**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, 2003**                                        |
|   |       |                                                                                          |
| **OR** |
|   |       |                                                                                          |
|   | **o**      | **Transition  Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934** |

 

**CommissionFile No. 333-61211**

 

**Radio UnicaCorp.**

(Exact name of registrant as specified in itscharter)

 

| **Delaware**                                                                        |   | **65-0776004**                           |
|-------------------------------------------------------------------------------------|--------|------------------------------------------|
| (State of Incorporation)                                                            |   | (I.R.S. Employer  Identification Number) |
|                                                                                |   |                                     |
| **8400 N.W. 52nd Street, Suite 101  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 check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.   YES ý          NO o

 

Indicate bycheck mark whether the registrant is an accelerated filer (as defined inExchange Act Rule 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 November 14, 2003, 100 shares of CommonStock, $.01 par value were outstanding.

 

 

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**RADIO UNICACORP.**

**TABLE OFCONTENTS**

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

 

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**RADIOUNICA CORP.**

 

**CONSOLIDATEDBALANCE SHEETS**

 
|                                                                                                    |   | **September  30,  2003** |        | **December  31,  2002** |       |
|---------------------------------------------------------------------------------------------------------|--------|--------------------------|-------------|-------------------------|------------|
|                                                                                                    |   | **(Unaudited)**          |        |                    |       |
| **ASSETS**                                                                                              |   |                     | ** **  |                    | ** ** |
|                                                                                                    |   |                     | ** **  |                    | ** ** |
| Current assets:                                                                                         |   |                     |        |                    |       |
| Cash and cash equivalents                                                                               |   | $                        | 981,009     |                    | $          | 2,805,775 |   |
| Accounts receivable, net of allowance for doubtful  accounts of $1,053,098 and $1,148,228, respectively |   | 10,179,912               |        | 9,494,925               |       |
| Prepaid expenses and other current assets                                                               |   | 1,374,863                |        | 2,251,029               |       |
| Assets held for sale                                                                                    |   | —                   |        | 2,925,554               |       |
| Total current assets                                                                                    |   | 12,535,784               |        | 17,477,283              |       |
|                                                                                                    |   |                     |        |                    |       |
| Property and equipment, net                                                                             |   | 21,194,168               |        | 23,071,043              |       |
| Broadcast licenses, net of accumulated  amortization of $10,336,623                                     |   | 96,433,935               |        | 96,433,935              |       |
| Other intangible assets, net                                                                            |   | 8,136,775                |        | 8,971,849               |       |
| Other assets                                                                                            |   | 327,847                  |        | 318,954                 |       |
|                                                                                                    |   | $                        | 138,628,510 |                    | $          | 146,273,064 |   |
|                                                                                                    |   |                     |        |                    |       |
| **LIABILITIES AND STOCKHOLDERS’  DEFICIT**                                                         |   |                     |        |                    |       |
| Current liabilities:                                                                                    |   |                     |        |                    |       |
| Accounts payable                                                                                        |   | $                        | 495,689     |                    | $          | 1,295,971 |   |
| Accrued expenses                                                                                        |   | 3,887,388                |        | 2,827,704               |       |
| Interest payable                                                                                        |   | 3,112,690                |        | 7,784,537               |       |
| Deferred revenue                                                                                        |   | 324,910                  |        | 608,218                 |       |
| Current portion of notes payable                                                                        |   | 502,014                  |        | 641,741                 |       |
| Total current liabilities                                                                               |   | 8,322,691                |        | 13,158,171              |       |
|                                                                                                    |   |                     |        |                    |       |
| Other liabilities                                                                                       |   | 84,000                   |        | 75,000                  |       |
| Notes payable                                                                                           |   | —                   |        | 500,810                 |       |
| Deferred taxes                                                                                          |   | 988,460                  |        | 988,460                 |       |
| Due to parent, net                                                                                      |   | 93,692,917               |        | 95,656,430              |       |
| Revolving credit facility                                                                               |   | 19,996,120               |        | —                  |       |
| 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                                                                           |   | (15,512                  | )           | (96,226                 | )          |
| Accumulated deficit                                                                                     |   | (202,140,241             | )           | (181,709,656            | )          |
| Total stockholders’ deficit                                                                        |   | (142,543,678             | )           | (122,193,807            | )          |
|                                                                                                    |   | $                        | 138,628,510 |                    | $          | 146,273,064 |   |

 

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

 

2

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**RADIOUNICA CORP.**

 

**CONSOLIDATEDSTATEMENTS OF OPERATIONS (Unaudited)**

 
|                                                                 |   | **Three months ended  September 30,** |       | **Nine months ended  September 30,** |   |
|----------------------------------------------------------------------|--------|---------------------------------------|------------|--------------------------------------|--------|
|                                                                 |   | **2003**                              |       | **2002**                             |   | **2003** |   | **2002** |   |
|                                                                 |   |                                  |       |                                 |   |   |   |   |   |
| Net revenue                                                          |   | $                                     | 13,328,224 |                                 | $      | 12,015,508 |   | $ | 35,232,029 |   | $ | 32,355,776 |   |
|                                                                 |   |                                  |       |                                 |   |   |   |   |   |
| Operating expenses:                                                  |   |                                  |       |                                 |   |   |   |   |   |
| Direct operating (exclusive of depreciation shown seperately  below) |   | 1,343,223                             |       | 1,390,475                            |   | 3,849,061 |   | 3,888,901 |   |
| Selling, general and administrative                                  |   | 4,238,343                             |       | 4,329,911                            |   | 12,630,254 |   | 12,671,762 |   |
| Network (exclusive of depreciation shown seperately below)           |   | 3,885,305                             |       | 3,054,998                            |   | 9,788,900 |   | 10,528,746 |   |
| Corporate                                                            |   | 740,329                               |       | 815,665                              |   | 2,260,947 |   | 2,537,807 |   |
| Financial advisory, legal and restructuring fees                     |   | 3,060,057                             |       | —                               |   | 3,060,057 |   | — |   |
| Cost of promotion services                                           |   | 1,908,325                             |       | 2,191,942                            |   | 6,589,813 |   | 4,709,455 |   |
| Depreciation and amortization                                        |   | 828,093                               |       | 768,192                              |   | 2,448,972 |   | 2,260,142 |   |
| Stock option compensation                                            |   | 15,772                                |       | 86,191                               |   | 80,717 |   | 397,657 |   |
|                                                                 |   | 16,019,447                            |       | 12,637,374                           |   | 40,708,721 |   | 36,994,470 |   |
| Loss from operations                                                 |   | (2,691,223                            | )          | (621,866                             | )      | (5,476,692 | ) | (4,638,694 | ) |
|                                                                 |   |                                  |       |                                 |   |   |   |   |   |
| Other income (expense):                                              |   |                                  |       |                                 |   |   |   |   |   |
| Interest expense                                                     |   | (5,236,903                            | )          | (4,845,888                           | )      | (15,219,353 | ) | (13,957,668 | ) |
| Interest income                                                      |   | 4,339                                 |       | 2,552                                |   | 9,630 |   | 7,271 |   |
| Other                                                                |   | 5,907                                 |       | (1,734                               | )      | 255,830 |   | (54,654 | ) |
|                                                                 |   | (5,226,657                            | )          | (4,845,070                           | )      | (14,953,893 | ) | (14,005,051 | ) |
| Loss before income taxes                                             |   | (7,917,880                            | )          | (5,466,936                           | )      | (20,430,585 | ) | (18,643,745 | ) |
| Income tax benefit                                                   |   | —                                |       | 39,018                               |   | — |   | 117,054 |   |
| Net loss                                                             |   | $                                     | (7,917,880 | )                                    | $      | (5,427,918 | ) | $ | (20,430,585 | ) | $ | (18,526,691 | ) |
|                                                                 |   |                                  |       |                                 |   |   |   |   |   |
| Net loss per common share - basic and diluted                        |   | $                                     | (79,178.80 | )                                    | $      | (54,279.18 | ) | $ | (204,305.85 | ) | $ | (185,266.91 | ) |
|                                                                 |   |                                  |       |                                 |   |   |   |   |   |
| Weighted average common shares outstanding - basic  and diluted      |   | 100                                   |       | 100                                  |   | 100 |   | 100 |   |

 

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

 

3

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**RADIO UNICA CORP.**

 

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

 
|                                                                         |   | **Nine months ended September 30,** |        |
|------------------------------------------------------------------------------|--------|-------------------------------------|-------------|
|                                                                         |   | **2003**                            |        | **2002** |   |
|                                                                         |   |                                | ** **  |   | ** ** |
| **Operating activities**                                                     |   |                                |        |   |   |
| Net loss                                                                     |   | $                                   | (20,430,585 | ) | $ | (18,526,691 | ) |
| Adjustments to reconcile net loss to net cash used  in operating activities: |   |                                |        |   |   |
| Depreciation and amortization                                                |   | 2,448,972                           |        | 2,260,142 |   |
| Provision for bad debts                                                      |   | (87,100                             | )           | 14,411 |   |
| Accretion of interest on senior discount notes                               |   | —                              |        | 10,153,218 |   |
| Amortization of deferred financing costs                                     |   | 680,014                             |        | 550,815 |   |
| Stock option compensation expense                                            |   | 80,717                              |        | 397,657 |   |
| Deferred income taxes                                                        |   |                                |        | (117,054 | ) |
| Gain on sale of radio station assets                                         |   | (225,616                            | )           | — |   |
| Other                                                                        |   | (24,556                             | )           | (118,835 | ) |
| Changes in assets and liabilities, net of effects  of acquisitions:          |   |                                |        |   |   |
| Accounts receivable                                                          |   | (597,887                            | )           | 244,813 |   |
| Prepaid expenses and other current assets                                    |   | 774,319                             |        | 78,767 |   |
| Other assets                                                                 |   | (11,925                             | )           | (661,578 | ) |
| Accounts payable                                                             |   | (800,282                            | )           | (1,478,805 | ) |
| Accrued expenses                                                             |   | 1,019,682                           |        | (746,082 | ) |
| Interest payable                                                             |   | (4,671,847                          | )           | 3,095,890 |   |
| Deferred revenue                                                             |   | (258,751                            | )           | 203,054 |   |
| Other liabilities                                                            |   | 9,000                               |        | 20,000 |   |
| Net cash used in operating activities                                        |   | (22,095,845                         | )           | (4,630,278 | ) |
|                                                                         |   |                                |        |   |   |
| **Investing activities**                                                     |   |                                |        |   |   |
| Acquisition of property and equipment                                        |   | (532,718                            | )           | (2,858,524 | ) |
| Proceeds from sale of radio station assets                                   |   | 3,411,726                           |        | — |   |
| Net cash provided by (used in) investing  activities                         |   | 2,879,008                           |        | (2,858,524 | ) |
|                                                                         |   |                                |        |   |   |
| **Financing activities**                                                     |   |                                |        |   |   |
| Borrowings under revolving credit facility                                   |   | 19,996,120                          |        | — |   |
| Intercompany payable, net                                                    |   | (1,963,513                          | )           | 9,876,794 |   |
| Repayment of notes payable                                                   |   | (640,536                            | )           | (976,597 | ) |
| Deferred financing costs                                                     |   | —                              |        | (948,703 | ) |
| Net cash provided by financing activities                                    |   | 17,392,071                          |        | 7,951,494 |   |
|                                                                         |   |                                |        |   |   |
| Net (decrease) increase in cash and cash  equivalents                        |   | (1,824,766                          | )           | 462,692 |   |
| Cash and cash equivalents at beginning of period                             |   | 2,805,775                           |        | 964,042 |   |
| Cash and cash equivalents at end of period                                   |   | $                                   | 981,009     |   | $ | 1,426,734 |   |

 

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

 

4

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**RADIOUNICA CORP.**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

 

**1.             Basis of Presentation**

 

Theaccompanying unaudited consolidated condensed financial statements of RadioUnica Corp. and subsidiaries (the “Company”) for the periods indicated hereinhave been prepared pursuant to the rules and regulations of the Securities andExchange Commission and in accordance with generally accepted accountingprinciples (“GAAP”) for interim financial information.  Accordingly, the financial statements do notinclude all of the information and notes required by GAAP for completefinancial statements.  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, 2003 are not necessarily indicative of the resultsthat may be expected for the year ending December 31, 2003.  The consolidated condensed financialstatements include the accounts of the Company and all majority ownedsubsidiaries over which the Company has control.  All significant intercompany accounts and transactions have beeneliminated in consolidation.  Forfurther information, refer to the Company’s 2002 consolidated financialstatements and notes thereto.

 

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 tothe provisions 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 toreport segment information. The Company classified its businesses into tworeporting segments: radio broadcasting and promotion services.  The radio broadcasting segment includes theoperations of the Company’s radio network, the operations of all owned andoperated radio stations and corporate expenses.  The promotion services segment includes the operations of theCompany’s marketing and promotions business. The Company evaluates performance based on several factors, of which theprimary financial measures are business segment net revenue, operating income(loss) and earnings (loss) before interest, taxes, depreciation andamortization. (“EBITDA”).

 

The Companyutilizes a financial measure that is not calculated in accordance with GAAP toassess its financial performance. A non-GAAP financial measure is defined as anumerical measure of a company’s financial performance that (i) excludes amounts,or is subject to adjustments that have the effect of excluding amounts, thatare included in the comparable measure calculated and presented in accordancewith GAAP in the statement of operations or statement of cash flows; or (ii)includes amounts, or is subject to adjustments that have the effect ofincluding amounts, that are excluded from the comparable measure so calculatedand presented. The Company believes that the presentation of EBITDA providesuseful information to investors regarding the Company’s financial conditionbecause it is a commonly used financial analysis tool for measuring andcomparing media companies. EBITDA should not be considered as an alternative tonet cash provided by (used in) operating activities as a measure of liquidity.This non-GAAP financial measure may not be comparable to similarly titledmeasures used by other companies. 

5

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Results by segment are as follows:

 
|                     |   | **Three months ended  September 30,** |       | **Nine months ended  September 30,** |       |
|--------------------------|--------|---------------------------------------|------------|--------------------------------------|------------|
|                     |   | **2003**                              |       | **2002**                             |       | **2003** |   | **2002** |   |
|                     |   | **(Unaudited)**                       |       | **(Unaudited)**                      | ** ** |
| Net  revenue             |   |                                  |       |                                 |       |   |   |   |   |
| Radio  broadcasting      |   | $                                     | 10,951,013 |                                 | $          | 9,255,185 |   | $ | 27,522,633 |   | $ | 25,882,159 |   |
| Promotion  services      |   | 2,377,211                             |       | 2,760,323                            |       | 7,709,396 |   | 6,473,617 |   |
| Consolidated             |   | $                                     | 13,328,224 |                                 | $          | 12,015,508 |   | $ | 35,232,029 |   | $ | 32,355,776 |   |
|                     |   |                                  |       |                                 |       |   |   |   |   |
| Operating  income (loss) |   |                                  |       |                                 |       |   |   |   |   |
| Radio  broadcasting      |   | $                                     | (2,850,457 | )                                    | $          | (839,286 | ) | $ | (5,589,331 | ) | $ | (5,253,697 | ) |
| Promotion  services      |   | 159,234                               |       | 217,420                              |       | 112,639 |   | 615,003 |   |
| Consolidated             |   | $                                     | (2,691,223 | )                                    | $          | (621,866 | ) | $ | (5,476,692 | ) | $ | (4,638,694 | ) |
|                     |   |                                  |       |                                 |       |   |   |   |   |
| EBITDA                   |   |                                  |       |                                 |       |   |   |   |   |
| Radio  broadcasting      |   | $                                     | (2,080,793 | )                                    | $          | (130,412 | ) | $ | (3,075,549 | ) | $ | (3,211,195 | ) |
| Promotion  services      |   | 223,570                               |       | 275,004                              |       | 303,660 |   | 777,989 |   |
| Consolidated             |   | $                                     | (1,857,223 | )                                    | $          | 144,592 |   | $ | (2,771,890 | ) | $ | (2,433,206 | ) |
|                     |   |                                  |       |                                 |       |   |   |   |   |
| Total  assets            |   |                                  |       |                                 |       |   |   |   |   |
| Radio  broadcasting      |   |                                  |       |                                 |       | $ | 133,370,639 |   | $ | 139,611,979 |   |
| Promotion  services      |   |                                  |       |                                 |       | 5,257,871 |   | 6,500,454 |   |
| Consolidated             |   |                                  |       |                                 |       | $ | 138,628,510 |   | $ | 146,112,433 |   |

 

Below is a reconciliation ofnet (loss) income to EBITDA for the Company’s radio broadcasting and promotionservices segments:

 

6

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|                           |   | **Three Months Ended  September 30,** |       | **Nine months ended  September 30,** |   |
|--------------------------------|--------|---------------------------------------|------------|--------------------------------------|--------|
|                           |   | **2003**                              |       | **2002**                             |   | **2003** |   | **2002** |   |
| **Radio broadcasting:**        |   |                                  |       |                                 |   |   |   |   |   |
| Net  loss                      |   | $                                     | (8,066,666 | )                                    | $      | (5,629,993 | ) | $ | (20,493,239 | ) | $ | (19,031,860 | ) |
| Adjustments:                   |   |                                  |       |                                 |   |   |   |   |   |
| Interest  expense, net         |   | 5,221,798                             |       | 4,827,610                            |   | 15,160,021 |   | 13,844,909 |   |
| Income  taxes                  |   | —                                |       | (39,018                              | )      | — |   | (117,054 | ) |
| Depreciation  and amortization |   | 764,075                               |       | 710,989                              |   | 2,257,669 |   | 2,092,810 |   |
| EBITDA                         |   | $                                     | (2,080,793 | )                                    | $      | (130,412 | ) | $ | (3,075,549 | ) | $ | (3,211,195 | ) |
|                           |   |                                  |       |                                 |   |   |   |   |   |
| **Promotion services:**        |   |                                  |       |                                 |   |   |   |   |   |
| Net  income (loss)             |   | $                                     | 148,786    |                                 | $      | 202,075 |   | $ | 62,654 |   | $ | 505,169 |   |
| Adjustments:                   |   |                                  |       |                                 |   |   |   |   |   |
| Interest  expense, net         |   | 10,766                                |       | 15,726                               |   | 49,702 |   | 105,488 |   |
| Income  taxes                  |   | —                                |       | —                               |   | — |   | — |   |
| Depreciation  and amortization |   | 64,018                                |       | 57,203                               |   | 191,303 |   | 167,332 |   |
| EBITDA                         |   | $                                     | 223,570    |                                 | $      | 275,004 |   | $ | 303,659 |   | $ | 777,989 |   |

 

7

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**3.****                                      StockOption Plan**

 

As permissibleunder SFAS No. 123, “Accounting for Stock-Based Compensation”, the Companyaccounts for all stock-based compensation arrangements using the intrinsicvalue method prescribed by Accounting Principles Board Opinion No. 25,“Accounting for Stock Issued to Employees”, as interpreted by FASBInterpretation No. 44, “Accounting for Certain Transactions Involving StockCompensation”, and discloses pro forma net loss and loss per share amounts asif the fair value method had been adopted. Accordingly, no compensation cost isrecognized for stock option awards granted to employees at or above fair marketvalue.

 

The Company’spro forma 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  September 30,** |       | **Nine  months ended  September 30,** |       |
|----------------------------------------|--------|----------------------------------------|------------|---------------------------------------|------------|
|                                   |   | **2003**                               |       | **2002**                              |       | **2003** |   | **2002** |   |
|                                   |   |                                   | ** ** |                                  | ** ** |   | ** ** |   | ** ** |
| Net  loss, as reported                 |   | $                                      | (7,917,880 | )                                     | $          | (5,427,918 | ) | $ | (20,430,585 | ) | $ | (18,526,691 | ) |
| Deduct:                                |   |                                   |       |                                  |       |   |   |   |   |
| Stock-based  compensation expense      |   |                                   |       |                                  |       |   |   |   |   |
| determined  under fair value method    |   | 698,814                                |       | 720,153                               |       | 2,072,622 |   | 2,067,381 |   |
| Net  loss, pro forma                   |   | $                                      | (8,616,693 | )                                     | $          | (6,148,071 | ) | $ | (22,503,207 | ) | $ | (20,594,072 | ) |
|                                   |   |                                   |       |                                  |       |   |   |   |   |
| Net  loss per share, basic and diluted |   |                                   |       |                                  |       |   |   |   |   |
| As  reported                           |   | $                                      | (79,179    | )                                     | $          | (54,279 | ) | $ | (204,306 | ) | $ | (185,267 | ) |
| Pro  forma                             |   | $                                      | (86,167    | )                                     | $          | (61,481 | ) | $ | (225,032 | ) | $ | (205,941 | ) |
|                                   |   |                                   |       |                                  |       |   |   |   |   |
| Weighted  average fair value           |   | $                                      | —     |                                  | $          | — |   | $ | — |   | $ | 1.09 |   |
| Expected  life (in years)              |   | 3                                      |       | 10                                    |       | 3 |   | 10 |   |
| Risk  free interest rate               |   | 4.0                                    | %          | 5.0                                   | %          | 4.0 | % | 5.0 | % |
| Expected  volatility                   |   | 126                                    | %          | 153                                   | %          | 167 | % | 134 | % |
| Dividend  yield                        |   | —                                 |       | —                                |       | — |   | — |   |

 

8

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**4.****                                      SubsequentEvents**

 

On October 3,2003, the Company announced that it had entered into a definitive assetpurchase agreement to sell its station group to Multicultural RadioBroadcasting, Inc., (“Multicultural”) a privately held company. The Companyalso announced that it is in discussions with third parties to sell its radionetwork, as well as its promotions company, Mass Promotions,Inc.  The Company will continue to broadcast its Spanish languageprogramming and otherwise operate its business in the normal course through theclosing of the Multicultural transaction.

 

On October 31,2003, the Company’s parent, Radio Unica Communications Corp, the Company andall of its subsidiaries (excluding Mass Promotions, Inc.) filed voluntarypetitions for relief under Chapter 11 of the U.S. Bankruptcy Code. The filingwas made in the U.S. Bankruptcy Court for the Southern District of New York inorder to implement the previously announced sale of its station group andrelated assets to Multicultural and its plan to separately sell its radionetwork and promotions company.

 

Under theMulticultural agreement the Company will receive approximately $150million in cash for its radio stations. Completion of the transaction issubject to bankruptcy court approval, regulatory approvals and otherconditions. It is expected that the transaction will be completed by the secondquarter of 2004. The transaction will be effected as part of a prepackagedbankruptcy in which holders of the Company’s 11 3⁄4% Senior Discount Notes wouldreceive approximately $700 in cash per $1,000 principal amount, allsecured, priority, administrative and other general unsecured claims (withexception of subordinated claims related to securities litigation) wouldreceive 100% of their claims, and stockholders would receive the remaindercurrently estimated to be between $0.47 and $1.03 pershare.    Holders of 100% of the Company’s outstandingSenior Discount Notes have agreed to support the transaction and vote in favorof the prepackaged bankruptcy.

 

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**MANAGEMENT’S DISCUSSION AND ANALYSIS****OF RESULTSOF OPERATIONS AND FINANCIAL CONDITION**

 

This reportcontains forward-looking statements within the meaning of Section 21E of theSecurities Exchange Act of 1934, as amended. These forward-looking statementsinclude, among others, statements concerning the Company’s outlook for 2003 andbeyond, the Company’s expectations, beliefs, future plans and strategies,anticipated events or trends, and similar expressions concerning matters thatare not historical facts.  Theforward-looking statements in this report are subject to risks anduncertainties that could cause actual results to differ materially from thoseexpressed in or implied by the statements.

**Overview**

 

We generateradio broadcasting revenue from sales of network advertising time, and sales oflocal and national advertising time on radio stations that we own and operate(“O&Os”). Advertising rates are, in large part, based upon the network’sand each station’s ability to attract audiences in demographic groups targetedby advertisers. All radio broadcasting revenue is stated net of any agencycommissions. We recognize radio broadcasting revenue when the commercials arebroadcast.   We also generate revenuefrom our promotion services company, MASS Promotions, Inc. (“MASS”).  We recognize revenue generated by MASS whenthe promotion services are performed.

 

Our operatingexpenses consist of programming expenses, marketing and selling costs,including commissions paid to our sales staff, technical and engineering costs,cost of promotion services and general and administrative expenses.

 

**Critical Accounting Policies and Estimates**

 

The discussionand analysis of our financial condition and results of operations are based onour consolidated financial statements, which have been prepared in accordancewith accounting principles generally accepted in the United States of America.The preparation of these financial statements requires us to make estimates andjudgments that affect the reported amount of assets and liabilities, revenuesand expenses, and related disclosure of contingent assets and liabilities atthe date of our financial statements. In general, we base our estimates onhistorical experience, on information from third party professionals and onvarious other assumptions that we believe are reasonable under the facts andcircumstances. We continually evaluate our accounting policies and estimates weuse to prepare our consolidated financial statements. Actual results may differfrom these estimates under different assumptions or conditions.

 

During the three and nine months ended September 30, 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.

 

**Results of Operations**

 

**Three Months EndedSeptember 30, 2003 Compared to the Three Months Ended September 30, 2002**

 

NETREVENUE.  Net revenue increased byapproximately $1.3 million or 11% to approximately $13.3 million for the threemonths ended September 30, 2003 from approximately $12.0 million for thecomparable period in the prior year. The increase in net revenue related to increased local spot, nationalspot and network revenue of approximately $1.7 million, offset by a decrease inpromotional and merchandising services revenue associated with MASS ofapproximately $0.4 million.

 

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Directoperating expenses decreased by approximately $0.1 million or 3% toapproximately $1.3 million for the three months ended September 30, 2003 fromapproximately $1.4 million for the comparable period in the prior year.  The decrease in direct operating expenseswas primarily due to the sale of assets and termination of operations at theDenver station as of February 11, 2003.

 

Selling,general and administrative expenses decreased by approximately $0.1 million or2% to approximately $4.2 million for the three months ended September 30, 2003from approximately $4.3 million for the comparable period in the prior year.The decrease in selling, general and administrative expenses primarily relatesto a decrease in headcount at MASS, and the sale of assets and termination ofoperations at the Denver station as of February 11, 2003.

 

Networkexpenses increased approximately $0.8 million or 27% to approximately $3.9million for the three months ended September 30, 2003 from approximately $3.1million for the comparable period in the prior year.  The increase in network expenses was mainly due to an increase inthe cost of sports rights for the 2003 Gold Cup soccer event during July 2003.

 

Corporateexpenses decreased approximately $0.1 million or 9% to approximately $0.7million for the three months ended September 30, 2003 from approximately $0.8million for the comparable period in the prior year. The decrease in corporateexpense is primarily due to decreased travel and travel related costs, anddecreased administrative costs.

 

Financialadvisory, legal and restructuring fees of approximately $3.1 million relate tocosts incurred in connection with the pending transaction with Multiculturaland the bankruptcy filing of the Company.

 

Cost ofpromotion services decreased by approximately $0.3 million or 13% to $1.9million for the three months ended September 30, 2003 from approximately $2.2million for the comparable period in the prior year.  The decrease in the cost of promotion services was related to thevariable costs associated with the decrease in MASS’ revenue.

 

Depreciationand amortization remained constant at approximately $0.8 million for the threemonths ended September 30, 2003 and 2002.

 

Stock optioncompensation expense decreased by approximately $0.1 million or 82% to approximately$16,000 for the three months ended September 30, 2003 from approximately $0.1million for the comparable period in the prior year.  Stock option compensation expense represents a non-cash chargerelating to the vesting of stock options granted to employees to purchaseshares of the Company’s parent Radio Unica Communications Corp (“RUCC”) commonstock.  The decrease in stock optioncompensation expense is due to a large portion of the stock options grantedbecoming fully vested during 2002.

 

OTHER INCOME(EXPENSE). Other income (expense) decreased by approximately $0.4 million or 8%to approximately $(5.2) million for the three months ended September 30, 2003from approximately $(4.8) million for the comparable period in the prior year.Other income (expense) for the three months ended September 30, 2003 includedinterest expense of approximately $(5.2) million.  Interest expense primarily relates to the interest on the SeniorDiscount Notes.

 

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NET LOSS.  Net loss increased by approximately $2.5million or 46% to approximately $(7.9) million for the three months endedSeptember 30, 2003 from approximately $(5.4) million for the comparable periodin the prior year.  The increase in netloss was primarily the result of financial advisory, legal and restructuringfees of approximately $3.1 million related to costs incurred in connection withthe pending transaction with Multicultural and the bankruptcy filing, increasedoperating expense of approximately $0.3 million and increased interest expenseof approximately $0.4 million, offset by increased revenue of approximately$1.3 million.

 

EBITDA.  EBITDA decreased by approximately $2.0million to approximately $(1.9) million for the three months ended September30, 2003 from approximately $0.1 million for the comparable period in the prioryear.  The decrease in EBITDA was mainlythe result of financial advisory, legal and restructuring fees of approximately$3.1 million related to costs incurred in connection with the pendingtransaction with Multicultural and the bankruptcy filing, increased operatingexpenses (excluding depreciation and amortization) of approximately $0.2million, offset by increased revenue of approximately $1.3 million.

 

**Nine Months EndedSeptember 30, 2003 Compared to the Nine Months Ended September 30, 2002**

 

NETREVENUE.  Net revenue increased byapproximately $2.9 million or 9% to approximately $35.3 million for the ninemonths ended September 30, 2003 from approximately $32.4 million for thecomparable period in the prior year. The increase in net revenue relates to increased revenue generated bypromotional and merchandising services associated with MASS of approximately$1.2 million, increased local spot and network revenue of approximately $2.4million, offset by a decrease in national spot revenue of approximately $0.7million.

 

Directoperating expenses remained constant at approximately $3.9 million for the ninemonths ended September 30, 2003 and 2002. Direct operating expenses are comprised of technical and programmingcosts at the O&Os.

 

Selling,general and administrative expenses remained constant at approximately $12.6million for the nine months ended September 30, 2003 and 2002.  Selling, general and administrative expensesfor the radio broadcasting business increased by approximately $0.2 million dueto increased local sales cost.  Thisincrease was offset by a decrease in general and administrative costsassociated with MASS of approximately $0.2 million due to a reduction inheadcount.

 

Networkexpenses decreased by approximately $0.7 million or 7% to approximately $9.8million for the nine months ended September 30, 2003 from approximately $10.5million for the comparable period in the prior year.  The decrease in network expenses is primarily due to decreasedcost of network programming and decreased advertising spending.

 

Corporateexpenses decreased approximately $0.3 million or 11% to approximately $2.3million for the for the nine months ended September 30, 2003 from approximately$2.5 million for the comparable period in the prior year. Corporate expensesare comprised of the cost of corporate management, legal and professional feesand insurance.

 

Financialadvisory, legal and restructuring fees of approximately $3.1 million relate tocosts incurred in connection with the pending transaction with Multiculturaland the bankruptcy filing of the Company.

 

Cost ofpromotion services increased by approximately $1.9 million or 40% to $6.6million for the nine months ended September 30, 2003 from approximately $4.7million for the comparable period in the prior year.  The increase in the cost of promotion services was related to thevariable costs associated with the increase in MASS’ revenue, as well as higherout of pocket costs associated with certain client’s marketing programs.

 

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Depreciationand amortization increased by approximately $0.2 million or 8% to approximately$2.5 million for the nine months ended September 30, 2003 from approximately$2.3 million for the comparable period in the prior year. The increase indepreciation and amortization was due to the additions of fixed and intangibleassets arising from signal upgrades completed during 2002.

 

Stock optioncompensation expense decreased by approximately $0.3 million or 80% toapproximately $0.1 million for the nine months ended September 30, 2003 fromapproximately $0.4 million for the comparable period in the prior year.  Stock option compensation expense representsa non-cash charge relating to the vesting of stock options granted to employeesto purchase shares of the Company’s parent RUCC common stock.  The decrease in stock option compensationexpense is due to a large portion of the stock options granted becoming fullyvested during 2002.

 

OTHER INCOME(EXPENSE). Other income (expense) decreased by approximately $1.0 million or 8%to approximately $(15.0) million for the nine months ended September 30, 2003from approximately $(14.0) million for the comparable period in the prior year.Other income (expense) for the nine months ended September 30, 2003 is mainlycomprised of interest expense of approximately $(15.2) million and interestincome and other income of approximately $0.2 million primarily related to thegain on the sale of the Denver radio station assets in February 2003.  Interest expense primarily relates to theinterest on the Senior Discount Notes.

 

INCOME TAXBENEFIT. The Company recorded an income tax benefit of approximately $0.1million for the nine months ended September 30, 2002.  The benefit resulted from the Company’s ability to utilize aportion of its net operating tax loss carryforwards to offset existing deferredtax liabilities.  The Company did notrecord any benefit during the nine months ended September 30, 2003.

 

NET LOSS.  Net loss increased by approximately $1.9million or 10% to approximately $20.4 million for the nine months endedSeptember 30, 2003 from approximately $18.5 million for the comparable periodin the prior year.  The increase in netloss is mainly the result of financial advisory, legal and restructuring feesof approximately $3.1 million related to costs incurred in connection with thepending transaction with Multicultural and the bankruptcy filing, increasedoperating expense of approximately $0.6 million, increased interest expenserelated to the Senior Discount Notes of approximately $1.3 million, decreasedincome tax benefit of approximately $0.1 million, offset by increased revenueof approximately $2.9 million and increased interest income and other income ofapproximately $0.3 million.

 

EBITDA.  EBITDA decreased by approximately $0.3million or 14% to approximately $(2.8) million for the nine months endedSeptember 30, 2003 from approximately $(2.5) million for the comparable periodin the prior year. The decrease in EBITDA was mainly the result of financialadvisory, legal and restructuring fees of approximately $3.1 million related tocosts incurred in connection with the pending transaction with Multiculturaland the bankruptcy filing, increased operating expenses (excluding depreciationand amortization) of approximately $0.4 million, offset by increased revenue ofapproximately $2.9 million and the gain on the sale of the Denver radio stationassets of approximately $0.3 million.

 

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**Use of Non-GAAPFinancial Measures**

 

The Companyutilizes a financial measure that is not calculated in accordance with GAAP toassess its financial performance. A non-GAAP financial measure is defined as anumerical measure of a company’s financial performance that (i) excludesamounts, or is subject to adjustments that have the effect of excludingamounts, that are included in the comparable measure calculated and presentedin accordance with GAAP in the statement of operations or statement of cashflows; or (ii) includes amounts, or is subject to adjustments that have theeffect of including amounts, that are excluded from the comparable measure socalculated and presented. EBITDA is defined as earnings (loss) before interest,taxes, depreciation and amortization. The Company believes that thepresentation of EBITDA provides useful information to investors regarding theCompany’s financial condition because it is a commonly used financial analysistool for measuring and comparing media companies. 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 net loss toEBITDA for the three and nine months ended September 30, 2003 and 2002:

 
|                           |   | **Consolidated**                      |       |
|--------------------------------|--------|---------------------------------------|------------|
|                           |   | **Three Months Ended  September 30,** |       | **Nine Months Ended  September 30,** |   |
|                           |   | **2003**                              |       | **2002** |   | **2003** |   | **2002** |   |
|                           |   |                                  |       |   |   |   |   |   |   |
| Net  loss                      |   | $                                     | (7,917,880 | ) | $ | (5,427,918 | ) | $ | (20,430,585 | ) | $ | (18,526,691 | ) |
| Adjustments:                   |   |                                  |       |   |   |   |   |   |   |
| Interest  expense, net         |   | 5,232,564                             |       | 4,843,336 |   | 15,209,723 |   | 13,950,397 |   |
| Income  taxes                  |   | —                                |       | (39,018 | ) | — |   | (117,054 | ) |
| Depreciation  and amortization |   | 828,093                               |       | 768,192 |   | 2,448,972 |   | 2,260,142 |   |
| EBITDA                         |   | $                                     | (1,857,223 | ) | $ | 144,592 |   | $ | (2,771,890 | ) | $ | (2,433,206 | ) |

 

**Liquidity and CapitalResources**

 

The Companyhas had negative cash flows since inception. Working capital and financing forthe Company’s acquisitions to date have been provided primarily by the proceedsfrom the Company’s initial public offering, the issuance of the 113⁄4% SeniorDiscount Notes due August 1, 2006, the issuance of promissory notes, common stockand preferred stock to the Company’s shareholders and proceeds from theRevolving Credit Facility.

 

Net cash usedin operating activities increased by approximately $17.5 million or 377% toapproximately $22.1 million for the nine months ended September 30, 2003 fromapproximately $4.6 million for the comparable period in the prior year.   Net cash provided by (used in) investingactivities increased by $5.8 million or 233% to $2.9 million for the ninemonths ended September 30, 2003 from approximately $(2.9) million for thecomparable period in the prior year. The increase of approximately $5.8 millionfrom 2002 to 2003 was primarily due to the proceeds received from the sale ofthe Denver radio station assets of approximately $3.4 million and a decrease incapital expenditures of approximately $2.4 million.  Net cash provided by financing activities increased byapproximately $9.4 million to approximately $17.4 million for the nine monthsended September 30, 2003 from approximately $8.0 million for the comparableperiod in the prior year. The increase of approximately $9.4 million wasprimarily due to the Company borrowing approximately $20.0 million under itsRevolving Credit Facility during the nine months ended September 30, 2003, adecrease in repayment of notes payable of approximately $0.3 million anddeferred financing cost incurred during 2002 of approximately $1.0 millionoffset by a decrease in intercompany borrowings of approximately $11.9 million.

 

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Capitalexpenditures primarily relate to the purchase of broadcast equipment for thenetwork and O&Os stations, leasehold improvements, computer equipment andtelecommunications equipment. Capital expenditures were approximately $0.5million and $2.9 million for the nine months ended September 30, 2003 and 2002,respectively.  The decrease in capitalexpenditures is primarily due to signal upgrades completed during 2002.

 

On October 3,2003, the Company announced that it had entered into a definitive assetpurchase agreement to sell its station group to Multicultural RadioBroadcasting, Inc., (“Multicultural”) a privately held company. The Companyalso announced that it is in discussions with third parties to sell its radionetwork, as well as its promotions company, Mass Promotions,Inc.  The Company will continue to broadcast its Spanish languageprogramming and otherwise operate its business in the normal course through theclosing of the Multicultural transaction.

 

On October 31,2003, the Company’s parent, Radio Unica Communications Corp, the Company andall of its subsidiaries (excluding Mass Promotions, Inc.) filed voluntarypetitions for relief under Chapter 11 of the U.S. Bankruptcy Code. The filingwas made in the U.S. Bankruptcy Court for the Southern District of New York inorder to implement the previously announced sale of its station group andrelated assets to Multicultural and its plan to separately sell its radionetwork and promotions company.

 

Under theMulticultural agreement the Company will receive approximately $150million in cash for its radio stations. Completion of the transaction issubject to bankruptcy court approval, regulatory approvals and otherconditions. It is expected that the transaction will be completed by the secondquarter of 2004. The transaction will be effected as part of a prepackagedbankruptcy in which holders of the Company’s 11 3⁄4% Senior Discount Notes wouldreceive approximately $700 in cash per $1,000 principal amount, allsecured, priority, administrative and other general unsecured claims (withexception of subordinated claims related to securities litigation) wouldreceive 100% of their claims, and stockholders would receive the remaindercurrently estimated to be between $0.47 and $1.03 per share.  Holders of 100% of the Company’s outstandingSenior Discount Notes have agreed to support the transaction and vote in favorof the prepackaged bankruptcy.

 

The Companywill continue operations in the normal course during the bankruptcy periodusing cash on hand and available working capital.  If the Company is unable to successfully obtain bankruptcy courtapproval and/or regulatory approvals to complete the transaction withMulticultural, it may have to adopt one or more alternatives such as sellingassets. There can be no assurance that this financing strategy could beeffected on satisfactory terms, if at all.

 

The bankruptcyfiling on October 31, 2003 constitutes an event of default under the RevolvingCredit Facility.  In addition, theCompany is subject to financial covenants under its Revolving CreditFacility.  There is no assurance thatthe Company will be able to comply with its financial covenants or that anyfuture covenant breaches will be waived. Any breach that is not waived couldresult in an event of default, permitting the lenders to declare amountsoutstanding and interest thereon due and payable.

 

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**Item 3****.****           Quantitativeand Qualitative Disclosures about Market Risk**

 

Our exposure to interestrate risk arises principally from the variable rates associated with ourRevolving Credit Facility. On September 30, 2003, we had borrowings ofapproximately $20.0 million under our Revolving Credit Facility that weresubject to variable rates. Based on amounts outstanding as of September 30,2003, an adverse change of 1.0% in the interest rate on our Revolving CreditFacility would have caused us to incur an increase in interest expense ofapproximately $0.2 million on an annual basis.

 

**Item 4****.****           Controlsand Procedures**

 

The Company’sChief Executive Officer and Chief Financial Officer, based on their evaluationof the Company’s disclosure controls and procedures at September 30, 2003, haveconcluded that such disclosure controls and procedures were effective to ensurethat material information relating to the Company and required to be disclosedby the Company has been made known to them and has been recorded, processed,summarized and reported timely. During the quarter ended September 30, 2003,there have not been any significant changes in the Company’s internal controlsor in other factors that could significantly affect these controls subsequentto the date of evaluation.

 

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**PART II****- OTHERINFORMATION**

 

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

 

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

 
| **Exhibit  No.** |   | **Description**                                                                                                  |
|------------------|--------|------------------------------------------------------------------------------------------------------------------|
| 31.1             |   | Certification of Chief Executive Officer pursuant to Section 302 of  Sarbanes-Oxley Act of 2002. Filed herewith. |
|             |   |                                                                                                             |
| 31.2             |   | Certification of Chief Financial Officer pursuant to Section 302 of  Sarbanes-Oxley Act of 2002. Filed herewith. |
|             |   |                                                                                                             |
| 32.1             |   | Certification of Chief Executive Officer pursuant to Section 906 of  Sarbanes-Oxley Act of 2002. Filed herewith. |
|             |   |                                                                                                             |
| 32.2             |   | 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 the requirements of the Securities Exchange Act of 1934,the Registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 

 
|   |   | Radio Unica Corp. |                    |
|--------|--------|-------------------|-------------------------|
|   |   |              |                    |
|   |   |              |                    |
|   |   | By:               |                    | /s/ Steven E. Dawson |   |
|   |   |              | Steven E. Dawson        |   |
|   |   |              | Chief Financial Officer |   |

 

 

Date:                    November14, 2003

 

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