XNAS:SBSA Spanish Broadcasting System Inc Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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Table of Contents

 

 

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 June 30, 2012

or

 

¨ 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 000-27823

 

 

 

LOGO

Spanish Broadcasting System, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   13-3827791

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

7007 NW 77th Ave.

Miami, Florida 33166

(Address of principal executive offices) (Zip Code)

(305) 441-6901

(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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   ¨ (Do not check if a smaller reporting company)    Smaller reporting company   x


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Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of August 9, 2012, 4,166,991 shares of Class A common stock, par value $0.0001 per share, 2,340,353 shares of Class B common stock, par value $0.0001 per share and 380,000 shares of Series C convertible preferred stock, $0.01 par value per share, which are convertible into 760,000 shares of Class A common stock, were outstanding.

 

 

 


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SPANISH BROADCASTING SYSTEM, INC.

INDEX

 

         Page  
PART I. FINANCIAL INFORMATION   
ITEM 1. Financial Statements—Unaudited      5   
 

Unaudited Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011

     5   
 

Unaudited Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three- and Six-Months Ended June 30, 2012 and 2011

     6   
 

Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Deficit for the Six-Months Ended June 30, 2012

     7   
 

Unaudited Condensed Consolidated Statements of Cash Flows for the Six-Months Ended June  30, 2012 and 2011

     8   
 

Notes to Unaudited Condensed Consolidated Financial Statements

     9   
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations      17   
ITEM 4. Controls and Procedures      27   
PART II. OTHER INFORMATION   
ITEM 1. Legal Proceedings      27   
ITEM 6. Exhibits      28   
Signature      29   


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Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not based on historical facts, but rather reflect our current expectations concerning future results and events. These forward-looking statements generally can be identified by the use of statements that include phrases such as “believe”, “expect”, “anticipate”, “intend”, “estimate”, “plan”, “project”, “foresee”, “likely”, “will” or other words or phrases with similar meanings. Similarly, statements that describe our objectives, plans or goals are, or may be, forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be different from any future results, performance and anticipated achievements expressed or implied by these statements. We do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to those described in our Annual Report on Form 10-K for the year ended December 31, 2011, and those described from time to time in our future reports filed with the Securities and Exchange Commission (the “SEC”).


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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements—Unaudited

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

 

     June 30,
2012
    December 31,
2011
 
     (In thousands,
except share data)
 

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 22,528        71,266   

Receivables, net of allowance for doubtful accounts of $829 in 2012 and $844 in 2011

     25,285        23,797   

Prepaid expenses and other current assets

     3,334        4,354   
  

 

 

   

 

 

 

Total current assets

     51,147        99,417   

Property and equipment, net of accumulated depreciation of $59,879 in 2012 and $57,834 in 2011

     39,689        41,743   

FCC broadcasting licenses

     323,055        323,055   

Goodwill

     32,806        32,806   

Other intangible assets, net of accumulated amortization of $511 in 2012 and $380 in 2011

     2,037        2,168   

Deferred financing costs, net of accumulated amortization of $1,358 in 2012 and $7,137 in 2011

     16,163        465   

Other assets

     1,844        1,858   
  

 

 

   

 

 

 

Total assets

   $ 466,741        501,512   
  

 

 

   

 

 

 

Liabilities and Stockholders’ Deficit

    

Current liabilities:

    

Accounts payable and accrued expenses

   $ 15,685        16,783   

Accrued interest

     7,646        280   

Unearned revenue

     779        914   

Other liabilities

     678        795   

Current portion of the senior credit facility term loan due 2012

     —          36,313   

Current portion of other long-term debt

     3,007        3,039   

Series B cumulative exchangeable redeemable preferred stock dividends payable

     24,405        21,923   
  

 

 

   

 

 

 

Total current liabilities

     52,200        80,047   

Other liabilities, less current portion

     834        603   

Derivative instruments

     857        740   

12.5% senior secured notes due 2017, net of unamortized discount

     267,204        —     

Senior credit facility term loan due 2012, less current portion

     —          266,750   

Other long-term debt, less current portion

     11,100        11,271   

Deferred income taxes

     85,830        84,368   
  

 

 

   

 

 

 

Total liabilities

     418,025        443,779   
  

 

 

   

 

 

 

Commitments and contingencies (note 6)

    

Cumulative exchangeable redeemable preferred stock: 10¾% Series B cumulative exchangeable redeemable preferred stock, $0.01 par value, liquidation value $1,000 per share. Authorized 280,000 shares; 92,349 shares issued and outstanding at June 30, 2012 and December 31, 2011

     92,349        92,349   
  

 

 

   

 

 

 

Stockholders’ deficit:

    

Series C convertible preferred stock, $0.01 par value and liquidation value. Authorized 600,000 shares; 380,000 shares issued and outstanding at June 30, 2012 and December 31, 2011

     4        4   

Class A common stock, $0.0001 par value. Authorized 100,000,000 shares; 4,166,991 shares issued and outstanding at June 30, 2012 and December 31, 2011

     —          —     

Class B common stock, $0.0001 par value. Authorized 50,000,000 shares; 2,340,353 shares issued and outstanding at June 30, 2012 and December 31, 2011

     —          —     

Additional paid-in capital

     525,263        525,235   

Accumulated other comprehensive loss, net

     (857     (740

Accumulated deficit

     (568,043     (559,115
  

 

 

   

 

 

 

Total stockholders’ deficit

     (43,633     (34,616
  

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $ 466,741        501,512   
  

 

 

   

 

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

5


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SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

and Comprehensive (Loss) Income

 

     Three-Months
Ended June 30,
    Six-Months Ended
June 30,
 
     2012     2011     2012     2011  
     (In thousands, except per share data)  

Net revenue

   $ 34,611        35,627        66,705        66,402   

Operating expenses:

        

Engineering and programming

     7,615        9,569        16,019        19,775   

Selling, general and administrative

     13,894        10,957        28,900        24,136   

Corporate expenses

     1,636        2,012        3,988        3,943   

Depreciation and amortization

     1,304        1,257        2,757        2,596   
  

 

 

   

 

 

   

 

 

   

 

 

 
     24,449        23,795        51,664        50,450   

(Gain) loss on the disposal of assets, net

     (5     (2     (5     (9

Impairment charges and restructuring costs

     368        207        424        207   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     9,799        11,627        14,622        15,754   

Other (expense) income:

        

Interest expense, net

     (9,844     (2,024     (16,682     (4,060

Loss on early extinguishment of debt

     —          —          (391     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

     (45     9,603        (2,451     11,694   

Income tax expense

     256        1,159        1,513        2,940   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

     (301     8,444        (3,964     8,754   

Dividends on Series B preferred stock

     (2,482     (2,482     (4,964     (4,964
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income applicable to common stockholders

   $ (2,783     5,962        (8,928     3,790   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic net (loss) income per common share

   $ (0.38     0.82        (1.23     0.52   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net (loss) income per common share

   $ (0.38     0.82        (1.23     0.52   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding:

        

Basic

     7,267        7,267        7,267        7,267   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     7,267        7,280        7,267        7,283   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

   $ (301     8,444        (3,964     8,754   

Other comprehensive (loss) income, net of taxes—unrealized (loss) gain on derivative instrument

     (32     (50     (117     16   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive (loss) income

   $ (333     8,394        (4,081     8,770   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

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SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Deficit

for the Six-Months Ended June 30, 2012

 

     Class C
preferred stock
     Class A
common stock
     Class B
common stock
     Additional
paid-in
capital
     Accumulated
other

comprehensive
loss, net
          Total
stockholders’
deficit
 
     Number
of shares
     Par
value
     Number of
shares
     Par
value
     Number of
shares
     Par
value
          Accumulated
deficit
   
     (In thousands, except share data)  

Balance at December 31, 2011

     380,000       $ 4         4,166,991       $ —           2,340,353       $ —         $ 525,235       $ (740   $ (559,115   $ (34,616

Stock-based compensation

     —           —           —           —           —           —           28         —          —          28   

Series B preferred stock dividends

     —           —           —           —           —           —           —           —          (4,964     (4,964

Comprehensive loss:

                           

Net loss

     —           —           —           —           —           —           —           —          (3,964     (3,964

Other comprehensive loss

     —           —           —           —           —           —           —           (117     —          (117
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance at June 30, 2012

     380,000       $ 4         4,166,991       $ —           2,340,353       $ —         $ 525,263       $ (857   $ (568,043   $ (43,633
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

7


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SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

 

     Six-Months Ended
June 30,
 
     2012     2011  
     (In thousands)  

Cash flows from operating activities:

    

Net (loss) income

   $ (3,964     8,754   

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

    

(Gain) loss on the disposal of assets

     (5     (9

Impairment charges and restructuring costs

     338        207   

Stock-based compensation

     28        45   

Depreciation and amortization

     2,757        2,596   

Net barter loss (income)

     55        107   

Provision for trade doubtful accounts

     251        391   

Loss on early extinguishment of debt

     391        —     

Amortization of deferred financing costs

     1,465        526   

Amortization of original issued discount

     454        —     

Deferred income taxes

     1,462        2,889   

Unearned revenue

     104        382   

Changes in operating assets and liabilities:

    

Trade receivables

     (2,033     1,871   

Prepaid expenses and other current assets

     987        916   

Other assets

     14        (1,544

Accounts payable and accrued expenses

     (1,066     1,809   

Accrued interest

     7,366        (2,002

Other liabilities

     (105     (560
  

 

 

   

 

 

 

Net cash provided by operating activities

     8,499        16,378   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of property and equipment

     (734     (2,207

Proceeds from the sale of property and equipment

     5        15   
  

 

 

   

 

 

 

Net cash used in investing activities

     (729     (2,192
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from 12.5% senior secured notes due 2017

     266,750        —     

Payment of financing costs

     (17,510     (1,625

Payment of senior secured credit facility term loan 2012

     (303,063     —     

Payment of Series B preferred stock cash dividends

     (2,482     (2,483

Payments of other long-term debt

     (203     (234
  

 

 

   

 

 

 

Net cash used in financing activities

     (56,508     (4,342
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (48,738     9,844   

Cash and cash equivalents at beginning of period

     71,266        55,140   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 22,528        64,984   
  

 

 

   

 

 

 

Supplemental cash flows information:

    

Interest paid

   $ 7,369        3,515   
  

 

 

   

 

 

 

Income taxes paid, net

   $ 23        8   
  

 

 

   

 

 

 

Noncash investing and financing activities:

    

Accrual of Series B preferred stock cash dividends not declared

   $ 2,482        2,482   
  

 

 

   

 

 

 

Unrealized (loss) gain on derivative instruments

   $ (117     16   
  

 

 

   

 

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

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SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The unaudited condensed consolidated financial statements include the accounts of Spanish Broadcasting System, Inc. and its subsidiaries (the Company, we, us, our or SBS). All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements as of June 30, 2012 and December 31, 2011 and for the three- and six-month periods ended June 30, 2012 and 2011 have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. They do not include all information and notes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with our consolidated financial statements as of, and for the fiscal year ended December 31, 2011, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which are all of a normal and recurring nature, necessary for a fair presentation of the results of the interim periods. Additionally, we evaluated subsequent events after the balance sheet date of June 30, 2012 through the financial statements issuance date. The results of operations for the six-months ended June 30, 2012 are not necessarily indicative of the results for a full year.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about future events that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements. Significant items subject to such estimates and assumptions include: the useful lives of fixed assets, allowance for doubtful accounts, the valuation of derivatives, deferred tax assets, fixed assets, intangible assets, stock-based compensation, contingencies and litigation. These estimates and assumptions are based on management’s best judgments. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Management adjusts such estimates and assumptions as facts and circumstances dictate. Illiquid credit markets, volatile equity markets and reductions in advertising spending have combined to increase the uncertainty inherent in such estimates and assumptions. Actual results could differ from these estimates.

During the fiscal second quarter of 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2012-02. The ASU is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. We will implement the provisions of ASU 2012-02 as of January 1, 2013. The adoption of this standard is not expected to have a material impact on the company’s results of operations, cash flows or financial position.

2. Stockholders’ Deficit

(a) Reverse Stock Split of our Class A and Class B Common Stock

On July 5, 2011, we filed the Certificate of Amendment with the Secretary of State of the State of Delaware, which effected a one-for-ten (1-for-10) reverse stock split of our outstanding Class A common stock, par value $0.0001 per share (the “Class A common stock”) and Class B common stock, par value $0.0001 per share (the “Class B common stock”). The reverse stock split became effective at 11:59 p.m., Eastern Daylight Time on July 11, 2011.

The reverse stock split was approved by our stockholders at the annual meeting held on June 1, 2011. The trading of our common stock on the NASDAQ Global Market on a split-adjusted basis began at the opening of trading on July 12, 2011, at which time the symbol changed to SBSAD to indicate that the reverse stock split had occurred. The symbol returned to the normal SBSA at the open of the market on August 9, 2011.

As a result of the reverse stock split, each ten (10) outstanding shares of pre-split common stock automatically combined into one (1) share of post-split common stock. No fractional shares were issued. Proportional adjustments were made to our outstanding stock, stock options and other equity awards and to our equity compensation plans to reflect the reverse stock split. The consolidated financial statements for current and prior periods have been adjusted to reflect the change in number of shares.

(b) Series C Convertible Preferred Stock

On December 23, 2004, in connection with the closing of the merger agreement, dated October 5, 2004, with CBS Radio (formerly known as Infinity Media Corporation, CBS Radio), a division of CBS Corporation, Infinity Broadcasting Corporation of

 

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San Francisco (“Infinity SF”) and SBS Bay Area, LLC, a wholly-owned subsidiary of SBS, pursuant to which SBS acquired the FCC license of Infinity SF (the “CBS Radio Merger”), we issued to CBS Radio an aggregate of 380,000 shares of Series C convertible preferred stock, $0.01 par value per share (the “Series C preferred stock”). Each share of Series C preferred stock is convertible at the option of the holder into two fully paid and non-assessable shares of the Class A common stock. The shares of Series C preferred stock issued at the closing of the CBS Radio Merger are convertible into 760,000 shares of Class A common stock, subject to certain adjustments. The number of Class A common stock shares reflects a 1-for-10 reverse stock split effectuated by the Company at 11:59 p.m., Eastern Daylight Time on July 11, 2011. In connection with the CBS Radio Merger, we also entered into a registration rights agreement with CBS Radio, pursuant to which CBS Radio may instruct us to file up to three registration statements, on a best efforts basis, with the SEC, providing for the registration for resale of the Class A common stock issuable upon conversion of the Series C preferred stock.

We are required to pay holders of Series C preferred stock dividends on parity with our Class A common stock and Class B common stock, and each other class or series of our capital stock created after December 23, 2004.

(c) Class A and B Common Stock

The rights of the Class A common stock holders and Class B common stock holders are identical except with respect to their voting rights and conversion provisions. The Class A common stock is entitled to one vote per share and the Class B common stock is entitled to ten votes per share. The Class B common stock is convertible to Class A common stock on a share-for-share basis at the option of the holder at any time, or automatically upon a transfer of the Class B common stock to a person or entity which is not a permitted transferee (as described in our Certificate of Incorporation). Holders of each class of common stock are entitled to receive dividends and, upon liquidation or dissolution, are entitled to receive all assets available for distribution to stockholders. Neither the holders of the Class A common stock nor the holders of the Class B common stock have preemptive or other subscription rights, and there are no redemption or sinking fund provisions with respect to such shares. Each class of common stock is subordinate to our 10  3/4% Series B cumulative exchangeable redeemable preferred stock, par value $0.01 per share (the “Series B preferred stock”). The Series B preferred stock has a liquidation preference of $1,000 per share and is on parity with the Series C preferred stock with respect to dividend rights and rights upon liquidation, winding up and dissolution of SBS.

(d) Share-Based Compensation Plans

2006 Omnibus Equity Compensation Plan

In July 2006, we adopted an omnibus equity compensation plan (the “Omnibus Plan”) in which grants of Class A common stock can be made to participants in any of the following forms: (i) incentive stock options, (ii) non-qualified stock options, (iii) stock appreciation rights, (iv) stock units, (v) stock awards, (vi) dividend equivalents, and (vii) other stock-based awards. The Omnibus Plan authorizes up to 350,000 shares of our Class A common stock for issuance, subject to adjustment in certain circumstances. The Omnibus Plan provides that the maximum aggregate number of shares of Class A common stock units, stock awards and other stock-based awards that may be granted, other than dividend equivalents, to any individual during any calendar year is 100,000 shares, subject to adjustments.

Stock Options Activity

Stock options have only been granted to employees and directors. Our stock options have various vesting schedules and are subject to the employees and directors continuing their service to SBS. We recognize compensation expense based on the estimated grant date fair value using the Black-Scholes option pricing model and recognize the compensation expense using a straight-line amortization method. When estimating forfeitures, we consider voluntary termination behaviors, as well as trends of actual option forfeitures. Ultimately, our stock-based compensation expense is based on awards that vest. Our stock-based compensation has been reduced for estimated forfeitures.

 

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A summary of the status of our stock options, as of December 31, 2011 and June 30, 2012, and changes during the six-months ended June 30, 2012, is presented below (in thousands, except per share data):

 

     Shares     Weighted
Average
Exercise
Price
     Aggregate
Intrinsic
Value
     Weighted
Average
Remaining
Contractual
Life (Years)
 

Outstanding at December 31, 2011

     159      $ 49.49         

Granted

     —          —           

Exercised

     —          —           

Forfeited

     (17     89.56         
  

 

 

   

 

 

    

 

 

    

 

 

 

Outstanding at June 30, 2012

     142      $ 44.78       $ 51         4.7   

Exercisable at June 30, 2012

     140      $ 45.16       $ 51         4.7   

During the six-months ended June 30, 2012 and 2011, no stock options were exercised; therefore, no cash payments were received. In addition, we did not recognize a tax benefit on our stock-based compensation expense due to our valuation allowance on substantially all of our deferred tax assets.

The following table summarizes information about stock options outstanding and exercisable at June 30, 2012 (in thousands, except per share data):

 

     Outstanding      Weighted
Average

Remaining
Contractual
Life (Years)
     Exercisable  
Range of Exercise Prices    Vested
Options
     Unvested
Options
     Weighted
Average
Exercise
Price
        Number
Exercisable
     Weighted
Average
Exercise
Price
 

$2.00 – 49.99

     80         2       $ 14.50         6.7         80       $ 14.41   

50.00 – 99.99

     47         —           79.26         1.8         47         79.26   

100.00 – 117.80

     13         —           111.06         2.2         13         111.06   
  

 

 

    

 

 

          

 

 

    
     140         2       $ 44.78         4.7         140       $ 45.16   
  

 

 

    

 

 

          

 

 

    

3. Basic and Diluted Net (Loss) Income Per Common Share

Basic net (loss) income per common share was computed by dividing net (loss) income applicable to common stockholders by the weighted average number of shares of common stock and convertible preferred stock outstanding for each period presented, using the “if converted” method. Diluted net (loss) income per common share is computed by giving effect to common stock equivalents as if they were outstanding for the entire period.

The following is a reconciliation of the shares used in the computation of basic and diluted net income per share for the three- and six-month periods ended June 30, 2012 and 2011 (in thousands):

 

     Three-Months
Ended June 30,
     Six-Months Ended
June 30,
 
     2012      2011      2012      2011  

Basic weighted average shares outstanding

     7,267        7,267        7,267        7,267  

Effect of dilutive equity instruments

     —           13        —           16  
  

 

 

    

 

 

    

 

 

    

 

 

 

Dilutive weighted average shares outstanding

     7,267        7,280        7,267        7,283  
  

 

 

    

 

 

    

 

 

    

 

 

 

Options to purchase shares of common stock and other stock-based awards outstanding which are not included in the calculation of diluted net income per share because their impact is anti-dilutive

     125        156        124        146  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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4. Operating Segments

We have two reportable segments: radio and television. The following summary table presents separate financial data for each of our operating segments:

 

     Three-Months Ended
June 30,
    Six-Months Ended
June 30,
 
     2012     2011     2012     2011  
     (In thousands)     (In thousands)  

Net revenue:

        

Radio

   $ 30,288        31,222        58,066        57,663   

Television

     4,323        4,405        8,639        8,739   
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated

   $ 34,611        35,627        66,705        66,402   
  

 

 

   

 

 

   

 

 

   

 

 

 

Engineering and programming expenses:

        

Radio

   $ 4,422        5,279        9,729        11,688   

Television

     3,193        4,290        6,290        8,087   
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated

   $ 7,615        9,569        16,019        19,775   
  

 

 

   

 

 

   

 

 

   

 

 

 

Selling, general and administrative expenses:

        

Radio

   $ 11,572        8,936        24,530        19,772   

Television

     2,322        2,021        4,370        4,364   
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated

   $ 13,894        10,957        28,900        24,136   
  

 

 

   

 

 

   

 

 

   

 

 

 

Corporate expenses:

   $ 1,636        2,012        3,988        3,943   

Depreciation and amortization:

        

Radio

   $ 526        545        1,077        1,163   

Television

     666        575        1,446        1,150   

Corporate

     112        137        234        283   
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated

   $ 1,304        1,257        2,757        2,596   
  

 

 

   

 

 

   

 

 

   

 

 

 

(Gain) loss on the disposal of assets, net:

        

Radio

   $ (5     (2     (5     (9

Television

     —          —          —          —     

Corporate

     —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated

   $ (5     (2     (5     (9
  

 

 

   

 

 

   

 

 

   

 

 

 

Impairment charges and restructuring costs:

        

Radio

   $ 71        —          71        —     

Television

     11        —          11        —     

Corporate

     286        207        342        207   
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated

   $ 368        207        424        207   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss):

        

Radio

   $ 13,702        16,464        22,664        25,049   

Television

     (1,869     (2,481     (3,478     (4,862

Corporate

     (2,034     (2,356     (4,564     (4,433
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated

   $ 9,799        11,627        14,622        15,754   
  

 

 

   

 

 

   

 

 

   

 

 

 

Capital expenditures:

        

Radio

   $ 75        190        267        453   

Television

     191        211        356        1,634   

Corporate

     104        69        111        120   
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated

   $ 370        470        734        2,207   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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      June 30,
2012
     December 31,
2011
 
     (In thousands)  

Total Assets:

     

Radio

   $ 389,264         436,806   

Television

     59,212         60,136   

Corporate

     18,265         4,570   
  

 

 

    

 

 

 

Consolidated

   $ 466,741         501,512   
  

 

 

    

 

 

 

5. Income Taxes

We have determined that due to a variety of reasons, we are currently unable to estimate our annual effective tax rate during our interim periods, which would be applied to our pre-tax ordinary income. We are calculating our effective income tax rate using a year-to-date income tax calculation. Our income tax expense differs from the statutory federal tax rate of 35% and related statutory state tax rates, primarily as a result of the reversal of our deferred tax liabilities related to the tax amortization of our FCC broadcasting licenses, which could no longer be assured over our net operating loss carry forward period. Therefore, our effective tax rate is impacted by the establishment of a valuation allowance on substantially all of our deferred tax assets.

We file federal, state and local income tax returns in the United States and Puerto Rico. The tax years that remain subject to assessment of additional liabilities by the United States federal, state, and local tax authorities are 2008 through 2011. The tax years that remain subject to assessment of additional liabilities by the Puerto Rico tax authority are 2007 through 2011.

Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our consolidated financial statements as of June 30, 2012.

6. Commitments and Contingencies

We are subject to certain legal proceedings and claims that have arisen in the ordinary course of business and have not been fully adjudicated. In our opinion, we do not have a potential liability related to any current legal proceedings and claims that would individually or in the aggregate have a material adverse effect on our financial condition or operating results. However, the results of legal proceedings cannot be predicted with certainty. Should we fail to prevail in any of these legal matters or should all of these legal matters be resolved against us in the same reporting period, the operating results of a particular reporting period could be materially adversely affected.

7. Fair Value Measurement Disclosures

Fair Value of Financial Instruments

Cash and cash equivalents, receivables, as well as accounts payable and accrued expenses, and other current liabilities, as reflected in the consolidated financial statements, approximate fair value because of the short-term maturity of these instruments and are considered Level 1 measurements within the fair value hierarchy. The estimated fair value of our other long-term debt instruments, approximate their carrying amounts as the interest rates approximate our current borrowing rate for similar debt instruments of comparable maturity, or have variable interest rates.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

The estimated fair values of our financial instruments are as follows (in millions):

 

            June 30, 2012      December 31, 2011  
Description    Fair Value
Hierarchy
     Carrying
Amount
     Fair Value      Carrying
Amount
     Fair Value  

12.5% senior secured notes due 2017

     Level 3       $ 267.2         279.9         —           —     

Senior credit facility term loan due 2012

     Level 3         —           —           303.1         281.3   

10 3/ 4% Series B cumulative exchangeable redeemable preferred stock

     Level 3         92.3         78.3         92.3         67.2   

Promissory note payable, included in other long-term debt

     Level 3         6.0         4.2         6.1         3.1   

Promissory note payable, included in other long-term debt

     Level 3         8.0         7.9         8.0         6.6   

 

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The fair value estimates of these financial instruments were based upon either: (a) market quotes from a major financial institution taking into consideration the most recent market activity, or (b) a discounted cash flow analysis taking into consideration current rates.

Fair Value of Derivative Instruments

The following table represents required quantitative disclosures regarding fair values of our derivative instruments (in thousands).

 

            Fair value measurements at June 30, 2012  
            Liabilities  
Description    June 30, 2012
carrying value and
balance sheet
location of derivative
instruments
     Quoted prices in
active markets
for identical
instruments
(Level 1)
     Significant
other
observable
inputs
(Level 2)
     Significant
unobservable
inputs
(Level 3)
 

Derivative designated as a cash flow hedging instrument:

           

Interest rate swap

   $ 857         —           857         —     

 

            Fair value measurements at December 31, 2011  
            Liabilities  
Description    December 31, 2011
carrying value and
balance sheet
location of derivative
instruments
     Quoted prices in
active markets
for identical
instruments
(Level 1)
     Significant
other
observable
inputs
(Level 2)
     Significant
unobservable
inputs
(Level 3)
 

Derivative designated as a cash flow hedging instrument:

           

Interest rate swap

   $ 740         —           740         —     

The interest rate swap fair value is derived from the present value of the difference in cash flows based on the forward-looking LIBOR yield curve rates, as compared to our fixed rate applied to the hedged amount through the term of the agreement, less adjustments for credit risk.

 

     Three-Months
Ended
June 30,
    Six-Months
Ended
June 30,
 

Interest rate swaps

   2012     2011     2012     2011  

(Loss) gain recognized in other comprehensive loss (effective portion)

   $ (32     (50     (117     16   

8. Refinancing of our First Lien Credit Facility due 2012

On February 7, 2012 we closed our offering of $275 million in aggregate principal amount of 12.5% senior secured notes due 2017 (the “Notes”) at an issue price of 97% of the principal amount. The Notes were offered solely by means of a private placement either to qualified institutional buyers in the United States pursuant to Rule 144A under the Securities Act, or to certain persons outside the United States pursuant to Regulation S under the Securities Act, as amended. We used the net proceeds from the offering, together with cash on hand, to repay and terminate the First Lien Credit Facility, and to pay the transaction costs related to the offering. As a result of the repayment and termination of the First Lien Credit Facility, we recognized a loss on early extinguishment of debt related to the write-off of unamortized deferred financing costs of approximately $0.4 million during the six-months ended June 30, 2012.

Interest

The Notes accrue interest at a rate of 12.5% per year. Interest on the Notes is paid semi-annually on each April 15 and October 15, commencing on April 15, 2012. After April 15, 2013, interest will accrue at a rate of 12.5% per annum on (i) the original amount of the Notes plus (ii) any Additional Interest (as defined below) payable but unpaid in any prior interest period, payable in cash on each interest payment date. Further, beginning on the interest payment date occurring on April 15, 2013, additional interest will be payable at a rate of 2.00% per annum (the “Additional Interest”) on (i) the original principal amount of the Notes plus (ii) any amount of Additional Interest payable but unpaid in any prior interest period, to be paid in cash, at our election, (x) on the applicable interest payment date or (y) on the earliest of the maturity date of the Notes, any acceleration of the Notes and any redemption of the

 

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Notes; provided that no Additional Interest will be payable on any interest payment date if, for the applicable fiscal period, either (a) we record positive consolidated station operating income for our television segment or (b) our secured leverage ratio on a consolidated basis is less than 4.75 to 1.00.

Collateral and Ranking

The Notes and the guarantees are secured on a first-priority basis by a security interest in certain of the Company’s and the guarantors’ existing and future tangible and intangible assets (other than “Excluded Assets” (as defined in the Indenture)). The Notes and the guarantees will be structurally subordinated to the obligations of our non-guarantor subsidiaries. The Notes and guarantees will be senior to all of the Company’s and the guarantors’ existing and future unsecured indebtedness to the extent of the value of the collateral.

The Indenture permits us, under specified circumstances, to incur additional debt in the future. The amount of such debt is limited by the covenants contained in the Indenture.

The Notes are senior secured obligations of the Company that rank equally with all of our existing and future senior indebtedness and senior to all of our existing and future subordinated indebtedness. Subject to certain exceptions, the Notes will be fully and unconditionally guaranteed by each of our existing and future wholly-owned domestic subsidiaries (which excludes (i) our existing and future subsidiaries formed in Puerto Rico (the “Puerto Rican Subsidiaries”), (ii) our future subsidiaries formed under the laws of foreign jurisdictions and (iii) our existing and future subsidiaries, whether domestic or foreign, of the Puerto Rican Subsidiaries or foreign subsidiaries) and our other domestic subsidiaries that guarantee certain of our other debt. The Notes and guarantees will be structurally subordinated to all existing and future liabilities (including trade payables) of our non-guarantor subsidiaries.

Covenants and Other Matters

The Indenture governing the Notes contains covenants that, among other things, limit our ability and the ability of the guarantors to:

 

   

incur or guarantee additional indebtedness;

 

   

pay dividends and make other restricted payments;

 

   

incur restrictions on the payment of dividends or other distributions from our restricted subsidiaries;

 

   

engage in sale-lease back transactions;

 

   

enter into new lines of business;

 

   

make certain payments to holders of notes that consent to amendments to the indenture governing the notes without paying such amounts to all holders of notes;

 

   

create or incur certain liens;

 

   

make certain investments and acquisitions;

 

   

transfer or sell assets;

 

   

engage in transactions with affiliates; and

 

   

merge or consolidate with other companies or transfer all or substantially all of our assets.

The Indenture contains certain customary representations and warranties, affirmative covenants and events of default which could, subject to certain conditions, cause the Notes to become immediately due and payable, including, but not limited to, the failure to make premium or interest payments; failure by the Company to accept and pay for Notes tendered when and as required by the change of control and asset sale provisions of the Indenture; failure to comply with certain covenants in the Indenture; failure to comply with certain agreements in the Indenture for a period of 60 days following notice by the Trustee or the holders of not less than 25% in aggregate principal amount of the Notes then outstanding; failure to pay any debt within any applicable grace period after the final maturity or acceleration of such debt by the holders thereof because of a default, if the total amount of such debt unpaid or accelerated exceeds $15 million; failure to pay final judgments entered by a court or courts of competent jurisdiction aggregating $15 million or more (excluding amounts covered by insurance), which judgments are not paid, discharged or stayed, for a period of 60 days; and certain events of bankruptcy or insolvency.

 

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Table of Contents

9. Dividend Payments on our 10  3/4% Series B Cumulative Exchangeable Redeemable Preferred Stock

Under the terms of our Series B preferred stock, the holders of the outstanding shares of the Series B preferred stock are entitled to receive, when, as and if declared by the Board of Directors out of funds of the Company legally available therefor, dividends on the Series B preferred stock at a rate of 10  3/4% per year, of the $1,000 liquidation preference per share. All dividends are cumulative, whether or not earned or declared, and are payable quarterly in arrears on specified dividend payment dates.

In determining whether to declare and pay any prior or future cash dividends, our Board of Directors considers management’s recommendation, our financial condition, as well as whether funds are legally available to make such payments and the dividend would otherwise be permitted under the Delaware General Corporate Law.

On April 4, 2012 and April 5, 2011, the Board of Directors declared a cash dividend for the dividend due April 15, 2012 and 2011 to the holders of our Series B preferred stock of record as of April 1, 2012 and 2011. The cash dividends of $26.875 per share were paid in cash on April 16, 2012 and April 15, 2011.

Our Board of Directors, under management’s recommendation, has previously determined that based on the circumstances at the time, among other things, the then current economic environment and our future cash requirements, it was not prudent to declare or pay the dividends scheduled for July 15, 2012, January 15, 2012, October 15, 2011, July 15, 2011 and January 15, 2011.

If dividends on our Series B preferred stock are in arrears and unpaid for four consecutive quarters, a “voting rights triggering event” will have occurred. Following the occurrence, and during the continuation, of a voting rights triggering event, holders of the Series B preferred stock will be entitled to elect two directors to newly created positions on our board of directors, and we will be subject to more restrictive covenants, including a prohibition on our ability to incur any additional indebtedness and restrictions on our ability to pay dividends or make distributions, redeem or repurchase securities, make investments, enter into transactions with affiliates or merge or consolidate with (or sell substantially all of our assets to) any other person. See Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2011 for a further discussion of our Series B preferred stock, including the consequences of not paying such dividends.

10. New Accounting Standards

In July 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2012-02, Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. This ASU permits an entity the option to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount. The ASU is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. We will implement the provisions of ASU 2012-02 as of January 1, 2013.

 

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Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General Overview

We own and/or operate 21 radio stations in markets that reach approximately 41% of the Hispanic population in the United States, including Puerto Rico. In addition, we broadcast via our owned and operated television stations in South Florida and Houston and through distribution agreements, including nationally on a subscriber basis, which allow us to serve television markets representing over 15% of U.S. Hispanics. We operate two reportable segments: radio and television.

Our radio stations are located in six of the eight most populous Hispanic markets in the United States: Los Angeles, New York, Puerto Rico, Chicago, Miami and San Francisco. Los Angeles and New York have the largest and second largest Hispanic populations and are also the largest and second largest radio markets in the United States measured by advertising revenue, respectively. We format the programming of each of our radio stations to capture a substantial share of the Hispanic audience in their respective markets. The U.S. Hispanic population is diverse, consisting of numerous identifiable ethnic groups from many different countries of origin, and each ethnic group has its own musical and cultural heritage. Since the music, culture, customs and Spanish dialects vary from one radio market to another, we strive to maintain familiarity with the musical tastes and preferences of each of the various Hispanic ethnic groups. To accommodate and monetize such diversity, we customize our programming to match the local preferences of our target demographic audience in each market we serve. For the six-months ended June 30, 2012 and 2011, our radio revenue was generated primarily from the sale of local, national and network advertising, and our radio segment generated 87% of our consolidated net revenue.

Our television stations and related affiliates operate under the “MegaTV” brand. We have created a unique television format which focuses on entertainment, current events and variety with high-quality content. Our programming is formatted to capture a larger share of the U.S. Hispanic audience by focusing on our core strengths as an “entertainment” company, thus offering a new alternative compared to the traditional Hispanic television channels. MegaTV’s programming is based on a strategy designed to showcase a combination of programs, ranging from televised radio-branded shows to general entertainment programs, such as music, celebrity, debate, interviews and personality based shows. As part of our strategy, we have incorporated certain of our radio on-air personalities into our television programming. In addition, we have included interactive elements into our programming to complement our Internet websites. We produce over 50 hours of original programming per week. For the six-months ended June 30, 2012 and 2011, our television revenue was generated primarily from the sale of local advertising and paid programming and generated 13% of our consolidated net revenues.

As part of our operating business, we also own 21 bilingual websites, including www.lamusica.com, Mega.tv and various station websites that provide content related to Latin music, entertainment, news and culture. LaMusica.com and our network of station websites generate revenue primarily from advertising and sponsorship. In addition, the majority of our station websites simultaneously stream our stations’ content, which has broadened the audience reach of our radio stations. In addition, we produce live concerts and events in the United States and Puerto Rico. Concerts generate revenue from ticket sales, sponsorship and promotions while raising awareness of our brands in the surrounding communities. These distinct offerings provide additional synergistic opportunities for our advertising partners to reach their targeted audiences.

 

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Table of Contents

Business Drivers and Financial Statement Presentation

The following discussion provides a brief description of certain key items that appear in our consolidated financial statements and general business factors that impact these items.

Net Revenue Description and Factors

Our net revenue is primarily derived from the sale of advertising airtime to local and national advertisers. Net revenue is gross revenue less agency commissions, which are generally 15% of gross revenue.

 

   

Local revenue generally consists of advertising airtime sold in a station’s local market either directly to the advertiser or through an advertiser’s agency. Local revenue includes local spot sales, integrated sales, sponsorship sales and paid-programming (or infomercials). For the six-months ended June 30, 2012 and 2011, local revenue comprised 68% of our gross revenue.

 

   

National and network revenue generally consists of advertising airtime sold to agencies purchasing advertising for multiple markets. National sales are generally facilitated by our national representation firm, which serves as our agent in these transactions. For the six-months ended June 30, 2012 and 2011, national revenue comprised 15—18% of our gross revenue. Network sales generally consists of advertising airtime sold to our network sales partner and for the six-months ended June 30, 2012 and 2011, comprised 3%—5% of our gross revenue.

Our net revenue is generally determined by the advertising rates that we are able to charge and the number of advertisements that we can broadcast without jeopardizing listenership/viewership levels. Each station broadcasts a predetermined number of advertisements per hour with the actual number depending upon the format of a particular station and any programming strategy we are utilizing to attract an audience. The number of advertisements we decide to broadcast hourly is intended to maximize the station’s revenue without negatively impacting its audience listener/viewer levels. While there may be shifts from time to time in the number of advertisements broadcast during a particular time of the day, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year.

Our advertising rates are primarily based on the following factors:

 

   

a station’s audience share in the demographic groups targeted by advertisers which are measured by ratings agencies, primarily Arbitron and Nielsen;

 

   

the number of stations, as well as other forms of media, in the market competing for the attention of the same demographic groups;

 

   

the supply of, and demand for, advertising time; and

 

   

the size of the market.

Our net revenue is also affected by general economic conditions, competition and our ability to improve operations at our market clusters. Seasonal revenue fluctuations are also common in the broadcasting industry and are primarily due to variations in advertising expenditures by local and national advertisers. Our net revenue is typically lowest in the first calendar quarter of the year.

In addition to advertising revenue, we also generate revenue from barter sales, special events revenue, interactive revenue, syndication revenue, subscriber revenue and other revenue. For the six-months ended June 30, 2012 and 2011, these revenues combined comprised approximately 9%—14% of our gross revenue.

 

   

Barter sales. We use barter sales agreements to reduce cash paid for operating costs and expenses by exchanging advertising airtime for goods or services. However, we endeavor to minimize barter revenue in order to maximize cash revenue from our available airtime.

 

   

Special events revenue. We generate special events revenue from ticket sales and event sponsorships, as well as profit-sharing arrangements by producing or co-producing live concerts and events promoted by our radio and television stations.

 

   

Interactive revenue. We derive internet revenue from our websites through the sale of advertiser promotions and advertising on our websites and the sale of advertising airtime during audio streaming of our radio stations over the internet.

 

   

Syndication revenue. We receive syndication revenue from licensing various MegaTV content internationally.

 

   

Subscriber revenue. We receive subscriber revenue in the form of a per subscriber based fee, which is paid to us by satellite operators.

 

   

Other revenue. We receive other ancillary revenue such as rental income from renting available tower space or sub-channels.

 

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Operating Expenses Description and Factors

Our operating expenses consist primarily of (1) engineering and programming expenses, (2) selling, general and administrative and (3) corporate expenses.

 

   

Engineering and programming expenses. Engineering and programming expenses are related to the delivery and creation of our programming content on the air. These expenses include compensation and benefits for employees involved in engineering and programming, transmitter-related expenses, originally produced content, on-air promotions, acquired programming, music license fees, broadcasting rights fees and other expenses.

 

   

Selling, general and administrative expenses. Selling, general and administrative expenses are related to the costs of selling our programming content and administrative costs associated with operating and managing our stations. These expenses include compensation and benefits for employees involved in selling and administrative functions, commissions, rating services, advertising, barter expenses, facilities expenses, special events expenses, professional fees, insurance, allowance for doubtful accounts and other expenses.

 

   

Corporate expenses. Corporate expenses are related to the operations of our corporate offices and matters. These expenses include compensation and benefits for our corporate employees, professional fees, insurance, corporate facilities expenses and other expenses.

We strive to control our operating expenses by centralizing certain functions at our corporate offices and consolidating certain functions in each of our market clusters. Also, in our pursuit to control our operating expenses, we work closely with our local station management and vendors.

Comparison Analysis of the Operating Results for the Three-Months Ended June 30, 2012 and 2011

The following summary table presents financial data for each of our operating segments:

 

     Three-Months Ended
June 30,
 
     2012     2011  
     (In thousands)  

Net revenue:

    

Radio

   $ 30,288        31,222   

Television

     4,323        4,405   
  

 

 

   

 

 

 

Consolidated

   $ 34,611        35,627   
  

 

 

   

 

 

 

Engineering and programming expenses:

    

Radio

   $ 4,422        5,279   

Television

     3,193        4,290   
  

 

 

   

 

 

 

Consolidated

   $ 7,615        9,569   
  

 

 

   

 

 

 

Selling, general and administrative expenses:

    

Radio

   $ 11,572        8,936   

Television

     2,322        2,021   
  

 

 

   

 

 

 

Consolidated

   $ 13,894        10,957   
  

 

 

   

 

 

 

Corporate expenses:

   $ 1,636        2,012   

Depreciation and amortization:

    

Radio

   $ 526        545   

Television

     666        575   

Corporate

     112        137   
  

 

 

   

 

 

 

Consolidated

   $ 1,304        1,257   
  

 

 

   

 

 

 

(Gain) loss on the disposal of assets, net:

    

Radio

   $ (5     (2

Television

     —          —     

Corporate

     —          —     
  

 

 

   

 

 

 

Consolidated

   $ (5     (2
  

 

 

   

 

 

 

Impairment charges and restructuring costs:

    

Radio

   $ 71        —     

Television

     11        —     

Corporate

     286        207   
  

 

 

   

 

 

 

Consolidated

   $ 368        207   
  

 

 

   

 

 

 

Operating income (loss):

    

Radio

   $ 13,702        16,464   

Television

     (1,869     (2,481

Corporate

     (2,034     (2,356
  

 

 

   

 

 

 

Consolidated

   $ 9,799        11,627   
  

 

 

   

 

 

 

 

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The following summary table presents a comparison of our results of operations for the three-months ended June 30, 2012 and 2011. Various fluctuations in the table are discussed below. This section should be read in conjunction with our unaudited condensed consolidated financial statements and notes.

 

     Three-Months Ended
June 30,
 
     2012     2011  
     (In thousands)  

Net revenue

   $ 34,611        35,627   

Engineering and programming expenses

     7,615        9,569   

Selling, general and administrative expenses

     13,894        10,957   

Corporate expenses

     1,636        2,012   

Depreciation and amortization

     1,304        1,257   

(Gain) loss on disposal of assets, net of disposal costs

     (5     (2

Impairment charges and restructuring costs

     368        207   
  

 

 

   

 

 

 

Operating income

   $ 9,799        11,627   

Interest expense, net

     (9,844     (2,024

Income tax expense

     256        1,159   
  

 

 

   

 

 

 

Net (loss) income

   $ (301     8,444   
  

 

 

   

 

 

 

Net Revenue

The decrease in our consolidated net revenue of $1.0 million, or 3%, was due to the decrease in our radio segment. Our radio segment net revenue decreased $0.9 million or 3%, primarily due to national and network sales, offset by increases in barter, interactive and local sales. The decrease in national and network sales occurred throughout most of our markets. The increase in barter and interactive sales occurred throughout most of our markets. The increase in local sales occurred in our New York and Los Angeles markets. Our television segment net revenues decreased $0.1 million or 2%, primarily as a result of decreases in national and local spot sales and integrated sales, offset by increases in paid-programming, sub-channel rental revenue, barter and interactive sales.

Engineering and Programming Expenses

The decrease in our consolidated engineering and programming expenses of $2.0 million or 20% was due to the decreases in both our radio and television segments. Our radio segment expenses decreased $0.9 million or 16%, primarily due to a decrease in music license fees. Our television segment expenses decreased $1.1 million or 26%, mainly due to a decrease in originally produced programming costs and a reduction in broadcasting rights fees related to our former New York and Puerto Rico outlets.

Selling, General and Administrative Expenses

The increase in our consolidated selling, general and administrative expenses of $2.9 million or 27% was due to the increase in both our radio and television segments. Our radio segment expenses increased $2.6 million or 29%, mainly due to increases in local and national commissions, advertising, barter expense, and compensation and benefits. Our television segment expenses increased $0.3 million or 15%, primarily due to increases in professional fees and the provision for doubtful accounts.

Corporate Expenses

The decrease in corporate expenses of $0.4 million or 19% was primarily a result of a decrease in professional fees.

Impairment Charges and Restructuring Costs

The impairment charges and restructuring costs were primarily related to an impairment charge recognized on the sub-lease of leased corporate office space.

Operating Income

The decrease in operating income of $1.8 million or 16% was mainly due to the decrease in net revenue and the increase in operating expenses.

 

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Interest Expense, Net

The increase in interest expense of $7.8 million was due to the increase in our interest rate and amortization of deferred financing costs related to our new 12.5% senior secured notes due 2017. On February 7, 2012, we issued $275 million in aggregate principal amount of 12.5% senior secured notes due 2017 at an issue price of 97% of the principal amount. We used the net proceeds from this offering, together with cash on hand, to repay and terminate the senior credit facility, and to pay the transaction costs related to this offering. Our new senior secured notes have an effective interest rate of approximately 13.3%, including the original issue discount. We also incurred approximately $17.5 million in transaction costs, which is being amortized over the life of our new senior secured notes and recorded as interest expense.

Income Taxes

The decrease in income tax expense of $0.9 million was primarily a result of the decrease in our FCC broadcasting licenses tax amortization.

Net (Loss) Income

The decrease in net income was primarily due to the increase in interest expense and decrease of operating income.

Comparison Analysis of the Operating Results for the Six-Months Ended June 30, 2012 and 2011

The following summary table presents financial data for each of our operating segments:

 

     Six-Months Ended
June 30,
 
     2012     2011  
     (In thousands)  

Net revenue:

    

Radio

   $ 58,066        57,663   

Television

     8,639        8,739   
  

 

 

   

 

 

 

Consolidated

   $ 66,705        66,402   
  

 

 

   

 

 

 

Engineering and programming expenses:

    

Radio

   $ 9,729        11,688   

Television

     6,290        8,087   
  

 

 

   

 

 

 

Consolidated

   $ 16,019        19,775   
  

 

 

   

 

 

 

Selling, general and administrative expenses:

    

Radio

   $ 24,530        19,772   

Television

     4,370        4,364   
  

 

 

   

 

 

 

Consolidated

   $ 28,900        24,136   
  

 

 

   

 

 

 

Corporate expenses:

   $ 3,988        3,943   

Depreciation and amortization:

    

Radio

   $ 1,077        1,163   

Television

     1,446        1,150   

Corporate

     234        283   
  

 

 

   

 

 

 

Consolidated

   $ 2,757        2,596   
  

 

 

   

 

 

 

(Gain) loss on the disposal of assets, net:

    

Radio

   $ (5     (9

Television

     —          —     

Corporate

     —          —     
  

 

 

   

 

 

 

Consolidated

   $ (5     (9
  

 

 

   

 

 

 

Impairment charges and restructuring costs:

    

Radio

   $ 71        —     

Television

     11        —     

Corporate

     342        207   
  

 

 

   

 

 

 

Consolidated

   $ 424        207   
  

 

 

   

 

 

 

Operating income (loss):

    

Radio

   $ 22,664        25,049   

Television

     (3,478     (4,862

Corporate

     (4,564     (4,433
  

 

 

   

 

 

 

Consolidated

   $ 14,622        15,754   
  

 

 

   

 

 

 

 

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The following summary table presents a comparison of our results of operations for the six-months ended June 30, 2012 and 2011. Various fluctuations in the table are discussed below. This section should be read in conjunction with our unaudited condensed consolidated financial statements and notes.

 

     Six-Months Ended
June 30,
 
     2012     2011  
     (In thousands)  

Net revenue

   $ 66,705        66,402   

Engineering and programming expenses

     16,019        19,775   

Selling, general and administrative expenses

     28,900        24,136   

Corporate expenses

     3,988        3,943   

Depreciation and amortization

     2,757        2,596   

(Gain) loss on disposal of assets, net of disposal costs

     (5     (9

Impairment charges and restructuring costs

     424        207   
  

 

 

   

 

 

 

Operating income

   $ 14,622        15,754   

Interest expense, net

     (16,682     (4,060

Loss on early extinguishment of debt

     (391     —     

Income tax expense

     1,513        2,940   
  

 

 

   

 

 

 

Net (loss) income

   $ (3,964     8,754   
  

 

 

   

 

 

 

Net Revenue

The increase in our consolidated net revenue of $0.3 million was due to the increase in our radio segment. Our radio segment net revenue increased $0.4 million or 1%, primarily due to local, interactive, barter and special events revenue, offset by decreases in national and network sales. The increase in local sales occurred in our New York and Los Angeles markets. The increase in interactive and barter sales occurred throughout most of our markets. The increase in special events revenue occurred mainly in our Puerto Rico and Miami markets. The decrease in national and network sales occurred in all of our markets. Our television segment net revenues decreased $0.1 million or 1%, primarily as a result of decreases in national and local spot sales and integrated sales, offset by increases in paid-programming, sub-channel rental revenue, barter and interactive sales.

Engineering and Programming Expenses

The decrease in our consolidated engineering and programming expenses of $3.8 million or 19% was due to the decreases in both our radio and television segments. Our radio segment expenses decreased $2.0 million or 17%, primarily due to decreases in legal settlements and music license fees. Our television segment expenses decreased $1.8 million or 22%, mainly due to a decrease in originally produced programming costs and a reduction in broadcasting rights fees related to our former New York and Puerto Rico outlets.

Selling, General and Administrative Expenses

The increase in our consolidated selling, general and administrative expenses of $4.8 million or 20% was due to the increase in our radio segment expenses. Our radio segment expenses increased $4.8 million or 24%, mainly due to increases in local and national commissions, barter expense, special events expenses, and compensation and benefits. Our television segment expenses were flat.

Corporate Expenses

The increase in corporate expenses of $0.1 million or 1% was primarily a result of an increase in compensation and benefits related to bonuses for the successful 2012 debt refinancing, offset by a decrease in professional fees.

Impairment Charges and Restructuring Costs

The impairment charges and restructuring costs were primarily related to an impairment charge recognized on the sub-lease of leased corporate office space.

Operating Income

The decrease in operating income of $1.1 million or 7% was mainly due to the increase in operating expenses.

 

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Interest Expense, Net

The increase in interest expense of $12.6 million was due to the increase in our interest rate and amortization of deferred financing costs related to our new 12.5% senior secured notes due 2017. On February 7, 2012, we issued $275 million in aggregate principal amount of 12.5% senior secured notes due 2017 at an issue price of 97% of the principal amount. We used the net proceeds from this offering, together with cash on hand, to repay and terminate the senior credit facility, and to pay the transaction costs related to this offering. Our new senior secured notes have an effective interest rate of approximately 13.3%, including the original issue discount. We also incurred approximately $17.5 million in transaction costs, which is being amortized over the life of our new senior secured notes and recorded as interest expense.

Loss on Early Extinguishment of Debt

The loss on the early extinguishment of debt was due to the write-off of unamortized deferred financing costs related to the repayment and termination of the senior credit facility, on February 7, 2012.

Income Taxes

The decrease in income tax expense of $1.4 million was primarily a result of the decrease in our FCC broadcasting licenses tax amortization.

Net (Loss) Income

The decrease in net income was primarily due to the increase in interest expense and decrease of operating income.

Liquidity and Capital Resources

Our primary sources of liquidity are our current cash and cash equivalents and the cash expected to be provided by operations. We do not currently have a revolving credit facility or other working capital lines of credit. Our cash flow from operations is subject to factors impacting our customers and target audience, such as overall advertising demand, shifts in population, station listenership and viewership, demographics, audience tastes and fluctuations in preferred advertising media. Our ability to raise funds by increasing our indebtedness is limited by the terms of the certificate of designations governing our Series B preferred stock and by the terms of the indenture governing the Notes. Additionally, our certificate of designations and the indenture governing the Notes place restrictions on us with respect to the sale of assets, liens, investments, dividends, debt repayments, transactions with affiliates, and consolidations and mergers, among other things.

Our strategy is to primarily utilize cash flows from operations to meet our capital needs and contractual obligations. Management continually projects anticipated cash requirements and believes that cash from operating activities, together with cash on hand, should be sufficient to permit us to meet our operating obligations over the next twelve month period, including, among other things, required semi-annual interest payments pursuant to the Notes due April 2017 and capital expenditures, excluding the acquisitions of major FCC broadcasting licenses. Disruptions in the capital and credit markets may result in increased borrowing costs associated with our short-term and long-term debt.

Assumptions (none of which can be assured) which underlie management’s beliefs, include the following:

 

   

the demand for advertising within the broadcasting industry and economic conditions in general will not deteriorate further in any material respect;

 

   

we will continue to successfully implement our business strategy; and

 

   

we will not incur any material unforeseen liabilities, including but not limited to taxes, environmental liabilities, regulatory matters or legal judgments.

We evaluate strategic media acquisitions and/or dispositions and strive to expand our media content through distribution and affiliations in order to achieve a significant presence with clusters of stations in the top U.S. Hispanic markets. We engage in discussions regarding potential acquisitions and/or dispositions and expansion of our content through media outlets from time to time in the ordinary course of business. We anticipate that any future acquisitions would be financed through funds generated from permitted debt financing, equity financing, operations, asset sales or a combination of these or other available sources. However, there can be no assurance that financing from any of these sources, if necessary and available, can be obtained on favorable terms.

 

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Refinancing of Company’s debt

On February 7, 2012 we closed our offering of $275 million in aggregate principal amount of 12.5% senior secured notes due 2017 (the “Notes”) at an issue price of 97% of the principal amount. The Notes were offered solely by means of a private placement either to qualified institutional buyers in the United States pursuant to Rule 144A under the Securities Act, or to certain persons outside the United States pursuant to Regulation S under the Securities Act, as amended. We used the net proceeds from the offering, together with cash on hand, to repay and terminate the First Lien Credit Facility, and to pay the transaction costs related to the offering. As a result of the repayment and termination of the First Lien Credit Facility, we recognized a loss on early extinguishment of debt related to the write-off of unamortized deferred financing costs of approximately $0.4 million during the six-months ended June 30, 2012.

Interest—The Notes accrue interest at a rate of 12.5% per year. Interest on the Notes is paid semi-annually on each April 15 and October 15, commencing on April 15, 2012. After April 15, 2013, interest will accrue at a rate of 12.5% per annum on (i) the original amount of the Notes plus (ii) any Additional Interest (as defined below) payable but unpaid in any prior interest period, payable in cash on each interest payment date. Further, beginning on the interest payment date occurring on April 15, 2013, additional interest will be payable at a rate of 2.00% per annum (the “Additional Interest”) on (i) the original principal amount of the Notes plus (ii) any amount of Additional Interest payable but unpaid in any prior interest period, to be paid in cash, at our election, (x) on the applicable interest payment date or (y) on the earliest of the maturity date of the Notes, any acceleration of the Notes and any redemption of the Notes; provided that no Additional Interest will be payable on any interest payment date if, for the applicable fiscal period, either (a) we record positive consolidated station operating income for our television segment or (b) our secured leverage ratio on a consolidated basis is less than 4.75 to 1.00.

Collateral and Ranking—The Notes and the guarantees are secured on a first-priority basis by a security interest in certain of the Company’s and the guarantors’ existing and future tangible and intangible assets (other than “Excluded Assets” (as defined in the Indenture)). The Notes and the guarantees will be structurally subordinated to the obligations of our non-guarantor subsidiaries. The Notes and guarantees will be senior to all of the Company’s and the guarantors’ existing and future unsecured indebtedness to the extent of the value of the collateral.

The Indenture permits us, under specified circumstances, to incur additional debt in the future. The amount of such debt is limited by the covenants contained in the Indenture.

The Notes are senior secured obligations of the Company that rank equally with all of our existing and future senior indebtedness and senior to all of our existing and future subordinated indebtedness. Subject to certain exceptions, the Notes will be fully and unconditionally guaranteed by each of our existing and future wholly-owned domestic subsidiaries (which excludes (i) our existing and future subsidiaries formed in Puerto Rico (the “Puerto Rican Subsidiaries”), (ii) our future subsidiaries formed under the laws of foreign jurisdictions and (iii) our existing and future subsidiaries, whether domestic or foreign, of the Puerto Rican Subsidiaries or foreign subsidiaries) and our other domestic subsidiaries that guarantee certain of our other debt. The Notes and guarantees are structurally subordinated to all existing and future liabilities (including trade payables) of our non-guarantor subsidiaries.

Covenants and Other Matters—The Indenture governing the Notes contains covenants that, among other things, limit our ability and the ability of the guarantors to:

 

   

incur or guarantee additional indebtedness;

 

   

pay dividends and make other restricted payments;

 

   

incur restrictions on the payment of dividends or other distributions from our restricted subsidiaries;

 

   

engage in sale-lease back transactions;

 

   

enter into new lines of business;

 

   

make certain payments to holders of notes that consent to amendments to the indenture governing the notes without paying such amounts to all holders of notes;

 

   

create or incur certain liens;

 

   

make certain investments and acquisitions;

 

   

transfer or sell assets;

 

   

engage in transactions with affiliates; and

 

   

merge or consolidate with other companies or transfer all or substantially all of our assets.

 

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Table of Contents

The Indenture contains certain customary representations and warranties, affirmative covenants and events of default which could, subject to certain conditions, cause the Notes to become immediately due and payable, including, but not limited to, the failure to make premium or interest payments; failure by the Company to accept and pay for Notes tendered when and as required by the change of control and asset sale provisions of the Indenture; failure to comply with certain covenants in the Indenture; failure to comply with certain agreements in the Indenture for a period of 60 days following notice by the Trustee or the holders of not less than 25% in aggregate principal amount of the Notes then outstanding; failure to pay any debt within any applicable grace period after the final maturity or acceleration of such debt by the holders thereof because of a default, if the total amount of such debt unpaid or accelerated exceeds $15 million; failure to pay final judgments entered by a court or courts of competent jurisdiction aggregating $15 million or more (excluding amounts covered by insurance), which judgments are not paid, discharged or stayed, for a period of 60 days; and certain events of bankruptcy or insolvency.

Potential impact on the liquidity of our Series B preferred stock

Our liquidity could be significantly affected on October 15, 2013 if the holders of shares of Series B preferred stock request that we repurchase (subject to the legal availability of funds) all or a portion of their Series B preferred stock. We can only make such purchases out of legally available funds. If we repurchase such Series B preferred stock with cash, we would reduce cash available to make other payments. Alternatively, if we fail to discharge our repurchase obligation with respect to the Series B preferred stock upon a valid request, then a voting rights triggering event will occur.

Following the occurrence, and during the continuation, of a “voting rights triggering event,” holders of the Series B preferred stock will be entitled to elect two directors to newly created positions on our board of directors, and we will be subject to more restrictive covenants, including a prohibition on our ability to incur any additional indebtedness and restrictions on our ability to pay dividends or make distributions, redeem or repurchase securities, make investments, enter into transactions with affiliates or merge or consolidate with (or sell substantially all of our assets to) any other person. See Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2011 for a further discussion of our Series B preferred stock, including the consequences of not paying such dividends.

Summary of Capital Resources

The following summary table presents a comparison of our capital resources for the six-months ended June 30, 2012 and 2011, with respect to certain key measures affecting our liquidity. The changes set forth in the table are discussed below. This section should be read in conjunction with the unaudited condensed consolidated financial statements and notes.

 

     Six-Months Ended
June 30,
    Change  
     2012     2011     $  
     (In thousands)  

Capital expenditures:

      

Radio

   $ 267        453        (186

Television

     356        1,634        (1,278

Corporate

     111        120        (9
  

 

 

   

 

 

   

Consolidated

   $ 734        2,207        (1,473
  

 

 

   

 

 

   

Net cash flows provided by operating activities

   $ 8,499        16,378        (7,879

Net cash flows used in investing activities

     (729     (2,192     1,463   

Net cash flows used in financing activities

     (56,508     (4,342     (52,166
  

 

 

   

 

 

   

Net increase (decrease) in cash and cash equivalents

   $ (48,738     9,844     
  

 

 

   

 

 

   

Capital Expenditures

The decrease in our capital expenditures is primarily related to the absence in 2012 of the 2011 build out of our Puerto Rico television studios.

Net Cash Flows Provided by Operating Activities

Changes in our net cash flows from operating activities were primarily a result of the increase in cash paid to vendors, including interest, offset by a decrease in cash collected from trade sales.

 

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Table of Contents

Net Cash Flows Used in Investing Activities

Changes in our net cash flows from investing activities were a result of the decrease in our capital expenditures. The decrease in our capital expenditures is primarily related to the absence in 2012 of the 2011 build out of our Puerto Rico television studios.

Net Cash Flows Used in Financing Activities

Changes in our net cash flows from financing activities were a result of the 2012 refinancing. On February 7, 2012, we issued $275 million in aggregate principal amount of 12.5% senior secured notes due 2017 at an issue price of 97% of the principal amount. We used the net proceeds from this offering, together with cash on hand, to repay and terminate the senior credit facility, and to pay the transaction costs related to this offering.

Recent Developments

Debt Refinancing

On February 7, 2012 we closed our offering of $275 million in aggregate principal amount of 12.5% senior secured notes due 2017 (the “Notes”) at an issue price of 97% of the principal amount. The Notes were offered solely by means of a private placement either to qualified institutional buyers in the United States pursuant to Rule 144A under the Securities Act, or to certain persons outside the United States pursuant to Regulation S under the Securities Act and are governed by an indenture, dated as of the same date, by and between the Company and Wilmington Trust, National Association, as trustee. We used the net proceeds from the offering, together with cash on hand, to repay and terminate the previously existing $350,000,000 first lien credit agreement, dated as of June 10, 2005, among the Company, the lenders from time to time party thereto, Merrill Lynch, Pierce Fenner & Smith, Inc., as syndication agent, Wachovia Bank, National Association, as documentation agent, and Lehman Commercial Paper Inc., as administrative agent, that was due June 10, 2012, and to pay the transaction costs related to the offering.

Dividend Payment on the Series B Preferred Stock

Under the terms of our Series B preferred stock, the holders of the outstanding shares of the Series B preferred stock are entitled to receive, when, as and if declared by the Board of Directors out of funds of the Company legally available therefor, dividends on the Series B preferred stock at a rate of 10  3/4% per year, of the $1,000 liquidation preference per share. All dividends are cumulative, whether or not earned or declared, and are payable quarterly in arrears on specified dividend payment dates.

In determining whether to declare and pay any prior or future cash dividends, our Board of Directors considers management’s recommendation, our financial condition, as well as whether funds are legally available to make such payments and whether the dividend would otherwise be permitted under the Delaware General Corporate Law.

On April 4, 2012 and April 5, 2011, the Board of Directors declared a cash dividend for the dividend due April 15, 2012 and 2011 to the holders of our Series B preferred stock of record as of April 1, 2012 and 2011. The cash dividends of $26.875 per share were paid in cash on April 16, 2012 and April 15, 2011.

Our Board of Directors, under management’s recommendation, had previously determined that based on the circumstances at the time, among other things, the then current economic environment and our future cash requirements, it was not prudent to declare or pay the dividends scheduled for July 15, 2012, January 15, 2012, October 15, 2011, July 15, 2011 and January 15, 2011.

If dividends on our Series B preferred stock are in arrears and unpaid for four consecutive quarters, a “voting rights triggering event” will have occurred. Following the occurrence, and during the continuation, of a voting rights triggering event, holders of the Series B preferred stock will be entitled to elect two directors to newly created positions on our board of directors, and we will be subject to more restrictive covenants, including a prohibition on our ability to incur any additional indebtedness and restrictions on our ability to pay dividends or make distributions, redeem or repurchase securities, make investments, enter into transactions with affiliates or merge or consolidate with (or sell substantially all of our assets to) any other person. See Item 1A. Risk Factors of our Annual Report on Form 10-K filed on March 30, 2012 for a further discussion of our Series B preferred stock, including the consequences of not paying such dividends.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

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Table of Contents
Item 4. Controls and Procedures

Evaluation Of Disclosure Controls And Procedures. Our management, including our principal executive and financial officers, have conducted an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures,” as such term is defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act, to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information we are required to disclose in such reports is accumulated and communicated to management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive and financial officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes In Internal Control Over Financial Reporting. There has been no change in our internal control over financial reporting during the quarter ended June 30, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings

The information set forth under Note 6 contained in the “Notes to Unaudited Condensed Consolidated Financial Statements” of this Quarterly Report on Form 10-Q is incorporated by reference in answer to this Item.

 

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Table of Contents
Item 6. Exhibits

The following exhibits, which are numbered in accordance with Item 601 of Regulation S-K, are filed herewith or, as noted, incorporated by reference herein:

 

Exhibit

Number

 

Exhibit Description

  31.1*   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2*   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1**   Certification of Periodic Financial Report by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  32.2**   Certification of Periodic Financial Report by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed herewith
** Furnished herewith

 

28


Table of Contents

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.
By:   /s/ JOSEPH A. GARCÍA
  JOSEPH A. GARCÍA
 

Chief Financial Officer,

Chief Administrative Officer, Senior

Executive Vice President and Secretary

(principal financial and accounting officer

and duly authorized officer of the registrant)

Date: August 14, 2012

 

29


Table of Contents

EXHIBIT INDEX

 

Exhibit

Number

 

Exhibit Description

  31.1*   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2*   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1**   Certification of Periodic Financial Report by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  32.2**   Certification of Periodic Financial Report by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed herewith
** Furnished herewith

 

30

XNAS:SBSA Spanish Broadcasting System Inc Quarterly Report 10-Q Filling

Spanish Broadcasting System Inc XNAS:SBSA Stock - Get Quarterly Report SEC Filing of Spanish Broadcasting System Inc XNAS:SBSA stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

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XNAS:SBSA Spanish Broadcasting System Inc Quarterly Report 10-Q Filing - 6/30/2012
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