<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1996 Commission File Number: 33-59534
UNIVISION TELEVISION GROUP, INC.
(Exact Name of Registrant as specified in its charter)
Delaware No. 95-4398877
-------- --------------
(State of Incorporation) I.R.S. Employer Identification
6701 Center West Drive, Fifteenth Floor, Los Angeles, California 90045
----------------------------------------------------------------------
Tel: (310) 216-3434
-------------------
(address and telephone number of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days YES NO X .
--- ---
There were 1,000 shares of Common Stock, $.01 par value, outstanding as of April
30, 1996.
<PAGE> 2
UNIVISION TELEVISION GROUP, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION:
- - - Financial Terms .......................................................................... 2
- - - Financial Introduction ................................................................... 3
- Item 1. Consolidated Financial Statements
- UNIVISION TELEVISION GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations for the three
months ended March 31, 1996 and 1995 ........................................ 4
Consolidated Balance Sheets at March 31, 1996 and December 31, 1995 ............. 5
Consolidated Statements of Cash Flows for the
three months ended March 31, 1996 and 1995 ................................. 7
Notes to the Consolidated Financial Statements .................................. 8
- THE UNIVISION NETWORK HOLDING LIMITED PARTNERSHIP AND SUBSIDIARY
Consolidated Statements of Operations for the three
months ended March 31, 1996 and 1995 ........................................ 10
Consolidated Balance Sheets at March 31, 1996 and December 31, 1995 ............. 11
Consolidated Statements of Cash Flows for the
three months ended March 31, 1996 and 1995 .................................. 13
Notes to the Consolidated Financial Statements .................................. 14
- Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations ................................... 16
PART II - OTHER INFORMATION:
Item 1. Legal Proceedings .................................................................. 21
Item 2. Changes in Securities .............................................................. 21
Item 3. Defaults Upon Senior Securities .................................................... 21
Item 4. Submission of Matters to a Vote of Security Holders ................................ 21
Item 5. Other Information .................................................................. 21
Item 6. Exhibits and Reports on form 8-K ................................................... 21
</TABLE>
<PAGE> 3
UNIVISION TELEVISION GROUP, INC.
FINANCIAL TERMS
The following terms are used in this Form 10-Q to refer to the companies and
operations indicated:
"HALLMARK" - Hallmark Cards, Incorporated, a Missouri corporation and the parent
company of UHI.
"NETWORK" - The Univision Network Limited Partnership ("UNP"). The Network is
held by UNHP, its general partner, and Network Limited Partner, Inc., its
limited partner.
"OWNERS" - Perenchio, Televisa and Venevision.
"PERENCHIO" - A. Jerrold Perenchio.
"PTI" - Perenchio Television, Inc., a Delaware corporation, a wholly-owned
subsidiary of PTIH and the parent of UTG.
"PTIH" - a Delaware corporation, the parent of PTI and indirect parent of UTG.
"TELEVISA" - Grupo Televisa, S.A., a publicly held Mexican Corporation, the
parent of Univisa.
"UHI" - Univision Holdings, Inc., a Delaware corporation, a wholly owned
subsidiary of Hallmark.
"UNHP" - The Univision Network Holding Limited Partnership, a Delaware limited
partnership, and the general partner of the Network. UNHP is beneficially owned
by Sunshine Acquisition, L.P., Bravo Enterprises, Inc. and Univisa Broadcasting,
L.P., as its general partners, and Network Limited Partner, Inc., as its limited
partner.
"UNIVISION GROUP" - The combined operations of UTG and the Network, in addition
to (prior to the acquisitions) UHI.
"USG" - The Univision Station Group was acquired on December 17, 1992 by
Univision Television Group, Inc. ("UTG"), with UTG as the surviving corporation.
Concurrently, USG's name was changed to Univision Television Group, Inc.
"UTG" Univision Television Group, Inc., a Delaware corporation. UTG is a
wholly-owned subsidiary of PTI and through such ownership is indirectly held by
affiliates of the Owners through PTIH and PCI.
"VENEVISION" - Corporacion Venezolana de Television, C.A. (Venevision), a
Venezuelan corporation, together with its affiliates.
2
<PAGE> 4
UNIVISION TELEVISION GROUP, INC.
FINANCIAL INTRODUCTION
The businesses of UTG and UNHP are under separate management and ownership
structures and are operated as two distinct businesses. Notwithstanding this
separation, the business operations of UTG and UNHP remain substantially
dependent on one another. UTG is dependent on UNHP for programming and
advertising sales support while UTG represents 71% of UNHP's total coverage of
Hispanic households in the U.S.
In addition, UTG's bank credit agreement and Senior Subordinated Note indenture
contain operating and financial covenants which measure performance of the two
operations combined. PTI, UNHP and UNLP are guarantors of the bank credit
agreement and the Senior Subordinated Notes. Consequently, unaudited condensed
consolidated financial statements of UTG and unaudited condensed consolidated
financial statements of UNHP are included in this Form 10-Q.
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
statements. The interim financial statements are unaudited but include all
adjustments, which are of a normal recurring nature, that management considers
necessary to fairly present the financial position and the results of operations
for such periods. Results of operations of interim periods are not necessarily
indicative of results for a full year. These financial statements should be read
in conjunction with the audited consolidated financial statements of UTG and
UNHP included in the December 31, 1995 Form 10-K of UTG.
3
<PAGE> 5
UNIVISION TELEVISION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1996 1995
------------------
<S> <C> <C>
Net revenues $39,191 $34,547
Direct operating expenses 8,115 7,504
Selling, general and administrative expenses 16,012 13,353
Depreciation and amortization 8,532 8,158
------- -------
Operating income 6,532 5,532
Interest expense 8,099 8,961
Amortization of deferred financing costs 973 1,160
------- -------
Loss before extraordinary loss on
extinguishment of debt (2,540) (4,589)
Extraordinary loss on extinguishment of debt (283) -
------- -------
Net loss $(2,823) $(4,589)
======= =======
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE> 6
UNIVISION TELEVISION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- -----------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,777 $ 14,029
Accounts receivable, less allowance
for doubtful accounts of $4,333 in 1996
and $3,853 in 1995 30,938 37,951
Prepaid expenses and other 2,585 3,043
-------- --------
Total current assets 43,300 55,023
Property and equipment, less accumulated
depreciation of $15,356 in 1996 and
$13,888 in 1995 27,635 25,557
Intangible assets, less accumulated
amortization of $93,597 in 1996 and
$86,520 in 1995 444,034 451,111
Deferred financing costs, less accumulated
amortization of $14,511 in 1996 and
$13,597 in 1995 11,136 12,193
Deferred income taxes 2,000 2,000
Other assets 1,848 1,746
-------- --------
Total assets $529,953 $547,630
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 7
UNIVISION TELEVISION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
LIABILITIES AND SHAREHOLDER'S EQUITY (Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable and accrued liabilities $ 34,096 $ 41,266
Due to the Network 44,042 64,505
Accrued interest 2,665 6,281
Current portion of program rights obligations 1,234 1,899
Current portion of long-term debt 27,399 17,313
-------- --------
Total current liabilities 109,436 131,264
Long-term debt, net of current portion 238,981 242,072
Sponsor loans, including accrued interest 118,517 108,361
Program rights obligations - net of current portion 638 753
Other long-term liabilities 1,325 1,301
Shareholder's equity:
Common stock; $.01 par value, 1,000 shares
authorized, issued and outstanding - -
Paid-in-capital 98,442 98,442
Accumulated deficit (37,386) (34,563)
-------- --------
Total shareholder's equity 61,056 63,879
-------- --------
Total liabilities and shareholder's equity $529,953 $547,630
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE> 8
UNIVISION TELEVISION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Net loss $ (2,823) $ (4,589)
Adjustment to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 1,455 1,186
Amortization of intangible assets, deferred financing
costs and other 8,050 8,132
Accretion of interest on sponsor loans 2,244 1,436
Extraordinary loss on extinguishment of debt 283 -
Changes in assets and liabilities:
Accounts receivable 7,013 9,024
Due to the Network (3,583) (5,046)
Prepaid and other assets 356 165
Accrued interest (3,616) (3,159)
Accounts payable and accrued liabilities (7,169) (1,976)
Sponsor loan payable (5,075) -
Obligations for program rights (780) (2,717)
Other, net 50 (10)
-------- --------
Net cash provided by (used in) operating activities (3,595) 2,446
Cash flow from investing activities:
Capital expenditures (3,564) (2,160)
-------- --------
Net cash (used in) investing activities (3,564) (2,160)
Cash flow from financing activities:
Net proceeds from long-term debt 17,000 3,398
Repayments of long-term debt (7,000) -
Proceeds from sponsor loans 12,986 10,737
Repurchase of senior subordinated notes (3,199) -
Advances to the Network (16,880) (12,437)
Deferred financing costs - (62)
-------- --------
Net cash provided by (used in) financing activities 2,907 1,636
Net increase(decrease) in cash (4,252) 1,922
Cash, beginning of year 14,029 5,869
-------- --------
Cash, end of period $ 9,777 $ 7,791
======== ========
Supplemental disclosure of cash flow information:
Interest paid during the period $ 9,366 $ 4,798
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
7
<PAGE> 9
UNIVISION TELEVISION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
MARCH 31, 1996
(UNAUDITED)
1. ORGANIZATION AND ACQUISITION
On December 17, 1992 (effective close of business December 16, 1992),
Univision Station Group, Inc. ("USG") and KTVW, Inc. ("KTVW") were
acquired by Univision Television Group, Inc. ("UTG" or "Company") with UTG
as the surviving corporation. Concurrently, USG's name was changed to
Univision Television Group, Inc. ("UTG"), and PTI Holding, Inc. ("PTIH")
contributed the capital stock of UTG and KTVW to Perenchio Television,
Inc. ("PTI") and PTI then contributed the capital stock of KTVW to UTG.
KTVW was subsequently merged into UTG. As a result of the above
transactions, UTG is a wholly-owned subsidiary of PTI, and PTI is a
wholly-owned subsidiary of PTIH.
PTIH and Perenchio Communications, Inc. ("PCI") are beneficially owned by
affiliates of A. Jerrold Perenchio (together with his affiliates
"Perenchio"), affiliates of Grupo Televisa, S.A. de C.V. (together with
its affiliates, "Televisa") and Dennevar, B.V., an affiliate of Venevision
International Limited (together with its affiliates, "Venevision"),
(collectively, the "Owners").
PCI and its subsidiaries had no operations prior to the acquisitions, and
PTIH and PTI are holding companies and otherwise inactive. The aggregate
purchase price for USG and KTVW was approximately $489,000,000, including
approximately $11,000,000 of acquisition costs. A subordinated note due
from PTIH to the seller (which was subsequently sold to a third party and
then to the public as a series of notes) financed $5,442,000 of the
purchase price, and is included as a capital contribution from PTIH to PTI
and from PTI to UTG in the consolidated financial statements. These
subordinated notes are not guaranteed in any form by PTI nor secured by
its assets. The acquisition was accounted for under the purchase method of
accounting. Accordingly, the assets acquired and liabilities assumed have
been recorded at the fair values at the date of the acquisition. In
addition to current assets and liabilities, the purchase price was
allocated principally to property and equipment of approximately
$22,000,000 and intangible assets of approximately $473,000,000.
On August 2, 1994, UTG completed its acquisition of all of the stock of
Combined Broadcasting of Chicago, Inc. The Purchase price was
approximately $36,000,000, plus the assumption of program rights
obligations totaling approximately $11,000,000. The unpaid portion of
program rights obligations is payable in varying amounts through the year
1999. The acquisition was financed with borrowings from the Bank
Facilities. Substantially all of the purchase price has been allocated to
intangible assets; however, during 1995 UTG had negotiated several
sub-license agreements and/or releases from the program suppliers, that
resulted in an increase in the other assets and a reduction of the
intangible assets of approximately $1,200,000.
On September 30, 1994, UTG completed its acquisition of all of the stock
of Pueblo Broadcasting Corporation which owned and operated a television
station affiliated with the Network serving Houston, Texas. The purchase
price was approximately $20,000,000 and was financed with
8
<PAGE> 10
UNIVISION TELEVISION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
MARCH 31, 1996
(UNAUDITED)
borrowings from the Bank Facilities and cash generated through operations.
Substantially all of the purchase price has been allocated to intangible
assets. During 1995, certain adjustments were made to the preliminary
allocation of the purchase price which has resulted in an increase in the
intangible assets of $2,300,000.
UTG owns and operates eleven Spanish-language full-power television
stations serving New York, Los Angeles, Miami, San Antonio, San Francisco,
Fresno, Dallas, Phoenix, Albuquerque, Houston, and Chicago, and six
Spanish-language low-power television stations serving Hartford,
Philadelphia, Tucson, Austin, Albuquerque and Bakersfield. The Company's
television stations are affiliated with the Spanish-language television
network owned and operated by The Univision Network Limited Partnership
(the "Network"), which is also ultimately beneficially-owned by the
Owners.
The businesses of the Company and the Network are under separate
management and ownership structures. Notwithstanding this separation, the
business operations of the Company and the Network remain substantially
dependent on one another. The Company is dependent on the Network for
programming and advertising sales support while the Company represents 71%
of the Network's total coverage of Hispanic households in the U.S. The
Company and the Network are collectively referred to herein as the
"Univision Group."
2. UNAUDITED FINANCIAL STATEMENTS
Certain reclassifications have been made to the prior year financial
statements to conform with the current presentation.
3. EARLY EXTINGUISHMENT OF DEBT
During the quarter ended March 31, 1996, UTG purchased at a premium
$3,000,000 face amount of its 11 3/4% Senior Subordinated Notes due 2001.
The purchase resulted in an extraordinary loss of $283,000, including the
write-off of the related financing costs.
9
<PAGE> 11
THE UNIVISION NETWORK HOLDING LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP) AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1996 1995
----------------------
<S> <C> <C>
Net revenues $33,483 $29,917
Direct operating expenses 18,241 17,260
Selling, general and administrative expenses 10,676 10,138
Depreciation and amortization 2,685 2,335
------- -------
Operating income 1,881 184
Interest expense 2,381 1,914
------- -------
Net loss (allocable to the
general partners) $ (500) $(1,730)
======= =======
</TABLE>
See notes to condensed consolidated financial statements
10
<PAGE> 12
THE UNIVISION NETWORK HOLDING LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP) AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash $ 29 $ 29
Short-term investments, at market value 85 85
Accounts receivable, less allowance
for doubtful accounts of $3,548 in 1996
and $3,849 in 1995 32,993 32,675
Due from UTG 44,042 64,505
Program rights 4,098 2,899
Prepaid expenses and other 2,122 1,956
-------- --------
Total current assets 83,369 102,149
Property and equipment, less accumulated
depreciation of $12,915 in 1996 and
$11,324 in 1995 73,463 48,618
Intangible assets, less accumulated
amortization of $14,990 in 1996 and
$13,886 in 1995 7,873 8,977
Other assets 778 621
-------- --------
Total assets $165,483 $160,365
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
11
<PAGE> 13
THE UNIVISION NETWORK HOLDING LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP) AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
LIABILITIES AND PARTNERS' EQUITY (Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable and accrued liabilities $ 32,789 $ 37,977
Deferred advertising revenues 3,830 9,603
Program cost sharing advance 4,948 4,157
Obligations for program rights 161 236
Accrued station compensation 3,530 2,988
Management and license fees payable 12,981 22,536
Current portion of capital lease obligations 2,163 1,324
-------- --------
Total current liabilities 60,402 78,821
Subordinated notes, including accrued interest 47,127 45,704
Other liabilities:
Capital lease obligations, net of current portion 41,065 18,246
Other long-term liabilities 2,522 2,704
General partners' equity 14,366 14,889
Limited partners' equity 1 1
-------- --------
Total liabilities and partners' equity $165,483 $160,365
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
12
<PAGE> 14
THE UNIVISION NETWORK HOLDING LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP) AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Net loss $ (500) $ (1,730)
Adjustment to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 1,581 1,230
Amortization of intangible assets 1,104 1,105
Accretion of interest on subordinate loans 1,424 1,264
Changes in assets and liabilities:
Accounts receivable (318) 3,484
Due from UTG 3,583 5,046
Program rights (1,199) (190)
Prepaid and other assets (322) 743
Accounts payable and accrued liabilities (4,988) (2,108)
Deferred advertising revenues (5,774) (7,231)
Management and license fees payable 12,802 11,700
Payment of license fees (12,986) (10,737)
Payment of management fee (9,371) (7,203)
Program cost sharing advance 791 (3,813)
Accrued station compensation 541 (1,992)
Obligations for program rights (75) (508)
Other liabilities (170) (743)
-------- --------
Net cash provided by (used in) operating activities (13,877) (11,683)
Cash flow from investing activities:
Advances from UTG 16,880 12,437
Capital expenditures (2,520) (470)
-------- --------
Net cash provided by (used in) investing activities 14,360 11,967
Cash flow from financing activities:
Principal payments of capital lease obligations (483) (286)
-------- --------
Net cash (used in) financing activities (483) (286)
Net decrease in cash 0 (2)
Cash, beginning of year 29 40
-------- --------
Cash, end of period $ 29 $ 38
======== ========
Supplemental disclosure of cash flow information:
Interest paid during the period $ 926 $ 563
======== ========
</TABLE>
See notes to consolidated financial statements.
13
<PAGE> 15
THE UNIVISION NETWORK HOLDING LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP) AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
1. ORGANIZATION AND ACQUISITION
The Univision Network Holding Limited Partnership (the "Partnership" or
"UNHP") was formed on December 7, 1992 pursuant to the laws of the State
of Delaware for the purpose of owning and operating a Spanish-language
television network in the United States. The General Partners of UNHP are
affiliates of A. Jerrold Perenchio (together with his affiliates,
"Perenchio"), Grupo Televisa, S.A. de C.V. (together with its affiliates,
"Televisa") and Venevision International, Inc. (together with its
affiliates, "Venevision"), respectively (collectively, the "Owners"). The
owners initially contributed a cash capital contribution of approximately
$7,002,000.
On December 17, 1992 (effective close of business December 16, 1992),
UNHP purchased the stock of Univision, Inc. and certain other assets from
Univision Holdings, Inc. for an aggregate purchase price of approximately
$38,684,000, including $273,000 of acquisition costs. A portion of the
total purchase price was financed by a 7% subordinated note with a face
amount of $61,094,000 due to the seller (which note was subsequently sold
to a third party and then to the public as a series of notes), which was
discounted for financial reporting purposes to $31,911,000 (12.5%
effective rate). The stock and other assets were immediately contributed
by UNHP to The Univision Network Limited Partnership ("UNP" or the
"Network"), of which UNHP is the sole general partner. Univision, Inc.
then liquidated and distributed its assets to UNP (which also assumed all
of the liabilities of Univision, Inc., including tax liabilities
attributable to its liquidation). The acquisition was accounted for under
the purchase method of accounting. Accordingly, the assets acquired and
liabilities assumed have been recorded at the fair values at the date of
the acquisitions. In addition to current assets and liabilities, the
purchase price was allocated principally to property and equipment of
approximately $27,000,000 and intangible assets of approximately
$13,000,000.
As a result of the acquisitions, UNP owns and operates a Spanish-language
television network which is affiliated with nineteen full-power
television stations and eighteen low-power television stations, including
eleven full-power stations and six low-power stations owned and operated
by Univision Television Group, Inc. ("UTG"). UTG is ultimately
beneficially owned by Perenchio, Televisa and Venevision.
The businesses of UTG and the Network are under separate management and
ownership structures. Notwithstanding this separation, the business
operations of UTG and the Network remain substantially dependent on one
another. UTG is dependent on the Network for programming and advertising
sales support while UTG represents 71% of the Network's total coverage of
Hispanic households in the U.S.
UNP and UTG are collectively referred to herein as the "Univision Group."
14
<PAGE> 16
THE UNIVISION NETWORK HOLDING LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP) AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
Subject to certain special allocations, net losses of the Partnership are
first allocated to reduce partners' capital accounts to the amount of
unrecovered capital contributions, and thereafter to the General Partners
in equal proportions, and net income is first allocated to offset any
prior net losses and thereafter to the Partners in accordance with their
Ownership Percentage Interests. Various provisions of the Partnership
agreement govern the allocation of gains and losses to the individual
partners for tax purposes. Upon dissolution of the Partnership, the
assets of the Partnership shall be distributed to the partners, after
payment of all debts and other obligations, first to reduce their
respective capital contributions, and thereafter, in accordance with
their respective Ownership Percentage Interests. Subject to obtaining any
necessary consents from lenders to the Partnership, the Partnership is
required to make sufficient cash distributions on a quarterly basis to
fund the partners' tax liabilities attributable to their ownership
interests in the Partnership. During 1996 approximately $773,000 was
distributed to the Partners covering taxes related to 1995.
UNHP holds a 99.99% general partner interest in UNP. The remaining
limited partner interest is held by the Network Limited Partner, Inc.
which is owned by Perenchio, Televisa and Venevision. UNHP and UNP had no
operations or transactions prior to the acquisitions described above.
2. UNAUDITED FINANCIAL STATEMENTS
Certain reclassifications have been made to the prior year financial
statements to conform with the current presentation.
3. SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITY
The Network has entered into two transponder agreements which qualify as
capital lease obligations. The first agreement, which is effectively a
nine-year lease, commenced January 1, 1995, resulting in a total
capitalized cost of $7,753,135. The second agreement, for two additional
transponders, commenced January 1996. Payments under the second agreement
will aggregate approximately $41,000,000 over the 15 year anticipated
life of the transponders and a total capitalized cost of approximately
$24,000,000. UNP's obligations under both agreements are contingent on
the successful operation of the transponders. The transponders were
successfully deployed in 1996.
15
<PAGE> 17
UNIVISION TELEVISION GROUP, INC.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management's discussion and analysis describes the results of
operations of UTG and UNHP for the three months ended March 31, 1996 ("1996") as
compared to the three months ended March 31, 1995 ("1995").
RESULTS OF OPERATIONS
UTG net revenues includes gross advertising revenues generated from the sale of
national and local spot advertising time plus an allocation of network gross
revenues, net of agency commissions. Network revenues are allocated to UTG based
on a formula set forth in each of its affiliation agreements. UTG's allocated
share of total Network gross revenues, net of agency commission, was 72% and 71%
during the first quarter of 1995 and 1996, respectively. Based on the current
affiliation agreements, net advertising revenues are shared by UTG and the
Network, 62% to each station owned by UTG and 38% to the Network during 1995 and
1996. Also included in net revenues are other miscellaneous revenues.
Direct operating expenses consist of programming and news costs and general
operating costs.
UTG CONSOLIDATED
REVENUES. Net revenues for the 1996 first quarter of $39,191,000 increased
$4,644,000 or 13.4% from the corresponding 1995 period. The increase is due to
higher local and national spot net revenues of $6,514,000, primarily from Los
Angeles, with increases at all other stations except for New York, and an
increase in its share of Network net revenues of $450,000. These net increases
were partially offset by the Network's share of higher local and national net
revenues of $2,475,000. UTG's increase in gross advertising revenues during the
first quarter of 1996 resulted from a combination of increased prices for
advertising spots of approximately 21% and by approximately 1% greater number of
spots being sold.
EXPENSES. For the three month period ended March 31, 1996 direct expenses
increased to $8,115,000, an increase of $611,000 or 8.1% over the comparable
1995 period. The increase is primarily due to minor increases in programming and
technical costs and a specific promotional campaign by the New York station.
Selling, general and administrative expenses increased to $16,012,000, an
increase of $2,659,000 or 19.9% over the comparable 1995 period. The increase is
due to increased selling costs associated with higher sales, increases in
corporate sales support and increased research fees.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased to
$8,532,000 or by 4.6% for the three month period ended March 31, 1996 due to
increased capital expenditures.
OPERATING INCOME. As a result of the factors described above, operating income
increased to $6,532,000 or by 18.1% for the three month period ended March 31,
1996 as compared to the same period in 1995.
16
<PAGE> 18
UNIVISION TELEVISION GROUP, INC.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTEREST EXPENSE. Interest expense decreased to $8,099,000 or by 9.6% for the
three months period ended March 31, 1996. This decrease was primarily a result
of lower bank borrowings partially offset by increased Sponsor Loan balances.
EARLY EXTINGUISHMENT OF DEBT. During the quarter ended March 31, 1996, UTG
purchased at a premium $3,000,000 face amount of its 11 3/4% Senior Subordinated
Notes due 2001. The purchase resulted in an extraordinary loss of $283,000,
including the write-off of the related deferred financing costs.
NET LOSS. As a result of the above factors, UTG generated a net loss of
$2,823,000 in the first quarter as compared to a net loss of $4,589,000 in the
comparable period in 1995.
UNHP CONSOLIDATED
REVENUES. Net revenues for the 1996 first quarter of $33,483,000 increased
$3,566,000 or 11.9% from the corresponding 1995 period. This increase resulted
from the Network's higher share of UTG's local and national spot net revenues of
$2,475,000 as well as higher Network advertising net revenues of $1,591,000,
that were partially offset by UTG's share of higher Network sales of $450,000.
The Network's increase in gross advertising revenues during the first quarter of
1996 resulted from a combination of rate increases and increased volume on
previously lower demand dayparts as compared to 1995.
EXPENSES. Direct operating expenses for the 1996 first quarter of $18,241,000
increased $981,000 or 5.7% from the corresponding 1995 period. This increase was
primarily due to a higher license fee payable to the program suppliers of
$862,000 based on higher combined net time sales.
Selling, general and administrative expenses for the 1996 first quarter of
$10,676,000 increased by $538,000 or 5.3% from the corresponding 1995 period.
This increase results primarily from increased sales force compensation of
$563,000 and a higher management fee payable to the Owners of $173,000, offset
partially by the timing of expenditures for affiliate relations of $242,000.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased to
$2,685,000 for the 1996 first quarter, an increase of $350,000 or 15.0%. The
increase is primarily due to the inclusion in the 1996 first quarter of two
additional transponders capitalized by the Network in January 1996.
OPERATING INCOME. As a result of the factors described above, UNHP generated
operating income of $1,881,000 for the 1996 first quarter as compared with
operating income of $184,000 in 1995.
INTEREST EXPENSE. Interest expense for the first quarter of 1996 of $2,381,000
increased by $467,000 or 24.4% as compared to the 1995 period. The increase was
due to the addition, in January 1996, of two additional Network capitalized
transponder leases.
17
<PAGE> 19
UNIVISION TELEVISION GROUP, INC.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NET LOSS. As a result of the above factors, UNHP generated a net loss of
$500,000 in the first quarter as compared to a net loss of $1,730,000 in the
1995 period.
UTG AND UNHP LIQUIDITY AND CAPITAL RESOURCES
The Combined Entities' primary source of cash flow is its broadcasting
operations. Funds for debt service, capital expenditures and operations
historically have been provided by income from operations and by borrowings. The
businesses of UTG and UNHP are under separate management and ownership
structures. The Owners ultimate ownership percentages in each of UTG and UNHP
are different.
Notwithstanding this separation, the business operations of UTG and UNHP remain
substantially dependent on one another. UTG's stations are dependent on the
Network for programming and advertising sales support and represent 71% of the
Network's total coverage of Hispanic households in the U.S.
UTG's bank credit agreement with a syndicate of banks and other lenders (the
"Bank Facility") requires most excess cash flow, as defined, of both UTG and
UNHP to be used to fund principal and/or interest payments under the Bank
Facility. Financial covenants in the Bank Facility and other debt instruments of
UTG measure operating performance of the Combined Entities. UTG and the Network
share a cash management system under which all excess cash is loaned daily on a
subordinated basis from the Network to UTG and cash shortfalls at the Network
are funded by repayments or by subordinated loans from UTG to the Network.
The following discussion of liquidity and capital resources of UTG and UNHP
reflects the cash management and debt service requirements described above.
For the three month periods ended March 31, 1996 and 1995, UTG's net cash
provided by (used in) operations totaled $(3,595,000) and $2,446,000,
respectively. The 1996 period was negatively impacted by cash payments of
accounts payable and accrued liabilities, accrued interest and the net loss of
$2,823,000. These uses of funds were partially offset by collections of accounts
receivable, non-cash charges for intangibles related to acquisitions, as well as
accreted interest on the Sponsor loans from the Owners. The 1995 period
benefited primarily from non-cash charges for intangibles, improved collections
of accounts receivables and accreted interest on the Sponsor loans from the
Owners. These benefits were partially offset by a net loss of $4,589,000 and a
lower payable due to the Network.
For the three month periods ended March 31, 1996 and 1995, UNHP's net cash used
in operations totaled $13,877,000 and $11,683,000, respectively. The 1996 period
was negatively impacted by the payment of license fees of $12,986,000 and the
full year 1994 management fee of $9,371,000. These uses of funds were partially
offset by benefits from net transactions with UTG of $3,583,000, due primarily
from UNLP's revenue sharing agreement with UTG, the accrual of current period
license fees payable under the Program License Agreements and a current period
management fee payable to the
18
<PAGE> 20
UNIVISION TELEVISION GROUP, INC.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Owners of $12,802,000. Funds for the payments of license and management fees,
accounts payable and accrued liabilities, capital expenditures and other cash
needs totaling approximately $16,880,000, were advanced from UTG under the cash
management structure to UNLP. The 1995 period was negatively impacted by the
payment of license fees of $10,737,000 and the full year 1994 management fee of
$7,203,000. These uses of funds were partially offset by benefits from net
transactions with UTG of $5,046,000, due primarily from UNHP's revenue sharing
agreement with UTG, the accrual of current period license fees payable under the
Program License Agreements and a current period management fee payable to the
Owners of $11,700,000. Funds for the payments of license and management fees,
accounts payable and accrued liabilities, capital expenditures and other cash
needs totaling approximately $12,437,000, were advanced from UTG under the cash
management structure to UNLP.
UTG's Bank Facilities, which total $400 million, consist of a $70 million
six-year revolving credit loan (the "Working Capital Facility"), a $180 million
five-year amortizing term loan, a $30 million six-year term loan, a $20 million
five and one-half year term loan (collectively the "Term Facility") and a $100
million five and one-half year term loan available under a revolving credit
facility, which to-date has not been borrowed against. The Bank Facilities
require, among other things, mandatory prepayments equal to 75% of excess cash
flow (as defined) of the Univision Group, in addition to net proceeds (as
defined) received by the Univision Group in certain situations from the sale or
other disposition of assets, to be applied to ratably reduce the Term Facility
and the availability under the Working Capital Facility. Any such mandatory
prepayments reduce the scheduled amortization of the Term Facility in inverse
order of maturity.
As of March 31, 1996, UTG and UNHP had long term debt, including current
maturities, of $266,380,000 and $49,290,000, respectively. At December 31, 1995
these balances were at $259,385,000 and $47,028,000, respectively. UTG's
increase was due primarily to increased borrowings to make the January 1996
semi-annual interest payment on the 11 3/4% Subordinated Notes of $5,408,000 and
for the subsequent purchase of $3,000,000 of these notes. The increase in UNHP's
debt is due to an increase in capitalized leases (see the Note 3) and accrued
interest on the subordinate.
Capital expenditures net of dispositions of UTG totaled $3,564,000 and
$2,160,000, and of UNHP totaled $2,520,000 and $470,000 (excluding capitalized
transponder lease obligations) for the three month periods ended March 31, 1996
and 1995, respectively. UTG and UNHP anticipate that total capital expenditures
for 1996 will be approximately $27,000,000 and for each of the three years
thereafter will be approximately $15,000,000.
UTG and UNHP expect earnings provided by operations, adjusted for non-cash
charges, to generate sufficient cash flows to satisfy debt service and capital
expenditures. Additional sources of cash for UTG's debt service and capital
expenditures of UTG and UNHP will come from the Bank Facility and proceeds from
the Sponsor Loans.
19
<PAGE> 21
UNIVISION TELEVISION GROUP, INC.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Management Committee of the Network from time to time considers which
programs are to be produced under the Cost Sharing Agreement. Should it be
determined that programs previously produced under the Cost Sharing Agreement
will no longer be produced under such agreement, and the Network determines to
continue producing such programs absent a new arrangement with Televisa and
Venevision, the Network would bear a greater proportion of the costs and will
retain worldwide rights to such programs. Furthermore, for the one-year period
commencing January 1, 1996, the Network, Televisa and Venevision have agreed
that in lieu of cash payments under the Program Cost Sharing Agreement, UTG will
instead receive payment in the form of Sponsor Notes having a principal amount
equal to the costs to be funded by Televisa and Venevision under the Program
Cost Sharing Agreement. As a result of this form of payment, the Network was not
reimbursed in cash for these programming expenditures of approximately
$4,700,000 during the first quarter of 1996. For the balance of 1996, the
Network will similarly not be reimbursed for such programming costs of
approximately $5,000,000 per quarter. Consequently, these programming costs will
be funded through the operations of UTG and UNLP.
SEASONALITY
The advertising revenues of the Univision Group vary over the calendar year.
Historically, approximately 30% of total advertising revenues have been
generated in the fourth quarter and 20% in the first quarter with the remainder
approximately equally split between the second and third quarters. Because of
the relatively fixed nature of the costs of the Univision Group's business,
seasonal variations in operating income are more pronounced than those of
revenues.
20
<PAGE> 22
PART II. OTHER INFORMATION
ITEM 1. None
ITEM 2. None
ITEM 3. None
ITEM 4. None
ITEM 5. None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
The registrant did not file any reports on Form 8-K during the
quarter.
21
<PAGE> 23
UNIVISION TELEVISION GROUP, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIVISION TELEVISION GROUP, INC.
(Registrant)
By /s/ George W. Blank
----------------------------------
May 14, 1996 George W. Blank
Los Angeles, California Executive Vice President and
Chief Financial Officer
22
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNIVISION
TELEVISION GROUP, INC.'S STATEMENTS OF EARNINGS AND BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
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<CASH> 9,777
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<RECEIVABLES> 35,271
<ALLOWANCES> 4,333
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