**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C.  20549**

 

**FORM 10-Q**

 

|                               | **ý** | **Quarterly Report pursuant to Section 13 or 15(d) of the  Securities Exchange Act of 1934**  |
|------------------------------------|------------|-----------------------------------------------------------------------------------------------|
|                               |       |                                                                                          |
|                               |       | **For the Quarterly Period Ended March 31, 2003**                                             |
|                               |       |                                                                                          |
| **OR**                             |
|                               |       |                                                                                          |
|                               | **o**      | **Transition Report Pursuant to Section 13 or 15(d) of the  Securities Exchange Act of 1934** |
|                               |       |                                                                                          |
| **Commission  File No. 333-61211** |

 

| **Radio Unica Corp.**                                                               |
|-------------------------------------------------------------------------------------|
| (Exact name of  registrant as specified in its charter)                             |
|                                                                                |   |   |
| **Delaware**                                                                        |   | **65-0776004** |
| (State of  Incorporation)                                                           |   | (I.R.S. Employer  Identification Number) |
|                                                                                |   |   |
| **8400  N.W. 52nd Street, Suite 100  Miami, FL**                                    |   | **33166** |
| (Address of principal  executive offices)                                           |   | (Zip Code) |
|                                                                                |   |   |
| **305-463-5000**                                                                    |
| (Registrant’s telephone  number, including area code)                          |
|                                                                                |
| **N/A**                                                                             |
| (Former name, former  address and former fiscal year, if changed since last report) |

 

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.  YES ý   NO o

 

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Exchange ActRule 12b-2) Yes o No ý

 

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

 

As of May 14,2003, 100 shares of Common Stock, $.01 par value were outstanding.

 

 

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**RADIO UNICA CORP.**

 

**TABLE OFCONTENTS**

 
| **PART I.**  | **FINANCIAL INFORMATION**                                   |
|--------------|-------------------------------------------------------------|
|         |                                                        |
| Item 1.      | Financial Statements                                        |
| Item 2.      | Management’s Discussion and Analysis                   |
| Item  3.     | Quantitative  and Qualitative Disclosures about Market Risk |
| Item 4.      | Control and Procedures                                      |
|         |                                                        |
| **PART II.** | **OTHER INFORMATION**                                       |
|         |                                                        |
| Item 6.      | Exhibits and  Reports on Form 8-K                           |
|              |                                                             |  |

 

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**RADIO UNICACORP.**

 

**CONSOLIDATEDBALANCE SHEETS**

 
|                                                                                                    |   | **March 31,  2003** |        | **December 31,  2002** |   |
|---------------------------------------------------------------------------------------------------------|--------|---------------------|-------------|------------------------|--------|
|                                                                                                    |   | **(Unaudited)**     |        |                   |   |
| **ASSETS**                                                                                              |   |                |        |                   |   |
| Current assets:                                                                                         |   |                |        |                   |   |
| Cash and cash equivalents                                                                               |   | $                   | 3,128,449   |                   | $      | 2,805,775 |   |
| Accounts receivable, net of  allowance for doubtful accounts of $1,134,365 and $1,148,228, respectively |   | 7,275,522           |        | 9,494,925              |   |
| Prepaid expenses and other  current assets                                                              |   | 3,306,232           |        | 2,251,029              |   |
| Assets held for sale                                                                                    |   | —              |        | 2,925,554              |   |
| Total current assets                                                                                    |   | 13,710,203          |        | 17,477,283             |   |
|                                                                                                    |   |                |        |                   |   |
| Property and equipment, net                                                                             |   | 22,483,820          |        | 23,071,043             |   |
| Broadcast licenses, net of  accumulated amortization of $10,210,423                                     |   | 96,433,935          |        | 96,433,935             |   |
| Other intangible assets,  net                                                                           |   | 8,679,609           |        | 8,971,849              |   |
| Other assets                                                                                            |   | 368,704             |        | 318,954                |   |
|                                                                                                    |   | $                   | 141,676,271 |                   | $      | 146,273,064 |   |
|                                                                                                    |   |                |        |                   |   |
| **LIABILITIES  AND STOCKHOLDERS’ DEFICIT**                                                         |   |                |        |                   |   |
| Current liabilities:                                                                                    |   |                |        |                   |   |
| Accounts payable                                                                                        |   | $                   | 901,754     |                   | $      | 1,295,971 |   |
| Accrued expenses                                                                                        |   | 2,388,208           |        | 2,827,704              |   |
| Interest payable                                                                                        |   | 3,164,095           |        | 7,784,537              |   |
| Deferred revenue                                                                                        |   | 384,122             |        | 608,218                |   |
| Current portion of notes  payable                                                                       |   | 632,049             |        | 641,741                |   |
| Total current liabilities                                                                               |   | 7,470,228           |        | 13,158,171             |   |
|                                                                                                    |   |                |        |                   |   |
| Other liabilities                                                                                       |   | 75,000              |        | 75,000                 |   |
| Notes payable                                                                                           |   | 500,000             |        | 500,810                |   |
| Deferred taxes                                                                                          |   | 988,460             |        | 988,460                |   |
| Due to parent, net                                                                                      |   | 93,876,927          |        | 95,656,430             |   |
| Borrowings under revolving  credit facility                                                             |   | 10,000,000          |        | —                 |   |
| Senior discount notes                                                                                   |   | 158,088,000         |        | 158,088,000            |   |
|                                                                                                    |   |                |        |                   |   |
| Commitments and  contingencies                                                                          |   |                |        |                   |   |
|                                                                                                    |   |                |        |                   |   |
| Stockholders’ deficit:                                                                             |   |                |        |                   |   |
| Common stock; $.01 par  value; 1,000 shares authorized, 100 shares issued and outstanding               |   | 1                   |        | 1                      |   |
| Additional paid-in-capital                                                                              |   | 59,612,074          |        | 59,612,074             |   |
| Deferred compensation  expense                                                                          |   | (74,483             | )           | (96,226                | )      |
| Accumulated deficit                                                                                     |   | (188,859,936        | )           | (181,709,656           | )      |
| Total stockholders’ deficit                                                                        |   | (129,322,344        | )           | (122,193,807           | )      |
|                                                                                                    |   | $                   | 141,676,271 |                   | $      | 146,273,064 |   |

 

*The accompanying notes are anintegral part of these financial statements.*

 

2

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**RADIO UNICA CORP.**

 

**CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)**

 
|                                                            |   | **Three  months ended  March 31,** |       |
|-----------------------------------------------------------------|--------|------------------------------------|------------|
|                                                            |   | **2003**                           |       | **2002** |   |
|                                                            |   |                               |       |   |   |
| Net revenue                                                     |   | $                                  | 9,597,394  |   | $ | 8,161,736 |   |
|                                                            |   |                               |       |   |   |   |   |
| Operating expenses:                                             |   |                               |       |   |   |
| Direct operating                                                |   | 1,012,535                          |       | 1,195,473 |   |
| Selling, general and administrative                             |   | 4,142,760                          |       | 3,970,692 |   |
| Network                                                         |   | 2,800,279                          |       | 3,761,046 |   |
| Corporate                                                       |   | 748,371                            |       | 847,242 |   |
| Cost of promotion services                                      |   | 2,508,591                          |       | 1,012,357 |   |
| Depreciation and amortization                                   |   | 798,700                            |       | 739,250 |   |
| Stock option compensation                                       |   | 21,743                             |       | 160,145 |   |
|                                                            |   | 12,032,979                         |       | 11,686,205 |   |
| Loss from operations                                            |   | (2,435,585                         | )          | (3,524,469 | ) |
|                                                            |   |                               |       |   |   |
| Other income (expense):                                         |   |                               |       |   |   |
| Interest expense                                                |   | (4,961,083                         | )          | (4,511,422 | ) |
| Interest income                                                 |   | 3,468                              |       | 3,104 |   |
| Other                                                           |   | 242,920                            |       | (48,480 | ) |
|                                                            |   | (4,714,695                         | )          | (4,556,798 | ) |
| Loss before income taxes                                        |   | (7,150,280                         | )          | (8,081,267 | ) |
| Income tax benefit                                              |   | —                             |       | 39,018 |   |
| Net loss                                                        |   | $                                  | (7,150,280 | ) | $ | (8,042,249 | ) |
|                                                            |   |                               |       |   |   |
| Net loss per common share - basic and diluted                   |   | $                                  | (71,503    | ) | $ | (80,422 | ) |
|                                                            |   |                               |       |   |   |
| Weighted average common shares outstanding - basic  and diluted |   | 100                                |       | 100 |   |

 

*The accompanying notes are anintegral part of these financial statements.*

 

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**RADIO UNICACORP.**

** **

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS (Unaudited)**

 
|                                                                         |   | **Three months ended  March 31,** |       |
|------------------------------------------------------------------------------|--------|-----------------------------------|------------|
|                                                                         |   | **2003**                          |       | **2002** |   |
|                                                                         |   |                              | ** ** |   | ** ** |
| **Operating  activities**                                                    |   |                              |       |   |   |
| Net loss                                                                     |   | $                                 | (7,150,280 | ) | $ | (8,042,249 | ) |
| Adjustments to reconcile  net loss to net cash used in operating activities: |   |                              |       |   |   |
| Depreciation and  amortization                                               |   | 798,700                           |       | 739,250 |   |
| Provision for bad debts                                                      |   | (13,863                           | )          | 178,077 |   |
| Accretion of interest on  senior discount notes                              |   | —                            |       | 4,305,021 |   |
| Amortization of deferred  financing costs                                    |   | 226,671                           |       | 159,981 |   |
| Stock option compensation  expense                                           |   | 21,743                            |       | 160,145 |   |
| Deferred income taxes                                                        |   | —                            |       | (39,018 | ) |
| Gain on sale of radio  station assets                                        |   | (231,416                          | )          | — |   |
| Other                                                                        |   | (11,556                           | )          | (110,325 | ) |
| Changes in assets and  liabilities, net of effects of acquisitions:          |   |                              |       |   |   |
| Accounts receivable                                                          |   | 2,233,266                         |       | 2,237,142 |   |
| Prepaid expenses and other  current assets                                   |   | (1,157,051                        | )          | 216,600 |   |
| Other assets                                                                 |   | (50,657                           | )          | (101,943 | ) |
| Accounts payable                                                             |   | (394,217                          | )          | (1,400,040 | ) |
| Accrued expenses                                                             |   | (439,496                          | )          | (304,165 | ) |
| Interest payable                                                             |   | (4,660,442                        | )          | — |   |
| Deferred revenue                                                             |   | (212,540                          | )          | (34,691 | ) |
| Other liabilities                                                            |   | —                            |       | 15,000 |   |
| Net cash used in operating  activities                                       |   | (11,041,138                       | )          | (2,021,215 | ) |
|                                                                         |   |                              |       |   |   |
| **Investing  activities**                                                    |   |                              |       |   |   |
| Acquisition of property and  equipment                                       |   | (170,183                          | )          | (1,357,789 | ) |
| Proceeds from sale of radio  station assets                                  |   | 3,324,000                         |       | — |   |
| Net cash used in investing  activities                                       |   | 3,153,817                         |       | (1,357,789 | ) |
|                                                                         |   |                              |       |   |   |
| **Financing  activities**                                                    |   |                              |       |   |   |
| Intercompany payable, net                                                    |   | (1,779,503                        | )          | 3,545,905 |   |
| Repayment of notes payable                                                   |   | (10,502                           | )          | (9,067 | ) |
| Borrowings under revolving  credit facility                                  |   | 10,000,000                        |       | — |   |
| Net cash provided by  financing activities                                   |   | 8,209,995                         |       | 3,536,838 |   |
|                                                                         |   |                              |       |   |   |
| Net decrease in cash and  cash equivalents                                   |   | 322,674                           |       | 157,834 |   |
| Cash and cash equivalents  at beginning of period                            |   | 2,805,775                         |       | 964,042 |   |
| Cash and cash equivalents  at end of period                                  |   | $                                 | 3,128,449  |   | $ | 1,121,876 |   |
|                                                                         |   |                              |       |   |   |

 

*The accompanying notes are anintegral part of these financial statements.*

 

4

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**RADIO UNICACORP.**

 

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (Unaudited)**

 

**1.      Basis of Presentation**

 

The accompanyingunaudited consolidated condensed financial statements of Radio Unica Corp. andsubsidiaries (the “Company”) for the periods indicated herein have been preparedpursuant to the rules and regulations of the Securities and Exchange Commissionand in accordance with generally accepted accounting principles for interimfinancial information.  Accordingly, thefinancial statements do not include all of the information and notes requiredby generally accepted accounting principles for complete financialstatements.  In the opinion ofmanagement, all adjustments (consisting of normal recurring adjustments)considered necessary for a fair presentation have been included.  Operating results for the three months endedMarch 31, 2003 are not necessarily indicative of the results that maybe expected for the year ending December 31, 2003.  The consolidated condensed financial statements include theaccounts of the Company and all majority owned subsidiaries over which theCompany has control.  All significantintercompany accounts and transactions have been eliminated inconsolidation.  For further information,refer to the Company’s 2002 consolidated financial statements and notesthereto.

 

The Company’srevenue and cash flows are typically lowest in the first calendar quarter.Seasonal fluctuations are common in the radio broadcasting industry and are dueprimarily to fluctuations in consumer spending.

 

**2.      Segment Operating Results**

 

Pursuant to theprovisions of Financial Accounting Standards Board (“FASB”) Statement ofFinancial Accounting Standards (“SFAS”) No. 131, “Disclosure About Segments ofa Business Enterprise and Related Information”, the Company is required to reportsegment information. The Company classified its businesses into two reportingsegments: radio broadcasting and promotion services.  The radio broadcasting segment includes the operations of theCompany’s radio network, the operations of all owned and operated radiostations and corporate expenses.  Thepromotion services segment includes the operations of the Company’s marketingand promotions business.  The Companyevaluates performance based on several factors, of which the primary financialmeasures are business segment net revenue, operating income (loss) and earnings(loss) before interest, taxes, depreciation and amortization (“EBITDA”).

 

EBITDA, is presented not as an alternative measure ofoperating results or cash flow from operations (as determined in accordancewith GAAP), but because it is a widely accepted supplemental financial measureof a company’s ability to service debt. The Company’s calculation of EBITDA maynot be comparable to similarly titled measures reported by other companies sinceall companies do not calculate this non-GAAP measure in the same manner. TheCompany’s EBITDA calculation is not intended to represent cash provided by(used in) operating activities, since it does not include interest and taxesand changes in operating assets and liabilities, nor is it intended torepresent the net increase or decrease in cash, since it does not include cashprovided by (used in) investing and financing activities.

 

5

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Results by segmentare as follows:

 
|                          |   | **Three  months ended  March 31,** |        |
|-------------------------------|--------|------------------------------------|-------------|
|                          |   | **2003**                           |        | **2002** |   |
|                          |   | **(Unaudited)**                    |        |
| Net revenue                   |   |                               |        |   |   |
| Radio broadcasting            |   | $                                  | 6,838,823   |   | $ | 6,648,897 |   |
| Promotion services            |   | 2,758,571                          |        | 1,512,839 |   |
| Consolidated                  |   | $                                  | 9,597,394   |   | $ | 8,161,736 |   |
|                          |   |                               |        |   |   |
| Operating income (loss)       |   |                               |        |   |   |
| Radio broadcasting            |   | $                                  | (2,322,395  | ) | $ | (3,655,637 | ) |
| Promotion services            |   | (113,190                           | )           | 131,168 |   |
| Consolidated                  |   | $                                  | (2,435,585  | ) | $ | (3,524,469 | ) |
|                          |   |                               |        |   |   |
| EBITDA                        |   |                               |        |   |   |
| Radio broadcasting            |   | $                                  | (1,343,603  | ) | $ | (3,020,913 | ) |
| Promotion services            |   | (50,362                            | )           | 187,214 |   |
| Consolidated                  |   | $                                  | (1,393,965  | ) | $ | (2,833,699 | ) |
|                          |   |                               |        |   |   |
| Total assets as of March  31, |   |                               |        |   |   |
| Radio broadcasting            |   | 135,222,330                        |        | $ | 136,993,278 |   |
| Promotion services            |   | 6,453,941                          |        | 5,423,119 |   |
| Consolidated                  |   | $                                  | 141,676,271 |   | $ | 142,416,397 |   |

 

Below is areconciliation of operating income (loss) to EBITDA for the Company’s radiobroadcasting and promotion services segments:

 
|                          |   | **Three  Months Ended  March 31,** |       |
|-------------------------------|--------|------------------------------------|------------|
|                          |   | **2003**                           |       | **2002** |   |
| **Radio broadcasting:**       |   |                               |       |   |   |
| Loss from operations          |   | $                                  | (2,322,395 | ) | $ | (3,655,637 | ) |
| Adjustments:                  |   |                               |       |   |   |
| Depreciation and amortization |   | 735,057                            |       | 684,771 |   |
| Other                         |   | 243,735                            |       | (50,047 | ) |
| EBITDA                        |   | $                                  | (1,343,603 | ) | $ | (3,020,913 | ) |
|                          |   |                               |       |   |   |
| **Promotion services:**       |   |                               |       |   |   |
| (Loss) income from operations |   | $                                  | (113,190   | ) | $ | 131,168 |   |
| Adjustments:                  |   |                               |       |   |   |
| Depreciation and amortization |   | 63,643                             |       | 54,479 |   |
| Other                         |   | (815                               | )          | 1,567 |   |
| EBITDA                        |   | $                                  | (50,362    | ) | $ | 187,214 |   |

 

6

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**3.      Stock Option Plan**

 

As permissibleunder Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accountingfor Stock-Based Compensation”, the Company accounts for all stock-basedcompensation arrangements using the intrinsic value method prescribed byAccounting Principles Board Opinion No. 25, “Accounting for Stock Issued toEmployees”, as interpreted by FASB Interpretation No. 44, “Accounting forCertain Transactions Involving Stock Compensation”, and discloses pro forma netloss and loss per share amounts as if the fair value method had been adopted. Accordingly, no compensation cost is recognized for stock option awardsgranted to employees at or above fair market value.

 

The Company’s proforma net loss, pro forma net loss per common share and pro forma weightedaverage fair value of options granted, with related assumptions, assuming theCompany had adopted the fair value method of accounting for all stock-basedcompensation arrangements consistent with the provisions of SFAS No. 123, usingthe Black-Scholes option pricing model for all options granted, are indicatedbelow:

 
|                                                                 |   | **Three  months ended  March 31,** |       |
|----------------------------------------------------------------------|--------|------------------------------------|------------|
|                                                                 |   | **2003**                           |       | **2002** |   |
|                                                                 |   |                               |       |   |   |
| Net loss, as reported                                                |   | $                                  | (7,150,280 | ) | $ | (8,042,249 | ) |
| Deduct:                                                              |   |                               |       |   |   |
| Stock-based compensation expense determined under  fair value method |   | 779,430                            |       | 808,268 |   |
| Net loss, pro forma                                                  |   | $                                  | (7,929,710 | ) | $ | (8,850,517 | ) |
| Net loss per share, basic and diluted                                |   |                               |       |   |   |
| As reported                                                          |   | $                                  | (71,503    | ) | $ | (80,422 | ) |
| Pro forma                                                            |   | $                                  | (79,297    | ) | $ | (88,505 | ) |
|                                                                 |   |                               |       |   |   |
| Weighted average fair value                                          |   | $                                  | —     |   | $ | 1.09 |   |
| Expected life (in years)                                             |   | 10                                 |       | 10 |   |
| Risk free interest rate                                              |   | 4.0                                | %          | 5.0 | % |
| Expected volatility                                                  |   | 213                                | %          | 113 | % |
| Dividend Yield                                                       |   | —                             |       | — |   |

 

7

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**4.      Revolving Credit Facility**

 

At March 31, 2003, the Company was in breach of itsMinimum Stage 1 Broadcast Cash Flow covenant (as defined).  The Company received a waiver for this breachfrom the lender.

 

The Company is subject to quarterly financialcovenants.  There is no assurance thatthe Company will be able to comply with its future financial covenants or thatany future financial covenant breaches will be waived. Any breach that is notwaived could result in an event of default, permitting the lenders to suspendcommitments to make any advance, and to declare amounts outstanding andinterest thereon due and payable, which could have a material adverse effect onour business, financial condition and results of operations.

 

8

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**RADIO UNICACORP.**

 

**MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONSAND FINANCIAL CONDITION**

 

This report contains forward-looking statements withinthe meaning of Section 21E of the Securities Exchange Act of 1934, as amended.These forward-looking statements include, among others, statements concerningthe Company’s outlook for 2003 and beyond, the Company’s expectations, beliefs,future plans and strategies, anticipated events or trends, and similarexpressions concerning matters that are not historical facts.  The forward-looking statements in thisreport are subject to risks and uncertainties that could cause actual resultsto differ materially from those expressed in or implied by the statements.

 

**Overview**

 

We generate radio broadcasting revenue from sales ofnetwork advertising time, and sales of local and national advertising time onradio stations that we own and those that we operate under local marketingagreements (collectively “O&Os”). Advertising rates are, in large part,based upon the network’s and each station’s ability to attract audiences indemographic groups targeted by advertisers. All radio broadcasting revenue isstated net of any agency commissions. We recognize radio broadcasting revenuewhen the commercials are broadcast.  Wealso generate revenue from our promotional and merchandising services company,MASS Promotions, Inc. (“MASS”).  Werecognize revenue generated by MASS when the promotion services are performed.

 

Our operating expenses consist of programmingexpenses, marketing and selling costs, including commissions paid to our salesstaff, technical and engineering costs, cost of promotion services and generaland administrative expenses.

 

**Critical Accounting Policies andEstimates**

 

The discussion and analysis of our financial conditionand results of operations are based on our consolidated financial statements,which have been prepared in accordance with accounting principles generallyaccepted in the United States of America. The preparation of these financialstatements requires us to make estimates and judgments that affect the reportedamount of assets and liabilities, revenues and expenses, and related disclosureof contingent assets and liabilities at the date of our financial statements.In general, we base our estimates on historical experience, on information fromthird party professionals and on various other assumptions that we believe arereasonable under the facts and circumstances. We continually evaluate ouraccounting policies and estimates we use to prepare our consolidated financialstatements. Actual results may differ from these estimates under differentassumptions or conditions.

 

During the quarter ended March 31, 2003, our criticalaccounting policies and the nature of our estimates have not changed from thosedisclosed in our annual report on Form 10-K for the year ended December 31,2002.

 

**Resultsof Operations**

 

**ThreeMonths Ended March 31, 2003 Compared To The Three Months Ended March 31, 2002**

 

NET REVENUE. Net revenue increased by approximately $1.4 million or 18% toapproximately $9.6 million for the three months ended March 31, 2003 fromapproximately $8.2 million for the comparable period in the prior year.  The increase in net revenue related toincreased revenue generated by promotional and merchandising servicesassociated with MASS of approximately $1.2 million, and increased revenue atthe O&Os of approximately $0.2 million.

 

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Direct operating expenses decreased by approximately$0.2 million or 15% to approximately $1.0 million for the three months endedMarch 31, 2003 from approximately $1.2 million for the comparable period in theprior year.  The decrease in directoperating expenses was primarily due to decreased advertising spending in 2003,decreases in headcount at certain stations and the sale and termination ofoperations at the Denver station as of February 11, 2003.

 

Selling, general andadministrative expenses increased by approximately $0.2 million or 4% toapproximately $4.1 million for the three months ended March 31, 2003 fromapproximately $3.9 million for the comparable period in the prior year. The increase in selling, general andadministrative expenses primarily related to the increase in the cost of thesales force at certain stations, the buildup of our operations at our Dallasstation following the signal upgrade completed during the third quarter of2002, offset in part by the sale and termination of operations at theDenver station as of February 11, 2003.

 

Network expenses decreasedapproximately $1.0 million or 26% to approximately $2.8 million for thethree months ended March 31, 2003 from approximately $3.8 million for thecomparable period in the prior year.  The decrease in network expenses was mainlydue to a decrease in the cost of network programming, including sportingevents, decreased personnel costs, and decreased spending associated with thepromotion and marketing of the network.

 

Corporate expenses remainedconstant at approximately $0.8 million for the three months ended March31, 2003 and 2002. Corporateexpenses are comprised of the cost of corporate management, legal and professional fees and insurance.

 

Cost of promotion services increased by approximately$1.5 million or 148% to $2.5 million for the three months ended March 31, 2003from approximately $1.0 million for the comparable period in the prioryear.  The increase in the cost ofpromotion services was related to the variable costs associated with theincrease in MASS’ revenue, as well as higher out of pocket costs associatedwith certain client’s marketing programs.

 

Depreciation andamortization increased by approximately $0.1 million or 8% toapproximately $0.8 million for the three months ended March 31, 2003 fromapproximately $0.7 million for the comparable period in the prior year.  Theincrease in depreciation and amortization was due to the additions of fixed andintangible assets arising from signal upgrades completed during 2002.

 

Stock option compensation expense decreased byapproximately $0.1 million or 86% to approximately $22,000 for the three monthsended March 31, 2003 from approximately $0.2 million for the comparable periodin the prior year.  Stock optioncompensation expense represents a non-cash charge relating to the vesting ofstock options granted to employees to purchase shares of Radio UnicaCommunications Corp.’s common stock.  Thedecrease in stock option compensation expense is due to stock options grantedbecoming fully vested during 2002.

 

10

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OTHER INCOME (EXPENSE). Other income (expense)decreased by approximately $0.2 million or 3% to approximately $(4.7) millionfor the three months ended March 31, 2003 from approximately $(4.5) million forthe comparable period in the prior year. Other income (expense) for the threemonths ended March 31, 2003 included interest expense of approximately $(5.0)million and interest and other income of approximately $0.3 million primarilyrelated to the gain on the sale of the Denver radio station assets in February2003.  Interest expense primarily relatesto the interest on the Senior Discount Notes.

 

NET LOSS.  Netloss decreased by approximately $0.9 million or 11% to approximately $(7.1)million for the three months ended March 31, 2003 from approximately $(8.0)million for the comparable period in the prior year.  The decrease in net loss was mainly the result of the increase inthe Company’s revenue of approximately $1.4 million, increased other income ofapproximately $0.3 million, offset in part by increased operating expenses ofapproximately $0.3 million and increased interest expense of approximately $0.5million.

 

EBITDA.  EBITDAincreased by approximately $1.4 million or 51% to approximately $(1.4) millionfor the three months ended March 31, 2003 from approximately $(2.8) million forthe comparable period in the prior year. The increase in EBTIDA was mainly the result of the decrease in networkexpenses and the gain on the sale of the Denver radio station assets.

 

**Use of Non-GAAP Financial Measures**

 

The Company utilizes a financial measure that is notcalculated in accordance with GAAP to assess its financial performance. Anon-GAAP financial measure is defined as a numerical measure of a company’sfinancial performance that (i) excludes amounts, or is subject to adjustmentsthat have the effect of excluding amounts, that are included in the comparablemeasure calculated and presented in accordance with GAAP in the statement ofincome or statement of cash flows; or (ii) includes amounts, or is subject toadjustments that have the effect of including amounts, that are excluded fromthe comparable measure so calculated and presented. EBITDA is defined asearnings (loss) before interest, taxes, depreciation and amortization. TheCompany believes that the presentation of EBITDA provides useful information toinvestors regarding the Company’s financial condition because it is a commonlyused financial analysis tool for measuring and comparing media companies.  EBITDA also serves as a gauge of theCompany’s ability to service long-term debt and other fixed obligations and tofund continued growth with internally generated funds. EBITDA should not beconsidered as an alternative to net cash provided by (used in) operatingactivities as a measure of liquidity. This non-GAAP financial measure may notbe comparable to similarly titled measures used by other companies.  Below is a reconciliation of loss fromoperations to EBITDA:

 
|                          |   | **Consolidated**                   |       |
|-------------------------------|--------|------------------------------------|------------|
|                          |   | **Three  Months Ended  March 31,** |       |
|                          |   | **2003**                           |       | **2002** |   |
|                          |   |                               |       |   |   |
| Loss from operations          |   | $                                  | (2,435,585 | ) | $ | (3,524,469 | ) |
| Adjustments:                  |   |                               |       |   |   |
| Depreciation and amortization |   | 798,700                            |       | 739,250 |   |
| Other                         |   | 242,920                            |       | (48,480 | ) |
| EBITDA                        |   | $                                  | (1,393,965 | ) | $ | (2,833,699 | ) |

 

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**Liquidity and Capital Resources**

 

The Company has had negative cash flows sinceinception. Working capital and financing for the Company’s acquisitions to datehave been provided primarily by the proceeds from Radio Unica CommunicationCorp.’s (“RUCC”) initial public offering, the issuance of the 113⁄4% SeniorDiscount Notes due August 1, 2006, the issuance of promissory notes, commonstock and preferred stock to the RUCC’s shareholders and proceeds from theRevolving Credit Facility.

 

Net cash used in operating activities increased byapproximately $9.0 million or 446% to approximately $11.0 million for the threemonths ended March 31, 2003 from approximately $2.0 million for the comparableperiod in the prior year.  Net cashprovided by (used in) investing activities increased by $4.5 million or 332% to$3.2 million for the three months ended March 31, 2003 from approximately$(1.3) million for the comparable period in the prior year. The increase ofapproximately $4.5 million from 2002 to 2003 was primarily due to the proceedsreceived from the sale of the Denver radio station of approximately $3.3million and a decrease in capital expenditures of approximately $1.2million.  Net cash provided by financingactivities increased by approximately $4.7 million or 132% to approximately$8.2 million for the three months ended March 31, 2003 from approximately $3.5million for the comparable period in the prior year. The increase ofapproximately $4.7 million from 2002 to 2003 was primarily due to the Companyborrowing $10.0 million under its Revolving Credit Facility in March 2003,offset by a decrease in borrowings from RUCC of approximately $1.8 compared toan increase during the same period last year of approximately $3.5.

 

Capital expenditures primarily relate to the purchaseof broadcast equipment for the network and O&Os, leasehold improvements,computer equipment and telecommunications equipment. Capital expenditures wereapproximately $0.2 million and $1.4 million for the three months ended March31, 2003 and 2002, respectively.  Thedecrease in capital expenditures is primarily due to signal upgrades completedduring 2002.

 

The Company believes that its current cash on hand andits borrowing availability under its Revolving Credit Facility, will at aminimum provide adequate resources to fund the Company’s operating expenses,debt service, working capital requirements and capital expenditures throughMarch 31, 2004.

 

The Company through its financial advisor, CIBC WorldMarkets Corp. (“CIBC”) is currently in discussions with representatives of theSenior Discount Notes (the “Notes”) in order to restructure the terms of theNotes. In addition, the Company through CIBC is in discussions with severalpotential investors to secure additional equity financing.  There can be no assurance that the Companywill be able to restructure its Notes or secure additional equity financing. Inconnection with the above mentioned efforts the Company has incurredapproximately $1,300,000 in fees through March 31, 2003. These fees areincluded in the balance sheet at March 31, 2003 in prepaid expenses and othercurrents assets.  If the Company issuccessful in its efforts to restructure its Notes, the fees paid will becapitalized and amortized accordingly. If the Company is successful in its efforts to raise equity, the feespaid will be recorded as a reduction of the equity proceeds. If the Company isunsuccessful in its efforts to restructure its Notes or raise equity, the feespaid will be expensed.

 

At March 31, 2003, the Company was in breach of theRevolving Credit Facility’s Minimum Stage 1 Broadcast Cash Flow covenant (asdefined).  The Company received a waiverfor this breach from its lender.

 

The Revolving Credit Facility contains quarterlyfinancial covenants.  There is noassurance that the Company will be able to comply with its future financialcovenants or that any future financial covenant breaches will be waived. Anybreach that is not waived could result in an event of default, permitting thelender to suspend commitments to make any advance, and to declare amountsoutstanding and interest thereon due and payable, which could have a materialadverse effect on our business, financial condition and results of operations.

 

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**Liquidity and Capital Resources**

 

If the Company is unable to generate sufficient cashflow, is unable to restructure its Notes, or is unable to secure additionalequity financing, it may have to adopt one or more alternatives after 2003,such as reducing or delaying planned capital expenditures or selling assets.There can be no assurance that any of these financing strategies could beeffected on satisfactory terms, if at all.

 

**Item3.    Quantitative and QualitativeDisclosures about Market Risk**

 

Our exposure to interest rate risk arises principallyfrom the variable rates associated with our Revolving Credit Facility. On March31, 2003, we had borrowings of $10.0 million under our senior credit facilitythat were subject to variable rates. As of March 31, 2003, an adverse change of1.0% in the interest rate on our Revolving Credit Facility would have caused usto incur an increase in interest expense of approximately $0.1 million on anannual basis

 

**Item4.    Controls and Procedures**

 

The Company’s Chief Executive Officer and ChiefFinancial Officer, based on their evaluation of the Company’s disclosure controlsand procedures within the past 90 days, have concluded that such disclosurecontrols and procedures were effective to ensure that material informationrelating to the Company and required to be disclosed by the Company has beenmade known to them and has been recorded, processed, summarized and reportedtimely.  There have not been anysignificant changes in the Company’s internal controls or in other factors thatcould significantly affect these controls subsequent to the date of evaluation.

 

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**RADIO UNICA CORP.**

 

**PART II - OTHER INFORMATION**

 

**Item 6.     Exhibits and Reports on Form 8-K.**

 

(a) Exhibits required by Item 601 of Regulation S-K.

 
| **Exhibit  No.** |   | **Description**                                                                                                   |
|------------------|--------|-------------------------------------------------------------------------------------------------------------------|
| 99.1             |   | Certification of Chief  Executive Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.  Filed herewith. |
|             |   |                                                                                                              |
| 99.2             |   | Certification of Chief  Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.  Filed herewith. |

 

(b) Reports on Form 8-K

 

None

 

SIGNATURES

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
|   | Radio Unica Corp.       |
|--------|-------------------------|
|   |                    |
|   | /s/ Steven E. Dawson    |
| By:    |                    |   |
|   | Steven E. Dawson        |
|   | Chief Financial Officer |
|   |                    |
|   |                    |
| Date:  | May 14, 2003            |   |
|        |                         |  |  |

 

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**Certificationpursuant to**

**Rule13a-14 of the Securities Exchange Act of 1934,**

**asadopted pursuant to**

**Section302 of the Sarbanes-Oxley Act of 2002**

** **

I, Joaquin F. Blaya,Chief Executive Officer of Radio Unica Corp. (the “Company”), certify that:

 

1.     I have reviewed thisquarterly report on Form 10-Q of the Company;

 

2.     Based on my knowledge, thisquarterly report does not contain any untrue statement of a material fact oromit to state a material fact necessary to make the statements made, in lightof the circumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

 

3.     Based on my knowledge, thefinancial statements, and other financial information included in thisquarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the Company as of, and for,the periods presented in this quarterly report;

 

4.     The Company’s othercertifying officers and I are responsible for establishing and maintainingdisclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and15d-14) for the Company and we have:

 

(a)          designed such disclosurecontrols and procedures to ensure that material information relating to theCompany, including its consolidated subsidiaries, is made known to us by otherswithin those entities, particularly during the period in which this quarterlyreport is being prepared;

 

(b)         evaluated theeffectiveness of the Company’s disclosure controls and procedures as of a datewithin 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

(c)          presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.     The Company’s othercertifying officers and I have disclosed, based on our most recent evaluation,to the Company’s auditors and the audit committee of the Company’s board ofdirectors (or persons performing the equivalent function):

 

(a)          all significantdeficiencies in the design or operation of internal controls which couldadversely affect the Company’s ability to record, process, summarize and reportfinancial data and have identified for the Company’s auditors any materialweaknesses in internal controls; and

 

(b)         any fraud, whether or notmaterial, that involves management or other employees who have a significantrole in the Company’s internal controls; and

 

6.     The Company’s othercertifying officers and I have indicated in this quarterly report whether ornot there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 
| Date: May 14, 2003 |                     |
|--------------------|--------------------------|
|               |                     |
|               | /s/ Joaquin F.  Blaya    |   |
|               | Joaquin F. Blaya         |
|               | Chief Executive  Officer |

 

15

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**Certificationpursuant to**

**Rule13a-14 of the Securities Exchange Act of 1934,**

**asadopted pursuant to**

**Section302 of the Sarbanes-Oxley Act of 2002**

 

I, Steven E.Dawson, Chief Financial Officer of Radio Unica Corp. (the “Company”), certifythat:

 

1.      I havereviewed this quarterly report on Form 10-Q of the Company;

 

2.     Based on my knowledge, thisquarterly report does not contain any untrue statement of a material fact oromit to state a material fact necessary to make the statements made, in lightof the circumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

 

3.     Based on my knowledge, thefinancial statements, and other financial information included in thisquarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the Company as of, and for,the periods presented in this quarterly report;

 

4.     The Company’s othercertifying officers and I are responsible for establishing and maintainingdisclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and15d-14) for the Company and we have:

 

(a)   designed such disclosurecontrols and procedures to ensure that material information relating to theCompany, including its consolidated subsidiaries, is made known to us by otherswithin those entities, particularly during the period in which this quarterlyreport is being prepared;

 

(b)         evaluated theeffectiveness of the Company’s disclosure controls and procedures as of a datewithin 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

(c)          presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.     The Company’s othercertifying officers and I have disclosed, based on our most recent evaluation,to the Company’s auditors and the audit committee of the Company’s board ofdirectors (or persons performing the equivalent function):

 

(a)  all significant deficiencies in the designor operation of internal controls which could adversely affect the Company’sability to record, process, summarize and report financial data and haveidentified for the Company’s auditors any material weaknesses in internalcontrols; and

 

(b)         any fraud, whether or notmaterial, that involves management or other employees who have a significantrole in the Company’s internal controls; and

 

6.     The Company’s other certifyingofficers and I have indicated in this quarterly report whether or not therewere significant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 
| Date: May 14, 2003 |                     |
|--------------------|--------------------------|
|               |                     |
|               | /s/ Steven E.  Dawson    |   |
|               | Steven E. Dawson         |
|               | Chief Financial  Officer |

 

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