**SECURITIESAND 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 September 30, 2002**                                       |

 

**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 ofregistrant 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 x       NO  ̈

 

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

 

As of November 14,2002, 100 shares of Common Stock, $.01 par value were outstanding.

 

 

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**RADIO UNICA CORP.**

 

**TABLE OF CONTENTS**

 
| **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 UNICA CORP.**

 

**CONSOLIDATEDBALANCE SHEETS**

 
|                                                                                                     |   | **September  30,  2002** |        | **December  31,  2001** |   |
|----------------------------------------------------------------------------------------------------------|--------|--------------------------|-------------|-------------------------|--------|
|                                                                                                     |   | **(Unaudited)**          |        |                    |   |
|                                                                                                     |   |                     |        |                    |   |
| **ASSETS**                                                                                               |   |                     |        |                    |   |
| Current  assets:                                                                                         |   |                     |        |                    |   |
| Cash  and cash equivalents                                                                               |   | $                        | 1,426,734   |                    | $      | 964,042 |   |
| Accounts  receivable, net of allowance for doubtful accounts of $1,267,836 and  $1,253,425, respectively |   | 9,992,116                |        | 10,251,340              |   |
| Prepaid  expenses and other current assets                                                               |   | 1,463,109                |        | 1,541,874               |   |
| Total  current assets                                                                                    |   | 12,881,959               |        | 12,757,256              |   |
|                                                                                                     |   |                     |        |                    |   |
| Property  and equipment, net                                                                             |   | 24,778,664               |        | 23,971,415              |   |
| Broadcast  licenses, net of accumulated amortization of $10,336,623                                      |   | 98,200,730               |        | 98,200,730              |   |
| Other  intangible assets, net                                                                            |   | 9,256,912                |        | 9,055,938               |   |
| Other  assets                                                                                            |   | 994,168                  |        | 344,543                 |   |
|                                                                                                     |   | $                        | 146,112,433 |                    | $      | 144,329,882 |   |
|                                                                                                     |   |                     |        |                    |   |
| **LIABILITIES AND STOCKHOLDERS’ DEFICIT**                                                           |   |                     |        |                    |   |
| Current  liabilities:                                                                                    |   |                     |        |                    |   |
| Accounts  payable                                                                                        |   | $                        | 737,850     |                    | $      | 2,216,655 |   |
| Accrued  expenses                                                                                        |   | 2,141,848                |        | 2,887,929               |   |
| Interest  payable                                                                                        |   | 3,095,890                |        | —                  |   |
| Current  portion of notes payable                                                                        |   | 645,657                  |        | 984,991                 |   |
| Deferred  revenue and fees                                                                               |   | 743,161                  |        | 658,943                 |   |
| Total  current liabilities                                                                               |   | 7,364,406                |        | 6,748,518               |   |
|                                                                                                     |   |                     |        |                    |   |
| Other  liabilities                                                                                       |   | 75,000                   |        | 55,000                  |   |
| Notes  payable                                                                                           |   | 502,013                  |        | 1,139,276               |   |
| Due  to parent, net                                                                                      |   | 95,619,640               |        | 85,742,845              |   |
| Deferred  taxes                                                                                          |   | 871,406                  |        | 988,460                 |   |
| Senior  discount notes                                                                                   |   | 158,088,000              |        | 147,934,782             |   |
|                                                                                                     |   |                     |        |                    |   |
| 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                                                                           |   | (173,159                 | )           | (570,817                | )      |
| Accumulated  deficit                                                                                     |   | (175,846,948             | )           | (157,320,257            | )      |
| Total  stockholders’ deficit                                                                        |   | (116,408,032             | )           | (98,278,999             | )      |
|                                                                                                     |   | $                        | 146,112,433 |                    | $      | 144,329,882 |   |

 

*The accompanying notes are an integral part of thesefinancial statements.*

 

2

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**RADIO UNICA CORP.**

 

**CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)**

 
|                                                            |   | **Three months ended  September 30,** |       | **Nine months ended  September 30,** |   |
|-----------------------------------------------------------------|--------|---------------------------------------|------------|--------------------------------------|--------|
|                                                            |   | **2002**                              |       | **2001**                             |   | **2002** |   | **2001** |   |
|                                                            |   |                                  |       |                                 |   |   |   |   |   |
| Net  revenue                                                    |   | $                                     | 12,015,508 |                                 | $      | 11,408,829 |   | $ | 32,355,776 |   | $ | 26,953,385 |   |
|                                                            |   |                                  |       |                                 |   |   |   |   |   |
| Operating  expenses:                                            |   |                                  |       |                                 |   |   |   |   |   |
| Direct  operating                                               |   | 1,390,475                             |       | 1,817,328                            |   | 3,888,901 |   | 5,909,611 |   |
| Selling,  general and administrative                            |   | 4,595,505                             |       | 4,656,440                            |   | 13,403,676 |   | 13,015,428 |   |
| Network                                                         |   | 3,054,998                             |       | 4,730,205                            |   | 10,528,746 |   | 12,432,243 |   |
| Corporate                                                       |   | 815,665                               |       | 917,964                              |   | 2,537,807 |   | 2,604,274 |   |
| Cost  of promotion services                                     |   | 1,926,348                             |       | 1,509,953                            |   | 3,977,541 |   | 2,210,460 |   |
| Depreciation  and amortization                                  |   | 768,192                               |       | 1,710,291                            |   | 2,260,142 |   | 4,970,084 |   |
| Stock  option compensation                                      |   | 86,191                                |       | 177,811                              |   | 397,657 |   | 533,425 |   |
|                                                            |   | 12,637,374                            |       | 15,519,992                           |   | 36,994,470 |   | 41,675,525 |   |
| Loss  from operations                                           |   | (621,866                              | )          | (4,111,163                           | )      | (4,638,694 | ) | (14,722,140 | ) |
|                                                            |   |                                  |       |                                 |   |   |   |   |   |
| Other  income (expense):                                        |   |                                  |       |                                 |   |   |   |   |   |
| Interest  expense                                               |   | (4,845,888                            | )          | (4,383,160                           | )      | (13,957,668 | ) | (12,609,521 | ) |
| Interest  income                                                |   | 2,552                                 |       | 7,232                                |   | 7,271 |   | 26,900 |   |
| Loss  on investment in unconsolidated company                   |   | —                                |       | (5,209,817                           | )      | — |   | (5,008,160 | ) |
| Other                                                           |   | (1,734                                | )          | (11,809                              | )      | (54,654 | ) | 2,581 |   |
|                                                            |   | (4,845,070                            | )          | (9,597,554                           | )      | (14,005,051 | ) | (17,588,200 | ) |
| Loss  before income taxes                                       |   | (5,466,936                            | )          | (13,708,717                          | )      | (18,643,745 | ) | (32,310,340 | ) |
| Income  tax benefit                                             |   | 39,018                                |       | 39,018                               |   | 117,054 |   | 117,053 |   |
| Net  loss                                                       |   | $                                     | (5,427,918 | )                                    | $      | (13,669,699 | ) | $ | (18,526,691 | ) | $ | (32,193,287 | ) |
|                                                            |   |                                  |       |                                 |   |   |   |   |   |
| Net  loss per common share - basic and diluted                  |   | $                                     | (54,279    | )                                    | $      | (136,697 | ) | $ | (185,267 | ) | $ | (321,933 | ) |
|                                                            |   |                                  |       |                                 |   |   |   |   |   |
| Weighted  average common shares outstanding - basic and diluted |   | 100                                   |       | 100                                  |   | 100 |   | 100 |   |

 

3

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**RADIO UNICA CORP.**

 

**CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)**

 
|                                                                                |   | **Nine months ended September 30,** |        |
|-------------------------------------------------------------------------------------|--------|-------------------------------------|-------------|
|                                                                                |   | **2002**                            |        | **2001** |   |
|                                                                                |   |                                |        |   |   |
| **Operating activities**                                                            |   |                                |        |   |   |
| Net  loss                                                                           |   | $                                   | (18,526,691 | ) | $ | (32,193,287 | ) |
| Adjustments  to reconcile net loss to net cash used in operating activities:        |   |                                |        |   |   |
| Depreciation  and amortization                                                      |   | 2,260,142                           |        | 4,970,084 |   |
| Provision  for bad debts                                                            |   | 14,411                              |        | 299,907 |   |
| Accretion  of interest on senior discount notes                                     |   | 10,153,218                          |        | 11,819,518 |   |
| Amortization  of deferred financing costs                                           |   | 550,815                             |        | 579,134 |   |
| Stock  option compensation expense                                                  |   | 397,657                             |        | 533,425 |   |
| Loss  on investment in unconsolidated company                                       |   | —                              |        | 5,008,160 |   |
| Deferred  income taxes                                                              |   | (117,054                            | )           | (117,053 | ) |
| Other                                                                               |   | (118,835                            | )           | (579,540 | ) |
| Changes  in assets and liabilities, net of effects of acquisitions:                 |   |                                |        |   |   |
| Accounts  receivable                                                                |   | 244,813                             |        | (955,448 | ) |
| Prepaid  expenses and other current assets                                          |   | 78,767                              |        | 1,559,079 |   |
| Other  assets                                                                       |   | (661,578                            | )           | 42,349 |   |
| Accounts  payable                                                                   |   | (1,478,805                          | )           | 202,938 |   |
| Accrued  expenses                                                                   |   | (746,082                            | )           | (100,326 | ) |
| Interest  payable                                                                   |   | 3,095,890                           |        | — |   |
| Deferred  revenue                                                                   |   | 203,054                             |        | 530,093 |   |
| Other  liabilities                                                                  |   | 20,000                              |        | 43,000 |   |
| Net  cash used in operating activities                                              |   | (4,630,278                          | )           | (8,357,967 | ) |
|                                                                                |   |                                |        |   |   |
| **Investing activities**                                                            |   |                                |        |   |   |
| Acquisition  of property and equipment                                              |   | (2,858,524                          | )           | (2,292,940 | ) |
| Acquisition  of wholly owned subsidiary, net of cash received                       |   | —                              |        | (1,342,687 | ) |
| Net  cash used in investing activities                                              |   | (2,858,524                          | )           | (3,635,627 | ) |
|                                                                                |   |                                |        |   |   |
| **Financing activities**                                                            |   |                                |        |   |   |
| Intercompany  payable, net                                                          |   | 9,876,794                           |        | 14,467,455 |   |
| Repayment  of notes payable                                                         |   | (976,597                            | )           | (39,583 | ) |
| Deferred  financing costs                                                           |   | (948,703                            | )           | — |   |
| Net  cash provided by financing activities                                          |   | 7,951,494                           |        | 14,427,872 |   |
|                                                                                |   |                                |        |   |   |
| Net  decrease in cash and cash equivalents                                          |   | 462,692                             |        | 2,434,278 |   |
| Cash  and cash equivalents at beginning of period                                   |   | 964,042                             |        | 143,619 |   |
| Cash  and cash equivalents at end of period                                         |   | $                                   | 1,426,734   |   | $ | 2,577,897 |   |
|                                                                                |   |                                |        |   |   |
| Issuance  of note payable in connection with acquisition of wholly owned subsidiary |   | $                                   | —      |   | $ | 2,078,561 |   |

 

*Theaccompanying notes are an integral part of these financial statements.*

 

4

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**RADIO UNICACORP.**

 

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

 

**1.      Basisof Presentation**

 

The accompanying unaudited consolidated condensedfinancial statements of Radio Unica Corp. and subsidiaries (the “Company”) forthe periods indicated herein have been prepared pursuant to the rules andregulations of the Securities and Exchange Commission and in accordance withgenerally accepted accounting principles for interim financialinformation.  Accordingly, the financialstatements do not include all of the information and notes required bygenerally accepted accounting principles (“GAAP”) 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 and ninemonths ended September 30, 2002 are not necessarily indicative of the resultsthat may be expected for the year ending December 31, 2002. The consolidatedcondensed financial statements include the accounts of the Company and allmajority owned subsidiaries over which the Company has control.  All significant intercompany accounts andtransactions have been eliminated in consolidation.  For further information, refer to the Company’s 2001 consolidatedfinancial statements and notes thereto.

 

The Company’s revenue and cash flows are typicallylowest in the first calendar quarter. Seasonal fluctuations are common in theradio broadcasting industry and are due primarily to fluctuations in consumerspending.

 

**2.      Segment Operating Results**

 

Pursuant tothe provisions of Financial Accounting Standards Board (“FASB”)Statement of Financial Accounting Standards (‘SFAS”) No. 131, “Disclosure AboutSegments of a Business Enterprise and Related Information”, the Company isrequired to report segment information. The Company classified its businessesinto two reporting segments: radio broadcasting and promotion services.  The radio broadcasting segment includes theoperations of the Company’s radio network, the operations of all owned and/oroperated radio stations and corporate expenses.  The promotion services segment includes the operations of theCompany’s marketing and promotions business The Company evaluates performancebased on several factors, of which the primary financial measures are businesssegment net revenue, operating income (loss) and earnings (loss) fromoperations plus depreciation and amortization and stock option compensationexpense (“EBITDA before Stock Option Compensation Expense”).

 

EBITDA before Stock Option Compensation Expense ispresented not as an alternative measure of operating results or cash flow fromoperations (as determined in accordance with GAAP), but because it is a widelyaccepted supplemental financial measure of a company’s ability to service debt.The Company’s calculation of EBITDA Before Stock Option Compensation Expensemay not be comparable to similarly titled measures reported by other companiessince all companies do not calculate this non-GAAP measure in the same manner.The Company’s EBITDA Before Stock Option Compensation Expense calculation isnot intended to represent cash used in operating activities, since it does notinclude interest and taxes and changes in operating assets and liabilities, noris it intended to represent the net increase or decrease in cash, since it doesnot include cash provided by (used in) investing and financing activities.

 

5

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Resultsby segment are as follows:

** **
|                                             |   | **Three months ended  September 30,** |       | **Nine months ended  September 30,** |   |
|--------------------------------------------------|--------|---------------------------------------|------------|--------------------------------------|--------|
|                                             |   | **2002**                              |       | **2001**                             |   | **2002** |   | **2001** |   |
|                                             |   | **(Unaudited)**                       |       | **(Unaudited)**                      |   |
| Net  revenue                                     |   |                                  |       |                                 |   |   |   |   |   |
| Radio  broadcasting                              |   | $                                     | 9,255,185  |                                 | $      | 9,079,248 |   | $ | 25,882,159 |   | $ | 23,430,182 |   |
| Promotion  services                              |   | 2,760,323                             |       | 2,329,581                            |   | 6,473,617 |   | 3,523,203 |   |
| Consolidated                                     |   | $                                     | 12,015,508 |                                 | $      | 11,408,829 |   | $ | 32,355,776 |   | $ | 26,953,385 |   |
|                                             |   |                                  |       |                                 |   |   |   |   |   |
| Operating  income (loss)                         |   |                                  |       |                                 |   |   |   |   |   |
| Radio  broadcasting                              |   | $                                     | (839,286   | )                                    | $      | (4,398,763 | ) | $ | (5,326,029 | ) | $ | (15,205,492 | ) |
| Promotion  services                              |   | 217,420                               |       | 287,600                              |   | 687,335 |   | 483,352 |   |
| Consolidated                                     |   | $                                     | (621,866   | )                                    | $      | (4,111,163 | ) | $ | (4,638,694 | ) | $ | (14,722,140 | ) |
|                                             |   |                                  |       |                                 |   |   |   |   |   |
| EBITDA  before Stock Option Compensation Expense |   |                                  |       |                                 |   |   |   |   |   |
| Radio  broadcasting                              |   | $                                     | (42,106    | )                                    | $      | (2,778,881 | ) | $ | (2,835,561 | ) | $ | (10,347,813 | ) |
| Promotion  services                              |   | 274,623                               |       | 378,009                              |   | 854,666 |   | 595,757 |   |
| Consolidated                                     |   | $                                     | 232,517    |                                 | $      | (2,400,872 | ) | $ | (1,980,895 | ) | $ | (9,752,056 | ) |
|                                             |   |                                  |       |                                 |   |   |   |   |   |
| Total  Assets                                    |   |                                  |       |                                 |   |   |   |   |   |
| Radio  broadcasting                              |   |                                  |       |                                 |   | $ | 139,611,979 |   | $ | 142,329,484 |   |
| Promotion  services                              |   |                                  |       |                                 |   | 6,500,454 |   | 5,537,831 |   |
| Consolidated                                     |   |                                  |       |                                 |   | $ | 146,112,433 |   | $ | 147,867,315 |   |

 

6

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**3.        ****Recent Accounting Standards**

 

Effective January 1, 2002, the Company adopted SFASNo. 142, “Goodwill and Other Intangible Assets”. Under SFAS No. 142, goodwilland intangible assets with indefinite lives are no longer amortized but arereviewed annually, or more frequently if indicators of impairment arise.Separable intangible assets that are not deemed to have indefinite lives willcontinue to be amortized over their useful lives. As prescribed by SFAS No.142, the Company has completed the transitional impairment test on its goodwilland broadcast licenses and has determined that no impairment exists. The Company has determined that its broadcastlicenses have indefinite lives. As required by SFAS No. 142, the results forthe periods prior to its adoption have not been restated. A reconciliation ofpreviously reported net loss and net loss per share to the amounts adjusted forthe exclusion of the amortization of goodwill and broadcast licenses is asfollows:

 
|                                           |   | **Three months ended  September 30,** |       | **Nine months ended  September 30,** |   |
|------------------------------------------------|--------|---------------------------------------|------------|--------------------------------------|--------|
|                                           |   | **2002**                              |       | **2001**                             |   | **2002** |   | **2001** |   |
|                                           |   |                                  |       |                                 |   |   |   |   |   |
| Net  loss as reported                          |   | $                                     | (5,427,918 | )                                    | $      | (13,669,699 | ) | $ | (18,526,691 | ) | $ | (32,193,287 | ) |
| Goodwill  and broadcast license amortization   |   | —                                |       | 970,655                              |   | — |   | 2,905,665 |   |
| Net  loss as adjusted                          |   | $                                     | (5,427,918 | )                                    | $      | (12,699,044 | ) | $ | (18,526,691 | ) | $ | (29,287,622 | ) |
|                                           |   |                                  |       |                                 |   |   |   |   |   |
| Net  loss per common share - basic and diluted |   |                                  |       |                                 |   |   |   |   |   |
| As  reported                                   |   | $                                     | (54,279    | )                                    | $      | (136,697 | ) | $ | (185,267 | ) | $ | (321,933 | ) |
| As  adjusted                                   |   | $                                     | (54,279    | )                                    | $      | (126,990 | ) | $ | (185,267 | ) | $ | (292,876 | ) |

 

Effective January 1, 2002, the Company adopted SFASNo. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. SFASNo. 144 superseded SFAS No. 121, “Accounting for the Impairment of Long-LivedAssets and for Long-Lived Assets to be Disposed of” and the accounting andreporting provisions of Accounting Principles Board Opinion No. 30, “Reportingthe Results of Operations -Reporting the Effects of Disposal of a Segment of aBusiness, and Extraordinary, Unusual and Infrequently Occurring Events andTransactions”, for the disposal of a segment of a business. SFAS No. 144 alsoamended Accounting Research Bulletin No. 51, “Consolidated FinancialStatements”, to eliminate the exception to consolidation for a subsidiary forwhich control is likely to be temporary. Consistent with SFAS No. 121, SFAS No.144 requires impairment losses to be recorded on long-lived assets used inoperations when indicators of impairment are present and the undiscounted cashflows estimated to be generated by those assets are less than the assets’carrying amount. Our adoption of SFAS No. 144 did not have an effect on ourconsolidated financial statements.

** **

7

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**4.      Revolving Credit Facility**

 

On June 25, 2002, the Company and all its subsidiariesentered into a credit agreement for a senior secured revolving credit facility(the “Revolving Credit Facility”) providing for up to $20 million ofavailability with General Electric Capital Corporation (“GECC”). The RevolvingCredit Facility will mature on February 1, 2006. Amounts outstanding under theRevolving Credit Facility bear interest at a rate of either (i) the Index Rate(as defined) plus 2.5% or (ii) LIBOR plus 3.5%. The obligations under theRevolving Credit Facility are guaranteed by Radio Unica Communications Corp.(“RUCC”), the sole stockholder of the Company, and secured by substantially allthe assets and stock of the Company and its subsidiaries and by the assets ofRUCC. The Company will pay certain fees in connection with the Revolving CreditFacility, including an Unused Line Fee (as defined) ranging between 0.50% and0.75% annually on the aggregate unused portion of the Revolving CreditFacility.   The Company may use theborrowings available under the Revolving Credit Facility for working capital,general corporate needs, to provide funds for future Permitted Acquisitions (asdefined), for capital expenditures, to pay interest, and to the extentpermitted by the agreement for Permitted Senior Note Repurchases (as defined).

 

The Revolving Credit Facility contains certainfinancial and operational covenants and customary events of default, including,among others, payment defaults and default in the performance of othercovenants, breach of representations or warranties, cross-default to otherindebtedness, certain bankruptcy or ERISA defaults, the entry of certainjudgments against the Company or any subsidiary, and any security interest orguarantee that ceases to be in effect. The Revolving Credit Facility alsoprovides that an event of default will occur upon the occurrence of a Change ofControl of RUCC (as defined).

 

8

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**RADIO UNICACORP.**

 

**MANAGEMENT****’SDISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND 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 2000 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.

 

The Company presents earnings before net interest,taxes, depreciation and amortization (“EBITDA”) not as an alternative measureof operating results or cash flow from operations (as determined in accordancewith generally accepted accounting principles (“GAAP”)), but because it is awidely accepted supplemental financial measure of a company’s ability toservice debt. EBITDA is defined as operating income (loss) plus depreciationand amortization. The Company’s calculation of EBITDA may not be comparable tosimilarly titled measures reported by other companies since all companies donot calculate this non-GAAP measure in the same fashion. The Company’s EBITDA calculationis not intended to represent cash used in operating activities, since it doesnot include interest and taxes and changes in operating assets and liabilities,nor is it intended to represent the net increase or decrease in cash, since itdoes not include cash provided by (used in) investing and financing activities.

 

**ResultsOf Operations**

 

**ThreeMonths Ended September 30, 2002 Compared To The Three Months Ended September30, 2001**

 

NET REVENUE. Net revenue increased by approximately $0.6 million or 5% toapproximately $12.0 million for the three months ended September 30, 2002 fromapproximately $11.4 million for the comparable period in the prior year.  The increase in net revenue relates toincreased revenue generated by promotional and merchandising servicesassociated with MASS of approximately $0.4 million, and increased rates andrevenue market share at the network and O&Os.

 

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OPERATING EXPENSES. Operating expenses decreased by approximately $2.9 million or 19% toapproximately $12.6 million for the three months ended September 30, 2002 fromapproximately $15.5 million for the comparable period in the prior year.  The decrease in operating expenses is due todecreased direct operating expenses of approximately $0.4 million, decreasedselling, general and administrative expenses of $0.1 million, decreased networkexpenses of approximately $1.7 million decreased corporate expenses ofapproximately $0.1 million, decreased depreciation and amortization ofapproximately $0.9 million and decreased stock option compensation expense ofapproximately $0.1 million offset in part by the increased cost associated withthe operations of MASS of approximately $0.4 million of cost of promotionservices.

 

Direct operating expenses decreased by approximately$0.4 million or 23% to approximately $1.4 million for the three months endedSeptember 30, 2002 from approximately $1.8 million for the comparable period inthe prior year.  The decrease in directoperating expenses is primarily due to decreased advertising spending in 2002,decreases in headcount at certain stations and termination of a time brokerageagreement and station operations in San Diego.

 

Selling, general andadministrative expenses decreased by approximately $0.1 million or 1% toapproximately $4.6 million for the three months ended September 30, 2002 fromapproximately $4.7 million for the comparable period in the prior year.  Thedecrease in selling, general and administrative expenses primarily relates tothe termination of a time brokerage agreement and station operations inSan Diego offset by the increase ingeneral and administrative expenses associated with the growth of MASS.

 

Network expenses decreasedapproximately $1.7 million or 35% to approximately $3.0 million for thethree months ended September 30, 2002 from approximately $4.7 million for thecomparable period in the prior year.  The decrease in network expenses is 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 expensesdecreased approximately $0.1 million or 11% to approximately $0.8 million forthe three months ended September 30, 2002 from approximately $0.9 million forthe comparable period in the prior year. The decrease in corporate expenses is mainly due to a decrease in legaland professional fees and other miscellaneous expenses.

 

Cost of promotion services increased by approximately$0.4 million or 28% to $1.9 million for the three months ended September 30,2002 from approximately $1.5 million for the comparable period in the prioryear.  The increase in the cost ofpromotion services is directly related to the increase in MASS’ revenue.

 

Depreciation andamortization decreased by approximately $0.9 million or 55% toapproximately $0.8 million for the three months ended September 30, 2002 fromapproximately $1.7 million for the comparable period in the prior year.  Thedecrease in depreciation and amortization is due to the fact that effectiveJanuary 1, 2002 the Company ceased the amortization of goodwill andbroadcast licenses with indefinite useful lives in accordance with the provisions of Financial Accounting StandardsBoard (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 142,“Goodwill and Other Intangible Assets”.

 

Stock option compensation expense decreased byapproximately $0.1 million or 52% to approximately $0.1 million for the threemonths ended September 30, 2002 from approximately $0.2 million for thecomparable period in the prior year. Stock option compensation expense represents a non-cash charge relatingto the vesting of stock options granted to employees to purchase shares ofRUCC’s common stock.

 

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OTHER INCOME (EXPENSE).Other income (expense) decreased by approximately $4.8 million or 50% toapproximately $(4.8) million for the three months ended September 30, 2002 fromapproximately $(9.6) million for the comparable period in the prior year. Other income (expense) for the threemonths ended September 30, 2002 includedinterest expense of approximately $(4.8) million.  Interest expense primarily relates to the interest on the SeniorDiscount Notes.  The Company hadapproximately $(4.4) million in interest expense as well as a loss oninvestment in an unconsolidated company of approximately $(5.2) million duringthe three months ended September 30, 2001.

 

INCOME TAX BENEFIT. The Company recorded an income taxbenefit of approximately $39,000 for the three months ended September 30, 2002and 2001.  The benefit results from theCompany’s ability to utilize a portion of its net operating tax losscarryforwards to offset existing deferred tax liabilities.

 

NET LOSS.  Netloss decreased by approximately $8.2 million or 60% to approximately $(5.4)million for the three months ended September 30, 2002 from approximately$(13.6) million for the comparable period in the prior year.  The decrease in net loss is mainly theresult of the increase in the Company’s revenue of approximately $0.6 million,decreased operating expenses of approximately $2.9 million, the decrease inloss on investment in an unconsolidated company of approximately $5.2 offset inpart by the increase in interest expense related to the Senior Discount Notesof approximately $0.5 million.

 

EBITDA.  EBITDAless the non-cash charge relating to the stock option compensation expense ofapproximately $0.1 million increased by approximately $2.5 million or 110% toapproximately $0.2 million for the three months ended September 30, 2002 fromapproximately $(2.3) million for the comparable period in the prior year.  The increase is mainly a result of theincrease in revenue generated by MASS, increased rates and revenue market shareat the network and O&Os, and decreased operating expenses relating to theradio broadcasting business.

 

**NineMonths Ended September 30, 2002 Compared To The Nine Months Ended September 30,2001**

 

The results of operations for the nine months endedSeptember 30, 2002 are not comparable to the same period in 2001 primarily dueto the acquisition of MASS, which took place on April 30, 2001.  Consequently, only five months of MASS’operations are included in the results for the nine months ended September 30,2001.

 

NET REVENUE. Net revenue increased by approximately $5.4 million or 20% toapproximately $32.4 million for the nine months ended September 30, 2002 fromapproximately $27.0 million for the comparable period in the prior year.  The increase in net revenue relates toincreased revenue generated by promotional and merchandising servicesassociated with MASS of approximately $3.0 million, and increased rates and revenuemarket share at the network and O&Os of approximately $2.4 million.

 

OPERATING EXPENSES. Operating expenses decreased by approximately $4.7 million or 11% toapproximately $37.0 million for the nine months ended September 30, 2002 fromapproximately $41.7 million for the comparable period in the prior year.  The decrease in operating expenses is due todecreased direct operating expenses of approximately $2.0 million, decreasednetwork expenses of approximately $1.9 million, decreased corporate expenses ofapproximately $0.1 million, decreased depreciation and amortization ofapproximately $2.7 million, decreased stock option compensation expense ofapproximately $0.1 million offset in part by increased selling, general andadministrative expenses of approximately $0.4 million and increased cost ofpromotion services of approximately $1.8 million.

 

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Direct operating expenses decreased by approximately$2.0 million or 34% to approximately $3.9 million for the nine months endedSeptember 30, 2002 from approximately $5.9 million for the comparable period inthe prior year.  The decrease in directoperating expenses is primarily due to decreased advertising spending in 2002,decreases in headcount at certain stations and the termination of a time brokerageagreement and station operations in San Diego.

 

Selling, general and administrative expenses increasedby approximately $0.4 million or 3% to approximately $13.4 million for the ninemonths ended September 30, 2002 from approximately $13.0 million for thecomparable period in the prior year. The increase in selling, general and administrative expenses primarilyrelates to the increase in general and administrative costs associated withMASS of approximately $1.0 million offset in part by a decrease ofapproximately $0.6 million related to the radio broadcasting business. Theincrease in general and administrative expenses associated with MASS isprimarily due to the additional four months of MASS’ operations in 2002 as wellas the growth of MASS as a business segment.

 

Network expenses decreased by approximately $1.9million or 15% to approximately $10.5 million for the nine months endedSeptember 30, 2002 from approximately $12.4 million for the comparable periodin the prior year.  The decrease in network expenses is 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 expensesdecreased by approximately $0.1 million or 3% to approximately $2.5 million forthe nine months ended September 30, 2002 from approximately $2.6 million fromthe comparable period in the prior year. The decrease in corporate expenses is mainly due to decreased outside servicesand professional fees.

 

Cost of promotion servicesincreased by approximately $1.8 million or 80% to $4.0 million for the ninemonths ended September 30, 2002 from approximately $2.2 million for thecomparable period in the prior year.  Theincrease in the cost of promotion services is directly related to the increasein MASS’ revenue and the additional four months of MASS’ operations in 2002.

 

Depreciation andamortization decreased by approximately $2.7 million or 55% toapproximately $2.3 million for the nine months ended September 30, 2002 fromapproximately $5.0 million for the comparable period in the prior year. The decrease in depreciation andamortization is due to the fact that effective January 1, 2002 theCompany ceased the amortization of goodwill and broadcast licenses withindefinite useful lives in accordancewith the provisions of SFAS No. 142, “Goodwill and Other IntangibleAssets”.

 

Stock option compensation expense decreased byapproximately $0.1 million or 25% to approximately $0.4 million for the ninemonths ended September 30, 2002 from approximately $0.5 million for thecomparable period in the prior year. Stock option compensation expense represents a non-cash charge relatingto the vesting of stock options granted to employees to purchase shares of theCompany’s common stock.

 

OTHER INCOME (EXPENSE).Other income (expense) decreased by approximately $3.6 million or 20% toapproximately $(14.0) million for the nine months ended September 30, 2002 fromapproximately $(17.6) million for the comparable period in the prior year.Other income (expense) for the nine months ended September 30, 2002 is mainlycomprised of interest expense of approximately $(14.0) million.  Interest expense primarily relates to theinterest on the Senior Discount Notes. The Company had approximately $(12.6)million in interest expense, as well as a loss on investment in anunconsolidated company of approximately $(5.0) million during the nine monthsended September 30, 2001.

 

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INCOME TAX BENEFIT. The Company recorded an income taxbenefit of approximately $0.1 million for the nine months ended September 30,2002 and 2001.  The benefit results fromthe Company’s ability to utilize a portion of its net operating tax losscarryforwards to offset existing deferred tax liabilities.

 

NET LOSS.  Netloss decreased by approximately $13.7 million or 42% to approximately $18.5million for the nine months ended September 30, 2002 from approximately $32.2million for the comparable period in the prior year.  The decrease in net loss is mainly the result of the increase inthe Company’s revenue of approximately $5.4 million and decreased operatingexpenses of approximately $4.7 million, decrease in loss on investment in anunconsolidated company of approximately $5.0, offset in part by the increase ininterest expense related to the Senior Discount Notes of approximately $1.4million.

 

EBITDA.  EBITDAless the non-cash charge relating to the stock option compensation expense ofapproximately $0.4 million increased by approximately $7.2 million or 79% toapproximately $(2.0) million for the nine months ended September 30, 2002 fromapproximately $(9.2) million for the comparable period in the prior year.  The increase is mainly a result of theincrease in revenue generated by MASS, increased rates and revenue market shareat the network and O&Os, and decreased operating expenses relating to theradio broadcasting business.

 

**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 RUCC’s initial publicoffering, the issuance of the 113⁄4% Senior Discount Notes due August 1, 2006 andthe issuance of promissory notes, common stock and preferred stock to RUCC’sshareholders.

 

On June 25, 2002, the Company entered into anagreement for a senior secured revolving credit facility (the “Revolving CreditFacility”) providing for up to $20 million of availability.  The Revolving Credit Facility will mature onFebruary 1, 2006.  The Company may usethe borrowings available under the Revolving Credit Facility for workingcapital, general corporate needs, to provide funds for future PermittedAcquisitions (as defined), for capital expenditures, to pay interest, and tothe extent permitted by the agreement, for Permitted Senior Note Repurchases(as defined).

 

Net cash used in operating activities decreased byapproximately $3.7 million or 45% to approximately $4.6 million for the ninemonths ended September 30, 2002 from approximately $8.3 million for thecomparable period in the prior year.  Net cash used in investing activities wasapproximately $2.8 million and $3.6 million for the nine months ended September30, 2002 and 2001, respectively.  Thedecrease of approximately $0.8 million from 2002 to 2001 is primarily due tothe acquisition of MASS which took place during April 2001, offset in part bythe increase in capital expenditures associated with signal upgrades currentlyin process or recently completed for our New York and Dallas stations.  Net cash provided by financing activitieswas approximately $7.9 million and $14.4 million for the nine months endedSeptember 30, 2002 and 2001, respectively. The decrease of approximately $6.5 million from 2002 to 2001 is due todeferred financing costs incurred in connection with the Revolving CreditFacility of approximately $0.9 million, the repayment of notes issued inconnection with the acquisition of MASS of approximately $1.0 million, andfewer borrowings from RUCC of approximately $4.6 million

 

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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 $2.9 million and $2.3 million for the nine months ended September30, 2002 and 2001, respectively.  Theincrease in capital expenditures is primarily due to the signal upgrades thatare currently in process or have been recently completed for our New York andDallas stations.

 

The Company believes that the remaining proceeds fromRUCC’s initial public offering and the borrowing availability under theRevolving Credit Facility will provide adequate resources to fund the Company’soperating expenses, working capital requirements and capital expenditures.  The Company’s first interest payment under theSenior Discount Notes in the amount of approximately $9.3 million is due onFebruary 1, 2003 and semiannually through August 1, 2006.  The Company will utilize its current cashposition, cash generated from operations and the borrowing availability underthe Revolving Credit Facility to fund such payments. There can be no assurancethat the Company will have sufficient funds or will generate future cash flowsto meet all of the of the Company’s obligations and commitments. The failure togenerate such sufficient cash flow could significantly adversely affect themarket value of the Company’s Senior Discount Notes, and the Company’s abilityto pay the principal of and interest on the Senior Discount Notes.

 

**Item 3****.    Quantitative and Qualitative Disclosuresabout Market Risk**

 

Our market risk exposure with respect to financialinstruments is to changes in the “Federal Funds Rate” in the United States. Wemay borrow up to $20 million under our credit facility. Amounts outstandingunder the credit facility bear interest, at the Company’s option, at theFederal Funds Rate plus 50 basis points plus 2.5% or LIBOR plus 3.50%.  At September 30, 2002, there were no amountsoutstanding under our credit facility.

 

**Item 4****.    Controls and Procedures**

 

The Company’s Chief Executive Officer and ChiefFinancial Officer, based on their evaluation of the Company’s disclosurecontrols and procedures within the past 90 days, have concluded that suchdisclosure controls and procedures were effective to ensure that materialinformation relating to the Company and required to be disclosed by the Companyhas been made known to them and has been recorded, processed, summarized andreported timely.  There have not beenany significant changes in the Company’s internal controls or in other factorsthat could significantly affect these controls subsequent to the date ofevaluation.

 

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**PARTII****- OTHER INFORMATION**

 

**Item 6****.     Exhibitsand Reports on Form 8-K.**

 

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

 

99.         Certification

 

 

(a)          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.       |
|--------|-------------------|--------|-------------------------|
|   |              |   |                    |
|   |              | By:    |                    | /s/ Steven E. Dawson |   |
|   |              |   | Steven E. Dawson        |
|   |              |   | Chief Financial Officer |
|   |              |   |                    |
|   |              |   |                    |
| Date:  | November 14, 2002 |   |                    |
|        |                   |        |                         |  |  |

 

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**CERTIFICATION**

 

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

 

1.               I have reviewedthis quarterly report on Form 10-Q of the Company;

 

2.               Based on myknowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

 

3.               Based on myknowledge, the financial statements, and other financial information includedin this quarterly 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: November  14, 2002 |                     |
|--------------------------|--------------------------|
|                     |                     |
|                     |                     |
|                     | /s/ Joaquin F.  Blaya    |   |
|                     | Joaquin F. Blaya         |
|                     | Chief Executive  Officer |

 

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**CERTIFICATION**

 

I, Steven E. Dawson, Chief Financial Officer of RadioUnica Corp. (the “Company”), certify that:

 

1.               I have reviewedthis quarterly report on Form 10-Q of the Company;

 

2.               Based on myknowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

 

3.               Based on myknowledge, the financial statements, and other financial information includedin this quarterly 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: November  14, 2002 |                     |
|--------------------------|--------------------------|
|                     |                     |
|                     |                     |
|                     | /s/ Steven E.  Dawson    |   |
|                     | Steven E. Dawson         |
|                     | Chief Financial  Officer |

 

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