-----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, MuUL75prIykOTGPy4eMcNIOthMpkbCHjO8/UG8WHlvMU0FoawfB+DuQOhcvBttGC EGyBUbJgWVonUemcxf9nHg== 0000950144-00-006185.txt : 20000511 0000950144-00-006185.hdr.sgml : 20000511 ACCESSION NUMBER: 0000950144-00-006185 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000326 FILED AS OF DATE: 20000510 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 SEC ACT: SEC FILE NUMBER: 000-27823 FILM NUMBER: 624828 BUSINESS ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 BUSINESS PHONE: 3054416901 MAIL ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPANISH BROADCASTING SYSTEM INC /NJ/ CENTRAL INDEX KEY: 0000927721 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 133181941 STATE OF INCORPORATION: DE FISCAL YEAR END: 0926 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-82114-01 FILM NUMBER: 624829 BUSINESS ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: NY ZIP: 33145 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPANISH BROADCASTING SYSTEM OF CALIFORNIA INC CENTRAL INDEX KEY: 0000927722 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 923952357 STATE OF INCORPORATION: CA FISCAL YEAR END: 0926 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-82114-02 FILM NUMBER: 624830 BUSINESS ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 BUSINESS PHONE: 3054416901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPANISH BROADCASTING SYSTEM OF FLORIDA INC CENTRAL INDEX KEY: 0000927723 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 581700848 STATE OF INCORPORATION: FL FISCAL YEAR END: 0926 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-82114-03 FILM NUMBER: 624831 BUSINESS ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 BUSINESS PHONE: 3054416901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALARCON HOLDINGS INC CENTRAL INDEX KEY: 0000927725 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 133475833 STATE OF INCORPORATION: NY FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-82114-05 FILM NUMBER: 624832 BUSINESS ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 BUSINESS PHONE: 3054416901 MAIL ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPANISH BROADCASTING SYSTEM NETWORK INC CENTRAL INDEX KEY: 0000927726 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 133511101 STATE OF INCORPORATION: NY FISCAL YEAR END: 0926 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-82114-06 FILM NUMBER: 624833 BUSINESS ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 BUSINESS PHONE: 3054416901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SBS PROMOTIONS INC CENTRAL INDEX KEY: 0000927727 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 133456128 STATE OF INCORPORATION: NY FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-82114-07 FILM NUMBER: 624834 BUSINESS ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 BUSINESS PHONE: 3054416901 MAIL ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SBS OF GREATER NEW YORK INC CENTRAL INDEX KEY: 0001017144 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133888732 STATE OF INCORPORATION: FL FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-85519-07 FILM NUMBER: 624835 BUSINESS ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 BUSINESS PHONE: 3054416901 MAIL ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPANISH BROADCASTING SYSTEM OF GREATER MIAMI INC CENTRAL INDEX KEY: 0001096126 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 650774450 STATE OF INCORPORATION: FL FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-85519-08 FILM NUMBER: 624836 BUSINESS ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 BUSINESS PHONE: 3054416901 MAIL ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPANISH BROADCASTING SYSTEM OF ILLINOIS INC CENTRAL INDEX KEY: 0001096127 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 364174296 STATE OF INCORPORATION: IL FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-85519-09 FILM NUMBER: 624837 BUSINESS ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 BUSINESS PHONE: 3054416901 MAIL ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPANISH BROADCASTING SYSTEM OF SAN ANTONIO INC CENTRAL INDEX KEY: 0001096128 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 650820776 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-85519-10 FILM NUMBER: 624838 BUSINESS ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 BUSINESS PHONE: 3054416901 MAIL ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPANISH BROADCASTING SYSTEM OF PUERTO RICO INC /DE/ CENTRAL INDEX KEY: 0001096129 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 650820776 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-85519-11 FILM NUMBER: 624839 BUSINESS ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 BUSINESS PHONE: 3054416901 MAIL ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SBS FUNDING INC CENTRAL INDEX KEY: 0001096130 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-85519-12 FILM NUMBER: 624840 BUSINESS ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 BUSINESS PHONE: 3054416901 MAIL ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPANISH BROADCASTING SYSTEM OF PUERTO RICO INC /PR/ CENTRAL INDEX KEY: 0001096342 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] STATE OF INCORPORATION: DE FISCAL YEAR END: 0926 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-85519-14 FILM NUMBER: 624841 BUSINESS ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 BUSINESS PHONE: 3054416901 MAIL ADDRESS: STREET 1: 3191 CORAL WAY CITY: MIAMI STATE: FL ZIP: 33145 10-Q 1 SPANISH BROADCASTING SYSTEM, INC. 3/26/2000 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 26, 2000 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. (Exact name of registrant as specified in its charter) SEE TABLE OF ADDITIONAL REGISTRANTS DELAWARE 13-3827791 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3191 Coral Way, Suite 805, Miami, Florida 33145 (Address of principal executive offices) (Zip Code) (305) 441-6901 (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 $.0001 per share, outstanding as of May 4, 2000: 32,399,760 shares of Class A Common Stock and 27,816,900 shares of Class B Common Stock. 2 TABLE OF ADDITIONAL REGISTRANTS
PRIMARY STANDARD STATE OR OTHER INDUSTRIAL I.R.S. EMPLOYER JURISDICTION OF CLASSIFICATION IDENTIFICATION NAME 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 Spanish Broadcasting System Network, Inc. New York 4899 13-3511101 SBS Promotions, Inc. New York 7999 13-3456128 Alarcon Holdings, Inc. New York 6512 13-3475833 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 Spanish Broadcasting System of San Antonio, Inc. Delaware 4832 65-0820776 Spanish Broadcasting System of Puerto Rico, Inc. Delaware 4832 52-2139546 Spanish Broadcasting System of Puerto Rico, Inc. Puerto Rico 4832 66-0564244 SBS Funding, Inc. Delaware 4832 52-6999475
3 SPANISH BROADCASTING SYSTEM, INC. INDEX
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 26, 1999 AND MARCH 26, 2000 3 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED MARCH 28, 1999 AND MARCH 26, 2000 4 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 28, 1999 AND MARCH 26, 2000 5 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 12 PART II. OTHER INFORMATION 13 ITEM 1. LEGAL PROCEEDINGS 13 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 13 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
2 4 SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 26, 1999 MARCH 26, 2000 ------------------ -------------- ASSETS CURRENT ASSETS: CASH AND CASH EQUIVALENTS $ 16,974,650 $ 108,138,002 RECEIVABLES: TRADE 26,006,007 24,856,022 LESS ALLOWANCE FOR DOUBTFUL ACCOUNTS 4,110,499 4,408,763 ------------- ------------- NET RECEIVABLES - TRADE 21,895,508 20,447,259 BARTER (NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS OF $2,255,460 AT SEPT. 26, 1999 AND $3,246,165 AT MARCH 26, 2000) 4,757 11,046 ------------- ------------- NET RECEIVABLES 21,900,265 20,458,305 OTHER CURRENT ASSETS 2,194,387 4,220,899 ------------- ------------- TOTAL CURRENT ASSETS 41,069,302 132,817,206 PROPERTY AND EQUIPMENT, NET 14,777,703 16,081,091 INTANGIBLE ASSETS, NET 301,454,059 397,870,197 DEFERRED FINANCING COSTS, NET 6,228,716 8,141,325 DEFERRED OFFERING COSTS 1,965,551 -- OTHER ASSETS 185,190 187,054 ------------- ------------- TOTAL ASSETS $ 365,680,521 $ 555,096,873 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) CURRENT LIABILITIES: CURRENT PORTION OF LONG-TERM DEBT $ 1,800,572 $ 1,050,572 ACCOUNTS PAYABLE AND ACCRUED EXPENSES 11,836,145 11,616,148 ACCRUED INTEREST 3,941,088 9,107,239 DEFERRED COMMITMENT FEE 2,343,931 2,509,544 DIVIDENDS PAYABLE 1,323,018 -- ------------- ------------- TOTAL CURRENT LIABILITIES 21,244,754 24,283,503 12.5% SENIOR UNSECURED NOTES, NET OF UNAMORTIZED DISCOUNT 92,262,924 100,000 11% SENIOR UNSECURED NOTES 75,000,000 -- 9.625% SENIOR SUBORDINATED NOTES -- 235,000,000 OTHER LONG-TERM DEBT, LESS CURRENT PORTION 3,422,341 865,660 DEFERRED INCOME TAXES 12,954,515 26,622,604 14.25% SENIOR EXCHANGABLE PREFERRED STOCK, $.01 PAR VALUE. AUTHORIZED 1,000,000 SHARES; ISSUED AND OUTSTANDING 245,815 SHARES AT SEPT. 26, 1999; NONE AT MARCH 26, 2000 235,918,055 -- STOCKHOLDERS' EQUITY (DEFICIENCY): CLASS A COMMON STOCK, $.0001 PAR VALUE. AUTHORIZED 100,000,000 SHARES; NONE ISSUED AND OUTSTANDING AT SEPT. 26, 1999; 32,399,760 ISSUED AND OUTSTANDING AT MARCH 26, 2000 -- 3,240 CLASS B COMMON STOCK, $.0001 PAR VALUE. AUTHORIZED 50,000,000 SHARES; 39,448,550 SHARES ISSUED AND OUTSTANDING AT SEPT. 26, 1999; 27,816,900 SHARES AT MARCH 26, 2000 3,945 2,782 ADDITIONAL PAID IN CAPITAL 6,869,241 393,019,908 ACCUMULATED DEFICIT (79,535,846) (124,800,824) ------------- ------------- (72,662,660) 268,225,106 LESS: LOANS RECEIVABLE FROM STOCKHOLDERS (2,459,408) -- ------------- ------------- TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) (75,122,068) 268,225,106 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 365,680,521 $ 555,096,873 ============= =============
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 3 5 SPANISH BROADCASTING SYSTEM,INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED ------------------------------ ------------------------------- MARCH 28, 1999 MARCH 26, 2000 MARCH 28, 1999 MARCH 26, 2000 -------------- -------------- -------------- -------------- GROSS BROADCASTING REVENUES $ 21,457,906 $ 28,729,792 $ 49,181,124 $ 61,931,899 LESS: AGENCY COMMISSIONS 2,631,542 3,801,650 6,084,946 8,070,354 ------------ ------------ ------------ ------------ NET BROADCASTING REVENUES 18,826,364 24,928,142 43,096,178 53,861,545 ------------ ------------ ------------ ------------ OPERATING EXPENSES ENGINEERING 476,825 626,587 1,013,527 1,212,103 PROGRAMMING 2,312,521 3,246,953 4,812,147 6,204,413 SELLING 4,590,486 5,171,226 10,513,939 11,454,596 GENERAL AND ADMINISTRATIVE 2,500,116 3,207,520 4,575,649 5,885,087 CORPORATE EXPENSES 2,249,272 2,391,330 4,334,310 15,454,514 DEPRECIATION & AMORTIZATION 2,379,647 3,223,763 4,667,670 5,847,633 ------------ ------------ ------------ ------------ 14,508,867 17,867,379 29,917,242 46,058,346 ------------ ------------ ------------ ------------ OPERATING INCOME 4,317,497 7,060,763 13,178,936 7,803,199 OTHER (INCOME) EXPENSES: INTEREST EXPENSE, NET 5,216,805 4,528,397 10,443,804 7,494,673 OTHER, NET 49,828 (48,892) 63,528 356,215 ------------ ------------ ------------ ------------ INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM (949,136) 2,581,258 2,671,604 (47,689) INCOME TAX EXPENSE (BENEFIT) (474,013) 1,057,695 1,121,594 (20,173) ------------ ------------ ------------ ------------ INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (475,123) 1,523,563 1,550,010 (27,516) EXTRAORDINARY ITEM, NET OF INCOME TAXES -- -- -- (16,865,069) ------------ ------------ ------------ ------------ NET INCOME (LOSS) (475,123) 1,523,563 1,550,010 (16,892,585) DIVIDENDS ON PREFERRED STOCK (8,451,068) -- (16,889,122) (28,372,393) ------------ ------------ ------------ ------------ NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS (8,926,191) 1,523,563 (15,339,112) (45,264,978) ------------ ------------ ------------ ------------ NET INCOME (LOSS) PER COMMON SHARE BEFORE EXTRAORDINARY ITEM: BASIC (0.29) 0.03 (0.51) (0.51) DILUTED (0.29) 0.03 (0.51) (0.51) NET LOSS PER COMMON SHARE FOR EXTRAORDINARY ITEM: BASIC -- -- -- (0.30) DILUTED -- -- -- (0.30) NET INCOME (LOSS) PER COMMON SHARE: BASIC (0.29) 0.03 (0.51) (0.81) DILUTED (0.29) 0.03 (0.51) (0.81) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: (BASIC AND DILUTED): BASIC 30,333,400 60,216,660 30,333,400 56,108,682 DILUTED 30,333,400 60,610,716 30,333,400 56,108,682
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 4 6 SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED --------------------------------- MARCH 28, 1999 MARCH 26, 2000 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME (LOSS) $ 1,550,010 $ (16,892,585) ------------ ------------- ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: LOSS ON RETIREMENT OF DEBT -- 28,584,862 DEPRECIATION AND AMORTIZATION 4,667,670 5,847,633 GAIN ON SALE OF RADIO STATIONS -- (54,963) PROVISION FOR DOUBTFUL ACCOUNTS 638,945 1,646,499 AMORTIZATION OF DEBT DISCOUNT 296,748 61,295 AMORTIZATION OF DEFERRED FINANCING COSTS 820,430 513,466 ACCRETION OF INTEREST TO PRINCIPAL ON OTHER LONG-TERM DEBT 153,600 151,441 DEFERRED INCOME TAXES 109,781 (8,531,911) CHANGES IN OPERATING ASSETS AND LIABILITIES: DECREASE IN RECEIVABLES 279,472 2,295,461 (INCREASE) DECREASE IN OTHER CURRENT ASSETS 446,280 (3,155,512) (INCREASE) DECREASE IN OTHER ASSETS 30,965 (1,864) DECREASE IN ACCOUNTS PAYABLE AND ACCRUED EXPENSES (929,043) (2,611,567) INCREASE IN ACCRUED INTEREST -- 5,166,151 INCREASE IN DEFERRED COMMITMENT FEE 389,068 165,613 ------------ ------------- TOTAL ADJUSTMENTS 6,903,916 30,076,604 ------------ ------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 8,453,926 13,184,019 ------------ ------------- CASH FLOWS FROM INVESTING ACTIVITIES: ACQUISITIONS OF RADIO STATIONS, NET OF CASH ACQUIRED (8,392,814) (80,608,272) PROCEEDS FROM SALE OF STATIONS -- 690,304 ADDITIONS TO PROPERTY AND EQUIPMENT (943,771) (373,658) ------------ ------------- NET CASH USED IN INVESTING ACTIVITIES (9,336,585) (80,291,626) ------------ ------------- CASH FLOWS FROM FINANCING ACTIVITIES: RETIREMENT OF 14.25% SENIOR EXCHANGEABLE PREFERRED STOCK -- (265,613,466) RETIREMENT OF SENIOR NOTES -- (190,295,268) DECREASE IN LOANS RECEIVABLE FROM STOCKHOLDERS -- 2,459,408 PROCEEDS FROM SENIOR SUBORDINATED NOTES -- 227,060,112 PROCEEDS FROM CLASS A COMMON STOCK -- 388,118,295 REPAYMENT OF OTHER LONG-TERM DEBT (23,389) (3,458,122) ------------ ------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (23,389) 158,270,959 ------------ ------------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (906,048) 91,163,352 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 37,642,227 16,974,650 ------------ ------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 36,736,179 $ 108,138,002 ============ ============= SUPPLEMENTAL CASH FLOW INFORMATION: INTEREST PAID $ 10,049,820 $ 5,927,284 ============ ============= INCOME TAXES PAID $ 889,938 $ 430,324 ============ =============
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS 5 7 SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 28, 1999 AND MARCH 26, 2000 (UNAUDITED) (1) BASIS OF PRESENTATION The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements for the three- and six-month periods ended March 28, 1999 and March 26, 2000 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 26, 1999 included in the Company's 1999 Form 10-K. 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- and six-month period ended March 26, 2000 are not necessarily indicative of the results for a full year. (2) ACQUISITIONS During fiscal year 1999, we acquired three stations, WCMA-FM (formerly WDOY-FM), WMEG-FM and WEMG-FM (all serving Puerto Rico), and eighty percent of the issued and outstanding capital stock of JuJu Media, Inc., the owner of LaMusica.com, a bilingual Spanish-English Internet Web site. The acquisitions of WCMA-FM, WMEG-FM and WEGM-FM were financed by cash on hand. The acquisition of JuJu Media, Inc. was financed by cash on hand and the issuance of promissory notes. The results of these acquisitions did not meet the significance test for pro forma presentation and, consequently, no pro forma results have been included with respect to these acquisitions. Our results include the operations of these stations and JuJu Media, Inc. from the date of their respective acquisitions. On September 22, 1999, Spanish Broadcasting System of Puerto Rico, Inc., a Delaware corporation, a wholly owned subsidiary of the Company, entered into a stock purchase agreement to purchase all of the outstanding capital stock of the following nine subsidiaries of AMFM Operating Inc., a Delaware corporation (formerly known as Chancellor Media Corporation of Los Angeles) ("AMFM"): Primedia Broadcast Group, Inc., WIO, Inc., Cadena Estereotempo, Inc., Portorican American Broadcasting, Inc., WLDI, Inc., WRPC, Inc., WOYE, Inc., WZNT, Inc., WOQI, Inc. (the "Primedia Station Group"). The Primedia Station Group owns and operates eight radio stations in Puerto Rico: WIOA-FM, WIOB-FM, WIOC-FM, WCOM-FM, WZMT-FM, WZNT-FM, WOYE-FM, and WCTA-FM. On January 14, 2000, the Company completed the purchase from AMFM of all of the outstanding capital stock of the Primedia Station Group for total cash consideration of $91.3 million, including a $10.0 million deposit that was made on September 22, 1999 and closing costs of $0.7 million. This acquisition was financed from cash on hand. 6 8 All of the Company's direct and indirect subsidiaries (except for JuJu Media, Inc. and the Primedia Station Group) have guaranteed the Senior Notes on a full, unconditional, and joint and several basis. Condensed consolidating unaudited financial information for the Company and its guarantor and non-guarantor subsidiaries is as follows:
PARENT AND GUARANTOR NON-GUARANTOR SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL ------------ ------------ ------------ ----- AS OF MARCH 26, 2000 ------------------------------------------------------------- CONDENSED CONSOLIDATING BALANCE SHEET Cash and cash equivalents 105,406,733 2,731,269 -- 108,138,002 Receivables, net 18,792,817 1,665,488 -- 20,458,305 Other current assets 5,288,518 (1,067,619) -- 4,220,899 ------------ ------------ ------------ ------------ Current assets 129,488,068 3,329,138 -- 132,817,206 Property and equipment, net 13,946,296 2,134,795 -- 16,081,091 Intangible assets, net 284,420,752 113,449,445 -- 397,870,197 Deferred financing costs, net 8,141,325 -- -- 8,141,325 Investment in subsidiaries and intercompany 94,807,528 (2,145,892) (92,661,636) -- Other assets 179,709 7,345 -- 187,054 ------------ ------------ ------------ ------------ Total assets 530,983,678 116,774,831 (92,661,636) 555,096,873 ============ ============ ============ ============ Current portion of long-term debt 1,050,572 -- -- 1,050,572 Accounts payable and accrued expenses 9,702,953 1,913,195 -- 11,616,148 Accrued interest 9,107,239 -- -- 9,107,239 Deferred commitment fee 2,509,544 -- -- 2,509,544 ------------ ------------ ------------ ------------ Current liabilities 22,370,308 1,913,195 -- 24,283,503 Long-term debt 235,965,660 -- -- 235,965,660 Deferred income taxes 4,422,604 22,200,000 -- 26,622,604 ------------ ------------ ------------ ------------ Total liabilities 262,758,572 24,113,195 -- 286,871,767 Common stock 6,022 1,000 (1,000) 6,022 Additional paid-in capital 393,019,908 94,500,323 (94,500,323) 393,019,908 Accumulated deficit (124,800,824) (1,839,687) 1,839,687 (124,800,824) ------------ ------------ ------------ ------------ Stockholders' equity 268,225,106 92,661,636 (92,661,636) 268,225,106 ------------ ------------ ------------ ------------ Total liabilities and stockholders' equity 530,983,678 116,774,831 (92,661,636) 555,096,873 ============ ============ ============ ============
PARENT AND GUARANTOR NON-GUARANTOR SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL ------------ ------------ ------------ ----- FOR THE THREE MONTHS ENDED MARCH 26, 2000 ------------------------------------------------------------- CONDENSED CONSOLIDATING INCOME STATEMENT Net broadcasting revenues 22,802,390 2,125,752 -- 24,928,142 Station operating expenses 10,340,244 1,912,042 -- 12,252,286 Corporate expenses 2,391,330 -- -- 2,391,330 Depreciation and amortization 2,433,584 790,179 -- 3,223,763 ------------ ------------ ------------ ------------ Operating income 7,637,232 (576,469) -- 7,060,763 Interest income (expense), net (4,528,397) -- -- (4,528,397) Other income (expense), net 48,892 -- -- 48,892 Income tax expense (benefit) 1,301,536 (243,841) -- 1,057,695 Extraordinary item, net of income taxes -- -- -- -- ------------ ------------ ------------ ------------ Net income (loss) 1,856,191 (332,628) -- 1,523,563 ============ ============ ============ ============
7 9
PARENT AND GUARANTOR NON-GUARANTOR SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL ------------ ------------ ------------ ----- FOR THE THREE MONTHS ENDED MARCH 26, 2000 ------------------------------------------------------------- CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Cash flows from operating activities 11,499,720 1,684,299 -- 13,184,019 ============ ============ ============ ============ Cash flows from investing activities (80,281,975) (9,651) -- (80,291,626) ============ ============ ============ ============ Cash flows from financing activities 157,223,220 1,047,739 -- 158,270,959 ============ ============ ============ ============
Parent-only financial information has not been provided since the parent has no operations or assets separate from its investments in its subsidiaries. The Company completed the sale of WVMQ-FM in Key West and WZMQ-FM in Key Largo to South Broadcasting System, Inc., a company owned by Mr. Pablo Raul Alarcon, Sr., on February 2, 2000 for total cash consideration of $0.7 million. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 26, 2000 COMPARED TO THE THREE MONTHS ENDED MARCH 28, 1999 NET REVENUES. Our net revenues were $24.9 million for the three months ended March 26, 2000, compared to $18.8 million for the three months ended March 28, 1999, an increase of $6.1 million or 32.5%. Most of the increase was generated by higher advertising rates, as advertisers continued to be attracted to the Spanish-language market as an important advertising choice. Additionally, our net revenues for the three months ended March 26, 2000 included results of certain of our stations in Puerto Rico, the Primedia Station Group, WMEG-FM and WEGM-FM, that had not yet been acquired during the same period in fiscal year 1999. STATION OPERATING EXPENSES. Total station operating expenses were $12.3 million for the three months ended March 26, 2000, compared to $9.9 million for the three months ended March 28, 1999, an increase of $2.4 million or 24.2%. The increase was primarily attributable to the inclusion of operating results from certain of our stations in Puerto Rico, the Primedia Station Group, WMEG-FM and WEGM-FM, and JuJu Media, Inc., the owner and operator of our bilingual Spanish-English Internet Web site, LaMusica.com, that had not yet been acquired during the same period in fiscal year 1999. In addition, on a same station basis, we experienced higher music license fees and commissions associated with increased sales, that were offset by lower station operating costs. BROADCAST CASH FLOW. Broadcast cash flow was $12.7 million for the three months ended March 26, 2000, compared to $8.9 million for the three months ended March 28, 1999, an increase of $3.8 million or 42.7%. This increase was attributable to continued revenue growth and effective management of operating expenses. Our broadcast cash flow margin increased to 51.0% for the three months ended March 26, 2000 compared to 47.3% for the three months ended March 28, 1999. Excluding net internet operating costs of $0.3 million, broadcast cash flow would have increased $4.1 million to $13.0 million, a 46.1% increase, and our broadcast cash flow margins would have reached 52.2% for the three months ended March 26, 2000. CORPORATE EXPENSES. Total corporate expenses were $2.4 million for the three months ended March 26, 2000, compared to $2.2 million for the three months ended March 28, 1999, an increase of $0.2 million or 9.1%. The increase in corporate expenses resulted mainly from higher legal expenses. 8 10 EBITDA. EBITDA was $10.3 million for the three months ended March 26, 2000, compared to $6.7 million for the three months ended March 28, 1999, an increase of $3.6 million or 53.7%. The increase in EBITDA was mostly attributable to increased revenues and operating efficiencies. DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was $3.2 million for the three months ended March 26, 2000, compared to $2.4 million for the three months ended March 28, 1999, an increase of $0.8 million or 33.3%. The increase was related to an increase in amortization costs and depreciation resulting from the purchases of the Primedia Station Group, WMEG-FM and WEGM-FM in Puerto Rico as well as the purchase of 80% of JuJu Media. OPERATING INCOME. Operating income was $7.1 million for the three months ended March 26, 2000, compared to $4.3 million for the three months ended March 28, 1999, an increase of $2.8 million or 65.1%. The increase was due primarily to the increase in EBITDA, that was partially offset by the increase in depreciation and amortization. INTEREST EXPENSE, NET. Interest expense was $4.5 million for the three months ended March 26, 2000, compared to $5.2 million for the three months ended March 28, 1999, a decrease of $0.7 million or 13.5%. This decrease was due to interest income earned on the unused proceeds from the initial public offering, partially offset by interest on additional debt related to the refinancing of the 12 1/2% and 11% notes. OTHER INCOME (EXPENSE). We had no meaningful other expenses during the three months ended March 26, 2000 and March 28, 1999. NET INCOME (LOSS.) Our net income was $1.5 million for the three months ended March 26, 2000, compared to a net loss of $0.5 million for the three months ended March 28, 1999. The net income was caused by significantly increased operating income and reduced interest expense, net. AFTER-TAX CASH FLOW. After-tax cash flow was $4.7 million for the three months ended March 26, 2000, compared to $1.9 million for the three months ended March 28, 1999. This increase was primarily attributable to the increase in EBITDA and the decrease in interest expense, net. SIX MONTHS ENDED MARCH 26, 2000 COMPARED TO THE SIX MONTHS ENDED MARCH 28, 1999 NET REVENUES. Our net revenues were $53.9 million for the six months ended March 26, 2000, compared to $43.1 million for the six months ended March 28, 1999, an increase of $10.8 million or 25.1%. Most of the increase was generated by higher advertising rates, as advertisers continued to be attracted to the Spanish-language market as an important advertising choice. Additionally, our net revenues for the six months ended March 26, 2000 included results of certain of our stations in Puerto Rico, the Primedia Station Group, WMEG-FM and WEGM-FM, that had not yet been acquired during the same period in fiscal year 1999. STATION OPERATING EXPENSES. Total station operating expenses were $24.8 million for the six months ended March 26, 2000, compared to $20.9 million for the six months ended March 28, 1999, an increase of $3.9 million or 18.7%. The increase was primarily attributable to the inclusion of operating results from certain of our stations in Puerto Rico, the Primedia Station Group, WMEG-FM and WEGM-FM, and JuJu Media, Inc., the owner and operator of our bilingual Spanish-English Internet Web site, LaMusica.com, that had not yet been acquired during the same period in fiscal year 1999. In addition, on a same station basis, we experienced higher music license fees and commissions associated with increased sales. BROADCAST CASH FLOW. Broadcast cash flow was $29.1 million for the six months ended March 26, 2000, compared to $22.2 million for the six months 9 11 ended March 28, 1999, an increase of $6.9 million or 31.1%. This increase was attributable to continued revenue growth and effective management of operating expenses. Our broadcast cash flow margin increased to 54.0% for the six months ended March 26, 2000 compared to 51.5% for the six months ended March 28, 1999. Excluding net internet operating costs of $0.7 million, broadcast cash flow would have increased $7.6 million to $29.8 million, a 34.2% increase, and our broadcast cash flow margin would have reached 55.3% for the six months ended March 26, 2000. CORPORATE EXPENSES. Total corporate expenses were $15.5 million for the six months ended March 26, 2000, compared to $4.3 million for the six months ended March 28, 1999, an increase of $11.2 million or 260.5%. The increase in corporate expenses resulted mainly from a non-recurring severance payment of $10.2 million related to the purchase of an annuity for two of our retired executives, executive performance bonuses and higher legal expenses. EBITDA. EBITDA was $13.7 million for the six months ended March 26, 2000, compared to $17.8 million for the three months ended March 28, 1999, a decrease of $4.1 million or 23.0%. The decrease in EBITDA was mostly attributable to the non-recurring severance payment of $10.2 million, partially offset by increased broadcast cash flow. Excluding the non-recurring severance payment, EBITDA was $23.9 million for the six months ended March 26, 2000, an increase of $6.1 million or 34.3% compared to the six months period ended March 28, 1999 and our EBITDA margin was 44.3%. DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was $5.8 million for the six months ended March 26, 2000, compared to $4.7 million for the six months ended March 28, 1999, an increase of $1.1 million or 23.4%. The increase was related to an increase in amortization costs as a result of the purchases of the Primedia Station Group, WMEG-FM, WEGM-FM and WCMA-FM in Puerto Rico as well as the purchase of 80% of JuJu Media. OPERATING INCOME. Operating income was $7.8 million for the six months ended March 26, 2000, compared to $13.2 million for the six months ended March 28, 1999, a decrease of $5.4 million or 40.9%. The decrease was due primarily to non-recurring severance payment of $10.2 million. INTEREST EXPENSE, NET. Interest expense was $7.5 million for the six months ended March 26, 2000, compared to $10.4 million for the six months ended March 28, 1999, a decrease of $2.9 million or 27.9%. This decrease was due to interest income earned on the unused proceeds from the initial public offering, partially offset by interest on additional debt related to the refinancing of the 12 1/2% and 11% notes. OTHER INCOME (EXPENSE). We had other expenses of $0.4 million for the six months ended March 26, 2000. The other expenses resulted primarily from the write-off of financing costs related to financing which the Company chose not to complete. EXTRAORDINARY LOSS. The Company incurred an extraordinary loss of $16.9 million, net of an income tax benefit of $11.7 million, in the six months ended March 26, 2000 related to the early retirement of our 11% and 12 1/2% notes for an amount in excess of our carrying value and the write-off of the related unamortized debt issuance costs. NET INCOME (LOSS.) Our net loss was $16.9 million for the six months ended March 26, 2000, compared to net income of $1.6 million for the six months ended March 28, 1999. The loss was caused primarily by the extraordinary loss and the non-recurring severance payment. AFTER-TAX CASH FLOW. After-tax cash flow was $5.8 million for the six months ended March 26, 2000, compared to $6.2 million for the six months ended March 28, 1999, a decrease of $0.4 million or 6.5%. This decrease was 10 12 primarily attributable to the non-recurring severance payment. Excluding the net non-recurring severance payment, after-tax cash flow was $11.7 million for the six months ended March 26, 2000, an increase of $5.5 million or 88.7% compared to the six months period ended March 28, 1999. LIQUIDITY AND CAPITAL RESOURCES Our primary source of liquidity is cash on hand and cash provided by operations. We intend to use a significant portion of our capital resources to make future acquisitions. These acquisitions will be funded primarily from cash on hand and internally generated cash flow, as well as potential credit facilities and equity financing. Our ability to increase our indebtedness is limited by the terms of the indentures governing our senior subordinated notes. Additionally, such indentures place restrictions on us with respect to the sale of assets, liens, investments, dividends, debt repayments, capital expenditures, transactions with affiliates and consolidations and mergers, among other things. Net cash flows provided by operating activities were $13.2 million for the six months ended March 26, 2000, compared to net cash flows provided by operating activities of $8.5 million for the six months ended March 28, 1999. Changes in our net cash flow from operating activities are primarily a result of changes in advertising revenues and station operating expenses which are affected by the acquisition and disposition of stations during those periods. Net cash flows used in investing activities were $80.3 million for the six months ended March 26, 2000, compared to net cash flows used in investing activities of $9.3 million for the six months ended March 28, 1999. Changes in our net cash flow from investing activities are primarily a result of the acquisition and disposition of stations during those periods. Net cash flows provided by financing activities were $158.3 million for the six months ended March 26, 2000, compared to no meaningful net cash flows used in financing activities for the six months ended March 28, 1999. Changes in our net cash flow from financing activities during the six months period ended March 26, 2000 were primarily a result of the initial public offering and related refinancing transactions that were completed during the first quarter of fiscal year 2000. Management believes that cash from operating activities, together with cash on hand, should be sufficient to permit us to meet our obligations in the foreseeable future, including: (1) required significant cash interest payments pursuant to the terms of the senior subordinated notes due 2009, (2) operating obligations and (3) capital expenditures. Assumptions (none of which can be assured) that underlie management's belief, include: o the economic conditions within the radio broadcasting market and economic conditions in general will not deteriorate in any material respect; o we will continue to successfully implement our business strategy; o we will not incur any material unforeseen liabilities, including, without limitation, environmental liabilities; and o no future acquisitions will adversely affect our liquidity. 11 13 We continuously review, and are currently reviewing, opportunities to acquire additional radio stations, primarily in the largest Hispanic markets in the United States. We engage in discussions regarding potential acquisitions from time to time in the ordinary course of business. On May 8, 2000, we entered into agreements to acquire all of the outstanding capital stock of Rodriguez Communications, Inc. ("RCI") and certain holdings of its affiliate, New World Broadcasters Corp. ("New World"), for total consideration of $165.2 million, consisting of $43.5 million of our Class A common stock and $121.7 million in cash, subject to certain conditions and adjustments. The purchase of RCI includes the rights to acquire the following radio stations -- KFOX-FM and KREA-FM broadcasting, on a co-channeled basis, at 93.5 MHz serving the Los Angeles, California market; KXJO-FM broadcasting at 92.7 MHz serving the San Francisco, California market; and KSAH-AM broadcasting at 720 kHz serving the San Antonio, Texas market. Spanish Broadcasting will acquire Dallas radio stations KTCY-FM broadcasting at 104.9 MHz and KXEB-AM broadcasting at 910 kHz from New World. Once acquired by RCI we intend to broadcast our programming on each of RCI's stations we have agreed to acquire under a time brokerage agreement until closing. Until closing, we are broadcasting our programming on New World's stations in the Dallas market under a time brokerage agreement that commenced on May 8. The closing of these acquisitions is targeted for November of this year and each of these transactions is subject to numerous conditions and approvals, including receipt of regulatory approvals under the federal communications laws and review by federal antitrust authorities. Additionally, the acquisition of KXJO-FM is subject to the completion of Clear Channel, Inc.'s merger with AMFM, Inc. We cannot assure you that the acquisition described above will occur during the expected time frame, under the terms described, or at all. We have no other written understandings, letters of intent or contracts to acquire radio stations or other companies. We anticipate that any future acquisitions would be financed through funds generated from permitted debt financing, equity financing, operations or a combination of these sources. However, there can be no assurance that financing from any of these sources, if available, can be obtained on favorable terms. YEAR 2000 ISSUE To date, no material interruptions to our operations have occurred as a result of the year 2000 issue. The greatest threat to our ability to continue broadcasting due to year 2000 issues comes from the utilities upon which we are dependent. To date, we are not aware of any external utility vendor with a year 2000 issue that has materially impacted our results of operations, liquidity, or capital resources. While we believe our efforts provide reasonable assurance that material disruptions will not occur due to internal or vendor failure, the possibility of interruption still exists. In 1999, we performed various analyses of potential problems related to the year 2000 issue. Internally, we bear some risks in the following areas: computer hardware and software for our accounting and administrative functions, computer-controlled programming of music and the transmission of our signals. Externally, we are at risk, like most companies, of losing power and phone lines. As of March 26, 2000 we had spent $0.1 million to upgrade/replace non-compliant systems and equipment. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We believe that inflation has not had a material impact on our results of operations for each of our fiscal years in the three-year period ended September 26, 1999 and in the three-and six-month periods ended March 26, 2000. However, there can be no assurance that future inflation would not have an adverse impact on our operating results and financial condition. We are not subject to currency fluctuations since we do not have any international operations other than Puerto Rico where the currency is the U.S. dollar. We have limited market risk exposure since we do not have any outstanding variable rate debt or derivative financial and commodity instruments as of May 10, 2000. Our financial instruments outstanding at March 26, 2000 with market risk are our senior subordinated notes due 2009. 12 14 PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS From time to time we are involved in litigation incidental to the conduct of our business, such as contract matters and employee-related matters. We are not currently a party to litigation which, in the opinion of management, is likely to have a material adverse effect on our business. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On August 18, 1999, we filed a registration statement of Form S-1 with the SEC (Registration No. 333-85499) with respect to our initial public offering of 21,787,400 shares of Class A Common Stock, par value $.0001. The SEC declared our registration statement effective on October 27, 1999. The initial public offering closed on November 2, 1999 and we and certain selling shareholders issued and sold 20,768,110 (including over-allotment options of 3,268,110) shares and 4,287,400 shares of Class A Common Stock, respectively. All of the 21,787,400 shares of Class A Common Stock registered in the offering were sold at an initial offering price of $20.00 per share, resulting in an aggregate-offering price of $435,748,000. Lehman Brothers, Inc. and Merrill, Lynch, Pierce, Fenner & Smith Incorporated acted as representatives for the underwriters, to whom SBS paid an aggregate of $26.0 million and the selling shareholders paid an aggregate of about $5.4 million in underwriting discounts and commissions ($1.25 per share), resulting in net proceeds to SBS of $389.4 million and $80.4 million to the selling shareholders. On August 18, 1999, we also filed a registration statement on Form S-1 with the Commission (Registration No. 333-85519) with respect to an offering of Senior Subordinated Notes. On November 2, 1999, we closed the offering of the 9 5/8% Senior Subordinated Notes due 2009. All of the notes registered in the offering were sold at an aggregate-offering price of $235.0 million. Lehman Brothers Inc. and CIBC World Markets Corp. served as underwriters, to whom SBS paid an aggregate underwriting discount of $7.1 million (3.00%), resulting in net proceeds to SBS of $228.0 million. Other expenses of these two offerings were $4.1 million including Securities and Exchange Commission registration fees, printing, accounting, legal fees and expenses and miscellaneous expenses. The net proceeds to SBS after deducting the total expense described above was $613.3 million. We used the net proceeds of our initial public offering and the concurrent senior subordinated notes offering to (1) redeem our preferred stock at 105% of aggregate liquidation preference at a cost of $265.6 million (2) repurchase our 11% notes and 12 1/2% notes at approximately 111% and 114% of their par value, respectively, pursuant to the tender offers and consent solicitations we completed on November 2, 1999 at a cost of $205.0 million (3) purchase an annuity for two of our retiring executives at a cost of $10.2 million (4) repay a promissory note to Infinity Broadcasting Corp., including accrued interest, for a total of $3.4 million, and (5) $129.1 million in excess proceeds remained for use by us for general corporate purposes, including potential acquisitions. In connection with these offerings, we also were paid $3.0 million by Messrs. Alarcon Sr. and Alarcon Jr. for repayment of loans previously made to them and $0.7 million by Mr. Alarcon Sr. for the acquisition of the Keys' stations, WVMQ-FM and WZMQ-FM. None of the expenses or net proceeds of the initial public offering were paid directly or indirectly to any director or officer of SBS or their associates, persons owning 10% or more of the equity position, or an affiliate of SBS. The excess proceeds of such offerings have not been separately allocated and are used by us, together with cash on hand, cash from operations and cash received from the sale of the Keys' stations, for general corporate purposes, including acquisitions. From November 2, 1999 through March 26, 2000, we have used approximately $100 million in our operations, including funding the acquisition of the Primedia Station Group. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - 27 Financial Data Schedule (b) Reports on Form 8-K. A Current Report on Form 8-K was filed by the Company on January 28, 2000, reporting an "Acquisition or Disposition of Assets" pursuant to Item 2 of Form 8-K and Form 8-K/A-1, Amendment No. 1 to the Current Report on Form 8-K, was filed on March 29, 2000. 13 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, each of the registrants 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, Inc., a New Jersey Corporation Spanish Broadcasting System of California, Inc. 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. Spanish Broadcasting System of San Antonio, Inc. Spanish Broadcasting System of Puerto Rico, Inc., a Delaware Corporation Spanish Broadcasting System of Puerto Rico, Inc., a Puerto Rico Corporation SBS Funding, Inc. By: /s/ Joseph A. Garcia --------------------------------------------- Joseph A. Garcia Executive Vice President, Date: May 10, 2000 Chief Financial Officer and Secretary (principal financial and accounting officer) 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 0000927720 SPANISH BROADCASTING 6-MOS MAR-26-2000 SEP-27-1999 MAR-26-2000 108,138,002 0 24,856,022 4,408,763 0 132,817,206 16,081,091 0 555,096,873 24,283,503 0 0 0 6,022 0 555,096,873 0 61,931,899 0 0 0 0 7,494,673 (47,689) (20,173) (27,516) 0 (16,865,069) 0 (16,892,585) (0.81) (0.81)
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