<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------------
FORM 10-Q/A
AMENDMENT NO. 1 TO
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-82114
SPANISH BROADCASTING SYSTEM, INC.
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
See Table of Additional Registrants
Delaware 13-3827791
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
26 West 56 Street 10019
New York, NY
(Address of principal executive offices) (Zip Code)
(212) 541-9200
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE> 2
FORM 10-Q
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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Number of shares of Registrant's Common Stock, par value $.01 per share,
outstanding as of May 14, 1997: 606,668 shares of Common Stock of which 558,135
shares are designated Class A Common Stock and 48,533 shares are designated
Class B Common Stock.
2
<PAGE> 3
TABLE OF ADDITIONAL REGISTRANTS(1)
<TABLE>
<CAPTION>
Primary Standard
State or Other Industrial I.R.S. Employer
Jurisdiction of Classification Identification
Name Incorporation Number Number
- ---- ------------- ---------------- ---------------
<S> <C> <C> <C>
Spanish Broadcasting System, New Jersey 4832 13-3181941
Inc.
Spanish Broadcasting System California 4832 92-3952357
of California, Inc.
Spanish Broadcasting System Florida 4832 58-1700848
of Florida, Inc.
Alarcon Holdings, Inc. New York 6512 13-3475833
Spanish Broadcasting System New York 4899 13-3511101
Network, Inc.
SBS Promotions, Inc. New York 7999 13-3456128
SBS of Greater New York, New York 4832 13-3888732
Inc.
</TABLE>
- --------
(1) This report is intended to discharge the reporting obligations of each
of the above-referenced subsidiaries under Section 13 of the Securities
Exchange Act of 1934, as amended.
3
<PAGE> 4
The Registrant hereby amends its Quarterly Report on Form 10-Q
for the quarterly period ended March 30, 1997 to amend and restate in its
entirety Item 1 - Financial Statements and Item 2 - Management's Discussion and
Analysis of Financial Condition and Results of Operations to read as set forth
below. The revisions made to Items 1 and 2 are intended to correct and/or
clarify certain disclosures.
4
<PAGE> 5
SPANISH BROADCASTING SYSTEM, INC.
INDEX TO QUARTERLY REPORT
MARCH 30, 1997
<TABLE>
<CAPTION>
PAGE
PART 1. FINANCIAL INFORMATION NUMBER
------
<S> <C>
Condensed Consolidated Balance Sheets as of September 29, 1996 and 6
March 30, 1997 (unaudited)
Condensed Consolidated Statements of Operations for the three months ended 7
and six months ended March 31, 1996 and March 30, 1997 (unaudited)
Condensed Consolidated Statements of Cash Flows for the six months ended 8
March 31, 1996 and March 30, 1997 (unaudited)
Notes to Condensed Consolidated Financial Statements (unaudited) 9
Management's Discussion and Analysis of Financial Condition and Results of 11
Operations
</TABLE>
5
<PAGE> 6
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 29, 1996 MARCH 30, 1997
(AUDITED) (UNAUDITED)
------------------ ---------------
<S> <C> <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS............................................. $ 5,468,079 $ 13,151,379
RECEIVABLES:
TRADE.............................................................. 12,104,500 9,887,459
LESS ALLOWANCE FOR DOUBTFUL ACCOUNTS............................... 1,873,359 1,980,351
------------- -------------
NET RECEIVABLES - TRADE...................................... 10,281,141 7,907,108
BARTER (NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS OF $2,372,386 AT
SEPT. 29, 1996 AND $3,462,564 AT MAR. 30, 1997).................... 548,885 476,092
------------- -------------
NET RECEIVABLES.............................................. 10,830,026 8,383,200
OTHER CURRENT ASSETS.................................................. 1,115,332 886,241
------------- -------------
TOTAL CURRENT ASSETS............................................... 17,413,437 22,420,820
PROPERTY AND EQUIPMENT, NET........................................... 18,873,437 19,353,908
FRANCHISE COSTS, NET.................................................. 133,917,182 277,981,910
DUE FROM RELATED PARTY................................................ 289,869 289,869
DEFERRED FINANCING COSTS, NET......................................... 6,235,341 8,148,692
DEFERRED TAXES........................................................ -- 3,160,491
OTHER ASSETS.......................................................... 131,294 104,296
------------- -------------
$ 176,860,159 $ 331,459,986
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
CURRENT PORTION OF SENIOR SECURED NOTES............................... -- $ 15,000,000
CURRENT PORTION OF LONG TERM DEBT..................................... 53,572 48,588
ACCOUNTS PAYABLE AND ACCRUED EXPENSES................................. 4,918,207 4,940,588
ACCRUED INTEREST...................................................... 2,394,621 2,489,449
UNEARNED REVENUE...................................................... 875,256 1,511,640
------------- -------------
TOTAL CURRENT LIABILITIES.......................................... 8,241,656 23,990,265
SENIOR NOTES, NET OF UNAMORTIZED DISCOUNT............................. 134,927,372 162,225,874
LONG-TERM DEBT, LESS CURRENT PORTION.................................. 1,033,368 4,018,843
REDEEMABLE PREFERRED STOCK, $.01 PAR VALUE. AUTHORIZED 413,930
413,930 SHARES ISSUED AND OUTSTANDING 175,000 SHARES.................. -- 148,135,197
STOCKHOLDERS DEFICIENCY:
CLASS A COMMON STOCK, $.01 PAR VALUE. AUTHORIZED
5,000,000 SHARES; ISSUED AND OUTSTANDING 558,135 SHARES............ 5,581 5,581
CLASS B COMMON STOCK, $.01 PAR VALUE. AUTHORIZED
200,000 SHARES; ISSUED AND OUTSTANDING 48,533 SHARES............... 485 485
ADDITIONAL PAID IN CAPITAL............................................ 10,806,004 15,543,023
ACCUMULATED DEFICIT................................................... (11,906,690) (19,985,046)
------------- -------------
(1,094,620) (4,435,951)
LESS: LOANS RECEIVABLE FROM STOCKHOLDERS.............................. (2,474,236) (2,474,236)
------------- -------------
TOTAL STOCKHOLDERS' DEFICIENCY..................................... (3,568,856) (6,910,193)
------------- -------------
$ 140,921,500 $ 331,459,986
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE> 7
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
MARCH 31, 1996 MARCH 30, 1997 MARCH 31, 1996 MARCH 30, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
GROSS BROADCASTING REVENUES ......... 10,318,819 12,746,549 24,169,520 26,741,121
LESS: AGENCY COMMISSIONS ......... 1,186,674 1,322,935 2,932,108 2,951,367
------------ ------------ ------------ ------------
NET BROADCASTING REVENUES .. 9,132,145 11,423,614 21,237,412 23,789,754
OPERATING EXPENSES
ENGINEERING ...................... 422,549 586,743 860,533 1,084,513
PROGRAMMING ...................... 1,293,367 1,514,869 2,704,152 3,032,258
SELLING .......................... 3,187,118 2,628,309 6,733,963 6,165,789
GENERAL AND ADMINISTRATIVE ....... 1,525,413 1,403,153 3,117,957 2,934,438
CORPORATE EXPENSES ............... 1,094,269 1,528,342 1,936,322 2,522,335
DEPRECIATION & AMORTIZATION ...... 816,543 1,406,609 1,636,739 2,801,156
8,339,259 9,068,025 16,989,666 18,540,489
------------ ------------ ------------ ------------
OPERATING INCOME ........... 792,886 2,355,589 4,247,746 5,249,265
OTHER EXPENSES:
INTEREST EXPENSE, NET ............ 3,414,213 5,321,235 6,649,023 10,327,648
OTHER, NET ....................... 911,157 452 911,150 27,890
------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAXES ......... (3,532,484) (2,966,098) (3,312,427) (5,106,273)
INCOME TAX BENEFIT .................. (1,426,017) (1,126,385) (1,324,971) (1,940,385)
------------ ------------ ------------ ------------
LOSS BEFORE EXTRAORDINARY ITEM ... (2,106,467) (1,839,713) (1,987,456) 3,165,888
EXTRAORDINARY ITEM-LOSS ON
EXTINGUISHMENT OF DEBT, NET
OF INCOME TAX BENEFIT ............ -- (1,715,206) -- (1,715,206)
------------ ------------ ------------ ------------
NET LOSS ......................... (2,106,467) (3,554,919) (1,987,456) (4,881,094)
DIVIDENDS ON PREFERRED STOCK ........ -- (928,642) -- (2,253,331)
------------ ------------ ------------ ------------
NET LOSS APPLICABLE TO COMMON
STOCK ......................... $ (2,106,467) $ (4,483,561) $ (1,987,456) $ 7,134,425
============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
7
<PAGE> 8
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 1996 AND MARCH 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1997
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) ....................................... (1,987,456) (4,881,094)
------------ -------------
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
LOSS ON EXTINGUISHMENT OF DEBT ......................... -- 2,766,460
DEPRECIATION AND AMORTIZATION .......................... 1,636,739 2,801,156
CHANGE IN PROVISION FOR LOSSES ON RECEIVABLES .......... (98,371) 156,992
AMORTIZATION OF DEBT DISCOUNT .......................... 2,497,350 3,203,122
INTEREST SATISFIED THROUGH THE ISSUANCE OF NEW NOTES ... -- 2,433,230
AMORTIZATION OF DEFERRED FINANCING COSTS ............... 416,327 623,402
DEFERRED INCOME TAXES .................................. (1,419,465) (3,548,451)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
DECREASE IN RECEIVABLES .............................. 4,060,223 2,289,834
(INCREASE) DECREASE IN OTHER CURRENT ASSETS .......... (98,668) 229,091
(INCREASE) DECREASE IN OTHER ASSETS .................. (21,729) 25,693
INCREASE IN ACCOUNTS PAYABLE AND ACCRUED EXPENSES .... 778,554 22,381
INCREASE IN ACCRUED INTEREST ......................... -- 94,828
DECREASE IN INCOME TAXES PAYABLE ..................... (196,835) --
INCREASE IN UNEARNED REVENUE ......................... 112,232 636,384
------------ -------------
TOTAL ADJUSTMENTS .................................... 7,666,357 11,734,122
------------ -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ............ 5,678,901 6,853,028
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
ACQUISITIONS OF RADIO STATIONS NET OF $3,000,000
NOTE PAYABLE ISSUED TO SELLER ........................... (85,726,695) (143,000,000)
ADDITIONS TO PROPERTY AND EQUIPMENT ....................... (1,680,277) (1,346,756)
------------ -------------
NET CASH USED IN INVESTING ACTIVITIES ................ (87,406,972) (144,346,756)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM ISSUANCE OF SENIOR SECURED NOTES NET OF
ISSUANCE COSTS .......................................... 33,452,446 71,146,678
PROCEEDS FROM ISSUANCE OF REDEEMABLE PREFERRED STOCK AND
WARRANTS, NET OF ISSUANCE COSTS ......................... 35,841,907 164,760,190
REDEMPTION OF SENIOR SECURED NOTES ........................ -- (39,687,741)
REDEMPTION OF PREFERRED STOCK ............................. -- (42,699,590)
REDEMPTION OF PRIMARY WARRANTS ............................ -- (8,323,000)
REPAYMENTS OF OTHER LONG-TERM DEBT ........................ (15,264) (19,509)
ADVANCES TO RELATED PARTY ................................. (3,490) --
------------ -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ............ 69,275,599 145,177,028
------------ -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS ................. (12,452,472) 7,683,300
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .......... 17,817,119 5,468,079
------------ -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................ $ 5,364,647 $ 13,151,379
============ =============
CASH PAID FOR:
INTEREST .............................................. $ 4,040,953 $ 4,022,235
============ =============
INCOME TAXES .......................................... $ 470,270 $ 358,826
============ =============
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
8
<PAGE> 9
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND MARCH 30, 1997
(UNAUDITED)
(1) BASIS OF PRESENTATION
The condensed consolidated financial statements include the
accounts of the Company and its direct and indirect subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation. The accompanying unaudited condensed consolidated financial
statements for the three and six month periods ended March 31, 1996 and March
30,1997 do not contain all disclosures required by generally accepted accounting
principles. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements of the Company as of and
for the fiscal year ended September 29, 1996.
In the opinion of management of the Company, the accompanying
unaudited condensed consolidated financial statements contain all adjustments,
which are all of a normal, recurring nature, necessary for a fair presentation
of the results of the interim periods. The results of operations for the three
and six month periods ended March 30,1997 are not necessarily indicative of the
results for a full year.
(2) ACQUISITIONS AND DISPOSITIONS
On March 27, 1997, the Company acquired (a) from Infinity
Holding Corp. of Orlando ("Infinity") substantially all of the tangible and
intangible assets owned or held by Infinity and used or useful in the business
or operations of radio station WYSY-FM, serving the Chicago metropolitan area,
for a purchase price of $33.5 million, including acquisition costs and a $3.0
million seller note (the "Chicago Acquisition") and (b) from New Age
broadcasting Inc. and The Seventies Broadcasting Corporation (together, the
"Miami Sellers") all of the tangible and intangible assets owned or held by the
Miami Sellers and used or useful in the business or operations of radio stations
WRMA-FM and WXDJ-FM, serving the Miami metropolitan area, for a cash purchase
price of $112.5 million including acquisition costs (the "Miami Acquisitions,"
and together with the Chicago Acquisition, the "Acquisitions").
On March 27, 1997, the Company completed offerings of (a)
175,000 units (the "Units Offering") comprised of 175,000 shares of the
Company's Series A Senior Exchangeable Preferred Stock, liquidation preference
$1,000 per share (the "Senior Preferred Stock"), and warrants to purchase 74,900
shares of the Company's Class A Common Stock, par value $.01 per share ("Common
Stock") and (b) $75.0 million aggregate principal amount of the Company's 11%
Senior Notes due 2004 (the "Senior Notes") (the "Notes Offering") in
transactions not registered under the Securities Act of 1933, as amended (the
"Act"), in reliance upon the exemption provided in Section 4 (2) of the Act.
9
<PAGE> 10
The Company's consolidated results of operations include the
results of WXDJ-FM and WRMA-FM which were acquired by the Company on March 27,
1997. The following unaudited pro-forma summary presents the consolidated
results of operations as if the acquisitions had occurred as of the beginning of
fiscal year 1997, after giving effect to certain adjustments, including
amortization of franchise costs and interest expense on the acquisition debt.
These pro-forma results have been prepared for comparative purposes only and do
not purport to be indicative of what would have occurred had the acquisition
been made as of that date or of results which may occur in the future.
<TABLE>
<CAPTION>
Six months ended
March 30,1997
-------------
<S> <C>
Net Revenues $30,542
Net Loss Before Extraordinary Item $ 2,043
</TABLE>
The Company is negotiating with a potential purchaser of the
assets and FCC licenses of the radio stations WXLX-AM, serving the New York
metropolitan area, KXMG-AM, serving the Los Angeles metropolitan area and
WCMQ-AM, serving the Miami metropolitan area. In addition, the Company is
soliciting offers from financially qualified third parties to acquire the assets
and FCC licenses of radio station WSKP-FM, serving the Key West, Florida market.
10
<PAGE> 11
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MARCH 31, 1996 AND MARCH 30, 1997
ALL AMOUNTS ARE PRESENTED IN $ THOUSANDS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE THREE MONTHS
ENDED MARCH 30, 1997
Net revenues. Net revenues increased from $9,132 for the three
months ended March 31, 1996, to $11,424 for the three months ended March 30,
1997, an increase of $2,292 or 25.1%. This increase was due primarily to the
termination of the Company's representation agreement with Katz Communications
Inc. ("Katz") (the "Katz Settlement"), pursuant to which the Company received an
aggregate of $1,167 from Katz, comprised of an amount in respect of payments
that were owed by Katz to the Company under the agreement, an amount that would
have been owed during fiscal 1997 had the agreement remained in place, and an
amount paid in exchange for Katz' right to terminate the agreement. The Katz
Settlement was allocated among the Company's various radio stations as described
below. The increase in net revenues also resulted from an increase in net
revenues of $1,581 and $672 from the Company's New York and Los Angeles
stations, respectively, partially offset by a decrease in net revenues of $330
from the Company's Miami stations. The increase in net revenues from the New
York stations resulted primarily from the inclusion of the results of WPAT-FM
for the three month period as opposed to two months during the same period last
year and $402 of the Katz Settlement. WPAT-FM experienced an increase in net
revenues of $1,096 for the three months ended March 30, 1997 as compared to the
prior period. The increase in net revenues with respect to the Los Angeles
stations was due primarily to the inclusion of $473 of the Katz Settlement. The
Miami stations experienced a decrease in net revenues partially related to a
format change at WCMQ-FM in October 1996 and management transition related to
the Acquisitions. In addition, the Company received $1,000 from Caballero
Spanish Media, LLC, a division of Interep ("Caballero"), in partial
consideration for entering into a seven-year national sales representation
agreement with Caballero, which amount will be prorated by the Company over the
term of the agreement, and which resulted in an increase in net revenues of $182
for the three month period.
Operating expenses. Total operating expenses increased from
$8,339 in the three months ended March 31, 1996, to $9,068 in the three months
ended March 30, 1997, an increase of $729 or 8.7%. The higher operating expenses
were caused by an increase of $590 in depreciation and amortization expense and
an increase of $434 in corporate expenses partially offset by a $295 decrease in
broadcasting operating expenses.
The decrease in broadcasting operating expenses resulted
mostly from a decrease in promotional and advertising expenditures from the
previous year related to the start-up of WPAT-FM in New York and a promotional
campaign for KLAX-FM in Los Angeles and lower
11
<PAGE> 12
selling expenses in Miami. The decreases in promotional and advertising
expenditures were somewhat offset by increases in audience research in each
market.
Corporate expenses increased as a result of the creation of a
new senior position and increased professional fees. The increase in
depreciation and amortization was the result of increased amortization of
franchise costs related to the acquisition of WPAT-FM.
Operating income. Operating income increased from $793 during
the three months ended March 31, 1996 to $2,356 during the three months ended
March 30, 1997, an increase of $1,563 or 197.1%. The increase was due to the
significant increase in net revenues partially offset by the moderate increase
in operating expenses.
EBITDA. EBITDA (defined as earnings before net interest,
income taxes, depreciation and amortization and other income and expense items)
increased $2,153 or 133.8% from $1,609 during the three months ended March 31,
1996 to $3,762 during the three months ended March 30, 1997. The increase in
EBITDA was caused by the increase in net revenues, partially offset by an
increase in operating expenses.
Other expenses. Other expenses, comprised mostly of interest
expense, increased from $4,325 in the three months ended March 31, 1996 to
$5,322 in the three months ended March 30, 1997, an increase of $997 or 23.1%.
The increase was caused by higher interest expenses associated with the issuance
of Senior Secured Notes to partially finance the acquisition of WPAT-FM.
Net income (loss). Simultaneously with the purchase of WRMA-FM
and WXDJ-FM in Miami and WYSY-FM in Chicago, the Company recorded an
extraordinary loss on the extinguishment of debt for the amount paid in excess
of the Company's carrying value and the write-off of the related unamortized
debt issuance costs, net of the related income tax benefits. The amount of this
loss, net of taxes, is $1,715. Consequently, the Company's net loss for the
three months ended March 30,1997 was $3,555 compared to a net loss of $2,106 for
the three months ended March 31, 1996, an increase in the net loss of $1,449 or
68.8%.
12
<PAGE> 13
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MARCH 31, 1996 AND MARCH 30, 1997
ALL AMOUNTS ARE PRESENTED IN $ THOUSANDS
RESULTS OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1996 COMPARED TO THE SIX MONTHS ENDED
MARCH 30, 1997
Net revenues. Net revenues increased from $21,237 for the six
months ended March 31, 1996, to $23,790 for the six months ended March 30, 1997,
an increase of $2,553 or 12.0%. This increase was due primarily to the
termination of the Company's representation agreement with Katz, pursuant to
which the Company received an aggregate of $1,167 from Katz, comprised of an
amount in respect of payments that were owed by Katz to the Company under the
agreement, an amount that would have been owed during fiscal 1997 had the
agreement remained in place, and an amount paid in exchange for Katz' right to
terminate the agreement. The Katz Settlement was allocated among the Company's
various radio stations as described below. The increase in net revenues also
resulted from an increase in net revenues of $2,515 and $681 from the Company's
New York and Los Angeles stations, respectively, partially offset by a decrease
in net revenues of $1,012 from the Company's Miami stations. The increase in net
revenues from the New York stations resulted primarily from the inclusion of the
results of WPAT-FM for the entire six month period as opposed to two months
during the same period last year and $402 of the Katz Settlement. WPAT-FM
experienced an increase in net revenues of $2,937 for the six months ended March
30, 1997 as compared to the prior period. The other New York stations
experienced decreases in net revenues partially due to the change in national
sales representative and local management transition. The increase in net
revenues with respect to the Los Angeles stations was due primarily to the
inclusion of $473 of the Katz Settlement. The Miami stations experienced a
decrease in net revenues partially related to a format change at WCMQ-FM in
October 1996 and management transition related to the Acquisitions. In addition,
the Company received $1,000 from Caballero in partial consideration for entering
into a seven-year national sales representation agreement with Caballero, which
amount will be prorated by the Company over the term of the agreement, and which
resulted in an increase in net revenues of $182 for the six month period.
Operating expenses. Total operating expenses increased from
$16,990 in the six months ended March 31, 1996, to $18,540 in the six months
ended March 30, 1997, an increase of $1,550 or 9.1%. The higher operating
expenses were caused by an increase of $1,164 in depreciation and amortization
expense and an increase of $586 in corporate expenses partially offset by a $200
decrease in broadcasting operating expenses.
13
<PAGE> 14
The decrease in broadcasting operating expenses resulted from
a significant decrease in selling expenses in the Miami market mostly due to
lower salaries and commission rates and promotional expenditures.
Corporate expenses increased as a result of the creation of a
new senior position and increased professional fees incurred in connection with
the Katz Settlement. The increase in depreciation and amortization was the
result of increased amortization of franchise costs related to the acquisition
of WPAT-FM.
Operating income. Operating income increased from $4,248
during the six months ended March 31, 1996 to $5,249 during the six months ended
March 30, 1997, an increase of $1,001 or 23.6%. The increase was due to the
significant increase in net revenues partially offset by the increase in
operating expenses.
EBITDA. EBITDA increased $2,166 or 36.8% from $5,884 during
the six months ended March 31, 1996 to $8,050 during the six months ended March
30, 1997. The increase in EBITDA was caused by the increase in net revenues,
partially offset by an increase in operating expenses.
Other expenses. Other expenses, comprised mostly of interest
expense, increased from $7,560 in the six months ended March 31, 1996 to $10,356
in the six months ended March 30, 1997, an increase of $2,796 or 37.0%. The
increase was caused by higher interest expenses associated with the issuance of
Senior Secured Notes to partially finance the acquisition of WPAT-FM, partially
offset by a decrease in other, net.
Net income (loss). Simultaneously with the purchase of WRMA-FM
and WXDJ-FM in Miami and WYSY-FM in Chicago, the Company refinanced its existing
debt structure. Related to this transaction, the Company recorded an
extraordinary loss on the extinguishment of debt for the amount paid in excess
of the Company's carrying value and the write-off of the related unamortized
debt issuance costs, net of the related income tax benefits. The amount of this
loss, net of taxes, is $1,715. Consequently, the Company's net loss for the six
months ended March 30,1997 was $4,881 compared to a net loss of $1,987 for the
six months ended March 31, 1996, an increase in the net loss of $2,894 or
145.6%.
14
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise primarily from its debt
service obligations, preferred stock dividend requirements, funding of the
Company's working capital needs and capital expenditures. The Company's primary
form of financing is cash generated from operations, the issuance of long-term
indebtedness and the issuance of preferred stock.
On March 27, 1997, the Company consummated the Acquisitions.
The Acquisitions were financed with the proceeds of the Units Offering and the
Notes Offering (the "Offerings"). Concurrently with the consummation of the
Acquisitions and the Offerings, the Company effected a series of transactions
including the redemption (the "Redemption") of the Company's Senior Secured
Notes due 2001 and Senior Exchangeable Preferred Stock, Series A and the
repurchase of related warrants to purchase an aggregate of 6.0% of the Company's
Common Stock, on a fully-diluted basis. In addition, simultaneously with the
consummation of the Offerings, the Company announced its intention to declare a
dividend of up to $4 million in the aggregate (the "Distribution") to its
stockholders and existing warrantholders who elected to receive their pro rata
portion of the Distribution in lieu of the anti-dilution adjustment they would
otherwise have been entitled to as a result of the Distribution.
Cash flow generated from operations was $6,853 for the six
months ended March 30, 1997. A portion of the company's cash flow was used to
make its semiannual interest payment on the Company's 12 1/2% Senior Notes due
2001. Additionally, the Company invested $1,347 in capital expenditures, mostly
for the construction of a new tower and antenna system for WXLX-AM.
Cash flow generated from operations was $5,679 for the six
months ended March 31, 1996. A portion of the Company's cash flow was used to
make its semiannual interest payments on the Company's 12 1/2% Senior Notes due
2001. Additionally, the Company invested $1,680 for capital expenditures mostly
for the upgrade of the Los Angeles building being used for its radio operations
and the construction of the new tower and antenna for WXLX-AM.
The Company's revenues fluctuate throughout the year. The
Company's second fiscal quarter (January through March) generally produces the
lowest revenues for the year and its third fiscal quarter (April through June)
generally produces the highest revenues primarily due to increased levels of
advertising during this period.
Management believes that cash from operating activities should
be sufficient to permit the Company to meet required cash interest obligations
(which will consist of cash interest expense on the Senior Notes and cash
interest expense on the Company's 12 1/2% Senior Notes due 2002 (the "Old
Notes"), which, commencing June 15, 1997, will accrue cash interest at a rate of
12 1/2% per annum) for the next five years, capital expenditures and operating
obligations. However, significant assumptions (none of which can be assured)
underlie this belief, including that (i) the Company will be able to
successfully integrate the Acquisitions,
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(ii) economic conditions within the radio broadcasting market and economic
conditions generally will not deteriorate in any material respect, (iii) the
Company will be able to successfully implement its business strategy, (iv) the
Company will not incur any material unforeseen liabilities, including, without
limitation, environmental liabilities, and (v) no future acquisition will
adversely affect the Company's liquidity. The Company expects that it may be
required to refinance the Old Notes on or prior to their maturity on June 15,
2002, and no assurance can be given that it will not be required to refinance
the Senior Notes and/or the Senior Preferred Stock. No assurance can be given
that any such refinancing, if required, will be obtained on terms satisfactory
to the Company, if at all.
The Company's fixed charges for fiscal 1997 are estimated to
be $37.1 million. The Company intends to reduce its fixed charged requirements
through consummation of the sales of radio stations KXMG-AM, WCMQ-AM and WXLX-AM
(the "Pending Dispositions"). However, no assurance can be given that any such
Pending Disposition will be consummated or that the Company will be able to
reduce its fixed charge requirements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment No. 1 to be signed on its behalf by
the undersigned thereunto duly authorized.
Spanish Broadcasting System, Inc.,
a Delaware Corporation
Spanish Broadcasting System, Inc.,
a New Jersey Corporation
Spanish Broadcasting System of
Florida, Inc.
Spanish Broadcasting System
Network, Inc.
SBS Promotions, Inc.
Alarcon Holdings, Inc.
SBS of Greater New York, Inc.
Date: June 17, 1997 By: /s/ Joseph A. Garcia
--------------------
Joseph A. Garcia
EVP and Chief Financial Officer
(principal financial and accounting
officer)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment No. 1 to be signed on its behalf by
the undersigned thereunto duly authorized.
Spanish Broadcasting System
of California, Inc.
Date: June 17, 1997 By: /s/ Joseph A. Garcia
--------------------
Joseph A. Garcia
EVP and Chief Financial Officer
(principal financial and accounting
officer)
18
