<PAGE> 1
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 June 30, 1996
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)
26 West 56 Street
New York, NY 10019
(Address of principal (Zip Code)
executive offices)
(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
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
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 August 9, 1996: 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.
<PAGE> 3
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
State or Primary
Other Standard I.R.S. Employer
Name Jurisdiction of Industrial Identification
Incorporation Classification Number
Number
<S> <C> <C> <C>
Spanish Broadcasting New Jersey 4832 13-3181941
System, Inc.
Spanish Broadcasting California 4832 92-3952357
System of California, Inc.
Spanish Broadcasting Florida 4832 58-1700848
System of Florida, Inc.
Spanish Broadcasting New York 4832 13-3570696
System of New York, Inc.
Alarcon Holdings, Inc. New York 6512 13-3475833
Spanish Broadcasting New York 4899 13-3511101
System Network, Inc.
SBS Promotions, Inc. New York 7999 13-3456128
SBS of Greater New York 4832 13-3888732
New York, Inc.
</TABLE>
<PAGE> 4
SPANISH BROADCASTING SYSTEM, INC.
Index to Quarterly Report
June 30, 1996
<TABLE>
<CAPTION>
Page
Part 1. Financial Information Number
<S> <C>
Condensed Consolidated Balance Sheets as of September 24, 1995
and June 30, 1996 (unaudited) 3
Condensed Consolidated Statements of Operations for the three months
ended and nine months ended June 25, 1995 and June 30, 1996 (unaudited) 4
Condensed Consolidated Statements of Cash Flows for the
nine months ended June 25, 1995 and June 30, 1996 (unaudited) 5
Notes to Condensed Consolidated Financial Statements
(unaudited) 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part 2. Other Information 14
</TABLE>
SIGNATURES
<PAGE> 5
SPANISH BROADCASTING SYSTEM,INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 24,1995 JUNE 30, 1996
ASSETS (AUDITED) (UNAUDITED)
CURRENT ASSETS :
<S> <C> <C>
CASH AND CASH EQUIVALENTS $17,817,119 $1,497,135
RECEIVABLES:
TRADE 12,614,434 12,260,792
LESS ALLOWANCE FOR DOUBTFUL ACCOUNTS 2,077,930 1,646,355
--------------------------------------
NET RECEIVABLES - TRADE 10,536,504 10,614,437
BARTER (NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS OF
$ 3,106,956 AT SEPT.24,1995 AND $2,511,458 AT JUNE 30,1996.) 663,360 704,180
--------------------------------------
NET RECEIVABLES 11,199,864 11,318,617
OTHER CURRENT ASSETS 549,270 880,953
--------------------------------------
TOTAL CURRENT ASSETS 29,566,253 13,696,705
PROPERTY AND EQUIPMENT, NET 17,596,572 19,221,654
FRANCHISE COSTS, NET 50,251,987 134,901,595
DUE FROM RELATED PARTY 286,947 290,437
DEFERRED FINANCING COSTS, NET 5,647,915 8,057,139
OTHER ASSETS 279,566 101,296
--------------------------------------
$103,629,240 $176,268,826
======================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES :
CURRENT PORTION OF LONG TERM DEBT $61,565 $52,933
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 4,315,365 5,444,185
ACCRUED INTEREST 2,341,919 334,567
INCOME TAXES PAYABLE 196,835 -
UNEARNED REVENUE 656,875 737,349
--------------------------------------
TOTAL CURRENT LIABILITIES 7,572,559 6,569,034
SENIOR NOTES, NET OF UNAMORTIZED DISCOUNT 94,315,087 132,119,777
DEFERRED INCOME TAXES 1,745,682 74,328
LONG-TERM DEBT, LESS CURRENT PORTION 1,146,066 1,040,490
REDEEMABLE SERIES A PREFERRED STOCK, $.01 PAR VALUE. AUTHORIZED
49,201 SHARES; ISSUED AND OUTSTANDING 38,695 SHARES - 34,409,721
STOCKHOLDERS EQUITY (DEFICIENCY):
CLASS A COMMON STOCK, $.01 PAR VALUE. AUTHORIZED
2,000,000 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 5,690,934 12,524,441
ACCUMULATED DEFICIT (4,425,882) (8,053,759)
--------------------------------------
1,271,118 4,476,748
LESS: LOANS RECEIVABLE FROM STOCKHOLDERS (2,421,272) (2,421,272)
--------------------------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) (1,150,154) 2,055,476
--------------------------------------
$103,629,240 $176,268,826
======================================
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
(3)
<PAGE> 6
SPANISH BROADCASTING SYSTEM,INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 25, 1995 JUNE 30, 1996 JUNE 25, 1995 JUNE 30, 1996
<S> <C> <C> <C> <C>
GROSS BROADCASTING REVENUES 15,324,981 16,247,973 39,787,274 40,417,493
LESS: AGENCY COMMISSIONS 1,951,626 1,951,986 4,981,347 4,884,094
---------------------------------------------------------------------
NET BROADCASTING REVENUES 13,373,355 14,295,987 34,805,927 35,533,399
---------------------------------------------------------------------
OPERATING EXPENSES
ENGINEERING 367,856 450,550 1,049,358 1,311,083
PROGRAMMING 1,224,615 1,639,909 3,751,647 4,344,061
SELLING 3,031,107 3,700,203 8,517,290 10,434,166
GENERAL AND ADMINISTRATIVE 1,101,140 1,682,048 4,080,988 4,800,005
CORPORATE EXPENSES 1,642,361 900,811 3,628,259 2,837,133
DEPRECIATION & AMORTIZATION 812,365 1,349,459 2,465,306 2,986,198
---------------------------------------------------------------------
8,179,444 9,722,980 23,492,848 26,712,646
---------------------------------------------------------------------
OPERATING INCOME 5,193,911 4,573,007 11,313,079 8,820,753
OTHER EXPENSES :
INTEREST EXPENSE, NET 3,221,739 4,928,744 9,784,564 11,577,767
OTHER, NET 325,720 (53,702) 380,720 857,448
---------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES 1,646,452 (302,035) 1,147,795 (3,614,462)
INCOME TAXES 397,768 (127,003) 468,833 (1,451,974)
---------------------------------------------------------------------
NET INCOME(LOSS ) 1,248,684 (175,032) 678,962 (2,162,488)
ACCUMULATED DEFICIT AT
BEGINNING OF PERIOD (6,985,239) (6,413,338) (6,415,517) (4,425,882)
PREFERRED STOCK DIVIDENDS - 1,465,389 - 1,465,389
---------------------------------------------------------------------
ACCUMULATED DEFICIT AT
END OF PERIOD (5,736,555) (8,053,759) (5,736,555) (8,053,759)
=====================================================================
</TABLE>
(4)
<PAGE> 7
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 25, 1995 AND JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1996
-----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) 678,962 (2,162,488)
-----------------------------------
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET
CASH PROVIDED BY OPERATING ACTIVITIES :
<S> <C> <C>
DEPRECIATION AND AMORTIZATION 2,465,306 2,986,198
CHANGE IN PROVISION FOR LOSSES ON RECEIVABLES 1,524,741 (1,027,073)
AMORTIZATION OF DEBT DISCOUNT 3,401,837 4,280,131
AMORTIZATION OF WARRANTS RE: PREFERRED STOCK - (269,475)
AMORTIZATION OF DEFERRED FINANCING COSTS 588,405 760,637
IMPUTED INTEREST 95,559 -
CHANGES IN OPERATING ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN RECEIVABLES (2,442,306) 908,320
INCREASE IN OTHER CURRENT ASSETS (158,270) (331,683)
DECREASE IN OTHER ASSETS 4,108,075 178,270
INCREASE IN DEFERRED FINANCING COSTS (369,315) -
INCREASE IN ACCOUNTS PAYABLE AND ACCRUED EXPENSES 3,803 1,128,820
DECREASE IN ACCRUED INTEREST (1,969,178) (2,007,352)
DECREASE IN INCOME TAXES PAYABLE (204,936) (196,835)
INCREASE IN UNEARNED REVENUE 175,000 80,474
INCREASE(DECREASE) IN DEFERRED INCOME TAXES PAYABLE 349,768 (1,671,354)
-----------------------------------
TOTAL ADJUSTMENTS 7,568,489 4,819,078
-----------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,247,451 2,656,590
-----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
ACQUISITION OF RADIO STATION WPAT-FM - (86,482,736)
ADDITIONS TO PROPERTY AND EQUIPMENT (3,577,324) (2,778,152)
-----------------------------------
NET CASH USED IN INVESTING ACTIVITIES (3,577,324) (89,260,888)
-----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
REPAYMENTS OF LONG-TERM DEBT (2,834,381) (114,208)
ADVANCES TO RELATED PARTY (91,517) (3,490)
PAYMENT OF LOANS TO STOCKHOLDERS (200,000) -
PROCEEDS FROM ISSUANCE OF SENIOR SECURED NOTES NET OF FINANCING - 34,541,579
NET PROCEEDS FROM ISSUANCE OF REDEEMABLE PREFERRED STOCK - 35,860,433
-----------------------------------
NET CASH USED IN FINANCING ACTIVITIES (3,125,898) 70,284,314
-----------------------------------
NET INCREASE (DECREASE)IN CASH AND CASH EQUIVALENTS 1,544,229 (16,319,984)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 12,136,567 17,817,119
-----------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $13,680,796 $1,497,135
===================================
CASH PAID FOR:
INTEREST $8,057,451 $8,072,194
===================================
INCOME TAXES $342,168 $597,844
===================================
</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
June 25, 1995 and June 30, 1996
(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 nine month periods ended June 25, 1995 and June 30, 1996 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 24, 1995.
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 nine
month periods ended June 30, 1996 are not necessarily indicative of the results
for a full year.
(2) Acquisition
On March 25,1996, the Company acquired the Federal Communications
Commission ("FCC") broadcast license and substantially all of the assets used or
useful in the operation of radio station WPAT-FM for $84.6 million, plus
financing and closing costs. The Company financed this purchase with a
combination of the issuance of 37,500 shares of the Company's Series A
Exchangeable Preferred Stock, $35.0 million of the Company's 12 1/4% Senior
Secured Notes due 2001 and cash on hand of $14.2 million. The Company also
issued to the holders of the Preferred Stock and new Notes, warrants to
purchase, in the aggregate, 6% of the Company's common stock on a fully diluted
basis. Approximately $6.8 million of the gross proceeds was determined to be the
value of the warrants which was credited to Additional Paid in Capital. The
Company assumed operational responsibility of WPAT-FM on January 20, 1996 under
an interim agreement at which time the Company changed the musical format of
WPAT-FM to adult contemporary music in Spanish, targeting the three million
Hispanics in the New York metropolitan area.
The Company's consolidated results of operations include the results of
WPAT-FM which has been operated by the Company since January 20, 1996. The
following unaudited pro-forma summary presents the consolidated results of
operations as if the acquisition had occurred as of the beginning of fiscal year
1996, 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.
(6)
<PAGE> 9
<TABLE>
<CAPTION>
Nine months ended Nine months ended
June 25, 1995 June 30, 1996
Pro-Forma Results
<S> <C> <C>
Net Revenues $ 37,544 $ 38,112
Net Loss $ (7,070) $ (6,811)
</TABLE>
(3) Reclassifications
The Company reclassified certain balances in the accompanying condensed
consolidated statement of operations for the three and nine months ended June
25, 1995 to conform to the current period presentation.
(7)
<PAGE> 10
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 25,1995 and June 30,1996
All amounts are presented in $ thousands
Results of Operations
Three Months Ended June 25, 1995 Compared to the Three Months Ended
June 30, 1996
Net revenues increased from $13,373 for the three months ended June 26,
1995, to $14,296 for the three months ended June 30, 1996, an increase of $923,
or 6.9%. The Company's net revenues in New York, which include recently acquired
WPAT-FM, and the net revenues in the Miami market increased significantly; these
increases were partially offset by a decrease in the net revenues of the Los
Angeles stations. In the New York market, the significant increase in sales
resulted from the upward trend in ratings of the Company's stations, as well as
the acquisition of WPAT-FM, which commenced operations on January 20, 1996. The
Miami market's sales rose as a result of more effective sales efforts and
improved conditions for advertising in the market. Sales in Los Angeles suffered
from a decline in the ratings of the Company's stations related to increased
competition from other Spanish broadcasters.
Total operating expenses increased from $8,179 in the three months
ended June 25, 1995, to $9,723 in the three months ended June 30, 1996, an
increase of $1,544 or 18.9%. The higher operating expenses were caused by an
increase of $498 in broadcasting operating expenses, an increase of $1,250 in
selling, general and administrative expenses and an increase of $537 in
depreciation and amortization expense offset by a decrease of $741 in corporate
expenses.
The increase in broadcasting operating expenses resulted from the
settlement of a lawsuit with an ex-employee in Miami and increased engineering
and programming expenses related to the acquisition of WPAT-FM. The $1,250
increase in selling, general and administrative expenses was caused by an
increase in costs associated with the Company's introduction of a Spanish music
format on WPAT-FM, the reserves established against the loans of former
employees. Also contributing to the increase in selling, general and
administrative expenses were increased costs due to promotional efforts in the
Los Angeles market and an increase in professional fees at the station level.
Corporate expenses were lower due to a decrease in corporate professional
fees and bonuses.
Operating income decreased from $5,194 during the three months ended
June 25, 1995 to $4,573 during the three months ended June 30, 1996, a decrease
of $621 or 12.0%. The decrease was due to the increase in operating expenses
which was partially offset by the increase in net revenues.
(8)
<PAGE> 11
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 26, 1995 and June 30, 1996
EBITDA (defined as earnings before net interest, income taxes,
depreciation and amortization and other income and expense items) decreased $84
or 1.4% from $6,006 during the three months ended June 25, 1995 to $5,922 during
the three months ended June 30, 1996. The decrease in EBITDA was caused by an
increase in operating expenses which was partially offset by an increase in net
revenues. Other expenses, comprised mostly of interest expenses, increased from
$3,547 in the three months ended June 25, 1995 to $4,875 in the three months
ended June 30,1996, an increase of $1,328 or 37.4%. The increase was caused by
higher interest expenses associated with the issuance of additional Senior
Secured Notes to purchase WPAT-FM.
The Company had a net loss of $175 for the three months ended June 30,
1996 compared to net income of 1,249 in the three months ended June 25,1995. The
change resulted primarily from the increased interest expenses described above.
(9)
<PAGE> 12
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 25, 1995 and June 30,1996
All amounts are presented in thousands
Results of Operations
Nine Months Ended June 25, 1995 Compared to the Nine Months Ended
June 30, 1996
Net revenues increased from $34,806 for the nine months ended June 25,
1995, to $35,533 for the nine months ended June 30, 1996, an increase of $727,
or 2.1%. The Company's radio stations in New York increased significantly in net
revenues, the Miami stations had a moderate increase in net revenues, while Los
Angeles stations had a decrease in net revenues. In the New York market, the
significant increase in sales related to the upward trend in ratings which led
to higher billing rates. The newly acquired station, WPAT-FM, which began
operating on January 20, 1996, also contributed to the revenue growth in this
market. The Miami stations' sales rose as a result of more effective sales
efforts and improved conditions for advertising in this market. Sales in Los
Angeles suffered from a decline in the ratings of the Company's stations
related to increased competition from other Spanish broadcasters.
Total operating expenses increased from $23,492 in the nine months
ended June 25, 1995 to $26,713 in the nine months ended June 30, 1996, an
increase of $3,221 or 13.7%. The higher operating expenses were caused by an
increase of $854 in broadcasting operating expenses, an increase of $2,637 in
selling, general and administrative expenses and an increase of $521 in
depreciation and amortization expense offset by a decrease of $791 in corporate
expenses.
The increase in broadcasting operating expenses resulted from the
settlement of a lawsuit with an ex-employee, a sign-up bonus and increased
salary of a new on-air personality, as well as increased engineering costs in
Miami and the additional broadcasting operating expenses related to the recently
purchased WPAT-FM. The $2,637 increase in selling, general and administrative
expenses resulted from an increase in representative and sales people's
commissions in New York related to higher sales, the settlement of a lawsuit
with a former customer in New York and the reserves established on loans to
former employees. Additionally, increased advertising and commissions on
WPAT-FM, New York, as well as increased selling expenses related to Dolphins'
broadcasts in Miami contributed to the increase. Corporate expenses were lower
due to decreased professional fees and bonuses.
Operating income decreased from $11,313 during the nine months ended
June 25, 1995 to $8,821 during the nine months ended June 30, 1996, a decrease
of $2,492 or 22.0%. The decrease was due to the increase in total operating
expenses which was partially offset by an increase in net revenues.
(10)
<PAGE> 13
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 25, 1995 and June 30, 1996
EBITDA decreased $1,971 or 14.3% from $13,778 during the nine months
ended June 25, 1995 to $11,807 during the nine months ended June 30, 1996. The
decrease in EBITDA was caused by the increase in operating expenses partially
offset by the increase in net revenues. Other expenses, comprised mainly of
interest expenses, increased from $10,165 for the nine months ended June 25,
1995 to $12,435 for the nine months ended June 30, 1996, an increase of $2,270
or 22.3%. The increase was caused by higher interest expenses associated with
the issuance of additional Senior Secured Notes to purchase WPAT-FM, as well as
non-recurring financing costs.
The Company had a net loss of $2,162 for the nine months ended June
30,1996 and net income for the nine months ended June 25, 1995 of $679. The
change was caused by the decrease in operating income and the increase in other
expenses described above.
(11)
<PAGE> 14
Liquidity and Capital Resources
The Company's liquidity needs arise primarily from its debt service
obligations, preferred 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.
Cash flow generated from operations was $2,657 for the nine months
ended June 30, 1996. 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 $2,778 in capital expenditures, mostly for
the construction of a new tower and antenna system at its newly leased site in
New Jersey for WXLX-AM and the upgrade of the Los Angeles building which is used
for its radio operations.
On March 25, 1996, the Company consummated the purchase of the FCC
broadcast license and substantially all of the assets used or useful in the
operation of radio station WPAT-FM for an aggregate purchase price of $84.6
million plus financing and closing costs of $1.9 million. The Company financed
the purchase price with a combination of the sale in a private placement of
37,500 shares of the Company's Series A Exchangeable Preferred Stock, $35.0
million of the Company's 12 1/4% Senior Secured Notes due 2001 and the balance
with cash on hand. The Company also issued to the holders of the Preferred Stock
and new Notes warrants to purchase, in the aggregate, 6% of the Company's common
stock on a fully diluted basis which are exercisable no later than June 29,1998.
Approximately $6.8 million of the gross proceeds was determined to be the value
of the warrants. In addition, deferred financing costs related to the financing
were $3.2 million.
The Exchangeable Preferred Stock is entitled to dividends
at the rate of 12.75% per annum payable quarterly with the dividend rate
increasing by 0.25% for each period of three months from March 25, 1996 through
March 24, 1997 and 0.50% for each period of three months thereafter, provided
that the dividend rate will at no time exceed 15.25% . During the first three
years, dividends may be paid in cash or additional shares of Preferred Stock. In
June, the Company issued an additional 1,195 shares of Preferred Stock in
payment of the quarterly dividends due on the Preferred Stock. The Company is
required to redeem the Preferred Stock on December 1, 2002.
The Senior Secured Notes are secured by FCC licenses for WPAT-FM and
are guaranteed by each of the Company's subsidiaries. The Notes are due on June
1, 200l and bear interest at the rate of 12.25% per annum payable quarterly,
with the interest rate increasing by 0.25% for each three month period from
March 25, 1996 to March 24, 1997, and 0.50% for each period of three months
thereafter, provided that the interest rate on the Notes may not exceed 14.75%
per annum. Until March 24, 1998, interest may be paid in cash or in additional
Senior Secured Notes. In June, the Company issued an additional $1,071,875
aggregate principal of additional Senior Secured Notes in satisfaction of the
quarterly interest payment due on outstanding Senior Secured Notes. Covenants
under the Indentures governing the 12 1/2% Senior Notes and the Senior Secured
Notes limit the Company's ability to pay dividends, repurchase or redeem its
Common Stock or the Notes or incur additional indebtedness, among other things.
(12)
<PAGE> 15
Cash flow generated from operations for the nine months ended June 25,
1995 amounted to $8,247. The Company used a portion of its cash flow to make
semiannual interest payments on 12 1/2% Senior Notes due 2001 of $7,717. The
Company also invested $3,577 for capital expenditures, mostly for the purchase
and upgrade of the Los Angeles building. Additionally, a payment to a former
shareholder of $3,500 in settlement of ongoing litigation was made from funds
previously held in a blocked account.
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.
The Company believes it has adequate cash resources and will generate
sufficient income to meet its working capital, capital expenditure and debt
service obligations, and that it will be in compliance for the foreseeable
future with all covenants in the indenture governing the Notes which constitute
the majority of the Company's indebtedness.
(13)
<PAGE> 16
PART II. OTHER INFORMATION
1. Legal, Regulatory and Other Matters
A. Information relating to the sale of preferred stock and
senior notes and the issuance of warrants to purchase the Company's Class A
Common Stock to finance the acquisition of WPAT-FM is contained in the Current
Report on Form 8-K incorporated by reference herein.
B. Information regarding legal proceedings is included in the
Company's previous 10-K and 10-Q reports and is expressly incorporated by
reference herein.
Item 6. Exhibits and Reports on Form 8-K
A Current Report on Form 8-K dated March 25, 1996, was filed
on May 24, 1996 reporting the acquisition of WPAT-FM.
(14)
<PAGE> 17
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
of California, Inc.
Date: August 9, 1996 By:
------------------- ---------------------------
Raul Alarcon
Vice President
Date: August 9, 1996 By:
--------------------- ---------------------------
Joseph A. Garcia
VP and Chief Financial Officer
(principal financial and
accounting officer)
<PAGE> 18
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, Inc.,
a New Jersey Corporation
Spanish Broadcasting System of
New York, Inc.
Spanish Broadcasting System of
Florida, Inc.
Spanish Broadcasting System
Network, Inc.
SBS Promotions, Inc.
Alarcon Holdings, Inc.
SBS of Greater New York, Inc.
Date: August 9, 1996 By: /s/ Raul Alarcon
---------------- --------------------------------
Raul Alarcon
President
(principal executive officer)
Date: August 9, 1996 By: /s/ Joseph A. Garcia
---------------- --------------------------------
Joseph A. Garcia
VP and Chief Financial Officer
(principal financial and accounting
officer)
<PAGE> 19
EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> SEP-25-1995
<PERIOD-END> JUN-30-1996
<CASH> 1,497,135
<SECURITIES> 0
<RECEIVABLES> 12,260,792
<ALLOWANCES> 1,646,355
<INVENTORY> 0
<CURRENT-ASSETS> 13,696,705
<PP&E> 19,221,654
<DEPRECIATION> 0
<TOTAL-ASSETS> 176,268,826
<CURRENT-LIABILITIES> 6,569,034
<BONDS> 0
34,409,721
0
<COMMON> 5,581,485
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 176,268,826
<SALES> 0
<TOTAL-REVENUES> 40,417,493
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,577,767
<INCOME-PRETAX> (3,614,462)
<INCOME-TAX> (1,451,974)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,162,488)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
