<PAGE>
DRAFT 5/9/00
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report pursuant to Section 13 or 15(d) of the
|X| Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
Transition Report Pursuant to Section 13 or 15(d) of
|_| the Securities Exchange Act of 1934
COMMISSION FILE NO. 001-15151
RADIO UNICA COMMUNICATIONS CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 65-00856900
(State of Incorporation) (I.R.S. Employer
Identification Number)
8400 N.W. 52ND STREET, SUITE 100
MIAMI, FL 33166
(Address of principal executive offices) (Zip Code)
305-463-5000
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES |X| NO |_|
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
As of May 12, 2000, 21,201,402 shares of Common Stock, $.01 par value
were outstanding.
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<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements................................................... 2
Item 2. Management's Discussion and Analysis................................... 6
Item 3. Quantitative and Qualitative Disclosures about Market Risk............. 9
PART II. OTHER INFORMATION
Item 2. Changes in Securities.................................................. 10
Item 6. Exhibits and Reports on Form 8-K....................................... 10
</TABLE>
<PAGE>
RADIO UNICA COMMUNICATION CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
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(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 66,141,129 $ 76,806,025
Restricted cash 601,500 305,000
Accounts receivable, net of allowance for doubtful
accounts of $344,655 and $255,242, respectively 6,375,151 5,304,088
Prepaid expenses 2,640,070 2,346,166
------------ ------------
Total current assets 75,757,850 84,761,279
Property and equipment, net 18,746,281 17,434,918
Broadcast licenses, net of accumulated amortization
of $4,213,366 and $3,463,192, respectively 83,808,684 84,665,873
Other intangible assets, net 8,747,997 9,093,528
Other assets 9,234,277 5,130,968
------------ ------------
$198,295,089 $201,086,566
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 1,184,511 $ 1,877,162
Accrued expenses 2,711,187 2,112,909
Notes payable 212,317 216,067
------------ ------------
Total current liabilities 4,108,015 4,206,138
Other liabilities 165,000 165,000
Notes payable 76,910 76,911
Deferred taxes 1,953,979 1,953,979
Senior discount notes 121,158,675 117,732,564
Commitments and contingencies
Stockholder's equity:
Preferred stock: $.01 par value, 5,000,000 shares
authorized; 0 shares issued and outstanding -- --
Common stock $.01 par value: 40,000,000 shares authorized
21,152,294 and 20,942,837 shares issued and outstanding at
March 31, 2000 and December 31, 1999, respectively 211,525 209,428
Additional paid in capital 160,864,830 158,795,542
Deferred compensation (3,512,149) (4,265,522)
Accumulated deficit (86,731,696) (77,787,474)
------------ ------------
Total stockholders' equity 70,832,510 76,951,974
------------ ------------
$198,295,089 $201,086,566
------------ ------------
------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------------
2000 1999
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<S> <C> <C>
Net revenue $ 6,217,703 $ 1,765,914
Operating expenses:
Direct operating 1,630,454 731,910
Selling, general and administrative 3,863,098 2,977,408
Network 3,671,876 3,239,237
Corporate 1,085,708 671,213
Depreciation and amortization 1,423,240 1,083,921
Stock option compensation 753,373 --
----------- ------------
12,427,749 8,703,689
----------- ------------
(6,210,046) (6,937,775)
Loss from operations
Other income (expense):
Interest expense (3,645,774) (3,274,860)
Interest income 907,911 448,856
Other 3,688 --
----------- ------------
(2,734,175) (2,826,004)
----------- ------------
(8,944,221) (9,763,779)
Net loss
Accrued dividends on Series A reedemable
cumulative preferred stock -- 958,553
----------- ------------
Net loss applicable to common shareholders $(8,944,221) $(10,722,332)
----------- ------------
----------- ------------
Net loss per common share applicable to
common shareholders-basic and diluted $ (0.43) $ (0.97)
----------- ------------
----------- ------------
Weighted average common shares
outstanding-basic and diluted 21,012,873 11,079,272
----------- ------------
----------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------------
2000 1999
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<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (8,944,221) $ (9,763,779)
Adjustments to reconcile net loss to net
cash used in operating activities: 1,423,240 1,083,921
Depreciation and amortization 89,413 31,177
Provision for bad debt 3,426,111 3,056,431
Accretion of interest on senior discount notes 192,708 192,708
Amortization of deferred financing costs 753,373 --
Stock option compensation expense (224,500) --
Other
Change in assets and liabilities:
Accounts receivable (1,160,476) (340,525)
Prepaid expenses (646,328) 1,348,499
Other assets (2,273,380) 98,805
Accounts payable (692,651) (569,627)
Accrued expenses 598,278 (169,065)
Radio broadcasting rights 576,924 --
------------ ------------
Net cash used in operating activities (6,881,509) (5,031,455)
------------ ------------
INVESTING ACTIVITIES
Acquisition of property and equipment (869,257) (671,769)
Restricted cash-escrow account (501,500) 8,964,447
Radio broadcasting rights -- (42,500)
Acquisition of radio stations (2,484,015) (27,941,442)
------------ ------------
Net cash used in investing activities (3,854,772) (19,691,264)
FINANCING ACTIVITIES
Debt financing costs -- (335,458)
Proceeds from issuance of common stock 71,385 --
Proceeds from issuance of Series A redeemable
cumulative preferred stock and common stock -- 45,000
------------ ------------
Net cash provided by (used in) financing
activities 71,385 (290,458)
------------ ------------
Net decrease in cash and cash equivalents (10,664,896) (25,013,177)
Cash and cash equivalents at beginning of
period 76,806,025 38,894,144
------------ ------------
Cash and cash equivalents at end of period $ 66,141,129 $ 13,880,967
------------ ------------
------------ ------------
Reclassification of prepaid expense to
broadcast license upon consummation of the
radio station acquisitions $ -- $ 2,500,000
------------ ------------
------------ ------------
Issuance of common stock for investment in
radio station $ 2,000,000 $ --
------------ ------------
------------ ------------
Reclassification of prepaid expense to
broadcasting rights $ 395,000 $ --
------------ ------------
------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements of
Radio Unica Communications Corp. and subsidiaries (the "Company") for the
periods indicated herein have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission and in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000. 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 1999 consolidated financial
statements and notes thereto.
The Company's revenues and cash flow are 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 18, 1999, the Company entered into an asset purchase agreement
with Den-Mex LLC to acquire Denver radio station KCUV-AM for a cash purchase
price of $2.7 million. On January 3, 2000, after receiving the consent of the
Federal Communications Commission (the "FCC") to assign the broadcasting
license, the Company completed the acquisition.
On February 11, 2000 the Company contracted to acquire substantially all
the assets used in the operations of radio station KVJY (AM) broadcasting on
840 kHz in McAllen, Texas from El Pistolon Investments, L.P., for a cash
purchase price of approximately $2.5 million. The Company funded a $500,000
escrow and has paid a $2.0 million deposit in conjunction with this
transaction. The transaction is expected to be finalized upon receipt of the
FCC's approval to assign the broadcasting license.
3. SUBSEQUENT EVENTS
On April 12, 2000, the Company contracted to acquire substantially all the
assets used in the operations of radio station KZDC (AM) broadcasting on 1250
kHz in San Antonio, Texas from Texas Lotus, Ltd., for a cash purchase price of
$1.85 million. The Company has been operating the station under a local
marketing agreement since January 1998. The transaction is expected to be
finalized upon the receipt of the FCC's approval to assign the broadcasting
license.
On April 27, 2000 the Company contracted to acquire substantially all
the assets used in the operations of radio station KQTL (AM) broadcasting on
1210 kHz in Tucson, Arizona from Cima Broadcasting, L.L.C., for a cash
purchase price of approximately $3.3 million. The Company funded a $300,000
escrow in conjunction with this transaction. The transaction is expected to
be finalized upon the receipt of the FCC's approval to assign the
broadcasting license.
5
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RADIO UNICA COMMUNICATIONS CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
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This report contains "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements include, among others, statements concerning the
Company's outlook for 2000 and beyond, the Company's expectations, beliefs,
future plans and strategies, anticipated events or trends, and similar
expressions concerning matters that are not historical facts. The
forward-looking statements in this report are subject to risks and uncertainties
that could cause actual results to differ materially from those expressed in or
implied by the statements.
OVERVIEW
We 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 local marketing agreements (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 programming expenses, marketing and
selling costs, including commissions paid to our sales staff, technical and
engineering costs, and general and administrative expenses.
As is true of other radio operators, the Company's performance is
customarily measured by its earnings before net interest, taxes, depreciation
and amortization ("EBITDA"). Although EBITDA is not a measure of performance
calculated in accordance with generally accepted accounting principles, EBITDA
is presented because it provides useful information regarding the Company's
ability to service debt. However, EBITDA should not be considered as an
alternative measure of operating results or cash flows from operations (as
determined in accordance with generally accepted accounting principles).
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1999
NET REVENUE. Net revenue increased by approximately $4.4 million or 252% to
approximately $6.2 million for the three months ended March 31, 2000 from
approximately $1.8 million for the comparable period in the prior year. The
increase in net revenue relates to an increase in the Company's customer base
due to the strengthening of the Company's network and O&Os, increases in
advertising rates at the Company's network and O&Os, and the increase in the
number of O&Os.
OPERATING EXPENSES. Operating expenses increased by approximately $3.7
million or 43% to approximately $12.4 million for the three months ended March
31, 2000 from approximately $8.7 million for the comparable period in the prior
year. The increase in operating expenses is due to a non-cash stock option
compensation expense charge of approximately $0.8 million, increased
depreciation and amortization relating to the increase in the number of O&Os of
approximately $0.3 million and increased costs associated with the increase in
the number of O&Os.
Direct operating expenses increased by approximately $0.9 million or 123%
to approximately $1.6 million for the three months ended March 31, 2000 from
approximately $0.7 million for the comparable period in the prior year. The
increase in direct operating expenses is primarily due to the increase in the
number of O&Os as well as increased spending relating to the promotion of those
O&Os.
6
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RADIO UNICA COMMUNICATIONS CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
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Selling, general and administrative expenses increased by approximately $0.9
million or 30% to approximately $3.9 million for the three months ended March
31, 2000 from approximately $3.0 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 $0.5 million or 13% to approximately $3.7
million for the three months ended March 31, 2000 from approximately $3.2
million for the comparable period in the prior year. The increase in network
expenses is mainly due to the increase in cost of network programming, including
sporting events, as well as increased network advertising.
Corporate expenses increased by approximately $0.4 million or 62% to
approximately $1.1 million for the three months ended March 31, 2000 from
approximately $0.7 million for the comparable period in the prior year. The
increase in corporate expenses is mainly due to increased costs of executive
management, legal and professional fees and other costs.
Depreciation and amortization increased by approximately $0.3 million or
31% to approximately $1.4 million for the three months ended March 31, 2000 from
approximately $1.1 million for the comparable period in the prior year. The
increase in depreciation and amortization is due to significant additions of
fixed assets and intangible assets arising from the acquisition of O&Os.
Stock option compensation expense relates to a non-cash charge of
approximately $0.8 million relating to the vesting of stock options granted to
employees of the Company to purchase approximately 267,000 shares of the
Company's common stock.
OTHER INCOME (EXPENSE). Other income (expense) increased by approximately
$0.1 million or 3% to approximately $(2.7) million for the three months ended
March 31, 2000 from approximately $(2.8) million for the comparable period in
the prior year. Other income (expense) for the three months ended March 31, 2000
included interest income of approximately $0.9 million, and interest expense of
approximately $(3.6) million. Interest expense primarily relates to the interest
on the outstanding balance of the Senior Discount Notes. The Company had
approximately $0.5 million in interest income and $(3.3) million in interest
expense during the three months ended March 31, 1999.
NET LOSS. Net loss decreased by approximately $0.9 million or 8% to
approximately $(8.9) million for the three months ended March 31, 2000 from
approximately $(9.8) million for the comparable period in the prior year. The
decrease in net loss is mainly the result of the increase in the Company's
revenue partially offset by increased costs associated with the operation of the
Company's O&Os, increased sales cost associated with the increase in revenue,
increased depreciation and amortization resulting from the increase in the
number of O&Os, as well as the non-cash stock option compensation expense
relating to the vesting of stock options.
7
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (continued)
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EBITDA. EBITDA less the non-cash charge relating to the stock option
compensation expense of approximately $0.8 million increased by approximately
$1.8 million or 31% to approximately $(4.0) million for the three months ended
March 31, 2000 from approximately $(5.8) million for the comparable period in
the prior year. EBITDA increased by approximately $1.1 million or 18% to
approximately $(4.8) million for the three months ended March 31, 2000 from
approximately $(5.9) million for the comparable period in the prior year. The
increase in EBITDA is mainly a result of the increase in the Company's revenues
offset by increase costs associated with the operation of the Company's network
and O&Os as well as the non-cash stock option compensation expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company has had negative cash flows since inception. Working capital
and financing for the Company's acquisitions to date have been provided
primarily by the proceeds from the Company's initial public offering, the
issuance of the 11 3/4 % Senior Discount Notes due August 1, 2006 and the
issuance of promissory notes, common stock and preferred stock to the
Company's shareholders.
The Company's primary source of liquidity is the remaining proceeds from
the initial public offering and the borrowing availability under the Senior
Secured Revolving Credit Facility. The Senior Secured Revolving Credit
Facility is a senior secured revolver with $20.0 million of available
borrowings subject to certain conditions. At March 31, 2000 there were no
amounts outstanding under the Senior Secured Revolving Credit Facility.
Net cash used in operating activities increased by approximately $1.9
million or 37% to approximately $6.9 million for the three months ended March
31, 2000 from approximately $5.0 million for the comparable period in the
prior year. Net cash used in investing activities was approximately $3.9
million and $19.7 million for the three months ended March 31, 2000 and 1999,
respectively. The decrease of $15.8 million from 2000 to 1999 is primarily
due to fewer radio station acquisitions that took place during 2000. Net cash
provided by (used in) financing activities was $0.1 million and $(0.3)
million for the three months ended March 31, 2000 and 1999, respectively. The
increase of $0.4 million from 1999 to 2000 is due to the payment of debt
financing costs related to the issuance of the Senior Discount Notes offset
by the issuance of preferred and common stock during 1999.
Capital expenditures primarily relates to the purchase of broadcast
equipment for the network and O&Os, leasehold improvements, computer equipment
and telecommunications equipment. Capital expenditures were approximately $0.9
million and $0.7 million for the three months ended March 31, 2000 and 1999,
respectively. The increase in capital expenditures is primarily due to radio
signal upgrade projects and the build-out of studios in Chicago.
8
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RADIO UNICA COMMUNICATIONS CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
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The Company believes that its current cash position, the remaining
proceeds from the initial public offering and the borrowing availability
under the Senior Secured Revolving Credit Facility, will provide adequate
resources to fund the Company's operating expenses, working capital
requirements, capital expenditures and acquisitions until its business
strategy provides the Company with sufficient operating cash flow. There can
be no assurance that such business strategy will be successfully implemented
or that the future cash flows of the Company will be sufficient to meet all
of the Company's obligations and commitments. The failure to generate such
sufficient cash flow could significantly adversely affect the market value of
the Company's common stock and Senior Discount Notes, and the Company's
ability to pay the principal of and interest on the Senior Discount Notes.
IMPACT OF YEAR 2000
In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 ready. In late 1999, the Company completed its remediation
and testing of systems. As a result of those planning and implementation
efforts, the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company
expensed approximately $10,000 during 1999 in connection with remediating its
systems. The Company is not aware of any material problems resulting from Year
2000 issues, either with its products, its internal systems, or the products and
services of third parties. The Company will continue to monitor its mission
critical computer applications and those of its suppliers and vendors throughout
the year 2000 to ensure that any latent Year 2000 matters that may arise are
addressed promptly.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risk exposure with respect to financial instruments is to changes
in the "prime rate" in the United States. We may borrow up to $20 million under
our credit facility. Amounts outstanding under the credit facility bear
interest, at the Company's option, at the bank's prime rate plus 1.25% or LIBOR
plus 2.50%. At March 31, 2000, there were no amounts outstanding under our
credit facility.
9
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RADIO UNICA COMMUNICATIONS CORP.
PART II - OTHER INFORMATION
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ITEM 2. CHANGES IN SECURITIES
On October 19, 1999, the Company's first registration statement under the
Securities Act of 1933 was declared effective by the Securities and Exchange
Commission (File No. 333-82561). The offering commenced October 19, 1999 and was
consummated on October 22, 1999.
The net proceeds received by the Company from the offering were
approximately $99,450,000. In connection with the offering, the Company incurred
an estimated $9,990,000 of expenses, including underwriting discounts of
$7,660,800, and other expenses of the offering of approximately $2,329,200. The
payments were all made to persons who were not directors, officers, 10%
stockholders or affiliates.
From the effective date of the registration statement, the net proceeds
from the offering have been used for the following purposes; none of which was
paid to persons who were officers, directors, 10% stockholders or affiliates,:
<TABLE>
<CAPTION>
(in Millions)
-------------
<S> <C>
Repayments of amounts outstanding under the senior credit facility $ 16.5
Deposits established in connection with future acquisitions 4.5
Acquistion of radio stations 5.4
Other purposes including: deposits on time brokerage agreements
and acquisition of radio broadcasting rights 1.6
Working capital and other 5.3
Temporary investments in cash and cash equivalents 66.1
------
$ 99.4
------
------
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 27.1 - Financial Data Schedule.
10
<PAGE>
(b) SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Radio Unica Communications Corp.
By: /s/ Steven E. Dawson
------------------------------
Steven E. Dawson
Chief Financial Officer
Date: May 12, 2000
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Radio Unica Communications Corp. for the three months
ended March 31, 2000 and is qualified in its entirety by reference to financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 66,141,129
<SECURITIES> 0
<RECEIVABLES> 6,375,151
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 75,757,850
<PP&E> 18,746,281
<DEPRECIATION> 0
<TOTAL-ASSETS> 198,295,089
<CURRENT-LIABILITIES> 4,108,015
<BONDS> 0
0
0
<COMMON> 211,525
<OTHER-SE> 70,620,985
<TOTAL-LIABILITY-AND-EQUITY> 198,295,089
<SALES> 6,217,703
<TOTAL-REVENUES> 6,217,703
<CGS> 0
<TOTAL-COSTS> 12,427,749
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,645,774)
<INCOME-PRETAX> (8,944,221)
<INCOME-TAX> (8,944,221)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> (0.43)
<EPS-DILUTED> (0.43)
</TABLE>
