215,090 125,379 0
Herbert M. Levin......................... 0 -- 0 0 --
<CAPTION>
NAME UNEXERCISABLE
- ----------------------------------------- -------------
<S> <C>
Joaquin F. Blaya......................... 0
Jose C. Cancela.......................... 0
Steven E. Dawson......................... 0
Blaine R. Decker......................... 0
Andrew C. Goldman........................ 0
Herbert M. Levin......................... --
</TABLE>
CERTAIN STOCKHOLDERS
The following table summarizes information regarding the beneficial
ownership of our outstanding common stock as of June 30, 1999 for
- each person or group that we know owns more than 5% of the common stock,
- each of our directors,
- our chief executive officer and four other highest paid executive
officers, and
- all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with rules of the SEC and
includes shares over which the indicated beneficial owner exercises voting
and/or investment power. The shares listed below assume that all our preferred
stock is converted to common stock immediately prior to the offering. Shares of
common stock subject to options currently exercisable or exercisable within 60
days are deemed outstanding for computing the percentage ownership of the person
holding the options but are not deemed outstanding for computing the percentage
ownership of any other person. Except as otherwise indicated, we believe the
beneficial owners of the common stock listed below, based on information
furnished by them, have sole voting and investment power with respect to the
number of shares listed opposite their names, and can be reached at our
principal offices.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES OUTSTANDING
NUMBER OF SHARES
BENEFICIALLY ------------------------------------
NAME OWNED BEFORE OFFERING AFTER OFFERING
- --------------------------------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Warburg, Pincus Ventures, L.P. (a) (b).........................
Joaquin F. Blaya (c)...........................................
Jose C. Cancela (d)............................................ * *
Steven E. Dawson (d)...........................................
Blaine R. Decker (e)........................................... 14,208 * *
Andrew C. Goldman (f)..........................................
Sidney Lapidus (a) (b)......................................... 0 -- --
John D. Santoleri (a) (b)...................................... 0 -- --
All Directors and Executive Officers as a Group (g) (10
persons).....................................................
</TABLE>
- ------------------------
* Less than 1%.
(a) The business address for such person is 466 Lexington Avenue, New York, New
York 10017.
53
<PAGE>
(b) The sole general partner of Warburg, Pincus Ventures is Warburg, Pincus &
Co. ("WP"), a New York general partnership. E. M. Warburg, Pincus & Co. LLC
("Warburg") manages Warburg, Pincus Ventures. The members of Warburg are
substantially the same as the partners of WP. WP, as the sole general
partner of Warburg, Pincus Ventures, has a 15% interest in the profits of
Warburg, Pincus Ventures. Mr. Lapidus and Mr. Santoleri are each Managing
Directors and members of Warburg and general partners of WP. As such, Mr.
Lapidus and Mr. Santoleri may each be deemed to have an indirect pecuniary
interest in an indeterminate portion of the shares beneficially owned by
Warburg, Pincus Ventures.
(c) Includes 511,221 shares issuable upon exercise of options that are currently
exercisable or exercisable within sixty days of this prospectus.
(d) Includes 181,300 shares issuable upon exercise of options that are currently
exercisable or exercisable within sixty days of this prospectus.
(e) Consists of 14,208 shares issuable upon exercise of options that are
currently exercisable or exercisable within sixty days of this prospectus.
(f) Includes 215,090 shares issuable upon exercise of options that are currently
exercisable or exercisable within sixty days of this prospectus.
(g) Includes 1,134,298 shares issuable upon exercise of options that are
currently exercisable or exercisable within sixty days of this prospectus.
54
<PAGE>
CERTAIN TRANSACTIONS
PURCHASE OF RADIO STATION KXYZ(AM); TRANSACTIONS INVOLVING BLAYA, INC.
Blaya, Inc., a Delaware corporation, was formed in October 1997 to
facilitate the purchase of radio station KXYZ (AM) located in Houston, Texas.
Upon such formation, we acquired 499 shares of Blaya, Inc.'s common stock (which
represented a 49.9% interest in Blaya, Inc.) and Joaquin F. Blaya acquired 501
shares of Blaya, Inc.'s common stock (which represented a 50.1% interest in
Blaya, Inc.). On December 24, 1997, Blaya, Inc. entered into an asset purchase
agreement with 13 Radio to acquire substantially all of the assets necessary to
operate KXYZ for a cash purchase price of $6.4 million. In connection with the
purchase, we advanced $1,016,590 to Blaya, Inc.
On March 6, 1998, we 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 Blaya, Inc.'s common
stock and $640,000. On the same day, we loaned Mr. Blaya $160,000 in exchange
for a 10 year 9% promissory note. These proceeds were used by Mr. Blaya
(together with the surrender of 501 shares of Blaya, Inc.'s common stock then
held by him) to acquire 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.
On March 10, 1998, we loaned $5.7 million to Blaya, Inc. in exchange for a
promissory note. The proceeds were used to complete the asset purchase agreement
with 13 Radio and to pay related closing costs. The promissory note bore
interest at 9%, compounded quarterly and payable annually, and was secured by
substantially all of the assets of Blaya, Inc.
On September 11, 1998, we purchased all of Mr. Blaya's interest in Blaya,
Inc. for $160,000 and Mr. Blaya repaid the $160,000, plus interest, he owed to
us pursuant to the 10 year 9% promissory note. Effective September 11, 1998, the
$5.7 million promissory note was cancelled by us and accounted for as a
contribution to Blaya, Inc.'s capital.
Mr. Blaya did not realize any gain or profit from these transactions.
INITIAL INVESTMENTS IN RADIO UNICA; AGREEMENTS AMONG STOCKHOLDERS
On August 11, 1997, Warburg, Pincus Ventures, Joaquin F. Blaya, Herbert M.
Levin, Andrew C. Goldman, and other investors, entered into a securities
purchase agreement with us pursuant to which they purchased an aggregate of
7,770,000 shares of our common stock and 207,000 shares of our preferred stock.
The purchase price for the common stock was $0.03 per share and the purchase
price for the preferred stock was $100 per share. The investors had the option
to acquire additional preferred and common stock.
The securities purchase agreement contained our obligations to provide
information to the investors and to obtain their approval for various actions
and provided various rights to the investors. Except for registration rights,
this agreement and a related stockholder agreement entered into among all our
stockholders, will be terminated on the date of this offering. As part of this
offering, our outstanding shares of preferred stock will be converted into an
aggregate of shares of common stock.
LOANS TO RADIO UNICA
On July 15, 1997, Joaquin F. Blaya, Herbert M. Levin and Andrew C. Goldman,
each an executive officer of Radio Unica at that time, and Barrett Alley, a
stockholder, loaned us an aggregate of $100,000. The loan was due upon demand
and bore interest at a rate of 9% per annum. In April 1998, we fully repaid the
loan by issuing Messrs. Blaya, Levin, Goldman and Alley 15,016, 15,016,
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<PAGE>
6,717 and 2,766 shares of our common stock, respectively, and 401.7816,
401.7816, 179.7444 and 74.0124 shares of our preferred stock, respectively.
On July 24, 1997, Warburg, Pincus Ventures loaned us $265,000. The loan was
due upon demand and bore interest at a rate of 8% per annum. The funds from the
loan were used to pay a deposit to Univision Network Limited Partnership
pursuant to a radio broadcasting rights agreement, dated as of July 30, 1997,
entered into by and between Univision and us for the exclusive Spanish-language
radio broadcast rights in the United States for the 1998 World Cup. Warburg,
Pincus Ventures also arranged for the issuance of a letter of credit in the
amount of $2,385,000 to Univision on our behalf to secure our payments under
this agreement. In April 1998, we fully repaid the loan by issuing Warburg,
Pincus Ventures 103,794 shares of common stock and 2,777.1788 shares of
preferred stock. On July 9, 1998, the original letter of credit was replaced by
a letter of credit issued by Canadian Imperial Bank of Commerce for the
remaining amount of $795,000.
On April 3, April 27, May 19 and June 16, 1998, Warburg, Pincus Ventures
loaned us $5,000,000, $11,000,000, $5,000,000 and $795,000 in exchange for
promissory notes. The funds from the promissory notes were primarily used to
finance the acquisition of KIQI from Oro and the acquisition of WNMA from
One-on-One. Each of the promissory notes was due upon demand and bore interest
at the rate of 10% per annum. On June 30, 1998, we repaid $15,000,000 of the
promissory notes plus accrued interest by issuing Warburg, Pincus Ventures
5,638,395 shares of common stock and 150,865.1507 shares of preferred stock. The
remaining $6,795,000 due under the promissory notes was repaid in July 1998 from
amounts borrowed under our credit facility.
DESCRIPTION OF CAPITAL STOCK
The following summarizes important provisions of our capital stock and our
certificate of incorporation and bylaws, each of which will be in effect prior
to the closing of this offering. This summary is not complete, and is qualified
by our certificate of incorporation and bylaws, copies of which have been filed
as exhibits to the registration statement of which this prospectus is a part,
and by the provisions of applicable law.
Our authorized capital stock consists of 40,000,000 shares of common stock,
par value $.01 per share, and 450,000 shares of preferred stock, par value $.01
per share.
COMMON STOCK
As of June 30, 1999, there were 13,226,760 shares of common stock
outstanding and held of record by seven stockholders.
Holders of common stock are entitled to one vote per share in the election
of directors and on all other matters on which stockholders are entitled or
permitted to vote. Holders of common stock are not entitled to cumulative voting
rights. Therefore, holders of a majority of the shares voting for the election
of directors can elect all the directors. Subject to the terms of any
outstanding series of preferred stock and to the terms of our credit facility,
the holders of common stock are entitled to dividends in amounts and at times as
may be declared by the Board of Directors out of funds legally available for
distribution. Upon liquidation or dissolution, holders of common stock are
entitled to share ratably in all net assets available for distribution to
stockholders after payment of any liquidation preferences to holders of
preferred stock. Holders of common stock have no redemption, conversion or
preemptive rights.
PREFERRED STOCK
Concurrently with this offering, all our issued and outstanding shares of
preferred stock will be converted into common stock. The Board of Directors has
the authority to issue up to
56
<PAGE>
shares of preferred stock and to fix the price, rights, preferences, privileges
and restrictions, including voting rights, of those shares without any further
vote or action by the stockholders. The rights of the holders of our common
stock will be subject to, and may be adversely affected by, the rights of the
holders of any preferred stock that we may issue in the future. The issuance of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, may have the effect of
delaying, deferring or preventing a change in control of Radio Unica, may
discourage bids for our common stock at a premium over the market price of the
common stock and may adversely affect the market price of and the voting and
other rights of the holders of the common stock. We have no present plans to
issue shares of preferred stock.
DELAWARE ANTI-TAKEOVER LAW AND CHARTER PROVISIONS
Provisions of our certificate of incorporation are intended to enhance
continuity and stability in our Board of Directors and in our policies, but
might have the effect of delaying or preventing a change in control of Radio
Unica and may make more difficult the removal of incumbent management even if
the transactions could be beneficial to the interests of stockholders. A summary
description of these provisions follows:
CHANGE IN CONTROL. We are subject to the provisions of Section 203 of the
DGCL, an anti-takeover law. In general, the statute prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. For purposes of Section
203, a "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder, and an
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior, did own) 15% or more of the
corporation's voting stock.
The provisions of Section 203, together with the ability of our Board of
Directors to issue preferred stock without further stockholder action, could
delay or frustrate the removal of incumbent directors or a change in control of
our company. The provisions also could discourage, impede or prevent a merger,
tender offer or proxy contest, even if this event would be favorable to the
interests of stockholders. Our stockholders, by adopting an amendment to the
certificate of incorporation or bylaws, may elect not to be governed by Section
203 effective 12 months after adoption. Neither our certificate of incorporation
nor bylaws currently exclude us from the restrictions imposed by Section 203.
AUTHORITY TO ISSUE PREFERRED STOCK. The certificate of incorporation
authorizes the Board, without stockholder approval, to establish and to issue
shares of one or more series of preferred stock, each series having the voting
rights, dividend rates, liquidation, redemption, conversion and other rights as
may be fixed by the Board.
LIMITATION OF DIRECTOR LIABILITY. Section 102(b)(7) of the DGCL authorizes
corporations to limit or eliminate the personal liability of directors to
corporations and their stockholders for monetary damages for breach of
directors' fiduciary duty of care. Although Section 102(b) does not change
directors' duty of care, it enables corporations to limit available relief to
equitable remedies such as injunction or rescission. Our certificate of
incorporation limits the liability of directors to the company or its
stockholders (in their capacity as directors but not in their capacity as
officers) to the fullest extent permitted by Section 102(b). Specifically, our
directors will not be personally liable for monetary damages for breach of a
director's fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to us or our
stockholders,
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
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<PAGE>
- for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the DGCL, or
- for any transaction from which the director derived an improper personal
benefit.
INDEMNIFICATION. To the maximum extent permitted by law, our certificate of
incorporation and bylaws provide for mandatory indemnification of directors and
permit indemnification of our officers, employees and agents against all
expense, liability and loss to which they may become subject or which they may
incur as a result of being or having been our director, officer, employee or
agent. In addition, we may advance or reimburse directors, officers, employees
and agents for expenses incurred by them as a result of indemnifiable claims.
REGISTRATION RIGHTS
Warburg, Pincus Ventures has been granted registration rights by us pursuant
to which Warburg, Pincus Ventures may require us, from time to time after the
expiration of 180 days from this offering, to register for sale to the public
under the Securities Act any shares of common stock owned by them. In addition,
Warburg, Pincus Ventures and other stockholders owning an aggregate of shares
have piggyback registration rights that allow them to include their shares of
common stock in registration statements initiated by us. These registration
rights are subject to conditions and limitations, including the right of the
underwriters of an offering to limit the number of shares to be included in a
registration statement.
TRANSFER AGENT
The transfer agent and registrar for the common stock is .
DESCRIPTION OF INDEBTEDNESS
BANK CREDIT FACILITY
On July 8, 1998, Radio Unica entered into a credit facility providing for up
to $20 million of availability with Canadian Imperial Bank of Commerce or an
affiliate ("CIBC"). The credit facility will mature on the earlier of 91 days
before the first cash interest is due on our senior discount notes or September
30, 2002. Amounts outstanding under the credit facility bear interest at a rate
of either (a) the higher of (x) CIBC's prime rate and (y) the Federal Funds Rate
plus 0.50% plus, in the case of clause (x) or (y) 1.25% or (b) LIBOR plus 2.50%.
Our obligations under the credit facility have been guaranteed by all of our
subsidiaries and have been secured by (a) first priority and perfected liens on
and security interests in all of our present and future assets and (b) a pledge
of the stock of all of our wholly-owned subsidiaries. We will pay certain fees
in connection with the credit facility, including a commitment fee of 0.50% per
annum on the aggregate unused portion of the credit facility.
The credit facility contains certain financial and operational covenants and
other restrictions with which we must comply, including, among others, (a)
limitations on indebtedness, guarantees, liens, negative pledges, sales and
leasebacks, mergers, acquisitions and dispositions, transactions with
affiliates, dividends, investments, changes in business lines and amendments of
material agreements and (b) requirements to maintain certain minimum
loan-to-value and senior leverage ratios.
The credit facility contains customary events of default, including 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 us, and any
security interest or guarantee ceases to be in effect. The credit facility also
provides that an event of default will occur upon the occurrence of a "change of
control".
58
<PAGE>
SENIOR DISCOUNT NOTES
On July 27, 1998, we sold $158,088,000 aggregate principal amount at
maturity of 11 3/4% senior discount notes due August 1, 2006. Cash interest on
these 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 the sale of these notes, we received net proceeds of approximately $94.4
million after deducting issuance expenses of approximately $5.6 million.
The notes are general senior unsecured obligations and rank PARI PASSU in
right of payment with all our existing and future unsecured and unsubordinated
indebtedness and senior in right of payment to any of our subordinated
indebtedness. The notes are guaranteed on a senior unsecured basis, as to
payment of principal, premium if any, and interest, by our subsidiaries on a
full, unconditional, joint and several basis. The notes are redeemable at any
time and from time to time at our option, 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, we may redeem, at our option, up
to 35% of the aggregate principal amount at maturity of the notes with the net
proceeds of one or more equity offerings, at 111.75% of the accreted value
thereof, as long as notes representing at least $65.0 million of the aggregate
initial accreted value of the notes originally issued remain 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, we are required to offer to repurchase the notes
at a purchase price equal to (a) 101% of the accreted value thereof, if the
purchase date is on or prior to August 1, 2002, or (b) 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.
The notes restrict, among other things, our 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 our assets or change the business conducted by us.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for our common
stock. We cannot predict the effect, if any, that sales of shares or the
availability of shares for sale will have on the market price of our common
stock. Nevertheless, sales of substantial amounts of our common stock in the
public market, or the perception that such sales might occur, could adversely
affect the market price of our common stock and could impair our future ability
to raise capital through the sale of our equity securities.
Upon the closing of this offering, we will have an aggregate of
shares of our common stock outstanding, assuming no exercise of
outstanding options. All of the shares sold in this offering will be
freely tradable without restriction or further registration under the Securities
Act, except that any shares purchased by our "affiliates," as that term is
defined in Rule 144 under the Securities Act, may only be sold in compliance
with the limitations described below. Shares of common stock purchased by our
affiliates will be "restricted securities" under Rule 144. Restricted securities
may be sold in the public market only if registered or if they qualify for an
exemption from registration under Rules 144 or 701 promulgated under the
Securities Act. Warburg, Pincus Ventures and other stockholders have
registration rights that allow them to initiate a registration statement or to
include their shares of common stock in a registration statement filed by us.
The number of shares to be sold
59
<PAGE>
in the public market could increase if such rights are exercised. See
"Description of Capital Stock-Registration Rights."
LOCK-UP AGREEMENTS
Prior to the closing of this offering, all of our officers, directors and
securityholders will have signed agreements under which they may not, for a
period of 180 days after the date of this prospectus, directly or indirectly
transfer or dispose of any shares of common stock or any securities convertible
into or exchangeable or exercisable for shares of common stock. The shares could
be available for resale immediately upon the expiration of the 180-day period if
they are available for resale under Rule 144. Transfers or dispositions can be
made sooner with the prior written consent of Salomon Smith Barney Inc.
RULE 144
In general, under Rule 144, a person (or persons whose shares are required
to be aggregated), including an affiliate, who has beneficially owned shares for
at least one year is entitled to sell, within any three-month period commencing
90 days after the date of this prospectus, a number of shares that does not
exceed the greater of:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately shares after the closing of this offering;
or
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a notice on Form 144 with respect
to such sale.
Sales under Rule 144 also are subject to manner-of-sale provisions and notice
requirements and to the availability of current public information about us.
RULE 144(K)
Under paragraph (k) of Rule 144, persons who are not our affiliate at any
time during the 90 days preceding a sale and who have beneficially owned the
shares proposed to be sold for at least two years are entitled to sell such
shares without complying with the manner-of-sale, public information, volume
limitation or notice provisions of Rule 144. The two-year holding period
includes the holding period of any prior owner who is not our affiliate.
Therefore, unless otherwise restricted, shares covered by Rule 144(k) may be
sold immediately upon the closing of this offering.
RULE 701
In general, under Rule 701, any of our employees, consultants or advisors
who purchase shares from us in connection with a compensatory stock or option
plan or other written agreement is eligible to resell such shares 90 days after
the date of this prospectus in reliance on Rule 144, but without compliance with
other restrictions, including the holding period, contained in Rule 144.
STOCK OPTIONS
As of the date of this prospectus, options to purchase a total of 3,416,284
shares of common stock are outstanding, of which options to purchase 1,134,298
shares are currently exercisable. Of the options to purchase 2,281,986 shares of
common stock that are not currently exercisable, options to purchase 1,319,618
shares of common stock shall immediately vest and become exercisable upon the
closing of this offering. Upon the closing of this offering, we intend to file a
registration statement to register for resale the shares of common stock
reserved for issuance under the stock option plan. That registration statement
will automatically become effective upon filing. Upon the expiration of the
lock-up agreements described above, at least shares of common stock will
be subject to vested
60
<PAGE>
options. Accordingly, shares issued upon the exercise of stock options granted
under the stock option plan, which are being registered under that registration
statement, will, giving effect to vesting provisions and in accordance with Rule
144 volume limitations applicable to our affiliates, be eligible for resale in
the public market from time to time immediately after the lock-up agreements
referred to above expire.
61
<PAGE>
UNDERWRITING
Subject to the terms and conditions stated in the Underwriting Agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and Radio Unica has agreed to sell to each underwriter, the number of
shares set forth opposite their respective names:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
Salomon Smith Barney Inc...................................................
Bear, Stearns & Co. Inc....................................................
CIBC World Markets.........................................................
Donaldson, Lufkin & Jenrette ..............................................
-----------------
Total..................................................................
-----------------
-----------------
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
approval of various legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the shares (other than those
covered by the over-allotment option described below) if they purchase any of
the shares.
The underwriters, for whom Salomon Smith Barney Inc., Bear, Stearns & Co.
Inc., CIBC World Markets and Donaldson, Lufkin & Jenrette are acting as
representatives, propose to offer some of the shares directly to the public at
the public offering price set forth on the cover page of this prospectus and
some of the shares to certain dealers at the public offering price less a
concession not in excess of $ per share. The underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per share on sales to
certain other dealers. If all of the shares are not sold at the initial offering
price, the representatives may change the public offering price and the other
selling terms.
Warburg, Pincus Ventures, L.P. has granted to the underwriters an option,
exercisable for 30 days from the date of this prospectus, to purchase up to
additional shares of common stock at the public offering price less the
underwriting discount. The underwriters may exercise such option solely for the
purpose of covering over-allotments, if any, in connection with this offering.
To the extent such option is exercised, each underwriter will be obligated,
subject to certain conditions, to purchase a number of additional shares
approximately proportionate to such underwriter's initial purchase commitment.
Radio Unica, its officers and directors and certain stockholders of Radio
Unica, have agreed that, for a period of 180 days from the date of this
prospectus, they will not, without the prior written consent of Salomon Smith
Barney Inc., dispose of or hedge any shares of common stock of Radio Unica or
any securities convertible into or exchangeable for common stock. Salomon Smith
Barney Inc. in its sole discretion may release any of the securities subject to
these lock-up agreements at any time without notice.
At our request certain of the underwriters have reserved up to % of the
shares of common stock (the "Directed Shares") for sale at the initial public
offering price to persons who are directors, officers or employees of Radio
Unica, or who are otherwise associated with us and our affiliates, and who have
advised us of their desire to purchase such shares. The number of shares of
common stock available for sale to the general public will be reduced to the
extent of sales of Directed Shares to any of the persons for whom they have been
reserved. Any shares not so purchased will be offered by the underwriters on the
same basis as all other shares of common stock offered hereby. We have agreed to
indemnify those certain underwriters against certain liabilities and expenses,
including liabilities under the Securities Act, in connection with the sales of
the Directed Shares.
Prior to this offering, there has been no market for the common stock.
Consequently, the initial public offering price for the shares was determined by
negotiations among Radio Unica, certain
62
<PAGE>
stockholders, and the representatives. Among the factors considered in
determining the initial public offering price were Radio Unica's results of
operations, its current financial condition, its future prospects, its markets,
the economic conditions in and future prospects for the industry in which Radio
Unica competes, its management, and currently prevailing general conditions in
the equity securities markets, including current market valuations of publicly
traded companies considered comparable to Radio Unica. There can be no
assurance, however, that the prices at which the shares will sell in the public
market after this offering will not be lower than the price at which they are
sold by the underwriters or that an active trading market in the common stock
will develop and continue after this offering.
Radio Unica has applied to have the common stock included for quotation on
the Nasdaq National Market under the symbol "UNCA".
The following table shows the underwriting discounts and commissions to be
paid to the underwriters by Radio Unica and, if the over-allotment option is
exercised, by Warburg, Pincus Ventures, L.P., in connection with this offering.
These amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional shares of common stock.
<TABLE>
<CAPTION>
PAID BY WARBURG, PINCUS
PAID BY RADIO UNICA VENTURES, L.P.
------------------------------ --------------------------------
<S> <C> <C> <C> <C>
NO EXERCISE FULL EXERCISE NO EXERCISE FULL EXERCISE
------------- --------------- --------------- ---------------
Per Share.................................................. $ $ $ 0 $
Total...................................................... $ $ $ 0 $
</TABLE>
In connection with the offering, Salomon Smith Barney Inc., on behalf of the
underwriters, may purchase and sell shares of common stock in the open market.
These transactions may include over-allotment, syndicate covering transactions
and stabilizing transactions. Over-allotment involves syndicate sales of common
stock in excess of the number of shares to be purchased by the underwriters in
the offering, which creates a syndicate short position. Syndicate covering
transactions involve purchases of the common stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Stabilizing transactions consist of certain bids or purchases of common stock
made for the purpose of preventing or retarding a decline in the market price of
the common stock while the offering is in progress.
The underwriters may also impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases shares originally sold by that syndicate
member.
Any of these activities may cause the price of the common stock to be higher
than the price that otherwise would exist in the open market in the absence of
such transactions. These transactions may be effected on the Nasdaq National
Market or in the over-the-counter market, or otherwise, and, if commenced, may
be discontinued at any time.
Bear, Stearns & Co. Inc. and an affiliate of CIBC World Markets have
performed certain investment banking and advisory services for Radio Unica from
time to time for which they have received customary fees and expenses. The
representatives may, from time to time, engage in transactions with and perform
services for Radio Unica in the ordinary course of their business.
An affiliate of CIBC World Markets is the lender under our credit facility
and will receive a portion of the proceeds of this offering in repayment of
amounts outstanding under this facility. Because more than 10% of the net
proceeds of this offering will be paid to an affiliate of the underwriters, this
offering will be made pursuant to the requirements of Rule 2710(c)(8) of the
Conduct Rules of the National Association of Securities Dealers, Inc. This rule
provides generally that if more than 10% of the net proceeds from the sale of
our common stock, not including underwriting
63
<PAGE>
compensation, is paid to the underwriters or their affiliates, the initial
public offering price of the stock may not be higher than that recommended by a
"qualified independent underwriter" meeting certain standards. Accordingly,
Salomon Smith Barney Inc. is assuming the responsibilities of acting as the
qualified independent underwriter in pricing the offering and conducting due
diligence. The initial public offering price of the shares of our common stock
will be no higher than the price recommended by Salomon Smith Barney Inc.
Radio Unica and certain stockholders have agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, or to contribute to payments the underwriters may be
required to make in respect of any of those liabilities.
This prospectus is not, under any circumstances, to be construed as an
advertisement or a public offering of the common stock in Canada or in any
province or territory thereof. Any offer or sale of common stock in Canada may
only be made pursuant to an exemption from the requirement to file a prospectus
in the province or territory of Canada in which such offer or sale is made.
LEGAL OPINIONS
The validity of the shares of common stock offered by this prospectus will
be passed upon for us by Stroock & Stroock & Lavan LLP, New York, New York, and
for the underwriters by Cleary, Gottlieb, Steen & Hamilton, New York, New York.
EXPERTS
Ernst & Young LLP, independent certified public accountants, have audited
our consolidated financial statements and schedules at December 31, 1998 and
1997, and for each of the two years in the period ended December 31, 1998, and
for the period from September 12, 1996 (inception) through December 31, 1996, as
set forth in their report. We have included our financial statements and
schedules in the prospectus and elsewhere in the registration statement in
reliance on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
Ernst & Young LLP, independent certified public accountants, have audited 13
Radio Corporation's financial statements for each of the two years in the period
ended December 31, 1997, as set forth in their report. We have included 13 Radio
Corporation's financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing
Miller Kaplan Arase & Co. LLP, independent certified public accountants,
have audited Oro Spanish Broadcasting, Inc's financial statements at August 31,
1997 and 1996, and for each of the two years in the period ended August 31,
1997, as set forth in their report. We have included Oro Spanish Broadcasting,
Inc's statements in the prospectus and elsewhere in the registration statement
in reliance on Miller Kaplan Arase & Co. LLP's report, given on their authority
as experts in accounting and auditing
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 (including
exhibits, schedules and amendments thereto) under the Securities Act with
respect to the shares of common stock to be sold in this offering. This
prospectus does not contain all the information set forth in the registration
statement. Certain parts of the registration statement are omitted as allowed by
the rules and regulations of the SEC. We refer to the registration statement and
the exhibits to such registration statement for further information with respect
to us and the shares of common stock to be sold in this offering. Statements
contained in this prospectus as to the contents of any contract, agreement or
other document referred to are not necessarily complete and in each instance we
refer you to the copy of that contract, agreement or other document filed as an
exhibit to the registration statement; each such statement is deemed qualified
in all respects by such reference.
64
<PAGE>
You may read and copy all or any portion of the registration statement or
any other information we file at the SEC's public reference room at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the SEC located at Seven World Trade Center, 13(th)Floor,
New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. You can request copies of these documents, upon payment of a
duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference rooms. Our
filings with the SEC, including the registration statement, are also available
to you on the SEC's Web site (http://www.sec.gov).
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act, and, in accordance with
those requirements, we will file periodic reports, proxy statements and other
information with the SEC. Upon approval of the common stock for quotation on the
Nasdaq National Market, these reports, proxy statements and other information
may also be inspected at the offices of Nasdaq Operations, 1735 K Street, N.W.,
Washington, D.C. 20006.
We intend to furnish our stockholders with annual reports containing audited
financial statements and with quarterly reports for the first three quarters of
each year containing unaudited interim financial information.
65
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
RADIO UNICA COMMUNICATIONS CORP.
Report of Independent Certified Public Accountants......................................................... F-2
Consolidated Balance Sheets................................................................................ F-3
Consolidated Statements of Operations...................................................................... F-4
Consolidated Statements of Changes in Series A Redeemable Cumulative Preferred Stock and Stockholders'
(Deficit) Equity......................................................................................... F-5
Consolidated Statements of Cash Flows...................................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
Consolidated Balance Sheet (Unaudited)..................................................................... F-23
Consolidated Statements of Operations (Unaudited).......................................................... F-24
Consolidated Statements of Cash Flows (Unaudited).......................................................... F-25
Notes to Consolidated Financial Statements (Unaudited)..................................................... F-26
13 RADIO CORPORATION
Report of Independent Certified Public Accountants......................................................... F-28
Statements of Operations and Accumulated Deficit........................................................... F-29
Statements of Cash Flows................................................................................... F-30
Notes to Consolidated Financial Statements................................................................. F-31
ORO SPANISH BROADCASTING, INC.
Independent Auditors' Report............................................................................... F-35
Independent Accountants' Report............................................................................ F-36
Balance Sheets............................................................................................. F-37
Statements of Operations and Accumulated Deficit........................................................... F-38
Statements of Cash Flows................................................................................... F-39
Notes to Financial Statements.............................................................................. F-40
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Radio Unica Communications Corp.
We have audited the accompanying consolidated balance sheets of Radio Unica
Communications Corp. and subsidiaries (formerly Radio Unica Holdings Corp.) as
of December 31, 1997 and 1998, and the related consolidated statements of
operations, changes in Series A redeemable cumulative preferred stock and
stockholders' (deficit) equity and cash flows for the period from September 12,
1996 (inception) through December 31, 1996 and for each of the two years in the
period ended December 31, 1998. Our audits also included the financial statement
schedules listed in the Index of Item 16(b). These financial statements and
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Radio Unica Communications Corp. and subsidiaries as of December 31, 1997 and
1998, and the consolidated results of their operations and their cash flows for
the period from September 12, 1996 (inception) through December 31, 1996 and for
the years ended December 31, 1997 and 1998, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
Ernst & Young LLP
Miami, Florida
February 24, 1999, except for the
second paragraph of Note 2, as
to which the date is July 6, 1999
F-2
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
<S> <C> <C>
1997 1998
------------ --------------
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 1,126,862 $ 38,894,144
Restricted cash.................................................................. -- 12,600,000
Accounts receivable, net of allowance for doubtful accounts of $116,031.......... -- 1,232,402
Prepaid expenses................................................................. 554,000 5,012,001
Radio broadcasting rights........................................................ 2,650,000 --
------------ --------------
Total current assets............................................................... 4,330,862 57,738,547
Property and equipment, net...................................................... 1,221,995 11,769,654
Broadcast licenses, net of accumulated amortization of $752,775.................. -- 43,729,708
Other intangible assets, net..................................................... -- 9,894,522
Investments and advances to equity investee...................................... 1,016,590 --
Other assets..................................................................... 108,641 371,011
------------ --------------
$ 6,678,088 $ 123,503,442
------------ --------------
------------ --------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable................................................................. $ 354,120 $ 922,064
Accrued expenses................................................................. 179,549 3,199,347
Radio broadcasting rights obligation............................................. 2,385,000 --
Notes payable.................................................................... 365,000 750,000
------------ --------------
Total current liabilities.......................................................... 3,283,669 4,871,411
Deferred taxes..................................................................... -- 1,641,990
Senior discount notes.............................................................. -- 105,029,128
Commitments and contingencies
Series A redeemable cumulative preferred stock $.01 par value; 450,000 shares
authorized; 51,975 and 353,560 issued and outstanding at December 31, 1997 and
1998, respectively............................................................... 5,316,990 38,266,437
Stockholders' deficit:
Common stock $.01 par value; 40,000,000 shares authorized; 1,942,500 shares and
13,213,810 shares issued and outstanding at December 31, 1997 and 1998,
respectively................................................................... 19,425 132,138
Capital deficiency............................................................... (86,415) (2,745,605)
Accumulated deficit.............................................................. (1,855,581) (23,692,057)
------------ --------------
Total stockholders' deficit........................................................ (1,922,571) (26,305,524)
------------ --------------
$ 6,678,088 $ 123,503,442
------------ --------------
------------ --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
SEPTEMBER 12, 1996
(INCEPTION) FOR THE YEAR
THROUGH ENDED DECEMBER 31,
DECEMBER 31, -----------------------------
1996 1997 1998
------------------ ------------- --------------
<S> <C> <C> <C>
Net revenue.................................................... $ -- $ -- $ 8,218,043
Operating expenses:
Direct operating expenses.................................... -- -- 1,852,832
Selling, general and administrative expenses................. -- 31,124 10,064,219
Network expenses............................................. -- 812,654 11,812,105
Corporate expenses........................................... 40,000 959,038 2,771,207
Depreciation and amortization................................ -- -- 1,696,376
---------- ------------- --------------
40,000 1,802,816 28,196,739
---------- ------------- --------------
Loss from operations........................................... (40,000) (1,802,816) (19,978,696)
Other income (expense):
Interest expense............................................. -- (12,765) (6,038,483)
Interest income.............................................. -- -- 1,748,825
Equity in loss of equity investee............................ -- -- (14,867)
---------- ------------- --------------
-- (12,765) (4,304,525)
---------- ------------- --------------
Loss before income taxes....................................... (40,000) (1,815,581) (24,283,221)
Income tax benefit............................................. -- -- 2,446,745
---------- ------------- --------------
Net loss....................................................... (40,000) (1,815,581) (21,836,476)
Accrued dividends on Series A redeemable cumulative preferred
stock........................................................ -- 119,490 2,850,608
---------- ------------- --------------
Net loss applicable to common stockholders..................... $ (40,000) $ (1,935,071) $ (24,687,084)
---------- ------------- --------------
---------- ------------- --------------
Net loss per common share applicable to common
stockholders--basic and diluted.............................. $ (0.04) $ (0.96) $ (2.39)
---------- ------------- --------------
---------- ------------- --------------
Weighted average common shares outstanding--
basic and diluted 1,110,000 2,010,580 10,308,570
---------- ------------- --------------
---------- ------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF CHANGES
IN SERIES A REDEEMABLE CUMULATIVE PREFERRED STOCK
AND STOCKHOLDERS' (DEFICIT) EQUITY
<TABLE>
<CAPTION>
SERIES A
REDEEMABLE
CUMULATIVE ADDITIONAL
PREFERRED STOCK COMMON STOCK PAID-IN
--------------------- -------------------- CAPITAL ACCUMULATED
SHARES AMOUNT SHARES AMOUNT (DEFICIENCY) DEFICIT TOTAL
--------- ---------- --------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 12, 1996.......... -- $ -- $ -- $ -- $ -- $ --
Issuance of common stock............... -- -- 1,110,000 11,100 33,900 -- 45,000
Net loss............................... -- -- -- -- -- (40,000) (40,000)
--------- ---------- --------- --------- ----------- ------------ -----------
Balance at December 31, 1996........... -- -- 1,110,000 11,100 33,900 (40,000) 5,000
Issuance of common stock............... -- -- 2,590,000 25,900 429,100 -- 455,000
Conversion of Predecessor Company
common stock to Series A redeemable
cumulative preferred stock and common
stock................................ 4,950 495,000 (3,515,000) (35,150) (459,850) -- (495,000)
Issuance of Series A redeemable
cumulative preferred stock and common
stock................................ 47,025 4,702,500 1,757,500 17,575 29,925 -- 47,500
Accrued dividends in arrears on Series
A redeemable cumulative preferred
stock................................ -- 119,490 -- -- (119,490) -- (119,490)
Net loss............................... -- -- -- -- -- (1,815,581) (1,815,581)
--------- ---------- --------- --------- ----------- ------------ -----------
Balance at December 31, 1997........... 51,975 5,316,990 1,942,500 19,425 (86,415) (1,855,581) (1,922,571)
Issuance of Series A redeemable
cumulative preferred stock and common
stock................................ 148,500 14,850,000 5,550,000 55,500 94,500 -- 150,000
Conversion of notes payable and
promissory notes payable to
stockholders to Series A redeemable
cumulative preferred stock and common
stock................................ 154,700 15,469,965 5,781,620 57,816 98,446 -- 156,262
Redemption and cancellation of Series A
redeemable cumulative preferred stock
and common stock..................... (2,110) (221,126) (78,810) (788) (1,343) -- (2,131)
Issuance of Series A reedemable
cumulative preferred stock and common
stock................................ 495 49,500 18,500 185 315 -- 500
Stockholder note receivable issued for
Series A redeemable cumulative
preferred stock and common stock..... -- (49,500) -- -- (500) -- (500)
Accrued dividends in arrears on Series
A redeemable cumulative preferred
stock................................ -- 2,850,608 -- -- (2,850,608) -- (2,850,608)
Net loss............................... -- -- -- -- -- (21,836,476) (21,836,476)
--------- ---------- --------- --------- ----------- ------------ -----------
Balance at December 31, 1998........... 353,560 $38,266,437 13,213,810 $ 132,138 ($2,745,605) ($23,692,057) $(26,305,524)
--------- ---------- --------- --------- ----------- ------------ -----------
--------- ---------- --------- --------- ----------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
SEPTEMBER 12,
1996
(INCEPTION) FOR THE YEAR ENDED
THROUGH DECEMBER 31,
DECEMBER 31, -----------------------
1996 1997 1998
------------- ---------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................................................. $ (40,000) $(1,815,581) $(21,836,476)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization.......................................... -- -- 1,696,376
Equity in loss of equity investee...................................... -- -- 14,867
Interest on notes payable paid with the issuance of preferred and
common stock......................................................... -- -- 261,227
Accretion of interest on senior discount notes......................... -- -- 5,029,128
Amortization of deferred financing costs............................... -- -- 321,181
Deferred taxes......................................................... -- -- (2,446,745)
Change in assets and liabilities:
Accounts receivable.................................................. -- -- (1,136,353)
Prepaid expenses..................................................... -- (554,000) (3,433,576)
Radio broadcasting rights............................................ -- (2,650,000) 1,650,000
Other assets......................................................... -- (108,641) (299,558)
Accounts payable..................................................... -- 354,120 551,046
Accrued expenses..................................................... -- 179,549 324,743
Radio broadcasting rights obligation................................. -- 2,385,000 (2,385,000)
------------- ---------- -----------
Net cash used in operating activities.................................... (40,000) (2,209,553) (21,689,140)
------------- ---------- -----------
INVESTING ACTIVITIES
Acquisition of property and equipment.................................... -- (1,221,995) (5,336,309)
Restricted cash-escrow account........................................... -- -- (12,600,000)
Advances to equity investee.............................................. -- (1,016,590) --
Repayment of advances to equity investee................................. -- -- 1,016,590
Acquisition of WNMA-AM and WRNU-AM Miami................................. -- -- (9,167,000)
Acquisition of KIQI-AM San Francisco..................................... -- -- (6,276,520)
Acquisition of KBLA-AM Los Angeles....................................... -- -- (21,465,920)
Acquisition of KXYZ-AM Houston........................................... -- -- (6,500,000)
Covenant not to compete.................................................. -- -- (276,743)
------------- ---------- -----------
Net cash used in investing activities.................................... -- (2,238,585) (60,605,902)
------------- ---------- -----------
FINANCING ACTIVITIES
Proceeds from issuance of senior discount notes, net..................... -- -- 95,535,581
Proceeds from issuance of Series A redeemable cumulative preferred stock
and common stock....................................................... 45,000 5,205,000 15,000,000
Proceeds from issuance of notes payable to stockholders.................. -- 365,000 21,795,000
Repayment on notes payable to stockholders............................... -- -- (6,795,000)
Repayment on note payable issued in connection with the acquisition of
KIQI-AM San Francisco.................................................. -- -- (5,250,000)
Redemption and cancellation of preferred stock and common stock.......... -- -- (223,257)
------------- ---------- -----------
Net cash provided by financing activities................................ 45,000 5,570,000 120,062,324
------------- ---------- -----------
Net increase in cash and cash equivalents................................ 5,000 1,121,862 37,767,282
Cash and cash equivalents at beginning of period......................... -- 5,000 1,126,862
------------- ---------- -----------
Cash and cash equivalents at end of period............................... $ 5,000 $1,126,862 $38,894,144
------------- ---------- -----------
------------- ---------- -----------
Supplemental disclosures of cash flow information:
Note payable issued in connection with the acquisition of KIQI-AM San
Francisco............................................................ $ -- $ -- $ 6,000,000
------------- ---------- -----------
------------- ---------- -----------
Cash paid for interest................................................. $ -- $ -- $ 413,712
------------- ---------- -----------
------------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND PRESENTATION
Radio Unica Corp., a Florida corporation incorporated on September 12, 1996
("Old Radio Unica"), was merged into Radio Unica Corp. ("Corp"), a Delaware
corporation, on August 7, 1997. As a result of the merger, the investors of Old
Radio Unica exchanged all of their common shares in Old Radio Unica for 500
shares of common stock and 4,950 shares of preferred stock of Corp, the
surviving corporation. The merger was accounted for as a combination of entities
under common control in a manner similar to a pooling.
Radio Unica Communications Corp. (the "Company") (formerly Radio Unica
Holdings Corp.), a Delaware corporation, was incorporated on June 29, 1998,
pursuant to which Corp was reorganized and became a wholly owned subsidiary of
the Company (the "Reorganization"). The Company has no assets other than the
shares of Corp's common stock. In connection with the Reorganization, the
holders of Corp's common stock and Series A redeemable cumulative preferred
stock exchanged their shares for shares of the Company's common stock and Series
A redeemable cumulative preferred stock bearing identical rights and preferences
to Corp's then existing common stock and Series A cumulative redeemable
preferred stock. The existing shares of Corp's common stock and Series A
redeemable cumulative preferred stock were cancelled. Corp subsequently
authorized and issued 100 shares par value $0.01 of common stock to the Company.
The Reorganization was accounted for as a combination of entities under common
control in a manner similar to a pooling.
The Company was formed for the purpose of producing, broadcasting and
distributing Spanish language radio programming in the United States. The
Company launched its network on January 5, 1998 and began broadcasting
programming to radio broadcast stations that it operates and to affiliated
stations in the United States and abroad. Prior to the launch, the Company was a
development stage company.
The Company has entered into Affiliation Agreements ("AFAs") with
substantially all of its affiliated radio stations. Pursuant to the AFAs, the
Company supplies programming for the affiliated stations which are typically
required to carry a minimum of eight hours per day of the Company's network
programming. The AFAs typically provide that the Company's programming will
include a certain number of minutes per hour of network advertising to be sold
by the Company and a certain number of minutes per hour for local advertising to
be sold by the station. The terms of the AFAs are generally one to two years,
subject to earlier termination under certain circumstances. Some of the AFAs
grant the Company a right of first refusal in the event the station owner offers
to sell the station.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation. The Company accounts for investments in
20% to 50% owned companies and for investments in over 50% owned companies over
which the Company does not have control under the equity method of accounting.
Effective July 6, 1999, the Company changed its name from Radio Unica
Holdings Corp. to Radio Unica Communications Corp. Effective July 6, 1999, the
Company's Board of Directors approved a share dividend of 370 common shares
payable for each common share, subject to consummation of the Company's proposed
initial public offering. As a result, all references in the financial statements
to
F-7
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
number of shares and per shares amounts have been restated to give retroactive
recognition to such share dividend. Also on that date, the Company's Board of
Directors approved an increase in the authorized common shares from 100,000
common shares to 40,000,000 common shares.
CASH EQUIVALENTS
The Company defines as cash equivalents all highly liquid investments with a
maturity of three months or less at the time of purchase.
RESTRICTED CASH
Restricted cash represents escrow accounts established by the Company in
connection with asset purchase agreements or local marketing agreements entered
into during the year.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is recorded on a
straight-line basis over the estimated useful lives of the related assets, which
range from 3 to 30 years. Leasehold improvements are capitalized and amortized
over their estimated useful lives or the remaining life of the lease, whichever
is shorter. The Company placed a majority of its property and equipment into
service on or about December 31, 1997; therefore, there was no depreciation
expense recorded for the year ended December 31, 1997 and for the period from
September 12, 1996 (inception) through December 31, 1996.
INTANGIBLE ASSETS
Intangible assets are recorded at cost. Amortization of intangible assets is
provided in amounts sufficient to relate the asset cost to operations over the
estimated useful lives on a straight-line basis. Intangible assets consist
primarily of broadcast licenses, goodwill and other identifiable intangible
assets. The estimated useful lives are as follows:
<TABLE>
<S> <C>
Broadcast licenses................................................ 30 years
Goodwill.......................................................... 30 years
Other intangibles................................................. 1-5 years
</TABLE>
The Company evaluates periodically the propriety of the carrying amount of
intangible assets as well as the amortization period to determine whether
current events or circumstances warrant adjustments to the carrying value and/or
revised estimates of useful lives. This evaluation consists of the projection of
undiscounted operating income before depreciation, amortization, nonrecurring
charges and interest for each of the Company's radio stations over the remaining
amortization periods of the related intangible assets. If such projections
indicate that undiscounted operating income is not expected to be adequate to
recover the carrying amounts of the related intangible assets, a loss is
recognized to the extent the carrying amount of the asset exceeds its fair
value. At this time, the Company believes that no impairment of goodwill or
other intangible assets has occurred and that no reduction of the estimated
useful lives is warranted.
F-8
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local, national and network advertisers. Revenue is recognized as commercials
are broadcast.
ADVERTISING COSTS
The Company incurs various marketing and promotional costs to add and
maintain listenership. These costs are charged to expense as incurred and for
the periods ended December 31, 1996, 1997 and 1998 amounted to approximately
$1,150, $82,000 and $3.6 million, respectively.
BARTER TRANSACTIONS
Barter transactions represent advertising time exchanged for promotional
items, advertising, supplies, equipment and services. Barter transactions are
recorded at the estimated fair value of the goods or services received. Revenues
from barter transactions are recognized as income when advertisements are
broadcast. Expenses are recognized when goods or services are received. Barter
amounts are not significant to the Company's consolidated financial statements.
INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes".
Prior to August 7, 1997, the Company, with the consent of its shareholders,
elected S Corporation treatment for the Company. As a result, the shareholders
of the Company were taxed on their proportionate share of the Company's taxable
income. Accordingly, no provision or credit for federal income tax amounts has
been included in the consolidated financial statements for the period prior to
August 7, 1997. On August 7, 1997, upon the merger of Old Radio Unica into Corp,
the Company became a C Corporation.
Deferred tax assets and liabilities are determined based upon differences
between the financial statements and income tax basis of assets and liabilities
using enacted tax rates in effect for the year in which the differences are
expected to reverse. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion
of the deferred tax assets will not be realized.
ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS
The Company accounts for the impairment of long-lived assets under the
provisions of SFAS No. 121, "Accounting For The Impairment Of Long-Lived
Assets". SFAS No. 121 requires impairment losses to be recorded on long-lived
assets when indications of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets
carrying amounts. If the carrying value of the assets will not be recoverable,
as determined based on the undiscounted cash flows estimated, the carrying value
of the assets are reduced to fair value. Generally, fair value will be
determined using valuation techniques such as expected discounted cash flows or
appraisals, as appropriate. The Company has not recorded any impairment losses.
F-9
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments of cash and cash equivalents, accounts
receivable, accounts payable, and accrued expenses approximate fair value
because of their short duration to maturity. The fair value of the long term
debt is based on quoted market prices. At December 31, 1998, the fair value of
the Senior Discount Notes was $85,367,520.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Accordingly, actual results could differ from those
reported.
BUSINESS SEGMENTS
Pursuant to SFAS No. 131, "Disclosure About Segments of a Business
Enterprise and Related Information", the Company is required to report segment
information. As the Company only operates in one business segment, no additional
reporting is required.
LOSS PER SHARE
In 1997, the Company retroactively adopted SFAS No. 128, "Earnings Per
Share", which replaced the calculations of primary and fully diluted earnings
per share (EPS) with basic and diluted EPS. For the period from September 12,
1996 (inception) through December 31, 1996 and for the years ended December 31,
1997 and 1998, there was no difference between the basic and diluted EPS
calculations.
Net loss per common share is calculated using the weighted average number of
common shares for the basic EPS presentation, and the weighted average number of
common and common equivalent shares for the diluted EPS presentation,
outstanding during the respective periods.
3. RADIO BROADCASTING RIGHTS AGREEMENTS
On July 30, 1997, the Company entered into a Radio Broadcasting Rights
Agreement with Univision Network Limited Partnership for the 1998 World Cup
Soccer Championship (1998 World Cup). This agreement granted the Company
exclusive Spanish-language radio broadcast rights in the United States for the
1998 World Cup. The Company amortized the cost of the Rights Agreement, on a
pro-rata basis, as revenue for the 1998 World Cup was earned.
4. 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 WRNU-AM for a cash
purchase price of $9.0 million. Other costs associated with the transaction were
approximately $167,000. On May 13, 1998, after receiving the consent of the
Federal Communications Commission (the "FCC") to assign the broadcasting
licenses, the Company completed the acquisitions. The Company operated the
stations under a Time Brokerage Agreement (also known as local marketing
agreements and referred to herein as "LMAs") for a
F-10
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ACQUISITIONS (CONTINUED)
monthly fee of $72,500 from February 1, 1998 to May 13, 1998. Based on current
FCC guidelines, the license of either WNMA or WRNU must be relinquished by the
Company by October 8, 2002.
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 $11.5 million. In connection with this acquisition, the Company
entered into a five-year non-compete agreement with the seller for $500,000.
Other costs associated with the transactions were approximately $277,000. On
April 30, 1998, after receiving the consent of the 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. The promissory note bears
interest at 8% and is payable monthly. On July 2, 1998 the Company revised
certain terms of and paid down $5.25 million against the promissory note. The
remaining $750,000 is due on or before October 31, 1999. The Company operated
the station under an LMA for a monthly fee of $58,000 from March 2, 1998 to
April 30, 1998. Effective February 1999, the Company ceased interest payments on
the note. The Company has made a claim to offset certain costs and expenses
related to the acquired transmitter site against the balance due. The Company
accounted for the acquisition as a purchase and, accordingly, the purchase price
was allocated to the assets acquired and liabilities assumed based on appraisals
and other estimates of the underlying values.
On May 20, 1998, the Company entered into an asset purchase agreement to
acquire the assets of Los Angeles radio station KBLA-AM from subsidiaries of
Sinclair Communications, Inc. for $21 million in cash. Other costs associated
with the transaction were approximately $466,000. On July 30, 1998, after
receiving the FCC's consent to assign the broadcasting licenses, the Company
completed the acquisition.
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. In connection with this acquisition, the Company advanced $1,016,590 to
Blaya, Inc., which was reflected in investments and advances to equity investee.
Also on December 24, 1997, Blaya, Inc. entered into an LMA with 13 Radio
effective as of January 5, 1998. The LMA 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 an LMA 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 LMA on January 5, 1998. Blaya, Inc. did not have
any operations during 1997.
On March 6, 1998, Blaya, Inc.'s capital stock was divided into the following
two classes: (i) Class A common stock with rights identical to all other shares
of Blaya, Inc.'s capital stock except that each share is entitled to cast 4.016
votes and (2) Class B common stock with rights identical to all other shares of
Blaya, Inc.'s capital stock except that each share is entitled to cast 1 vote.
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 Mr. Blaya
$160,000 in the form of a 10 year 9% promissory note. These proceeds were used
by Mr. Blaya to purchase 200
F-11
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ACQUISITIONS (CONTINUED)
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 provided the Company the right of first refusal if the majority
voting stockholder decided to sell any interest in Blaya, Inc.
On March 10, 1998, the Company entered into a promissory note in the amount
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 bore interest of 9% compounded quarterly and was payable
annually. The entire principal amount outstanding under the promissory note was
due and payable in full on the earliest to occur of (i) the termination of the
LMA, (ii) fifteen days following the date when 50% of the voting stock was
transferred to any party or substantially all the assets of Blaya, Inc. were
sold, or (iii) March 10, 2008. The promissory note was 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 an asset purchase agreement dated
December 24, 1997. Other costs associated with the transaction were
approximately $100,000.
On June 10, 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 "Remaining
Interest"). On September 11, 1998, the Company completed the acquisition of the
Remaining Interest for $160,000 and, accordingly, Blaya, Inc., became a wholly
owned subsidiary of the Company and Radio Unica of Houston License Corp., a
wholly owned subsidiary of Blaya, Inc., became an indirect, wholly owned
subsidiary of the Company. The majority-voting stockholder of Blaya, Inc. repaid
the $160,000, plus interest, he owed the Company pursuant to the 10 year 9%
promissory note. In addition, the $5.7 million promissory note was cancelled by
the Company and accounted for such cancellation as a contribution to Blaya,
Inc.'s capital.
The Company accounted for the acquisition of Blaya, Inc. as a purchase and
accordingly, the purchase price was allocated to the assets acquired and
liabilities assumed based on appraisals and other estimates of the underlying
values. The operations of Blaya, Inc. are included in the consolidated statement
of operations of the Company beginning on September 11, 1998.
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. An advanced payment of $2.5 million was made to
Children's Broadcasting Corporation with the execution of the LMA. On January
14, 1999, after receiving the consent of the FCC to assign the broadcasting
licenses, the Company completed the acquisitions. Based on current FCC
guidelines, the license of either WWRU or WJDM must be relinquished by the
Company by March 12, 2003.
The acquisitions of the assets of WNMA-AM and WRNU-AM, Miami and KBLA-AM,
Los Angeles, 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
F-12
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ACQUISITIONS (CONTINUED)
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.
The pro forma results of operations of the Company for the years ended
December 31, 1997 and 1998 assuming the Oro Spanish Broadcasting, Inc. and
Blaya, Inc. acquisitions 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>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998
------------- --------------
<S> <C> <C>
Net revenue.................................................... $ 3,586,407 $ 8,529,015
------------- --------------
------------- --------------
Net loss applicable to common stockholders..................... $ (3,433,090) $ (25,004,564)
------------- --------------
------------- --------------
Net loss per common share applicable to common
stockholders--basic and diluted.............................. $ (1.71) $ (2.43)
------------- --------------
------------- --------------
</TABLE>
5. SENIOR DISCOUNT NOTES AND SENIOR SECURED REVOLVING CREDIT FACILITY
SENIOR DISCOUNT NOTES
On July 27, 1998, Corp sold in an unregistered offering to qualified
institutional buyers and accredited institutional investors $158,088,000
aggregate principal amount at maturity of Corp's 11 3/4% Senior Discount Notes
due August 1, 2006 (the "Old Notes"). Cash interest on the Old Notes would not
accrue or be payable prior to August 1, 2002. Thereafter, cash interest would
accrue at a rate of 11 3/4% per annum on the principal amount at maturity of the
Old Notes through and including the maturity date and would be payable
semi-annually on August 1 and February 1 of each year. In connection with this
transaction, Corp received net proceeds of approximately $94.4 million after
deducting issuance expenses of approximately $5.6 million of which approximately
$1.1 million are accrued for at December 31, 1998.
The Old Notes were general senior unsecured obligations of Corp and ranked
PARI PASSU in right of payment with all existing and future unsecured and
unsubordinated indebtedness of Corp and senior in right of payment to any
subordinated indebtedness of Corp. The Old Notes were guaranteed on a senior
unsecured basis, as to payment of principal, premium if any, and interest, by
the Guarantors, which consist of Corp's Domestic Restricted Subsidiaries, (as
defined in the Indenture, dated July 27, 1998 between Corp, Wilmington Trust as
trustee and the Guarantors named therein (the "Indenture")), on a full,
unconditional, joint and several basis. The Old Notes were redeemable at any
time and from time to time at the option of Corp, 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, Corp could redeem, at its
option, up to 35% of the aggregate principal amount at maturity of the Old Notes
with the net proceeds of one or more Equity Offerings, as defined, at 111.75% of
the Accreted Value thereof, as defined in the Indenture, as long as Old Notes
representing at least $65.0 million of the aggregate initial Accreted Value of
the Old Notes originally issued remained outstanding after each such redemption
and that such redemption occurred within 90 days of the closing of any such
Equity Offering.
F-13
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. SENIOR DISCOUNT NOTES AND SENIOR SECURED REVOLVING CREDIT FACILITY
(CONTINUED)
Upon a Change of Control as defined in the Indenture, Corp would be required
to offer to repurchase the Old Notes at a purchase price equal to (i) 101% of
the Accreted Value thereof, if the purchase date was 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 was after
August 1, 2002.
The Old Notes restricted, among other things, Corp'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 Corp.
On December 17, 1998, in order to satisfy certain obligations of Corp under
a Registration Rights Agreement, dated July 22, 1998 (the "Registration Rights
Agreement"), between Corp, CIBC Oppenheimer Corp. and Bear, Stearns & Co. Inc.,
Corp completed the registration of the Old Notes and exchanged the Old Notes for
newly issued 11 3/4% Senior Discount Notes Series B due 2006 (the "New Notes").
The form and terms of the New Notes are substantially the same as the Old
Notes, except that the New Notes have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), and hence are not subject to certain
transfer restrictions, registration rights and related liquidated damages
provisions applicable to the Old Notes. The New Notes evidence the same debt as
the Old Notes and are entitled to the benefits of the Indenture. The Indenture
provides for the issuance of both the Old Notes and the New Notes.
SENIOR SECURED REVOLVING CREDIT FACILITY
On July 8, 1998, Corp entered into a credit agreement with a bank for a
senior secured revolving credit facility (the "Revolving Credit Facility")
providing for up to $20.0 million of availability. The Revolving Credit Facility
will mature in May 2002. Amounts outstanding under the Revolving Credit Facility
bear interest at the higher of the (i) bank'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 Corp
and its subsidiaries.
Corp has paid and pays 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. At December 31, 1998, there were no
amounts outstanding under 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 Corp 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. As of December 31,
1998 Corp was in compliance with these covenants.
F-14
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. PROMISSORY NOTES PAYABLE
On July 15 and July 24, 1997, the Company entered into promissory notes
payable with several stockholders amounting to $365,000. 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 143,190 shares of common stock valued at $383,450 and
$3,873, respectively.
On January 5, 1998, WPV purchased 148,500 shares of preferred stock and
5,550,000 shares of common stock in exchange for $15,000,000.
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 bore interest at 10% per annum and were
due on demand. On June 30, 1998, the Company converted $15 million of the
promissory notes payable to preferred stock. The Company paid the remaining
$6.795 million on July 15, 1998.
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 5,638,430 shares of common stock
valued at $15,086,515 and $152,389, respectively.
7. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
USEFUL LIVES ---------------------------
(YEARS) 1997 1998
--------------- ------------ -------------
<S> <C> <C> <C>
Land............................................... -- $ -- $ 2,629,241
Buildings.......................................... 30 -- 1,064,349
Broadcast equipment................................ 7 867,735 6,273,644
Leasehold improvements............................. 10 147,759 910,393
Office equipment, computers & software............. 3-5 146,804 1,205,049
Furniture & fixtures............................... 5 59,697 380,804
------------ -------------
1,221,995 12,463,480
Less: Accumulated depreciation and amortization.... -- 693,826
------------ -------------
$ 1,221,995 $ 11,769,654
------------ -------------
------------ -------------
</TABLE>
Depreciation expense for the period from September 12, 1996 (inception)
through December 31, 1996 and the years ended December 31, 1997 and 1998 was $0,
$0 and $693,826, respectively.
F-15
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. OTHER INTANGIBLE ASSETS
Other intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
USEFUL LIVES ---------------------------
(YEARS) 1997 1998
--------------- ------------- ------------
<S> <C> <C> <C>
Goodwill........................................... 30 $ -- $ 4,088,735
Deferred financing costs........................... 4-8 -- 5,600,000
Covenants not to compete........................... 1-5 -- 776,743
------------- ------------
-- 10,465,478
Less: Accumulated amortization..................... -- 570,956
------------- ------------
$ -- $ 9,894,522
------------- ------------
------------- ------------
</TABLE>
There was no amortization expense for the period from September 12, 1996
(inception) through December 31, 1996 and for the year ended December 31, 1997.
Amortization expense for the year ended December 31, 1998 was $570,956.
Amortization expense relating to the deferred financing costs of $321,181 for
the year ended December 31, 1998 was classified as interest expense.
9. INCOME TAXES
Concurrent with the August 7, 1997 merger of Old Radio Unica with and into
Corp, Old Radio Unica's S Corporation election was terminated. Thereafter, the
Company became subject to corporate income taxes. The Company had no income tax
expense or benefit for the year ended December 31, 1997 and for the period from
September 12, 1996 (inception) through December 31, 1996.
HISTORICAL
The components of the income tax benefit are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------
1997 1998
---------- -------------
<S> <C> <C>
Current............................................................ $ -- $ --
Deferred........................................................... -- (2,446,745)
---------- -------------
$ -- $ (2,446,745)
---------- -------------
---------- -------------
</TABLE>
F-16
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES (CONTINUED)
The differences between the federal statutory income tax and the effective
income tax rate are summarized below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1998
----------- -------------
<S> <C> <C>
Tax benefit at federal statutory rate............................. $ (493,823) $ (8,499,127)
State income tax benefit, net of federal benefit.................. (52,375) (1,239,329)
Permanent differences............................................. 3,259 60,111
Other............................................................. (7,924) (58,775)
Increase in valuation allowance................................... 550,863 7,290,375
----------- -------------
$ -- $ (2,446,745)
----------- -------------
----------- -------------
</TABLE>
Deferred income taxes reflect the tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's net deferred income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------
1997 1998
----------- -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards................................ $ 542,939 $ 11,079,878
Other........................................................... 7,924 45,340
----------- -------------
550,863 11,125,218
Valuation allowance............................................. (550,863) (7,841,238)
----------- -------------
Total deferred tax assets..................................... -- 3,283,980
Deferred tax liabilities:
Amortization.................................................... -- (4,912,080)
Other........................................................... -- (13,890)
----------- -------------
-- (4,925,970)
----------- -------------
Total net deferred taxes...................................... $ -- $ (1,641,990)
----------- -------------
----------- -------------
</TABLE>
The differences between the federal statutory income tax rate of 34% and the
effective income tax rate are summarized below assuming the Company was a C
corporation for the periods presented:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1996 1997
----------- -----------
<S> <C> <C>
Tax benefit at federal statutory rate............................... $ (13,600) $ (617,298)
State income tax benefit, net of federal benefit.................... (1,422) (65,392)
Permanent differences............................................... 280 4,810
Valuation allowance................................................. 14,742 677,880
----------- -----------
Net deferred tax asset.............................................. $ -- $ --
----------- -----------
----------- -----------
</TABLE>
F-17
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES (CONTINUED)
SFAS No. 109 requires a valuation allowance to reduce the deferred tax
assets reported if based on the weight of the evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
After consideration of all the evidence, both positive and negative, management
has determined that a $7,841,238 valuation allowance at December 31, 1998 is
necessary to reduce the deferred tax assets to the amount that will more likely
than not be realized. The change in the valuation allowance for the current year
is approximately $7,290,000. At December 31, 1998, the Company has available net
operating loss carryforwards of approximately $27,575,000, of which
approximately $24,578,000 expire in the year 2018 and the remaining $2,997,000
expires in years 2007 through 2012.
10. SERIES A REDEEMABLE CUMULATIVE PREFERRED STOCK
The Company has 450,000 authorized shares of redeemable, 10% cumulative,
nonconvertible, voting, Series A Preferred Stock (the "Preferred Stock"), $.01
par value, of which 51,975 and 353,560 shares were issued and outstanding at
December 31, 1997 and 1998, respectively. If and when dividends are declared by
the Board of Directors of the Company, holders of the Preferred Stock shall be
entitled to receive cumulative dividends at the rate of 10% per annum. Each
share of Preferred Stock shall be entitled to ten votes per share on all matters
upon which common stockholders of the Company are entitled to vote (one vote per
common share) and have a redemption price of $100 per share, together with
accrued and unpaid dividends thereon. Redemption of the Preferred Stock is at
the option of the holders for any or all the outstanding shares upon the
occurrence of (i) a change in control, (ii) an initial public offering or (iii)
on August 6, 2007. In the event of any liquidation, dissolution or winding up of
the affairs of the Company, holders of Preferred Stock shall be paid the
redemption price plus all accrued dividends to the date of liquidation,
dissolution or wind up of affairs before any payment to other stockholders.
Accrued dividends in arrears of approximately $119,000 and $2,970,000, as of
December 31, 1997 and 1998, respectively, are included in the redemption value
of the Preferred Stock.
On August 28, 1998 the Company, pursuant to a separation agreement between
the Company and its former President and Chief Operating Officer, redeemed and
cancelled 2,110 shares of Series A redeemable cumulative preferred stock and
78,810 shares of common stock of the Company in exchange for $223,257.
11. STOCK OPTION PLAN
On August 8, 1997, Corp adopted the 1997 Stock Option Plan (the Plan) which
provides for the granting of incentive stock options to purchase shares of
Corp's common stock to officers, directors and key employees responsible for the
direction and management of Corp and to non-employee consultants and independent
contractors. At December 31, 1997, Corp reserved 7,400,000 shares of its common
stock for issuance under the Plan. The vesting period and the terms of the
incentive stock options granted are established by a Committee of the Board of
Directors (the Committee). The incentive stock options expire no later than ten
years from the date of grant. Upon the adoption of the Plan, Corp granted
options to its employees to purchase 2,849,000 shares of its common stock. Upon
consummation of the Reorganization, each option to purchase one share of Corp's
common stock was converted into an option to purchase one share of the Company's
common stock, exercisable upon the same terms and conditions as they were under
Corp's stock option plan, and Corp's stock option plan was cancelled. The
Company has granted options to its employees to purchase 3,395,490 shares of the
F-18
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. STOCK OPTION PLAN (CONTINUED)
Company's common stock. Of the 3,395,490 options granted, 809,560 vested
immediately, 486,550 vest ratably over time and 758,500 vest upon the attainment
of certain performance goals as determined by the Committee. Of the 758,500
options, 156,222 vested on December 31, 1998. The exercise price of these
incentive stock options is $0.03 per share, which was determined by the
Committee to be the fair value at the date of grant, or, in the case of the
156,222 options, on the date they vested. As a result, no compensation cost has
been recognized under the provisions of APB Opinion No. 25. The remaining
1,340,880 incentive stock options vest upon the attainment of specified return
on equity targets and have a variable exercise price per share based on a
formula which is triggered upon the occurrence of certain events.
Changes to the plan for 1996, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 1997 1998
---------------------- ----------------------- ------------------------
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE WEIGHTED AVERAGE
EXERCISE AVERAGE EXERCISE
PRICE PER EXERCISE PRICE PER
OPTIONS SHARE OPTIONS PRICE OPTIONS SHARE
--------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year............ -- $ -- -- $ -- 2,849,000 $ 0.03
Granted..................................... -- -- 2,849,000 $ 0.03 3,395,490 $ 0.03
Exercised................................... -- -- -- -- -- --
Cancelled................................... -- -- -- -- (2,849,000) $ 0.03
--------- ----- ---------- ----- ----------- -----
Outstanding at end of year.................. -- -- 2,849,000 $ 0.03 3,395,490 $ 0.03
--------- ----- ---------- ----- ----------- -----
--------- ----- ---------- ----- ----------- -----
Options exercisable at year-end............. -- -- 796,610 $ 0.03 1,160,402 $ 0.03
--------- ----- ---------- ----- ----------- -----
--------- ----- ---------- ----- ----------- -----
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------- ----------------------------
WEIGHTED NUMBER
NUMBER AVERAGE EXERCISABLE WEIGHTED
OUTSTANDING AT REMAINING AT AVERAGE
EXERCISE DECEMBER 31, CONTRACTUAL DECEMBER 31, EXERCISE
PRICE 1998 LIFE 1998 PRICE
- ----------- -------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
$ 0.03 3,395,490 6.93 1,160,402 $ 0.03
</TABLE>
The weighted average per share fair values of options granted under the
stock option plan during 1997 and 1998, based on the Black-Scholes option
valuation model, were $0.006 and $0.007, respectively. Had compensation expense
for the Company's stock option grants been determined based
F-19
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. STOCK OPTION PLAN (CONTINUED)
on the fair value at the grant date for awards, consistent with the method of
SFAS No. 123, the Company's net loss would have increased the pro forma amounts
for each year as indicated below:
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
SEPTEMBER 12, 1996
(INCEPTION) YEAR ENDED DECEMBER 31,
THROUGH -----------------------------
DECEMBER 31, 1996 1997 1998
------------------ ------------- --------------
<S> <C> <C> <C>
Net loss applicable to common
stockholders:
As reported............................. $ (40,000) $ (1,935,071) $ (24,687,084)
-------- ------------- --------------
-------- ------------- --------------
Pro forma............................... $ (40,000) $ (1,939,851) $ (24,688,270)
-------- ------------- --------------
-------- ------------- --------------
Net loss per share applicable to common
stockholders:
As reported............................. $ (0.04) $ (0.96) $ (2.39)
-------- ------------- --------------
-------- ------------- --------------
Pro forma............................... $ (0.04) $ (0.96) $ (2.39)
-------- ------------- --------------
-------- ------------- --------------
</TABLE>
The following weighted average assumptions were used in the Black-Scholes
model:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1996 1997 1998
--------- --------- ----------
<S> <C> <C> <C>
Expected life.............................................. -- 5 years 5-9 years
Interest rate.............................................. -- 6.00% 6.00%
Volatility................................................. -- -- --
Dividend yield............................................. -- -- --
</TABLE>
The Black-Scholes options valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's stock options have characteristics
significantly different from traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, the
existing models, in management's opinion, do not necessarily provide a reliable
single measure of the fair value of the Company's stock options.
12. COMMITMENTS
LOTUS OXNARD CORP. TIME BROKERAGE AGREEMENTS
On October 31, 1997, the Company entered into a 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 addition to the LMA and escrow
agreement, the Company entered into an asset purchase option agreement with
Lotus, which provides an option to purchase the assets of KVCA, including its
broadcasting license, from Lotus. This purchase option is exercisable at any
time from June 24, 2001 through and including December 31, 2001. The LMA shall
end upon the earliest to occur of (i) the closing or termination as defined in
the asset purchase option agreement or (ii) December 31, 2001.
F-20
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. COMMITMENTS (CONTINUED)
On October 31, 1997, the Company entered into a LMA with Lotus to operate
San Antonio radio station KZDC, effective January 5, 1998. Simultaneous with the
LMA, the Company entered into an asset purchase option agreement with Lotus
which provides an option to purchase the assets of KZDC, including its
broadcasting license, from Lotus, which is exercisable at any time from June 24,
2001 through and including December 31, 2001. The LMA shall end upon the
earliest to occur of (i) the closing or termination as defined in the asset
purchase option agreement or (ii) December 31, 2001.
The future minimum payments under the Lotus LMAs are as follows:
<TABLE>
<S> <C>
1999............................................................ $2,425,000
2000............................................................ 2,650,000
2001............................................................ 2,875,000
---------
$7,950,000
---------
---------
</TABLE>
TIME BROKERAGE AGREEMENT FOR KDFT-AM DALLAS
On April 27, 1998, the Company entered into a LMA with The Freedom Network,
Inc. to operate 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 LMA. In accordance with the terms of the LMA
agreement, on December 11, 1998, the Company gave The Freedom Network, Inc. the
required termination notification. The Company operated the station under the
LMA through March 11, 1999.
TIME BROKERAGE AGREEMENT AND OPTION TO PURCHASE WYPA-AM CHICAGO
On June 9, 1998, the Company entered into a LMA with Achievement Radio
Holdings, Inc. ("Achievement") for substantially all of the broadcast time on
Chicago radio station WYPA-AM for a monthly fee of $118,000 through June 8,
1999. The term of the LMA may be extended at the Company's option through June
9, 2000 (Renewal Term). In addition to the LMA, 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 LMA is
extended. The Company has provided Achievement with a termination notification
and expects to cease broadcasting by June, 1999.
RADIO BROADCASTING RIGHTS
On September 28, 1998, the Company entered into Radio Broadcasting Rights
Agreements ("Rights Agreements") with Inter/Forever Sports, Inc. for several
large soccer events including Copa America 1999 and 2001, Copa Oro 2000 and
2002, and elimination games for the 2002 World Cup (collectively the "Soccer
Events"). The Rights Agreements grant the Company exclusive Spanish-language
radio broadcast rights in the United States for the Soccer Events.
F-21
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. COMMITMENTS (CONTINUED)
At December 31, 1998, remaining cash payment obligations under the Rights
Agreements are as follows:
<TABLE>
<S> <C>
January 15, 2000................................................ $ 600,000
June 30, 2000................................................... 600,000
March 31, 2001.................................................. 600,000
---------
$1,800,000
---------
---------
</TABLE>
LEASES
The Company leases office space, broadcasting studios and certain equipment
under operating leases, which expire at various dates through September 2007.
Certain leases contain renewal options and provide for base rental payments plus
escalation charges for real estate taxes and operating expenses.
At December 31, 1998, future minimum lease payments under such leases are as
follows:
<TABLE>
<S> <C>
1999............................................................ $ 638,000
2000............................................................ 632,000
2001............................................................ 556,000
2002............................................................ 538,000
2003............................................................ 462,000
Thereafter...................................................... 539,000
---------
$3,365,000
---------
---------
</TABLE>
Total rent expense for the period from September 12, 1996 (inception)
through December 31, 1996 and for the years ended December 31, 1997 and 1998 was
approximately $0, $109,000 and $526,000, respectively.
13. SUBSEQUENT EVENTS
On February 22, 1999, the Company contracted to acquire substantially all
the assets used in the operation of station WIDB (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. The transaction is expected to be finalized upon the receipt of the
FCC's approval and the expiration or termination of the applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
F-22
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
1999
--------------
<S> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents....................................................................... $ 13,880,967
Restricted cash................................................................................. 3,635,553
Accounts receivable, net of allowance for doubtful accounts of $147,208......................... 1,541,750
Prepaid expenses................................................................................ 1,163,502
--------------
Total current assets.............................................................................. 20,221,772
Property and equipment, net..................................................................... 13,540,346
Broadcast licenses, net of accumulated amortization of $1,322,434............................... 71,811,923
Other intangible assets, net.................................................................... 10,287,930
Other assets.................................................................................... 272,207
--------------
$ 116,134,178
--------------
--------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable................................................................................ $ 352,437
Accrued expenses................................................................................ 2,994,822
Notes payable................................................................................... 817,233
--------------
Total current liabilities......................................................................... 4,164,492
Deferred taxes.................................................................................... 1,641,990
Senior discount notes............................................................................. 108,085,559
Commitments and contingencies
Series A redeemable cumulative preferred stock $.01 par value; 450,000 shares authorized; 353,907
shares issued and outstanding................................................................... 39,269,540
Stockholders' deficit:
Common stock; $.01 par value; 40,000,000 shares authorized, 13,226,760 shares issued and
outstanding................................................................................... 132,268
Capital deficiency.............................................................................. (3,703,836)
Accumulated deficit............................................................................. (33,455,835)
--------------
Total stockholders' deficit....................................................................... (37,027,403)
--------------
$ 116,134,178
--------------
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
<S> <C> <C>
1998 1999
------------- --------------
Net revenue........................................................................ $ 561,583 $ 1,765,914
Operating expenses:
Direct operating expenses........................................................ 218,174 731,910
Selling, general and administrative expenses..................................... 1,740,450 2,977,408
Network expenses................................................................. 1,622,166 3,239,237
Corporate expenses............................................................... 633,352 671,213
Depreciation and amortization.................................................... 252,244 1,083,921
------------- --------------
4,466,386 8,703,689
------------- --------------
Loss from operations............................................................... (3,904,803) (6,937,775)
Other income (expense):
Interest expense................................................................. -- (3,274,860)
Interest income.................................................................. 26,734 448,856
Equity in income of equity investee.............................................. 10,868 --
------------- --------------
37,602 (2,826,004)
------------- --------------
Net loss........................................................................... (3,867,201) (9,763,779)
Accrued dividends on Series A redeemable cumulative preferred stock................ 481,712 958,553
------------- --------------
Net loss applicable to common stockholders......................................... $ (4,348,913) $ (10,722,332)
------------- --------------
------------- --------------
Net loss per common share applicable to common stockholders--
basic and diluted................................................................ $ (0.61) $ (0.81)
------------- --------------
------------- --------------
Weighted average common shares outstanding--basic and diluted...................... 7,184,290 13,223,430
------------- --------------
------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
<S> <C> <C>
1998 1999
------------- -------------
OPERATING ACTIVITIES
Net loss............................................................................ $ (3,867,201) $ (9,763,779)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization..................................................... 252,244 1,083,921
Provision for bad debt............................................................ 10,669 31,177
Equity in income of equity investee............................................... (10,868) --
Accretion of interest on senior discount notes.................................... -- 3,056,431
Amortization of deferred financing costs.......................................... -- 192,708
Change in assets and liabilities:
Accounts receivable............................................................... (1,128,496) (340,525)
Prepaid expenses.................................................................. (250,809) 1,348,499
Other assets...................................................................... (156,147) 98,805
Accounts payable.................................................................. 553,473 (569,627)
Accrued expenses.................................................................. 421,541 (169,065)
Deferred revenue.................................................................. 654,065 --
------------- -------------
Net cash used in operating activities............................................... (3,521,529) (5,031,455)
------------- -------------
INVESTING ACTIVITIES
Acquisition of property and equipment............................................... (1,214,624) (671,769)
Restricted cash-escrow account...................................................... (4,500,000) 8,964,447
Advances to equity investee......................................................... (5,340,000) --
Note receivable from stockholders................................................... (160,000) --
Radio broadcasting rights........................................................... -- (42,500)
Acquisition of WWRU and WJDM (NY), KIDR (PH) and KAHZ (DL).......................... -- (27,941,442)
------------- -------------
Net cash used in investing activities............................................... (11,214,624) (19,691,264)
------------- -------------
FINANCING ACTIVITIES
Debt financing costs................................................................ -- (335,458)
Proceeds from issuance of Series A redeemable cumulative preferred stock and common
stock............................................................................. 15,000,000 --
Proceeds from issuance of Series A redeemable cumulative preferred stock and common
stock............................................................................. -- 45,000
------------- -------------
Net cash (used in) provided by financing activities................................. 15,000,000 (290,458)
------------- -------------
Net (decrease) increase in cash and cash equivalents................................ 263,847 (25,013,177)
Cash and cash equivalents at beginning of period.................................... 1,126,862 38,894,144
------------- -------------
Cash and cash equivalents at end of period.......................................... $ 1,390,709 $ 13,880,967
------------- -------------
------------- -------------
Reclassification of prepaid expense to broadcast license upon consummation of the
acquisition of WWRU and WJDM (NY), KIDR (PH) and KAHZ (DL)........................ $ -- $ 2,500,000
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements of
Radio Unica Communications Corp. and subsidiaries (the "Company") (formerly
Radio Unica Holdings Corp.) 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 months ended March 31, 1999
and 1998 are not necessarily indicative of the results that may be expected for
the year ended 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 revenues 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. An advanced payment of $2.5 million was made to
Children's Broadcasting Corporation with the execution of the LMA. 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 or WJDM
must be relinquished by the Company by March 12, 2003.
The acquisitions of the assets of WWRU-AM and WJDM-AM, New York, KAHZ-AM,
Dallas and KIDR-AM, Phoenix, 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.
On February 22, 1999, the Company contracted to acquire substantially all
the assets used in the operation of radio station WIDB (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. The FCC approved the license transfer and the transaction
was finalized on May 14, 1999.
F-26
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. COMMITMENTS
TIME BROKERAGE AGREEMENT AND OPTION TO PURCHASE OF WYPA-AM CHICAGO
On June 9, 1998, the Company entered into a Time Brokerage Agreement ("TBA")
with Achievement Radio Holdings, Inc. for substantially all of the broadcast
time on 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. The Company has provided Achievement with a termination notification
and expects to cease broadcasting by June 1999.
F-27
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholder
13 Radio Corporation
We have audited the accompanying statements of operations and accumulated
deficit and cash flows of 13 Radio Corporation for each of the two years in the
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly in
all material respects, the results of operations and accumulated deficit and
cash flows of 13 Radio Corporation for each of the two years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Miami, Florida
June 12, 1998
F-28
<PAGE>
13 RADIO CORPORATION
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
POST
PRE-ACQUISITION ACQUISITION
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
-------------- ------------
<S> <C> <C>
Net revenue........................................................................ $ 1,610,764 $1,606,201
Operating expenses:
Direct expenses.................................................................. 784,118 844,108
Selling, general and administrative expenses..................................... 1,095,456 1,089,792
Depreciation and amortization.................................................... 81,020 105,088
-------------- ------------
1,960,594 2,038,988
-------------- ------------
Loss before income taxes........................................................... (349,830) (432,787)
Deferred income tax benefit........................................................ -- (12,118)
-------------- ------------
Net loss........................................................................... (349,830) (420,669)
Accumulated deficit at beginning of year........................................... (3,902,056) --
-------------- ------------
Accumulated deficit at end of year................................................. $ (4,251,886) $ (420,669)
-------------- ------------
-------------- ------------
</TABLE>
See accompanying notes
F-29
<PAGE>
13 RADIO CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
POST
PRE-ACQUISITION ACQUISITION
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
-------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss......................................................................... $ (349,830) $ (420,669)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization.................................................. 81,020 105,088
Provision for bad debts........................................................ 2,473 69,654
Deferred income taxes.......................................................... -- (12,118)
Changes in operating assets and liabilities:
Accounts receivable.......................................................... (387) (23,290)
Other current assets......................................................... 65,447 1,045
Other assets................................................................. (37,501) 6,387
Accounts payable............................................................. (2,934) 3,066
Accrued expenses............................................................. (109,966) 39,685
-------------- ------------
Cash used by operating activities.................................................. (351,678) (231,152)
INVESTING ACTIVITY
Purchases of property and equipment................................................ (11,993) (37,539)
-------------- ------------
Cash used by investing activity.................................................... (11,993) (37,539)
FINANCING ACTIVITY
Net advances from Parent........................................................... 363,677 362,626
-------------- ------------
Cash provided by financing activity................................................ 363,677 362,626
Increase in cash................................................................... 6 93,935
Cash at beginning of period........................................................ 109,818 109,824
-------------- ------------
Cash at end of period.............................................................. $ 109,824 $ 203,759
-------------- ------------
-------------- ------------
</TABLE>
See accompanying notes
F-30
<PAGE>
13 RADIO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
NATURE OF BUSINESS
13 Radio Corporation (13 Radio or the Company), a Delaware corporation and
subsidiary of CBS Radio Group (CBS), operates Houston radio station KXYZ-AM. 13
Radio, produces, broadcasts and distributes Spanish-language radio programming
in the Houston area.
On December 24, 1997, 13 Radio entered into an asset purchase agreement with
Blaya, Inc. whereby Blaya, Inc. acquired certain assets of 13 Radio for a cash
purchase price of $6.4 million. On March 11, 1998, this transaction was
completed upon receipt of the Federal Communication Commission's (FCC) consent
to transfer the broadcast license from 13 Radio to Blaya, Inc.
ORGANIZATION AND BASIS OF PRESENTATION
For the year ended December 31, 1996, the accounts of 13 Radio were included
in the consolidated accounts of Infinity Broadcasting Corporation (Infinity) and
were not presented as a separate reporting entity. Accordingly, the accounts
included in the accompanying financial statements were carved out of Infinity's
historical accounting records.
On December 31, 1996, CBS completed its acquisition of all of the
outstanding common stock of Infinity. The fair value of net assets acquired
applicable to 13 Radio, including approximately $1.5 million allocated to 13
Radio's broadcast license, was $2.6 million. The fair value of the broadcast
license is being amortized on a straight line basis over forty years. The
acquisition was accounted for using the purchase method of accounting.
For the year ended December 31, 1997, the accounts of 13 Radio were included
in the consolidated accounts of CBS and were not presented as a separate
reporting entity. Accordingly, the accounts included in the accompanying
financial statements were carved out of CBS's historical accounting records.
The accompanying statements of operations and accumulated deficit and cash
flows for the year ended December 31, 1996 represents the results of 13 Radio
when it was owned by Infinity, while the accompanying statements of operation
and accumulated deficit and cash flows for the year ended December 31, 1997
represents the results of 13 Radio after it was acquired by CBS.
The accompanying financial statements include costs allocated to 13 Radio by
Infinity and CBS for certain functions and services they performed centrally.
All allocations and estimates were based on assumptions Infinity's and CBS'
management believed were reasonable in the circumstances. These allocations and
estimates are not necessarily indicative of the costs and expenses that would
have resulted if 13 Radio had been operated as a separate entity. See Note 3 for
a description of the functions and services and the amounts allocated.
2. SIGNIFICANT ACCOUNTING POLICIES
CONCENTRATIONS OF CREDIT RISK
The Company's trade receivables result from advertising sales for
commercials aired. The majority of the Company's trade receivables are due from
local and national advertising agencies and are not collateralized.
Consideration is given to the nature of these receivables and the financial
position of
F-31
<PAGE>
13 RADIO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
customers in determining the appropriate allowance for doubtful accounts. Credit
losses are provided for in the financial statements and have been within
management's expectations.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is recorded on a
straight-line basis over the estimated useful lives of the related assets, which
range from 2 to 10 years. Depreciation expense for the year ended December 31,
1996 amounted to $62,320.
INTANGIBLE ASSETS
The broadcast license represents the fair value allocated to the FCC license
held by 13 Radio upon the acquisition of 13 Radio by CBS, which is being
amortized on a straight-line basis over forty years. Goodwill represents the
excess of purchase price of certain assets of 13 Radio over the fair value of
net assets acquired. Goodwill is being amortized on a straight-line basis over
forty years.
ACCOUNTING FOR THE IMPAIRMENT OF LONG LIVED ASSETS
The Company accounts for the impairment of long lived assets and certain
intangible assets under the provisions of FASB Statement of Financial Accounting
Standards (SFAS) No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG LIVED ASSETS.
SFAS No. 121 requires impairment losses to be recorded on long-lived assets when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. Based
on current circumstances, the Company does not believe that any impairment
indicators are present.
INCOME TAXES
The Company accounts for income taxes under SFAS No. 109, ACCOUNTING FOR
INCOME TAXES. Deferred income tax assets and liabilities are determined based
upon differences between the financial statements and income tax basis of assets
and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion of the tax assets will not be realized.
REVENUE RECOGNITION
Advertising revenues are recognized as income when commercials are aired.
Included in revenues are certain barter transactions which represent commercials
aired in exchange for products or services to be provided to the Company. Barter
transactions are recorded at the estimated fair market value of the merchandise
or services received in exchange for the commercial broadcast. If the
merchandise or services are received prior to the broadcast of the commercial, a
liability is recorded. Likewise, if the commercial is broadcast first, a
receivable is recorded. At December 31, 1996 and 1997, accounts receivable and
liabilities remaining from barter transactions were insignificant.
F-32
<PAGE>
13 RADIO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING EXPENSE
The Company expenses advertising costs as incurred. Advertising expense for
the years ended December 31, 1996 and 1997 amounted to approximately $13,000 and
$18,000, respectively.
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, accounts payable and
accrued expenses approximate fair value because of their short duration to
maturity.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Accordingly, actual results could differ from those
reported.
3. INCOME TAXES
The Company is a member of a group which files consolidated federal and
state income tax returns. The Company recorded income taxes as if the Company
was filing unconsolidated income tax returns.
The components of the benefit for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31
---------------------
<S> <C> <C>
1996 1997
--------- ----------
Current....................................................................................... $ -- $ --
Deferred...................................................................................... -- (12,118)
--------- ----------
$ -- $ (12,118)
--------- ----------
--------- ----------
</TABLE>
The differences between the reported benefit from income taxes and income
taxes computed at the U.S. statutory federal income tax rate are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
<S> <C> <C>
1996 1997
----------- -----------
Income tax benefit computed at the U.S.
statutory rate of 34%................................................................... $ (118,942) $ (147,148)
State taxes, net of federal benefit..................................................... (10,390) (12,291)
Non-deductible items.................................................................... 1,530 4,731
Change in deferred tax valuation allowance.............................................. 127,802 142,590
----------- -----------
Total............................................................................... $ -- $ (12,118)
----------- -----------
----------- -----------
</TABLE>
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax
F-33
<PAGE>
13 RADIO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
3. INCOME TAXES (CONTINUED)
purposes. SFAS No. 109 requires a valuation allowance to reduce the deferred tax
assets reported if, based on the weight of the evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
After consideration of all the evidence, both positive and negative, management
has determined that a valuation allowance of $432,246 and $574,836 at December
31, 1996 and 1997, respectively, is necessary to reduce the deferred tax assets
to the amount that will more likely than not be realized. At December 31, 1997,
the Company has available net operating loss carryforwards of $2,090,000 (of
which $1,798,000 would be subject to an IRC section 382 annual limitation) which
expire in the years 2001 through 2012.
4. RELATED PARTY TRANSACTIONS
The 1996 financial statements include significant allocations from Infinity
for the cost of functions and services it performed centrally which are included
in selling, general and administrative expenses. Included in this caption are
allocated costs for general liability, workers' compensation and auto insurance,
and certain corporate salaries. The Company's employees also participated in
certain Infinity sponsored savings plans. Total allocated costs amounted to
approximately $50,000 for the year ended December 31, 1996.
The 1997 financial statements include significant allocations from CBS for
the cost of functions and services it performed centrally which are included in
selling, general and administrative expenses. Included in this caption are
allocated costs for general liability, workers' compensation and auto insurance,
and certain corporate salaries. The Company's employees also participated in
certain CBS sponsored savings plans. Total allocated costs amounted to
approximately $82,000 for the year ended December 31, 1997.
F-34
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Oro Spanish Broadcasting, Inc.
2601 Mission Street
San Francisco, California 94110
We have audited the accompanying balance sheets of Oro Spanish Broadcasting,
Inc. as of August 31, 1996 and 1997 and the related statements of operations and
accumulated deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Oro Spanish Broadcasting,
Inc., as of August 31, 1996 and 1997 and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company has suffered recurring net losses and has an
accumulated deficit. In addition, the Company's current liabilities exceed its
current assets and the Company has experienced some difficulty meeting
obligations as they become due. Those conditions raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans
regarding those matters are also described in Note 9. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ MILLER, KAPLAN, ARASE & CO., LLP
North Hollywood, California
November 18, 1997
F-35
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
Oro Spanish Broadcasting, Inc.
2601 Mission Street
San Francisco, California 94110
We have reviewed the accompanying balance sheet of Oro Spanish Broadcasting,
Inc. as of February 28, 1998 and the statements of operations and accumulated
deficit and cash flows for the six months ended February 28, 1997 and 1998, in
accordance with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants. All
information included in these financial statements is the representation of the
management of Oro Spanish Broadcasting, Inc.
A review consists principally of inquiries of management personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the February 28, 1997 and 1998 financial statements in order
for them to be in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company has suffered recurring net losses and has an
accumulated deficit. In addition, the Company's current liabilities exceed its
current assets and the Company has experienced some difficulty meeting
obligations as they become due. Those conditions raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans
regarding those matters are also described in Note 9. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
MILLER, KAPLAN, ARASE & CO., LLP
North Hollywood, California
June 6, 1998
F-36
<PAGE>
ORO SPANISH BROADCASTING, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31 SIX MONTHS
-------------------------- ENDED
1996 1997 FEBRUARY 28,
------------ ------------ 1998
------------
(REVIEWED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash.................................................................. $ 30,448 $ 49,928 $ 2,135
Accounts Receivable, Net of Allowance for Doubtful Accounts of
$18,506, $50,000 and $62,000........................................ 371,678 431,099 400,887
Prepaid Expenses and Other Current Assets............................. 21,144 19,529 50,067
------------ ------------ ------------
TOTAL CURRENT ASSETS................................................ 423,270 500,556 453,089
PROPERTY AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION OF $1,164,277,
$1,203,748 AND $1,224,177 (NOTE 2).................................... 132,650 133,098 140,273
------------ ------------ ------------
GOODWILL, NET OF ACCUMULATED AMORTIZATION OF $800,800, $850,800 AND
$875,800.............................................................. 1,199,200 1,149,200 1,124,200
------------ ------------ ------------
OTHER ASSETS
Accounts Receivable--Stockholder (Note 7)............................. 284,335 317,957 325,937
Other Assets.......................................................... 43,392 39,935 40,935
------------ ------------ ------------
TOTAL OTHER ASSETS.................................................. 327,727 357,892 366,872
------------ ------------ ------------
TOTAL ASSETS........................................................ $ 2,082,847 $ 2,140,746 2,084,434
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES
CURRENT LIABILITIES
Accounts Payable...................................................... $ 122,943 $ 137,871 $ 155,453
Accrued Expenses and Other............................................ 190,930 306,784 357,152
Covenant Not To Compete (Note 3)...................................... 50,000 50,000 50,000
Note Payable--Current (Note 4)........................................ 110,000 240,000 340,000
License Payable--Current (Note 5)..................................... 105,727 230,840 219,341
------------ ------------ ------------
TOTAL CURRENT LIABILITIES........................................... 579,600 965,495 1,121,946
------------ ------------ ------------
NON-CURRENT LIABILITIES
Interest Payable--Long Term (Note 4).................................. 1,097,995 1,122,279 1,127,330
Note Payable--Long Term (Note 4)...................................... 3,059,610 2,899,610 2,799,610
License Payable--Long Term (Note 5)................................... 157,107 -- --
Equipment Lease and Loans Payable (Note 4)............................ 20,675 27,590 16,935
------------ ------------ ------------
TOTAL NON-CURRENT LIABILITIES....................................... 4,335,387 4,049,479 3,943,875
------------ ------------ ------------
TOTAL LIABILITIES................................................... 4,914,987 5,014,974 5,065,821
------------ ------------ ------------
COMMITMENTS (NOTES 6 AND 8)
STOCKHOLDER'S DEFICIENCY
COMMON STOCK, AUTHORIZED 1,000,000 SHARES $1 PAR VALUE, ISSUED AND
OUTSTANDING 6,000 SHARES.............................................. 6,000 6,000 6,000
ADDITIONAL PAID-IN CAPITAL.............................................. 994,000 994,000 994,000
ACCUMULATED DEFICIT..................................................... (3,832,140) (3,874,228) (3,981,387)
------------ ------------ ------------
TOTAL STOCKHOLDER'S DEFICIENCY...................................... (2,832,140) (2,874,228) (2,981,387)
------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIENCY...................... $ 2,082,847 $ 2,140,746 $2,084,434
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
(Accountants' reports and the attached notes are an integral part of this
statement)
F-37
<PAGE>
ORO SPANISH BROADCASTING, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
AUGUST 31 FEBRUARY 28
---------------------- ----------------------
1996 1997
---------- ----------
1997 1998
---------- ----------
REVIEWED REVIEWED
<S> <C> <C> <C> <C>
NET REVENUE................................ $2,294,107 $2,274,594 $1,025,752 $1,093,602
OPERATING EXPENSES
Direct Operating Expenses................ 301,257 290,492 146,598 147,377
Selling, General and Administrative...... 1,600,611 1,591,888 742,475 840,292
Depreciation and Amortization............ 98,703 89,471 45,258 45,429
---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES............... 2,000,571 1,971,851 934,331 1,033,098
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS................. 293,536 302,743 91,421 60,504
OTHER EXPENSES
Interest Expense, Net.................... (333,432) (344,031) (175,996) (166,863)
---------- ---------- ---------- ----------
LOSS BEFORE INCOME TAX..................... (39,896) (41,288) (84,575) (106,359)
INCOME TAXES............................... 800 800 800 800
---------- ---------- ---------- ----------
NET LOSS................................... (40,696) (42,088) (85,375) (107,159)
ACCUMULATED DEFICIT AT BEGINNING OF
PERIOD................................... (3,791,444) (3,832,140) (3,832,140) (3,874,228)
---------- ---------- ---------- ----------
ACCUMULATED DEFICIT AT END OF PERIOD....... $(3,832,140) $(3,874,228) $(3,917,515) $(3,981,387)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
(Accountants' reports and the attached notes are an integral part of this
statement)
F-38
<PAGE>
ORO SPANISH BROADCASTING, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, SIX MONTHS ENDED
FEBRUARY 28,
---------------------- ------------------------
1996 1997 1997 1998
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
REVIEWED REVIEWED
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss.................................................... $ (40,696) $ (42,088) $ (85,375) $(107,159)
Adjustments to Reconcile Net Loss to Net Cash.............
Provided (Used) in Operating Activities:
Depreciation and Amortization......................... 98,703 89,471 45,258 45,429
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable.......... 23,326 (59,421) 27,748 30,212
(Increase) Decrease Prepaid Expenses and Other
Current Assets.................................... 22,068 1,615 (23,592) (30,538)
(Increase) Decrease in Other Assets................. (14,733) 3,457 3,457 (1,000)
(Increase) in Advances to Stockholder-- Interest
Receivable Portion................................ (16,097) (17,622) (7,500) (7,980)
Increase in Accounts Payable and Other................ 28,269 51,483 30,653 134
Increase in Interest Payable.......................... 19,927 54,704 30,088 62,052
---------- ---------- ----------- -----------
NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES...... 120,767 81,599 20,737 (8,850)
---------- ---------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Property and Equipment..................... (15,731) (14,097) (10,027) (27,604)
Increase in Accounts Receivable--Stockholder.............. -- (16,000) (16,000) --
Proceeds from Sale of Assets.............................. 500 -- -- --
---------- ---------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES................. (15,231) (30,097) (26,027) (27,604)
---------- ---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments on Equipment Lease and Loans Payable... (16,746) (18,022) (7,582) (11,339)
Proceeds from Refinancing of Automobile Loan Payable...... -- 16,000 16,000 --
Principal Payments on Note Payable........................ (80,000) (30,000) (30,000) --
---------- ---------- ----------- -----------
NET CASH USED IN FINANCING ACTIVITIES................. (96,746) (32,022) (21,582) (11,339)
---------- ---------- ----------- -----------
NET INCREASE (DECREASE) IN CASH............................... 8,790 19,480 (26,872) (47,793)
CASH AT BEGINNING OF PERIOD................................... 21,658 30,448 30,448 49,928
---------- ---------- ----------- -----------
CASH AT END OF PERIOD......................................... $ 30,448 $ 49,928 $ 3,576 $ 2,135
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid for Interest.................................... $ 326,253 $ 307,837 $ 153,907 $ 112,825
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Cash Paid for Income Taxes................................ $ 800 $ 800 $ 800 $ 800
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
During November 1996, the Company incurred a note payable of $17,822 for
property and equipment. In addition, the Company acquired property and equipment
with a cost of $8,000 which was included in accounts payable at August 31, 1997.
(Accountants' reports and the attached notes are an integral part of this
statement)
F-39
<PAGE>
ORO SPANISH BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1996 AND 1997 AND FEBRUARY 28, 1997 AND 1998
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. NATURE OF BUSINESS
Oro Spanish Broadcasting, Inc. ("the Company") is a California Corporation,
that has owned and operated radio station KIQI-AM licensed to San Francisco,
California since September 8, 1980.
B. UNAUDITED INTERIM INFORMATION
In the opinion of management, the financial statements for the unaudited
periods ended February 28, 1997 and 1998 include all adjustments necessary for a
fair presentation in accordance with generally accepted accounting principles.
The results of operations and cash flows for the six months ended February 28,
1997 and 1998 are not necessarily indicative of results which would be expected
for a full year.
C. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The Company uses the straight
line method of depreciating equipment for both book and income tax purposes over
estimated useful lives of 5-12 years. Amounts expended for improvements to
increase the useful lives of property and equipment, or to replace major units
of property and equipment are capitalized. Expenditures for maintenance and
repairs or minor renewals are charged to expense when incurred.
D. GOODWILL
Goodwill is recorded at cost and amortized using the straight line method,
over 40 years.
E. TRADE ACTIVITY
Under trade agreements with certain advertisers, commercial airtime is
exchanged for goods and services. These transactions are recorded at the
estimated fair market value of the merchandise and services rendered. Revenue is
recognized when commercial spot announcements are broadcast and the value of
merchandise and services are expensed when utilized. Included in net revenue was
trade revenue of $245,003, $198,086, $76,584 and $97,075 and included in
selling, general and administrative was trade expense of $231,003, $191,196,
$73,059 and $94,575 for the years ended August 31, 1996 and 1997 and six months
ended February 28, 1997 and 1998, respectively.
F. INVESTMENT TAX CREDITS
As investment tax credits are utilized, they will be accounted for on the
flow through method.
G. REVENUE RECOGNITION
The Company recognizes revenue when the commercial spot announcements are
aired. Payments received in advance of airing are accounted for as deferred
revenue, which will be recognized in a subsequent period.
F-40
<PAGE>
ORO SPANISH BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996 AND 1997 AND FEBRUARY 28, 1997 AND 1998
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
H. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to credit risk
consist of accounts receivable. Concentration of credit risk with respect to
accounts receivable is somewhat limited due to the large number of customers
comprising the Company's customer base and their dispersion across many
different industries. However, there is a geographical risk as the Company
grants credit to many advertisers located in Northern California.
I. INCOME TAXES
The Company recognizes deferred tax assets and liabilities for future tax
consequences of events that have been previously recognized on the Company's
financial statements or tax returns. The measurement of deferred tax assets and
liabilities is based on the provisions of the tax laws in effect as of the date
of these financial statements; the effects of future changes in tax laws or
rates are not anticipated except as otherwise noted.
For the years ended August 31, 1996 and 1997, the Company utilized federal
net operating loss ("NOL") carryforwards of approximately $25,000 and $105,000,
respectively, and California NOL carryforwards of approximately $37,000 and
$117,000, respectively.
The Company has available to offset future federal Corporation taxable
income, NOL carryforwards of approximately $1,576,000, $1,471,000 and $1,537,000
for years ended August 31, 1996 and 1997 and six months ended February 28, 1998,
respectively, expiring in the years 2005 through 2013. In addition, the Company
has available to offset any future federal Corporation income tax liabilities,
investment tax credit carryovers of approximately $22,000 expiring in the years
1998 through 2001.
At August 31, 1996 and 1997 and February 28, 1998, the Company has available
for California income tax purposes, NOL carryforwards of approximately $579,000,
$412,000 and $452,000, respectively, expiring in the years 1998, 1999 and 2003.
The Company's net deferred tax assets (using a federal rate of 34% and an
effective California rate of 9.3%) consisted of the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------------ FEBRUARY 28,
1996 1997 1998
----------- ----------- ------------
<S> <C> <C> <C>
Deferred Tax Asset........................................................ $ 598,395 $ 574,611 $ 609,380
Deferred Tax Asset Valuation.............................................. (598,395) (574,611) (609,380)
Net Deferred Tax Asset.................................................... $ -- -- $ --
</TABLE>
The tax benefit computed at the statutory rate is due primarily to temporary
differences in depreciation and amortization calculated for book and tax
purposes and the NOL carryforwards. Management anticipates that there will not
be sufficient taxable income to utilize the NOL carryforward benefits prior to
their expiration, thus a valuation allowance has been established to fully
offset the deferred tax asset.
F-41
<PAGE>
ORO SPANISH BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996 AND 1997 AND FEBRUARY 28, 1997 AND 1998
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
J. ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.
K. IMPAIRMENT OF LONG-LIVED ASSETS
The Company accounts for the impairment of long lived assets under the
provisions of Statement of Financial Accounting Standards (SFAS) No. 121,
Accounting for the Impairment of Long Lived Assets. SFAS No. 121 requires
impairment losses to be recorded on long-lived assets when indications of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. If the carrying value
of the assets will not be recoverable, as determined based on the undiscounted
cash flows estimated, the carrying value of the assets are reduced to fair
value. Generally, fair value will be determined using valuation techniques such
as expected discounted cash flows or appraisals, as appropriate. The adoption of
SFAS No. 121 did not have a material impact on the results of operations of the
Company.
L. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practical to estimate
that value
-- Cash
The carrying amount is a reasonable estimate of fair value
-- Accounts Receivable
The carrying value of accounts receivable approximates the fair value due to
the short-term nature of these instruments
-- Accounts Payable and Accrued Liabilities
The carrying value of accounts payable and accrued expenses approximates the
fair value due to the short-term nature of these instruments.
F-42
<PAGE>
ORO SPANISH BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996 AND 1997 AND FEBRUARY 28, 1997 AND 1998
NOTE 2--PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------------ FEBRUARY 28,
1996 1997 1998
---------- ------------ ------------
<S> <C> <C> <C>
Equipment................................................................ $ 672,127 $ 672,127 $ 672,127
Transmitter.............................................................. 372,807 386,957 412,600
Furniture and Fixtures................................................... 60,935 60,935 61,748
Trucks and Automobiles................................................... 97,167 116,095 117,025
Computer Equipment....................................................... 43,825 48,455 48,455
Leasehold Improvements................................................... 34,342 35,722 35,940
Music Library............................................................ 15,724 16,555 16,555
---------- ------------ ------------
1,296,927 1,336,846 1,364,450
Less: Accumulated Depreciation........................................... 1,164,277 1,203,748 1,224,177
---------- ------------ ------------
$ 132,650 $ 133,098 $ 140,273
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
NOTE 3--COVENANT NOT TO COMPETE
The covenant of $475,000 was amortized over a nine year period, commencing
on the closing date, September 8, 1980 and was to be fully paid, per terms of
the covenant, on September 8, 1989. The current balance in arrears owed is
$50,000.
NOTE 4--LONG TERM DEBT
NOTE PAYABLE
The $3,600,000 note with Bank of America ("the Bank") accrues interest at a
rate per annum equal to the Reference Rate (Bank of America's Prime rate) plus
2%. The agreement provided for the capitalization into principal certain months'
interest totaling $97,995 and allows for $1,000,000 of accrued interest to be
repaid at the loan maturity date. All remaining principal plus any accrued
interest is due and payable on December 31, 1999. Additionally, certain
financial covenants must be met including covenants governing current ratios and
operating profit ratios. Substantially all assets of the Company are pledged as
collateral on the note.
As of August 31, 1996, the Company was in violation of certain covenants and
failed to make required principal and interest payments. The Company entered
into an agreement with the Bank to make weekly payments of interest in the
amount of $10,000, due on Friday of each week, commencing May 9, 1997 and ending
September 26, 1997. Any accrued and unpaid interest as of September 26, 1997 was
due and payable on September 30, 1997. Additionally, principal payments of
$90,000 due through September 10, 1997 were due and payable on September 30,
1997, unless the agreement terminated. As of February 28, 1998, the Company was
five interest payments in arrears totaling approximately $135,000 and was in
violation of some of its loan covenants for which the Bank forbore from pursuing
its remedies with respect to the loan covenant violations.
F-43
<PAGE>
ORO SPANISH BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996 AND 1997 AND FEBRUARY 28, 1997 AND 1998
NOTE 4--LONG TERM DEBT (CONTINUED)
Aggregate principal payments required on the note payable for each of the
succeeding five years ending February 28 are as follows:
<TABLE>
<S> <C>
1999............................................................ $ 340,000
2000............................................................ 2,799,610
---------
$3,139,610
---------
---------
</TABLE>
The Bank's prime rate on interest at August 31, 1996 and 1997 and February
28, 1998, was 8.50%, 8.25% and 8.50%, respectively.
EQUIPMENT LEASE AND LOANS PAYABLE
The Company has entered into lease and loan agreements for the purchase of
automobiles and office equipment which mature through September 2000. The
agreements call for monthly installments which range from $556 to $1,552 which
includes interest at rates ranging from 8.5% to 15.0%. All agreements are
collateralized by the purchased equipment.
The capitalized cost of the above is $83,958, $68,628 and $68,628 less
accumulated depreciation of $55,841, $35,186 and $42,048 and is included in
property and equipment in the accompanying financial statements for the years
ended August 31, 1996 and 1997 and six months ended February 28, 1998,
respectively. Interest expense related to these loans was $5,283, $5,491, $2,822
and $2,405 for the years ended August 31, 1996 and 1997 and six months ended
February 28, 1997 and 1998, respectively.
Future minimum loan payments for the years ended February 28, are as
follows:
<TABLE>
<S> <C>
1999............................................................... $ 20,716
2000............................................................... 13,951
2001............................................................... 2,984
---------
$ 37,651
---------
---------
</TABLE>
NOTE 5--LICENSE PAYABLE
On April 22, 1993, Broadcast Music, Inc. ("BMI") obtained an arbitration
award of $264,181 against the Company for unpaid license fees.
Effective September, 1995 the Company entered into a Settlement Agreement
and Stipulation of Dismissal with Prejudice ("the Agreement") which superseded
the original award. In this Agreement, the Company is to pay BMI the sum of
$200,000 in monthly payments ranging from $2,500 to $3,200 starting October 1,
1995 and a final balloon payment of $24,800 on October 1, 2000. There is no
interest calculated into the payment schedule. If the Company defaults on the
payment schedule, then the Company will be liable for the original award plus
interest at the California statutory rate, less the total of payments which had
been made to date. As of August 31, 1996, the Company was in compliance with the
payment schedule. As of August 31, 1997 and February 28, 1998, the Company was
four and six payments in arrears, respectively, and as a result, the entire
obligation is presented as a current liability. Under the Agreement, the current
License Agreement dated May, 1994 is excluded from the settlement and the
Company is still bound to its obligation. The License Agreement dated
F-44
<PAGE>
ORO SPANISH BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996 AND 1997 AND FEBRUARY 28, 1997 AND 1998
NOTE 5--LICENSE PAYABLE (CONTINUED)
May, 1994 is retroactive and covers the period January 1, 1992 through December
31, 1996. The new Agreement settlement plus current license fees under the new
license agreement amounted to a total liability of $239,227, $213,233 and
$203,234 at August 31, 1996 and 1997 and February 28, 1998, respectively.
In addition, the Company fell into arrears with its 1995/1996 ASCAP music
license fee payments for approximately $11,607 and owed an additional $15,000
due to an audit conducted for the period ending December 31, 1994. On May 9,
1996, the Company entered into an arrangement whereas they agreed to make
monthly payments of at least $750 in addition to the regular monthly billing
until paid in full. The balance remaining at August 31, 1996 and 1997 and
February 28, 1998, was $23,607, $17,607 and $16,107, respectively. As of August
31, 1997 and February 28, 1998, the Company was two and six payments in arrears
under the terms of this arrangement and, as a result, the entire obligation is
presented as a current liability.
NOTE 6--OPERATING LEASES
The Company leases its office space and transmitter location under operating
leases. The office spaced is leased for $5,000 per month for the first year
(renegotiated to $4,000 per month beginning October 1, 1996) and subject to CPI
increases thereafter under an agreement dated March, 1993. The lease expires
July 1, 2000. The transmitter location lease dated October 20, 1987 had a term
of 10 years but was renegotiated in October 1997 and extended for an additional
10 years at $3,750 per month. Total rental expense related to the above leases
for the years ended August 31, 1996 and 1997 and six months ended February 28,
1997 and 1998 was $94,431, $89,325, $44,915 and $46,170, respectively.
The future payments are as follows for the years ended February 28:
<TABLE>
<S> <C>
1999.............................................................. $ 93,000
2000.............................................................. 93,000
2001.............................................................. 61,000
2002.............................................................. 45,000
2003.............................................................. 45,000
Thereafter........................................................ 210,000
---------
$ 547,000
---------
---------
</TABLE>
F-45
<PAGE>
ORO SPANISH BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996 AND 1997 AND FEBRUARY 28, 1997 AND 1998
NOTE 7--ACCOUNTS RECEIVABLE--STOCKHOLDER
Accounts receivable--stockholder accrues interest at 6% until paid. Accounts
receivable-- stockholder consisted of the following:
<TABLE>
<CAPTION>
AUGUST 31,
---------------------- FEBRUARY 28,
1996 1997 1998
---------- ---------- ------------
<S> <C> <C> <C>
Cash Advances for Crosby (Royster) Note Prior to 1982....................... $ 63,298 $ 63,298 $ 63,298
Dividend--Repayment......................................................... (36,650) (36,650) (36,650)
Net Cash Advances........................................................... 91,322 107,322 107,322
Interest.................................................................... 166,365 183,987 191,967
---------- ---------- ------------
$ 284,335 $ 317,957 $ 325,937
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
Interest income related to this note was approximately $16,000, $17,600,
$7,500 and $8,000 for the years ended August 31, 1996 and 1997 and the six
months ended February 28, 1997 and 1998, respectively.
NOTE 8--SIMPLE IRA PLAN
Effective January 1, 1997, the Company established a SIMPLE IRA Plan ("the
Plan") under IRC Section 408(p) covering employees earning over $5,000 during
the calendar year. Under the terms of the Plan, the Company is required to
contribute a matching contribution to each eligible employee's SIMPLE IRA equal
to the employee's salary reduction contributions up to a limit of 3% of the
employee's compensation for the calendar year. The Company may reduce the 3%
limit for the calendar year if: (1) the limit is not reduced below 1%; (2) the
limit is not reduced for more than 2 calendar years during the 5 year period
ending with the calendar year the reduction is effective; and (3) each employee
is notified of the reduced limit within a reasonable period of time before the
employee's 60 day election period for the calendar year. No accrual for the
Company's required contribution for the Plan year ending December 31, 1997 has
been made as of February 28, 1998. Plan expense for the year ended August 31,
1997 and the six months ended February 28, 1997 and 1998 was $-0-.
NOTE 9--GOING CONCERN UNCERTAINTY
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The Company has suffered net losses of
$40,696, $42,088, $85,375 and $107,159 during the years ended August 31, 1996
and 1997 and the six months ended February 28, 1997 and 1998, respectively; and
as of February 28, 1998, had a negative net worth of $2,981,387. The Company's
current liabilities as of this date exceeded current assets by $668,857. In
addition, the Company has experienced difficulty meeting obligations as they
become due.
In view of the matters described in the preceding paragraph, future
profitability is dependent upon the success of future operations. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classifications of
liabilities that might be necessary should the Company be unable to continue
normal operations.
F-46
<PAGE>
ORO SPANISH BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996 AND 1997 AND FEBRUARY 28, 1997 AND 1998
NOTE 9--GOING CONCERN UNCERTAINTY (CONTINUED)
However, the Company's management believes it will be able to continue as a
going concern due to the sale of the Company's common stock discussed in Note
10. $4,236,321 from the proceeds of the sale was recognized by the Company as
additional paid in capital. This money was used to retire the debt which
contributed to the going concern uncertainty.
NOTE 10--SUBSEQUENT EVENTS (UNAUDITED)
On February 20, 1998, the Company's sole stockholder entered into a Stock
Purchase Agreement to sell all of his common stock interest in the Company to
Radio Unica of San Francisco, Inc. ("Radio Unica") for $12,000,000.
The Company and Radio Unica entered into a Time Brokerage Agreement (the
"LMA") effective March 1, 1998 and expiring on the closing date or termination
of the Stock Purchase Agreement. During this period, the Company is responsible
for all engineering and certain personnel costs and will receive $58,000 per
month from Radio Unica.
On March 2, 1998, the Company and BMI entered into an agreement to settle
the outstanding obligation under the Agreement (Note 5) for $75,000 payable on
or before June 19, 1998, plus interest at 9% per annum accumulating from
February 19, 1998 to the date of payment.
On March 30, 1998, the Company and the Bank entered into an agreement
whereby upon the closing date of the Stock Purchase Agreement, the Company will
pay the Bank $3,800,000, plus interest at prime plus 2% per annum beginning
February 1, 1998, as settlement in full of all principal and accrued interest
owed under the terms of the note (Note 4).
On April 30, 1998, the common stock interest in the Company was sold and the
debt discussed above was retired. At Closing, the receivable from the
stockholder discussed in Note 7 was recognized as a dividend.
F-47
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
RADIO UNICA COMMUNICATIONS CORP.
COMMON STOCK
[LOGO]
---------
P R O S P E C T U S
__, 1999
---------
SALOMON SMITH BARNEY
BEAR, STEARNS & CO. INC.
CIBC WORLD MARKETS
DONALDSON, LUFKIN & JENRETTE
- --------------------------------------------------------
- --------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the registrant in connection with the sale of
the common stock being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fee and the Nasdaq National Market listing
fee.
<TABLE>
<S> <C>
SEC Registration Fee............................................................... $ 27,175
NASD Filing Fee.................................................................... 10,275
Nasdaq National Market Listing Fee................................................. *
Blue Sky Fees and Expenses......................................................... *
Printing and Engraving Costs....................................................... *
Legal Fees and Expenses............................................................ *
Accounting Fees and Expenses....................................................... *
Transfer Agent and Registrar Fees and Expenses..................................... *
Miscellaneous...................................................................... *
---------
Total............................................................................ $ *
---------
---------
</TABLE>
- ------------------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our certificate of incorporation provides that, except to the extent
prohibited by the Delaware General Corporation Law (the "DGCL"), our directors
shall not be personally liable to the registrant or its stockholders for
monetary damages for any breach of fiduciary duty as directors of the
registrant. Under the DGCL, the directors have a fiduciary duty to the
registrant which is not eliminated by this provision of the certificate of
incorporation and, in appropriate circumstances, equitable remedies such as
injunctive or other forms of nonmonetary relief will remain available. In
addition, each director will continue to be subject to liability under the DGCL
for breach of the director's duty of loyalty to the registrant, for acts or
omissions which are found by a court of competent jurisdiction to be not in good
faith or involving intentional misconduct, for knowing violations of law, for
actions leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are prohibited by
the DGCL. This provision also does not affect the directors' responsibilities
under any other laws, such as the Federal securities laws or state or Federal
environmental laws. The registrant has liability insurance for its officers and
directors. Section 145 of the DGCL empowers a corporation to indemnify its
directors and officers and to purchase insurance with respect to liability
arising out of their capacity or status as directors and officers, provided that
this provision shall not eliminate or limit the liability of a director: (1) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) arising under Section
174 of the DGCL, or (4) for any transaction from which the director derived an
improper personal benefit. The DGCL provides further that the indemnification
permitted thereunder shall not be deemed exclusive of any other rights to which
the directors and officers may be entitled under the corporation's bylaws, any
agreement, a vote of stockholders or otherwise. The certificate of incorporation
eliminates the personal liability of directors to the fullest extent permitted
by Section 102(b)(7) of the DGCL and provides that the registrant may fully
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (whether
civil, criminal, administrative or investigative) by reason of the fact that
person is or was a director or officer
II-1
<PAGE>
of the registrant, or is or was serving at the request of the registrant as a
director or officer of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with any threatened, pending or
completed action, suit or proceeding.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the certificate of incorporation. The registrant is
not aware of any threatened litigation or proceeding that may result in a claim
for any indemnification.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following is a summary of the sales during the past three years by Radio
Unica, or its predecessor, of securities that were not registered under the
Securities Act.
<TABLE>
<CAPTION>
PREFERRED
INVESTOR DATE AMOUNT COMMON SHARES SHARES
- ---------------------------------------------------- --------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
Warburg, Pincus Ventures............................ 8/12/97 $ 1,000,000 370,000 9,900
10/24/97 1,000,000 370,000 9,900
11/7/97 2,750,000 1,017,500 27,225
1/5/98 15,000,000 5,550,000 148,500
4/17/98 280,523 103,970 2,777
6/30/98 15,238,904 5,638,430 150,865
Joaquin F. Blaya.................................... 12/31/96 15,000 5,550 148.50
1/20/97 10,000 3,700 99.00
2/12/97 15,000 5,550 148.50
2/28/97 20,000 7,400 198.00
3/14/97 40,000 14,800 396.00
6/4/97 50,000 18,500 495.00
6/25/97 22,500 8,325 222.75
4/17/98 40,584 15,016 401.78
Allan Stess......................................... 12/31/96 15,000 5,550 148.50
1/20/97 10,000 3,700 99.00
2/12/97 15,000 5,550 148.50
2/28/97 10,000 3,700 99.00
Barrett Alley....................................... 1/23/97 2,500 925 24.75
2/12/97 1,500 555 14.85
2/28/97 5,000 1,850 49.50
4/7/97 11,599 4,292 114.83
4/28/97 4,401 1,628 43.57
4/17/98 7,476 2,766 74.01
Andrew C. Goldman................................... 4/18/97 46,377 17,159 459.13
6/4/97 33,623 12,441 332.87
4/17/98 18,156 6,718 179.74
Steven E. Dawson.................................... 12/15/98 50,000 18,500 495.00
Jose C. Cancela..................................... 1/22/99 35,000 12,950 346.50
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
PREFERRED
INVESTOR DATE AMOUNT COMMON SHARES SHARES
- ---------------------------------------------------- --------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
Herbert Levin....................................... 12/31/96 15,000 5,550 148.50
1/20/97 10,000 3,700 99.00
2/12/97 15,000 5,550 148.50
4/18/97 12,000 4,440 118.80
4/24/97 28,000 10,360 277.20
4/28/97 20,000 7,400 198.00
5/14/97 25,000 9,250 247.50
5/29/97 25,000 9,250 247.50
6/25/97 22,500 8,325 222.75
4/17/98 40,584 15,016 401.78
</TABLE>
In addition, Radio Unica, from time to time, has issued an aggregate of
3,416,284 stock options to various people pursuant to its stock option plan.
All the foregoing securities were issued in reliance on the exemption from
registration under Section 4(2) of the Securities Act of 1933.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<C> <S>
1.1*** Form of Underwriting Agreement.
3.1*** Certificate of Incorporation
3.2*** Bylaws.
4.1* Purchase Agreement, dated July 22, 1998, among Radio Unica Corp., each of its
subsidiaries set forth therein, CIBC Oppenheimer Corp. and Bear, Stearns & Co.
Inc.
4.2* Indenture dated as of July 27, 1998 between Radio Unica Corp. and Wilmington
Trust Company, as Trustee.
5.1*** Opinion of Stroock & Stroock & Lavan LLP
10.1* Credit Agreement, dated as of July 8, 1998 among Radio Unica Corp., Radio Unica
Holdings Corp., the several banks and other financial institutions from time to
time parties thereto and Canadian Imperial Bank of Commerce, in its individual
capacity and as Agent ("CIBC").
10.2* Securities Purchase Agreement, dated as of August 11, 1997, by and among Radio
Unica Corp., Warburg, Pincus Ventures, L.P. and the other investors named
therein.
10.3* Supplement to Securities Purchase Agreement, dated as of June, 1998, among
Radio Unica Corp., Radio Unica Holdings Corp., Warburg, Pincus Ventures, L.P.
and the other investors named therein.
10.4* Stockholders' Agreement, dated as of June 30, 1998, by and among Radio Unica
Holdings Corp., Warburg, Pincus Ventures, L.P., Joaquin Blaya, Herbert Levin
and the other persons listed therein.
10.5* Time Brokerage Agreement, dated as of October 31, 1997, by and between Radio
Unica and Lotus Oxnard Corp. relating to KVCA(AM).
10.6* Time Brokerage Agreement, dated as of October 31, 1997, by and between Radio
Unica and Texas Lotus Corp. relating to KZDC(AM).
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.7*(a) Asset Purchase Agreement, dated as of January 26, 1998, by and among Radio
Unica, One-on-One Sports License of Florida, L.L.C. and One-on-One Sports Radio
of Florida, L.L.C.
10.8*(a) Stock Purchase Agreement, dated as of February 20, 1998, by and among Radio
Unica, Oro Spanish Broadcasting, Inc. and Rene De La Rosa.
10.9* Asset Purchase Agreement, dated as of May 20, 1998, by and among Radio Unica,
Sinclair Radio of Los Angeles, Inc. and Sinclair Radio of Los Angeles Licensee,
Inc.
10.10* Form of Non Competition and Confidentiality Agreement with each of Joaquin F.
Blaya and Steven E. Dawson, dated August 13, 1997.
10.11* Agreement, dated as of January 15, 1998, entered into by and between Radio
Unica Corp. and Jorge Ramos.
10.12* Amended and Restated Artist Agreement, dated as of June 5, 1998, entered into
by and between Radio Unica Network, Inc. and Raque Productions (for services of
Pedro Sevcec).
10.13* Independent Contractor Agreement dated as of June 30, 1998 between Radio Unica
Network, Inc. and Dra Isabel, Inc. (for services of Isabel Gomez Bassols).
10.14* Stock Purchase Agreement, dated as of June 10, 1998, by and among Radio Unica,
Blaya, Inc. and Joaquin F. Blaya.
10.15* Option Agreement, dated as of October 31, 1997, by and between Lotus Oxnard
Corp. and Radio Unica.
10.16* Option Agreement, dated as of October 31, 1997, by and between Texas Lotus
Corp. and Radio Unica.
10.17*(a) Agreement, dated as of September 28, 1998, between Radio Unica and
Inter/Forever Sports, Inc.
10.18*(a) Agreement, dated as of September 28, 1998, between Radio Unica and
Inter/Forever Sports, Inc.
10.19* Asset Purchase Agreement, dated as of October 26, 1998, among Radio Unica,
Children's Broadcasting Corporation, Children's Radio of Dallas, Inc.,
Children's Radio of Phoenix, Inc. and Children's Radio of New York, Inc.
10.20* First Amendment to Asset Purchase Agreement, dated as of October 27, 1998,
among Radio Unica, Children's Radio of Dallas, Inc., Children's Radio of
Phoenix, Inc., and Children's Radio of New York, Inc.
10.21**** Asset Purchase Agreement, dated as of February 22, 1999, among Radio Unica,
One-on-One Sports License of Illinois, L.L.C. and One-on-One Sports Radio of
Illinois, L.L.C.
21.1** Subsidiaries
23.1** Consent of Ernst & Young LLP
23.2** Consent of Miller, Kaplan, Arase & Co., LLP
23.3 Consent of Stroock & Stroock & Lavan LLP (included in Exhibit 5.1)
24.1** Power of Attorney (included on signature page).
27.1** Financial data schedule
27.2** Financial data schedule
</TABLE>
II-4
<PAGE>
- ------------------------
*Incorporated by reference from Registration Statement on Form S-4 (No.
333-61211) of Radio Unica Corp., as amended, as declared effective by the
Securities and Exchange Commission on December 18, 1998.
**Filed herewith.
***To be filed by amendment.
****Incorporated by reference from Annual Report on Form 10-K for the year ended
December 31, 1998 filed by Radio Unica Corp.
(a) Portions of this exhibit have been omitted pursuant to a request for
confidential treatment and have been filed separately with the Securities
and Exchange Commission.
(b) Financial Statement Schedules.
Schedule I--Condensed Financial Information of Radio Unica Communications
Corp.
Schedule II--Valuation and Qualifying Accounts.
All other financial statement schedules have been omitted because they are
not required, not applicable, or the information to be included in the financial
statement schedules is included in the Consolidated Financial Statements or the
notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
this indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) It will provide to the underwriters at the closing specified in the
underwriting agreements, certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
(2) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule 424
(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(3) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and this offering of these securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Miami, State
of Florida, on this 8th day of July, 1999.
RADIO UNICA COMMUNICATIONS CORP.
BY: /S/ STEVEN E. DAWSON
-----------------------------------------
Name: Steven E. Dawson
Title: Executive Vice President and Chief
Financial Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each of the persons whose names
appear below appoints and constitutes Joaquin F. Blaya, Steven E. Dawson and
Manuel Borges, and each of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to execute any and all amendments to
the within Registration Statement, including post-effective amendments, and to
sign any and all registration statements relating to the same offering of
securities as this Registration Statement that are filed pursuant to Rule 462(b)
of the Securities Act of 1933, as amended, and to file the same, together with
all exhibits thereto, with the Securities and Exchange Commission, granting unto
each said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each said attorney-in-fact and
agent may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons on July 8, 1999
in the capacities indicated:
SIGNATURE TITLE
- ------------------------------ ---------------------------
/s/ JOAQUIN F. BLAYA Chief Executive Officer and
- ------------------------------ Director (principal
Joaquin F. Blaya executive officer)
/s/ STEVEN E. DAWSON Chief Financial Officer
- ------------------------------ (principal financial
Steven E. Dawson officer) and Director
/s/ MANUEL A. BORGES Chief Accounting Officer
- ------------------------------
Manuel A. Borges
/s/ JOSE C. CANCELA Director
- ------------------------------
Jose C. Cancela
/s/ ANDREW C. GOLDMAN Director
- ------------------------------
Andrew C. Goldman
/s/ SIDNEY LAPIDUS Director
- ------------------------------
Sidney Lapidus
/s/ JOHN D. SANTOLERI Director
- ------------------------------
John D. Santoleri
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Miami, State
of Florida, on this 8th day of July, 1999.
RADIO UNICA COMMUNICATIONS CORP.
BY: /S/ STEVEN E. DAWSON
-----------------------------------------
Name: Steven E. Dawson
Title: Executive Vice President and Chief
Financial Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each of the persons whose names
appear below appoints and constitutes Joaquin F. Blaya, Steven E. Dawson and
Manuel Borges, and each of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to execute any and all amendments to
the within Registration Statement, including post-effective amendments, and to
sign any and all registration statements relating to the same offering of
securities as this Registration Statement that are filed pursuant to Rule 462(b)
of the Securities Act of 1933, as amended, and to file the same, together with
all exhibits thereto, with the Securities and Exchange Commission, granting unto
each said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each said attorney-in-fact and
agent may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons on July 8, 1999
in the capacities indicated:
SIGNATURE TITLE
- ------------------------------ ---------------------------
/s/ JOAQUIN F. BLAYA Chief Executive Officer and
- ------------------------------ Director (principal
Joaquin F. Blaya executive officer)
/s/ STEVEN E. DAWSON Chief Financial Officer
- ------------------------------ (principal financial
Steven E. Dawson officer) and Director
/s/ MANUEL A. BORGES Chief Accounting Officer
- ------------------------------
Manuel A. Borges
/s/ JOSE C. CANCELA Director
- ------------------------------
Jose C. Cancela
/s/ ANDREW C. GOLDMAN Director
- ------------------------------
Andrew C. Goldman
/s/ SIDNEY LAPIDUS Director
- ------------------------------
Sidney Lapidus
/s/ JOHN D. SANTOLERI Director
- ------------------------------
John D. Santoleri
II-6
<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF
RADIO UNICA COMMUNICATIONS CORP.
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1998
--------------
<S> <C>
ASSETS
Investments in wholly owned subsidiary............................................................ $ (12,184,170)
--------------
--------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Due to subsidiary............................................................................... $ 223,257
Commitments and contingencies
Series A redeemable cumulative preferred stock $.01 par value; 450,000 shares authorized and
353,560 shares issued and outstanding........................................................... 38,266,437
Stockholders' deficit:
Common stock $.01 par value; 40,000,000 shares authorized and 13,213,810 shares issued and
outstanding................................................................................... 132,138
Capital deficiency.............................................................................. (2,745,605)
Accumulated deficit............................................................................. (23,692,057)
--------------
Total stockholders' deficit....................................................................... (26,305,524)
--------------
$ 12,184,170
--------------
--------------
</TABLE>
S-1
<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF
RADIO UNICA COMMUNICATIONS CORP.
CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
1998
------------------
<S> <C>
Equity in net loss of subsidiary.............................................................. $ (11,352,917)
------------------
Net loss.................................................................................... (11,352,917)
------------------
Accrued dividends on Series A reedemable cumulative preferred stock........................... 1,847,594
------------------
Net loss per common share applicable to common stockholders--basic and diluted................ $ (13,200,511)
------------------
------------------
</TABLE>
S-2
<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF
RADIO UNICA COMMUNICATIONS CORP.
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
1998
------------------
<S> <C>
OPERATING ACTIVITIES:
Net loss...................................................................................... $ (11,352,917)
Adjustments to reconcile net loss to net cash used in operating activities:
Equity in net loss of subsidiary.......................................................... 11,352,917
------------------
Net cash used in operating activities......................................................... --
------------------
FINANCING ACTIVITIES:
Due to subsidiary............................................................................. 223,257
Redemption and cancellation of Series A reedemable preferred stock and common stock........... (223,257)
------------------
Net cash provided by financing activities..................................................... --
------------------
Net increase in cash and cash equivalents..................................................... --
Cash and cash equivalents at the beginning of period.......................................... --
------------------
Cash and cash equivalents at end of period.................................................... $ --
------------------
------------------
</TABLE>
S-3
<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENT
1. BASIS OF PRESENTATION
In the parent company-only financial statements of Radio Unica
Communications Corp. (formerly Radio Unica Holdings Corp.) (the Company), the
investment in the wholly owned subsidiary is stated at cost plus equity in the
net loss of subsidiary since inception. The parent company-only financial
statements should be read in conjunction with Radio Unica Communications Corp.'s
consolidated financial statements which are included herein.
S-4
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
ADDITIONS
------------------------- BALANCE AT
BALANCE AT CHARGED CHARGES END OF
BEGINNING OF TO COSTS TO OTHER DESCRIPTION
YEAR AND EXPENSES ACCOUNTS DEDUCTION YEAR
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1998:
Allowance for doubtful trade accounts
Receivable.................................... $ -- $ 118,098 $ -- $ 2,067 $ 116,031
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
Deferred tax valuation allowance................ $ 550,863 $7,290,375 $ -- $ -- $ 7,841,238
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
1997:
Allowance for doubtful trade accounts
Receivable.................................... $ -- $ -- $ -- $ -- $ --
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
Deferred tax valuation allowance................ $ -- $ 550,863 $ -- $ -- $ 550,863
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
1996:
Allowance for doubtful trade accounts
Receivable.................................... $ -- $ -- $ -- $ -- $ --
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
Deferred tax valuation allowance................ $ -- $ -- $ -- $ -- $ --
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
</TABLE>
S-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
INDEX DESCRIPITON
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
1.1*** Form of Underwriting Agreement.
3.1*** Certificate of Incorporation
3.2*** Bylaws.
4.1* Purchase Agreement, dated July 22, 1998, among Radio Unica Corp., each of its subsidiaries set
forth therein, CIBC Oppenheimer Corp. and Bear, Stearns & Co. Inc.
4.2* Indenture dated as of July 27, 1998 between Radio Unica Corp. and Wilmington Trust Company, as
Trustee.
5.1*** Opinion of Stroock & Stroock & Lavan LLP
10.1* Credit Agreement, dated as of July 8, 1998 among Radio Unica Corp., Radio Unica Holdings Corp., the
several banks and other financial institutions from time to time parties thereto and Canadian
Imperial Bank of Commerce, in its individual capacity and as Agent ("CIBC").
10.2* Securities Purchase Agreement, dated as of August 11, 1997, by and among Radio Unica Corp.,
Warburg, Pincus Ventures, L.P. and the other investors named therein.
10.3* Supplement to Securities Purchase Agreement, dated as of June, 1998, among Radio Unica Corp., Radio
Unica Holdings Corp., Warburg, Pincus Ventures, L.P. and the other investors named therein.
10.4* Stockholders' Agreement, dated as of June 30, 1998, by and among Radio Unica Holdings Corp.,
Warburg, Pincus Ventures, L.P., Joaquin Blaya, Herbert Levin and the other persons listed therein.
10.5* Time Brokerage Agreement, dated as of October 31, 1997, by and between Radio Unica and Lotus Oxnard
Corp. relating to KVCA(AM).
10.6* Time Brokerage Agreement, dated as of October 31, 1997, by and between Radio Unica and Texas Lotus
Corp. relating to KZDC(AM).
10.7*(a) Asset Purchase Agreement, dated as of January 26, 1998, by and among Radio Unica, One-on-One Sports
License of Florida, L.L.C. and One-on-One Sports Radio of Florida, L.L.C.
10.8*(a) Stock Purchase Agreement, dated as of February 20, 1998, by and among Radio Unica, Oro Spanish
Broadcasting, Inc. and Rene De La Rosa.
10.9* Asset Purchase Agreement, dated as of May 20, 1998, by and among Radio Unica, Sinclair Radio of Los
Angeles, Inc. and Sinclair Radio of Los Angeles Licensee, Inc.
10.10* Form of Non Competition and Confidentiality Agreement with each of Joaquin F. Blaya and Steven E.
Dawson, dated August 13, 1997.
10.11* Agreement, dated as of January 15, 1998, entered into by and between Radio Unica Corp. and Jorge
Ramos.
10.12* Amended and Restated Artist Agreement, dated as of June 5, 1998, entered into by and between Radio
Unica Network, Inc. and Raque Productions (for services of Pedro Sevcec).
10.13* Independent Contractor Agreement dated as of June 30, 1998 between Radio Unica Network, Inc. and
Dra Isabel, Inc. (for services of Isabel Gomez Bassols).
10.14* Stock Purchase Agreement, dated as of June 10, 1998, by and among Radio Unica, Blaya, Inc. and
Joaquin F. Blaya.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
INDEX DESCRIPITON
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
10.15* Option Agreement, dated as of October 31, 1997, by and between Lotus Oxnard Corp. and Radio Unica.
10.16* Option Agreement, dated as of October 31, 1997, by and between Texas Lotus Corp. and Radio Unica.
10.17*(a) Agreement, dated as of September 28, 1998, between Radio Unica and Inter/Forever Sports, Inc.
10.18*(a) Agreement, dated as of September 28, 1998, between Radio Unica and Inter/Forever Sports, Inc.
10.19* Asset Purchase Agreement, dated as of October 26, 1998, among Radio Unica, Children's Broadcasting
Corporation, Children's Radio of Dallas, Inc., Children's Radio of Phoenix, Inc. and Children's
Radio of New York, Inc.
10.20* First Amendment to Asset Purchase Agreement, dated as of October 27, 1998, among Radio Unica,
Children's Radio of Dallas, Inc., Children's Radio of Phoenix, Inc., and Children's Radio of New
York, Inc.
10.21**** Asset Purchase Agreement, dated as of February 22, 1999, among Radio Unica, One-on-One Sports
License of Illinois, L.L.C. and One-on-One Sports Radio of Illinois, L.L.C.
21.1** Subsidiaries
23.1** Consent of Ernst & Young LLP
23.2** Consent of Miller, Kaplan, Arase & Co., LLP
23.3 Consent of Stroock & Stroock & Lavan LLP (included in Exhibit 5.1)
24.1** Power of Attorney (included on signature page).
27.1** Financial data schedule
27.2** Financial data schedule
</TABLE>
- ------------------------
*Incorporated by reference from Registration Statement on Form S-4 (No.
333-61211) of Radio Unica Corp., as amended, as declared effective by the
Securities and Exchange Commission on December 18, 1998.
**Filed herewith.
***To be filed by amendment.
****Incorporated by reference from Annual Report on Form 10-K for the year ended
December 31, 1998 filed by Radio Unica Corp.
(a) Portions of this exhibit have been omitted pursuant to a request for
confidential treatment and have been filed separately with the Securities
and Exchange Commission.
<PAGE>
Exhibit 21.1
<TABLE>
<CAPTION>
State or Other Jurisdiction of
Subsidiaries Incorporation or Organization
- ------------ -----------------------------
<S> <C>
Oro Spanish Broadcasting, Inc. California
Radio Unica of San Francisco, Inc. Delaware
Radio Unica of San Francisco License Corp. Delaware
Radio Unica of Miami, Inc. Delaware
Radio Unica of Miami License Corp. Delaware
Radio Unica of Los Angeles, Inc. Delaware
Radio Unica of Los Angeles License Corp. Delaware
Radio Unica of San Antonio, Inc. Delaware
Radio Unica Network, Inc. Delaware
Radio Unica Sales Corp. Florida
Blaya, Inc. Delaware
Radio Unica of Houston License Corp. Delaware
Radio Unica Corp. Delaware
Radio Unica of Denver, Inc. Delaware
Radio Unica of Chicago, Inc. Delaware
Radio Unica of Chicago License Corp. Delaware
Radio Unica of New York, Inc. Delaware
Radio Unica of New York License Corp. Delaware
Radio Unica of Dallas, Inc. Delaware
Radio Unica of Dallas License Corp. Delaware
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Radio Unica of Phoenix, Inc. Delaware
Radio Unica of Phoenix License Corp. Delaware
</TABLE>
2
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated June 12, 1998 and February 24, 1999, except for the
second paragraph of Note 2, as to which the date is July 6, 1999, in the
Registration Statement (Form S-1 No. 333-00000) and related Prospectus of Radio
Unica Communications Corp. for the registration of 000,000 shares of its common
stock.
Ernst & Young LLP
Miami, Florida
July 6, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of our
report dated November 18, 1997, on our audits of the financial statements of Oro
Spanish Broadcasting, Inc. We also consent to the reference to our firm under
the caption "Experts".
Miller, Kaplan, Arase & Co., LLP
North Hollywood, California
July 8, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 38,894,144
<SECURITIES> 0
<RECEIVABLES> 1,232,402
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 57,738,547
<PP&E> 11,769,654
<DEPRECIATION> 0
<TOTAL-ASSETS> 123,503,442
<CURRENT-LIABILITIES> 4,871,411
<BONDS> 105,029,128
0
38,266,437
<COMMON> 358
<OTHER-SE> (26,305,882)
<TOTAL-LIABILITY-AND-EQUITY> 123,503,442
<SALES> 8,218,043
<TOTAL-REVENUES> 8,218,043
<CGS> 0
<TOTAL-COSTS> 28,196,739
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (6,038,483)
<INCOME-PRETAX> (24,283,221)
<INCOME-TAX> 2,446,745
<INCOME-CONTINUING> (21,836,476)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,836,476)
<EPS-BASIC> (886.08)
<EPS-DILUTED> (886.08)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 13,880,967
<SECURITIES> 0
<RECEIVABLES> 1,541,750
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,221,772
<PP&E> 13,540,346
<DEPRECIATION> 0
<TOTAL-ASSETS> 116,135,178
<CURRENT-LIABILITIES> 4,164,492
<BONDS> 108,085,559
0
39,269,540
<COMMON> 0
<OTHER-SE> (37,027,403)
<TOTAL-LIABILITY-AND-EQUITY> 116,135,178
<SALES> 1,765,914
<TOTAL-REVENUES> 1,765,914
<CGS> 0
<TOTAL-COSTS> 8,703,689
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,274,860)
<INCOME-PRETAX> (9,763,779)
<INCOME-TAX> (9,763,779)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> (0.81)
<EPS-DILUTED> (0.81)
</TABLE>
