-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N5ohTGMlgTfOS02nEZWhw/FLrO07tcMPjneC7lT5H//VnxYySP3MCis9rPndq0J+ O1pGh6n2c6y15OqfvkNbHg== 0000912057-02-031527.txt : 20020813 0000912057-02-031527.hdr.sgml : 20020813 20020813152841 ACCESSION NUMBER: 0000912057-02-031527 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HISPANIC BROADCASTING CORP CENTRAL INDEX KEY: 0000922503 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 990113417 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-15859 FILM NUMBER: 02729525 BUSINESS ADDRESS: STREET 1: 3102 OAK LAWN AVENUE STREET 2: STE 215 CITY: DALLAS STATE: TX ZIP: 75219 BUSINESS PHONE: 2145257700 MAIL ADDRESS: STREET 1: 3102 OAK LAWN AVENUE STREET 2: SUITE 215 CITY: DALLAS STATE: TX ZIP: 75219 FORMER COMPANY: FORMER CONFORMED NAME: HEFTEL BROADCASTING CORP DATE OF NAME CHANGE: 19940502 10-Q 1 a2085746z10-q.htm 10-Q
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
ý	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
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 0-24516

HISPANIC BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		99-0113417 (I.R.S. Employer Identification No.)
3102 Oak Lawn Avenue, Suite 215 Dallas, Texas (Address of principal executive offices)		75219 (Zip Code)

(214) 525-7700
(Registrant's telephone number, including area code)

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 ý No o

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class		Outstanding at August 1, 2002
Class A Common Stock, $.001 Par Value		80,397,272
Class B Non-Voting Common Stock, $.001 Par Value		28,312,940

HISPANIC BROADCASTING CORPORATION
JUNE 30, 2002
INDEX

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001	2
	Condensed Consolidated Statements of Income and Comprehensive Income for the Three Months Ended June 30, 2002 and 2001 and the Six Months Ended June 30, 2002 and 2001	3
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and 2001	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	17
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	18
Item 4.	Submission of Matters to a Vote of Security Holders	18
Item 6.	Exhibits and Reports on Form 8-K	19

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands except share information)

			June 30, 2002			December 31, 2001
ASSETS
Current assets:
	Cash and cash equivalents		$	26,474		$	59,587
	Accounts receivable, net			52,441			50,241
	Prepaid expenses and other current assets			1,826			748

		Total current assets		80,741			110,576
Property and equipment, at cost, net				54,160			54,428
Intangible assets, net				1,137,467			1,023,400
Restricted cash				—			3,151
Deferred charges and other assets				16,556			50,188

		Total assets	$	1,288,924		$	1,241,743

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$	5,476		$	4,700
	Accrued expenses			16,921			15,968
	Income taxes payable			5,567			3,349
	Current portion of long-term obligations			6			6

		Total current liabilities		27,970			24,023

Long-term obligations, less current portion				16,418			1,418

Deferred income taxes				127,886			119,486

Stockholders' equity:
	Preferred Stock, cumulative, $.001 par value; authorized 5,000,000 shares; no shares issued or outstanding			—			—
	Class A Common Stock, $.001 par value; authorized 175,000,000 shares; issued 81,082,772 shares and outstanding 80,397,272 shares in 2002 and issued 80,923,786 shares and outstanding 80,238,286 shares in 2001			81			81
	Class B Common Stock, convertible, $.001 par value; authorized 50,000,000 shares; issued and outstanding 28,312,940 shares			28			28
	Additional paid-in capital			1,045,382			1,042,907
	Retained earnings			81,267			63,908
	Treasury stock, at cost, 685,500 shares			(10,108	)		(10,108	)

		Total stockholders' equity		1,116,650			1,096,816

		Total liabilities and stockholders' equity	$	1,288,924		$	1,241,743

See accompanying notes to unaudited condensed consolidated financial statements.

HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME (UNAUDITED)

(in thousands except per share data)

		Three Months Ended June 30,				Six Months Ended June 30,
		2002		2001		2002		2001
Net revenues		$	68,596	$	65,896	$	120,546	$	113,692
Operating expenses			22,019		20,475		37,870		34,295
Wages, salaries and benefits			22,143		19,226		42,510		38,236
Provision for bad debts			540		418		1,139		1,023
Depreciation and amortization			3,300		9,180		6,141		18,267
Corporate expenses			3,644		803		4,612		1,859

Operating income			16,950		15,794		28,274		20,012
Interest income, net			117		1,140		184		2,537
Other, net			—		2		—		366

Income before income tax			17,067		16,936		28,458		22,915
Income tax			6,633		6,690		11,099		9,051

Net income		$	10,434	$	10,246	$	17,359	$	13,864

Net income per common share:
	Basic	$	0.10	$	0.09	$	0.16	$	0.13
	Diluted		0.09		0.09		0.16		0.13
Weighted average common shares outstanding:
	Basic		108,707		109,016		108,648		108,999
	Diluted		109,856		109,857		109,787		109,932
Other comprehensive income, net of tax:
	Unrealized gain on marketable equity securities	$	—	$	1,073	$	—	$	1,073
Net income			10,434		10,246		17,359		13,864

Comprehensive income			10,434	$	11,319		17,359	$	14,937

See accompanying notes to unaudited condensed consolidated financial statements.

HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

				Six Months Ended June 30,
				2002			2001
Cash flows from operating activities:
	Net income			$	17,359		$	13,864
	Adjustments to reconcile net income to net cash provided by operating activities:
		Provision for bad debts			1,139			1,023
		Depreciation and amortization			6,141			18,267
		Deferred income taxes			8,400			2,800
		Changes in operating assets and liabilities			(469	)		187
		Other, net			(10	)		135

			Net cash provided by operating activities		32,560			36,276

Cash flows from investing activities:
	Acquisitions of radio stations				(75,875	)		—
	Property and equipment acquisitions				(5,739	)		(8,994	)
	Dispositions of property and equipment				719			5
	Additions to intangible assets				(667	)		(109	)
	Increase in deferred charges and other assets				(1,521	)		(3,181	)

			Net cash used in investing activities		(83,083	)		(12,279	)

Cash flows from financing activities:
	Borrowing on long-term obligations				15,000			—
	Payments on long-term obligations				(1	)		(18	)
	Proceeds from stock issuances				2,411			1,364

			Net cash provided by financing activities		17,410			1,346

Net increase (decrease) in cash and cash equivalents					(33,113	)		25,343
Cash and cash equivalents at beginning of period					59,587			115,689

Cash and cash equivalents at end of period				$	26,474		$	141,032

See accompanying notes to unaudited condensed consolidated financial statements.

HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

JUNE 30, 2002

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Hispanic Broadcasting Corporation and subsidiaries (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001.

2. New Accounting Pronouncements

In 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized and to be tested for impairment at least annually in accordance with the provisions of SFAS No. 142. The Company adopted the provisions of SFAS No. 142 on July 1, 2001 and January 1, 2002 for intangible assets acquired in business combinations completed after June 30, 2001 and prior to July 1, 2001, respectively.

On January 1, 2002, we were required by SFAS No. 142 to reassess the useful lives of all intangible assets acquired on or before June 30, 2001, and make any necessary remaining amortization period adjustments by March 31, 2002. No remaining amortization period adjustments were necessary. In addition, to the extent that an intangible asset is identified as having an indefinite useful life, we are required to perform a transitional test to determine if there is an asset impairment in accordance with the provisions of SFAS No. 142. Any impairment loss is measured as of January 1, 2002 and recognized as the cumulative effect of a change in accounting principle in the six months ended June 30, 2002.

In connection with the transitional cost in excess of fair value of net assets acquired impairment evaluation, SFAS No. 142 requires us to perform an assessment of whether there is an indication that cost in excess of fair value of net assets acquired is impaired as of January 1, 2002. To accomplish this, we identified the reporting units and determined the carrying value of each reporting unit. The Company defines its reporting unit to be an individual radio market. To the extent a reporting unit's carrying amount exceeds its fair value, the reporting unit's cost in excess of fair value of net assets acquired may be impaired and we must perform the second step of the transitional impairment test. In the second step, we must compare the implied fair value of the reporting unit's cost in excess of fair value of net assets acquired, determined by allocating the reporting unit's fair value to all of its assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation in accordance with SFAS No. 141, to its carrying amount, both of which would be measured as of January 1, 2002. Any transitional impairment loss is recognized as the cumulative effect of a change in accounting principle in our statement of income. No impairment loss was recognized for the six months ended June 30, 2002 as a result of the transitional test discussed above.

In 2001, the Financial Accounting Standards Board issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. SFAS No. 144 retains the requirements of SFAS No. 121 to (a) recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and (b) measure an impairment loss as the difference between the carrying amount and fair value of the assets. The statement also removes goodwill from its scope and covers the accounting for the disposal of long-lived assets. The Company adopted the provisions of SFAS No. 144 on January 1, 2002. Management does not believe adoption of this statement will materially impact the Company's financial position or results of operations.

3. Pending Merger

On June 12, 2002, the Company announced a merger with Univision Communications, Inc. ("Univision"). Univision will acquire the Company in an all-stock transaction. Under the agreement, each share of the Company's common stock will be exchanged for a fixed 0.85 shares of Univision Class A Common Stock. If the Federal Communications Commission determines that the holders of the Company's Class B Common Stock have an attributable interest in Univision under the Federal Communications Act then their shares will be exchanged for a fixed 0.85 shares of Univision Class B Common Stock. The acquisition, which has been approved by the Boards of both companies, is expected to close by year-end, subject to approval by the shareholders of both companies as well as regulatory approvals and customary closing conditions.

Included in Corporate expenses are merger expenses of $2.4 million for the three and six months ended June 30, 2002. Under the terms of an agreement with the Company's investment bankers, the Company will pay a $10.5 million success fee upon the completion of the merger. The $10.5 million success fee will be recognized in expense upon the completion of the merger.

4. Acquisitions and Radio Signal Upgrades

2002 Acquisitions and Radio Signal Upgrades

On August 10, 2001, the Company entered into an asset purchase agreement to acquire for $16.0 million the assets of KQMR(FM), serving the Las Vegas market (the "Las Vegas Acquisition"). On March 22, 2002, the Company closed on the Las Vegas Acquisition. The Company used its available cash to fund the acquisition.

The fair value of the assets acquired in the Las Vegas Acquisition as of March 22, 2002 is as follows (in thousands):

Property and equipment	$	26
Broadcast licenses		15,957
Other intangible assets		57

	$	16,040

On October 10, 2001, the Company entered into an asset purchase agreement to acquire for $5.0 million the assets of KZOL(FM) (formerly KAJZ(FM)), serving the Fresno market (the "Fresno Acquisition"). On March 29, 2002, the Company closed on the Fresno Acquisition. The Company used its available cash to fund the acquisition.

The fair value of the assets acquired in the Fresno Acquisition as of March 29, 2002 is as follows (in thousands):

Property and equipment	$	90
Broadcast licenses		4,897
Other intangible assets		34

	$	5,021

On December 17, 2001, the Company entered into an asset purchase agreement to acquire for $58.0 million the assets of KSOL(FM) (formerly KEMR(FM)), serving the San Jose and San Francisco markets (the "San Jose Acquisition"). On April 1, 2002, the Company closed on the San Jose Acquisition. The Company used its available cash to fund the acquisition along with $15.0 million borrowed from the $202.5 million revolving credit facility (the "Credit Facility") on April 1, 2002.

The fair value of the assets acquired in the San Jose Acquisition as of April 1, 2002 is as follows (in thousands):

Property and equipment	$	415
Broadcast licenses		57,410
Other intangible assets		464

	$	58,289

Radio stations KPTY(FM) in Houston and KDXX(FM) and KDXT(FM) in Dallas have been involved in a variety of proceedings before the Federal Communications Commission to upgrade each of the stations' signal strength. The radio signal upgrade projects for KPTY(FM) in Houston and KDXX(FM) in Dallas were substantially completed in February 2002 and the stations began broadcasting according to their new authorized signal authority. The upgrade costs of $34.9 million incurred by the Company and included in deferred charges and other assets were reclassified to broadcast licenses in February 2002 and are not subject to amortization. The Company is obligated to pay an additional $1.6 million related to the upgrade projects of KDXX(FM) and KDXT(FM).

2001 Acquisitions

On April 24, 2001, the Company entered into an asset purchase agreement to acquire for $80.0 million the FCC licenses of a radio station broadcasting at 106.5 MHz (KOVE(FM)), serving the Houston market (the "Houston Acquisition"). The Houston Acquisition closed on July 20, 2001. The asset acquisition was funded with available cash. The station's programming is an existing format from a different Company-owned radio station in the Houston market.

The fair value of the assets acquired in the Houston Acquisition as of July 20, 2001 is as follows (in thousands):

Property and equipment	$	2,028
Broadcast licenses		77,863
Other intangible assets		173

	$	80,064

On September 4, 2001, the Company entered into an asset purchase agreement to acquire for $34.0 million the assets of KOMR(FM), KMRR(FM), KKMR(FM) and KHOV(FM), serving the Phoenix market (the "Phoenix Acquisition"). The Phoenix Acquisition closed on October 31, 2001. The asset acquisition was funded with available cash. KOMR(FM), KMRR(FM) and KKMR(FM) are programmed with one new Hispanic-targeted format and KHOV(FM) is simulcast with the Company's existing Phoenix station KHOT(FM).

The fair value of the assets acquired in the Phoenix Acquisition as of October 31, 2001 is as follows (in thousands):

Prepaid expenses and other current assets	$	24
Property and equipment		2,052
Broadcast licenses		31,707
Other intangible assets		282

	$	34,065

The intangible assets acquired in the Las Vegas Acquisition, the Fresno Acquisition, the San Jose Acquisition, the Houston Acquisition and the Phoenix Acquisition are not subject to amortization.

All of the acquisitions discussed above were accounted for using the purchase method of accounting. Accordingly, the accompanying financial statements include the operations of the acquired businesses from the respective dates of acquisition.

Unaudited pro forma results of operations for the six months ended June 30, 2002 and 2001, calculated as though the Las Vegas Acquisition, the Fresno Acquisition, the San Jose Acquisition, the Houston Acquisition and the Phoenix Acquisition had occurred at the beginning of each period, is as follows (in thousands, except per share data):

		Six Months Ended June 30,
		2002		2001
Net revenues		$	120,648	$	118,701
Operating income			28,297		19,526
Net income			17,962		12,136
Net income per common share:
	Basic		0.17		0.11
	Diluted		0.16		0.11

The pro forma information is presented for comparative purposes only and does not purport to be indicative of what would have occurred had the acquisitions actually been made at such dates, nor is it indicative of future operating results.

5. Intangible Assets

Intangible assets as of June 30, 2002 are summarized as follows (in thousands):

		Gross Carrying Amount		Accumulated Amortization		Net Amount
Intangible assets subject to amortization:
	Other intangible assets	$	12,456	$	10,779	$	1,677
Intangible assets not subject to amortization:
	Broadcast licenses		1,131,420		86,666		1,044,754
	Cost in excess of fair value of net assets acquired		97,625		12,379		85,246
	Other intangible assets		6,312		522		5,790

		$	1,247,813	$	110,346	$	1,137,467

Amortization expense for the three and six months ended June 30, 2002 is $0.1 and $0.2 million, respectively. Estimated amortization expense of intangible assets acquired as of June 30, 2002 with finite useful lives are summarized as follows (in thousands):

Year	Amount
2002	$	470
2003		431
2004		304
2005		140
2006		105

The reconciliation of reported net income to adjusted net income, which is adjusted for the effect of amortization of intangible assets with an indefinite useful life (net of income taxes) is as follows (in thousands except per share data):

			Three Months Ended June 30,				Six Months Ended June 30,
			2002		2001		2002		2001
Reported net income			$	10,434	$	10,246	$	17,359	$	13,864
Broadcast licenses amortization, net of income tax				—		3,813		—		7,448
Cost in excess of fair value of net assets acquired amortization, net of income tax				—		421		—		822
Other intangible assets amortization, net of income tax				—		22		—		43

Adjusted net income			$	10,434	$	14,502	$	17,359	$	22,177

Adjusted net income per common share:
	Basic:
		Reported net income	$	0.10	$	0.09	$	0.16	$	0.12
		Broadcast licenses amortization, net of income tax		—		0.04		—		0.07
		Cost in excess of fair value of net assets acquired amortization, net of income tax		—		—		—		0.01
		Other intangible assets amortization, net of income tax		—		—		—		—

		Adjusted net income	$	0.10	$	0.13	$	0.16	$	0.20

	Diluted:
		Reported net income	$	0.09	$	0.09	$	0.16	$	0.12
		Broadcast licenses amortization, net of income tax		—		0.04		—		0.07
		Cost in excess of fair value of net assets acquired amortization, net of income tax		—		—		—		0.01
		Other intangible assets amortization, net of income tax		—		—		—		—

		Adjusted net income	$	0.09	$	0.13	$	0.16	$	0.20

6. Long-Term Obligations

The Company's ability to borrow under the Credit Facility is subject to compliance with certain financial ratios and other conditions set forth in the Credit Facility. The Credit Facility is secured by the stock of the Company's subsidiaries. Borrowings under the Credit Facility bear interest at a rate based on the LIBOR rate plus an applicable margin as determined by the Company's leverage ratio. The Company borrowed $15.0 million from the Credit Facility on April 1, 2002. As of June 30, 2002, the Company has $187.5 million of credit available. The Credit Facility commitment began reducing on September 30, 1999 and continues quarterly through December 31, 2004.

7. Contingencies

The Company is subject to legal proceedings and other claims which have arisen in the ordinary course of its business and have not been fully adjudicated. These actions, when ultimately concluded, will not, in the opinion of management, have a material adverse effect upon the financial position, results of operations or liquidity of the Company.

On June 12, 2002, Spanish Broadcasting System, Inc. filed Spanish Broadcasting System, Inc. v. Clear Channel Communications, Inc. and Hispanic Broadcasting Corporation. The case is pending in the United States District Court for the Southern District of Florida. Plaintiff alleges a variety of claims against the defendants including claims for federal and state antitrust violations under the Sherman Act, the Florida Antitrust Act, and California's Cartwright Act. Plaintiff's complaint also includes numerous other state law causes of action including, among others, tortious interference, defamation, and violation of the California Unfair Competition Act. The plaintiff, and both defendants, own and operate radio stations throughout the United States, and plaintiff's claims arise out of steps the defendants allegedly took to undermine plaintiff's radio station business. On July 31, 2002, plaintiff amended its complaint. The amended complaint seeks actual damages in excess of $500 million before any trebling under federal or state statute along with attorney fees and other unspecified damages. Defendants' response to the lawsuit is due on September 3, 2002, and there has been no discovery in the action. The Company is vigorously contesting this matter.

8. Stockholders' Equity

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations (in thousands):

			Three Months Ended June 30,				Six Months Ended June 30,
			2002		2001		2002		2001
Numerator:
	Net income		$	10,434	$	10,246	$	17,359	$	13,864

Denominator:
	Denominator for basic earnings per share			108,707		109,016		108,648		108,999
	Effect of dilutive securities:
		Stock options		1,139		822		1,129		923
		Employee Stock Purchase Plan		10		19		10		10

	Denominator for diluted earnings per share			109,856		109,857		109,787		109,932

Stock options which were excluded from the computation of diluted earnings per share due to their antidilutive effect amounted to 1.1 and 1.3 million shares for the six months ended June 30, 2002 and 2001, respectively.

9. Supplemental Cash Flows Information

Noncash investing and financing activities for the six months ended June 30, 2002 are as follows (in thousands):

	Increase (Decrease)
	Property and equipment, net		Intangible assets, net		Restricted cash			Deferred charges and other assets
Amounts reclassified due to the completion of radio station upgrades	$	18	$	34,811	$	—		$	(34,829	)
Amounts reclassified due to radio station acquisitions		—		3,475		(3,151	)		(324	)

	$	18	$	38,286	$	(3,151	)	$	(35,153	)

10. Long-Term Incentive Plan

On May 21, 1997, the stockholders of the Company approved the Hispanic Broadcasting Corporation Long-Term Incentive Plan (the "Incentive Plan"). The types of awards that may be granted under the Incentive Plan include (a) incentive stock options, (b) non-qualified stock options, (c) stock appreciation rights, (d) rights to receive a specified amount of cash or shares of Class A Common Stock and (e) restricted stock. In addition, the Incentive Plan provides that directors of the Company may elect to receive some or all of their annual director compensation in the form of shares of Class A Common Stock. Subject to certain exceptions set forth in the Incentive Plan, the aggregate number of shares of Class A Common Stock that may be the subject of awards under the Incentive Plan at one time shall be an amount equal to (a) ten percent of the total number of shares of Class A Common Stock outstanding from time to time minus (b) the total number of shares of Class A Common Stock subject to outstanding awards on the date of calculation under the Incentive Plan and any other stock-based plan for employees or directors of the Company (other than the Company's Employee Stock Purchase Plan). The Company has incentive and non-qualified stock options outstanding for 5,736,969 shares of Class A Common Stock primarily to directors and key employees. The exercise prices range from $8.22 to $50.57 per share and were equal to the fair market value of the Class A Common Stock on the dates such options were granted.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The following discussion of the consolidated results of operations for the three and six months ended June 30, 2002 and 2001, the cash flows of the Company for the six months ended June 30, 2002 and 2001, and consolidated financial condition as of June 30, 2002 and December 31, 2001 should be read in conjunction with the unaudited condensed consolidated financial statements of the Company and the related notes included elsewhere in this report.

The primary source of revenues is the sale of broadcasting time for advertising. We generate the majority of our gross revenues from local advertising, which is sold primarily by each individual local radio station's sales staff, and from national spot advertising, which is sold by independent advertising sales representatives. The balance of our revenues are derived from political, network sales and miscellaneous revenues such as rental income from tower sites, and from our Internet operation.

The most significant operating expenses are programming expenses, and advertising and promotion expenses. Operating expenses are affected in part by the timing of promotion campaigns to improve audience ratings, the timing of acquisitions, and the financial performance of our new station formats.

The Company has historically purchased primarily English-language radio stations and converted the formats to a variety of Spanish-language formats. As a result, the historical financial performance of acquired radio stations is not a good indicator of future financial performance. A new start-up radio station typically generates operating losses in its first one to two years of operation. The magnitude of operating losses is determined in part by the size of the market served by the radio station, the amount of promotion expense required to attract an audience to the station, and the size of the acquisition. Thus, the Company's financial results in any given period can be affected by the timing, number, acquisition cost and operating expenses of its start-up stations in that period.

EBITDA consists of operating income or loss excluding depreciation and amortization. EBITDA is not calculated in accordance with generally accepted accounting principles. This measure should not be considered in isolation or as a substitute for or as superior to operating income, cash flows from operating activities or any other measure for determining operating performance or liquidity that is calculated in accordance with accounting principles generally accepted in the United States of America. EBITDA does not take into account the Company's debt service requirements and other commitments and, accordingly, it is not necessarily indicative of an amount that may be available for dividends, reinvestment in the Company's business or other discretionary uses. In addition, our definition of EBITDA is not necessarily comparable to similarly titled measures reported by other companies.

We calculate same station results by measuring the operating performance of each radio station format in the current period to the performance in the comparable period of the prior year for each station format that has been in a Spanish-language format for two or more years. In some instances, existing station formats are moved to new radio frequencies. In this case, the same station designation follows the format and the start-up becomes the station that launches a new Spanish-language format.

On June 12, 2002, the Company announced a merger with Univision. Univision will acquire the Company in an all-stock transaction. The acquisition, which has been approved by the Boards of both companies, is expected to close by year-end, subject to approval by the shareholders of both companies as well as regulatory approvals and customary closing conditions.

Results of Operations for the Three and Six Months Ended June 30, 2002 Compared to the Three and Six Months Ended June 30, 2001

The results of operations for the three and six months ended June 30, 2002 are not comparable to the results of operations for the same period in 2001 primarily due to the programming format change on KQBU(FM) in Houston on August 18, 2001 and the acquisitions of KOVE(FM) in Houston on July 20, 2001, KOMR(FM), KMRR(FM), KKMR(FM) and KHOV(FM) in Phoenix on October 31, 2001, KQMR(FM) in Las Vegas on March 22, 2002, KZOL(FM) in Fresno on March 29, 2002 and KSOL(FM) in San Jose on April 1, 2002. In addition, in January 2002, the Company launched HBC Sales Integration, Inc. ("HBCSi"). The Company has adopted the marketing name HBCSi to brand all aspects of its national and network sales efforts, including HBC Radio Network sales, new business development, and, in cooperation with Katz Hispanic Media, national spot advertising sales.

Net revenues increased by $2.7 million or 4.1% to $68.6 million for the three months ended June 30, 2002 from $65.9 million for the same period in 2001. Net revenues for the six months ended June 30, 2002 increased by $6.8 million, or 6.0% to $120.5 million, compared to $113.7 million for the same period in 2001. Net revenues increased for the three and six months ended June 30, 2002, compared to the same periods in 2001 primarily because of (a) revenues from start-up stations acquired or reformatted in 2000, 2001 and 2002, and (b) revenue growth of same stations.

Operating expenses increased by $1.6 million or 7.8% to $22.1 million for the three months ended June 30, 2002 from $20.5 million for the same period in 2001. Operating expenses for the six months ended June 30, 2002 increased by $3.6 million or 10.5% to $37.9 million, compared to $34.3 million for the same period in 2001. Start-up stations and expenses related to the launch of HBCSi were the primary reasons why operating expenses increased for the three and six months ended June 30, 2002, compared to the same period in 2001. Also, operating expenses (which include the effect of start-up stations and HBCSi) increased for the three and six months ended June 30, 2002, compared to the same period in 2001 because of (a) promotion expenses to improve audience ratings on new or existing stations, (b) music fees, (c) rent associated with the studio and office facilities in San Francisco and New York and tower space rent in Chicago, (d) barter expenses associated with promotion campaigns to improve audience ratings, (e) insurance expense, (f) special event expenses, and (g) programming contract labor to perform music research. As a percentage of net revenues, operating expenses increased to 32.2% from 31.1% for the three months ended June 30, 2002 and 2001, respectively, and increased to 31.5% from 30.2% for the six months ended June 30, 2002 and 2001, respectively.

Wages, salaries and benefits increased by $2.9 million or 15.1% to $22.1 million for the three months ended June 30, 2002 from $19.2 million for the same period in 2001. Wages, salaries and benefits for the six months ended June, 30, 2002 increased by $4.3 million or 11.3% to $42.5 million, compared to $38.2 million for the same period in 2001. Start-up stations and expenses related to the launch of HBCSi were the primary reasons why wages, salaries and benefits increased for the three and six months ended June 30, 2002, compared to the same period in 2001. Also, wages, salaries and benefits (which include the effect of start-up stations and HBCSi) increased for the three and six months ended June 30, 2002, compared to the same period in 2001 because of (a) salaries, (b) sales commissions, (c) bonuses, and (d) group insurance costs. Included in wages, salaries and benefits are expenses related to the corporate office of $1.5 and $2.9 million for the three and six months ended June 30, 2002. As a percentage of net revenues, wages, salaries and benefits increased to 32.2% from 29.1% for the three months ended June 30, 2002 and 2001, respectively, and increased to 35.3% from 33.6% for the six months ended June 30, 2002 and 2001, respectively.

The provision for bad debts increased $0.1 million or 25.0% to $0.5 million for the three months ended June 30, 2002 from $0.4 million for the same period in 2001. The provision for bad debts increased $0.1 million or 10.0% to $1.1 million for the six months ended June 30, 2002 from $1.0 million for the same period in 2001. As a percentage of net revenues, the provision increased to

0.7% from 0.6% for the three months ended June 30, 2002 and 2001, respectively, and is 0.9% for the six months ended June 30, 2002 and 2001, respectively.

Corporate expenses increased $2.8 million or 350.0% to $3.6 million for the three months ended June 30, 2002 from $0.8 million for the same period in 2001. Corporate expenses for the six months ended June 30, 2002 increased by $2.7 million or 142.1% to $4.6 million, compared to $1.9 million for the same period in 2001. The increase was due to merger expenses of $2.4 million related to the Company's merger with Univision and an increase in legal and professional fees unrelated to the merger. As a percentage of net revenues, corporate expenses increased to 5.2% from 1.2% for the three months ended June 30, 2002 and 2001, respectively, and increased to 3.8% from 1.7% for the six months ended June 30, 2002 and 2001, respectively.

Depreciation and amortization for the three and six months ended June 30, 2002 decreased 64.1% and 66.7% to $3.3 and $6.1 million, respectively, compared to $9.2 and $18.3 million for the same periods in 2001, respectively. The decrease is due to the adoption of SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized.

Interest income, net decreased to $0.1 and $0.2 million from $1.1 and $2.5 million for the three and six months ended June 30, 2002 and 2001, respectively. The decrease for the three and six months ended June 30, 2002 compared to the same periods in 2001 was due to cash and cash equivalents and interest rates being higher in 2001 than in 2002.

Other, net decreased from $0.4 million to zero for the six months ended June 30, 2001 and 2002. The decrease was due to the final award received by the Company in 2001 related to an arbitration proceeding.

Federal and state income taxes are being provided at an effective rate of 38.9% and 39.5% for the three months ended June 30, 2002 and 2001, respectively, and 39.0% and 39.5% for the six months ended June 30, 2002 and 2001, respectively. The decrease in the effective rate is due to a lower effective state tax rate.

For the three months ended June 30, 2002, the Company's net income totaled $10.4 million ($0.09 per common share—diluted) compared to $10.2 million ($0.09 per common share) in the same period in 2001. For the six months ended June 30, 2002, the Company's net income totaled $17.4 million ($0.16 per common share) compared to $13.9 million ($0.13 per common share) in the same period in 2001.

Liquidity and Capital Resources

Net cash provided by operating activities for the six months ended June 30, 2002 was $32.6 million as compared to $36.3 million for the same period in 2001. The $3.7 million decrease from 2001 to 2002 is due to merger expenses of $2.4 million being recognized in 2002 and changes in operating assets and liabilities. Net cash used in investing activities was $83.1 and $12.3 million for the six months ended June 30, 2002 and 2001, respectively. The $70.8 million increase from 2001 to 2002 is due to the Las Vegas Acquisition, the Fresno Acquisition and the San Jose Acquisition. The cash flows used in the acquisitions is partially offset by a lower amount of spending in 2002 compared to 2001 in property and equipment and deferred charges and other assets due to the completion in February 2002 of the radio signal upgrade projects for KPTY(FM) in Houston and KDXX(FM) in Dallas. Net cash provided by financing activities was $17.4 and $1.3 million for the six months ended June 30, 2002 and 2001, respectively. The $16.1 million increase from 2001 to 2002 is due to a borrowing from the Credit Facility and the proceeds from the issuance of stock under the Incentive Plan.

Generally, capital expenditures are made with cash provided by operations. Capital expenditures totaled $5.7 and $9.0 million for the six months ended June 30, 2002 and 2001. Approximately $2.3 million of the capital expenditures incurred during the six months ended June 30, 2002 related to radio signal upgrade projects for three different radio stations in Houston and Dallas and the build-out of studio and office space in Las Vegas, Phoenix, San Francisco, Fresno and San Antonio compared to $6.3 million incurred in the same period of 2001 for three radio signal upgrade projects and the build-out of studio and office space in Los Angeles, San Francisco, New York, Miami and San Antonio.

Available cash on hand plus cash flow provided by operations was sufficient to fund the Company's operations, meet its debt obligations, and to fund capital expenditures. Management believes the Company will have sufficient cash on hand and cash provided by operations to finance its operations, satisfy its debt service requirements, and to fund capital expenditures. Management regularly reviews potential acquisitions. Future acquisitions will be financed primarily through proceeds from borrowings under the Credit Facility, available cash on hand, and proceeds from securities offerings.

Long-Term Debt

The scheduled maturities of long-term obligations and future minimum rental payments under noncancellable operating leases as of June 30, 2002 are as follows (in thousands):

	Payments Due by Period
	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Long-term obligations	$	16,424	$	6	$	15,014	$	17	$	1,387
Operating leases		69,854		3,736		15,434		13,597		37,087

Total contractual cash obligations	$	86,278	$	3,742	$	30,448	$	13,614	$	38,474

On April 1, 2002, $15.0 million was borrowed on the Credit Facility. As of April 1, 2002, the Company had $187.5 million of credit available. Borrowings under the Credit Facility bear interest at a rate based on LIBOR plus an applicable margin as determined by the Company's leverage ratio. The Credit Facility is secured by the stock of the Company's subsidiaries. Availability under the Credit Facility reduces quarterly commencing September 30, 1999 and ending December 31, 2004. Our ability to make additional borrowings under the Credit Facility is subject to compliance with certain financial ratios and other conditions set forth in the Credit Facility.

Critical Accounting Policies

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. The Company believes that its critical accounting policies are limited to those described below.

Impairment of Long-Lived Assets

The Company records impairment losses when events and circumstances indicate that long-lived assets might be impaired. Long-lived assets other than goodwill and intangible assets with an indefinite useful life are determined to be impaired if the undiscounted cash flow estimated to be generated by those assets is less than the carrying amount of those assets. Goodwill and intangible assets with an indefinite useful life are determined to be impaired if the fair value of a reporting unit is less than the carrying value of the respective reporting unit. When specific assets are determined to be impaired, the cost basis of the assets is reduced to reflect their current fair market value.

We performed a recoverability assessment of all of our long-lived assets as of January 1, 2002 and no impairment loss was required to be recognized.

Revenue Recognition

Revenue is derived primarily from the sale of advertising time to local and national advertisers. Revenue is recognized as commercials are broadcast. Revenues from barter transactions are recognized as income when commercials are broadcast. Barter transactions are recorded at the estimated fair value of the goods or services received.

Allowance For Doubtful Accounts

The allowance for doubtful accounts is estimated using a combination of the aging of the accounts receivable balances and knowledge related to the ability of the Company to collect specific accounts. Older accounts receivable are seen to be less likely to be collected and require a greater allowance. Specific accounts which are estimated to not be collected increase the allowance.

For additional information on our significant accounting policies, see Note 1 to our Annual Report on Form 10-K for the year ended December 31, 2001.

Inflation

Inflation has affected financial performance due to higher operating expenses. Although the exact impact of inflation is indeterminable, we have offset these higher costs by increasing the effective advertising rates of most of our radio stations.

Forward Looking Statements

Certain statements contained in this report are not based on historical facts, but are forward looking statements that are based on numerous assumptions made as of the date of this report. When used in the preceding and following discussions, the words "believes," "intends," "expects," "anticipates" and similar expressions are intended to identify forward looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in any of the forward looking statements. Such risks and uncertainties include, but are not limited to, industry-wide market factors and regulatory developments affecting the Company's operations, acquisitions of broadcast properties described elsewhere herein, the financial performance of start-up stations, and efforts by management to integrate its operating philosophies and practices at the station level. This report should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2001. The Company disclaims any obligation to update the forward looking statements in this report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is subject to interest rate risk on the interest earned on cash and cash equivalents. A change of 10% in the interest rate earned on short-term investments would not have had a significant impact on the Company's historical financial statements.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is involved in various claims and lawsuits, which are generally incidental to its business. The Company is vigorously contesting all such matters and believes that their ultimate resolution will not have a material adverse effect on its consolidated financial position or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a): The Company held its Annual Meeting of Stockholders on June 4, 2002 in New York, New York.
(b): The stockholders of the Company voted to elect five members to the Board of Directors as follows:

DIRECTORS	FOR	WITHHELD
McHenry T. Tichenor, Jr.	55,827,944	14,794,958
McHenry T. Tichenor	56,420,677	14,202,225
Robert W. Hughes	69,829,766	793,136
James M. Raines	69,829,752	793,150
Ernesto Cruz	69,830,201	792,701

(c): The stockholders of the Company voted to approve an amendment to the Company's 1997 Employee Stock Purchase Plan as follows:

FOR		AGAINST		ABSTENTIONS
67,796,179		2,806,280		20,413

(d): The stockholders of the Company voted to ratify the appointment of KPMG LLP as independent auditors for the year ending December 31, 2002 as follows:

FOR		AGAINST		ABSTENTIONS
68,251,863		2,364,871		6,168

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a): Exhibits

Exhibit No.		Description
2.1		Agreement and Plan of Reorganization, dated June 11, 2002, by and among Univision Communications Inc., Univision Acquisition Corporation and Hispanic Broadcasting Corporation (incorporated by reference to Univision Communications Inc. Current Report on Form 8-K, dated June 12, 2002, File No. 001-12223).
2.2		Univision Stockholder Support Agreement, dated June 11, 2002, by and among Univision Communications Inc., Hispanic Broadcasting Corporation, and A. Jerrold Perenchio (incorporated by reference to Univision Communications Inc. Current Report on Form 8-K, dated June 12, 2002, File No. 001-12223).
2.3		HBC Stockholder Support Agreement, dated June 11, 2002, by and among Univision Communications Inc., Univision Acquisition Corporation, and the stockholders listed on Exhibit A thereto (incorporated by reference to Univision Communications Inc. Current Report on Form 8-K, dated June 12, 2002, File No. 001-12223).
3.1		Second Amended and Restated Certificate of Incorporation of the Company dated February 14, 1997 (incorporated by reference to Exhibit 3.1 to the Company's Form 8-K filed on March 3, 1997).
3.2		Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the Company dated June 4, 1998 (incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q filed on November 12, 1998).
3.3		Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the Company dated June 3, 1999 (incorporated by reference to Exhibit 3.3 to the Company's Form 10-Q filed on August 12, 1999).
3.4		Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the Company dated May 25, 2000 (incorporated by reference to Exhibit 3.4 to the Company's Form 10-Q filed on August 11, 2000).
3.5		Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Amendment No. 3 to Form S-1 (Registration No. 33-78370) filed on July 8, 1994).
4.1		Specimen certificate for the Class A Common Stock (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Amendment No. 3 to Form S-1 (Registration No. 33-78370) filed on July 8, 1994).
4.2		Specimen certificate for the Class B Common Stock.
10.1		Second Amended and Restated 1997 Employee Stock Purchase Plan, dated April 15, 2002.

(b): Reports on Form 8-K

The Company filed a report on Form 8-K dated June 12, 2002, disclosing that the Company entered into a definitive merger agreement with Univision Communications, Inc.

Signature

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.

		HISPANIC BROADCASTING CORPORATION (Registrant)
				/s/ JEFFREY T. HINSON Jeffrey T. Hinson Senior Vice President/Chief Financial Officer Principal Financial Officer

Dated: August 13, 2002

Index To Exhibits

Exhibit No.		Description
2.1		Agreement and Plan of Reorganization, dated June 11, 2002, by and among Univision Communications Inc., Univision Acquisition Corporation and Hispanic Broadcasting Corporation (incorporated by reference to Univision Communications Inc. Current Report on Form 8-K, dated June 12, 2002, File No. 001-12223).
2.2		Univision Stockholder Support Agreement, dated June 11, 2002, by and among Univision Communications Inc., Hispanic Broadcasting Corporation, and A. Jerrold Perenchio (incorporated by reference to Univision Communications Inc. Current Report on Form 8-K, dated June 12, 2002, File No. 001-12223).
2.3		HBC Stockholder Support Agreement, dated June 11, 2002, by and among Univision Communications Inc., Univision Acquisition Corporation, and the stockholders listed on Exhibit A thereto (incorporated by reference to Univision Communications Inc. Current Report on Form 8-K, dated June 12, 2002, File No. 001-12223).
3.1		Second Amended and Restated Certificate of Incorporation of the Company dated February 14, 1997 (incorporated by reference to Exhibit 3.1 to the Company's Form 8-K filed on March 3, 1997).
3.2		Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the Company dated June 4, 1998 (incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q filed on November 12, 1998).
3.3		Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the Company dated June 3, 1999 (incorporated by reference to Exhibit 3.3 to the Company's Form 10-Q filed on August 12, 1999).
3.4		Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the Company dated May 25, 2000 (incorporated by reference to Exhibit 3.4 to the Company's Form 10-Q filed on August 11, 2000).
3.5		Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Amendment No. 3 to Form S-1 (Registration No. 33-78370) filed on July 8, 1994).
4.1		Specimen certificate for the Class A Common Stock (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Amendment No. 3 to Form S-1 (Registration No. 33-78370) filed on July 8, 1994).
4.2		Specimen certificate for the Class B Common Stock.
10.1		Second Amended and Restated 1997 Employee Stock Purchase Plan, dated April 15, 2002.

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HISPANIC BROADCASTING CORPORATION JUNE 30, 2002 INDEX
PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands except share information)
HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED) (in thousands except per share data)
HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)
HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2002

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

Signature

Index To Exhibits
EX-4.2 3 a2085746zex-4_2.htm EXHIBIT 4.2
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Exhibit 4.2

NUMBER

[PICTURE]

SHARES

Hispanic Broadcasting Corporation

This Certifies that is the registered holder of Shares

of Class B Common Stock, par value $.001

transferable only on the books of the Corporation by the holder hereof in person or by Attorney upon surrender of this Certificate properly endorsed. In Witness Whereof, the said Corporation has caused this Certificate to be signed by its duly authorized officers and its Corporate Seal to be hereunto affixed

this day of A.D.

David Gerow, Secretary

[SEAL]

McHenry T. Tichenor, Jr., President

FRED L. LAKE & CO., INC.
Dallas, Texas 75207

For value received hereby sell, assign and transfer unto
, shares of the capital stock represented by the within certificate and do hereby irrevocably constitute and appoint Attorney to transfer the said stock on the books of the within named corporation with full power of substitution in the premises.

Dated

In presence of

NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

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Exhibit 4.2

Hispanic Broadcasting Corporation
EX-10.1 4 a2085746zex-10_1.htm EXHIBIT 10.1
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Exhibit 10.1

HISPANIC BROADCASTING CORPORATION

SECOND AMENDED AND RESTATED 1997 EMPLOYEE STOCK PURCHASE PLAN

1. Purpose. The purpose of the HISPANIC BROADCASTING CORPORATION SECOND AMENDED AND RESATED 1997 EMPLOYEE STOCK OPTION PLAN (the "Plan") is to furnish to eligible employees an incentive to advance the best interests of Hispanic Broadcasting Corporation (formerly known as Heftel Broadcasting Corporation, the "Company") by providing a method whereby they voluntarily may purchase stock of the Company at a favorable price and upon favorable terms.

2. Administration of the Plan. The Plan shall be administered by a committee (the "Committee") of, and appointed by, the Board of Directors of the Company (the "Board"), and the Committee shall be constituted so as to permit the Plan to comply with Rule 16b-3, as currently in effect or as hereinafter modified or amended ("Rule 16b-3"), promulgated under the Securities Exchange Act of 1934, as amended (the "1934 Act"). Subject to the provisions of the Plan, the Committee shall interpret the Plan and all options granted under the Plan, shall make such rules as it deems necessary for the proper administration of the Plan, shall make all other determinations necessary or advisable for the administration of the Plan and shall correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any option granted under the Plan in the manner and to the extent that the Committee deems desirable to carry the Plan or any option into effect. The Committee shall, in its sole discretion exercised in good faith, make such decisions or determinations and take such actions, and all such decisions, determinations and actions taken or made by the Committee pursuant to this and the other paragraphs of the Plan shall be conclusive on all parties. The Committee shall not be liable for any decision, determination or action taken in good faith in connection with the administration of the Plan.

3. Participating Companies. Each present and future parent or subsidiary corporation of the Company (within the meaning of Sections 424(e) and (f) of the Internal Revenue Code of 1986, as amended (the "Code")) that is eligible by law to participate in the Plan shall be a "Participating Company" during the period that such corporation is such a parent or subsidiary corporation; provided, however, that the Committee may at any time and from time to time, in its sole discretion, terminate a Participating Company's Plan participation. Any Participating Company may, by appropriate action of its Board of Directors, terminate its participation in the Plan. Transfer of employment among the Company and Participating Companies (and among any other parent or subsidiary corporation of the Company) shall not be considered a termination of employment hereunder.

4. Eligibility. All employees of the Company and the Participating Companies who are customarily employed at least 20 hours per week and at least 5 months per year shall be eligible to participate in the Plan; provided, however, that no option shall be granted to an employee if such employee, immediately after the option is granted, owns stock possessing five percent or more of the total combined voting power or value of all classes of stock of the Company or of its parent or subsidiary corporation (within the meaning of Sections 423(b)(3) and 424(d) of the Code).

5. Stock Subject to the Plan. Subject to the provisions of paragraph 12 (relating to adjustment upon changes in stock), the aggregate number of shares which may be sold pursuant to options granted under the Plan shall not exceed [400,000] shares of the authorized $0.001 par value common stock of the Company ("Stock"), which shares may be unissued shares or reacquired shares or shares bought on the market for purposes of the Plan. Should any option granted under the Plan expire or terminate prior to its exercise in full, the shares theretofore subject to such option may again be subject to an option granted under the Plan. Any shares which are not subject to outstanding options upon the termination of the Plan shall cease to be subject to the Plan.

6. Grant of Options.

(a) General Statement: "date of grant"; "option period"; "date of exercise". Following the effective date of the Plan and continuing while the Plan remains in force, the Company shall offer options under the Plan to all eligible employees to purchase shares of Stock. Except as otherwise determined by the Committee, these options shall be granted on November 1, 1997 and, thereafter, on the sixteenth day of each January and July (each of which dates is herein referred to as a "date of grant"). The term of each option granted on November 1, 1997 shall be for two months, and the term of each option granted thereafter shall be for six months (each of such two-month and six-month periods is herein referred to as an "option period"), which shall begin on a date of grant (the last day of each option period is herein referred to as a "date of exercise"). The number of shares subject to each option shall be the quotient of the payroll deductions withheld on behalf of each participant in accordance with subparagraph 6(b) and the payments made by such participant pursuant to subparagraph 6(f) extended for the option period divided by the "option price" (defined in subparagraph 7(b)) of the Stock, provided, however, that the maximum number of shares that may be subject to any option may not exceed [625] (subject to adjustment as provided in paragraph 12).

(b) Election to Participate; Payroll Deduction Authorization. Except as provided in subparagraph 6(f), an eligible employee may participate in the Plan only by means of payroll deduction. Except as provided in subparagraph 6(g), each eligible employee who elects to participate in the Plan shall deliver to the Company, within the time period prescribed by the Company, a written payroll deduction authorization in a form prepared by the Company whereby he gives notice of his election to participate in the Plan as of the next following date of grant, and whereby he designates an integral percentage or specific amount of his "eligible compensation" (as defined in subparagraph 6(d)) to be deducted from his compensation for each pay period and paid into the Plan for his account. The designated percentage or specific amount may not be expected to result in the payment into the Plan during any payroll period of an amount less than five dollars. The designated percentage or specific amount may not exceed either of the following: (i) 15% of the amount of eligible compensation for the option period in which the deduction is made; or (ii) an amount which will result in noncompliance with the [$25,000] limitation stated in subparagraph 6(e).

(c) Changes in Payroll Authorization. Except as provided in subparagraph 8(a), the payroll deduction authorization referred to in subparagraph 6(b) may not be changed during the option period.

(d) "Eligible Compensation" Defined. The term "eligible compensation" means the gross (before taxes are withheld) total of all wages, salaries, commissions, and bonuses received during the option period, and provided that such term shall include elective contributions made on an employee's behalf by the Company or a Participating Company that are not includable in income under Section 125 or Section 402(e)(3) of the Code. Notwithstanding the foregoing, "eligible compensation" shall not include (i) employer contributions to or payments from any deferred compensation program, whether such program is qualified under Section 401(a) of the Code or nonqualified, (ii) amounts realized from the receipt or exercise of a stock option that is not an incentive stock option within the meaning of Section 422 of the Code, (iii) amounts realized at the time property described in Section 83 of the Code is freely transferable or no longer subject to a substantial risk of forfeiture, (iv) amounts realized as a result of an election described in Section 83(b) of the Code, and (v) any amount realized as a result of a disqualifying disposition within the meaning of Section 421(a) of the Code.

(e) [$25,000] Limitation. No employee shall be granted an option under the Plan to the extent the grant of an option under the Plan would permit his rights to purchase Stock under the Plan and under all other employee stock purchase plans of the Company and its parent and subsidiary corporations (as such terms are defined in Section 424(e) and (f) of the Code) to accrue at a rate which exceeds [$25,000] of fair market value of Stock (determined at the time the option is granted) for each calendar year in which any such option granted to such employee is outstanding at any time (within the meaning of Section 423(b)(8) of the Code).

(f) Leaves of Absence. During a paid leave of absence approved by the Company and meeting the requirements of Treasury Regulation § 1.421-7(h)(2), a participant's elected payroll deductions shall continue. If a participant takes an unpaid leave of absence that is approved by the Company or a Participating Company and meets the requirements of Treasury Regulation § 1.421-7(h)(2), then such participant may continue participation in the Plan by cash payments to the Company on his normal pay days equal to the reduction in his payroll deductions caused by his leave. If a participant on such leave fails to make such payments, or if a participant takes a leave of absence that is not described in the preceding provisions of this subparagraph 6(f), then he shall be considered to have withdrawn from the Plan pursuant to the provisions of paragraph 8 hereof.

(g) Continuing Election. A participant (i) who has elected to participate in the Plan pursuant to subparagraph 6(b) as of a date of grant and (ii) who takes no action to change or revoke such election as of the next following date of grant and/or as of any subsequent date of grant prior to any such respective date of grant shall be deemed to have made the same election, including the same attendant payroll deduction authorization, for such next following and/or subsequent date(s) of grant as was in effect for the date of grant for which he made such election to participate.

7. Exercise of Options.

(a) General Statement. Each eligible employee who is a participant in the Plan automatically and without any act on his part shall be deemed to have exercised his option on each date of exercise. To the extent that the cash balance then in his account under the Plan is insufficient to purchase at the "option price" (as defined in subparagraph 7(b)) a whole share of Stock or if the exercise of the option would result in the acquisition of a fractional share, the eligible employee's account will be credited with the ownership of a fractional share. Upon the issuance of a stock certificate to an eligible employee pursuant to subparagraph 7(c) or the termination of an eligible employee's employment with the Company, any fractional shares shall be treated as provided in subparagraph 7(d).

(b) "Option Price" Defined. The option price per share of Stock to be paid by each optionee on each exercise of his option shall be a sum equal to 85% of the fair market value of the Stock on the date of exercise or on the date of grant, whichever amount is lesser. For all purposes under the Plan, the fair market value of a share of Stock on a particular date shall be equal to the closing sales price of the Stock as reported on the stock exchange composite tape on that date; or, if no prices are reported on that date, on the last preceding date on which such prices of the Stock are so reported. If the Stock is traded over the counter at the time a determination of its fair market value is required to be made hereunder, its fair market value shall be deemed to be equal to the average between the reported high and low or closing bid and asked prices of Stock on the most recent date on which Stock was publicly traded. In the event Stock is not publicly traded at the time a determination of its value is required to be made hereunder, the determination of its fair market value shall be made by the Committee in such manner as it deems appropriate.

(c) Delivery of Stock Certificates. As soon as practicable after each date of exercise, the Company shall issue one or more certificates representing the total number of whole shares of Stock respecting exercised options in the aggregate of all of the eligible employees hereunder. Any such certificate shall be held by the Company, and, if the Company issues a certificate representing the shares of more than one eligible employee, the Company shall keep accurate records of the beneficial interests of each eligible employee in each such certificate by means of a Company stock account. Each eligible employee shall be provided with such periodic statements as may be directed by the Committee reflecting all activity in any such Company stock account. In the event the Company is required to obtain from any commission or agency authority to issue any such certificate, the Company shall seek to obtain such authority. Inability of the Company to obtain from any such commission or agency authority which counsel for the Company deems necessary for the lawful issuance of any such certificate shall relieve the Company from liability to any participant in the Plan except to return to him the amount of the balance in his account. After a period of at least 12 months from the date of

exercise of an option pursuant to which shares of Stock were issued has past, an employee may, on the form prescribed by the Committee, request the Company to deliver to such employee as soon as practicable, a certificate issued in his name representing the aggregate whole number of shares of Stock issued in connection with such option and then held by the Company on his behalf under the Plan. Further, upon termination of an employee's employment with the Company and its parent or subsidiary corporations for any reason whatsoever, the Company shall deliver to such employee a certificate issued in his name representing the aggregate whole number of shares of Stock then held by the Company on his behalf under the Plan. While shares of Stock are held by the Company, such shares may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of by the employee who has purchased such shares; provided, however, that such restriction shall not apply to the transfer of such shares of Stock pursuant to (i) a plan of reorganization, merger, recapitalization or other extraordinary corporate transaction or share exchange of the Company, but the stock, securities or other property received in exchange therefor shall be held by the Company pursuant to the provisions hereof or (ii) a divorce. The Committee may cause the Stock certificates issued in connection with the exercise of options under the Plan to bear such legend or legends, and the Committee may take such other actions, as it deems appropriate in order to reflect the provisions of this subparagraph 7(c) and to assure compliance with applicable securities laws. Neither the Company nor the Committee shall have any liability with respect to a delay in the delivery of a Stock certificate pursuant to this subparagraph 7(c).

(d) No Fractional Shares. No stock certificates evidencing fractional shares of Stock shall be issued to eligible employees under the Plan, and such fractional share interests shall not entitle the owner thereof to any rights of a stockholder of the Company. In lieu of any such fractional shares, each eligible employee whose account reflects any fractional share interest, upon the issuance of certificate as provided in subparagraph 7(c), shall be paid an amount in cash (without interest), rounded to the nearest cent, determined by multiplying (i) the fair market value of the Stock, determined as the average between the reported high and low or closing bid and asked prices of Stock on the most recent trading day prior to the date on which the certificate is issued by (ii) the fractional interest to which such eligible employee would otherwise be entitled. In the event Stock is not publicly traded at the time a determination of its fair market value is required to be made hereunder, the determination of its fair market value shall be made by the Committee in such manner as it deems appropriate.

8. Withdrawal from the Plan.

(a) General Statement. Any participant may withdraw in whole from the Plan at any time prior to 30 days before the exercise date relating to a particular option period. Partial withdrawals shall not be permitted. A participant who wishes to withdraw from the Plan must timely deliver to the Company a notice of withdrawal in a form prepared by the Company. The Company, promptly following the time when the notice of withdrawal is delivered, shall refund to the participant the amount of the cash balance in his account under the Plan; and thereupon, automatically and without any further act on his part, his payroll deduction authorization and his interest in unexercised options under the Plan shall terminate.

(b) Eligibility Following Withdrawal. A participant who withdraws from the Plan shall be eligible to participate again in the Plan upon expiration of the option period during which he withdrew (provided that he is otherwise eligible to participate in the Plan at such time).

9. Termination of Employment. If the employment of a participant terminates for any reason whatsoever, his participation in the Plan automatically and without any act on his part shall terminate as of the date of the termination of his employment. The Company shall refund to him the amount of the cash balance in his account under the Plan, and thereupon his interest in unexercised options under the Plan shall terminate. In addition, as provided in subparagraph 7(c), the Company shall deliver to the employee a certificate issued in his name representing the aggregate whole number of shares of Stock then held by the Company on his behalf under the Plan.

10. Restriction Upon Assignment of Option. An option granted under the Plan shall not be transferable otherwise than by will or the laws of descent and distribution. Each option shall be exercisable, during his lifetime, only by the employee to whom granted. The Company shall not recognize and shall be under no duty to recognize any assignment or purported assignment by an employee of his option or of any rights under his option.

11. No Rights of Stockholder Until Certificate Issues. With respect to shares of Stock subject to an option, an optionee shall not be deemed to be a stockholder, and he shall not have any of the rights or privileges of a stockholder. An optionee shall have the rights and privileges of a stockholder upon, but not until, the issuance on his behalf of a certificate for shares following exercise of his option. With respect to an optionee's Stock held by the Company pursuant to subparagraph 7(c), the Company shall, as soon as practicable, pay the optionee any cash dividends attributable thereto and facilitate the optionee's voting rights (other than with respect to any fractional shares) attributable thereto.

12. Changes in Stock; Adjustments. Whenever any change is made in the Stock, by reason of a stock dividend or by reason of subdivision, stock split, reverse stock split, recapitalization, reorganization, combinations, reclassification of shares, or other similar change, appropriate action will be taken by the Committee to adjust accordingly the number of shares subject to the Plan, the maximum number of shares that may be subject to any option, and the number and option price of shares subject to options outstanding under the Plan.

If the Company shall not be the surviving corporation in any merger or consolidation (or survives only as a subsidiary of another entity), or if the Company is to be dissolved or liquidated, then unless a surviving corporation assumes or substitutes new options (within the meaning of Section 424(a) of the Code) for all options then outstanding, (i) the date of exercise for all options then outstanding shall be accelerated to a date fixed by the Committee prior to the effective date of such merger or consolidation or such dissolution or liquidation and (ii) upon such effective date any unexercised options shall expire.

13. Use of Funds; No Interest Paid. All funds received or held by the Company under the Plan shall be included in the general funds of the Company free of any trust or other restriction, and may be used for any corporate purpose. No interest shall be paid to any participant or credited to his account under the Plan.

14. Term of the Plan. The Plan shall be effective as of August 1, 1997. The Plan was originally approved by the stockholders of the Company on May 21, 1997 and amended on October 31, 1997. The amendments effected by this Second Amended and Restated 1997 Employee Stock Purchase Plan were approved by the stockholders of the Company on June 4, 2002. Except with respect to options then outstanding, if not sooner terminated under the provisions of paragraph 15, the Plan shall terminate upon and no further options shall be granted after July 31, 2007.

15. Amendment or Termination of the Plan. The Board in its discretion may terminate the Plan at any time with respect to any shares for which options have not theretofore been granted. The Board shall have the right to alter or amend the Plan or any part thereof from time to time; provided, that no change in any option theretofore granted may be made which would impair the rights of the optionee without the consent of such optionee; and provided, further, that the Board may not make any alteration or amendment which would materially increase the benefits accruing to participants under the Plan, increase the aggregate number of shares which may be issued pursuant to the provisions of the Plan (other than as a result of the anti-dilution provisions of the Plan), change the class of individuals eligible to receive options under the Plan, extend the term of the Plan, or cause options issued under the Plan to fail to meet the requirements of employee stock purchase options as defined in Section 423 of the Code without the approval of the stockholders of the Company.

16. Securities Laws. The Company shall not be obligated to issue any Stock pursuant to any option granted under the Plan at any time when the shares covered by such option have not been registered under the Securities Act of 1933, as amended, and such other state and federal laws, rules or regulations as the Company or the Committee deems applicable and, in the opinion of legal counsel for the Company, there is no exemption from the registration requirements of such laws, rules or regulations available for the issuance and sale of such shares. Further, all Stock acquired pursuant to the Plan shall be subject to the Company's policy or policies, if any, concerning compliance with securities laws and regulations, as the same may be amended from time to time.

17. No Restriction on Corporate Action. Nothing contained in the Plan shall be construed to prevent the Company or any subsidiary from taking any corporate action which is deemed by the Company or such subsidiary to be appropriate or in its best interest, whether or not such action would have an adverse effect on the Plan or any award made under the Plan. No employee, beneficiary or other person shall have any claim against the Company or any subsidiary as a result of any such action.

EXECUTED this 15^th day of April, 2002.

		HISPANIC BROADCASTING CORPORATION
		By:	/s/ MCHENRY T. TICHENOR, JR. McHenry T. Tichenor, Jr. President and Chief Executive Officer

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Exhibit 10.1

HISPANIC BROADCASTING CORPORATION SECOND AMENDED AND RESTATED 1997 EMPLOYEE STOCK PURCHASE PLAN
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