UNITED STATES
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 March 31, 2004 | ||
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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 | |
| 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.) |
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2601 South Bayshore Drive, PH II Coconut Grove, Florida 33133 (Address of principal executive offices) (Zip Code) |
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(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 May 6, 2004, 39,600,355 shares of Class A common stock, par value $.0001 per share, and 25,105,150 shares of Class B common stock, par value $.0001 per share, were outstanding.
SPANISH BROADCASTING SYSTEM, INC.
INDEX
2
PART I. — FINANCIAL INFORMATION
Item 1. Financial Statements — Unaudited
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
| December 31, 2003 | March 31, 2004 | |||||||||
| (In thousands, except share data) | ||||||||||
| ASSETS | ||||||||||
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Current assets:
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Cash and cash equivalents
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$ | 45,609 | $ | 74,187 | ||||||
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Net receivables
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25,567 | 21,364 | ||||||||
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Other current assets
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3,482 | 3,188 | ||||||||
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Assets held for sale
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25,906 | 13,993 | ||||||||
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Total current assets
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100,564 | 112,732 | ||||||||
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Property and equipment, net
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24,558 | 24,425 | ||||||||
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Intangible assets, net
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705,251 | 705,244 | ||||||||
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Deferred financing costs, net
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11,461 | 11,108 | ||||||||
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Other assets
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448 | 1,025 | ||||||||
| $ | 842,282 | $ | 854,534 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
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Current liabilities:
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Current portion of the senior credit facilities
term loan due 2009
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$ | 1,250 | $ | 1,250 | ||||||
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Current portion of other long-term debt
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227 | 232 | ||||||||
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Accounts payable and accrued expenses
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18,822 | 16,525 | ||||||||
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Accrued interest
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6,370 | 13,485 | ||||||||
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Deposit on the sale of a station
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1,500 | 1,500 | ||||||||
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Deferred commitment fee
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— | 281 | ||||||||
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Total current liabilities
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28,169 | 33,273 | ||||||||
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Senior credit facilities term loan due 2009, less
current portion
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123,750 | 123,438 | ||||||||
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9 5/8% senior subordinated notes due 2009,
net
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325,246 | 325,540 | ||||||||
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Other long-term debt, less current portion
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3,721 | 3,661 | ||||||||
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Deferred income taxes
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68,354 | 64,332 | ||||||||
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Total liabilities
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549,240 | 550,244 | ||||||||
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Cumulative exchangeable redeemable preferred
stock:
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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 76,702 issued and outstanding at March 31, 2004 |
76,366 | 78,420 | ||||||||
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Stockholders’ equity:
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Class A common stock, $0.0001 par value.
Authorized 100,000,000 shares; 37,087,355 shares issued and
outstanding at December 31, 2003, 39,587,355 shares issued
and outstanding at March 31, 2004
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3 | 3 | ||||||||
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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 March 31, 2004
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3 | 3 | ||||||||
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Additional paid-in capital
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443,961 | 443,531 | ||||||||
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Accumulated deficit
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(227,291 | ) | (217,667 | ) | ||||||
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Total stockholders’ equity
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216,676 | 225,870 | ||||||||
| $ | 842,282 | $ | 854,534 | |||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
3
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
| Three Months Ended | |||||||||||
| March 31, 2003 | March 31, 2004 | ||||||||||
| (In thousands, except per share data) | |||||||||||
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Gross revenue
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$ | 32,052 | $ | 33,520 | |||||||
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Less agency commissions
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4,129 | 4,288 | |||||||||
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Net revenue
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27,923 | 29,232 | |||||||||
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Operating expenses:
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Engineering
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918 | 1,088 | |||||||||
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Programming
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5,236 | 6,324 | |||||||||
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Stock-based programming
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343 | — | |||||||||
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Selling
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7,636 | 7,384 | |||||||||
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General and administrative
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3,335 | 3,533 | |||||||||
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Corporate expenses
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4,489 | 3,228 | |||||||||
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Depreciation and amortization
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708 | 822 | |||||||||
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Total operating expenses
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22,665 | 22,379 | |||||||||
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Operating income from continuing operations
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5,258 | 6,853 | |||||||||
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Other (expense) income:
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Interest expense, net
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(8,629 | ) | (10,238 | ) | |||||||
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Other, net
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26 | 175 | |||||||||
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Loss from continuing operations before income
taxes and discontinued operations
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(3,345 | ) | (3,210 | ) | |||||||
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Income tax (benefit) expense
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(2,448 | ) | (3,948 | ) | |||||||
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(Loss) income from continuing operations before
discontinued operations
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(897 | ) | 738 | ||||||||
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Income on discontinued operations, net of tax
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96 | 10,940 | |||||||||
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Net (loss) income
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$ | (801 | ) | $ | 11,678 | ||||||
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Dividends on preferred stock
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— | (2,054 | ) | ||||||||
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Net (loss) income applicable to common
stockholders
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$ | (801 | ) | $ | 9,624 | ||||||
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Basic and diluted loss per common share:
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Net loss per common share before discontinued
operations:
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Basic and Diluted
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$ | (0.01 | ) | $ | (0.02 | ) | |||||
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Net income per common share for discontinued
operations:
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Basic and Diluted
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$ | — | $ | 0.17 | |||||||
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Net (loss) income per common share:
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Basic and Diluted
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$ | (0.01 | ) | $ | 0.15 | ||||||
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Weighted average common shares outstanding:
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Basic
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64,682 | 64,693 | |||||||||
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Diluted
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64,682 | 65,359 | |||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
4
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
| Three Months Ended | Three Months Ended | |||||||||||
| March 31, 2003 | March 31, 2004 | |||||||||||
| (In thousands) | ||||||||||||
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Cash flows from operating activities:
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Net (loss) income
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$ | (801 | ) | $ | 11,678 | |||||||
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Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
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Income from discontinued operations
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(96 | ) | (10,940 | ) | ||||||||
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Stock-based programming expense
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343 | — | ||||||||||
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Depreciation and amortization
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707 | 822 | ||||||||||
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Net barter (income) expense
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(41 | ) | 46 | |||||||||
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Reduction of allowance for doubtful accounts
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(138 | ) | (232 | ) | ||||||||
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Amortization of debt discount
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261 | 294 | ||||||||||
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Amortization of deferred financing costs
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321 | 493 | ||||||||||
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Deferred income taxes
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(2,576 | ) | (4,012 | ) | ||||||||
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Amortization of deferred commitment fee
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(176 | ) | (19 | ) | ||||||||
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Changes in operating assets and liabilities, net
of acquisitions:
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Decrease in receivables
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4,579 | 3,861 | ||||||||||
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Decrease in other current assets
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143 | 267 | ||||||||||
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Increase in other assets
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(1,102 | ) | (577 | ) | ||||||||
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Increase (decrease) in accounts payable and
accrued expenses
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456 | (3,537 | ) | |||||||||
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Increase in accrued interest
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8,150 | 7,115 | ||||||||||
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Increase in deferred commitment fee
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— | 300 | ||||||||||
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Net cash provided by continuing operations
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10,030 | 5,559 | ||||||||||
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Net cash provided by discontinued operations
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53 | 908 | ||||||||||
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Net cash provided by operating activities
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10,083 | 6,467 | ||||||||||
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Cash flows from investing activities:
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Proceeds from a sale of radio stations, net of
closing cost
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— | 23,730 | ||||||||||
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Advances on purchase price of radio stations
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(15,150 | ) | — | |||||||||
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Additions to property and equipment
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(1,233 | ) | (682 | ) | ||||||||
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Additions to property and equipment of
discontinued operations
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(2 | ) | — | |||||||||
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Net cash (used in) provided by investing
activities
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(16,385 | ) | 23,048 | |||||||||
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Cash flows from financing activities:
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Increase in deferred offering costs
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— | (430 | ) | |||||||||
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Increase in deferred financing costs
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— | (140 | ) | |||||||||
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Repayment of senior credit facilities
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— | (312 | ) | |||||||||
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Repayment of other long-term debt
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(50 | ) | (55 | ) | ||||||||
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Net cash used in financing activities
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(50 | ) | (937 | ) | ||||||||
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Net (decrease) increase in cash and cash
equivalents
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(6,352 | ) | 28,578 | |||||||||
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Cash and cash equivalents at beginning of period
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71,430 | 45,609 | ||||||||||
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Cash and cash equivalents at end of period
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$ | 65,078 | $ | 74,187 | ||||||||
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Supplemental cash flow information:
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Interest paid
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$ | 142 | $ | 2,479 | ||||||||
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Income taxes paid
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$ | 187 | $ | 323 | ||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
5
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 1. | Basis of Presentation |
The unaudited condensed consolidated financial statements include the accounts of Spanish Broadcasting System, Inc. and its subsidiaries (the “Company”). All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements as of December 31, 2003 and March 31, 2004, and for the three-month periods ended March 31, 2003 and 2004 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 31, 2003 included in the Company’s fiscal year 2003 Annual Report on Form 10-K.
Effective December 30, 2002, the Company changed its year-end from a broadcast calendar 52-53-week fiscal year ending on the last Sunday in December to a calendar year ending on December 31. Pursuant to Securities and Exchange Commission Financial Reporting Release No. 35, such change was not deemed a change in fiscal year for financial reporting purposes and the Company was not required to file a separate transition report or to report separate financial information for the two-day period of December 30 and 31, 2002. Financial results for December 30 and 31, 2002 are included in the Company’s financial results for the three-month period ended March 31, 2003.
In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which are all of a normal and recurring nature, necessary for a fair presentation of the results of the interim periods. The results of operations for the three-month period ended March 31, 2004 are not necessarily indicative of the results for a full year.
| 2. | Financial Information for Parent, Guarantor and Non-Guarantor Subsidiaries |
Certain of the Company’s subsidiaries (collectively, the “Subsidiary Guarantors”) have guaranteed the Company’s 9 5/8% senior subordinated notes due 2009 on a joint and several basis. The Company has not included separate financial statements of the Subsidiary Guarantors because (i) all of the Subsidiary Guarantors are wholly owned subsidiaries of the Company, and (ii) the guarantees issued by the Subsidiary Guarantors are full and unconditional. The Company has not included separate parent-only financial statements since the parent (Spanish Broadcasting System, Inc., a Delaware corporation) is a holding company with no independent assets or operations other than its investments in its subsidiaries. All Federal Communications Commission (FCC) licenses are held by special purpose subsidiaries formed solely for the purpose of holding each respective FCC license and/or non-guarantor subsidiaries. All of the special purpose subsidiaries are non-guarantors of the 9 5/8% senior subordinated notes due 2009. Condensed consolidating unaudited financial information for the parent and its guarantor and non-guarantor subsidiaries is as follows (in thousands):
6
CONDENSED CONSOLIDATING BALANCE SHEET
| Non | ||||||||||||||||||||||
| Guarantors | Guarantors | |||||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||||||||
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Cash and cash equivalents
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$ | 24,503 | 18,340 | 2,766 | — | 45,609 | ||||||||||||||||
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Net receivables
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— | 23,917 | 1,650 | — | 25,567 | |||||||||||||||||
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Other current assets
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2,379 | 760 | 343 | — | 3,482 | |||||||||||||||||
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Assets held for sale
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— | 2,879 | 23,027 | — | 25,906 | |||||||||||||||||
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Total current assets
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26,882 | 45,896 | 27,786 | — | 100,564 | |||||||||||||||||
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Property and equipment, net
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1,453 | 15,987 | 7,118 | — | 24,558 | |||||||||||||||||
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Intangible assets, net
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— | 9,019 | 696,232 | |||||||||||||||||||