UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended September 30, 2003 | ||
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the transition period from to | ||
Commission File Number 33-82114
Spanish Broadcasting System, Inc.
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Delaware
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13-3827791 | |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
2601 South Bayshore Drive, PH II
(305) 441-6901
(Former name, former address and former fiscal year,
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 12, 2003, 37,079,655 shares of Class A common stock, par value $.0001 per share, and 27,605,150 shares of Class B common stock, par value $.0001 per share, were outstanding.
SPANISH BROADCASTING SYSTEM, INC.
INDEX
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| PART I. FINANCIAL INFORMATION | ||||||
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ITEM 1.
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Financial Statements — Unaudited | 3 | ||||
| Unaudited Condensed Consolidated Balance Sheets as of December 29, 2002 and September 30, 2003 | 3 | |||||
| Unaudited Condensed Consolidated Statements of Operations for the Three and Nine-Months Ended September 29, 2002 and September 30, 2003 | 4 | |||||
| Unaudited Condensed Consolidated Statements of Cash Flows for the Nine-Months Ended September 29, 2002 and September 30, 2003 | 5 | |||||
| Notes to Unaudited Condensed Consolidated Financial Statements | 6 | |||||
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ITEM 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 | ||||
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ITEM 3.
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Quantitative and Qualitative Disclosures About Market Risk | 26 | ||||
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ITEM 4.
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Controls and Procedures | 26 | ||||
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ITEM 1.
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Legal Proceedings | 27 | ||||
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ITEM 2.
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Changes in Securities and Use of Proceeds | 27 | ||||
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ITEM 4.
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Submission of Matters to a Vote of Security Holders | 27 | ||||
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ITEM 5.
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Other Information | 28 | ||||
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ITEM 6.
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Exhibits and Reports on Form 8-K | 30 | ||||
2
PART I. — FINANCIAL INFORMATION
Item 1. Financial Statements — Unaudited
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
| December 29, 2002 | September 30, 2003 | |||||||||
| (In thousands, except share information) | ||||||||||
| ASSETS | ||||||||||
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Current assets:
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Cash and cash equivalents
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$ | 71,430 | $ | 46,604 | ||||||
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Receivables, net
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25,516 | 26,834 | ||||||||
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Other current assets
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2,252 | 2,272 | ||||||||
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Assets held for sale
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27,139 | 27,192 | ||||||||
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Total current assets
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126,337 | 102,902 | ||||||||
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Property and equipment, net
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23,618 | 24,420 | ||||||||
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Intangible assets
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476,369 | 513,001 | ||||||||
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Deferred financing costs, net
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8,759 | 7,980 | ||||||||
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Deferred offering costs
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— | 432 | ||||||||
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Other assets
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201 | 1,385 | ||||||||
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Total assets
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$ | 635,284 | $ | 650,120 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
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Current liabilities:
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Current portion of long-term debt
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$ | 208 | $ | 222 | ||||||
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Accounts payable and accrued expenses
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15,691 | 15,786 | ||||||||
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Accrued interest
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5,226 | 13,553 | ||||||||
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Deferred commitment fee
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581 | 115 | ||||||||
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Total current liabilities
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21,706 | 29,676 | ||||||||
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9 5/8% senior subordinated notes, net
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324,154 | 324,960 | ||||||||
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Other long-term debt, less current portion
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3,948 | 3,780 | ||||||||
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Deferred income taxes
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58,051 | 63,723 | ||||||||
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Total liabilities
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407,859 | 422,139 | ||||||||
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Stockholders’ equity:
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Class A common stock, $.0001 par value.
Authorized 100,000,000 shares; 37,076,655 shares issued and
outstanding at December 29, 2002 and 37,079,655 shares
issued and outstanding at September 30, 2003
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3 | 3 | ||||||||
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Class B common stock, $.0001 par value.
Authorized 50,000,000 shares; 27,605,150 shares issued and
outstanding at December 29, 2002 and September 30, 2003
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3 | 3 | ||||||||
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Additional paid-in capital
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444,594 | 447,561 | ||||||||
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Accumulated deficit
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(217,175 | ) | (219,586 | ) | ||||||
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Total stockholders’ equity
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227,425 | 227,981 | ||||||||
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Total liabilities and stockholders’ equity
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$ | 635,284 | $ | 650,120 | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
3
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 29, | September 30, | September 29, | September 30, | ||||||||||||||||
| 2002 | 2003 | 2002 | 2003 | ||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||
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Gross revenue
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$ | 40,219 | $ | 41,171 | $ | 114,915 | $ | 115,268 | |||||||||||
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Less agency commissions
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5,095 | 5,471 | 13,710 | 15,110 | |||||||||||||||
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Net revenue
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35,124 | 35,700 | 101,205 | 100,158 | |||||||||||||||
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Operating expenses:
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Engineering
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847 | 940 | 2,597 | 2,787 | |||||||||||||||
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Programming
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5,333 | 4,914 | 15,079 | 14,857 | |||||||||||||||
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Stock-based programming
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— | 1,321 | — | 2,943 | |||||||||||||||
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Selling
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9,570 | 8,616 | 31,634 | 26,487 | |||||||||||||||
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General and administrative
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3,230 | 3,269 | 9,779 | 10,610 | |||||||||||||||
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Corporate expenses
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3,609 | 4,570 | 9,559 | 13,751 | |||||||||||||||
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Depreciation and amortization
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715 | 651 | 2,102 | 2,117 | |||||||||||||||
| 23,304 | 24,281 | 70,750 | 73,552 | ||||||||||||||||
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Operating income from continuing operations
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11,820 | 11,419 | 30,455 | 26,606 | |||||||||||||||
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Other (income) expenses:
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Interest expense, net
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8,574 | 8,826 | 25,775 | 26,256 | |||||||||||||||
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Other, net
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66 | (2,643 | ) | (200 | ) | (2,866 | ) | ||||||||||||
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Income from continuing operations before income
taxes, discontinued operations and cumulative effect of a change
in accounting principle
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3,180 | 5,236 | 4,880 | 3,216 | |||||||||||||||
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Income tax expense
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5,103 | 7,410 | 49,242 | 5,287 | |||||||||||||||
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Loss from continuing operations before
discontinued operations and cumulative effect of a change in
accounting principle
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(1,923 | ) | (2,174 | ) | (44,362 | ) | (2,071 | ) | |||||||||||
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Income (loss) from discontinued operations,
net of tax
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1,830 | (225 | ) | 1,906 | (340 | ) | |||||||||||||
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Cumulative effect of a change in accounting
principle for intangible assets, net of income tax benefit
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— | — | (45,288 | ) | — | ||||||||||||||
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Net loss
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$ | (93 | ) | $ | (2,399 | ) | $ | (87,744 | ) | $ | (2,411 | ) | |||||||
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Net loss per common share before discontinued
operations, and cumulative effect of a change in accounting
principle:
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Basic and Diluted
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$ | 0.03 | $ | (0.04 | ) | $ | (0.69 | ) | $ | (0.03 | ) | ||||||||
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Net income (loss) per common share for
discontinued operations
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Basic and Diluted
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$ | 0.03 | $ | — | $ | 0.03 | $ | (0.01 | ) | ||||||||||
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Net loss per common share attributed to a
cumulative effect of a change in accounting principle, net of
tax:
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Basic and Diluted
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$ | — | $ | — | $ | (0.70 | ) | $ | — | ||||||||||
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Net loss per common share:
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Basic and Diluted
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$ | — | $ | (0.04 | ) | $ | (1.36 | ) | $ | (0.04 | ) | ||||||||
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Weighted-average common shares outstanding:
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Basic and Diluted
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64,673 | 64,684 | 64,699 | 64,683 | |||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
4
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
| Nine Months Ended | Nine Months Ended | |||||||||||
| September 29, 2002 | September 30, 2003 | |||||||||||
| (In thousands) | ||||||||||||
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Cash flows from operating activities:
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Net loss
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$ | (87,744 | ) | $ | (2,411 | ) | ||||||
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Adjustments to reconcile net loss to net cash
provided by operating activities:
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(Income) loss from discontinued operations
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(1,906 | ) | 340 | |||||||||
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Stock-based programming expense
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— | 2,943 | ||||||||||
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Cumulative effect of a change in accounting
principle for intangible assets
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75,480 | — | ||||||||||
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Loss (gain) on disposal of assets
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22 | (151 | ) | |||||||||
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Depreciation and amortization
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2,103 | 2,117 | ||||||||||
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Reduction of doubtful accounts
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(700 | ) | (998 | ) | ||||||||
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Amortization of debt discount
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716 | 806 | ||||||||||
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Amortization of deferred financing costs
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961 | 961 | ||||||||||
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Increase in deferred income taxes
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18,352 | 4,903 | ||||||||||
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Decrease in deferred commitment fee
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(526 | ) | (466 | ) | ||||||||
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Changes in operating assets and liabilities, net
of acquisitions:
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Increase in receivables
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(1,486 | ) | (174 | ) | ||||||||
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Decrease (increase) in other current assets
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410 | (3 | ) | |||||||||
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Decrease (increase) in other assets
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52 | (1,184 | ) | |||||||||
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Increase in accounts payable and accrued expenses
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2,704 | 43 | ||||||||||
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Increase in accrued interest
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8,148 | 8,327 | ||||||||||
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Net cash provided by continuing operations
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16,586 | 15,053 | ||||||||||
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Net cash provided by discontinued operations
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2,309 | 379 | ||||||||||
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Net cash provided by operating activities
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18,895 | 15,432 | ||||||||||
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Cash flows from investing activities:
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Proceeds from sale of assets
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— | 595 | ||||||||||
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Proceeds from sale of assets of discontinued
operations
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— | 44 | ||||||||||
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Proceeds from sale of radio station, net of
closing costs
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34,534 | — | ||||||||||
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Advances on purchase price of radio station
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(21,221 | ) | (15,283 | ) | ||||||||
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Acquisition of radio stations
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— | (22,356 | ) | |||||||||
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Additions to property and equipment
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(2,730 | ) | (2,364 | ) | ||||||||
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Additions to property and equipment of
discontinued operations
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(160 | ) | (149 | ) | ||||||||
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Net cash used in (provided by) investing
activities
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10,423 | (39,513 | ) | |||||||||
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Cash flows from financing activities:
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Increase in deferred financing costs
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— | (432 | ) | |||||||||
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Increase in deferred offering costs
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— | (182 | ) | |||||||||
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Proceeds from Class A stock option exercised
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101 | 23 | ||||||||||
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Repayment of other long-term debt
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(241 | ) | (154 | ) | ||||||||
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Net cash used in financing activities
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(140 | ) | (745 | ) | ||||||||
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Net increase (decrease) in cash and cash
equivalents
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29,178 | (24,826 | ) | |||||||||
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Cash and cash equivalents at beginning of period
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51,640 | 71,430 | ||||||||||
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Cash and cash equivalents at end of period
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$ | 80,818 | $ | 46,604 | ||||||||
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Supplemental cash flow information:
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Interest paid
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$ | 16,427 | $ | 16,572 | ||||||||
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Income taxes (received) paid, net
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$ | (14 | ) | $ | 191 | |||||||
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Non-cash financing and investing activities:
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Issuance of warrants towards the acquisition of a
radio station
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$ | 8,922 | $ | — | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
5
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
1. Basis of Presentation
The unaudited condensed consolidated financial statements include the accounts of Spanish Broadcasting System, Inc. and its subsidiaries (the “Company” or “SBS”). All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements as of December 29, 2002 and September 30, 2003, and for the three and nine-month periods ended September 29, 2002 and September 30, 2003 do not contain all disclosures required by generally accepted accounting principles. These unaudited 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 December 29, 2002 included in the Company’s fiscal year 2002 Annual Report on Form 10-K.