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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, 2002
OR
/ / Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
COMMISSION FILE NO. 333-61211
RADIO UNICA CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 65-0776004
(State of Incorporation) (I.R.S. Employer
Identification Number)
8400 N.W. 52ND STREET, SUITE 100
MIAMI, FL 33166
(Address of principal executive offices) (Zip Code)
305-463-5000
(Registrant's telephone number, including area code)
N/A
(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 /X/ NO / /
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 13, 2002, 100 shares of Common Stock, $.01 par value were
outstanding.
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RADIO UNICA CORP.
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements............................................................ 2
Item 2. Management's Discussion and Analysis............................................ 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................................ 15
RADIO UNICA CORP.
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
2002 2001
- -----------------------------------------------------------------------------------------------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 1,385,698 $ 964,042
Accounts receivable, net of allowance for doubtful
accounts of $1,285,364 and $1,253,425, respectively 10,412,495 10,251,340
Prepaid expenses and other current assets 1,799,599 1,541,874
------------------ ------------------
Total current assets 13,597,792 12,757,256
Property and equipment, net 24,769,257 23,971,415
Broadcast licenses, net of accumulated amortization of
$10,336,623 98,200,730 98,200,730
Other intangible assets, net 9,433,143 9,055,938
Other assets 541,648 344,543
------------------ ------------------
$ 146,542,570 $ 144,329,882
================== ==================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 496,674 $ 2,216,655
Accrued expenses 3,264,875 2,887,929
Current portion of notes payable 978,188 984,991
Deferred revenue and fees 647,550 658,943
------------------ ------------------
Total current liabilities 5,387,287 6,748,518
Other liabilities 75,000 55,000
Notes payable 1,128,202 1,139,276
Due to parent, net 93,482,010 85,742,845
Deferred taxes 910,424 988,460
Senior discount notes 156,625,953 147,934,782
Commitments and contingencies
Stockholders' deficit:
Common stock; $.01 par value; 1,000 shares authorized,
100 shares issued and outstanding 1 1
Additional paid-in-capital 59,612,074 59,612,074
Deferred compensation expense (259,351) (570,817)
Accumulated deficit (170,419,030) (157,320,257)
------------------ ------------------
Total stockholders' deficit (111,066,306) (98,278,999)
------------------ ------------------
$ 146,542,570 $ 144,329,882
================== ==================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2
RADIO UNICA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
- -------------------------------------------------------------------------------------------------------------
2002 2001 2002 2001
-------------- --------------- --------------- ---------------
Net revenue $ 12,178,532 $ 9,923,227 $ 20,340,268 $ 15,544,556
Operating expenses:
Direct operating 1,302,953 2,424,287 2,498,426 4,092,283
Selling, general and administrative 4,612,478 4,246,408 8,808,171 8,358,988
Network 3,712,702 3,964,496 7,473,748 7,702,038
Corporate 874,900 852,626 1,722,142 1,686,310
Cost of promotion services 1,263,837 700,507 2,051,193 700,507
Depreciation and amortization 752,700 1,592,253 1,491,950 3,259,793
Stock option compensation 151,321 177,806 311,466 355,614
-------------- --------------- --------------- ---------------
12,670,891 13,958,383 24,357,096 26,155,533
-------------- --------------- --------------- ---------------
Loss from operations (492,359) (4,035,156) (4,016,828) (10,610,977)
Other income (expense):
Interest expense (4,600,358) (4,163,348) (9,111,780) (8,226,361)
Interest income 1,615 10,135 4,719 19,669
Other (4,440) 208,338 (52,920) 216,046
-------------- --------------- --------------- ---------------
(4,603,183) (3,944,875) (9,159,981) (7,990,646)
-------------- --------------- --------------- ---------------
Loss before income taxes (5,095,542) (7,980,031) (13,176,809) (18,601,623)
Income tax benefit 39,018 78,035 78,036 78,035
-------------- --------------- --------------- ---------------
Net loss $ (5,056,524) $ (7,901,996) $ (13,098,773) $ (18,523,588)
============== =============== =============== ===============
Net loss per common share - basic and
diluted $ (50,565) $ (79,020) $ (130,988) $ (185,236)
============== =============== =============== ===============
Weighted average common shares
outstanding - basic and diluted 100 100 100 100
============== =============== =============== ===============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
RADIO UNICA CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30,
-------------------------------------
2002 2001
- -----------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net loss $ (13,098,773) $ (18,523,588)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 1,491,950 3,259,793
Provision for bad debts 31,939 (25,825)
Accretion of interest on senior discount notes 8,691,171 7,753,383
Amortization of deferred financing costs 319,962 385,820
Stock option compensation expense 311,466 355,614
Loss on investment in unconsolidated company - 131,677
Deferred income taxes (78,036) (78,035)
Other (118,835) (653,683)
Changes in assets and liabilities, net of effects of
acquisitions:
Accounts receivable (193,093) (696,282)
Prepaid expenses and other current assets (257,725) (339,272)
Other assets (198,317) (67,847)
Accounts payable (1,719,982) 524,127
Accrued expenses 376,948 611,450
Deferred revenue 107,442 78,816
Other liabilities 20,000 25,000
---------------- ----------------
Net cash used in operating activities (4,313,883) (7,258,852)
---------------- ----------------
INVESTING ACTIVITIES
Acquisition of property and equipment (2,157,440) (1,603,352)
Acquisition of wholly owned subsidiary, net of cash received - (1,342,687)
---------------- ----------------
Net cash used in investing activities (2,157,440) (2,946,039)
---------------- ----------------
FINANCING ACTIVITIES
Intercompany payable, net 7,739,164 10,481,578
Repayment of notes payable (17,878) (27,096)
Deferred financing costs (828,307) -
---------------- ----------------
Net cash provided by financing activities 6,892,979 10,454,482
---------------- ----------------
Net decrease in cash and cash equivalents 421,656 249,591
Cash and cash equivalents at beginning of period 964,042 143,619
---------------- ----------------
Cash and cash equivalents at end of period $ 1,385,698 $ 393,210
================ ================
Issuance of note payable in connection with acquisition of
wholly owned subsidiary $ - $ 2,078,561
================ ================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
RADIO UNICA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements of
Radio Unica Corp. and subsidiaries (the "Company") for the periods indicated
herein have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission and in accordance with generally accepted
accounting principles for interim financial information. Accordingly, the
financial statements do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three and six months ended June 30, 2002 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2002. The consolidated condensed financial statements include the
accounts of the Company and all majority owned subsidiaries over which the
Company has control. All significant intercompany accounts and transactions have
been eliminated in consolidation. For further information, refer to the
Company's 2001 consolidated financial statements and notes thereto.
The Company's revenue and cash flows are typically lowest in the first
calendar quarter. Seasonal fluctuations are common in the radio broadcasting
industry and are due primarily to fluctuations in consumer spending.
2. SEGMENT OPERATING RESULTS
Pursuant to the provisions of Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standards (`SFAS") No. 131, "Disclosure About
Segments of a Business Enterprise and Related Information", the Company is
required to report segment information. The Company classified its businesses
into two reporting segments: radio broadcasting and promotion services. The
radio broadcasting segment includes the operations of the Company's radio
network, the operations of all owned and/or operated radio stations and
corporate expenses. The promotion services segment includes the operations of
the Company's marketing and promotions business The Company evaluates
performance based on several factors, of which the primary financial measures
are business segment net revenue, operating income (loss) and earnings (loss)
from operations plus depreciation and amortization and stock option compensation
expense ("EBITDA").
EBITDA is presented not as an alternative measure of operating results or
cash flow from operations (as determined in accordance with generally accepted
accounting principles ("GAAP")), but because it is a widely accepted
supplemental financial measure of a company's ability to service debt. The
Company's calculation of EBITDA may not be comparable to similarly titled
measures reported by other companies since all companies do not calculate this
non-GAAP measure in the same fashion. The Company's EBITDA calculation is not
intended to represent cash used in operating activities, since it does not
include interest and taxes and changes in operating assets and liabilities, nor
is it intended to represent the net increase or decrease in cash, since it does
not include cash provided by (used in) investing and financing activities.
5
RADIO UNICA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
2. SEGMENT OPERATING RESULTS, CONTINUED
Results by segment are as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------- ---------------------------------
2002 2001 2002 2001
--------------------------------- ---------------------------------
(UNAUDITED) (UNAUDITED)
Net revenue
Radio broadcasting $ 9,978,077 $ 8,729,605 $ 16,626,974 $ 14,350,934
Promotion services 2,200,455 1,193,622 3,713,294 1,193,622
-------------- --------------- -------------- ---------------
Consolidated $ 12,178,532 $ 9,923,227 $ 20,340,268 $ 15,544,556
============== =============== ============== ===============
Operating income (loss)
Radio broadcasting $ (831,108) $ (4,230,908) $ (4,486,745) $ (10,806,729)
Promotion services 338,749 195,752 469,917 195,752
-------------- --------------- -------------- ---------------
Consolidated $ (492,359) $ (4,035,156) $ (4,016,828) $ (10,610,977)
============== =============== ============== ===============
EBITDA
Radio broadcasting $ 17,264 $ (2,482,844) $ (2,793,456) $ (7,213,317)
Promotion services 394,398 217,747 580,044 217,747
-------------- --------------- -------------- ---------------
Consolidated $ 411,662 $ (2,265,097) $ (2,213,412) $ (6,995,570)
============== =============== ============== ===============
Total Assets
Radio broadcasting $ 140,530,997 $ 146,162,213
Promotion services 6,011,573 5,252,686
-------------- ---------------
Consolidated $ 146,542,570 $ 151,414,899
============== ===============
6
RADIO UNICA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. NEW ACCOUNTING STANDARDS
Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and
Other Intangible Assets". Under SFAS No. 142, goodwill and intangible assets
with indefinite lives are no longer amortized but are reviewed annually, or more
frequently if indicators arise, for impairment. Separable intangible assets that
are not deemed to have indefinite lives will continue to be amortized over their
useful lives. As prescribed by SFAS No. 142, the Company has completed its
transitional impairment test on its goodwill and broadcast licenses and has
determined that no impairment exists. The Company has determined that its
broadcast licenses have indefinite lives. As required by SFAS No. 142, the
results for the periods prior to its adoption have not been restated. A
reconciliation of previously reported net loss and net loss per share to the
amounts adjusted for the exclusion of the amortization of goodwill and broadcast
licenses is as follows.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------- -------------------------------
2002 2001 2002 2001
-------------- ------------- -------------- --------------
Net loss as reported $ (5,056,524) $ (7,901,996) $ (13,098,773) $ (18,523,588)
Goodwill and broadcast licenses amortization - 956,929 - 1,935,010
-------------- ------------- -------------- --------------
Net loss as adjusted $ (5,056,524) $ (6,945,067) $ (13,098,773) $ (16,588,578)
============== ============= ============== ==============
Net loss per common share - basic and diluted
As reported $ (50,565) $ (79,020) $ (130,988) $ (185,236)
============== ============= ============== ==============
As adjusted $ (50,565) $ (69,451) $ (130,988) $ (165,886)
============== ============= ============== ==============
Effective January 1, 2002 the Company adopted SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 superseded SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" and the accounting and reporting provisions of
Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations
- -Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for
the disposal of a segment of a business. SFAS No. 144 also amended Accounting
Research Bulletin No. 51, "Consolidated Financial Statements," to eliminate the
exception to consolidation for a subsidiary for which control is likely to be
temporary. Consistent with SFAS No. 121, SFAS No. 144 requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. Our adoption of SFAS
No. 144 did not have an effect on our consolidated financial statements.
7
RADIO UNICA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. REVOLVING CREDIT FACILITY
On June 25, 2002, the Company and all its subsidiaries entered into a
credit agreement for a senior secured revolving credit facility (the "Revolving
Credit Facility") providing for up to $20 million of availability with General
Electric Capital Corporation ("GECC"). The Revolving Credit Facility will mature
on February 1, 2006. Amounts outstanding under the Revolving Credit Facility
bear interest at a rate of either (i) the Index Rate (as defined) plus 2.5% or
(ii) LIBOR plus 3.5%. The obligations under the Revolving Credit Facility are
guaranteed by Radio Unica Communications Corp. ("RUCC"), the sole stockholder of
the Company, and secured by substantially all the assets and stock of the
Company and its subsidiaries and by the assets of RUCC. The Company will pay
certain fees in connection with the Revolving Credit Facility, including an
Unused Line Fee (as defined) ranging between 0.50% and 0.75% annually on the
aggregate unused portion of the Revolving Credit Facility. The Company may use
the borrowings available under the Revolving Credit Facility for working
capital, general corporate needs, to provide funds for future Permitted
Acquisitions (as defined), for capital expenditures, to pay interest, and to the
extent permitted by the agreement for Permitted Senior Note Repurchases (as
defined).
The Revolving Credit Facility contains certain financial and operational
covenants and customary events of default, including, among others, payment
defaults and default in the performance of other covenants, breach of
representations or warranties, cross-default to other indebtedness, certain
bankruptcy or ERISA defaults, the entry of certain judgments against the Company
or any subsidiary, and any security interest or guarantee that ceases to be in
effect. The Revolving Credit Facility also provides that an event of default
will occur upon the occurrence of a Change of Control of RUCC (as defined).
8
RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
This report contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements include, among others, statements concerning the
Company's outlook for 2000 and beyond, the Company's expectations, beliefs,
future plans and strategies, anticipated events or trends, and similar
expressions concerning matters that are not historical facts. The
forward-looking statements in this report are subject to risks and uncertainties
that could cause actual results to differ materially from those expressed in or
implied by the statements.
OVERVIEW
We generate radio broadcasting revenue from sales of network advertising
time, and sales of local and national advertising time on radio stations that we
own and those that we operate under local marketing agreements (collectively
"O&Os"). Advertising rates are, in large part, based upon the network's and each
station's ability to attract audiences in demographic groups targeted by
advertisers. All radio broadcasting revenue is stated net of any agency
commissions. We recognize radio broadcasting revenue when the commercials are
broadcast. We also generate revenue from our promotional and merchandising
services company, MASS Promotions, Inc. ("MASS"). We recognize revenue generated
by MASS when the promotional and/or merchandising services are performed.
Our operating expenses consist of programming expenses, marketing and
selling costs, including commissions paid to our sales staff, technical and
engineering costs, cost of promotion services and general and administrative
expenses.
The Company presents EBITDA not as an alternative measure of operating
results or cash flow from operations (as determined in accordance with generally
accepted accounting principles ("GAAP")), but because it is a widely accepted
supplemental financial measure of a company's ability to service debt. The
Company's calculation of EBITDA may not be comparable to similarly titled
measures reported by other companies since all companies do not calculate this
non-GAAP measure in the same fashion. The Company's EBITDA calculation is not
intended to represent cash used in operating activities, since it does not
include interest and taxes and changes in operating assets and liabilities, nor
is it intended to represent the net increase or decrease in cash, since it does
not include cash provided by (used in) investing and financing activities.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
2001
The results of operations for the three months ended June 30, 2002 are not
comparable to the same period in 2001 primarily due to the acquisition of MASS,
which took place on April 30, 2001. Consequently, only two months of MASS'
operations are included in the results for the quarter ended June 30, 2001.
NET REVENUE. Net revenue increased by approximately $2.3 million or 23% to
approximately $12.2 million for the three months ended June 30, 2002 from
approximately $9.9 million for the comparable period in the prior year. The
increase in net revenue relates to increased revenue generated by promotional
and merchandising services associated with MASS of approximately $1.0 million,
and increased rates and revenue market share at the network and O&Os.
9
RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
OPERATING EXPENSES. Operating expenses decreased by approximately $1.3
million or 9% to approximately $12.7 million for the three months ended June 30,
2002 from approximately $14.0 million for the comparable period in the prior
year. The decrease in operating expenses is due to decreased direct operating
expenses of approximately $1.1 million, decreased network expenses of
approximately $0.3 million and decreased depreciation and amortization of
approximately $0.8 million offset in part by the increased cost associated with
the operations of MASS of approximately $0.4 million of selling, general and
administrative expenses and approximately $0.6 million of cost of promotion
services.
Direct operating expenses decreased by approximately $1.1 million or 46% to
approximately $1.3 million for the three months ended June 30, 2002 from
approximately $2.4 million for the comparable period in the prior year. The
decrease in direct operating expenses is primarily due to decreased advertising
spending in 2002, decreases in headcount at certain stations and the termination
of a time brokerage agreement and station operations in San Diego.
Selling, general and administrative expenses increased by approximately
$0.4 million or 9% to approximately $4.6 million for the three months ended June
30, 2002 from approximately $4.2 million for the comparable period in the prior
year. The increase in selling, general and administrative expenses primarily
relates to the increase in general and administrative expenses associated with
MASS of approximately $0.4 million. This increase is primarily due to the
additional month of MASS' expenses in 2002 as well as the growth of MASS as a
business segment.
Network expenses decreased approximately $0.3 million or 6% to
approximately $3.7 million for the three months ended June 30, 2002 from
approximately $4.0 million for the comparable period in the prior year. The
decrease in network expenses is primarily due to decreased advertising spending
for the three months ended June 30, 2002 of approximately $0.3 million.
Corporate expenses remained constant at approximately $0.9 million for the
three months ended June 30, 2002 and 2001. Corporate expenses are comprised of
the cost of corporate management and legal and professional fees.
Cost of promotion services increased by approximately $0.6 million or 80%
to $1.3 million for the three months ended June 30, 2002 from approximately $0.7
million for the comparable period in the prior year. The increase in the cost of
promotion services is directly related to the increase in MASS' revenue and the
additional month of MASS' expenses in 2002.
Depreciation and amortization decreased by approximately $0.8 million or
53% to approximately $0.8 million for the three months ended June 30, 2002 from
approximately $1.6 million for the comparable period in the prior year. The
decrease in depreciation and amortization is due to the fact that effective
January 1, 2002 the Company ceased the amortization of goodwill and broadcast
licenses with indefinite useful lives in accordance with the provisions of
Financial Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets".
Stock option compensation expense remained constant at approximately $0.2
million for the three months ended June 30, 2002 and 2001. Stock option
compensation expense represents a non-cash charge relating to the vesting of
stock options granted to employees to purchase shares of the Company's common
stock.
10
RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
OTHER INCOME (EXPENSE). Other income (expense) decreased by
approximately $0.7 million or 17% to approximately $(4.6) million for the
three months ended June 30, 2002 from approximately $(3.9) million for the
comparable period in the prior year. Other income (expense) for the three
months ended June 30, 2002 included interest expense of approximately $(4.6)
million. Interest expense primarily relates to the interest on the
outstanding balance of the Senior Discount Notes. The Company had
approximately $(4.2) million in interest expense and $0.2 million of interest
and other income during the three months ended June 30, 2001.
INCOME TAX BENEFIT. The Company recorded an income tax benefit of
approximately $39,000 for the three months ended June 30, 2002 and approximately
$78,000 for the comparable period in the prior year. The benefit results from
the Company's ability to utilize a portion of its net operating tax loss
carryforwards to offset existing deferred tax liabilities.
NET LOSS. Net loss decreased by approximately $2.8 million or 36% to
approximately $(5.1) million for the three months ended June 30, 2002 from
approximately $(7.9) million for the comparable period in the prior year. The
decrease in net loss is mainly the result of the increase in the Company's
revenue of approximately $2.3 million and decreased operating expenses of
approximately $1.3 million, offset in part by the increase in general and
administrative expenses associated with MASS of approximately $0.4 million and
the increase in interest expense related to the Senior Discount Notes of
approximately $0.4 million.
EBITDA. EBITDA less the non-cash charge relating to the stock option
compensation expense of approximately $0.2 million increased by approximately
$2.7 million or 118% to approximately $0.4 million for the three months ended
June 30, 2002 from approximately $(2.3) million for the comparable period in the
prior year. EBITDA increased by approximately $2.7 million or 111% to
approximately $0.3 million for the three months ended June 30, 2002 from
approximately $(2.4) million for the comparable period in the prior year. The
increase in EBITDA is mainly a result of the increase in revenue generated by
MASS, increased rates and revenue market share at the network and O&Os, and
decreased operating expenses relating to the radio broadcasting business.
SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2001
The results of operations for the six months ended June 30, 2002 are not
comparable to the same period in 2001 primarily due to the acquisition of MASS,
which took place on April 30, 2001. Consequently, only two months of MASS'
operations are included in the results for the six months ended June 30, 2001.
NET REVENUE. Net revenue increased by approximately $4.8 million or 31% to
approximately $20.3 million for the six months ended June 30, 2002 from
approximately $15.5 million for the comparable period in the prior year. The
increase in net revenue relates to increased revenue generated by promotional
and merchandising services associated with MASS of approximately $2.5 million,
and increased rates and revenue market share at the network and O&Os.
OPERATING EXPENSES. Operating expenses decreased by approximately $1.8
million or 7% to approximately $24.4 million for the six months ended June 30,
2002 from approximately $26.2 million for the comparable period in the prior
year. The decrease in operating expenses is due to decreased direct operating
expenses of approximately $1.6 million, increased selling, general and
administrative expenses of approximately $0.4 million, decreased network
expenses of approximately $0.4 million, increased cost of promotion services of
approximately $1.4 million and decreased depreciation and amortization of
approximately $1.8 million.
11
RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
Direct operating expenses decreased by approximately $1.6 million or 39% to
approximately $2.5 million for the six months ended June 30, 2002 from
approximately $4.1 million for the comparable period in the prior year. The
decrease in direct operating expenses is primarily due to decreased advertising
spending in 2002, decreases in headcount at certain stations and the termination
of a time brokerage agreement and station operations in San Diego.
Selling, general and administrative expenses increased by approximately
$0.4 million or 5% to approximately $8.8 million for the six months ended June
30, 2002 from approximately $8.4 million for the comparable period in the prior
year. The increase in selling, general and administrative expenses primarily
relates to the increase in general and administrative costs associated with MASS
of approximately $0.8 million offset in part by a decrease of approximately $0.4
million related to the radio broadcasting business The increase in general and
administrative expenses associated with MASS is primarily due to the additional
four months of MASS' expenses in 2002 as well as the growth of MASS as a
business segment.
Network expenses decreased by approximately $0.2 million or 3% to
approximately $7.5 million for the six months ended June 30, 2002 from
approximately $7.7 million for the comparable period in the prior year. The
decrease in network expenses is primarily due to decreased advertising spending.
Corporate expenses remained constant at approximately $1.7 million for
the six months ended June 30, 2002 and 2001. Corporate expenses are comprised
of the cost of corporate management and legal and professional fees.
Cost of promotion services increased by approximately $1.4 million or 193%
to $2.1 million for the six months ended June 30, 2002 from approximately $0.7
million for the comparable period in the prior year. The increase in the cost of
promotion services is directly related to the increase in MASS' revenue and the
additional four months of MASS' expenses in 2002.
Depreciation and amortization decreased by approximately $1.8 million or
55% to approximately $1.5 million for the six months ended June 30, 2002 from
approximately $3.3 million for the comparable period in the prior year. The
decrease in depreciation and amortization is due to the fact that effective
January 1, 2002 the Company ceased the amortization of goodwill and broadcast
licenses with indefinite useful lives in accordance with the provisions of SFAS
No. 142, "Goodwill and Other Intangible Assets".
Stock option compensation expense decreased by approximately $0.1 million
or 12% to approximately $0.3 million for the six months ended June 30, 2002
from approximately $0.4 million for the comparable period in the prior year.
Stock option compensation expense represents a non-cash charge relating to the
vesting of stock options granted to employees to purchase shares of the
Company's common stock.
OTHER INCOME (EXPENSE). Other income (expense) decreased by
approximately $1.2 million or 15% to approximately $(9.2) million for the six
months ended June 30, 2002 from approximately $(8.0) million for the
comparable period in the prior year. Other income (expense) for the six
months ended June 30, 2002 is mainly comprised of interest expense of
approximately $(9.1) million and other expense of approximately $0.1 million.
Interest expense primarily relates to the interest on the outstanding balance
of the Senior Discount Notes. The Company had approximately $(8.2) million in
interest expense and approximately $0.2 million in interest and other income
during the six months ended June 30, 2001.
12
RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
INCOME TAX BENEFIT. The Company recorded an income tax benefit of
approximately $0.1 million for the six months ended June 30, 2002 and 2001. The
benefit results from the Company's ability to utilize a portion of its net
operating tax loss carryforwards to offset existing deferred tax liabilities.
NET LOSS. Net loss decreased by approximately $5.4 million or 29% to
approximately $13.1 million for the six months ended June 30, 2002 from
approximately $18.5 million for the comparable period in the prior year. The
decrease in net loss is mainly the result of the increase in the Company's
revenue of approximately $4.8 million and decreased operating expenses of
approximately $1.8 million, offset in part by the increase in interest
expense related to the Senior Discount Notes of approximately $0.9 million
and decreased interest and other income of approximately $0.3 million.
EBITDA. EBITDA less the non-cash charge relating to the stock option
compensation expense of approximately $0.3 million increased by approximately
$4.8 million or 68% to approximately $(2.2) million for the six months ended
June 30, 2002 from approximately $(7.0) million for the comparable period in the
prior year. EBITDA increased by approximately $4.8 million or 66% to
approximately $(2.5) million for the six months ended June 30, 2002 from
approximately $(7.3) million for the comparable period in the prior year. The
increase in EBITDA is mainly a result of the increase in revenue generated by
MASS, increased rates and revenue market share at the network and O&Os, and
decreased operating expenses relating to the radio broadcasting business.
LIQUIDITY AND CAPITAL RESOURCES
The Company has had negative cash flows since inception. Working capital
and financing for the Company's acquisitions to date have been provided
primarily by the proceeds from RUCC's initial public offering, the issuance of
the 11 3/4% Senior Discount Notes due August 1, 2006 and the issuance of
promissory notes, common stock and preferred stock to RUCC's shareholders.
On June 25, 2002, the Company entered into an agreement for a senior
secured revolving credit facility (the "Revolving Credit Facility") providing
for up to $20 million of availability. The Revolving Credit Facility will
mature on February 1, 2006.
13
RADIO UNICA CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES, CONTINUED
Net cash used in operating activities decreased by approximately $2.9
million or 41% to approximately $4.3 million for the six months ended June 30,
2002 from approximately $7.3 million for the comparable period in the prior
year. Net cash used in investing activities was approximately $2.2 million and
$3.0 million for the six months ended June 30, 2002 and 2001, respectively. The
decrease of approximately $0.8 million from 2002 to 2001 is primarily due to the
acquisition of MASS which took place during April 2001, offset in part by the
increase in capital expenditures associated with signal upgrades currently in
process for our New York and Dallas stations. Net cash provided by financing
activities was approximately $6.9 million and $10.5 million for the six months
ended June 30, 2002 and 2001, respectively. The decrease of approximately $3.6
million from 2002 to 2001 is due to fewer borrowings from RUCC of approximately
$2.8 million as well as approximately $0.8 million of deferred financing cost
which was incurred in connection with the Revolving Credit Facility..
Capital expenditures primarily relate to the purchase of broadcast
equipment for the network and O&Os, leasehold improvements, computer
equipment and telecommunications equipment. Capital expenditures were
approximately $2.2 million and $1.6 million for the six months ended June 30,
2002 and 2001, respectively. The increase in capital expenditures is
primarily due to signal upgrades that are currently in process for our New
York and Dallas stations.
The Company believes that the remaining proceeds from RUCC's initial public
offering and the borrowing availability under the Revolving Credit Facility will
provide adequate resources to fund the Company's operating expenses, working
capital requirements and capital expenditures. The Company's first interest
payment under the Senior Discount Notes in the amount of approximately $9.3
million is due on February 1, 2003 and semiannually through August 1, 2006. The
Company will utilize its current cash position, cash generated from operations
and the borrowing availability under the Revolving Credit Facility to fund such
payments. There can be no assurance that the Company will have sufficient funds
or will generate future cash flows to meet all of the of the Company's
obligations and commitments. The failure to generate such sufficient cash flow
could significantly adversely affect the market value of the Company's Senior
Discount Notes, and the Company's ability to pay the principal of and interest
on the Senior Discount Notes.
14
RADIO UNICA CORP.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits required by Item 601 of Regulation S-K.
10.1 Credit Agreement dated as of June 25, 2002 among Radio Unica Corp.
and subsidiaries as borrowers and General Electric Capital
Corporation, as Agent and Lender.
99. Certification
(a) 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.
Radio Unica Corp.
/s/ Steven E. Dawson
By:
-------------------------
Steven E. Dawson
Chief Financial Officer
Date: August 13, 2002
15
INDEX TO EXHIBITS
a) Exhibits required by Item 601 of Regulation S-K
10.1 Credit Agreement dated as of June 25, 2002 among Radio Unica Corp.
and subsidiaries as borrowers and General Electric Capital
Corporation, as Agent and Lender.
99. Certification