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 September 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 November 8, 2004, 39,656,755 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 September 30, 2004		2
	Unaudited Condensed Consolidated Statements of Operations for the Three- and Nine-Months Ended September 30, 2003 and 2004		3
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine-Months Ended September 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		16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		24
Item 4.	Controls and Procedures		25
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		25
Item 5.	Other Information		26
Item 6.	Exhibits		26
TIME BROKERAGE AGREEMENT
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION

PART I. — FINANCIAL INFORMATION


Item 1.	*Financial Statements — Unaudited*

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


			December 31,			September 30,
			2003			2004


			(In thousands, except
			share data)
ASSETS
Current assets:
	Cash and cash equivalents		$	45,609		$	106,009
	Net receivables			25,567			29,566
	Other current assets			3,482			2,298
	Assets held for sale (note 4 and 5)			25,906			86,939

		Total current assets		100,564			224,812
Property and equipment, net				24,558			22,349
Intangible assets, net				705,251			618,430
Deferred financing costs, net				11,461			10,136
Other assets				448			683

			$	842,282		$	876,410

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Current portion of the senior credit facilities term loan due 2009 (note 5)		$	1,250		$	124,063
	Current portion of other long-term debt			227			3,186
	Accounts payable and accrued expenses			18,822			16,527
	Accrued interest			6,370			13,576
	Deposits on the sale of a station			1,500			—
	Deferred commitment fee			—			544

		Total current liabilities		28,169			157,896
Senior credit facilities term loan due 2009, less current portion				123,750			—
9 5/8% senior subordinated notes due 2009, net				325,246			326,155
Other long-term debt, less current portion				3,721			593
Deferred income taxes				68,354			73,948

		Total liabilities		549,240			558,592

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 80,880 issued and outstanding at September 30, 2004			76,366			82,692

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, 39,656,755 shares issued and outstanding at September 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 September 30, 2004			3			3
Additional paid-in capital				443,961			444,039
Accumulated deficit				(227,291	)		(208,919	)

		Total stockholders’ equity		216,676			235,126

			$	842,282		$	876,410

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						Nine Months Ended
					September 30,						September 30,

					2003			2004			2003			2004


					(In thousands, except per share data)
Net revenue					$	35,700		$	41,127		$	100,158		$	110,651

Operating expenses:
	Engineering					940			1,034			2,787			3,297
	Programming					4,914			7,063			14,857			19,749
	Stock-based programming					1,321			—			2,943			—
	Selling					8,616			9,884			26,487			27,586
	General and administrative					3,269			3,753			10,610			11,670
	Corporate expenses					4,570			2,943			13,751			9,170
	Depreciation and amortization					651			798			2,117			2,443

				Total operating expenses		24,281			25,475			73,552			73,915

				Operating income from continuing operations		11,419			15,652			26,606			36,736

Other (expense) income:
	Interest expense, net					(8,826	)		(10,437	)		(26,256	)		(30,875	)
	Other, net					2,643			14			2,866			270

				Income from continuing operations before income taxes and discontinued operations		5,236			5,229			3,216			6,131
Income tax expense						7,410			8,462			5,287			9,960

				Loss from continuing operations before discontinued operations		(2,174	)		(3,233	)		(2,071	)		(3,829	)
(Loss) income on discontinued operations, net of tax						(225	)		17,638			(340	)		28,527

				Net (loss) income	$	(2,399	)	$	14,405		$	(2,411	)	$	24,698

Dividends on preferred stock						—			(2,164	)		—			(6,326	)

Net (loss) income applicable to common stockholders					$	(2,399	)	$	12,241		$	(2,411	)	$	18,372

Basic and diluted loss per common share:
	Net loss per common share before discontinued operations:
		Basic and Diluted			$	(0.04	)	$	(0.08	)	$	(0.03	)	$	(0.16	)
	Net income (loss) per common share for discontinued operations:
		Basic and Diluted			$	—		$	0.27		$	(0.01	)	$	0.44
	Net (loss) income per common share:

		Basic and Diluted			$	(0.04	)	$	0.19		$	(0.04	)	$	0.28

			Weighted average common shares outstanding
				Basic		64,684			64,756			64,683			64,722

				Diluted		64,684			64,962			64,683			65,095

See accompanying notes to the unaudited condensed consolidated financial statements.

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



					Nine Months Ended
					September 30,

					2003			2004


					(In thousands)
Cash flows from operating activities:
	Net (loss) income				$	(2,411	)	$	24,698
	Adjustments to reconcile net (loss) income to net cash provided by operating activities:
		Loss (income) from discontinued operations, net of taxes				340			(28,527	)
		Stock-based programming expense				2,943			—
		(Income ) loss on disposal of assets				(151	)		58
		Depreciation and amortization				2,117			2,443
		Net barter income				(381	)		(348	)
		Provision for trade doubtful accounts				122			682
		Amortization of debt discount				806			909
		Amortization of deferred financing costs				961			1,491
		Deferred income taxes				4,903			9,809
		Amortization of deferred commitment fee				(466	)		(56	)
		Changes in operating assets and liabilities:
			Increase in receivables			(1,244	)		(5,341	)
			(Increase) decrease in other current assets			(3	)		1,022
			Increase in other assets			(1,184	)		(254	)
			Increase (decrease) in accounts payable and accrued expenses			374			(3,735	)
			Increase (decrease) in accrued interest			8,327			7,206
			Increase in deferred commitment fee			—			600

				Net cash provided by continuing operations		15,053			10,657
				Net cash provided by discontinued operations		379			1,565

			Net cash provided by operating activities			15,432			12,222

Cash flows from investing activities:
	Proceeds from sale of assets of discontinued operations					595			—
	Proceeds from sale of assets					44			—
	Proceeds from a sale of radio stations, net of closing cost					—			51,924
	Advances on purchase price of radio stations					(15,283	)		(234	)
	Acquisition of radio stations					(22,356	)		—
	Additions to property and equipment					(2,364	)		(2,318	)
	Additions to property and equipment of discontinued operations					(149	)		—

			Net cash (used in) provided by investing activities			(39,513	)		49,372

Cash flows from financing activities:
	Increase in deferred offering costs					(432	)		(375	)
	Increase in deferred financing costs					(182	)		(166	)
	Proceeds from Class A stock options exercised					23			453
	Repayment of senior credit facilities					—			(938	)
	Repayment of other long-term debt					(154	)		(168	)

			Net cash used in financing activities			(745	)		(1,194	)

Net (decrease) increase in cash and cash equivalents						(24,826	)		60,400
Cash and cash equivalents at beginning of period						71,430			45,609

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