-----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, WeaH0g71sYHlu7Vpzl86uRnY56LNLc0a1aG3HE5qj+T+n3R2YxUthlaPPa+y13YY aag7u4rlQilo0woptBZ2Ow== 0000950123-98-001893.txt : 19980224 0000950123-98-001893.hdr.sgml : 19980224 ACCESSION NUMBER: 0000950123-98-001893 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971228 FILED AS OF DATE: 19980223 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPANISH BROADCASTING SYSTEM INC CENTRAL INDEX KEY: 0000927720 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 133827791 STATE OF INCORPORATION: DE FISCAL YEAR END: 0926 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 033-82114 FILM NUMBER: 98547444 BUSINESS ADDRESS: STREET 1: 26 WEST 56TH ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2125419200 MAIL ADDRESS: STREET 1: 26 WEST 56TH ST CITY: NEW YORK STATE: NY ZIP: 10019 10-Q/A 1 SPANISH BROADCASTING SYSTEM, INC. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- AMENDMENT NO. 1 TO FORM 10-Q/A |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 28, 1997 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 33-82114 SPANISH BROADCASTING SYSTEM, INC. See Table of Additional Registrants (Exact name of registrant as specified in its charter) Delaware 13-3827791 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 26 West 56 Street, New York, NY 10019 (Address of principal executive offices) (Zip Code) (212) 541-9200 (Registrant's telephone number, including area code) Not Applicable (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. |X| YES |_| NO APPLICABLE ONLY TO CORPORATE ISSUERS: Number of shares of Registrant's Common Stock, par value $.01 per share, outstanding as of February 11, 1998; 606,668 shares of Common Stock of which 558,135 shares are designated Class A Common Stock and 48,533 shares are designated Class B Common Stock. 2 TABLE OF ADDITIONAL REGISTRANTS
Primary State or Standard Other Industrial I.R.S. Employer Jurisdiction of Classification Identification Incorporation Number Number --------------- -------------- -------------- Spanish Broadcasting System, Inc.................. New Jersey 4832 13-3181941 Spanish Broadcasting System of California, Inc.... California 4832 92-3952357 Spanish Broadcasting System of Florida, Inc....... Florida 4832 58-1700848 Alarcon Holdings, Inc............................. New York 6512 13-3475833 Spanish Broadcasting System Network, Inc.......... New York 4899 13-3511101 SBS Promotions, Inc............................... New York 7999 13-3456128 SBS of Greater New York, Inc...................... New York 4832 13-3888732 Spanish Broadcasting System of Illinois, Inc...... Delaware 4832 36-4174296 Spanish Broadcasting System of Greater Miami, Inc. Delaware 4832 65-0774450
1 3 SPANISH BROADCASTING SYSTEM, INC. INDEX Part I. Financial Information Page Number ------ Item 1. Financial Statements Condensed Consolidated Balance Sheets as of September 28, 1997 and December 28, 1997 (unaudited) .................... 3 Condensed Consolidated Statements of Operations for the three months ended December 29, 1996 and December 28, 1997 (unaudited) ............................................... 4 Condensed Consolidated Statements of Cash Flows for the three months ended December 29, 1996 and December 28, 1997 (unaudited) ............................................... 5 Notes to Condensed Consolidated Financial Statements (unaudited) ............................................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ................................. 8 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 2 4 PART I FINANCIAL INFORMATION 5 SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS September 28, December 28, 1997 1997 ------------ ------------ Current Assets: (Unaudited) Cash and cash equivalents.................................. $12,287,764 $40,822,339 Receivables: Trade.................................................... 17,226,345 19,075,384 Less allowance for doubtful accounts..................... 2,385,267 3,343,599 ------------ ------------ Net receivables - Trade................................ 14,841,078 15,731,785 Barter (net of allowance for doubtful accounts of $3,019,828 at September 28, 1997 and $3,954,907 at December 28, 1997) 270,900 106,532 ------------ ------------ Net receivables........................................ 15,111,978 15,838,317 Other current assets....................................... 1,409,906 2,187,435 ------------ ------------ Total current assets..................................... 28,809,648 58,848,091 Property and equipment, net................................ 18,409,415 14,986,070 Franchise costs, net....................................... 273,631,766 268,481,874 Due from related party..................................... 289,869 289,869 Deferred financing costs, net.............................. 9,262,314 8,436,017 Deferred income taxes...................................... 3,674,287 -- Other assets............................................... 289,784 201,564 ------------ ------------ $334,367,083 $351,243,485 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIENCY Current Liabilities: Current portion of senior secured notes.................... 15,000,000 -- Current portion of other long term debt.................... 44,644 48,588 Accounts payable and accrued expenses...................... 5,090,349 5,525,827 Accrued interest........................................... 4,536,627 3,069,433 Unearned revenue........................................... 1,551,255 1,588,849 Dividends payable.......................................... 960,761 7,612,190 ------------ ------------ Total current liabilities................................ 27,183,636 17,844,887 12 1/2% Senior Secured Notes, net of unamortized discount.. 88,820,963 91,225,023 11% Senior Secured Notes................................... 75,000,000 75,000,000 Deferred income taxes payable.............................. -- 10,090,763 Other Long-term debt, less current portion................. 4,147,676 4,220,532 14 1/4% Senior Exchangeable Redeemable Preferred Stock, $.01 par value. Authorized 413,930 shares; issued and outstanding 186,706 shares..................................................... 171,261,919 171,869,437 Stockholders' Deficiency: Class A Common Stock, $.01 par value. Authorized 5,000,000 shares; issued and outstanding 558,135 shares........ 5,581 5,581 Class B Common Stock, $.01 par value. Authorized 200,000 shares; issued and outstanding 48,533 shares............. 485 485 Additional paid in capital................................. 6,590,473 6,590,473 Accumulated deficit........................................ (35,119,184) (22,079,230) ------------ ------------ (28,522,645) (15,482,691) Less: loans receivable from stockholders................... (3,524,466) (3,524,466) ------------ ------------ Total stockholders' deficiency........................... (32,047,111) (19,007,157) ------------ ------------ $334,367,083 $351,243,485 ============ ============
See accompanying notes to unaudited condensed consolidated financial statements. 3 6 SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT (Unaudited)
Three Months Ended ----------------------------- December 29, December 28, 1996 1997 ------------ ------------ Gross broadcasting revenues ..................... $13,994,572 $21,587,922 Less: Agency commissions ..................... 1,628,432 2,647,093 ------------ ------------ Net broadcasting revenues ................... 12,366,140 18,940,829 ------------ ------------ Operating expenses Engineering ................................... 497,770 496,042 Programming ................................... 1,517,389 1,846,010 Selling ....................................... 3,537,480 4,624,358 General and administrative .................... 1,531,285 2,848,404 Corporate expenses ........................... 993,993 1,309,307 Depreciation and amortization ................ 1,394,547 2,374,318 ------------ ------------ 9,472,464 13,498,439 ------------ ------------ Operating income .......................... 2,893,676 5,442,390 Other (income) expenses: Gain on sale of AM stations .................. -- (36,868,441) Interest expense, net ........................ 5,006,413 5,791,458 Other, net ................................... 27,438 -- ------------ ------------ Income (loss) before income taxes and extraordinary item ........................... (2,140,175) 36,519,373 Income tax expense (benefit) .................... (814,000) 14,607,749 ------------ ------------ Income (loss) before extraordinary item ......... (1,326,175) 21,911,624 Extraordinary item, loss on extinguishment of debt, net of income taxes ................. -- (1,612,723) ------------ ------------ Net (loss) income ............................... (1,326,175) 20,298,901 Accumulated deficit at beginning of period ...... (11,906,690) (35,119,184) Dividends on preferred stock .................... (1,324,689) (6,651,429) Accretion of preferred Stock .................... (246,054) (607,518) ------------ ------------ Accumulated deficit at end of period ............ $(14,803,608) $(22,079,230) ============ ============
See accompanying notes to unaudited condensed consolidated financial statements. 4 7 SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
THREE MONTHS ENDED ----------------------------- DECEMBER 29, DECEMBER 28, 1996 1997 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income ........................................................... $ (1,326,175) $ 20,298,901 ------------ ------------- Adjustments to reconcile net (loss) income to net cash provided by operating activities: Loss on extinguishment of debt .......................................... -- 2,687,872 Gain on sale of AM Stations ............................................. -- (36,868,441) Depreciation and amortization ........................................... 1,394,547 2,374,318 Change in provision for losses on receivables ........................... 358,818 1,893,411 Amortization of debt discount ........................................... 1,558,046 182,511 Interest satisfied through the issuance of new notes .................... 1,185,722 -- Amortization of deferred financing costs ................................ 282,005 360,029 Interest added to face amount of note payable............................ -- 76,800 Deferred income taxes ................................................... (621,000) 13,765,050 Changes in operating assets and liabilities: Decrease (Increase) in receivables .................................... 615,577 (2,619,750) Increase in other current assets ...................................... (694,313) (777,529) Decrease in other assets .............................................. 30,000 88,220 (Decrease) Increase in accounts payable and accrued expenses .......... (286,276) 435,478 Decrease in accrued interest ......................................... (2,007,357) (1,467,194) (Decrease) Increase in unearned revenue ............................... (36,616) 37,594 ------------ ------------ Total adjustments .............................................. 1,779,153 (19,831,631) ------------ ------------ Net cash, (used in) provided by operating activities ............... 452,978 467,270 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of AM Stations, net of closing costs ..................... -- 43,787,348 Additions to property and equipment ......................................... (956,213) (719,988) ------------ ------------ Net cash (used in) provided by investing activities ............... (956,213) 43,067,360 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of Senior Secured Notes ............................................ -- (15,000,055) Increase in deferred financing costs ........................................ (58,296) -- Repayments of other long-term debt .......................................... (7,380) -- ------------ ------------ Net cash used in financing activities .............................. (65,676) (15,000,055) ------------ ------------ Net increase (decrease) in cash and cash equivalents ........................ (568,911) 28,534,575 Cash and cash equivalents at the beginning period ........................... 5,468,079 12,287,764 ------------ ------------ Cash and cash equivalents at the end of period .............................. $ 4,899,168 $ 40,822,339 ============ ============ Cash paid for: Interest ................................................................. $ 4,027,832 $ 6,561,515 Income taxes ............................................................. 342,923 183,431
See accompanying notes to unaudited condensed consolidated financial statements. 5 8 SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 29, 1996 AND DECEMBER 28, 1997 (Unaudited) (Dollars in Thousands) (1) Basis of Presentation The condensed consolidated financial statements include the accounts of the Company and its direct and indirect subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements for the three month periods ended December 29, 1996 and December 28, 1997 do not contain all disclosures required by generally accepted accounting principles. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company as of and for the fiscal year ended September 28, 1997. In the opinion of management of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which are all of a normal, recurring nature, necessary for a fair presentation of the results of the interim periods. The results of operations for the three month period ended December 28, 1997 are not necessarily indicative of the results for a full year. (2) Acquisitions and Dispositions On March 27, 1997, the Company acquired the FCC broadcast license and substantially all of the assets used or useful in the operation of radio station WYSY-FM, serving the Chicago metropolitan area, for a purchase price of $33.0 million, including a $3.0 million seller note, plus closing costs of $0.5 million. The Company subsequently changed the call letters to WLEY-FM. Additionally, on March 27, 1997, the Company acquired the FCC broadcast license and substantially all of the assets used or useful in the operations of radio stations WRMA-FM and WXDJ-FM, serving the Miami metropolitan area, for a purchase price of $111 million plus closing costs of $0.8 million. On March 27, 1997, the Company completed offerings of (a) 175,000 units (the "Units Offering") comprised of 175,000 shares of the Company's Series A Senior Exchangeable Preferred Stock (the "Series A Preferred Stock"), liquidation preference $1,000 per share, and warrants to purchase 74,900 shares of the Company's Class A Common Stock, par value $.01 per share ("Common Stock") and (b) $75.0 million aggregate principal amount of the Company's 11% Senior Notes due 2004 (the "Senior Notes") (the "Notes Offering") in transactions not registered under the Securities Act of 1933, as amended (the "Act") in reliance upon the exemption provided in Section 4 (2) of the Act. The proceeds of these offerings were used to finance the acquisition of radio stations WRMA-FM, WXDJ-FM and WLEY-FM (the "Acquisitions") and retire the notes issued in 1996. The Company's consolidated results of operations for the three month period ended December 29, 1996 exclude the results of the acquisitions. The following unaudited pro-forma summary presents the consolidated results of operations as if the acquisition of WRMA-FM and WXDJ-FM had occurred as of the beginning of fiscal year 1997 after giving effect to certain adjustments, including amortization of franchise costs and interest expense on the acquisition debt. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisition been made as of that date or of results which may occur in the future. The results of WLEY-FM prior to its acquisition have not been included in the pro forma summary as the acquisition does not meet the significance test for presentation of pro forma information.
Three Months Ended Pro-Forma Results: December 29, 1996 ------------------ Net Revenues $16,155 Net Loss $ (533)
On July 22, 1997, the Company commenced an exchange offer whereby shares of Series A Preferred Stock may be exchanged for an equal number of Series B Senior Exchangeable Preferred Stock (the "Series B Preferred Stock"). The exchange of Series A Preferred Stock for Series B Preferred Stock has been registered under the Act. 6 9 SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) On July 22, 1997, the Securities and Exchange Commission declared effective a shelf registration statement relating to the Senior Notes, and to $338,930,000 in aggregate principal amount of 14 1/4% Exchange Debentures due 2005, Series A and 23,836 shares of Common Stock that may be issued upon the occurrence of certain events, each of which may be offered from time to time by or for the account of the holders thereof. The Company is using its best efforts to keep such shelf registration continuously effective. The Company has completed the transfer of certain assets to its newly formed subsidiaries, Spanish Broadcasting System of Greater Miami, Inc. and Spanish Broadcasting System of Illinois, Inc. (together the "New Subsidiaries"). The Company has not included separate financial statements for its guarantor subsidiaries because (a) such guarantor subsidiaries (including the New Subsidiaries) have jointly and severally guaranteed the Senior Notes on a full and unconditional basis, (b) the aggregate assets, liabilities, earnings and equity of the guarantor subsidiaries are substantially equivalent to the assets, liabilities, earnings and equity of the parent on a consolidated basis and (c) the separate financial statements and other disclosures concerning the subsidiary guarantors are not deemed material to investors. On July 2, 1997, the Company entered into an agreement (as amended, the "One-on-One Agreement") with One-on-One Sports, Inc. ("One-on-One") to sell the FCC licenses and all of the assets used or useful in operating its AM stations, KXMG-AM of Los Angeles, WXLX-AM of New York and WCMQ-AM of Miami for $44 million. The Company was required to use the greater of $25 million or 50% of the net proceeds of such sale to make offers to purchase 12 1/2% Senior Notes due 2002 ("Old Notes") at 110% of the principal amount. The One-on-One Agreement contained customary representations, warranties and conditions, including receipt of FCC approval to the transfer of the FCC licenses. Pursuant to the One-on-One Agreement, on September 29, 1997, the Company sold the assets and FCC licenses of WXLX-AM and WCMQ-AM to One-on-One for a purchase price of $26 million. On December 2, 1997, the Company consummated the sale of the assets and FCC licenses of KXMG-AM to One-on-One for a purchase price of $18 million (together with the sale of WXLX-AM and WCMQ-AM, the "Dispositions"). The gain from the sale of these stations amounts to approximately $36.9 million before income taxes. Pursuant to the terms of the Company's debt agreements, in October 1997, the Company made an offer to holders of its Notes to acquire $22,730,000 in principal amount of Notes at a purchase price of $1,100 for each $1,000 in principal amount. Pursuant to this tender offer, the Company purchased $5,500,000 in principal amount of Notes for $6,050,000. In November 1997, the Company purchased an additional $7,666,000 in principal amount of notes for $8,950,055. The Company recognized a loss on the transactions of $1.6 million, net of income taxes. This amount has been classified as an extraordinary item in the accompanying condensed consolidated financial statements. (3) Subsequent Events On January 28, 1998, the Company entered into an Asset Purchase Agreement with Radio Station KRIO-FM, Ltd. to buy the FCC broadcast license and substantially all of the assets used or useful in the operation of radio station KRIO-FM serving the San Antonio area for $9,000,000. The purchase of this station is subject to certain closing conditions, including approval of the FCC. The Company expects to finance this purchase from cash on hand and from operations. 7 10 SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Three Months Ended December 29, 1996 Compared to the Three Months Ended December 28, 1997 (All Dollar Amounts Are Presented in Thousands). Net Revenues. Net revenues increased from $12,366 for the three months ended December 29, 1996 to $18,941 for the three months ended December 28, 1997, an increase of $6,575 or 53.2%. This increase was due primarily to the inclusion of the results of WRMA-FM, WXDJ-FM, and WLEY-FM which were purchased on March 27, 1997. The increase in net revenues attributable to these three stations was $5,627. The increase in net revenues also resulted from a significant increase in net revenues of $1,943 at the New York stations, WPAT-FM, and WSKQ-FM, offset by a decrease in net revenues from the Company's other Miami stations, WCMQ-AM and WCMQ-FM, and the Los Angeles station, KLAX-FM. The Miami Stations had net revenues decrease due to the termination of a contract to broadcast Miami Dolphins games and the sale of WCMQ-AM. The net revenues for the Company also decreased because of the sale of the AM stations. Operating Expenses. Total operating expenses increased from $9,472 in the three months ended December 29, 1996, to $13,498 in the three months ended December 28, 1997, an increase of $4,026 or 42.5%. The higher operating expenses were caused by an increase of $2,731 in broadcasting operating expenses an increase of $980 in depreciation and amortization expense, and a $315 increase in corporate expenses. The increase in broadcasting operating expenses was caused mainly by the inclusion of the results of WRMA-FM, WXDJ-FM, and WLEY-FM. The increase in corporate expenses was caused by higher professional fees and a small increase in salaries. The increase in depreciation and amortization was the result of increased amortization of franchise costs related to the acquisitions of WRMA-FM, WXDJ-FM and WLEY-FM. Operating Income. Operating income increased from $2,894 during the three months ended December 29, 1996, to $5,442 during the three months ended December 28, 1997, an increase of $2,548 or 88.1%. The increase was due to the significant increase in net revenues partially offset by the increase in operating expenses. EBITDA. EBITDA (defined as income before extraordinary item, net interest expense, financing costs, income taxes, depreciation and amortization, writedown of franchise costs, gains on sales of radio stations and other income and expense) increased $3,529 or 82.3% from $4,288 during the three months ended December 29, 1996, to $7,817 during the three months ended December 28, 1997. The increase in EBITDA was caused by the increase in net revenues, partially offset by an increase in operating expenses. Other Income and Expenses. Other income and expenses, changed from an expense of $5,034 in the three months ended December 29, 1996 to income of $31,077 in the three months ended December 28, 1997. The income in fiscal year 1998 was primarily because of the sale of the AM Stations at a gain of $36,868. Extraordinary Item. The extraordinary item in the three months ended December 28, 1997 is a result of the premiums paid on the purchase of certain outstanding Notes and the write off of related unamortized debt discount and deferred financing costs. Net Income (Loss). The Company's net income for the three months ended December 28, 1997, was $20,299 compared to the net loss of $1,326 for the three months ended December 29, 1996. The net income resulted from the increase in operating income and the gain from the sale of AM stations partially offset by the increase in interest expense and the extraordinary loss related to the retirement of debt. Liquidity and Capital Resources The Company's liquidity needs arise primarily from its debt service obligations, preferred stock dividend requirements, funding of the Company's working capital needs and capital expenditures. The Company's primary form of financing is cash generated from operations, long-term indebtedness and the issuance of preferred stock. On March 27, 1997, the Company consummated the Acquisitions. The Acquisitions were financed with proceeds of the Units Offering and the Notes Offering (the "Offerings"). Concurrently with the consummation of the Acquisitions and the Offerings, the Company effected a series of transactions including the redemption (the "Redemption") of the Company's Senior Secured Notes due 2002 and Senior Exchangeable Preferred Stock, Series A and the repurchase of related warrants to purchase an aggregate of 6.0% of the Company's Common Stock, on a fully-diluted basis. In addition, simultaneously with the consummation of the Offerings, the Company announced its intention to declare a dividend of up to $4 million in the aggregate (the "Distribution") to its stockholders and existing warrantholders who elected to receive their pro rata portion of the Distribution in lieu of the anti-dilution adjustment they would otherwise have been entitled to as a result of the Distribution. The dividend has yet to be declared. 8 11 SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION On July 2, 1997, the Company entered into an agreement to sell the FCC licenses and all of the assets used or useful in operating its AM stations, KXMG-AM of Los Angeles, WXLX-AM of New York and WCMQ-AM of Miami for $44 million. The Company was required to use the greater of $25 million or 50% of the net proceeds of such sale to make offers to purchase Old Notes at 110% of the principal amount. The One-on-One Agreement contained customary representations, warranties and conditions, including receipt of FCC approval to the transfer of the FCC licenses. Pursuant to the One-on-One Agreement, on September 29, 1997, the Company sold the assets and FCC licenses of WXLX-AM and WCMQ-AM to One-on-One for a purchase price of $26 million. On December 2, 1997, the Company consummated the sale of the assets and FCC licenses of KXMG-AM to One-on-One for a purchase price of $18 million. On January 28, 1998 the Company entered into an Asset Purchase Agreement to purchase the FCC broadcast license and substantially all the assets used or useful in the operation of radio station KRIO-FM for $9 million. The Company expects to finance this acquisition from cash on hand and from operations. Cash flow generated from operations was $467 for the three months ended December 28, 1997. A portion of the Company's cash flow was used to make its semiannual interest payment on the Company's Old Notes of $6,347. Additionally, the Company invested $720 in capital expenditures and used $15,000 to purchase Old Notes. Proceeds from the sales of AM stations were approximately $43,787, net of closing costs of $213. Cash flow generated from operations was $453 for the three months ended December 29, 1996. The Company made its semiannual interest payment on the Old Notes and invested $956 for capital expenditures, mostly for the construction of the new tower and antenna for the recently sold station in New York, WXLX-AM. The Company's revenues fluctuate throughout the year. The Company's second fiscal quarter (January through March) generally produces the lowest revenues for the year and its third fiscal quarter (April through June) generally produces the highest revenues primarily due to increased levels of advertising during this period. Management believes, together with cash in hand, that cash from operating activities should be sufficient to permit the Company to meet required cash interest obligations (which will consist of cash interest expense on the Senior Notes and cash interest expense on the Company's Old Notes, which, commencing June 15, 1997, began to accrue cash interest at a rate of 12 1/2% per annum) for the foreseeable future as well as capital expenditures, operating obligations and the pending acquisition of KRIO. However, significant assumptions (none of which can be assured) underlie this belief, including that (i) the Company will be able to successfully integrate the Acquisitions, (ii) economic conditions within the radio broadcasting market and economic conditions generally will not deteriorate in any material respect, (iii) the Company will be able to successfully implement its business strategy, (iv) the Company will not incur any material unforseen liabilities, including, without limitation, environmental liabilities, and (v) no future acquisition will adversely affect the Company's liquidity. The Company expects that it may be required to refinance the Old Notes on or prior to their maturity date on June 15, 2002, and no assurances can be given that it will not be required to refinance the Senior Notes and/or the Senior Preferred Stock. No assurance can be given that any such refinancing, if required, will be obtained on terms satisfactory to the Company, if at all. 9 12 PART II -- OTHER INFORMATION 13 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Asset Purchase Agreement dated January 28, 1998 by and between Spanish Broadcasting System of San Antonio, Inc. and Radio KRIO, Ltd. (as previously filed). (b) Reports on Form 8-K A Current Report on Form 8-K was filed by the Company on October 15, 1997 Reporting an "Acquisition or Disposition of Assets" pursuant to Item 2 of Form 8-K. 14 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. Spanish Broadcasting System, Inc., a Delaware corporation Spanish Broadcasting System of California, Inc. Spanish Broadcasting System, Inc., a New Jersey Corporation Spanish Broadcasting System of Florida, Inc. Spanish Broadcasting System Network, Inc. SBS Promotions, Inc. Alarcon Holdings, Inc. SBS of Greater New York, Inc. Spanish Broadcasting System of Illinois, Inc. Spanish Broadcasting System of Greater Miami, Inc. By: /s/ JOSEPH A. GARCIA ----------------------------- Joseph A. Garcia EVP and Chief Financial Officer (principal financial and accounting officer) Date: February 23, 1998 10 15 EXHIBIT INDEX Exhibit No. Description Page - ----------- ----------- ---- 1 Asset Purchase Agreement dated January 28, 1998 By and between Spanish Broadcast System of San Antonio, Inc. and Radio KRIO, LTD. (as previously filed). 27 Financial Data Schedule. EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS SEP-27-1998 SEP-29-1997 DEC-29-1997 40,822,339 0 19,075,384 3,343,599 0 58,848,091 14,986,070 0 351,243,485 17,844,887 0 0 171,869,437 5,581 0 351,243,485 21,587,922 21,587,922 0 0 (36,868,441) 0 5,791,458 36,519,373 14,607,749 0 0 (1,612,723) 0 20,298,901 0 0
-----END PRIVACY-ENHANCED MESSAGE-----