SPANISH BROADCASTING SYSTEM INC - 10-Q Quarterly Report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended June 30, 2004

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to

Commission file number 33-82114

(SBS LOGO)

Spanish Broadcasting System, Inc.

(Exact name of registrant as specified in its charter)


Delaware		13-3827791
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2601 South Bayshore Drive, PH II

Coconut Grove, Florida 33133

(Address of principal executive offices) (Zip Code)

(305) 441-6901

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year,

if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of August 6, 2004, 39,656,355 shares of Class A common stock, par value $.0001 per share, and 25,105,150 shares of Class B common stock, par value $.0001 per share, were outstanding.

SPANISH BROADCASTING SYSTEM, INC.

INDEX


		Page

PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements — Unaudited		2
	Unaudited Condensed Consolidated Balance Sheets as of December 31, 2003 and June 30, 2004		2
	Unaudited Condensed Consolidated Statements of Operations for the Three- and Six-Months Ended June 30, 2003 and 2004		3
	Unaudited Condensed Consolidated Statements of Cash Flows for the Six-Months Ended June 30, 2003 and 2004		4
	Notes to Unaudited Condensed Consolidated Financial Statements		5
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		22
ITEM 4.	Controls and Procedures		22
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings		23
ITEM 4.	Submission of Matters to a Vote of Security Holders		24
ITEM 5.	Other Information		24
ITEM 6.	Exhibits and Reports on Form 8-K		24
NONQUALIFIED STOCK OPTION AGREEMENT
NONQUALIFIED STOCK OPTION AGREEMENT
AMENDMENT TO ASSET PURCHASE AGREEMENT
TIME BROKERAGE AGREEMENT
ASSET PURCHASE AGREEMENT
CERTIFICATION
CERTIFICATION
CERTIFICATION
CERTIFICATION

PART I. — FINANCIAL INFORMATION


Item 1.	*Financial Statements — Unaudited*

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets


			December 31,			June 30,
			2003			2004


			(In thousands, except
			share data)
Assets
Current assets:
	Cash and cash equivalents		$	45,609		$	63,246
	Net receivables			25,567			29,840
	Other current assets			3,482			2,908
	Assets held for sale (note 4)			25,906			13,897

		Total current assets		100,564			109,891
Property and equipment, net				24,558			24,270
Intangible assets, net				705,251			705,337
Deferred financing costs, net				11,461			10,632
Other assets				448			1,022

			$	842,282		$	851,152


Liabilities and Stockholders’ Equity
Current liabilities:
	Current portion of the senior credit facilities term loan due 2009 (note 4)		$	1,250		$	26,400
	Current portion of other long-term debt			227			3,234
	Accounts payable and accrued expenses			18,822			16,190
	Accrued interest			6,370			5,425
	Deposits on the sale of a station			1,500			2,000
	Deferred commitment fee			—			563

		Total current liabilities		28,169			53,812
Senior credit facilities term loan due 2009, less current portion				123,750			97,975
9 5/8% senior subordinated notes due 2009, net				325,246			325,843
Other long-term debt, less current portion				3,721			603
Deferred income taxes				68,354			69,734

		Total liabilities		549,240			547,967

Cumulative exchangeable redeemable preferred stock:
	10 3/4 Series B cumulative exchangeable redeemable preferred stock, $0.01 par value. Authorized 280,000 shares, 75,000 issued and outstanding at December 31, 2003 and 78,763 issued and outstanding at June 30, 2004			76,366			80,527

Stockholders’ equity:
	Class A common stock, $0.0001 par value. Authorized 100,000,000 shares; 37,087,355 shares issued and outstanding at December 31, 2003, 39,626,355 shares issued and outstanding at June 30, 2004			3			3
	Class B common stock, $0.0001 par value. Authorized 50,000,000 shares; 27,605,150 shares issued and outstanding at December 31, 2003, 25,105,150 shares issued and outstanding at June 30, 2004			3			3
Additional paid-in capital				443,961			443,812
Accumulated deficit				(227,291	)		(221,160	)

		Total stockholders’ equity		216,676			222,658

			$	842,282		$	851,152

See accompanying notes to the unaudited condensed consolidated financial statements.

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations



				Three Months Ended						Six Months Ended
				June 30,						June 30,

				2003			2004			2003			2004


				(In thousands, except						(In thousands, except
				per share data)						per share data)
Net revenue				$	36,535		$	40,292		$	64,458		$	69,524

Operating expenses:
	Engineering				930			1,176			1,847			2,263
	Programming				4,707			6,361			9,944			12,686
	Stock-based programming				1,280			—			1,622			—
	Selling				10,234			10,317			17,871			17,701
	General and administrative				4,005			4,384			7,340			7,917
	Corporate expenses				4,693			2,999			9,181			6,227
	Depreciation and amortization				758			824			1,466			1,646

		Total operating expenses			26,607			26,061			49,271			48,440

		Operating income from continuing operations			9,928			14,231			15,187			21,084

Other (expense) income:
	Interest expense, net				(8,800	)		(10,200	)		(17,429	)		(20,438	)
	Other, net				197			80			223			255

		Income (loss) from continuing operations before income taxes and discontinued operations			1,325			4,111			(2,019	)		901
Income tax expense (benefit)					325			5,446			(2,122	)		1,498

		Income (loss) from continuing operations before discontinued operations			1,000			(1,335	)		103			(597	)
(Loss) income on discontinued operations, net of tax					(211	)		(51	)		(115	)		10,889

		Net income (loss)		$	789		$	(1,386	)	$	(12	)	$	10,292

Dividends on preferred stock					—			(2,107	)		—			(4,161	)

Net income (loss) applicable to common stockholders				$	789		$	(3,493	)	$	(12	)	$	6,131

Basic and diluted loss per common share:
	Net income (loss) per common share before discontinued operations:
		Basic and Diluted		$	0.01		$	(0.05	)	$	—		$	(0.07	)
	Net (loss) income per common share for discontinued operations:
		Basic and Diluted		$	—		$	—		$	—		$	0.16

	Net income (loss) per common share:
		Basic and Diluted		$	0.01		$	(0.05	)	$	—		$	0.09

			Weighted average common shares outstanding
			Basic		64,682			64,718			64,682			64,705

			Diluted		64,786			64,718			64,682			65,178

See accompanying notes to the unaudited condensed consolidated financial statements.

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows



					Six Months Ended
					June 30,

					2003			2004


					(In thousands)
Cash flows from operating activities:
	Net (loss) income				$	(12	)	$	10,292
	Adjustments to reconcile net (loss) income to net cash used in operating activities:
		Loss (income) from discontinued operations				115			(10,889	)
		Stock-based programming expense				1,622			—
		Loss on disposal of assets				—			7
		Depreciation and amortization				1,466			1,646
		Net barter income				(102	)		(100	)
		Provision for trade doubtful accounts				290			365
		Amortization of debt discount				529			597
		Amortization of deferred financing costs				641			992
		(Decrease) increase in deferred income taxes				(2,295	)		1,390
		Amortization of deferred commitment fee				(351	)		(37	)
		Changes in operating assets and liabilities:
			Increase in receivables			(1,408	)		(5,094	)
			(Increase) decrease in other current assets			(440	)		437
			Increase in other assets			(1,105	)		(581	)
			Increase (decrease) in accounts payable and accrued expenses			572			(3,664	)
			Increase (decrease) in accrued interest			177			(945	)
			Increase in deferred commitment fee			—			600

				Net cash used in continuing operations		(301	)		(4,984	)
				Net cash provided by discontinued operations		156			789

			Net cash used in operating activities			(145	)		(4,195	)

Cash flows from investing activities:
	Proceeds from a sale of radio stations, net of closing cost					—			23,730
	Deposit on sale of station								500
	Advances on purchase price of radio stations					(15,156	)		—
	Acquisition of radio stations					(22,356	)		—
	Additions to property and equipment					(1,903	)		(1,350	)
	Additions to property and equipment of discontinued operations					(87	)		—

			Net cash (used in) provided by investing activities			(39,502	)		22,880

Cash flows from financing activities:
	Increase in deferred offering costs					—			(375	)
	Increase in deferred financing costs					—			(163	)
	Proceeds from Class A stock options exercised					—			226
	Repayment of senior credit facilities					—			(625	)
	Repayment of other long-term debt					(102	)		(111	)

			Net cash used in financing activities			(102	)		(1,048	)

Net (decrease) increase in cash and cash equivalents						(39,749	)		17,637
Cash and cash equivalents at beginning of period						71,430			45,609</

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