<PAGE> 1
PROSPECTUS SUPPLEMENT FEBRUARY 19, 1999
(TO PROSPECTUS DATED FEBRUARY 2, 1999) Filed Pursuant to Rule
424(b)(3) and (c)
File No. 33-82114
RECENT DEVELOPMENTS
Attached hereto and incorporated by reference herein is the Form 10-Q
Quarterly Report of Spanish Broadcasting System, Inc. for the quarterly period
ending December 27, 1998.
This Prospectus Supplement supplements and amends the Prospectus dated
February 2, 1999 relating to our Senior Preferred Stock, Exchange Debentures
and Common Stock. This Prospectus Supplement and the Prospectus have been
prepared by us for use by holders of our Senior Preferred Stock, Exchange
Debentures or Common Stock in connection with sales of our securities that may
require delivery of a prospectus. We will receive no part of the proceeds of
this offering.
This Prospectus Supplement should be read in conjunction with the
Prospectus, and is qualified by reference to the Prospectus except to the
extent that the information in this Prospectus Supplement supersedes the
information contained in the Prospectus.
<PAGE> 2
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 27, 1998
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.
See Table of Additional Registrants
(Exact name of registrant as specified in its charter)
Delaware 13-3827791
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3191 Coral Way, Suite 805, Miami, Florida 33145
(Address of principal executive offices) (Zip Code)
(305) 441-6901
(Registrant's telephone number, including area code)
Not Applicable
(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.
( X ) YES ( ) NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
Number of shares of registrant's common stock, par value $.01 per
share, outstanding as of February 9, 1999: 606,668 shares of Class A Common
Stock.
===============================================================================
<PAGE> 3
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
Primary
Standard
State or Other Industrial I.R.S. Employer
Jurisdiction of Classification Identification
Incorporation Number Number
--------------- -------------- ---------------
<S> <C> <C> <C>
Spanish Broadcasting System, Inc. ............................ New Jersey 4832 13-3181941
Spanish Broadcasting System of California, Inc. .............. California 4832 92-3952357
Spanish Broadcasting System of Florida, Inc. ................. Florida 4832 58-1700848
Alarcon Holdings, Inc. ....................................... New York 6512 13-3475833
Spanish Broadcasting System Network, Inc. .................... New York 4899 13-3511101
SBS Promotions, Inc. ......................................... New York 7999 13-3456128
SBS of Greater New York, Inc. ................................ New York 4832 13-3888732
Spanish Broadcasting System of Illinois, Inc. ................ Delaware 4832 36-4174296
Spanish Broadcasting System of Greater Miami, Inc. ........... Delaware 4832 65-0774450
Spanish Broadcasting System of San Antonio, Inc. ............. Delaware 4832 65-0820776
Spanish Broadcasting System of Puerto Rico, Inc. ............. Delaware 4832 52-2139546
Spanish Broadcasting System of Puerto Rico, Inc. ............. Puerto Rico 4832 66-0564244
</TABLE>
-1-
<PAGE> 4
Spanish Broadcasting System, Inc.
Index
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
Part I Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of September 27, 1998 and
December 27, 1998 (Unaudited) 3
Condensed Consolidated Statements of Operations for the three months
ended December 28, 1997 and December 27, 1998 (unaudited) 4
Condensed Consolidated Statements of Cash Flows for the three
months ended December 28, 1997 and December 27, 1998 (unaudited) 5
Notes to Condensed Consolidated Financial Statements (unaudited) 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
</TABLE>
-2-
<PAGE> 5
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 27, 1998 DECEMBER 27, 1998
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS :
CASH AND CASH EQUIVALENTS $ 37,642,227 $ 32,168,201
RECEIVABLES:
TRADE 20,777,151 23,518,813
LESS ALLOWANCE FOR DOUBTFUL ACCOUNTS 4,245,502 4,456,318
------------- -------------
NET RECEIVABLES - TRADE 16,531,649 19,062,495
BARTER (NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS OF
$3,524,558 AT SEPT. 27, 1998 AND $4,146,130 AT DEC. 27, 1998) 58,193 25,824
------------- -------------
NET RECEIVABLES 16,589,842 19,088,319
OTHER CURRENT ASSETS 1,822,584 1,435,697
------------- -------------
TOTAL CURRENT ASSETS 56,054,653 52,692,217
PROPERTY AND EQUIPMENT, NET 14,942,933 15,010,506
FRANCHISE COSTS, NET 272,261,440 278,598,496
DUE FROM RELATED PARTY 289,869 289,869
DEFERRED FINANCING COSTS, NET 7,275,980 6,846,131
OTHER ASSETS 209,301 208,336
------------- -------------
$ 351,034,176 $ 353,645,555
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
CURRENT PORTION OF LONG TERM DEBT $ 47,496 $ 47,765
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 8,451,760 8,570,811
ACCRUED INTEREST 3,941,088 3,069,432
UNEARNED REVENUE 2,141,456 2,200,803
DIVIDENDS PAYABLE 1,124,360 8,842,195
------------- -------------
TOTAL CURRENT LIABILITIES 15,706,160 22,731,006
12.5% SENIOR UNSECURED NOTES,NET OF UNAMORTIZED DISCOUNT 91,668,465 91,816,599
11% SENIOR SECURED NOTES 75,000,000 75,000,000
OTHER LONG-TERM DEBT, LESS CURRENT PORTION 4,410,505 4,475,432
DEFERRED INCOME TAXES PAYABLE 9,074,596 10,140,771
14.25% SENIOR EXCHANGEABLE PREFERRED STOCK,
$.01 PAR VALUE. AUTHORIZED 413,930 SHARES; ISSUED
AND OUTSTANDING 214,260 SHARES 201,367,927 202,088,145
STOCKHOLDERS' DEFICIENCY:
CLASS A COMMON STOCK, $.01 PAR VALUE. AUTHORIZED
5,000,000 SHARES; ISSUED AND OUTSTANDING 606,668 SHARES 6,066 6,066
ADDITIONAL PAID IN CAPITAL 6,864,301 6,864,301
ACCUMULATED DEFICIT (50,604,436) (57,017,357)
------------- -------------
(43,734,069) (50,146,990)
LESS: LOANS RECEIVABLE FROM STOCKHOLDERS (2,459,408) (2,459,408)
------------- -------------
TOTAL STOCKHOLDERS' DEFICIENCY (46,193,477) (52,606,398)
------------- -------------
$ 351,034,176 $ 353,645,555
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
-3-
<PAGE> 6
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 28, 1997 DECEMBER 27, 1998
<S> <C> <C>
GROSS BROADCASTING REVENUES 21,587,922 27,723,218
LESS: AGENCY COMMISSIONS 2,647,093 3,453,404
----------- -----------
NET BROADCASTING REVENUES 18,940,829 24,269,814
----------- -----------
OPERATING EXPENSES
ENGINEERING 496,042 536,702
PROGRAMMING 1,846,010 2,499,626
SELLING 4,624,358 5,923,453
GENERAL AND ADMINISTRATIVE 2,848,404 2,075,533
CORPORATE EXPENSES 1,309,307 2,085,038
DEPRECIATION & AMORTIZATION 2,374,318 2,288,023
----------- -----------
13,498,439 15,408,375
----------- -----------
OPERATING INCOME 5,442,390 8,861,439
OTHER (INCOME) EXPENSES:
GAIN ON SALE OF AM STATIONS (36,868,441) --
INTEREST EXPENSE, NET 5,791,458 5,226,999
OTHER, NET -- 13,700
----------- -----------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM 36,519,373 3,620,740
INCOME TAX EXPENSE 14,607,749 1,595,607
----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM 21,911,624 2,025,133
EXTRAORDINARY ITEM, LOSS ON EXTINGUISHMENT OF DEBT,
NET OF INCOME TAXES (1,612,723) --
----------- -----------
NET INCOME 20,298,901 2,025,133
ACCUMULATED DEFICIT AT BEGINNING OF PERIOD (35,119,184) (50,604,436)
ACCRETION OF PREFERRED STOCK (607,518) (720,218)
DIVIDENDS ON PREFERRED STOCK (6,651,429) (7,717,836)
----------- -----------
ACCUMULATED DEFICIT AT END OF PERIOD (22,079,230) (57,017,357)
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
-4-
<PAGE> 7
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 28, 1997 AND DECEMBER 27, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 20,298,901 $ 2,025,133
------------ ------------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES :
LOSS ON EXTINGUISHMENT OF DEBT 2,687,872 --
GAIN ON SALE OF AM STATIONS (36,868,441) --
DEPRECIATION AND AMORTIZATION 2,374,318 2,288,023
CHANGE IN PROVISION FOR LOSSES ON RECEIVABLES 1,893,411 832,388
AMORTIZATION OF DEBT DISCOUNT 182,511 148,134
AMORTIZATION OF DEFERRED FINANCING COSTS 360,029 429,848
ACCRETION OF INTEREST TO PRINCIPAL ON OTHER LONG-TERM DEBT 76,800 76,800
DEFERRED INCOME TAXES 13,765,050 1,066,175
CHANGES IN OPERATING ASSETS AND LIABILITIES:
INCREASE IN RECEIVABLES (2,619,750) (3,330,865)
(INCREASE) DECREASE IN OTHER CURRENT ASSETS (777,529) 386,887
DECREASE IN OTHER ASSETS 88,220 965
INCREASE IN ACCOUNTS PAYABLE AND ACCRUED EXPENSES 435,478 119,051
DECREASE IN ACCRUED INTEREST (1,467,194) (871,656)
INCREASE IN UNEARNED REVENUE 37,594 59,347
------------ ------------
TOTAL ADJUSTMENTS (19,831,631) 1,205,097
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 467,270 3,230,230
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF RADIO STATIONS, NET OF CLOSING COSTS 43,787,348 --
ACQUISITION OF RADIO STATION -- (8,367,728)
ADDITIONS TO PROPERTY AND EQUIPMENT (719,988) (324,924)
------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 43,067,360 (8,692,652)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
PURCHASE OF SENIOR SECURED NOTES (15,000,055) --
REPAYMENTS OF DEBT -- (11,604)
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (15,000,055) (11,604)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 28,534,575 (5,474,026)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 12,287,764 37,642,227
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 40,822,339 $ 32,168,201
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
INTEREST PAID $ 6,561,515 $ 5,908,723
============ ============
INCOME TAXES PAID $ 183,431 $ 184,838
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
-5-
<PAGE> 8
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 28, 1997 and December 27, 1998
(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 months ended December 28, 1997 and December 27, 1998 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 27, 1998 included in the Company's 1998 Form 10K.
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
month period ended December 27, 1998 are not necessarily indicative of the
results for a full year.
(2) ACQUISITIONS, DISPOSITIONS AND FINANCINGS
On December 1, 1998, the Company acquired the FCC broadcast license and
substantially all of the assets used in the operation of WDOY-FM serving Puerto
Rico for $8.3 million, plus closing costs of $0.1 million. The Company financed
this purchase from cash on hand and from operations. In January, 1999 the
Company entered into an Asset Purchase Agreement with Guayama Broadcasting
Company, Inc. and LaMega Estacion, Inc., to purchase the FCC broadcast licenses
and substantially all of the assets used or useful in the operation of WMEG-FM
and WEGM-FM serving Puerto Rico for $16.0 million. The purchase is subject to
certain closing conditions, including FCC approval. The Company expects this
transaction to close during the third fiscal quarter and finance this purchase
from cash on hand. The results of WDOY-FM and KLEY-FM do not meet the
significance test for pro-forma presentation and, consequently, no pro-forma
results have been included.
The Company has completed the transfer of certain assets to its newly
formed subsidiaries, Spanish Broadcasting System of San Antonio, Inc., Spanish
Broadcasting System of Puerto Rico Inc. (Del.) and Spanish Broadcasting System
of Puerto Rico, Inc. (Puerto Rico) (together the "New Subsidiaries"). The
Company has not included separate financial statements for its guarantor
subsidiaries because (a) such guarantor subsidiaries (including the New
Subsidiaries) have jointly and severally guaranteed the Senior Notes on a full
and unconditional basis, (b) the aggregate assets, liabilities, earnings and
equity of the guarantor subsidiaries are substantially equivalent to the
assets, liabilities, earnings and equity of the parent on a consolidated basis
and (c) the separate financial statements and other disclosures concerning the
subsidiary guarantors are not deemed material to investors.
The Company sold the assets and FCC licenses of WXLX-AM of New York
and WCMQ-AM of Miami for a sales price of $26.0 million on September 29, 1997.
On December 2, 1997, the Company consummated the sale of the assets and FCC
license of KXMG-AM of Los Angeles for a sales price of $18.0 million, resulting
in a gain of $36.9 million.
-6-
<PAGE> 9
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
December 28, 1997 and December 27, 1998
(Unaudited)
On October 17, 1997, the Company made a "Tender Offer" to purchase for
cash any and all of the Notes up to $22.7 million plus accrued interest up to,
but not including the payment date. The amount payable by the Company was 110%
of the principal amount of the Notes. The Company paid $15.7 million to the
noteholders who responded to the "Tender Offer" and purchased $13.2 million in
principal amount of Notes for $15.0 million plus accrued interest of $0.7
million in October and November 1997. The Company recognized a loss on the
"Tender Offer" of $1.6 million, net of income taxes of $1.1 million, due to the
premium paid for the Notes and the subsequent write-off of the deferred
financing costs and original issue discounts related to the Notes purchased.
This amount has been classified as an extraordinary item in the accompanying
Consolidated Statement of Operations.
-7-
<PAGE> 10
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company's financial results depend on a number of factors,
including the strength of the national economy and the local economies served
by the Company's stations, total advertising dollars dedicated to the markets
served by the Company's stations, advertising dollars targeted to the Hispanic
consumers in the markets served by the Company's stations, the Company's
stations' audience ratings, the Company's ability to provide popular
programming, local market competition from other radio stations and other
advertising media, and government regulation and policies.
Gross revenues derived from radio advertising are affected primarily
by the advertising rates the Company's radio stations are able to charge and
the number of advertisements that can be broadcast without jeopardizing
audience listening levels and the resultant audience ratings. Advertising rates
are, in large part, based upon each station's ability to attract audiences in
demographic groups targeted by advertisers. Audience level are generally
measured by quarterly ARBITRON RADIO MARKET REPORTS. Each of the Company's
stations strives to maximize net revenues by actively managing the amount of
airtime available for sale and adjusting prices based upon local market
conditions and audience ratings.
As is true of other radio groups, the Company's performance is
customarily measured by its ability to generate broadcast cash flow and EBITDA.
"Broadcast cash flow" means operating income before depreciation and
amortization, write-down of franchise costs and corporate expenses. Although
broadcast cash flow and EBITDA are not measures of performance calculated in
accordance with generally accepted accounting principles, the Company believes
that broadcast cash flow and EBITDA are useful in evaluating the Company
because such measures are accepted by the broadcasting industry as generally
recognized measures of performance and are used by securities industry analysts
who publish reports on the performance of broadcasting companies. In addition,
the Company has included information concerning EBITDA because it is used by
certain investors as a measure of a company's ability to service its debt
obligations and it is also the basis for determining compliance with certain
covenants in the Indentures and the Certificate of Designation. Broadcast cash
flow and EBITDA are not intended to be substitutes for operating income (as
determined in accordance with generally accepted accounting principles), or
alternatives to cash flow from operating activities (as a measure of
liquidity), or alternatives to net income.
-8-
<PAGE> 11
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 28, 1997 COMPARED TO THE THREE MONTHS ENDED
DECEMBER 27, 1998
NET REVENUES. Net revenues increased from $18.9 million for the three
months ended December 28, 1997 to $24.3 million for the three months ended
December 27, 1998, an increase of $5.4 million or 28.6%. The majority of the
increase resulted from increases at the Company's New York stations and WLEY-FM
in Chicago. The Company's New York stations had strong increases in net
revenues particularly from WSKQ-FM which had a significant increase in ratings.
Additionally, WLEY-FM benefited from the successful conversion from a "70's"
rock format to a Spanish language format.
OPERATING EXPENSES. Total operating expenses increased from $13.5
million in the three months ended December 28, 1997 to $15.4 million in the
three months ended December 27, 1998, an increase of $ 1.9 million or 14.1%.
The higher operating expenses were caused by an increase of $1.2 million in
broadcasting operating expenses and an increase of $0.8 million in corporate
expenses, partially offset by a decrease of $0.1 million in depreciation and
amortization.
The increase in broadcasting operating expenses was caused mainly by
the inclusion of the results of KLEY-FM which was acquired in May, 1998 and an
advertising campaign related to various stations. The increase in corporate
expenses was caused by increased headcount, an increase in salaries and an
increase in corporate overhead related to operating more stations at different
locations. The decrease in depreciation and amortization was the result of the
sale of the AM stations during the fiscal year 1998.
OPERATING INCOME. Operating income increased from $5.4 million during
the three months ended December 28, 1997 to $8.9 million during the three
months ended December 28, 1998, an increase of $3.5 million or 64.8%. The
increase was due to the increase in net revenues, partially offset by the
increase in operating expenses.
EBITDA. EBITDA (defined as income before extraordinary item, net
interest expense, income taxes, depreciation and amortization, gains on sales
of radio stations and other income and expenses) increased $3.3 million or 42.3%
from $7.8 million during the three months ended December 28, 1997 to $11.1
million during the three months ended December 27, 1998. The increase in EBITDA
was caused by the increase in net revenues, partially offset by increases in
broadcasting operating expenses and corporate expenses.
OTHER (INCOME) EXPENSES. The Company's other expenses were $5.3
million during the three months ended December 27, 1998 compared to other
income of $31.1 million during the three months ended December 28, 1997. Other
income in fiscal 1998 was caused by the gain on the sale of the AM stations.
Net interest expense was lower in the three months ended December 27, 1998 due
to an increase in interest income and the purchase of Old Notes in the first
quarter of fiscal 1998.
NET INCOME. The Company's net income decreased from $20.3 million for
the three months ended December 28, 1997 to $2.0 million for the three months
ended December 27, 1998, a decrease of $18.3 million or 90.1%. The decrease was
caused by the absence of the gain on the sale of the AM stations, offset by the
increased operating income and lower income taxes.
-9-
<PAGE> 12
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, long-term indebtedness and the
issuance of preferred stock.
The Company sold the assets and FCC licenses of WXLX-AM of New York
and WCMQ-AM of Miami for a sales price of $26.0 million on September 29, 1997.
On December 2, 1997, the Company consummated the sale of the assets and FCC
license of KXMG-AM of Los Angeles for a sales price of $18.0 million.
On December 1, 1998, the Company acquired the FCC broadcast license
and substantially all of the assets used or useful in the operation of WDOY-FM
serving Puerto Rico for $8.3 million plus closing costs of $0.1 million. The
Company financed this purchase from cash on hand and from operations. In
January, 1999 the Company entered into an Asset Purchase Agreement with Guayama
Broadcasting Company, Inc. and LaMega Estacion, Inc., to purchase the FCC
broadcast licenses and substantially all of the assets used or useful in the
operation of WMEG-FM and WEGM-FM serving Puerto Rico for $16.0 million. The
purchase is subject to certain closing conditions, including FCC approval. The
Company expects this transaction to close during the third fiscal quarter. The
Company expects to finance this purchase from cash on hand.
Cash flow generated from operations was $3.2 million for the three
months ended December 27, 1998. A portion of the Company's cash flow was used
to make its interest payment on the Company's Notes of $5.9 million.
Additionally, the Company purchased WDOY-FM for $8.3 million, plus closing
costs of $0.1 million and invested $0.3 million in capital expenditures.
Cash flow generated from operations was $0.5 million for the three
months ended December 28, 1997. A portion of the Company's cash flow was used
to make its semiannual interest payment on the Company's Notes of $6.3 million.
Additionally, the Company invested $0.7 million in capital expenditures and
used $15.0 million to purchse Old Notes. Proceeds from the sales of AM stations
were approximately $43.8 million net of closing costs of $0.2 million.
Management believes that cash from operating activities, together with
cash on hand, 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 Old Notes) for the foreseeable
future as well as capital expenditures, operating obligations and the pending
acquisitions of WMEG-FM and WEGM-FM. However, significant assumptions (none of
which can be assured) underlie this belief, including (i ) the economic
conditions within the radio broadcasting market and economic conditions in
general will not deteriorate in any material respect, (ii) the Company will be
able to successfully implement its business strategy, (iii) the Company will
not incur any material unforeseen liabilities, including, without limitation,
environmental liabilities, and (iv) no future acquisitions will adversely
affect the Company's liquidity. The Company anticipates paying dividends on its
Preferred Stock through the issuance of additional shares as permitted under
the Preferred Stock Agreement. The Company expects that it may be required to
refinance the Old Notes on or prior to their maturity date of June 15, 2002,
and no assurances 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.
-10-
<PAGE> 13
YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs or hardware that have date-sensitive software or
embedded chips may recognize a date using "00" as the year 1900 rather than the
year 2000. This could cause a system failure or miscalculations in the Company's
broadcast and corporate locations which could cause disruptions of operations,
including, among other things, a temporary inability to produce broadcast
signals, process financial transactions, or engage in similar normal business
activities.
The Company has performed a preliminary analysis of potential problems
related to the "Y2K" issue but has not completed its assessment. Internally,
the Company bears some risks in the following areas: computer hardware and
software for its accounting and administrative functions, computer-controlled
programming of music and the actual transmission of its signals. Externally,
the Company is at risk, like most companies, of losing power and phone lines.
In the administrative area, the vast majority of the hardware and
software has been purchased over the preceding two years and is Year 2000
compliant. There are no more than 30 computers that may have to be replaced or
upgraded. In the programming areas the system in use is year 2000 compliant.
Studio equipment, transmitters and other broadcasting equipment are not date
sensitive and, consequently do not pose much of a threat although the Company
will continue to seek assurances and/or upgrades from all significant vendors.
The greatest threat to the Company's ability to broadcast is from the
utilities upon which the Company is dependent. To date, the Company is not
aware of any external vendor with a Y2K issue that would materially impact the
Company's results of operations, liquidity or capital resources. However, the
Company has no means for ensuring that third parties will be Y2K ready. The
inability of third parties to complete their Y2K resolution process in a timely
fashion could materially impact the Company. The effect of non-compliance by
external vendors is not determinable. In addition, disruptions in the economy
generally resulting from the Y2K issues could also materially adversely affect
the Company.
While the Company believes its efforts will provide reasonable
assurance that material disruptions will not occur due to internal failure, the
possibility of interruption still exists. The Company is not anticipating having
to spend more than $0.1 million to be Year 2000 compliant. It is performing
this analysis with its MIS manager, its engineers and its accounting staff. It
is anticipated that all assessments and solutions will be in place by May,
1999.
-11-
<PAGE> 14
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
No. 1 - Asset Purchase Agreement dated January 8, 1999 by and
between Spanish Broadcasting System of Puerto Rico, Inc. and
Guayama Broadcasting Company, Inc. and LaMega Estacion, Inc.
(incorporated by reference to Form S-1, post-effective
amendment dated January 21, 1999).
(b) Reports on Form 8-K
No Current Report on Form 8-K was filed by the Company since
November 1997.
-12-
<PAGE> 15
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.
Spanish Broadcasting System, Inc.,
a Delaware Corporation.
Spanish Broadcasting System
of California, Inc.
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.
Spanish Broadcasting System of Illinois, Inc.
Spanish Broadcasting System of
Greater Miami, Inc.
Spanish Broadcasting System of San Antonio, Inc.
Spanish Broadcasting System of Puerto Rico, Inc.,
a Delaware Corporation
Spanish Broadcasting System of Puerto Rico, Inc., a
Puerto Rico Corporation.
By: /s/ Joseph A. Garcia
-----------------------------------------------
Joseph A. Garcia
EVP and Chief Financial Officer
(principal financial and accounting officer)
Date: February 9, 1999
-13-
<PAGE> 16
EXHIBIT INDEX
Exhibits
- --------
No. 1 Asset Purchase Agreement dated January 8, 1999 by and between
Spanish Broadcasting System of Puerto Rico, Inc. and Guayama
Broadcasting Company, Inc. and LaMega Estacion, Inc. (incorporated by
reference to Form S-1, post-effective amendment dated January 21,
1999).
27 Financial Data Schedule (for SEC use only)
-14-
<PAGE> 17
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-27-1998
[PERIOD-START] SEP-28-1998
[PERIOD-END] DEC-27-1998
[CASH] 32,168,201
[SECURITIES] 0
[RECEIVABLES] 23,518,813
[ALLOWANCES] 4,456,318
[INVENTORY] 0
[CURRENT-ASSETS] 52,692,217
[PP&E] 15,010,506
[DEPRECIATION] 0
[TOTAL-ASSETS] 353,645,555
[CURRENT-LIABILITIES] 22,731,006
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 202,088,145
[COMMON] 6,066
[OTHER-SE] 0
[TOTAL-LIABILITY-AND-EQUITY] 353,645,555
[SALES] 27,723,218
[TOTAL-REVENUES] 0
[CGS] 0
[TOTAL-COSTS] 0
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 5,226,999
[INCOME-PRETAX] 3,620,740
[INCOME-TAX] 1,595,607
[INCOME-CONTINUING] 2,025,133
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 2,025,133
[EPS-PRIMARY] 0
[EPS-DILUTED] 0
</TABLE>
