Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Annual Report -- [x] Reg. S-K Item 405 72 417K
2: EX-3.2 Certificate of Designations, Preferences & Rights 10 39K
5: EX-10.11 First Amendment to Lease and Agreement 8 30K
3: EX-10.5 Executive Employment Agreement Dated Dec. 1, 2000 14 56K
4: EX-10.6 First Amendment to Executive Employment Agreement 2 9K
6: EX-21.1 Subsidiaries of the Registrant 2 11K
7: EX-23.1 Consent of Independent Accountants 1 5K
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from to
Commission File Number 1-15997
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ENTRAVISION COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
[Download Table]
Delaware 95-4783236
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2425 Olympic Boulevard, Suite 6000 West
Santa Monica, California 90404
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: (310) 447-3870
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class Name of each exchange on which registered
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Class A Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 20, 2001 was approximately $252,894,282 (based upon the
closing price for shares of the registrant's Class A common stock as reported
by the New York Stock Exchange for the last trading date prior to that date).
Shares of Class A common stock held by each officer, director and holder of 5%
or more of the outstanding Class A common stock have been excluded in that
such persons may be deemed to be affiliates. This determination of affiliate
status is not necessarily a conclusive determination for other purposes.
As of March 20, 2001, there were 65,732,618 shares, $0.0001 par value per
share, of the registrant's Class A common stock outstanding, 27,678,533
shares, $0.0001 par value per share, of the registrant's Class B common stock
outstanding and 21,983,392 shares, $0.0001 par value per share, of the
registrant's Class C common stock outstanding.
Portions of the registrant's Proxy Statement for the 2001 Annual Meeting of
Stockholders scheduled to be held on May 10, 2001 are incorporated by a
reference in Part III hereof.
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ENTRAVISION COMMUNICATIONS CORPORATION
2000 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
[Download Table]
Page
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PART I
ITEM 1. BUSINESS...................................................... 3
ITEM 2. PROPERTIES.................................................... 23
ITEM 3. LEGAL PROCEEDINGS............................................. 23
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 23
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS....................................................... 24
ITEM 6. SELECTED FINANCIAL DATA....................................... 26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION...................................... 28
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.... 37
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................... 37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE...................................... 37
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............ 38
ITEM 11. EXECUTIVE COMPENSATION........................................ 38
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................... 38
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................ 38
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K...................................................... 39
EXHIBIT INDEX........................................................... 40
SIGNATURES.............................................................. 42
POWER OF ATTORNEY....................................................... 42
2
ITEM 1. BUSINESS
Overview
Entravision Communications Corporation and its wholly owned subsidiaries,
or Entravision, is a diversified media company utilizing a combination of
television, radio, outdoor and publishing operations to reach Hispanic
consumers in the United States. We operate in 33 of the top 50 U.S. Hispanic
markets. We currently own and operate television stations in 22 U.S. markets.
We are the largest Univision-affiliated station group in the United States.
Univision Communications Inc., or Univision, is a key source of programming
for our television broadcasting business and we consider them to be a valuable
strategic partner of ours. We also own and/or operate 58 radio stations in 25
markets, including Spanish-language stations in Los Angeles, San Francisco,
Phoenix and Dallas-Ft. Worth. Our outdoor operations consist of approximately
11,200 advertising faces concentrated primarily in high-density Hispanic
communities in Los Angeles and New York. We also own El Diario/la Prensa, the
oldest major Spanish-language daily newspaper in the United States.
Significant Transactions in 2000
The LCG Acquisition. Through our acquisition of Latin Communications Group
Inc., or LCG, on April 20, 2000 for approximately $256 million, we added 17
radio stations to our existing radio stations and LCG's publishing operations.
LCG's radio stations are located in nine radio markets, including Los Angeles
and San Francisco, which are two of the top ten U.S. Hispanic markets.
Initial Public Offering. On August 2, 2000, we completed an initial public
offering, or IPO, of our Class A common stock. We sold 46,435,458 shares of
our Class A common stock to the underwriters at a price of $16.50 per share.
We also sold 6,464,542 shares of our Class A common stock directly to
Univision at a price of $15.47 per share. The net proceeds to us after
deducting underwriting discounts and commissions and offering expenses were
approximately $814 million.
Reorganization. On August 2, 2000, we completed a reorganization from a
limited liability company to a corporation. As a result of this
reorganization, prior to the closing of the IPO, the beneficial ownership of
Entravision was virtually identical to the beneficial ownership of Entravision
Communications Company, L.L.C., our predecessor, immediately before the
reorganization. This reorganization occurred as follows:
. Walter F. Ulloa, Philip C. Wilkinson and Paul A. Zevnik and each of their
trusts and other controlled entities exchanged their direct and indirect
ownership interests in our predecessor for newly-issued shares of Class B
common stock;
. each of the stockholders in the seven corporate member entities of our
predecessor (other than Messrs. Ulloa, Wilkinson and Zevnik and their
trusts and related entities) exchanged their shares in such corporate
members for newly-issued shares of Class A common stock;
. each of the remaining individuals, trusts and other entities holding
direct membership interests in our predecessor exchanged such interests
for newly-issued shares of Class A common stock; and
. Univision exchanged its subordinated note and option in our predecessor
for shares of Class C common stock.
The Z-Spanish Acquisition. Through our acquisition of Z-Spanish Media
Corporation, or Z-Spanish Media, on August 9, 2000 for approximately $462
million, including approximately $110 million of debt, we became the largest
group of Spanish-language radio stations and the largest centrally programmed
radio network in the United States targeting primarily Hispanic listeners. Z-
Spanish Media also operates one of the largest outdoor advertising companies
in the United States focusing on the Hispanic market.
Acquisition of Radio Stations KACD-FM and KBCD-FM. On August 24, 2000, we
acquired the Federal Communications Commission, or FCC, licenses relating to
the operations of radio stations KACD-FM, Santa Monica, California, and KBCD-
FM, Newport Beach, California, from Citicasters Co., a subsidiary of Clear
Channel Communications, Inc. for $85 million.
3
Acquisition of Radio Stations KFRQ-FM, KKPS-FM, KVPA-FM and KVLY-FM. On
September 12, 2000, we acquired certain assets relating to the operations of
radio stations KFRQ-FM, KKPS-FM, KVPA-FM and KVLY-FM in the McAllen, Texas
market from Sunburst Media, LP for $55 million.
Acquisition of Infinity Broadcasting Outdoor Advertising Assets. On October
2, 2000, we acquired certain outdoor advertising assets located primarily in
high-density Hispanic communities in New York City from Infinity Broadcasting
Corporation, or Infinity, for a total of approximately $168 million.
The Hispanic Market Opportunity
Although Hispanics represent approximately 12.5% of the U.S. population,
the U.S. Hispanic population is growing seven times faster than the non-
Hispanic population. Consequently, advertisers have recently begun to direct
more advertising dollars toward U.S. Hispanics. We believe that we have
benefited and will continue to benefit from the following industry trends and
attributes in the United States:
Spanish-Language Use. Approximately 68% of all Hispanics, regardless of
income or educational level, speak Spanish at home. This percentage is
expected to remain relatively constant through 2020. The number of Hispanics
who speak Spanish in the home is expected to grow from 22 million in 2000 to
36.3 million in 2020. We believe that the strong Spanish-language use among
Hispanics indicates that Spanish-language media will continue to be an
important source of news, sports and entertainment for Hispanics and an
important vehicle for our marketing and advertising.
Hispanic Population Growth and Concentration. Our audience consists
primarily of Hispanics, one of the fastest-growing segments of the U.S.
population. The overall Hispanic population is growing at approximately seven
times the rate of the non-Hispanic U.S. population and is expected to grow to
55.2 million (17% of the total U.S. population) by 2020.
Increasing Hispanic Buying Power. The Hispanic population accounted for
total consumer expenditures of $444 billion in 2000, an increase of 106% since
1990. Hispanics are expected to account for $2.1 trillion in consumer
expenditures by 2020. We believe these factors make Hispanics an attractive
target audience for many major U.S. advertisers.
Spanish-Language Advertising. According to published sources, nearly $2.4
billion of total advertising expenditures in the United States were placed in
Spanish-language media in 2000. Approximately 52% of that nearly $2.4 billion
was placed in Spanish-language television advertising. We believe that major
advertisers have found that Spanish-language media is a more cost-effective
means to target the growing Hispanic audience than English-language broadcast
media.
Attractive Profile of Hispanic Consumers. We believe the demographic
profile of the Hispanic audience makes it attractive to advertisers. The
larger size and younger age of Hispanic households (averaging 3.4 persons and
26.2 years of age as compared to the general public's average of 2.5 persons
and 36.1 years of age) lead Hispanics to spend more per household on many
categories of goods and services. Although the average U.S. Hispanic household
has less disposable income than the average U.S. household, the average U.S.
Hispanic household spends 21% more per year than the average non-Hispanic U.S.
household on food at home, 91% more on children's clothing, 52% more on
footwear and 25% more on laundry and household cleaning products. We expect
Hispanics to continue to account for a disproportionate share of growth in
spending nationwide in many important consumer categories as the Hispanic
population and its disposable income continue to grow.
4
Business Strategy
We seek to increase our advertising revenue through the following
strategies:
Effectively Use Our Network and Media Brands. We are the largest Univision
television affiliate group, the largest operator of Spanish-language radio
stations and the largest centrally programmed Spanish-language radio network
in the United States. Univision reaches 92% of all Hispanic households and has
an approximately 84% household share of the U.S. Spanish-language network
television prime-time audience. Univision makes available to our television
stations 24 hours a day of Spanish-language programming including a prime time
schedule of substantially all first-run programming (i.e., no reruns)
throughout the year. We operate our radio networks using four primary formats
designed to appeal to different listener tastes. We format the programming of
our network and radio stations to capture a substantial share of the U.S.
Hispanic audience.
Invest in Media Research and Sales. We believe that continued use of
reliable ratings and surveys will allow us to further increase our advertising
rates and narrow the gap which has historically existed between our audience
share and our share of advertising revenue. We use industry ratings and
surveys, including Nielsen, Arbitron, the Traffic Audit Bureau and the Audit
Bureau of Circulation, to provide a more accurate measure of consumers that we
reach with our operations. We believe that our focused research and sales
efforts will enable us to continue to achieve significant revenue growth.
Continue to Build and Retain Strong Management Teams. We believe we have
one of the most experienced management teams in the industry. Walter F. Ulloa,
our Chairman and Chief Executive Officer, Philip C. Wilkinson, our President
and Chief Operating Officer, Jeanette Tully, our Chief Financial Officer,
Jeffery A. Liberman, the President of our Radio Division, and Glenn Emanuel,
the President of our Outdoor Division, have an average of 20 years of media
experience. We intend to continue to build and retain our key management
personnel and to capitalize on their knowledge and experience in the Spanish-
language markets.
Emphasize Local Content, Programming and Community Involvement. We believe
that local content in each market we serve is an important part of building
our brand identity within the community. By combining our local news and
quality network programming, we believe we have a significant competitive
advantage. We also believe that our active community involvement, including
station remote broadcasting appearances at client events, concerts and tie-ins
to major events, helps to build station awareness and identity as well as
viewer and listener loyalty.
Increase In-Market Cross Promotion. Our strategy is to cross-promote our
television and radio stations, outdoor and publishing properties. In addition,
we believe we will add significant value to our advertisers by providing
attractive media packages to target the Hispanic consumer.
Target Other Attractive Hispanic Markets and Fill-In Acquisitions. We
believe our knowledge of, and experience with, the Hispanic marketplace will
enable us to continue to identify acquisitions in the television, radio and
outdoor markets. Since our inception, we have used our management expertise,
programming and brand identity to improve our acquired media properties.
Television
Overview
We own and operate Univision-affiliated stations in 21 of the top 50
Hispanic markets in the United States. Our television operations are the
largest affiliate group of Univision stations. Univision is the leading
Spanish-language broadcaster in the United States, with broadcast coverage
reaching more than 92% of all Hispanic households, which represents an
approximately 84% market share of the U.S. Spanish-language network television
primetime audience as of December 2000. Univision is the most-watched
television network (English- or Spanish-language) among Hispanic households
and makes available to our Univision-affiliated stations
5
24 hours a day of Spanish-language programming. Univision's prime time
schedule is all first-run programming (i.e., no reruns) through the year. We
believe that the breadth and diversity of Univision's programming, combined
with our local news and community-oriented segments, provide us with an
advantage over other Spanish-language and English-language broadcasters in
reaching Hispanic viewers. Our local content is designed to brand each of our
stations as the best source for relevant community information that accurately
reflects local interests and needs. As a result, all but one of our Univision-
affiliated stations rank first in Spanish-language television viewership in
their markets.
Television Programming
Univision Network Programming. Univision directs its programming primarily
toward its young, family-oriented audience. It begins daily with Despierta
America and other talk and information shows, Monday through Friday, followed
by novelas. In the late afternoon and early evening, Univision offers a talk
show, a game show, a news-magazine and national news, in addition to local
news produced by our television stations. During prime time, Univision airs
novelas, variety shows, a talk show, comedies, news magazines and lifestyle
shows, as well as specials and movies. Prime time is followed by late news and
a late night talk show. Overnight programming consists primarily of repeats of
programming aired earlier in the day. Weekend daytime programming begins with
children's programming, followed by sports, variety, teen lifestyle shows and
movies.
Approximately eight to ten hours of programming per weekday, including a
substantial portion of weekday prime time, are currently programmed with
novelas supplied primarily by Grupo Televisa and Venevision. Although novelas
have been compared to daytime soap operas on ABC, NBC or CBS, the differences
are significant. Novelas, originally developed as serialized books, have a
beginning, middle and end, generally run five days per week and conclude four
to eight months after they begin. Novelas also have a much broader audience
appeal than soap operas, delivering audiences that contain large numbers of
men, children and teens in addition to women.
Entravision Local Programming. We believe that our local news brands each
of our stations in the market. We shape our local news to relate to our target
audiences. In nine of our television markets, our local news is ranked first
among viewers 18-34 in any language. We have made substantial investments in
people and equipment in order to provide our local communities with quality
newscasts. Our local newscasts have won numerous awards, and we strive to be
the most important community voice in each of our local markets.
Network Affiliation Agreements. All but two of our television stations are
Univision-affiliated stations. Our network affiliation agreements with
Univision provide each station with the exclusive right to broadcast the
Univision network programming in its respective market. These long-term
affiliation agreements expire in 2021. Under the affiliation agreements,
Univision retains the right to sell approximately six minutes per hour of the
advertising time available during the Univision schedule, with the remaining
six minutes per hour available for sale by our stations.
Our network affiliation agreement with the United Paramount Network, or
UPN, gives us the right to provide UPN network programming for a ten year
period expiring in October 2009 on XUPN-TV serving the Tecate/San Diego
market. A related participation agreement grants UPN a 20% interest in the
appreciation of XUPN-TV above $35 million upon certain liquidity events as
defined in the agreement. XHAS-TV broadcasts Telemundo network programming
serving the Tijuana/San Diego market pursuant to a network affiliation
agreement.
Our network affiliation agreement with Telemundo Network Group LLC, or
Telemundo, gives us the right to provide Telemundo network programming for a
six year period expiring in July 2007 on XHAS-TV serving the Tijuana/San Diego
market. The affiliation agreement grants Telemundo a 20% interest in the
appreciation of XHAS-TV above $31 million, plus capital expenditures and
certain other adjustments. We also granted Telemundo an option to purchase our
ownership interest in KTCD-LP at a purchase price equal to our cost for such
interest.
6
Our Television Station Portfolio
The following table lists information as of March 20, 2001 concerning each
of our owned and/or operated television stations and its respective market:
[Enlarge/Download Table]
Market Rank
(by
Hispanic Total Hispanic % Hispanic
Market Households) Households Households Households Call Letters, Channel
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Harlingen-Weslaco- 9 256,810 209,240 81.5% KNVO-TV, Channel 48
Brownsville-McAllen, Texas
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San Diego, California 11 996,220 193,110 19.4% KBNT-LP, Channel 17
KSZZ-LP, Channel 19
KTCD-LP, Channel 46 (1)
KHAX-LP, Channel 49 (1)
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Albuquerque-Santa Fe, 12 570,460 190,010 33.3% KLUZ-TV, Channel 41
New Mexico KLUZ-LP, Channel 48
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El Paso, Texas 15 275,850 177,580 64.4% KINT-TV, Channel 26
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Denver-Boulder, Colorado 16 1,312,300 147,640 11.2% KCEC-TV, Channel 50
KUVC-LP, Channel 36
K03EM, Channel 3
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Washington, D.C. 18 2,047,340 109,240 5.3% WMDO-CA, Channel 30 (2)
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Tampa-St. Petersburg 19 1,507,790 105,090 7.0% WVEA-TV, Channel 62
(Sarasota), Florida WVEA-LP, Channel 61
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Corpus Christi, Texas 20 185,570 99,950 53.9% KORO-TV, Channel 28
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Boston, Massachusetts 23 2,242,240 96,760 4.38% WUNI-TV, Channel 27
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Orlando-Daytona Beach- 24 1,126,000 83,060 7.4% WVEN-TV, Channel 26
Melbourne, Florida WVEN-LP, Channel 63
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Las Vegas, Nevada 25 559,330 82,910 14.8% KINC-TV, Channel 15
KELV-LP, Channel 27
KNTL-LP, Channel 47
KWWB-LP, Channel 45 (3)
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Monterey-Salinas-Santa Cruz, 26 223,650 59,780 26.7% KSMS-TV, Channel 67
California
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Hartford-New Haven, 28 923,740 55,910 6.0% WUVN-TV, Channel 18
Connecticut
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Laredo, Texas 31 57,270 52,990 92.5% KLDO-TV, Channel 27
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Colorado Springs-Pueblo, 33 298,600 47,840 16.0% KGHB-CA, Channel 27 (2)
Colorado
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Santa Barbara-Santa 36 227,240 44,130 19.4% KPMR-TV, Channel 38 (3)
Maria-San Luis Obispo,
California
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Yuma, Arizona-El Centro, 37 88,530 43,230 48.8% KVYE-TV, Channel 7
California
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Odessa-Midland, Texas 38 138,300 41,950 30.3% KUPB-TV, Channel 18 (3)
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Lubbock, Texas 39 141,990 38,440 27.0% KBZO-LP, Channel 51
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Palm Springs, California 42 118,330 35,230 29.8% KVER-CA, Channel 4 (2)
KEVC-CA, Channel 5 (2)
KVES-LP, Channel 28
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Amarillo, Texas 43 189,880 31,820 16.7% KEAT-LP, Channel 22
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San Angelo, Texas 66 51,370 13,910 27.1% KEUS-LP, Channel 31
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Tecate, Baja California, -- -- -- -- XUPN-TV, Channel 49 (4)
Mexico
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Tijuana, Mexico -- -- -- -- XHAS-TV, Channel 33 (4)
Source: Nielsen Media Research 2001 universe estimates.
(1) We own a 47.5% equity interest in the entity that holds the FCC license to
this station, with an option to acquire an additional 47.5%. We provide
substantially all of the programming and related services available on
this station pursuant to a time brokerage agreement.
(2) "CA" in call letters indicates station is under Class A television
service.
(3) Regular broadcast operations not yet commenced.
(4) We hold a minority, limited voting interest (neutral investment stock) in
the entity that directly or indirectly holds the broadcast license for
this station. We have been retained to provide the programming and related
services available on this station under a time brokerage agreement. The
station holds absolute control on the contents and other broadcast issues.
7
Television Advertising
In 1999, national advertising revenue accounted for 39%, local advertising
accounted for 57% and network compensation for 4% of our total television
advertising revenue. In 2000, national advertising accounted for 37%, local
advertising accounted for 58% and network compensation for 5% of our total
television advertising revenue.
National Advertising. National advertising revenue represents commercial
time sold to a national advertiser within a specific market by Univision, our
national representative firm. For these sales, Univision is paid a 15%
commission on the net revenue from each sale (gross revenue less agency
commission). We target the largest national Spanish-language advertisers that
collectively purchase the greatest share of national advertisements through
Univision. The Univision representative works closely with each station's
national sales manager. This has enabled us to secure major national
advertisers, including Ford Motor Company, General Motors, Southwestern Bell,
McDonald's and Burger King. We have a similar national advertising
representative arrangement with Telemundo. UPN is represented by Petry
Television Inc.
Local Advertising. Local advertising revenue is generated from commercial
airtime and is sold directly by the station to an in-market advertiser or its
agency.
Network compensation. Network compensation revenue represents compensation
from Univision in exchange for broadcasting their programming in certain
television markets.
Television Audience Research
We derive our revenue primarily from selling advertising time. The relative
advertising rates charged by competing stations within a market depend
primarily on four factors:
. the station's ratings (households or people viewing its programs as a
percentage of total television households or people in the viewing area);
. audience share (households or people viewing its programs as a percentage
of households or people actually watching television at a specific time);
. the time of day the advertising will run; and
. the demographic qualities of a program's viewers (primarily age and
gender).
Nielsen ratings provide advertisers with the industry-accepted measure of
television viewing. In recent years, Nielsen began a special service to
measure Hispanic viewing. Nielsen is now introducing improved methodology to
its general market service that more accurately measures Hispanic viewing by
using language spoken in the home in its metered market sample. We believe
that this new methodology will result in substantial ratings gains and allow
us to further increase our advertising rates and narrow the gap which has
historically existed between our audience share and our advertising revenue.
We have made significant investments in experienced sales managers and account
executives and have provided our sales professionals with research tools to
continue to attract major advertisers.
The various Nielsen rating services that we use are described below:
Nielsen Hispanic Station Index. This service measures Hispanic household
viewing at the local market level. Each sample also reflects the varying
levels of language usage by Hispanics in each market in order to more
accurately reflect the Hispanic household population in the relevant market.
Nielsen Hispanic Station Index only measures the audience viewing of Hispanic
households, that is, households where the head of the household is of Hispanic
descent or origin. Although this offers improvements over previous measurement
indices, we believe it still underreports the number of viewers watching
Entravision programming because we have viewers who do not live in Hispanic
households.
Nielsen Station Index. This service measures local station viewing of all
households in a specific market. We buy these reports in all of our markets to
measure our viewing against both English- and Spanish-language competitors.
This rating service, however, is not language-stratified and generally under-
represents Spanish-speaking households. As a result, we believe that this
typically under-reports viewing of Spanish-language
8
television. Despite this limitation, the Nielsen Station Index demonstrates
that many of our full-power broadcast stations achieve total market ratings
that are fully comparable with their English-language counterparts, with eight
of our full-power television stations ranking as the top station in their
respective markets from sign-on to sign-off among adults 18-34.
Television Competition
We compete for viewers and revenues with other Spanish-language and
English-language television stations and networks, including the four
principal English-language television networks, ABC, CBS, NBC and Fox, and in
certain cities, UPN and WB. Certain of these English-language networks and
others have begun producing Spanish-language programming and simulcasting
certain programming in English and Spanish. Several cable broadcasters have
recently commenced, or announced their intention to commence, Spanish-language
services as well.
Telemundo is a large competitor that broadcasts Spanish-language television
programming. As of December 31, 2000, Telemundo served 64 markets in the
United States and Puerto Rico, with broadcast coverage reaching approximately
85% of all Hispanic households in those areas. In some of our markets, we
compete directly with stations affiliated with Telemundo. We also compete for
viewers and revenues with independent television stations, other video media,
suppliers of cable television programs, direct broadcast systems, newspapers,
magazines, radio and other forms of entertainment and advertising.
Radio
Overview
We currently own and/or operate 58 radio stations in 25 markets. Our radio
stations cover in aggregate approximately 58% of the Hispanic population and
56 of our stations are located in the top 50 Hispanic markets. We also provide
programming to 39 affiliate stations in 38 markets. Our radio operations
combine network programming with local time slots available for advertising,
news, traffic, weather, promotions and community events. This strategy allows
us to provide quality programming with significantly lower costs of operations
than we could otherwise deliver solely with independent programming.
Radio Programming
Radio Networks. Through our radio network, we have created the single
largest U.S. Hispanic radio market, currently with over 17 million potential
listeners. Our networks allow clients with national product distribution to
deliver a uniform advertising message to the fast growing Hispanic market
around the country in an efficient manner and at a cost that is generally
lower than our English-language counterparts.
Although our networks have a broad reach across the United States,
technology allows our stations to offer the necessary local feel and to be
responsive to local clients and community needs.
Designated time slots are used for local advertising, news, traffic,
weather, promotions and community events. The audience gets the benefit of a
national radio sound along with local content. To further enhance this effect,
our on-air personalities frequently travel to participate in local promotional
events. For example, in selected key markets our on-air personalities appear
at special events and client locations. We promote these events as "remotes"
to bond the national personalities to local listeners. Furthermore, all of our
stations can disconnect from the networks and operate independently in the
case of a local emergency or a problem with the central satellite
transmission.
Our network format "La Zeta" is currently used by Jones Satellite Network
and served by 39 affiliates located in 38 markets across the United States.
These affiliates receive our programming in exchange for two minutes per hour
for network commercials. Affiliates are allowed up to 16 minutes per hour for
local
9
advertisements and content. Our affiliates receive quality programming at a
significantly lower cost than they could produce themselves. We benefit by
having extended national coverage without the capital expenditures necessary
to buy and manage stations in those markets. The extended coverage also allows
the network to charge higher rates as its delivery to the U.S. Hispanic market
grows.
Radio Formats. We produce programming in a variety of music formats that
are simultaneously distributed via satellite with a digital CD-quality sound
to our owned and affiliated stations. We offer four primary formats which
appeal to different listener preferences:
. Radio Romantica is an adult-contemporary, romantic ballads/current hits
format, targeting Hispanics 18-49 (primarily females).
. Radio Tricolor is a personality-driven, Mexican country-style format,
targeting Hispanics 18-49 (primarily males).
. Super Estrella is a music-driven, pop and alternative Spanish rock
format, targeting Hispanics 18-34 (males and females).
. La Zeta is a top hits Spanish format with recognizable radio
personalities. The music is primarily from the northern and central
regions of Mexico, targeting Hispanics 18-49 (primarily males).
10
Our Radio Station Portfolio
The following table lists information as of March 20, 2001 concerning each
of our owned and/or operated radio stations and its respective market:
[Enlarge/Download Table]
Market Rank
(by Hispanic
Market Households) Station Frequency Format
------------------------------------------------------------------------------------------
Los Angeles, California 1 KSSC-FM 103.1 MHz Super Estrella(2)
KSSD-FM 103.1 MHz Super Estrella(2)
KSSE-FM 97.5 MHz Super Estrella
Riverside-San Bernardino, KCAL-AM 1410 kHz Radio Tricolor
California KSZZ-AM 590 kHz Radio Tricolor
------------------------------------------------------------------------------------------
Miami-Ft. Lauderdale- 3 WLQY-AM 1320 kHz Time Brokered (1)
Hollywood, Florida
------------------------------------------------------------------------------------------
San Francisco-San Jose, 4 KBRG-FM 100.3 MHz Radio Romantica
California KLOK-AM 1170 kHz Radio Tricolor
------------------------------------------------------------------------------------------
Chicago, Illinois 5 WRZA-FM 99.9 MHz Super Estrella(2)
WZCH-FM 103.9 MHz Super Estrella(2)
WNDZ-AM 750 kHz Time Brokered (1)
------------------------------------------------------------------------------------------
Houston-Galveston, Texas 6 KGOL-AM 1180 kHz Time Brokered (1)
------------------------------------------------------------------------------------------
Dallas-Ft. Worth, Texas 8 KRVA-FM 106.9 MHz Super Estrella (2)(3)
KRVF-FM 107.1 MHz Super Estrella (2)(3)
KZMP-FM 101.7 MHz Radio Tricolor (2)
KRVA-AM 1600 kHz Radio Romantica
KXGM-FM 106.5 MHz Time Brokered (1)
KZMP-AM 1540 kHz Radio Tricolor (2)
------------------------------------------------------------------------------------------
Harlingen-Weslaco-
Brownsville-McAllen, 9 KFRQ-FM 94.5 MHz Classic Rock (English)
Texas KKPS-FM 99.5 MHz Tejano
KVLY-FM 107.9 MHz Adult Contemporary (English)
KVPA-FM 101.1 MHz Top 40 (English)
------------------------------------------------------------------------------------------
Phoenix, Arizona 10 KLNZ-FM 103.5 MHz Radio Tricolor
KVVA-FM 107.1 MHz Radio Romantica (2)
KUET-AM 710 kHz -- (4)
KDVA-FM 106.9 MHz Radio Romantica (2) (3)
------------------------------------------------------------------------------------------
Albuquerque-Santa Fe, New
Mexico 12 KRZY-FM 105.9 MHz Radio Romantica
KRZY-AM 1450 kHz Radio Tricolor
------------------------------------------------------------------------------------------
Fresno, California 13 KZFO-FM 92.1 MHz Super Estrella
KHOT-AM 1250 kHz La Zeta
------------------------------------------------------------------------------------------
Sacramento, California 14 KRRE-FM 104.3 MHz Radio Romantica
KRCX-FM 99.9 MHz Radio Tricolor
KCCL-FM 101.9 MHz Oldies (English)
Stockton, California KMIX-FM 100.9 MHz Radio Tricolor
KCVR-AM 1570 kHz Radio Romantica (2)
Modesto, California KTDZ-FM 98.9 MHz Radio Romantica (2)
KZMS-FM 97.1 MHz Super Estrella
------------------------------------------------------------------------------------------
El Paso, Texas 15 KINT-FM 93.9 MHz La Caliente (Top 40)
KHRO-FM 94.7 MHz 80's (English)
KOFX-FM 92.3 MHz Oldies (English)
KSVE-AM 1150 kHz Radio Unica
KBIV-AM 1650 kHz -- (5)
------------------------------------------------------------------------------------------
Denver-Boulder, Colorado 16 KJMN-FM 92.1 MHz Radio Romantica
KMXA-AM 1090 kHz Radio Tricolor
------------------------------------------------------------------------------------------
Tucson/Nogales, Arizona 22 KZLZ-FM 105.3 MHz Radio Tricolor
KZNO-FM 98.3 MHz Radio Tricolor (3)
------------------------------------------------------------------------------------------
Las Vegas, Nevada 25 KRRN-FM 105.1 MHz Super Estrella
------------------------------------------------------------------------------------------
Monterey-Salinas-Santa
Cruz, California 26 KLOK-FM 99.5 MHz Radio Tricolor
KSES-FM 107.1 MHz Super Estrella (2)
KSES-AM 700 kHz Super Estrella (2)
------------------------------------------------------------------------------------------
El Centro, California 37 KSEH-FM 94.5 MHz Super Estrella
Brawley, California KWST-AM 1430 kHz Country (English)
Imperial, California KMXX-FM 99.3 MHz Radio Tricolor
------------------------------------------------------------------------------------------
Lubbock, Texas 39 KBZO-AM 1460 kHz Radio Tricolor
------------------------------------------------------------------------------------------
Palm Springs, California 42 KLOB-FM 94.7 MHz Radio Romantica
------------------------------------------------------------------------------------------
Reno, Nevada 48 KRNV-FM 101.7 MHz Radio Tricolor
------------------------------------------------------------------------------------------
Chico, California 70 KHHZ-FM 97.7 MHz La Zeta (2)
KEWE-AM 1340 kHz La Zeta (2)
Source: Nielsen Media Research 2001 universe estimates.
(1) Operated pursuant to a time brokerage agreement under which we grant to a
third-party the right to program the station.
(2) Simulcast station.
(3) Operated pursuant to a time brokerage agreement under which we receive
from the licensee the right to program the station.
(4) Under a FCC construction permit.
(5) Not yet operating--expanded band for Station KSVE-AM.
11
Radio Advertising
Substantially all of the revenue from our radio operations is derived from
local, national and network advertising.
Local. This form of revenue refers to advertising usually purchased by a
local client or agency directly from the station's sales force. In 2000, local
radio revenue comprised 70% of our total radio revenue.
National. This form of revenue refers to advertising purchased by a
national client targeting a specific market. Usually this business is placed
by a national advertising agency or media buying services and ordered through
one of the offices of our national sales representative, Caballero Spanish
Media. The national accounts are handled locally by the station's general
sales manager and/or national sales manager. In 2000, 26% of our total radio
revenue was from national radio advertising.
Network. This form of revenue refers to advertising that is placed on one
or all of our network formats. This business is placed as a single order and
is broadcast from the network's central location. The network advertising can
be placed by a local account executive that has a client in its market that
wants national exposure. Network inventory can also be sold by corporate
executives, by our national representative or by two other entities with whom
we have network sales arrangements, the Jones Radio Network and the Hispanic
Broadcasting Company Radio Network. In 2000, network radio revenue accounted
for 4% of our total radio revenue.
Radio Marketing/Audience Research
We believe that radio is an efficient means for advertisers to reach
targeted demographic groups. Advertising rates charged by our radio stations
are based primarily on the following factors:
. the station's ability to attract listeners in a given market;
. the demand for available air time;
. the attractiveness of the demographic qualities of the listeners
(primarily age and purchasing power);
. the time of day that the advertising runs;
. the program's popularity with listeners; and
. the availability of alternative media in the market.
In the smaller and mid-sized markets, Spanish-language radio continues to
be more of a concept sale. In the larger markets, Arbitron provides
advertisers with the industry-accepted measure of listening audience
classified by demographic segment and time of day that the listeners spend on
particular radio stations. Radio advertising rates generally are highest
during the morning and afternoon drive-time hours which are the peak times for
radio audience listening.
We believe that having multiple stations in a market is desirable to enable
the broadcaster to provide alternatives and to command higher advertising
rates and budget share. Historically, advertising rates for Spanish-language
radio stations have been lower than those of English-language stations with
similar audience levels. We believe we will be able to increase our rates as
new and existing advertisers recognize the growing desirability of targeting
the Hispanic population in the United States.
Each station broadcasts an optimal number of advertisements each hour,
depending upon its format, in order to maximize the station's revenue without
jeopardizing its audience listenership. Our owned stations have up to 15
minutes per hour for commercial inventory and local content. Our network has
up to four additional minutes of commercial inventory per hour. The pricing is
based on a rate card and negotiations subject to the supply and demand for the
inventory in each particular market and the network.
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Radio Competition
Radio broadcasting is a highly competitive business. The financial success
of each of our radio stations and markets depends in large part on our
audience ratings, our ability to increase our market share of the overall
radio advertising revenue and the economic health of the market. In addition,
our advertising revenue depends upon the desire of advertisers to reach our
audience demographic. Each of our radio stations competes for audience share
and advertising revenue directly with both Spanish-language and English-
language radio stations in its market, and with other media within their
respective markets, such as newspapers, broadcast and cable television,
magazines, billboard advertising, transit advertising and direct mail
advertising. Our primary competitors in our markets in Spanish-language radio
are Hispanic Broadcasting Corporation, Radio Unica Communications Corp. and
Spanish Broadcasting System, Inc. Several of the companies with which we
compete are large national or regional companies that have significantly
greater resources and longer operating histories than we do.
Factors that are material to competitive position include management
experience, the station's rank in its market, signal strength and audience
demographics. If a competing station within a market converts to a format
similar to that of one of our stations, or if one of our competitors upgrades
its stations, we could suffer a reduction in ratings and advertising revenue
in that market. The audience ratings and advertising revenue of our individual
stations are subject to fluctuation and any adverse change in a particular
market could have a material adverse effect on our operations.
The radio industry is subject to competition from new media technologies
that are being developed or introduced, such as:
. audio programming by cable television systems, direct broadcast satellite
systems, Internet content providers and other digital audio broadcast
formats;
. satellite digital audio service, which could result in the introduction
of new satellite radio services with sound quality comparable to that of
compact disks; and
. In-Band On-Channel(TM) digital radio, which could provide multi-channel,
multi-format digital radio services in the same bandwidth currently
occupied by traditional AM and FM radio services.
Outdoor Advertising/Publishing
Overview
Our outdoor and publishing operations complement our television and radio
businesses and will allow for cross-promotional opportunities. Because of its
repetitive impact and relatively low cost, outdoor advertising attracts
national, regional and local advertisers. We offer the ability to target
specific demographic groups on a cost-effective basis as compared to other
advertising media. In addition, we provide businesses with advertising
opportunities in locations near their stores or outlets.
Our outdoor portfolio adds to our television and radio reach by providing
local advertisers with significant coverage of the Hispanic communities in Los
Angeles and New York. Our outdoor advertising strategy is designed to
complement our existing television and radio businesses by allowing us to
capitalize on our Hispanic market expertise. The primary components of our
strategy are to leverage the strengths of our inventory, continue to focus on
ethnic communities and increase market penetration.
Outdoor Advertising Markets
We own approximately 11,200 outdoor advertising faces located primarily in
high-density Hispanic communities in Los Angeles and New York, the two largest
Hispanic markets in the United States. We believe our outdoor advertising
appeals to both large and small businesses.
13
Los Angeles. The greater Los Angeles market has a population of
approximately 15.6 million, of which approximately six million or 39% are
Hispanic. As such, Los Angeles ranks as the largest Hispanic advertising
market in the United States. Approximately 87% of our billboard inventory in
Los Angeles is located in neighborhoods where Hispanics represent at least 30%
of the local population, based on the 1990 Census Report. We believe that this
coverage of the Hispanic population has increased significantly since 1990 as
the Hispanic community continues to grow into communities previously populated
by other demographic groups. The Los Angeles metropolitan area has miles of
freeways and surface streets where the average commuter spends in excess of 75
minutes per day in the car.
New York. The greater New York City area has a population of approximately
18.4 million, of which approximately 3.3 million or 18% are Hispanic. As such,
New York ranks as the second largest Hispanic advertising market in the United
States. We have consolidated substantially all of the 8-sheet and 30-sheet
outdoor advertising faces in New York.
Outdoor Advertising Inventory
[Download Table]
Inventory Type Los Angeles New York
-------------- ----------- --------
8-sheet posters............................................ 6,000 3,500
City-Lights................................................ 250 0
30-sheet posters........................................... 0 1,075
Wall-Scapes................................................ 5 187
Bulletins.................................................. 20 164
----- -----
Total...................................................... 6,275 4,926
===== =====
Our inventory consists of the following types of advertising faces that are
typically located on sites that we have leased or have a permanent easement:
8-sheet posters are generally 6 feet high by 12 feet wide. Due to the
smaller size of this type of billboard, 8-sheet posters are often located in
densely populated or fast growing areas where larger signs do not fit or are
not permitted, such as parking lots and other tight areas. Accordingly, most
of our 8-sheet posters are concentrated on city streets, targeting both
pedestrian and vehicular traffic and are sold to advertisers for periods of
four weeks.
City-Lights is a product we created in 1998 to serve national advertisers
with a new advertising format visible both during the day and night. The
format is typically used by national fashion, entertainment and consumer
products companies desiring to target consumers within proximity of local
malls or retail outlets. A City-Lights structure is approximately 7 feet by 10
feet set vertically on a single pole structure. The advertisement is usually
housed in an illuminated glass casing for greater visibility at night and is
sold to advertisers for a period of four weeks.
30-sheet posters are generally 12 feet high by 25 feet wide and are the
most common type of billboard. Lithographed or silk-screened paper sheets,
supplied by the advertiser are pre-pasted and packaged in airtight bags by the
outdoor advertising company and applied, like wallpaper, to the face of the
display. The 30-sheet posters are concentrated on major traffic arteries and
space is usually sold to advertisers for periods of four weeks.
Wall-Scapes generally consist of advertisements ranging in a variety of
sizes (from 120 to 800 square feet) which are displayed on the sides of
buildings in densely populated locations. Advertising formats can include
either vinyl prints or painted artwork. Because of a Wall-Scape's greater
impact and higher cost relative to other types of billboards, space is usually
sold to advertisers for periods of six to 12 months.
Bulletins are generally 14 feet high and 48 feet wide and consist of panels
or a single sheet of vinyl that are hand painted at the facilities of the
outdoor advertising company or computer painted in accordance with design
specifications supplied by the advertiser and mounted to the face of the
display. Because of painted bulletins'
14
greater impact and higher cost relative to other types of billboards, they are
usually located near major highways and are sold for periods of six to 12
months.
Outdoor Advertising Revenue
Advertisers usually contract for outdoor displays through advertising
agencies, which are responsible for the artistic design and written content of
the advertising. Advertising contracts are negotiated on the basis of monthly
rates published in our "rate card." These rates are based on a particular
display's exposure (or number of "impressions" delivered) in relation to the
demographics of the particular market and its location within that market. The
number of "impressions" delivered by a display (measured by the number of
vehicles passing the site during a defined period and weighted to give effect
to such factors as its proximity to other displays and the speed and viewing
angle of approaching traffic) is determined by surveys that are verified by
the Traffic Audit Bureau, an independent agency which is the outdoor
advertising industry's equivalent of television's Nielsen ratings and radio's
Arbitron ratings.
In each of our markets, we employ salespeople who sell both local and
national advertising. Our 2000 outdoor advertising revenue mix consisted of
approximately 70% national advertisers and 30% local advertisers. We believe
that our local sales force is crucial to maintaining relationships with key
advertisers and agencies and identifying new advertisers.
Outdoor Advertising Competition
We compete in each of our outdoor markets with other outdoor advertisers
including Infinity Broadcasting Corporation, Clear Channel Communications,
Inc., ArtKraft Strauss, Medallion Financial Corp., Ackerley Communications,
Inc. and Regency Outdoor. Many of these competitors have a larger national
network and may have greater total resources than we have. In addition, we
also compete with a wide variety of out-of-home media, including advertising
in shopping centers, airports, stadiums, movie theaters and supermarkets, as
well as on taxis, trains and buses. In competing with other media, outdoor
advertising relies on its relative cost efficiency and its ability to reach a
segment of the population with a particular set of demographic characteristics
within that market.
Publishing
We publish El Diario/la Prensa, the oldest major Spanish-language daily
newspaper in the United States and one of only two Spanish-language newspapers
in New York. The newspaper reports news of interest to the Hispanic community,
focusing primarily on local news events and daily occurrences in Latin
America. El Diario/la Prensa has a daily paid circulation of approximately
55,000 as of December 31, 2000, up from 52,000 as of December 31, 1999.
The majority of El Diario/la Prensa's revenue comes from circulation sales
and the sale of local, national and classified advertising. Our top ten
newspaper advertisers by dollar volume accounted for 8.5% of
El Diario/la Prensa's total advertising revenue in 2000. Circulation revenue
comes almost exclusively from sales at newsstands and retail outlets, rather
than mailed subscriptions.
Our primary Spanish-language publishing competitor is a new publication
called Hoy. Our publishing operations also compete with English-language
newspapers and other types of advertising media, many of which reach larger
audiences and have greater total resources than we have.
Most of our publishing employees are represented by the Newspaper and Mail
Deliverers' Union of New York and Vicinity and the Newspaper Guild of New
York. Our collective bargaining agreement with the Newspaper Guild of New York
expires on June 30, 2002 and our agreement with the Newspaper and Mail
Deliverers' Union of New York and Vicinity expires on March 30, 2004.
15
Material Trademarks, Trade Names and Service Marks
In the course of our business, we use various trademarks, trade names and
service marks, including our logos, in our advertising and promotions. We
believe the strength of our trademarks, trade names and service marks are
important to our business and intend to protect and promote them as
appropriate. We do not hold or depend upon any material patent, government
license, franchise or concession, except our broadcast licenses granted by the
FCC.
Employees
As of December 31, 2000, we had approximately 1,000 full-time employees,
including 447 full-time employees in television, 414 full-time employees in
radio, 46 full-time employees in outdoor and 160 full-time employees in
publishing. As of December 31, 2000, 108 of our publishing employees were
represented by labor unions that have entered into collective bargaining
agreements with us. As of December 31, 2000, 3 of our full-time outdoor
employees were represented by labor unions that have entered into or are
currently in negotiations for collective bargaining agreements with us. We
believe our relations with our employees are good.
Regulation of Television and Radio Broadcasting
General. The FCC regulates television and radio broadcast stations pursuant
to the Communications Act of 1934, as amended, or the Communications Act.
Among other things, the FCC:
. determines the particular frequencies, locations and operating power of
stations;
. issues, renews, revokes and modifies station licenses;
. regulates equipment used by stations; and
. adopts and implements regulations and policies that directly or
indirectly affect the ownership, changes in ownership, control, operation
and employment practices of stations.
A licensee's failure to observe the requirements of the Communications Act
or FCC rules and policies may result in the imposition of various sanctions,
including admonishment, fines, the grant of renewal terms of less than eight
years, the grant of a license with conditions or, in the case of particularly
egregious violations, the denial of a license renewal application, the
revocation of an FCC license or the denial of FCC consent to acquire
additional broadcast properties.
Congress and the FCC have had under consideration or reconsideration, and
may in the future consider and adopt, new laws, regulations and policies
regarding a wide variety of matters that could, directly or indirectly, affect
the operation, ownership and profitability of our television and radio
stations, result in the loss of audience share and advertising revenue for our
television and radio broadcast stations or affect our ability to acquire
additional television and radio broadcast stations or finance such
acquisitions. Such matters may include:
. changes to the license authorization and renewal process;
. proposals to impose spectrum use or other fees on FCC licensees;
. changes to the FCC's equal employment opportunity regulations and other
matters relating to involvement of minorities and women in the
broadcasting industry;
. proposals to change rules relating to political broadcasting including
proposals to grant free air time to candidates, and other changes
regarding program content;
. proposals to restrict or prohibit the advertising of beer, wine and other
alcoholic beverages;
. technical and frequency allocation matters, including a new Class A
television service for existing low-power television stations and a new
low-power FM radio broadcast service;
. the implementation of digital audio broadcasting on both satellite and
terrestrial bases;
16
. the implementation of rules governing the transmission of local
television signals by direct broadcast satellite services in their local
areas, and requiring cable television and direct broadcast satellite to
carry local television digital signals;
. changes in broadcast multiple ownership, foreign ownership, cross-
ownership and ownership attribution policies; and
. proposals to alter provisions of the tax laws affecting broadcast
operations and acquisitions.
We cannot predict what changes, if any, might be adopted, nor can we
predict what other matters might be considered in the future, nor can we judge
in advance what impact, if any, the implementation of any particular proposal
or change might have on our business.
FCC Licenses. Television and radio stations operate pursuant to licenses
that are granted by the FCC for a term of eight years, subject to renewal upon
application to the FCC. During the periods when renewal applications are
pending, petitions to deny license renewal applications may be filed by
interested parties, including members of the public. The FCC is required to
hold hearings on renewal applications if it is unable to determine that
renewal of a license would serve the public interest, convenience and
necessity, or if a petition to deny raises a "substantial and material
question of fact" as to whether the grant of the renewal applications would be
inconsistent with the public interest, convenience and necessity. However, the
FCC is prohibited from considering competing applications for a renewal
applicant's frequency, and is required to grant the renewal application if it
finds:
. that the station has served the public interest, convenience and
necessity;
. that there have been no serious violations by the licensee of the
Communications Act or the rules and regulations of the FCC; and
. that there have been no other violations by the licensee of the
Communications Act or the rules and regulations of the FCC that, when
taken together, would constitute a pattern of abuse.
If as a result of an evidentiary hearing, the FCC determines that the
licensee has failed to meet the requirements for renewal and that no
mitigating factors justify the imposition of a lesser sanction, the FCC may
deny a license renewal application. Historically, FCC licenses have generally
been renewed. We have no reason to believe that our licenses will not be
renewed in the ordinary course, although there can be no assurance to that
effect. The non-renewal of one or more of our stations' licenses could have a
material adverse effect on our business.
Ownership Matters. The Communications Act requires prior approval of the
FCC for the assignment of a broadcast license or the transfer of control of a
corporation or other entity holding a license. In determining whether to
approve an assignment of a television or radio broadcast license or a transfer
of control of a broadcast licensee, the FCC considers a number of factors
pertaining to the licensee including compliance with various rules limiting
common ownership of media properties, the "character" of the licensee and
those persons holding "attributable" interests therein, and the Communications
Act's limitations on foreign ownership and compliance with the FCC rules and
regulations.
To obtain the FCC's prior consent to assign or transfer a broadcast
license, appropriate applications must be filed with the FCC. If the
application to assign or transfer the license involves a substantial change in
ownership or control of the licensee, for example, the transfer or acquisition
of more than 50% of the voting stock, the application must be placed on public
notice for a period of 30 days during which petitions to deny the application
may be filed by interested parties, including members of the public. If an
assignment application does not involve new parties, or if a transfer of
control application does not involve a "substantial change" in ownership or
control, it is a pro forma application, which is not subject to the public
notice and 30 day petition to deny procedure. The regular and pro forma
applications are nevertheless subject to informal objections that may be filed
any time until the FCC acts on the application. If the FCC grants an
assignment or transfer application, interested parties have 30 days from
public notice of the grant to seek reconsideration of that grant. The FCC
17
has an additional ten days to set aside such grant on its own motion. When
ruling on an assignment or transfer application, the FCC is prohibited from
considering whether the public interest might be served by an assignment or
transfer to any party other than the assignee or transferee specified in the
application.
Under the Communications Act, a broadcast license may not be granted to or
held by persons who are not U.S. citizens, by any corporation that has more
than 20% of its capital stock owned or voted by non-U.S. citizens or entities
or their representatives, by foreign governments or their representatives or
by non-U.S. corporations. Furthermore, the Communications Act provides that no
FCC broadcast license may be granted to or held by any corporation directly or
indirectly controlled by any other corporation of which more than 25% of its
capital stock is owned of record or voted by non-U.S. citizens or entities or
their representatives, or foreign governments or their representatives or by
non-U.S. corporations, if the FCC finds the public interest will be served by
the refusal or revocation of such license. Thus, the licenses for our stations
could be revoked if more than 25% of our outstanding capital stock is issued
to or for the benefit of non-U.S. citizens in excess of these limitations. Our
first restated certificate of incorporation restricts the ownership and voting
of our capital stock to comply with these requirements.
The FCC generally applies its other broadcast ownership limits to
"attributable" interests held by an individual, corporation or other
association or entity. In the case of a corporation holding broadcast
licenses, the interests of officers, directors and those who, directly or
indirectly, have the right to vote 5% or more of the stock of a licensee
corporation are generally deemed attributable interests, as are positions as
an officer or director of a corporate parent of a broadcast licensee.
Stock interests held by insurance companies, mutual funds, bank trust
departments and certain other passive investors that hold stock for investment
purposes only become attributable with the ownership of 20% or more of the
voting stock of the corporation holding broadcast licenses.
A time brokerage agreement with another television or radio station in the
same market creates an attributable interest in the brokered television or
radio station as well for purposes of the FCC's local television or radio
station ownership rules, if the agreement affects more than 15% of the
brokered television or radio station's weekly broadcast hours.
Debt instruments, non-voting stock, options and warrants for voting stock
that have not yet been exercised, insulated limited partnership interests
where the limited partner is not "materially involved" in the media-related
activities of the partnership and minority voting stock interests in
corporations where there is a single holder of more than 50% of the
outstanding voting stock whose vote is sufficient to affirmatively direct the
affairs of the corporation generally do not subject their holders to
attribution.
However, the FCC now applies a rule, known as the equity-debt-plus rule,
that causes certain creditors or investors to be attributable owners of a
station, regardless of whether there is a single majority stockholder or other
applicable exception to the FCC's attribution rules. Under this new rule, a
major programming supplier (any programming supplier that provides more than
15% of the station's weekly programming hours) or a same-market media entity
will be an attributable owner of a station if the supplier or same-market
media entity holds debt or equity, or both, in the station that is greater
than 33% of the value of the station's total debt plus equity. For purposes of
the equity-debt-plus rule, equity includes all stock, whether voting or
nonvoting, and equity held by insulated limited partners in limited
partnerships. Debt includes all liabilities, whether long-term or short-term.
Generally, the FCC only permits an owner to have one television station per
market. A single owner is permitted to have two stations with overlapping
signals so long as they are assigned to different markets. Recent changes to
the FCC's rules regarding ownership now permit an owner to operate two
television stations assigned to the same market so long as either:
. the television stations do not have overlapping broadcast signals; or
. there will remain after the transaction eight independently owned, full
power noncommercial or commercial operating television stations in the
market and one of the two commonly-owned stations is not ranked in the
top four based upon audience share.
18
The FCC will consider waiving these ownership restrictions in certain cases
involving failing or failed stations or stations which are not yet built.
The FCC permits a television station owner to own one radio station in the
same market as its television station. In addition, a television station owner
is permitted to own additional radio stations, not to exceed the local
ownership limits for the market, as follows:
. in markets where 20 media voices will remain, an owner may own an
additional five radio stations, or, if the owner only has one television
station, an additional six radio stations; and
. in markets where ten media voices will remain, an owner may own an
additional three radio stations.
A "media voice" includes each independently-owned and operated full-power
television and radio station and each daily newspaper that has a circulation
exceeding 5% of the households in the market, plus one voice for all cable
television systems operating in the market.
The FCC has eliminated the limitation on the number of radio stations a
single individual or entity may own nationwide and increased the limits on the
number of stations an entity or individual may own in a market as follows:
. In a radio market with 45 or more commercial radio stations, a party may
own, operate or control up to eight commercial radio stations, not more
than five of which are in the same service (AM or FM).
. In a radio market with between 30 and 44 (inclusive) commercial radio
stations, a party may own, operate or control up to seven commercial
radio stations, not more than four of which are in the same service (AM
or FM).
. In a radio market with between 15 and 29 (inclusive) commercial radio
stations, a party may own, operate or control up to six commercial radio
stations, not more than four of which are in the same service (AM or
FM).
. In a radio market with 14 or fewer commercial radio stations, a party
may own, operate or control up to five commercial radio stations, not
more than three of which are in the same service (AM or FM), except that
a party may not own, operate, or control more than 50% of the radio
stations in such market.
The FCC staff has notified the public of its intention to review
transactions that comply with these numerical ownership limits but that might
involve undue concentration of market share.
Because of these multiple and cross-ownership rules, if a stockholder,
officer or director of Entravision holds an "attributable" interest in
Entravision, such stockholder, officer or director may violate the FCC's rules
if such person or entity also holds or acquires an attributable interest in
other television or radio stations or daily newspapers, depending on their
number and location. If an attributable stockholder, officer or director of
Entravision violates any of these ownership rules, we may be unable to obtain
from the FCC one or more authorizations needed to conduct our broadcast
business and may be unable to obtain FCC consents for certain future
acquisitions.
The Communications Act requires broadcasters to serve the "public
interest." The FCC has relaxed or eliminated many of the more formalized
procedures it developed to promote the broadcast of certain types of
programming responsive to the needs of a broadcast station's community of
license. Nevertheless, a broadcast licensee continues to be required to
present programming in response to community problems, needs and interests and
to maintain certain records demonstrating its responsiveness. The FCC will
consider complaints from the public about a broadcast station's programming
when it evaluates the licensee's renewal application, but complaints also may
be filed and considered at any time. Stations also must pay regulatory and
application fees, and follow various FCC rules that regulate, among other
things, political broadcasting, the broadcast of obscene or indecent
programming, sponsorship identification, the broadcast of contests and
lotteries and technical operation.
19
The FCC requires that licensees must not discriminate in hiring practices.
The FCC rules also prohibit a broadcast licensee from simulcasting more
than 25% of its programming on another radio station in the same broadcast
service (that is, AM/AM or FM/FM). The simulcasting restriction applies if the
licensee owns both radio broadcast stations or owns one and programs the other
through a local marketing agreement, provided that the contours of the radio
stations overlap in a certain manner.
"Must Carry" Rules. FCC regulations implementing the Cable Television
Consumer Protection and Competition Act of 1992 require each television
broadcaster to elect, at three year intervals beginning October 1, 1993, to
either:
. require carriage of its signal by cable systems in the station's market,
which is referred to as "must carry" rules; or
. negotiate the terms on which such broadcast station would permit
transmission of its signal by the cable systems within its market which
is referred to as "retransmission consent."
We have elected "must carry" with respect to each of our full-power
stations.
Under the FCC's rules currently in effect, cable systems are only required
to carry one signal from each local broadcast television station. As our
systems begin broadcasting digital signals in 2002, the cable systems that
carry our stations' analog signals will not be required to carry such digital
signal until we discontinue our analog broadcasting. Also, under current FCC
rules, the cable systems will be required to carry only one channel of digital
signal from each of our stations, even though we may be capable of
broadcasting multiple programs simultaneously within the bandwidth that the
FCC has allotted to us for digital broadcasting.
Time Brokerage Agreements. We have, from time to time, entered into time
brokerage agreements, generally in connection with pending station
acquisitions, under which we are given the right to broker time on stations
owned by third parties. By using time brokerage agreements, we can provide
programming and other services to a station proposed to be acquired before we
receive all applicable FCC and other governmental approvals. We have also,
from time to time, entered into time brokerage agreements giving third parties
the right to broker time on stations owned by us.
FCC rules and policies generally permit time brokerage agreements if the
station licensee retains ultimate responsibility for and control of the
applicable station. We cannot be sure that we will be able to air all of our
scheduled programming on a station with which we have time brokerage
agreements or that we will receive the anticipated revenue from the sale of
advertising for such programming.
Stations may enter into cooperative arrangements known as joint sales
agreements. Under the typical joint sales agreement, a station licensee
obtains, for a fee, the right to sell substantially all of the commercial
advertising on a separately-owned and licensed station in the same market. It
also involves the provision by the selling party of certain sales, accounting
and services to the station whose advertising is being sold. Unlike a time
brokerage agreement, the typical joint sales agreement does not involve
programming.
As part of its increased scrutiny of radio and television station
acquisitions, the Department of Justice has stated publicly that it believes
that time brokerage agreements and joint sales agreements could violate the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 if such agreements take
effect prior to the expiration of the waiting period under such Act.
Furthermore, the Department of Justice has noted that joint sales agreements
may raise antitrust concerns under Section 1 of the Sherman Antitrust Act and
has challenged them in certain locations. The Department of Justice also has
stated publicly that it has established certain revenue and audience share
concentration benchmarks with respect to television and radio station
acquisitions, above which a transaction may receive additional antitrust
scrutiny.
Digital Television Services. The FCC has adopted rules for implementing
digital television service in the United States. Implementation of digital
television will improve the technical quality of television signals and
provide broadcasters the flexibility to offer new services, including high-
definition television and data broadcasting.
20
The FCC has established service rules and adopted a table of allotments for
digital television. Under the table, certain eligible broadcasters with a
full-power television station are allocated a separate channel for digital
television operation. Stations will be permitted to phase in their digital
television operations over a period of years after which they will be required
to surrender their license to broadcast the analog, or non-digital television
signal. Our stations must be on the air with a digital signal by May 1, 2002.
We must return one of our paired channels for each station to the government
by 2006, except that this deadline will be extended until at least 85% of all
U.S. households own a television set with a digital tuner.
Digital Radio Services. The FCC currently is considering standards for
evaluating, authorizing and implementing terrestrial digital audio
broadcasting technology, including In-Band On-Channel(TM) technology for FM
radio stations. Digital audio broadcasting's advantages over traditional
analog broadcasting technology include improved sound quality and the ability
to offer a greater variety of auxiliary services. In-Band On-Channel(TM)
technology would permit an FM station to transmit radio programming in both
analog and digital formats, or in digital only formats, using the bandwidth
that the radio station is currently licensed to use. It is unclear what
regulations the FCC will adopt regarding digital audio broadcasting or In-Band
On-Channel(TM) technology and what effect such regulations would have on our
business or the operations of our radio stations.
Equipment and other costs associated with the transition to digital
television, including the necessity of temporary dual-mode operations and the
relocation of stations from one channel to another, will impose some near-term
financial costs on television stations providing the services. The potential
also exists for new sources of revenue to be derived from digital television.
We cannot predict the overall effect the transition to digital television
might have on our business.
Radio Frequency Radiation. The FCC has adopted rules limiting human
exposure to levels of radio frequency radiation. These rules require
applicants for renewal of broadcast licenses or modification of existing
licenses to inform the FCC whether the applicant's broadcast facility would
expose people or employees to excessive radio frequency radiation. We believe
that all of our stations are in compliance with the FCC's current rules
regarding radio frequency radiation exposure.
Satellite Digital Audio Radio Service. The FCC has allocated spectrum to a
new technology, satellite digital audio radio service, to deliver satellite-
based audio programming to a national or regional audience. The nationwide
reach of the satellite digital audio radio service could allow niche
programming aimed at diverse communities that we are targeting. Two companies
that hold licenses for authority to offer multiple channels of digital,
satellite-delivered radio could compete with conventional terrestrial radio
broadcasting. These potential competitors are expected to begin operations no
later than 2001.
Low-Power Radio Broadcast Service. On January 20, 2000, the FCC adopted
rules creating a new low- power FM radio service. The low-power FM service
consists of two classes of radio stations, with maximum power levels of either
10 watts or 100 watts. The 10 watt stations will reach an area with a radius
of between one and two miles and the 100 watt stations will reach an area with
a radius of approximately three and one-half miles. The low-power FM stations
are required to protect other existing FM stations, as currently required of
full-powered FM stations, under a law passed by Congress in 2000.
The low-power FM service will be exclusively non-commercial. Current
broadcast licensees or parties with interests in cable television or
newspapers will not be eligible to hold low-power FM licenses. It is difficult
to predict what impact, if any, the new low-power FM service will have on
technical interference with our stations' signals or competition for our
stations' audiences. Because of the legislation passed by Congress in 2000
which protected incumbent radio broadcasters on frequency three channels away,
we expect that low-power FM service will cause little or no signal
interference with our stations.
Other Pending FCC and Legislative Proceedings. The Satellite Home Viewer
Act allows satellite carriers to deliver broadcast programming to subscribers
who are unable to obtain television network programming over the air from
local television stations. Congress in 1999 enacted legislation to amend the
Satellite Home Viewer Improvement Act to facilitate the ability of satellite
carriers to provide subscribers with programming from local
21
television stations. These policies do not achieve "must-carry" status until
January 1, 2002, when any satellite company that has chosen to provide local-
into-local service must provide subscribers with all of the local broadcast
television signals that are assigned to the market and where television
licensees ask to be carried on the satellite system.
On November 29, 1999, Congress enacted the Community Broadcasters
Protection Act of 1999, which provides for a new Class A television service,
consisting of certain low-power television stations. Low-power television
stations that qualify for Class A status are no longer secondary in nature and
are protected against certain full-power stations. The existence of Class A
stations impacts the ability of full-power stations to modify their
facilities. As the owner of both full-power and low-power stations, we are not
certain as to whether the creation of the Class A service will, on balance, be
beneficial or detrimental to us.
Regulation of Outdoor Advertising
Outdoor advertising is subject to governmental regulation at the federal,
state and local levels. Federal law, principally the Highway Beautification
Act of 1965 regulates outdoor advertising on federally aided primary and
interstate highways. As a condition to federal highway assistance, the Highway
Beautification Act requires states to restrict billboards on such highways to
commercial and industrial areas and imposes certain additional size, spacing
and other limitations. All states have passed state billboard control statutes
and regulations at least as restrictive as the federal requirements, including
removal of any illegal signs on such highways at the owner's expense and
without compensation. We believe that the number of our billboards that may be
subject to removal as illegal is immaterial. No state in which we operate has
banned billboards, but some have adopted standards more restrictive than the
federal requirements. Municipal and county governments generally also have
sign controls as part of their zoning laws. Some local governments prohibit
construction of new billboards and some allow new construction only to replace
existing structures, although most allow construction of billboards subject to
restrictions on zones, size, spacing and height.
Federal law does not require the removal of existing lawful billboards, but
does require payment of compensation if a state or political subdivision
compels the removal of a lawful billboard along a federally aided primary or
interstate highway. State governments have purchased and removed legal
billboards for beautification in the past, using federal funding for
transportation enhancement programs, and may do so in the future. Governmental
authorities from time to time use the power of eminent domain to remove
billboards. Thus far, we have been able to obtain satisfactory compensation
for any of our billboards purchased or removed as a result of governmental
action, although there is no assurance that this will continue to be the case
in the future. Local governments do not generally purchase billboards for
beautification, but some have attempted to force the removal of legal but
nonconforming billboards (billboards which conformed with applicable zoning
regulations when built but which do not conform to current zoning regulations)
after a period of years under a concept called "amortization," by which the
governmental body asserts that just compensation is earned by continued
operation over time. Although there is some question as to the legality of
amortization under federal and many state laws, amortization has been upheld
in some instances. We generally have been successful in negotiating
settlements with municipalities for billboards required to be removed.
Restrictive regulations also limit our ability to rebuild or replace
nonconforming billboards.
Under the terms of a settlement agreement among U.S. tobacco companies and
46 states, tobacco companies discontinued all advertising on billboards and
buses in the 46 participating states as of April 23, 1999. The remaining four
states had already reached separate settlements with the tobacco industry. We
removed all tobacco billboards and advertising in these states in compliance
with the settlement deadlines.
In addition to the above settlement agreements, state and local governments
are also considering regulating the outdoor advertising of alcohol products.
Alcohol related advertising represented approximately 9.4% of the total
revenue of our outdoor billboard business in 2000. As a matter of both company
policy and industry practice (on a voluntary basis), we do not post any
alcohol advertisements within a 500 square foot radius of any school, church
or hospital.
22
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements, including statements
under the captions "Business," "Management's Discussion and Analysis of
Financial Condition and Results of Operation" and elsewhere in this document,
concerning our expectations of future revenue, expenses, the outcome of our
growth and acquisition strategy and the projected growth of the U.S. Hispanic
population. Forward-looking statements often include words or phrases such as
"will likely result," "expect," "will continue," "anticipate," "estimate,"
"intend," "plan," "project," "outlook," "seek" or similar expressions. These
statements are not guarantees of future performance and are subject to certain
risks, uncertainties and other factors, some of which are beyond our control,
are difficult to predict and could cause actual results to differ materially
from those expressed in the forward-looking statements. Factors which could
cause actual results to differ from expectations include those in the "Risk
Factors" section of our Registration Statement on Form S-1, No. 333-35336,
filed with the Securities and Exchange Commission, or SEC, on April 21, 2000,
and all amendments thereto, and our Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000, filed with the SEC on September 15, 2000. Our
results of operations may be adversely affected by one or more of these
factors. We caution you not to place undue reliance on these forward-looking
statements, which reflect our management's view only as of the date of this
document.
ITEM 2. PROPERTIES
Our corporate headquarters are located in Santa Monica, California. We
lease approximately 13,083 square feet of space in the building housing our
corporate headquarters under a lease expiring in 2006. The types of properties
required to support each of our television and radio stations typically
include offices, broadcasting studios and antenna towers where broadcasting
transmitters and antenna equipment are located. The majority of our office,
studio and tower facilities are leased pursuant to long-term leases. We also
own the buildings and/or land used for office, studio and tower facilities at
six of our television stations and at one of our radio stations. We own
substantially all of the equipment used in our television and radio
broadcasting business. We believe that all of our facilities and equipment are
adequate to conduct our present operations.
ITEM 3. LEGAL PROCEEDINGS
We currently and from time to time are involved in litigation incidental to
the conduct of our business, but we are not currently a party to any lawsuit
or proceeding which, in the opinion of management, is likely to have a
material adverse effect on us.
We were a party to a proceeding before the American Arbitration
Association, or AAA, in Phoenix, Arizona with Hispanic Broadcasting
Corporation, or HBC, regarding a dispute over an agreement to exchange radio
stations KLNZ-FM, Glendale, Arizona, and KRTX-FM, Winnie Texas, with one
another. In written decisions issued in December 2000 and February 2001, the
AAA issued an Interim Award of Arbitrators ruling that the parties will not
exchange stations and awarding HBC $2,000,000 with interest thereon at the
rate of 10% per annum from October 1999, plus costs and attorneys' fees
incurred by HBC in connection with the arbitration.
We were a defendant to a lawsuit filed in the Superior Court of the
District of Columbia by First Millennium Communications, Inc. to resolve
certain contract disputes arising out of a terminated brokerage-type
arrangement. The litigation primarily concerns the payment of a brokerage fee
alleged to be due in connection with the acquisition of television station
WBSV-TV in Sarasota, Florida for $17 million, after taking into account
certain additional capital expenditures, losses, interest expense and
management fees. The parties have reached a confidential settlement and the
lawsuit was dismissed with prejudice by court order. The settlement provides
that the parties will resolve the dispute with respect to television station
WBSV-TV pursuant to binding arbitration.
On February 2, 2001, we reached a settlement with Telemundo with respect to
the parties' pending disputes relating to our investment in XHAS-TV, Channel
33, Tijuana, Mexico. The actions previously filed in Florida and California
were dismissed with prejudice without either party compensating the other.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
23
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our Class A common stock has been listed and traded on the New York Stock
Exchange since August 2, 2000 under the symbol "EVC." The following table sets
forth the range of high and low closing sales prices reported by the New York
Stock Exchange for our Class A common stock for the periods indicated.
[Download Table]
High Low
------- ------
Year Ended December 31, 2000
Third Quarter (August 2, 2000 through September 30,
2000).................................................... $20.375 $16.00
Fourth Quarter............................................ $18.375 $10.00
Year Ending December 31, 2001
First Quarter (through March 20, 2001).................... $19.50 $7.270
As of March 20, 2001, there were approximately 90 holders of record of our
Class A common stock. We believe that the number of beneficial owners of our
Class A common stock substantially exceeds this number.
Dividend Policy
We have never declared or paid any cash dividends on our Class A common
stock, Class B common stock or Class C common stock. We currently intend to
retain all future earnings, if any, to fund the development and growth of our
business and do not anticipate paying any cash dividends on our Class A common
stock, Class B common stock or Class C common stock in the foreseeable future.
In addition, our credit facility and the terms of our outstanding preferred
stock restrict our ability to pay dividends on our common stock.
Use of Proceeds from Sales of Registered Securities
On August 2, 2000, we completed the IPO of our Class A common stock. The
underwriters for the IPO were represented by Donaldson, Lufkin & Jenrette
Securities Corporation, Credit Suisse First Boston Corporation, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Salomon Smith Barney Inc., Bear, Stearns
& Co. Inc. and DLJdirect Inc. The shares of Class A common stock sold in the
IPO were registered under the Securities Act of 1933, as amended, on a
Registration Statement on Form S-1 (Reg. No. 333-35336) that was declared
effective by the SEC on August 1, 2000. We also sold 6,464,542 shares of our
Class A common stock directly to Univision at a price of $15.47 per share. The
aggregate public offering price was $866.2 million. In connection with the
IPO, we paid an aggregate of $47.9 million in underwriting discounts and
commissions to the underwriters. In addition, the following table sets forth
all expenses incurred in connection with the IPO, other than underwriting
discounts and commissions.
[Download Table]
(In thousands of dollars)
SEC registration fee................................................... $ 195.5
NASD filing fee........................................................ 30.5
New York Stock Exchange listing fee.................................... 272.6
Standard and Poor's.................................................... 115.0
Printing and engraving expenses........................................ 741.7
Legal fees and expenses (including $782.5 to related parties).......... 880.3
Accounting fees and expenses........................................... 2,003.7
Miscellaneous.......................................................... 97.7
--------
Total................................................................ $4,337.0
========
24
The net proceeds to us from the sale of 52,900,000 shares of Class A common
stock in the IPO were approximately $814 million, after deducting the
underwriting discounts and commissions and offering expenses. We used all of
the net proceeds of the IPO proceeds as set forth below.
We closed the acquisition of Z-Spanish Media on August 9, 2000.
Approximately $331 million of the net proceeds of the IPO were used to pay the
cash portion of the purchase price for Z-Spanish Media and to extinguish the
Z-Spanish Media indebtedness.
We closed the acquisition of two radio stations from Citicasters Co. on
August 24, 2000. Approximately $68 million of the net proceeds of the IPO were
used to pay the balance of the $85 million purchase price, $17 million of
which had been placed in escrow on March 3, 2000.
We closed the acquisition of four radio stations from Sunburst Media, LP on
September 12, 2000. Approximately $53 million of the net proceeds of the IPO
were used to pay the purchase price.
We closed the acquisition of advertising assets from Infinity on October 2,
2000. Approximately $168 million of the net proceeds of the IPO were used to
pay the purchase price.
We also used $115 million of the net proceeds of the IPO to repay a bank
loan borrowed in connection with our acquisition of LCG, and $79 million to
repay part of the balance on our credit facility.
None of the net proceeds of the IPO were paid directly or indirectly to any
director or officer of ours or their associates, persons owning 10% or more of
any class of our equity securities or any affiliate of ours.
25
ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per share and per membership unit data)
Presented below are our selected financial data for the fiscal years ended
December 31, 2000, 1999, 1998, 1997 and 1996.
The data as of December 31, 2000, 1999, 1998, 1997 and 1996 and for the
years ended December 31, 2000, 1999, 1998, 1997 and 1996 are derived from, and
are qualified by reference to, our audited financial statements and should be
read in conjunction therewith and the notes thereto.
[Download Table]
Year Ended December 31,
---------------------------------------------------
2000 1999 1998 1997 1996
----------- --------- -------- -------- -------
Statement of Operations
Data:
Gross revenue............. $ 170,810 $ 66,204 $ 49,872 $ 33,419 $13,555
Less agency commissions... 16,789 7,205 5,052 2,963 1,481
----------- --------- -------- -------- -------
Net revenue............... 154,021 58,999 44,820 30,456 12,074
----------- --------- -------- -------- -------
Expenses:
Direct operating.......... 58,987 24,441 15,794 9,184 3,819
Selling, general and
administrative (excluding
non-cash stock-based
compensation)............ 38,600 11,611 8,877 5,845 4,667
Corporate................. 12,741 5,809 3,963 3,899 564
Depreciation and
amortization............. 69,238 15,982 10,934 10,216 1,707
Non-cash stock-based
compensation (1)......... 5,822 29,143 500 900 --
----------- --------- -------- -------- -------
Total expenses............ 185,388 86,986 40,068 30,044 10,757
----------- --------- -------- -------- -------
Operating income (loss)... (31,367) (27,987) 4,752 412 1,317
Interest expense, net..... (23,916) (9,591) (8,244) (5,107) (1,035)
Non-cash interest expense
relating to related-party
beneficial conversion
options (2).............. (39,677) (2,500) -- -- --
----------- --------- -------- -------- -------
Income (loss) before
income taxes............. (94,960) (40,078) (3,492) (4,695) 282
Income tax (expense)
benefit (3).............. 2,934 121 (210) 7,531 (145)
Equity in loss of
nonconsolidated
affiliates............... (214) -- -- -- --
----------- --------- -------- -------- -------
Net income (loss)......... (92,240) $ (39,957) $ (3,702) $ 2,836 $ 137
========= ======== ======== =======
Accretion of preferred
stock redemption value... (2,449)
-----------
Net loss applicable to
common stock............. $ (94,689)
===========
Loss per share: basic and
diluted.................. $ (0.27)
===========
Income (loss) per
membership unit (4)...... $ (31.04) $ (19.12) $ (0.07) $ (1.19) $ 0.02
=========== ========= ======== ======== =======
Pro forma income tax
(expense) benefit (5).... 5,904 2,499 322 643 (204)
----------- --------- -------- -------- -------
Pro forma net income
(loss) (5)............... $ (86,336) $(37,579) $ (3,170) $ (4,052) $ 78
=========== ========= ======== ======== =======
Pro forma basic and
diluted earnings per
share:
Pro forma net income
(loss) (5)............... $ (1.34) $ (1.16) $ (0.10) $ (0.12) $ 0.00
=========== ========= ======== ======== =======
Pro forma weighted average
common shares
outstanding.............. 66,452 32,402 32,895 32,972 32,046
=========== ========= ======== ======== =======
Year Ended December 31,
---------------------------------------------------
2000 1999 1998 1997 1996
----------- --------- -------- -------- -------
Other Financial Data:
Broadcast cash flow (6)... $ 56,434 $ 22,947 $ 20,149 $ 15,427 $ 3,588
EBITDA (adjusted for non-
cash stock-based
compensation) (7)........ 43,693 17,138 16,186 11,528 3,024
Non-cash stock-based
compensation (1)......... 5,822 29,143 500 900 --
Cash flows from operating
activities............... 10,608 6,128 7,658 6,509 2,001
Cash flows from investing
activities............... (1,002,300) (59,063) (25,586) (61,908) (3,396)
Cash flows from financing
activities............... 1,058,559 51,631 19,339 54,763 3,556
Capital expenditures...... 23,675 12,825 3,094 2,366 935
As of December 31,
---------------------------------------------------
2000 1999 1998 1997 1996
----------- --------- -------- -------- -------
Balance Sheet Data:
Cash and cash
equivalents.............. $ 69,224 $ 2,357 $ 3,661 $ 2,250 $ 2,886
Total assets.............. 1,560,493 205,017 131,291 111,953 49,072
Long-term debt, including
current portion.......... 255,148 167,537 99,938 74,781 17,449
Series A mandatorily
redeemable convertible
preferred stock.......... 80,603 -- -- -- --
Total equity.............. 1,055,377 28,011 24,871 32,057 30,047
26
--------
(1) Non-cash stock-based compensation consists primarily of compensation
expense relating to stock awards granted to our employees and vesting of
the intrinsic value of unvested options exchanged in our acquisition of
Z-Spanish Media in 2000.
(2) Non-cash interest expense charges relate to the estimated intrinsic value
of the conversion options contained in our subordinated note to Univision
in the amount of $2.5 million in 1999 and $31.6 million in 2000, and the
conversion option feature in our convertible subordinated note in the
amount of $8.1 in 2000.
(3) Included in the 1997 income tax expense is a $7.8 million tax benefit that
resulted from the reversal of previously recorded deferred tax liabilities
that were established in our acquisition of television station KNVO-TV,
upon its conversion from a C-corporation to an S-corporation. Included in
the 2000 income tax benefit is a charge of $10.5 million relating to the
effect of change in tax status, which resulted from the recording of a net
deferred tax liability upon our reorganization from a limited liability
company to a C-corporation, effective with our IPO.
(4) Income (loss) per membership unit is computed as net income (loss) of our
predecessor divided by the number of membership units as of the last day
of each reporting period. For 2000, (loss) per membership unit is for the
period from January 1, 2000 through the August 2, 2000 reorganization.
(5) Pro forma net income (loss) and pro forma basic and diluted net income
(loss) per share give effect to our reorganization from a limited
liability company to a C-corporation for federal and state income tax
purposes and assume that we were subject to corporate income taxes at an
effective combined federal and state income tax rate of 40% before the
effect of non-tax deductible goodwill, non-cash stock-based compensation
and non-cash interest expense for each of the four years in the period
ended December 31, 1999. The December 31, 2000 statement of operations
reflects operations and the related income tax benefit as a C-corporation
for the period subsequent to our reorganization. Pro forma income tax
expense is presented for the period from January 1, 2000 through the
August 2, 2000 reorganization on the same basis as the preceding years.
(6) Broadcast cash flow means operating income (loss) before corporate
expenses, depreciation and amortization and non-cash stock-based
compensation and gain (loss) on the sale of assets. We have presented
broadcast cash flow, which we believe is comparable to the data provided
by to other companies in the broadcast industry, because such data is
commonly used as a measure of performance in our industry. However,
broadcast cash flow should not be construed as an alternative to operating
income (as determined in accordance with generally accepted accounting
principles) as an indicator of operating performance or to cash flows from
operating activities (as determined in accordance with generally accepted
accounting principles) as a measure of liquidity.
(7) EBITDA means broadcast cash flow less corporate expenses (adjusted for
non-cash stock-based compensation) and is commonly used in the broadcast
industry to analyze and compare broadcast companies on the basis of
operating performance, leverage and liquidity. EBITDA, as presented above,
may not be comparable to similarly titled measures of other companies
unless such measures are calculated in substantially the same fashion.
EBITDA should not be construed as an alternative to operating income (as
determined in accordance with generally accepted accounting principles) as
an indicator of operating performance or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) as a measure of liquidity.
27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of our consolidated results of operations and cash
flows for the years ended December 31, 2000, 1999, and 1998 and consolidated
financial condition as of December 31, 2000 and 1999 should be read in
conjunction with our consolidated financial statements and the related notes
included elsewhere in this document.
OVERVIEW
We operate 34 television stations (and have three additional television
stations that are not yet operational) and 56 radio stations primarily in the
Southwestern United States where the majority of U.S. Hispanics live,
including the U.S./Mexican border markets. Our television stations consist
primarily of Univision affiliates serving 18 of the top 50 U.S. Hispanic
markets. Our operating radio stations consist of 39 FM and 17 AM stations
serving portions of the Arizona, California, Colorado, Florida, Illinois, New
Mexico and Texas markets.
We were organized as a Delaware limited liability company in January 1996
to combine the operations of our predecessor entities. On August 2, 2000, we
completed a reorganization in which all of the outstanding direct and indirect
membership interests of our predecessor were exchanged for shares of our Class
A and Class B common stock and Univision's subordinated note and option were
exchanged for shares of our Class C common stock.
We generate revenue from sales of national and local advertising time on
television and radio stations and advertising in our publications and on our
billboards. Advertising rates are, in large part, based on each station's
ability to attract audiences in demographic groups targeted by advertisers. We
recognize advertising revenue when the commercials are broadcast, when
publishing services are provided and when outdoor services are provided. We
incur commissions from agencies on local, regional and national advertising.
Our revenue reflects deductions from gross revenue for commissions to these
agencies.
Our primary expenses are employee compensation, including commissions paid
to our sales staffs, marketing, promotion and selling costs, technical, local
programming, engineering costs, general and administrative expenses, non-cash
stock-based compensation and depreciation and amortization. Our local
programming costs for television consist of costs related to producing a local
newscast in each of our markets.
We have historically not had material income tax expense or benefit
reflected in our statement of operations as the majority of our subsidiaries
have been non-taxpaying entities. Federal and state income taxes attributable
to income during such periods were incurred and paid directly by the members
of our predecessor. Accordingly, no discussion of income taxes is included in
this section. However, we are now a taxpaying organization and effective with
our reorganization and the exchange transaction on August 2, 2000, we have
recorded a charge to income tax expense of approximately $10.5 million to
establish net deferred tax liabilities, as a result of our change in tax
status. We have included in our historical financial statements a pro forma
provision for income taxes and a pro forma net loss to show what our net
income or loss would have been if we were a taxpaying entity. We anticipate
that our future effective income tax rate will vary from 40% due to a portion
of our purchase price for the LCG and Z-Spanish Media acquisitions being
allocated to non-tax deductible goodwill.
Broadcast cash flow means operating income (loss) before corporate
expenses, depreciation and amortization, non-cash stock-based compensation and
gain (loss) on sale of assets. We have presented broadcast cash flow which we
believe is comparable to the data provided by other companies in the broadcast
industry, because such data is commonly used as a measure of performance for
companies in our industry. However, broadcast cash flow should not be
construed as an alternative to operating income (as determined in accordance
with generally accepted accounting principles) as an indicator of operating
performance or to cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) as a measure of
liquidity.
28
EBITDA means broadcast cash flow less corporate expenses (adjusted for non-
cash stock-based compensation) and is commonly used in the broadcast industry
to analyze and compare broadcast companies on the basis of operating
performance, leverage and liquidity. EBITDA, as presented above, may not be
comparable to similarly titled measures of other companies unless such
measures are calculated in substantially the same fashion. EBITDA should not
be construed as an alternative to operating income (as determined in
accordance with generally accepted accounting principles) as an indicator of
operating performance or to cash flows from operating activities (as
determined in accordance with generally accepted accounting principles) as a
measure of liquidity.
Impairment of long-lived assets
We review our long-lived assets and intangibles related to those assets
periodically to determine potential impairment by comparing the carrying value
of the long-lived assets and identified goodwill with the estimated future net
undiscounted cash flows expected to result from the use of the assets,
including cash flows from disposition. Should the sum of the expected future
net cash flows be less than the carrying value, we may be required to
recognize an impairment loss at that date. An impairment loss would be the
amount, if any, by which the carrying value exceeds the fair value of the
long-lived assets and identified goodwill.
Goodwill not identified with impaired assets is evaluated to determine
whether events or circumstances warrant a write-down or revised estimates of
useful lives. We determine impairment by comparing the carrying value of
goodwill with the estimated future net undiscounted cash flows expected to
result from the use of the assets, including cash flows from disposition.
Should the sum of the expected future net cash flows be less than the carrying
value, we may be required to recognize an impairment loss at that date.
Impairment losses are measured by comparing the amount by which the carrying
value exceeds the fair value (estimated discounted future cash flows) of the
goodwill.
To date, we have determined that no impairment of long-lived assets and
goodwill exists.
29
RESULTS OF OPERATIONS
Separate financial data for each of our operating segments is provided
below. Segment operating loss is defined as operating loss before corporate
expenses and non-cash stock-based compensation. We evaluate the performance of
our operating segments based on the following:
[Download Table]
Years Ended December 31,
------------------------------
2000 1999 1998
---------- -------- --------
(In thousands of dollars)
Net revenue:
TV............................................ $ 82,417 $ 56,846 $ 43,752
Radio......................................... 43,338 2,153 1,068
Outdoor....................................... 13,096 -- --
Publishing.................................... 15,170 -- --
---------- -------- --------
Consolidated................................ 154,021 58,999 44,820
---------- -------- --------
Direct expenses:
TV............................................ 34,290 23,165 15,067
Radio......................................... 10,991 1,276 727
Outdoor....................................... 5,494 -- --
Publishing.................................... 8,212 -- --
---------- -------- --------
Consolidated................................ 58,987 24,441 15,794
---------- -------- --------
Selling, general and administrative expenses
TV............................................ 15,642 11,093 8,590
Radio......................................... 16,767 518 287
Outdoor....................................... 1,544 -- --
Publishing.................................... 4,647 -- --
---------- -------- --------
Consolidated................................ 38,600 11,611 8,877
---------- -------- --------
Depreciation and amortization
TV............................................ 20,064 15,277 10,570
Radio......................................... 41,537 705 364
Outdoor....................................... 5,984 -- --
Publishing.................................... 1,653 -- --
---------- -------- --------
Consolidated................................ 69,238 15,982 10,934
---------- -------- --------
Segment operating profit (loss):
TV............................................ 12,421 7,311 9,525
Radio......................................... (25,957) (346) (310)
Outdoor....................................... 74 -- --
Publishing.................................... 658 -- --
---------- -------- --------
Consolidated................................ (12,804) 6,965 9,215
Corporate expenses............................. 12,741 5,809 3,963
Non-cash stock-based compensation.............. 5,822 29,143 500
---------- -------- --------
Operating profit (loss)........................ $ (31,367) $(27,987) $ 4,752
========== ======== ========
Broadcast cash flow
TV............................................ $ 32,485 $ 22,588 $ 20,095
Radio......................................... 15,580 359 54
Outdoor....................................... 6,058 -- --
Publishing.................................... 2,311 -- --
---------- -------- --------
Consolidated................................ $ 56,434 $ 22,947 $ 20,149
========== ======== ========
Total assets
TV............................................ $ 401,075 $199,360 $127,630
Radio......................................... 856,038 5,657 3,661
Outdoor....................................... 293,887 -- --
Publishing.................................... 9,493 -- --
---------- -------- --------
Consolidated................................ $1,560,493 $205,017 $131,291
========== ======== ========
Capital expenditures
TV............................................ $ 15,749 $ 12,825 $ 3,094
Radio......................................... 7,700 -- --
Outdoor....................................... 164 -- --
Publishing.................................... 62 -- --
---------- -------- --------
Consolidated................................ $ 23,675 $ 12,825 $ 3,094
========== ======== ========
30
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999.
Segment Operations
We operate in four reportable segments based upon the types of advertising
medium which consists of television broadcasting, radio broadcasting, outdoor
advertising and newspaper publishing. We operate 34 television stations
primarily in the Southwestern United States and consisting primarily of
Univision affiliates. We operate 56 radio stations (39 FM and 17 AM) located
primarily in Arizona, California, Colorado, Florida, Illinois, Nevada, New
Mexico and Texas. Our outdoor advertising segment owns approximately
11,200 billboards in Los Angeles and New York. Our newspaper publishing
operations consist of a publication in New York.
Net Revenue. Net revenue in our television segment increased to $82.4
million for the year ended December 31, 2000 from $56.8 million for the year
ended December 31, 1999, an increase of $25.6 million. This increase is
primarily attributed to an increase in our advertising rates of approximately
21% and in the number of advertising spots aired in half of our markets, as
well as other acquisitions in 2000 and the benefit of 12 months of our 1999
acquisitions.
Net revenue in our radio segment increased to $43.3 million for the year
ended December 31, 2000 from $2.2 million for the year ended December 31,
1999, an increase of $41.1 million. This increase is primarily attributable to
our acquisition of LCG in April 2000 and Z-Spanish Media in August 2000, as
well as the acquisition of four radio stations from Sunburst Media, LP in
September 2000 and the FCC licenses relating to the operations of two radio
stations in Santa Monica/Newport Beach, California acquired from Citicasters
Co., in August 2000.
Net revenue from our outdoor segment in the amount of $13.1 million for the
year ended December 31, 2000 is a result of our acquisition of Z-Spanish
Media's outdoor business in August 2000 and our acquisition of certain outdoor
advertising assets from Infinity in October 2000.
Net revenue from our publishing segment in the amount of $15.2 million for
the year ended December 31, 2000 is primarily attributable to our acquisition
of El Diario/la Prensa, the oldest major Spanish-language daily newspaper in
New York, from LCG in April 2000. Additionally, we published VEA New York, or
VEA, a visitor guide targeting Spanish-language visitors. In January 2001 we
ceased operations of VEA due to its lack of profitability and its inability to
generate positive cash flow. We believe this will allow us to better focus on
our core publishing business of El Diario/la Prensa.
Consolidated Operations
Net Revenue. Net revenue increased to $154 million for the year ended
December 31, 2000 from $59 million for the year ended December 31, 1999, an
increase of $95 million. This is primarily attributable to the acquisitions of
LCG, Z-Spanish Media and Infinity assets which accounted for $68.9 million of
the increase. Additionally, $11.2 million of the increase was attributable to
our other acquisitions in 2000 and the benefit of 12 months of our 1999
acquisitions. On a same station basis, for the stations we owned or operated
for all of 1999, net revenue increased $14 million or 26.1%. This increase is
attributable to an increase in advertising rates of approximately 21% and
advertising spots aired in half of our markets. Additionally, we earned $3.6
million of network compensation from Univision during the year ended December
31, 2000 which will not recur in 2001. We experienced significant growth
during 2000 primarily due to our acquisitions of LCG, Z-Spanish Media and the
assets acquired from Infinity. As a result, we do not expect to experience the
same level of growth in 2001. Additionally, we believe that our 2001
operations will be impacted by the weak economic environment and subsequent
reduction in advertising expenditures by our customers.
Direct Operating Expenses. Direct operating expenses increased to $59
million for the year ended December 31, 2000 from $24.4 million for the year
ended December 31, 1999, an increase of $34.6 million.
31
This increase was primarily attributable to the acquisitions of LCG, Z-Spanish
Media and Infinity assets. On a same station basis, for the stations we owned
or operated for all of 1999, direct operating expenses increased $4.7 million
or 23.2%. Additionally, $2.8 million of the increase was due to increases in
selling costs associated with increased sales, increases in management and
staff, and increases in market research tools. In addition we incurred
approximately $1.4 million in technical and news costs to implement local news
programming in Orlando, Florida and to continue improving local news
programming in our McAllen, Texas and Las Vegas, Nevada markets. As a
percentage of net revenue, direct operating expenses decreased to 38% for the
year ended December 31, 2000 from 41% for the year ended December 31, 1999. We
expect direct operating expenses to decrease as a percentage of revenue in
2001.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $38.6 million for the year ended December
31, 2000 from $11.6 million for the year ended December 31, 1999, an increase
of $27 million. This increase was primarily attributable to the acquisitions
of LCG, Z-Spanish Media, and the Infinity assets. On a same station basis, for
the stations we owned or operated for all of 1999, selling, general and
administrative expenses increased $1.2 million or 10.8%. The increase was due
to increases in rent, property tax, insurance, and bonuses. As a percentage of
net revenue, selling, general and administrative expenses increased to 25% for
the year ended December 31, 2000 from 20% for the year ended December 31,
1999. We expect selling, general and administrative expenses to decrease as a
percentage of revenue in 2001.
Depreciation and Amortization. Depreciation and amortization increased to
$69.2 million for the year ended December 31, 2000 from $16 million for the
year ended December 31, 1999, an increase of $53.2 million. This increase was
primarily attributable to the acquisitions of LCG, Z-Spanish Media and
Infinity assets. On a same station basis, for the stations we owned or
operated for all of 1999, depreciation and amortization was relatively flat as
it decreased to $11.2 million for the year ended December 31, 2000 from $11.4
million for the year ended December 31, 1999.
Corporate Expenses. Corporate expenses increased to $12.7 million for the
year ended December 31, 2000 from $5.8 million for the year ended December 31,
1999, an increase of $6.9 million. This increase was primarily due to the
acquisitions of LCG, Z-Spanish Media and Infinity assets and the hiring of
additional corporate personnel due to our growth and the costs associated with
being a public company. As a percentage of net revenue, corporate expenses
decreased to 8% for the year ended December 31, 2000 from 10% for the year
ended December 31, 1999. We expect corporate expenses to decrease as a
percentage of revenue in 2001.
Non-Cash Stock-Based Compensation. Non-cash stock-based compensation
decreased to $5.8 million for the year ended December 31, 2000 from $29.1
million for the year ended December 31, 1999 a decrease of $23.3 million. Non-
cash stock-based compensation consists primarily of compensation expense
relating to stock awards granted to our employees. We expect to continue to
make stock-based awards to our employees in the future.
Operating Loss. As a result of the above factors, we recognized an
operating loss of $31.4 million for the year ended December 31, 2000 compared
to an operating loss of $28 million for the year ended December 31, 1999.
Excluding non-cash stock-based compensation, we recognized an operating loss
of $25.5 million for the year ended December 31, 2000, compared to operating
income of $1.2 million for the year ended December 31, 1999, a decrease of
$26.7 million. The decrease was primarily due to the increase in depreciation
and amortization offset by the increase in net revenue.
Interest Expense, Net. Interest expense increased to $23.9 million for the
year ended December 31, 2000 from $9.6 million for the year ended December 31,
1999, an increase of $20.1 million. This increase is primarily due to
increased bank loan facilities, the increase in our convertible subordinated
note to Univision and the issuance of our $90 million convertible subordinated
note used to finance our acquisition of LCG.
The non-cash interest expense of $39.7 million for the year ended December
31, 2000 relates to the estimated intrinsic value of the conversion option
features in our $90 million convertible subordinated note used
32
to finance our acquisition of LCG and our convertible subordinated note to
Univision. These notes were converted and exchanged for shares of our
preferred and common stock during 2000 and, as such, we do not expect to incur
additional non-cash interest expense in 2001.
Net Loss. We recognized a net loss of $92.2 million for the year ended
December 31, 2000 compared to a net loss of $40 million for the year ended
December 31, 1999. Excluding non-cash stock-based compensation and interest
expense relating to the estimated intrinsic value of the conversion option
features in our $90 million convertible subordinated note and our convertible
subordinated note with Univision, our net loss increased to $46.7 for the year
ended December 31, 2000 from $8.3 million for the year ended December 31,
1999.
Broadcast Cash Flow. Broadcast cash flow increased to $56.4 million for the
year ended December 31, 2000 from $22.9 million for the year ended December
31, 1999, an increase of $33.5 million. As a percentage of net revenue,
broadcast cash flow decreased to 37% for the year ended December 31, 2000 from
39% for the year ended December 31, 1999. On a same station basis for the
stations we owned or operated for all of 1999, broadcast cash flow increased
$6.8 million or 32%.
EBITDA. EBITDA increased to $43.7 million for the year ended December 31,
2000 from $17.1 million for the year ended December 31, 1999, an increase of
$26.6 million. As a percentage of net revenue, EBITDA decreased to 28% for the
year ended December 31, 2000 from 29% for the year ended December 31, 1999.
The decrease in EBITDA was primarily due to the increase in direct operating
and selling, general and administrative expenses offset by the increase in net
revenue.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998.
Net Revenue. Net revenue increased to $59 million for the year ended
December 31, 1999 from $44.8 million for the year ended December 31, 1998, an
increase of $14.2 million. This increase was primarily attributable to the
acquisition of television stations in 1999 and the benefit of 12 months of our
1998 acquisitions. On a same station basis, for stations we owned or operated
for all of 1998, net revenue increased $4.3 million, or 10.4%. This increase
is attributable to an increase in advertising rates of approximately 20% in
certain of our markets, offset by a $2.2 million decrease in network
compensation from Univision.
Direct Operating Expenses. Direct operating expenses increased to $24.4
million for the year ended December 31, 1999 from $15.8 million for the year
ended December 31, 1998, an increase of $8.6 million. This increase was
primarily due to the additional operations of five television stations in
1999. On a same station basis, for stations owned or operated for all of 1998,
direct operating expenses increased $1.9 million, or 12.0%. This increase was
due to approximately $1.4 million in technical and news costs to implement
local news programming in our McAllen, Texas and Las Vegas, Nevada markets and
an additional newscast at our station in San Diego, California. The addition
of local newscasts to our television stations is consistent with our strategy
of increasing advertising revenue and viewership by producing news programming
specifically designed for each of our markets. As a percentage of net revenue,
direct operating expenses increased to 41.4% in 1999 from 35.2% in 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $11.6 million for the year ended December
31, 1999 from $8.9 million for the year ended December 31, 1998, an increase
of $2.7 million. This increase was primarily due to the acquisition of
television stations in 1999. On a same station basis, for stations owned or
operated for all of 1998, selling, general and administrative expenses
decreased $1.4 million, or 15.7%. The decrease was due to the elimination of
duplicative costs in integrating our 1998 acquisitions as well as volume
discounts obtained due to the increase in the number of stations and
employees. This decrease was partially offset by the increase in selling costs
associated with increased sales, management and staff levels and increased
market research. As a percentage of net revenue, selling, general and
administrative expenses decreased to 19.7% in 1999 from 19.8% in 1998.
33
Depreciation and Amortization. Depreciation and amortization increased to
$16 million for the year ended December 31, 1999 from $10.9 million for the
year ended December 31, 1998, an increase of $5.1 million. The increase was
primarily attributable to the acquisition of television stations in 1999. On a
same station basis, for stations we owned or operated for all of 1998,
depreciation and amortization decreased $1 million. This decrease was due
primarily to a decrease in amortization relating to presold advertising
contracts.
Corporate Expenses. Corporate expenses increased to $5.8 million for the
year ended December 31, 1999 from $4 million for the year ended December 31,
1998, an increase of $1.8 million. This increase was primarily due to
additional costs associated with our acquisitions. As a percentage of net
revenue, corporate expenses increased by 1% to 9.8% in 1999.
Non-Cash Stock-Based Compensation. We have an employment agreement with an
executive vice president in which the employee was awarded 54,284 Class D
membership units in our predecessor which converted into 922,828 shares of our
Class A common stock which vested through January 2000. At December 31, 1999,
the estimated fair value of this award was $27.7 million, of which $0.9
million, $0.5 million and $26.3 million were recorded as non-cash stock-based
compensation for the years ended December 31, 1997, 1998, and 1999
respectively. In January 1999, we entered into an employment agreement with a
senior vice president. As amended, the agreement allowed the employee to
purchase 4,835 restricted Class D membership units which converted into 82,195
shares of Class A common stock at $0.01 per share. The shares vest ratably
over three years. Non-cash stock-based compensation associated with both of
the awards was determined using an estimate by management and based primarily
on the estimated IPO price. With respect to the restricted shares, we recorded
$2.8 million in non-cash stock-based compensation during 1999. Total non-cash
stock-based compensation was $29.1 million for 1999.
Operating Loss. As a result of the above factors, we recognized an
operating loss of $28 million for the year ended December 31, 1999 compared to
an operating income of $4.8 million for the year ended December 31, 1998.
Excluding non-cash stock-based compensation, operating income decreased to
$1.2 million in 1999 from $5.3 million in 1998, a decrease of $4.1 million. As
a percentage of net revenue, operating income, excluding non-cash stock-based
compensation, decreased to 2% in 1999 from 11.7% in 1998.
Interest Expense, Net. Interest expense increased to $9.6 million for the
year ended December 31, 1999 from $8.2 million for the year ended December 31,
1998, an increase of $1.4 million. This increase is due to additional
borrowings to fund our acquisitions and higher interest rates due to our
increased debt to cash flow ratio. The non-cash interest expense of $2.5
million for the year ended December 31, 1999 relates to our subordinated note
to Univision.
Net Loss. We recognized a net loss of $40 million for the year ended
December 31, 1999 compared to a net loss of $3.7 million for the year ended
December 31, 1998. Excluding non-cash stock-based compensation and interest
expense relating to the estimated intrinsic value of the option feature of our
original $10 million subordinated note payable to Univision, our net loss
increased to $8.3 million on 1999 from $3.2 million in 1998, an increase of
$5.1 million.
Broadcast Cash Flow. Broadcast cash flow increased to $22.9 million for the
year ended December 31, 1999 from $20.1 million for the year ended December
31,1998, an increase of $2.8 million. The increase was primarily attributable
to the additional operations of five television stations in 1999. On a same
station basis, for stations we owned or operated for all of 1998, broadcast
cash flow increased $0.8 million. The increase was attributable to an increase
in advertising rates of approximately 20% in some of our markets, offset by a
$2.2 million decrease in network compensation from Univision and our
investment in local news programming in our McAllen, Texas and Las Vegas,
Nevada markets, and additional costs to implement an additional newscast at
our station in San Diego, California. As a percentage of net revenue,
broadcast cash flow decreased to 38.9% in 1999 from 45% in 1998.
34
EBITDA. EBITDA increased to $17.1 million for the year ended December 31,
1999 from $16.2 million for the year ended December 31, 1998, an increase of
$0.9 million. As a percentage of net revenue, EBITDA decreased to 29% for the
year ended December 31, 1999 from 36.1% for the year ended December 31, 1998.
The decrease in EBITDA was primarily due to the increase in direct operating
and selling expenses offset by the increase in net revenue.
Liquidity and Capital Resources Overview
Our primary sources of liquidity are cash provided by operations and
available borrowings under our credit facility in the amount of $600 million,
of which $200 million was outstanding as of December 31, 2000. The credit
facility is secured by substantially all of our assets as well as the pledge
of the stock of several of our subsidiaries including our special purpose
subsidiaries formed to hold our FCC licenses, and consists of a $250 million
revolving credit facility and a $150 million Term A loan, both bearing
interest at LIBOR (6.5% as of December 31, 2000) plus a margin ranging from
0.875% to 2.75% based on our leverage, and a $200 million Term B loan bearing
interest at LIBOR plus 3.25%. The revolving credit facility expires December
31, 2007. If not used, the Term A loan commitment expires on July 31, 2001.
Upon expiration of the Term A loan commitment, we will have a $150 million
incremental loan facility under substantially the same terms, expiring on
December 31, 2007. The Term B loan expires on December 31, 2008. The revolving
credit facility contains scheduled quarterly reductions in the amount that is
available ranging from $6.3 million to $18.8 million, commencing September 30,
2002. The Term A loan contains scheduled quarterly reductions in the amount
that is available ranging from $1.9 million to $11.3 million, commencing on
September 30, 2001. The Term B loan contains scheduled quarterly reductions in
the amount that is available ranging from $0.5 million to $42.5 million,
commencing September 30, 2001. In addition, we pay a quarterly loan commitment
fee ranging from 0.25% to 0.75% per annum and levied upon the unused portion
of the amount available. All of the outstanding balance as of December 31,
2000 was under the Term B loan.
The credit facility contains a mandatory prepayment clause in the event
that we should liquidate any assets if the proceeds are not utilized to
acquire assets of the same type within one year, receive insurance or
condemnation proceeds which are not fully utilized toward the replacement of
such assets, or have excess cash flows.
The credit facility contains certain financial covenants relating to
maximum total debt ratio, total interest coverage ratio and a fixed charge
coverage ratio. The covenants become increasingly restrictive in the later
years of the facility. The credit facility also contains restrictions on the
incurrence of additional debt, the payment of dividends, acquisitions and the
sale of assets over a certain limit. Additionally, we are required to enter
into interest rate agreements if our leverage exceeds certain limits as
defined in the agreement.
The facility requires us to maintain our FCC licenses for our broadcast
properties and contains other operating covenants, including restrictions on
our ability to incur additional indebtedness and pay dividends.
Acquisitions having an aggregate maximum consideration during the term of
the credit agreement of greater than $25 million but less than or equal to $75
million are conditioned on delivery to the agent bank a covenant compliance
certificate showing pro forma calculations assuming such acquisition had been
consummated and revised projections for those acquisitions. For acquisitions
having an aggregate maximum consideration during the term of the credit
agreement in excess of $75 million, majority lender consent of the bank group
is required. We can draw on our revolving credit facility without prior
approval for working capital needs and acquisitions below $25 million.
Net cash flow from operating activities increased to approximately $10.6
million for the year ended December 31, 2000, from approximately $6.1 million
for the year ended December 31, 1999. Net cash flow from operating activities
decreased to approximately $6.1 million for 1999, from approximately $7.7
million for 1998.
Net cash flow used in investing activities increased to approximately $1
billion for the year ended December 31, 2000, from approximately $59.1 million
for the year ended December 31, 1999. During the year
35
ended December 31, 2000 we acquired media properties for a total of
approximately $990 million, including LCG for approximately $256 million,
Z-Spanish Media for approximately $462 million and certain assets from
Infinity Broadcasting Corporation for approximately $168 million, made capital
expenditures of approximately $22.8 million, and disposed of media properties
and other assets of approximately $11 million. During the year ended December
31, 1999, we acquired broadcast properties of approximately $46 million and
made capital expenditures of approximately $12.8 million. Net cash flow used
in investing activities increased to approximately $59.1 million for 1999,
compared to approximately $25.6 million for 1998. During 1998, we acquired
broadcast properties for a total of approximately $23 million and made
purchases of capital equipment totaling approximately $3.1 million.
Net cash flow from financing activities increased to approximately $1.1
billion for the year ended December 31, 2000, from approximately $51.6 million
for the year ended December 31, 1999. In order to finance our acquisitions
during the year ended December 31, 2000 we issued 52,900,000 shares of our
Class A common stock in our IPO for approximately $814 million, we increased
our subordinated debt to Univision by $110 million to $120 million which was
subsequently exchanged into 21,983,392 shares of our Class C common stock as a
result of our reorganization, we issued a $90 million convertible subordinated
note, which was subsequently converted into 5,865,102 shares of our Series A
mandatorily redeemable convertible preferred stock in our reorganization, we
entered into a new $600 million credit facility of which $200 million is
currently outstanding, we issued a note in the amount of $37.5 million to
acquire television station WUNI and we paid approximately $12.9 million in
deferred debt costs in connection with our credit facility. During 1999, we
drew on our bank credit facility to acquire television stations from LCG and a
television station in Venice (Sarasota), Florida. In 1998, we completed
acquisitions totaling $15.3 million, which were financed with borrowings under
our revolving credit facility. These acquisitions included KORO-TV and KVYE-
TV.
During 2001, we anticipate our capital expenditures will be approximately
$18 million, including the building of two studio facilities, upgrading
approximately seven stations to digital, as well as upgrades and maintenance
on broadcasting equipment and facility improvements to radio stations in some
of our markets. We anticipate paying for these capital expenditures out of net
cash flow from operating activities. The amount of these capital expenditures
may change based on future changes in business plans, our financial condition
and general economic conditions.
We currently anticipate that funds generated from operations and available
borrowings under our credit facility will be sufficient to meet our
anticipated cash requirements for the foreseeable future.
We continuously review, and are currently reviewing, opportunities to
acquire additional television and radio stations as well as billboards and
other opportunities targeting the U.S. Hispanic market. We expect to finance
any future acquisitions through funds generated from operations and borrowings
under our credit facility and through additional debt and equity financing.
Any additional financing, if needed, might not be available to us on
reasonable terms or at all. Failure to raise capital when needed could
seriously harm our business and our acquisition strategy. If additional funds
were raised through the issuance of equity securities, the percentage of
ownership of our stockholders would be reduced. Furthermore, these equity
securities might have rights preferences or privileges senior to our Class A
common stock.
On March 19, 2001, our Board of Directors approved a stock repurchase
program. We are authorized to repurchase up to $35 million of our outstanding
Class A common stock from time to time in open market transactions at
prevailing market prices, block trades and private repurchases. The extent and
timing of any repurchases will depend on market conditions and other factors.
We intend to finance stock repurchases, if and when made, with our available
cash on hand and cash provided by operations.
New Pronouncements
In June 1998, FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which is required to be adopted in all
fiscal quarters of all fiscal years beginning after June 15, 2000.
36
SFAS No. 133 permits early adoption as of the beginning of any fiscal quarter
after its issuance. We will adopt SFAS No. 133 effective January 1, 2001. SFAS
No. 133 will require us to recognize all derivatives on the balance sheet at
fair value. Derivatives that are not hedges must be adjusted to fair value
through income. If the derivative is a hedge, depending on the nature of the
hedge, changes in the fair value of derivatives will either be offset against
the change in fair value of the hedged assets, liabilities or firm commitment
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's
change in fair value will be immediately recognized in earnings. Because of
our minimal use of derivatives, management does not anticipate that the
adoption of SFAS No. 133 will have a significant effect on our earnings or
financial position.
In December 1999, the SEC issued SAB No. 101, Revenue Recognition in
Financial Statements. SAB 101 provides guidance on the recognition,
presentation and disclosure of revenue in financial statements filed with the
SEC. This accounting bulletin, as amended in March 2000, is effective
beginning in the fourth quarter of 2000. The adoption of SAB 101 did not have
a material impact on our or our acquired companies' financial statements.
In March 2000, FASB issued Interpretation No. 44, Accounting for Certain
Transactions Involving Stock Compensation--an interpretation of APB Opinion
No. 25. Interpretation No. 44 clarifies the definition of employee for
purposes of applying APB Opinion No. 25, Accounting for Stock Issued to
Employees, the criteria for determining whether a plan qualifies as a non-
compensatory plan, the accounting consequence of various modifications to the
terms of previously fixed stock options or awards and the accounting for an
exchange of stock compensation awards in a business combination.
Interpretation No. 44 is effective July 1, 2000, but certain conclusions in
Interpretation No. 44 cover specific events that occurred after either
December 15, 1998 or January 12, 2000. Interpretation No. 44 did not have a
material effect on our financial position or results of operations, other than
the stock options issued in connection with our acquisition of Z-Spanish
Media.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
General
Market risk represents the potential loss that may impact our financial
position, results of operations or cash flows due to adverse changes in the
financial markets. We are exposed to market risk from changes in the base
rates on our variable rate debt. We periodically enter into derivative
financial instrument transactions such as swaps or interest rate caps, in
order to manage or reduce our exposure to risk from changes in interest rates.
Under no circumstances do we enter into derivatives or other financial
instrument transactions for speculative purposes. Our credit facilities
require us to maintain an interest rate protection agreement, if we exceed
certain leverage ratios, as defined in the agreement.
Interest Rates
Our bank term loan bears interest at a variable rate of LIBOR (6.5% as of
December 31, 2000) plus 3.25%. As of December 31, 2000, we had $200 million of
variable rate bank debt. As of December 31, 2000, we were not required to
hedge any of our outstanding variable rate debt by using an interest rate cap.
Based on our overall interest rate exposure on our LIBOR loans as of December
31, 2000, a change of 10% in interest rates would have an impact of
approximately $2 million on a pre-tax earnings and pre-tax cash flows over a
one year period.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See pages F-1 through F-29.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
37
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to our directors is set forth in "Proposal 1--Election
of Directors" under the captions "Information Regarding Class A/B Directors,"
"Information Regarding Class C Directors" and "Board Meetings and Committees"
in our definitive Proxy Statement for our 2001 Annual Meeting of Stockholders
to be held on May 10, 2001. Such information is incorporated herein by
reference. Information regarding compliance by our directors and executive
officers and owners of more than ten percent of Class A common stock with the
reporting requirements of Section 16(a) of the Securities Exchange Act of
1934, as amended, is set forth in the Proxy Statement under the caption
"Section 16(a) Beneficial Ownership Reporting Compliance." Such information is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to the compensation of our executive officers and
directors is set forth in "Proposal 1--Election of Directors" under the
caption "Director Compensation" and under the caption "Summary of Cash and
Certain Other Compensation" in the Proxy Statement. Such information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding ownership of our Class A common stock by certain
persons is set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" and under the caption "Summary of Cash and
Certain Other Compensation" in the Proxy Statement. Such information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding relationships or transactions between our affiliates
and us is set forth under the caption "Certain Relationships and Related
Transactions" in the Proxy Statement. Such information is incorporated herein
by reference.
38
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report:
1. Financial Statements
The consolidated financial statements contained herein are as listed on the
"Index to Consolidated Financial Statements" on page F-1 of this report.
2. Financial Statement Schedules
Not applicable.
3. Exhibits
The following exhibits are attached hereto and incorporated herein by
reference.
[Download Table]
Exhibit
Number Exhibit Description
------- -------------------
3.1(1) First Restated Certificate of Incorporation
3.2* Certificate of Designations, Preferences and Rights of Series A
Convertible Preferred Stock
3.3(1) First Amended and Restated Bylaws
10.1(2) 2000 Omnibus Equity Incentive Plan
10.2(2) Form of Voting Agreement by and among Walter F. Ulloa, Philip C.
Wilkinson, Paul A. Zevnik and the registrant
10.3(1) Employment Agreement dated August 1, 2000 by and between the
registrant and Walter F. Ulloa
10.4(1) Employment Agreement dated August 1, 2000 by and between the
registrant and Philip C. Wilkinson
10.5* Executive Employment Agreement dated December 1, 2000 by and between
the registrant and Jeffery A. Liberman
10.6* First Amendment to Executive Employment Agreement dated March 9, 2001
by and between the registrant and Jeffery A. Liberman
10.7(3) Credit Agreement dated as of September 26, 2000 by and among the
registrant, as Borrower, the several banks and other lenders from
time to time parties of the Agreement, as Lenders, Union Bank of
California, N.A, as Arranging Agent for the Lenders, Union Bank of
California, N.A., as Co-Lead Arranger and Joint Book Manager, Credit
Suisse First Boston, as Co-Lead Arranger, Administrative Agent and
Joint Book Manager, The Bank of Nova Scotia, as Syndication Agent,
and Fleet National Bank, as Documentation Agent
10.8(1) Form of Indemnification Agreement for officers and directors of the
registrant
10.9(2) Form of Investors Rights Agreement by and among the registrant and
certain of its stockholders
10.10(2) Office Lease dated August 19, 1999 by and between Water Garden
Company L.L.C. and Entravision Communications Company, L.L.C.
10.11* First Amendment to Lease and Agreement Re: Sixth Floor Additional
Space dated as of March 15, 2001 by and between Water Garden Company
L.L.C., Entravision Communications Company, L.L.C. and the registrant
21.1* Subsidiaries of the registrant
23.1* Consent of Independent Accountants
24.1* Power of Attorney (included after signatures hereto)
--------
* Filed herewith
39
(1) Incorporated by reference from our Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000, filed with the SEC on September 15, 2000.
(2) Incorporated by reference from our Registration Statement on Form S-1, No.
333-35336, filed with the SEC on April 21, 2000, as amended by Amendment
No. 1 thereto, filed with the SEC on June 14, 2000, Amendment No. 2
thereto, filed with the SEC on July 10, 2000, Amendment No. 3 thereto,
filed with the SEC on July 11, 2000, and Amendment No. 4 thereto, filed
with the SEC on July 26, 2000.
(3) Incorporated by reference from our Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000, filed with the SEC on November 14, 2000.
(b) Reports on Form 8-K:
We filed a report on Form 8-K (Item 2) on October 17, 2000, in which we
reported the purchase of certain outdoor advertising assets from Infinity.
We filed a report on Form 8-K (Item 5) on November 15, 2000, in which we
reported the election of two new directors.
(c) Exhibits
The following exhibits are attached hereto and incorporated herein by
reference.
[Download Table]
Exhibit
Number Exhibit Description
------- -------------------
3.1(1) First Restated Certificate of Incorporation
3.2* Certificate of Designations, Preferences and Rights of Series A
Convertible Preferred Stock
3.3(1) First Amended and Restated Bylaws
10.1(2) 2000 Omnibus Equity Incentive Plan
10.2(2) Form of Voting Agreement by and among Walter F. Ulloa, Philip C.
Wilkinson, Paul A. Zevnik and the registrant
10.3(1) Employment Agreement dated August 1, 2000 by and between the
registrant and Walter F. Ulloa
10.4(1) Employment Agreement dated August 1, 2000 by and between the
registrant and Philip C. Wilkinson
10.5* Executive Employment Agreement dated December 1, 2000 by and between
the registrant and Jeffery A. Liberman
10.6* First Amendment to Executive Employment Agreement dated March 9, 2001
by and between the registrant and Jeffery A. Liberman
10.7(3) Credit Agreement dated as of September 26, 2000 by and among the
registrant, as Borrower, the several banks and other lenders from
time to time parties of the Agreement, as Lenders, Union Bank of
California, N.A, as Arranging Agent for the Lenders, Union Bank of
California, N.A., as Co-Lead Arranger and Joint Book Manager, Credit
Suisse First Boston, as Co-Lead Arranger, Administrative Agent and
Joint Book Manager, The Bank of Nova Scotia, as Syndication Agent,
and Fleet National Bank, as Documentation Agent
10.8(1) Form of Indemnification Agreement for officers and directors of the
registrant
10.9(2) Form of Investors Rights Agreement by and among the registrant and
certain of its stockholders
10.10(2) Office Lease dated August 19, 1999 by and between Water Garden
Company L.L.C. and Entravision Communications Company, L.L.C.
40
[Download Table]
Exhibit
Number Exhibit Description
------- -------------------
10.11* First Amendment to Lease and Agreement Re: Sixth Floor Additional
Space dated as of March 15, 2001 by and between Water Garden Company
L.L.C., Entravision Communications Company, L.L.C. and the registrant
21.1* Subsidiaries of the registrant
23.1* Consent of Independent Accountants
24.1* Power of Attorney (included after signatures hereto)
--------
* Filed herewith
(1) Incorporated by reference from our Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000, filed with the SEC on September 15, 2000.
(2) Incorporated by reference from our Registration Statement on Form S-1, No.
333-35336, filed with the SEC on April 21, 2000, as amended by Amendment
No. 1 thereto, filed with the SEC on June 14, 2000, Amendment No. 2
thereto, filed with the SEC on July 10, 2000, Amendment No. 3 thereto,
filed with the SEC on July 11, 2000 and Amendment No. 4 thereto, filed
with the SEC on July 26, 2000.
(3) Incorporated by reference from our Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000, filed with the SEC on November 14, 2000.
(d) Financial Statement Schedules
Not applicable.
41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Entravision Communications
Corporation
By: /s/ Walter F. Ulloa
___________________________________
Walter F. Ulloa,
Chairman and Chief Executive
Officer
Date: March 28, 2001
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints, jointly and severally, Walter F. Ulloa
and Jeanette Tully, and each of them, as his or her true and lawful attorneys-
in-fact and agents, will full power of substitution and resubstitution, for
him or her and in his or her name, place and stead, in any and all capacities,
to sign any and all amendments to this Report on Form 10-K, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934 this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
[Download Table]
Signature Title Date
--------- ----- ----
/s/ Walter F. Ulloa Chairman and Chief Executive March 28, 2001
____________________________________ Officer (principal
Walter F. Ulloa executive officer)
/s/ Philip C. Wilkinson President, Chief Operating March 28, 2001
____________________________________ Officer and Director
Philip C. Wilkinson (principal executive
officer)
/s/ Jeanette Tully Executive Vice President, March 28, 2001
____________________________________ Treasurer and Chief
Jeanette Tully Financial Officer
(principal financial
officer and principal
accounting officer)
Secretary and Director March , 2001
____________________________________
Paul A. Zevnik
42
[Download Table]
Signature Title Date
--------- ----- ----
/s/ Darryl B. Thompson Director March 28, 2001
____________________________________
Darryl B. Thompson
/s/ Amador S. Bustos Director March 28, 2001
____________________________________
Amador S. Bustos
/s/ Andrew W. Hobson Director March 28, 2001
____________________________________
Andrew W. Hobson
/s/ Michael D. Wortsman Director March 28, 2001
____________________________________
Michael D. Wortsman
/s/ Michael S. Rosen Director March 28, 2001
____________________________________
Michael S. Rosen
____________________________________ Director March , 2001
Esteban E. Torres
43
ENTRAVISION COMMUNICATIONS CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
[Download Table]
Page
----
Independent Auditor's Report............................................. F-2
Consolidated Balance Sheets.............................................. F-3
Consolidated Statements of Operations.................................... F-4
Consolidated Statements of Mandatorily Redeemable Preferred Stock and
Equity.................................................................. F-5
Consolidated Statements of Cash Flows.................................... F-7
Notes to Consolidated Financial Statements............................... F-8
F-1
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Entravision Communications Corporation
Santa Monica, California
We have audited the accompanying consolidated balance sheets of Entravision
Communications Corporation and subsidiaries as of December 31, 2000 and 1999,
and the related consolidated statements of operations, equity and cash flows
for each of the three years in the period ended December 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Entravision Communications Corporation and subsidiaries as of December 31,
2000 and 1999, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2000 in conformity
with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
Pasadena, California
February 5, 2001
F-2
ENTRAVISION COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
[Download Table]
December 31,
--------------------
2000 1999
---------- --------
ASSETS
Current assets
Cash and cash equivalents.............................. $ 69,224 $ 2,357
Receivables:
Trade, net of allowance for doubtful accounts of 2000
$5,966; 1999 $979..................................... 38,274 12,392
Related parties........................................ 273 273
Prepaid expenses and taxes............................. 3,038 355
Deferred taxes......................................... 11,244 --
---------- --------
Total current assets.................................. 122,053 15,377
Property and equipment, net............................. 169,289 27,230
Intangible assets, net.................................. 1,257,348 152,387
Other assets, including amounts due from related parties
of 2000 $562 and deposits on acquisitions of 2000
$2,689; 1999 $8,742.................................... 11,803 10,023
---------- --------
$1,560,493 $205,017
========== ========
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND
EQUITY
Current liabilities
Current maturities of notes and advances payable,
related parties....................................... $ 201 $ 231
Current maturities of long-term debt................... 2,452 1,389
Accounts payable and accrued expenses (including
related parties of 2000 $711; 1999 $527 which includes
amounts due to Univision-2000 $362; 1999 $247)........ 30,274 7,479
---------- --------
Total current liabilities............................. 32,927 9,099
---------- --------
Long-term debt
Subordinated note payable to Univision................. -- 10,000
Notes payable, less current maturities................. 252,495 155,917
---------- --------
252,495 165,917
Other long-term liabilities............................. 6,672 --
Deferred taxes.......................................... 132,419 1,990
---------- --------
Total liabilities..................................... 424,513 177,006
---------- --------
Series A mandatorily redeemable convertible preferred
stock, $0.0001 par value, 11,000,000 shares authorized,
shares issued and outstanding 2000 5,865,102
(liquidation value at December 31, 2000: $51,394)...... 80,603 --
---------- --------
Commitments and Contingencies
Members' capital
Entravision Communications Company, L.L.C.............. -- 59,645
Common stock of member corporations.................... -- 1,256
Additional paid-in capital of member corporations...... -- 16,329
Accumulated deficit.................................... -- (48,635)
Stockholders' equity
Preferred stock, $0.0001 par value, 39,000,000 shares
authorized, none issued and outstanding............... -- --
Class A common stock, $0.0001 par value, 260,000,000
shares authorized; shares issued and outstanding 2000
65,626,063............................................ 7 --
Class B common stock, $0.0001 par value, 40,000,000
shares authorized; shares issued and outstanding 2000
27,678,533............................................ 3 --
Class C common stock, $0.0001 par value, 25,000,000
shares authorized; shares issued and outstanding 2000
21,983,392............................................ 2 --
Additional paid-in capital............................. 1,092,865 --
Deferred compensation.................................. (5,745) --
Accumulated deficit.................................... (31,147) --
---------- --------
1,055,985 28,595
Less L.L.C. membership and stock subscription notes
receivable............................................ (608) (584)
---------- --------
1,055,377 28,011
---------- --------
$1,560,493 $205,017
========== ========
See Notes to Consolidated Financial Statements
F-3
ENTRAVISION COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share, per share and per L.L.C. membership unit data)
[Download Table]
Years Ended December 31,
-------------------------------------
2000 1999 1998
----------- ----------- -----------
Gross revenue (including network
compensation from Univision of $4,338,
$2,748 and $4,922)..................... $ 170,810 $ 66,204 $ 49,872
Less agency commissions................. 16,789 7,205 5,052
----------- ----------- -----------
Net revenue........................... 154,021 58,999 44,820
----------- ----------- -----------
Direct operating expenses (including
Univision national representation fees
of $4,145, $3,149 and $2,379).......... 58,987 24,441 15,794
Selling, general and administrative
expenses (excluding non-cash stock-
based compensation of $5,822, $29,143
and $500).............................. 38,600 11,611 8,877
Corporate expenses (including related
parties of $527, $522 and $453)........ 12,741 5,809 3,963
Non-cash stock-based compensation....... 5,822 29,143 500
Depreciation and amortization........... 69,238 15,982 10,934
----------- ----------- -----------
185,388 86,986 40,068
----------- ----------- -----------
Operating income (loss)............... (31,367) (27,987) 4,752
Interest expense (including amounts to
Univision of $3,645, $701 and $701).... (29,834) (9,690) (8,386)
Non-cash interest expense relating to
related-party beneficial conversion
options................................ (39,677) (2,500) --
Interest income......................... 5,918 99 142
----------- ----------- -----------
Loss before income taxes.............. (94,960) (40,078) (3,492)
Income tax (expense) benefit............ 13,448 121 (210)
Effect of change in tax status.......... (10,514) -- --
----------- ----------- -----------
Net loss before equity in earnings of
nonconsolidated affiliates............. (92,026) (39,957) (3,702)
Equity in loss of nonconsolidated
affiliates............................. (214) -- --
----------- ----------- -----------
Net loss.............................. (92,240) $ (39,957) $ (3,702)
=========== ===========
Accretion of preferred stock redemption
value.................................. 2,449
-----------
Net loss applicable to common stock..... $ (94,689)
===========
Loss per share: basic and diluted....... $ (0.27)
===========
Loss per L.L.C. membership unit......... $ (31.04) $ (19.12) $ (0.07)
=========== =========== ===========
Pro forma provision for income tax
benefit................................ 5,904 2,499 322
----------- ----------- -----------
Pro forma net loss...................... $ (86,336) $ (37,579) $ (3,170)
=========== =========== ===========
Pro forma per share data:
Net loss per share:
Basic and diluted.................... $ (1.34) $ (1.16) $ (0.10)
=========== =========== ===========
Pro forma weighted average common shares
outstanding:
Basic and diluted..................... 66,451,637 32,402,378 32,894,802
=========== =========== ===========
See Notes to Consolidated Financial Statements
F-4
ENTRAVISION COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF MANDATORILY REDEEMABLE PREFERRED STOCK AND EQUITY
Years ended December 31, 1998 and 1999 and for the period from January 1, 2000
through August 2, 2000
(In thousands, except share and L.L.C. membership unit data)
[Enlarge/Download Table]
Additional
Entravision Paid-in Notes
Communications Common Stock Capital of Receivable
Company, of Member Member Deferred Accumulated Stockholder
L.L.C. Corporations Corporations Compensation Deficit and Members Total
-------------- ------------ ------------ ------------ ----------- ----------- --------
Balance, December 31,
1997................... $ 13,543 $ 1,255 $ 16,329 $ -- $ 1,470 $(540) $ 32,057
Capitalization of 9,750
shares of Telecorpus,
Inc.................... -- 1 -- -- -- -- 1
Issuance of 147,411
Class A membership
units in exchange for
assets contributed by
member corporation..... -- -- -- -- -- -- --
Conversion of 4,500
Class A membership
units into 4,500 Class
E and F membership
units.................. -- -- -- -- -- -- --
Interest earned on notes
and subscriptions
receivable from
member................. 21 -- -- -- -- -- 21
Increase in notes and
subscriptions
receivable from
member................. -- -- -- -- -- (21) (21)
Repurchase of 1,600
shares of Golden Hills
Broadcasting
Corporation common
stock.................. -- -- -- -- (1,000) -- (1,000)
Compensation expense
attributable to
employee equity
awards................. 500 -- -- -- -- -- 500
Net loss................ -- -- -- -- (3,702) -- (3,702)
Distributions and
dividends to members
and stockholders....... -- -- -- -- (2,985) -- (2,985)
-------- ------- -------- ------- -------- ----- --------
Balance, December 31,
1998................... 14,064 1,256 16,329 -- (6,217) (561) 24,871
Increase in conversion
option on subordinated
note agreement relating
to acquisition of
business............... 13,915 -- -- -- -- -- 13,915
Estimated value of
subordinated note
conversion option...... 2,500 -- -- -- -- -- 2,500
Conversion of 813 Class
A membership units into
813 Class E and F
membership units....... -- -- -- -- -- -- --
Interest earned on notes
and subscriptions
receivable from
member................. 23 -- -- -- -- -- 23
Increase in notes and
subscriptions
receivable from
member................. -- -- -- -- -- (23) (23)
Compensation expense
attributable to
employee equity
awards................. 29,143 -- -- -- -- -- 29,143
Repurchase of 250 shares
of Telecorpus, Inc.
common stock........... -- -- -- -- (61) -- (61)
Net loss................ -- -- -- -- (39,957) -- (39,957)
Distributions and
dividends to members
and stockholders....... -- -- -- -- (2,400) -- (2,400)
-------- ------- -------- ------- -------- ----- --------
Balance, December 31,
1999................... 59,645 1,256 16,329 -- (48,635) (584) 28,011
Interest earned on notes
and subscriptions
receivable............. 14 -- -- -- -- (14) --
Estimated value of
Univision subordinated
note conversion
option................. -- -- 31,600 -- -- -- 31,600
Estimated value of
subordinated note
conversion option ..... -- -- 19,537 -- -- -- 19,537
Restricted employee
equity awards of 33,923
Class D L.L.C. units... 6,920 -- -- (6,920) -- -- --
Amortization of deferred
compensation........... -- -- -- 392 -- -- 392
Unrestricted employee
equity awards of 16,050
Class D L.L.C. units... 3,852 -- -- -- -- -- 3,852
Net loss for the period
through August 2,
2000................... -- -- -- -- (63,542) -- (63,542)
Reclassification of
accumulated deficit.... (44,711) -- (67,466) -- 112,177 -- --
To give effect to
reorganization......... (25,720) (1,256) -- 6,528 -- 598 (19,850)
-------- ------- -------- ------- -------- ----- --------
Balance, August 2,
2000................... $ -- $ -- $ -- $ -- $ -- $ -- $ --
======== ======= ======== ======= ======== ===== ========
See Notes to Consolidated Financial Statements.
F-5
ENTRAVISION COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF MANDATORILY REDEEMABLE PREFERRED STOCK AND EQUITY
For the period from August 2, 2000 through December 31, 2000
(In thousands, except share and L.L.C. membership unit data)
[Enlarge/Download Table]
Mandatorily
Redeemable
Preferred Stock Number of Common Shares Common Stock Additional
----------------- -------------------------------- ----------------------- Paid-in Deferred Accumulated
Shares Amount Class A Class B Class C Class A Class B Class C Capital Compensation Deficit
--------- ------- ---------- ---------- ---------- ------- ------- ------- ---------- ------------ -----------
Balance, August
2, 2000.......... -- $ -- -- -- -- $ -- $ -- $ -- $ -- $ -- $ --
Adjustments to
give effect to
reorganization.. -- -- 5,538,175 27,678,533 -- 1 3 -- 26,972 (6,528) --
Interest earned
on subscriptions
receivable...... -- -- -- -- -- -- -- -- 10 -- --
Issuance of
common stock in
initial public
offering,
including
exchange of
Univision note
payable for
21,983,392 Class
C common shares,
and net of
$52,217 issuance
costs........... -- -- 52,900,000 -- 21,983,392 5 -- 2 933,967 -- --
Issuance of
common stock and
exchange of
stock options in
connection with
the acquisition
of Z-Spanish
Media........... -- -- 7,187,888 -- -- 1 -- -- 131,825 (817) --
Issuance of
preferred stock
upon conversion
of subordinated
note............ 5,865,102 78,154 -- -- -- -- -- -- -- -- --
Accretion of
redemption value
on preferred
stock........... -- 2,449 -- -- -- -- -- -- -- -- (2,449)
Amortization of
deferred
compensation.... -- -- -- -- -- -- -- -- -- 1,600 --
Stock options
granted to non-
employees....... -- -- -- -- -- -- -- -- 91 -- --
Net loss for the
period from
August 2, 2000
through December
31, 2000........ -- -- -- -- -- -- -- -- -- -- (28,698)
--------- ------- ---------- ---------- ---------- ----- ----- ----- ---------- ------- --------
Balance, December
31, 2000......... 5,865,102 $80,603 65,626,063 27,678,533 21,983,392 $ 7 $ 3 $ 2 $1,092,865 $(5,745) $(31,147)
========= ======= ========== ========== ========== ===== ===== ===== ========== ======= ========
Subscription
Notes
Receivable Total
------------ -----------
Balance, August
2, 2000.......... $ -- $ --
Adjustments to
give effect to
reorganization.. (598) 19,850
Interest earned
on subscriptions
receivable...... (10) --
Issuance of
common stock in
initial public
offering,
including
exchange of
Univision note
payable for
21,983,392 Class
C common shares,
and net of
$52,217 issuance
costs........... -- 933,974
Issuance of
common stock and
exchange of
stock options in
connection with
the acquisition
of Z-Spanish
Media........... -- 131,009
Issuance of
preferred stock
upon conversion
of subordinated
note............ -- --
Accretion of
redemption value
on preferred
stock........... -- (2,449)
Amortization of
deferred
compensation.... -- 1,600
Stock options
granted to non-
employees....... -- 91
Net loss for the
period from
August 2, 2000
through December
31, 2000........ -- (28,698)
------------ -----------
Balance, December
31, 2000......... $(608) $1,055,377
============ ===========
See Notes to Consolidated Financial Statements.
F-6
ENTRAVISION COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
[Download Table]
Years Ended December 31,
-------------------------------
2000 1999 1998
----------- -------- --------
Cash Flows from Operating Activities
Net loss..................................... $ (92,240) $(39,957) $ (3,702)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization................ 69,238 15,723 10,934
Deferred tax expense (benefit)............... (4,126) 406 (83)
Amortization of debt issue costs............. 2,779 258 1,295
Intrinsic value of subordinated note
conversion option........................... 39,677 2,500 --
Net loss in equity method investee........... 214 -- --
Non-cash stock-based compensation............ 5,899 29,143 500
(Gain) loss on disposal of media properties
and other assets............................ (43) 100 15
Changes in assets and liabilities, net of
effect of business combinations:
(Increase) in accounts receivable........... (10,813) (3,249) (2,446)
(Increase) in prepaid expenses and other
assets..................................... (229) (87) (119)
Increase in accounts payable, accrued
expenses and other......................... 252 1,291 1,264
----------- -------- --------
Net cash provided by operating activities.. 10,608 6,128 7,658
----------- -------- --------
Cash Flows from Investing Activities
Purchases of property and equipment.......... (22,848) (12,825) (3,094)
Proceeds from disposal of media properties
and other assets............................ 11,043 116 19
Cash deposits and purchase price on
acquisitions................................ (990,495) (46,354) (22,511)
----------- -------- --------
Net cash (used in) investing activities.... (1,002,300) (59,063) (25,586)
----------- -------- --------
Cash Flows from Financing Activities
Proceeds from issuance of common stock....... 813,974 -- --
Principal payments on notes payable.......... (334,925) (352) (288)
Proceeds from borrowings on notes payable.... 592,367 54,913 24,407
Dividends paid to members for income taxes... -- (2,400) (2,985)
Purchase and retirement of common stock...... -- (530) (500)
Payments of deferred debt costs.............. (12,857) -- (1,295)
----------- -------- --------
Net cash provided by financing activities.. 1,058,559 51,631 19,339
----------- -------- --------
Net increase (decrease) in cash and cash
equivalents............................... 66,867 (1,304) 1,411
Cash and Cash Equivalents
Beginning.................................... 2,357 3,661 2,250
----------- -------- --------
Ending....................................... $ 69,224 $ 2,357 $ 3,661
=========== ======== ========
Supplemental Disclosures of Cash Flow
Information
Cash payments for:
Interest..................................... $ 23,266 $ 10,542 $ 6,744
=========== ======== ========
Income taxes................................. $ 895 $ 96 $ 51
=========== ======== ========
Supplemental Disclosures of Non-Cash Investing
and Financing Activities
Conversion of notes payable into preferred
stock and Class C common shares............. $ 198,539 $ -- $ --
=========== ======== ========
Property and equipment acquired under capital
lease obligations and included in accounts
payable..................................... $ 827 $ -- $ --
=========== ======== ========
Issuance of note payable in connection with
redemption of common stock of member
corporations................................ $ -- $ 30 $ 500
=========== ======== ========
Assets Acquired and Debt Issued in Business
Combinations
Current and other assets..................... $ 25,771 $ 86 $ 99
Property and equipment....................... 128,342 4,477 1,343
Intangible assets............................ 1,164,047 67,533 16,733
Current and other liabilities................ (25,811) -- (164)
Deferred taxes............................... (123,311) (2,112) --
Notes payable................................ (40,004) (12,000) (350)
Increase in subordinated note conversion
option...................................... -- (13,915) --
Estimated fair value allocated to purchase
option agreement............................ (3,500) -- --
Issuance of common stock and exchange of
stock options............................... (131,009) -- --
Less cash deposits from prior year........... (8,500) (5,533) (500)
----------- -------- --------
Net cash paid.............................. $ 986,025 $ 38,536 $ 17,161
=========== ======== ========
See Notes to Consolidated Financial Statements
F-7
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS, REORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business
Entravision Communications Corporation (together with its subsidiaries,
hereinafter, individually and collectively, "ECC" or the "Company") is a
diversified Spanish-language media company utilizing a combination of
television, radio, outdoor and publishing operations to reach Hispanic
consumers in the United States. The Company operates 34 television stations in
24 markets located primarily in the Southwestern United States, consisting
primarily of Univision Communications Inc. ("Univision") affiliated stations.
Radio operations consist of a Spanish-language radio network, which provides
programming to the Company's 56 operational radio stations, 39 FM and 17 AM,
in 25 markets located primarily in Arizona, California, Colorado, Florida,
Illinois, Nevada, New Mexico and Texas. Additionally the Company's radio
network provides programming to 39 radio station affiliates in 38 markets.
Publishing operations consist of a newspaper publication in New York. The
Company's outdoor operations consist of approximately 11,200 billboards
located in Los Angeles and New York.
Pursuant to Univision network affiliation agreements, Univision acts as the
Company's exclusive sales representative for the sale of all national
advertising aired on Univision television stations. Proceeds of national sales
are remitted to the Company by Univision, net of an agency commission and a
network representative fee. The affiliation agreements expire December 2021.
Reorganization
The financial statements presented for the years ended December 31, 1998
and 1999, and for the period from January 1, 2000 through August 2, 2000 are
those of Entravision Communications Company, L.L.C. ("ECC LLC") and its
combined affiliates: Cabrillo Broadcasting Corporation, Golden Hills
Broadcasting Corporation, Las Tres Palmas Corporation, Tierra Alta
Broadcasting, Inc., KSMS, Inc., Valley Channel 48, Inc., and Telecorpus, Inc.
(collectively, the "Affiliates") prior to the exchange transaction (the
"Exchange Transaction") described below. Under the terms of the ECC LLC
operating agreement, ECC LLC was authorized to issue Class A, B, C, D, E and F
membership units. Through a series of prior planned transactions, each of the
Affiliates had transferred all of their operations and all their operating
assets and liabilities except for acquisition debt to ECC LLC in exchange for
membership interests in ECC LLC.
Effective August 2, 2000, an Exchange Transaction was consummated whereby
the direct and indirect membership interests in ECC LLC were exchanged for
Class A or Class B common stock of ECC. The Class B common stock was issued to
Walter F. Ulloa, Philip C. Wilkinson and Paul A. Zevnik (and certain trusts
and related entities of such individuals) in exchange for their direct and
indirect membership interests in ECC LLC. The remaining individual members and
stockholders (other than Messrs. Ulloa, Wilkinson and Zevnik) of the
Affiliates exchanged their LLC membership units and common shares of the
respective corporations for Class A common stock of ECC. Accordingly the
Affiliates became wholly owned subsidiaries of ECC and ECC LLC became a wholly
owned subsidiary of the Affiliates. The number of shares of common stock of
ECC issued to the members of ECC LLC and the stockholders of the Affiliates
was determined in such a manner that the ownership interests in ECC equaled
the direct and indirect ownership interests in ECC LLC immediately prior to
the exchange. Prior to the Exchange Transaction, ECC LLC and its Affiliates
were considered to be under common control and, as such, the Exchange
Transaction was accounted for in a manner similar to a pooling of interests.
ECC LLC membership units were exchanged into Class A or Class B shares of
common stock of the Company at an exchange ratio of 17 shares of common stock
per membership unit. As a result, for all periods prior to the Exchange
Transaction, ECC LLC membership units have been reflected as shares of ECC
common stock in these notes to financial statements.
F-8
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Additionally, effective with the Exchange Transaction, Univision exchanged
its $120 million subordinated note (see Note 5) into 21,983,392 shares of ECC
Class C common stock.
Initial Public Offering
On August 2, 2000, the Company completed an underwritten initial public
offering (the "IPO") of 46,435,458 shares of its Class A common stock at a
price of $16.50 per share. The Company also sold 6,464,542 shares of its Class
A common stock directly to Univision at a price of $15.47 per share. The net
proceeds to the Company, after deducting underwriting discounts and
commissions, and offering expenses, were approximately $814 million.
Significant accounting policies
Basis of consolidation
The accompanying consolidated financial statements include the accounts of
ECC and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
Investment in nonconsolidated affiliates
The Company accounts for its investment in its less than majority-owned
investees using the equity method under which the Company's share of the net
income (loss) is recognized in the Company's statement of operations.
Condensed financial information is not provided as these operations are not
considered to be significant.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
The Company's operations are affected by numerous factors including changes
in audience acceptance (i.e., ratings), priorities of advertisers, new laws
and governmental regulations and policies and technological advances. The
Company cannot predict if any of these factors might have a significant impact
on the television, radio, publishing and outdoor advertising industries in the
future, nor can it predict what impact, if any, the occurrence of these or
other events might have on the Company's operations. Significant estimates and
assumptions made by management are used for, but not limited to, the allowance
for doubtful accounts, the carrying value of long-lived and intangible assets
and the fair value of the Company's common stock used to determine interest
and compensation expense.
Cash and cash equivalents
For purposes of reporting cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to
be cash equivalents.
Interest rate cap agreements
Interest rate cap agreements are principally used by the Company in the
management of interest rate exposure. The differential to be paid or received
is accrued as interest rates change and is recorded in the statement of
operations.
F-9
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Property and equipment
Property and equipment are recorded at cost. Depreciation and amortization
are provided using accelerated and straight-line methods over the following
estimated useful lives:
[Download Table]
Years
-----------------
Buildings and land improvements............................ 39
Outdoor advertising displays............................... 15
Transmission, studio and broadcast equipment............... 5-15
Office and computer equipment.............................. 5-7
Transportation equipment................................... 5
Leasehold improvements..................................... Lesser of the
life of the lease
or economic
life of the asset
Intangible assets
Intangible assets consisting of the following items are amortized on a
straight-line method over the following estimated useful lives:
[Download Table]
Years
-----
FCC licenses........................................................... 15
Network affiliation agreements......................................... 15
Goodwill............................................................... 15
Time brokerage agreements.............................................. 15
Customer base.......................................................... 15
Other.................................................................. 1-15
Deferred debt costs related to the Company's credit facility are amortized
using a method which approximates the effective interest method over the life
of the related indebtedness. Favorable leasehold interests are amortized over
the term of the underlying lease. Presold advertising contracts are amortized
over the term of the underlying contracts.
Impairment of long-lived assets
The Company reviews its long-lived assets and intangibles related to those
assets periodically to determine potential impairment by comparing the
carrying value of the long-lived assets and identified goodwill with the
estimated future net undiscounted cash flows expected to result from the use
of the assets, including cash flows from disposition. Should the sum of the
expected future net cash flows be less than the carrying value, the Company
may be required to recognize an impairment loss at that date. An impairment
loss would be the amount, if any, by which the carrying value exceeds the fair
value of the long-lived assets and identified goodwill.
Goodwill not identified with impaired assets is evaluated to determine
whether events or circumstances warrant a write-down or revised estimates of
useful lives. The Company determines impairment by comparing the carrying
value of goodwill with the estimated future net undiscounted cash flows
expected to result from the use of the assets, including cash flows from
disposition. Should the sum of the expected future net cash flows be less than
the carrying value, the Company may be required to recognize an impairment
loss at that date.
F-10
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Impairment losses are measured by comparing the amount by which the carrying
value exceeds the fair value (estimated discounted future cash flows) of the
goodwill.
To date, management has determined that no impairment of long-lived assets
and goodwill exists.
Concentrations of credit risk
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents and trade accounts
receivable. The Company from time to time may have bank deposits in excess of
the FDIC insurance limits. The Company has not experienced any losses in such
accounts and believes it is not exposed to any significant credit risk on cash
and cash equivalents.
The Company routinely assesses the financial strength of its customers and,
as a consequence, believes that their trade receivable credit risk exposure is
limited. A valuation allowance is provided for known and anticipated credit
losses. Credit losses for bad debts are provided for in the financial
statements through a charge to the allowance, and aggregated $2.2 million,
$0.8 million and $0.6 million for the years ended December 31, 2000, 1999 and
1998, respectively. During the years ended December 31, 2000, 1999 and 1998
the Company's allowance for doubtful accounts was increased through business
acquisitions in the amounts of $6.3 million, $0 and $0.1 million respectively.
The net charge off of bad debts aggregated $3.5 million, $0.6 million and
$0.5 million for the years ended December 31, 2000, 1999 and 1998,
respectively.
Disclosures about fair value of financial instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash and cash equivalents
The carrying amount approximates fair value because of the short maturity
of those instruments.
Long-term debt
The carrying amount approximates the fair value of the Company's long-term
debt based on the quoted market prices for the same or similar issues or on
the current rates offered to the Company for debt of the same remaining
maturities with similar collateral requirements.
Mandatorily redeemable convertible preferred stock
Mandatorily redeemable convertible preferred stock is stated at redemption
value less the unamortized discount. The discount is accreted into the
carrying value of the mandatorily redeemable preferred stock through the date
at which the preferred stock is redeemable at the option of the holder with a
charge to accumulated deficit using the effective-interest method.
Income taxes
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when it is determined to be more likely than not that some
portion or all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.
F-11
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Advertising costs
Advertising costs are expensed as incurred. Advertising expense totaled
approximately $2.5 million, $0.9 million and $0.6 million for the years ended
December 31, 2000, 1999 and 1998, respectively.
Revenue recognition
Television and radio revenue related to the sale of advertising is
recognized at the time of broadcast. Network compensation is recognized
ratably over the period of the agreement. Publishing revenue is recognized as
services are provided. Outdoor advertising revenue is recognized over the life
of advertising contracts.
Local marketing and time brokerage agreements
The Company operates certain stations under local marketing agreements and
time brokerage agreements whereby the Company sells and retains all
advertising revenue. The broadcast station licensee retains responsibility for
ultimate control of the station in accordance with all FCC rules and
regulations. The Company pays a fixed fee to the station owner, as well as all
expenses of the station, and performs other functions. The financial results
of the local marketing and time brokerage agreements operated stations are
included in the Company's statement of operations from the date of
commencement of the respective agreement.
Trade transactions
The Company exchanges broadcast time for certain merchandise and services.
Trade revenue and the related receivables are recorded when spots air at the
fair value of the goods or services received or time aired, whichever is more
readily determinable. Trade expense and the related liability are recorded
when the goods or services are used or received. Trade revenue and costs were
approximately $6.5 million, $1.3 million and $0.9 million for the years ended
December 31, 2000, 1999 and 1998, respectively.
Stock-based compensation
The Company accounts for stock-based employee compensation under the
requirements of Accounting Principles Board (APB) Opinion No. 25, which does
not require compensation to be recorded if the consideration to be received is
at least equal to fair value of the common stock to be received at the
measurement date. Nonemployee stock-based transactions are accounted for under
the requirements of SFAS No. 123, Accounting for Stock-Based Compensation,
which requires compensation to be recorded based on the fair value of the
securities issued or the services received, whichever is more reliably
measurable.
Earnings per share
The following table sets forth the calculation of the Company's loss per
share:
[Download Table]
For the period from
August 2, 2000
through December 31, 2000
---------------------------------
(In thousands, except share data)
Net loss................................. $ 28,698
Accretion to preferred stock redemption
value................................... 2,449
-----------
Net loss attributable to common stock.... $ 31,147
===========
Shares................................... 115,287,988
===========
F-12
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Basic earnings per share is computed as net income (loss) less accretion of
the discount on Series A mandatorily redeemable preferred stock divided by the
weighted average number of shares outstanding for the period. Diluted earnings
per share reflects the potential dilution that could occur from shares
issuable through stock options and convertible securities.
For the period from August 2, 2000 through December 31, 2000, all dilutive
securities have been excluded as their inclusion would have had an
antidilutive effect on earnings per share. As of December 31, 2000, the
securities whose conversion would result in an incremental number of shares
that would be included in determining the weighted average shares outstanding
for diluted earnings per share if their effect was not antidilutive is as
follows: 5,511,123 stock options, 549,293 unvested stock grants subject to
repurchase and 5,865,102 shares of Series A mandatorily redeemable convertible
preferred stock.
Earnings per membership unit
Basic earnings per unit is computed as net income (loss) divided by the
number of membership units outstanding as of the last day of each period.
Diluted earnings per unit reflects the potential dilution that could occur
from membership units through options and convertible securities.
For the years ended December 31, 1998 and 1999 and for the period from
January 1, 2000 through August 2, 2000, the date of the Exchange Transaction,
all dilutive securities have been excluded as their inclusion would have had
an antidilutive effect on earnings per membership unit.
The following table sets forth the calculation of loss per membership unit:
[Download Table]
For the period
from January 1, Years Ended December 31,
2000 through -------------------------
August 2, 2000 1999 1998
--------------- ------------ ------------
Net loss......................... $ 63,542 $ 39,957 $ 3,702
Less loss of member
corporations.................... 2,886 3,547 3,566
--------- ------------ ------------
Net loss applicable to L.L.C.
members......................... $ 60,656 $ 36,410 $ 136
========= ============ ============
L.L.C. membership units
outstanding..................... 1,953,924 1,903,951 1,907,731
========= ============ ============
Pro forma income tax adjustments and pro forma earnings per share
The pro forma income tax information is included in these financial
statements for all periods prior to the Exchange Transaction to show what the
significant effects might have been on the historical statements of operations
had the Company and its Affiliates not been treated as flow-through entities
not subject to income taxes. The pro forma information reflects a benefit for
income taxes at the assumed effective rate for the years ended December 31,
2000, 1999 and 1998.
The weighted average number of shares of common stock outstanding during
the years ended December 31, 2000, 1999 and 1998, used to compute pro forma
basic and diluted net loss per share is based on the conversion ratio used to
exchange ECC LLC membership units and member corporation shares for shares of
ECC's common stock in the Exchange Transaction.
Comprehensive income
For the years ended December 31, 2000, 1999 and 1998, the Company had no
components of comprehensive income and, therefore, net income is equal to
comprehensive income.
F-13
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
New pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities (the
"Statement"), which is required to be adopted in all fiscal quarters of all
fiscal years beginning after June 15, 2000. The Statement permits early
adoption as of the beginning of any fiscal quarter after its issuance. The
Company adopted the Statement effective January 1, 2001. The Statement will
require the Company to recognize all derivatives on the balance sheet at fair
value. The Company has not entered into any derivative contracts or hedging
activities.
In December 1999, the Securities and Exchange Commission (the "SEC") issued
SAB No. 101, Revenue Recognition in Financial Statements. SAB 101 provides
guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the SEC. This accounting bulletin, as amended
in March 2000, is effective beginning in the fourth quarter of 2000. The
adoption of SAB 101 did not have a material impact on the Company's financial
statements.
In March 2000, the FASB issued Interpretation No. 44, Accounting for
Certain Transactions Involving Stock Compensation--an interpretation of APB
Opinion No. 25. Interpretation No. 44 clarifies the definition of employee for
purposes of applying APB Opinion No. 25, Accounting for Stock Issued to
Employees, the criteria for determining whether a plan qualifies as a non-
compensatory plan, the accounting consequence of various modifications to the
terms of previously fixed stock options or awards and the accounting for an
exchange of stock compensation awards in a business combination.
Interpretation No. 44 is effective July 1, 2000, but certain conclusions in
Interpretation No. 44 cover specific events that occurred after either
December 15, 1998 or January 12, 2000. Interpretation No. 44 did not have a
material effect on the financial position or the results of operations of the
Company, other than the stock options issued in connection with the Company's
acquisition of Z-Spanish Media (as defined below).
2. BUSINESS ACQUISITION AND DISPOSITIONS
Acquisitions
During the years ended December 31, 2000, 1999 and 1998, the Company made
the following acquisitions, some of which were asset acquisitions and did not
constitute a business. All business acquisitions have been accounted for as
purchase business combinations with the operations of the businesses included
subsequent to their acquisition dates. The allocation of the respective
purchase prices is generally based upon management's estimates of the
discounted future cash flows to be generated from the media properties for
intangible assets, and replacement cost for tangible assets, and as it relates
to certain 2000 acquisitions, reflects management's preliminary allocation of
purchase price.
Latin Communications Group Inc.
In April 2000, the Company acquired all of the outstanding capital stock of
Latin Communications Group Inc. ("LCG") for approximately $256 million, plus
the assumption of certain liabilities. LCG operated 17 radio stations located
in California, Colorado, New Mexico and Washington D.C. and also owned and
operated two Spanish-language publications. In connection with this
acquisition, the Company issued a $90 million convertible subordinated note.
The subordinated note contained two conversion rights, a voluntary option to
the holder at any time after December 31, 2000 and the second automatically
upon the effectiveness of the IPO and the Exchange Transaction. Effective with
the Exchange Transaction, as discussed in Note 1, the subordinated note
converted into 5,865,102 shares of Series A mandatorily redeemable convertible
preferred stock of ECC.
In connection with the $90 million convertible subordinated note, the
Company recorded non-cash interest expense of approximately $8.1 million
during the year ended December 31, 2000. Upon conversion, the carrying
F-14
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
value of the note, net of the unamortized beneficial conversion discount of
$11.4 million, was recorded as Series A mandatorily redeemable convertible
preferred stock (see Note 11).
Z-Spanish Media Corporation
In August 2000, the Company acquired all of the outstanding capital stock
of Z-Spanish Media Corporation ("Z-Spanish Media"). Z-Spanish Media owned 33
radio stations and an outdoor billboard business. The purchase price, as
amended, consisted of approximately $222 million in cash, 7,187,888 shares of
newly-issued Class A common stock of the Company after the reorganization as
discussed in Note 1, and the assumption of certain liabilities including
approximately $110 million of outstanding debt and $2.4 million in connection
with the December 2000 settlement with Hispanic Broadcasting Corporation to
satisfy a contract dispute in a proposed exchange of certain radio stations
between the parties. Furthermore, to comply with a preliminary Department of
Justice inquiry, seven of Z-Spanish Media's radio stations were transferred to
a trust. The beneficiaries of the trust are the former stockholders of Z-
Spanish Media. The net proceeds from the sale of these stations will be
remitted to the former stockholders of Z-Spanish Media.
In connection with this acquisition, the Company issued approximately 1.5
million stock options to purchase its Class A common stock in exchange for Z-
Spanish Media's previously outstanding stock options. In connection with these
stock options, the Company also recorded as additional purchase price
approximately $12.4 million for the excess of the estimated fair value over
the intrinsic value of the unvested options. The Company will also recognize
approximately $0.8 million as non-cash stock-based compensation over the
remaining vesting period.
Additionally, as part of this business combination, the Company has adopted
a plan to restructure its radio division. In accordance with this plan,
management recorded approximately $1.4 million relating to employee
termination and exit costs of the acquired business. These amounts were
recorded as a purchase accounting adjustment, resulting in an increase in
goodwill and have been included in accrued expenses in the accompanying
consolidated balance sheet. Management anticipates that substantially all of
the termination and exit costs will be paid by December 31, 2001.
Citicasters Co.
In August 2000, the Company acquired the Federal Communications Commission
("FCC") licenses relating to the operations of radio stations KACD(FM) Santa
Monica, California, and KBCD(FM) Newport Beach, California, from Citicasters
Co., a subsidiary of Clear Channel Communications, Inc., for $85 million in
cash.
Radio Stations KFRQ(FM), KKPS(FM), KVPA(FM) and KVLY(FM)
In September 2000, the Company acquired certain assets relating to the
operations of radio stations KFRQ(FM), KKPS(FM), KVPA(FM) and KVLY(FM) from
Sunburst Media, LP for $55 million in cash.
Infinity Broadcasting Corporation
In October 2000, the Company acquired approximately 1,200 outdoor display
faces located in New York from Infinity Broadcasting Corporation for a total
of approximately $168 million in cash.
WUNI-TV
In December 2000, the Company acquired certain assets of television station
WUNI-TV in Boston, Massachusetts. The aggregate purchase price paid of $47.5
million consisted of $10 million in cash and a note payable in the amount of
$37.5 million (see Note 5).
F-15
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Other
Also during 2000, the Company acquired four additional television stations
for an aggregate purchase price of $82.3 million and two radio stations for an
aggregate purchase price of $14 million.
The following is a summary of the purchase price allocation for all
acquisitions during 2000 described above.
[Download Table]
(In millions of dollars)
Current and other assets.............................................. $ 25.8
Property and equipment................................................ 128.3
Intangible assets..................................................... 1,164.0
Current and other liabilities......................................... (25.8)
Deferred taxes........................................................ (123.3)
Notes payable......................................................... (40.0)
Estimated fair value allocated to purchase option agreement........... (3.5)
Issuance of common stock and exchange of stock options................ (131.0)
Less cash deposits from prior year.................................... (8.5)
--------
Net cash paid......................................................... $ 986.0
========
During the year ended December 31, 1999, in several separate transactions,
the Company acquired nine television stations for an aggregate purchase price
of $67.2 million and seven radio stations for an aggregate purchase price of
$4.8 million. The excess of cost over the fair value of net assets acquired
relating to these acquisitions aggregated $63 million.
During the year ended December 31, 1998, in several separate transactions,
the Company acquired two television stations and entered into an agreement
with an unrelated third party to form a new company to construct a television
station in Odessa-Midland, Texas. The aggregate purchase price paid in
connection with these acquisitions was $17.9 million. The excess of cost over
the fair value of net assets acquired relating to these acquisitions
aggregated $13.9 million. In connection with the Odessa-Midland station,
construction commenced during 2000. It is anticipated that the construction
will be completed during the second quarter of 2001.
Dispositions
In August 2000, the Company sold certain outdoor advertising display faces
and related assets located in Joliet, Illinois for $1 million in cash. In
December 2000, the Company sold all of its assets relating to radio station
WACA-AM in Wheaton, Maryland for $2.5 million in cash. No income or loss was
recognized as a result of these dispositions.
Pending transactions
The Company has entered into an agreement to acquire the FCC license and
permits to construct a television station. The Company has also agreed to
acquire two radio stations. The aggregate purchase price to be paid in
connection with these acquisitions is $33.6 million. In addition, one of the
acquisition agreements calls for the Company to exchange two of its radio
stations as part of the consideration to be paid in connection with one of the
radio station acquisitions.
Management intends to close on these transactions upon receiving FCC
approval, which it anticipates receiving during 2001.
F-16
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Pro forma results (unaudited)
The following pro forma results of continuing operations assume the 2000
and 1999 acquisitions discussed above occurred on January 1, 1999. The
unaudited pro forma results have been prepared using the historical financial
statements of the Company and each acquired entity. The unaudited pro forma
results give effect to certain adjustments including amortization of goodwill,
depreciation of property and equipment, interest expense and the related tax
effects as if the Company had been a tax paying entity since January 1, 1999.
[Download Table]
December 31
----------------------
2000 1999
---------- ----------
(In millions of dollars, except per share data) (Unaudited) (Unaudited)
Net revenue.......................................... $ 195.9 $ 159.0
Net loss............................................. (136.5) (133.7)
Basic and diluted net loss per share................. $ (2.05) $ (2.21)
The above pro forma financial information does not purport to be indicative
of the results of operations had the 2000 and 1999 acquisitions actually taken
place on January 1, 1999, nor is it intended to be a projection of future
results or trends.
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31 consists of:
[Download Table]
2000 1999
(In millions of dollars) ------ -----
Buildings...................................................... $ 9.6 $ 5.3
Construction in progress....................................... 13.2 --
Outdoor advertising displays................................... 83.9 --
Leasehold improvements and land improvements................... 3.5 1.9
Transmission studio and other broadcast equipment.............. 59.6 25.4
Office and computer equipment.................................. 8.3 3.1
Transportation equipment....................................... 2.0 1.0
------ -----
180.1 36.7
Less accumulated depreciation and amortization................. 21.2 11.6
------ -----
158.9 25.1
Land........................................................... 10.4 2.1
------ -----
$169.3 $27.2
====== =====
F-17
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. INTANGIBLE ASSETS
At December 31, intangible assets consist of:
[Download Table]
2000 1999
(In millions of dollars) -------- ------
FCC licenses................................................ $ 603.7 $ 44.0
Network affiliation agreements.............................. 56.2 52.5
Goodwill.................................................... 558.2 47.6
Time brokerage agreements................................... 46.8 19.5
Customer base............................................... 22.1 --
Other....................................................... 43.0 15.4
-------- ------
1,330.0 179.0
Less accumulated amortization............................... 72.7 26.6
-------- ------
$1,257.3 $152.4
======== ======
5. LONG-TERM DEBT AND NOTES PAYABLE
Notes payable at December 31 are summarized as follows:
[Download Table]
2000 1999
(In millions of dollars) ------ ------
Credit facility.............................................. $200.0 $142.9
Note payable for station acquisition, due in annual principal
installments of $7.5 million through January 2006. The note
is collateralized by a pledge of the ownership interest of
Entravision 27, L.L.C., a wholly owned subsidiary formed to
effect this acquisition. Interest is payable quarterly at 8%
through January 2003, 10% January 2003 through January 2004
and 12% thereafter. The note may be paid in cash or the
Company's Class A common stock, at the sole discretion of
the Company. The Company may prepay this note at any time
with no penalty............................................. 37.5 --
Time brokerage contract payable, due in annual installments
of $1 million bearing interest at LIBOR (6.5% at December
31, 1999) through June 2011................................. 11.0 12.0
Subordinated note with interest at 7.01%..................... -- 10.0
Other........................................................ 6.5 2.4
------ ------
255.0 167.3
Less current maturities...................................... 2.5 1.4
------ ------
$252.5 $165.9
====== ======
Credit facility
The Company has a credit facility in the amount of $600 million, of which
$200 million was outstanding at December 31, 2000. The credit facility is
secured by substantially all of the Company's assets, as well as the pledge of
the stock of several of the Company's subsidiaries, and consists of a $250
million revolving facility and a $150 million Term A loan, both bearing
interest at LIBOR (6.5% at December 31, 2000) plus a margin ranging from
0.875% to 2.75% based on the Company's leverage, and a $200 million Term B
loan bearing interest at LIBOR plus 3.25%. The revolving facility expires on
December 31, 2007. If not used, the Term A loan commitment expires on July 31,
2001 and the Term B loan expires on December 31, 2008. Upon expiration of the
Term A loan commitment, we will have a $150 million incremental loan facility
with substantially the same terms, expiring on December 31, 2007. The line-of-
credit facility contains scheduled quarterly reductions in the amount that is
available ranging from $6.3 million to $18.8 million, commencing
F-18
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 2002. The Term A loan contains scheduled quarterly reductions in
the amount that is available ranging from $1.9 million to $11.3 million,
commencing on September 30, 2001. The Term B loan contains scheduled quarterly
reductions in the amount that is available ranging from $0.5 million to $42.5
million, commencing September 30, 2001. In addition, the Company pays a
quarterly loan commitment fee ranging from 0.25% to 0.75% per annum and levied
upon the unused portion of the amount available. All of the outstanding
balance at December 31, 2000 was under the Term B loan.
The credit facility also allows for an incremental loan facility of up to
an additional $150 million under substantially the same terms, and expires in
December 2007. There were no borrowings under the incremental loan facility at
December 31, 2000.
The credit facility also contains a mandatory prepayment clause in the
event the Company should liquidate any assets if the proceeds are not utilized
to acquire assets of the same type within one year, receive insurance or
condemnation proceeds which are not fully utilized toward the replacement of
such assets, or have excess cash flows.
The credit facility contains certain financial covenants relating to
maximum total debt ratio, total interest coverage ratio, a fixed charge
coverage ratio and a ceiling on annual capital expenditures. The covenants
become increasingly restrictive in the later years of the facility. The credit
facility also contains restrictions on the incurrence of additional debt, the
payment of dividends, acquisitions and the sale of assets over a certain
limit. Additionally, the Company is required to enter into interest rate
agreements if its leverage exceeds certain limits as defined in the agreement.
Aggregate maturities of long-term debt and notes payable as of December 31,
2000 are as follows:
[Download Table]
Years Ending December 31, Amount
------------------------- ------
(In millions of dollars)
2001................................................................. $ 2.5
2002................................................................. 10.9
2003................................................................. 10.8
2004................................................................. 10.8
2005................................................................. 10.9
Thereafter........................................................... 209.1
------
$255.0
======
Subordinated note
On December 30, 1996, the Company issued a $10 million subordinated note to
Univision. This note was subordinated to all senior debt. The note was due
December 30, 2021 with interest at 7.01% per annum, for which Univision agreed
to provide the Company with network compensation equal to the amount of annual
interest due. Under a separate agreement, Univision had the option to exchange
the note into Class A membership units of ECC LLC representing a 27.9%
interest in the Company, at the holder's option at any time prior to maturity.
During 1999 certain conditions restricting the exchange of the note were
eliminated and, as such, the Company recorded non-cash interest expense of
$2.5 million based on the estimated intrinsic value of the option feature at
the date the note was entered into.
On March 2, 2000, the note was amended and increased to $120 million, and
the option exchange feature was increased from 27.9% to 40%, resulting in
additional non-cash interest expense of $31.6 million during the quarter ended
March 31, 2000 based on the estimated intrinsic value of the option feature.
The intrinsic value of the exchange option feature was determined using an
estimate by management based primarily on the estimated IPO price as the fair
market value. On August 2, 2000, the note was exchanged for Class C common
stock of the Company, as described in Note 1.
F-19
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at December 31 consist of:
[Download Table]
2000 1999
(In millions of dollars) ------ ----
Accounts payable................................................ $ 5.0 $2.4
Accrued payroll and compensated absences........................ 7.0 1.1
Income taxes payable............................................ 3.0 0.3
Executive employment agreement and bonuses...................... 2.2 1.1
Professional fees and transaction costs......................... 5.1 0.8
Deferred revenue................................................ 2.0 --
Other........................................................... 6.0 1.8
------ ----
$ 30.3 $7.5
====== ====
7. INCOME TAXES
Prior to the reorganization of the Company as described in Note 1, the
combined organization included various taxpaying and non-taxpaying entities.
Each of the entities filed separate federal and state tax returns. Deferred
taxes were not provided for the difference between the book and tax basis of
intangible assets, broadcast equipment, and furniture and fixtures for the
non-taxpaying entities. As a result of the reorganization and Exchange
Transaction, the Company recorded a net deferred tax liability with a
corresponding charge to tax expense of approximately $10.5 million.
The provision for income taxes for the years ended December 31 is as
follows:
[Download Table]
2000 1999 1998
(In millions of dollars) ----- ----- -----
Current:
Federal............................................... $ -- $ 0.2 $ 0.1
State................................................. 1.2 0.1 0.2
Deferred................................................ (4.1) (0.4) (0.1)
----- ----- -----
$(2.9) $(0.1) $ 0.2
===== ===== =====
The income tax provision differs from the amount of income tax determined
by applying the U.S. federal income tax rate of 34% to pretax income for the
years ended December 31 due to the following:
[Download Table]
2000 1999 1998
(In millions of dollars) ------ ------ -----
Computed "expected" tax (benefit).................... $(32.3) $(13.6) $(1.2)
Change in income tax resulting from:
State taxes, net of federal benefit................ ( 3.2) ( 1.4) (0.2)
Non-deductible expenses............................ 22.1 15.0 1.3
Effect of change in tax status..................... 10.5 -- --
Other.............................................. -- ( 0.1) 0.3
------ ------ -----
$ (2.9) $ (0.1) $ 0.2
====== ====== =====
F-20
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The components of the deferred tax assets and liabilities at December 31
consist of the following:
[Download Table]
2000 1999
(In millions of dollars) ------- -----
Deferred tax assets:
Accrued expenses.......................................... $ 2.2 $ --
Accounts receivable....................................... 3.3 --
Net operating loss carryforward........................... 12.8 --
Stock-based compensation.................................. 0.3 --
------- -----
18.6 --
------- -----
Deferred tax liabilities:
Intangible assets......................................... (125.1) (1.8)
Property and equipment.................................... (14.7) (0.2)
------- -----
(139.8) (2.0)
------- -----
$(121.2) $(2.0)
======= =====
The deferred tax amounts have been classified in the accompanying balance
sheets at December 31 as follows:
2000 1999
(In millions of dollars) ------- -----
Current assets.............................................. $ 11.2 $ --
Non-current liabilities..................................... (132.4) (2.0)
------- -----
$(121.2) $(2.0)
======= =====
The Company has recorded deferred tax assets of $18.6 million, including
the benefit of $30.4 million in net operating loss carryforwards which expire
through 2020.
8. COMMITMENTS
The Company has agreements with certain media research and rating
providers, expiring at various dates through December 2005, to provide
television and radio audience measurement services. Pursuant to these
agreements, the Company is obligated to pay these providers a total of $27.3
million in increasing annual amounts. The annual commitments range from $1.8
million to $7.1 million.
F-21
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Operating leases
The Company leases facilities and broadcast equipment under various
operating lease agreements with various terms and conditions, expiring at
various dates through May 2009.
The approximate future minimum lease payments under these operating leases
at December 31, 2000 are as follows:
[Download Table]
Years Ending December 31, Amount
------------------------- ------
(In millions of dollars)
2001.................................................................. $ 6.1
2002.................................................................. 5.3
2003.................................................................. 4.6
2004.................................................................. 3.8
2005.................................................................. 3.4
Thereafter............................................................ 17.8
-----
$41.0
=====
Total rent expense under operating leases, including rent under month-to-
month arrangements, was approximately $9.4 million, $2.0 million and $1.2
million for the years ended December 31, 2000, 1999 and 1998, respectively.
Employment agreements
The Company has entered into employment agreements (the "Agreements") with
two executive officers, who are also stockholders and directors, through
August 2005. The Agreements provide that a minimum annual base salary and a
bonus be paid to each of the executives. The Company accrued approximately
$1.6 million, $1.1 million and $0.9 million of bonuses payable to these
executives for the years ended December 31, 2000, 1999 and 1998, respectively.
Additionally, the Agreements provide for a continuation of each executive's
annual base salary and annual bonus through the end of the employment period
if the executive is terminated due to a permanent disability or without cause,
as defined in the Agreements.
The Company also has an employment arrangement with its executive vice
president which provides for an annual base salary and bonus. Additionally, in
1997 the employee was awarded 922,828 shares of Class A common stock in the
Company, which vested through January 2000. The estimated fair value
associated with this award of was approximately $27.7 million. The Company has
recorded $26.3 million and $0.5 million of compensation expense in connection
with this award for the years ended December 31, 1999 and 1998, respectively.
This award originally provided for a repurchase option which has been
eliminated. As such, the award was considered variable. Compensation expense
for 1999 was determined using an estimate by management based primarily on the
estimated IPO price.
In January 1999, the Company entered into an employment agreement with a
senior vice president which expires on January 4, 2002 and provides for an
annual base salary and bonus to be paid to the employee. As part of this
agreement, the Company originally granted an option to the employee to
purchase Class A common stock. As amended in April 2000, the Company sold the
employee 82,195 shares of restricted Class A common stock at $ 0.01 per share.
The Company may repurchase the restricted shares at $0.01 per share. The
number of shares subject to the Company's repurchase option is eliminated
proportionately over three years from the original grant date. The intrinsic
value of the original option at the grant date was determined by management
using the estimated IPO price. In accordance with APB No. 25, the Company
recorded $2.8 million in compensation expense during 1999 attributable to the
original option grant which is reflected as non-cash stock-based
F-22
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
compensation in the statement of operations. This amount approximates the
total intrinsic value of the amended employee restricted Class A common stock
purchase. Accordingly, no amounts have been recorded for non-cash stock-based
compensation for this grant during the year ended December 31, 2000.
9. RELATED-PARTY TRANSACTIONS
Related-party transactions not discussed elsewhere consist of the
following:
The Company has unsecured advances of $0.2 million payable to related
parties which bear interest and are due on demand at December 31, 2000 and
1999.
The Company has unsecured stock subscriptions due from
officer/director/stockholders of the Company amounting to $0.6 million at
December 31, 2000 and 1999. The advances are due on demand and have been
recorded as a reduction of equity.
In addition, the Company has unsecured advance receivables due on demand
from related parties amounting to $0.3 million at December 31, 2000 and 1999.
The Company also has notes receivable totaling $0.6 million from two officers
which bear interest ranging from 6.02% to 9.75% and are due from August 2002
through October 2005.
The Company utilizes the services of a law firm, a partner of which is a
stockholder and director. Total legal fees incurred with this law firm
aggregated approximately $3.6 million, $0.5 million and $0.5 million for the
years ended December 31, 2000, 1999 and 1998, respectively. Approximately $0.8
million of the fees for the year ended December 31, 2000 are included in
amounts netted with the proceeds from the issuance of common stock as
disclosed in the statements of stockholders' equity.
10. 401(K) SAVINGS PLAN
The Company has multiple 401(k) savings plans covering substantially all
employees. The Company currently matches the amounts contributed by each
participant up to the maximum amount allowable under the plans for its defined
contribution plans. Additionally, the Company has a 401(k) savings plan which
allows discretionary matching contributions. Employer matching contributions
for the year ended December 31, 2000 and 1999 aggregated approximately $0.4
million and $0.1 million, respectively.
11. STOCKHOLDERS' EQUITY
Common stock
The First Restated Certificate of Incorporation of ECC authorizes both
common and preferred stock. The common stock has three classes identified as
A, B and C which have similar rights and privileges, except the Class B common
stock provides ten votes per share as compared to one vote per share for all
other classes of common stock. Univision, as the holder of all Class C common
stock, is entitled to vote as a separate class to elect two directors, and has
the right to vote as a separate class on certain material transactions. Class
B and C common stock is convertible at the holder's option into one fully paid
and nonassessable share of Class A common stock and is required to be
converted into one share of Class A common stock upon certain events as
defined in the First Restated Certificate of Incorporation.
In April 2000, the Company granted an unrestricted stock award to an
executive vice president and officer totaling 240,737 shares of Class A common
stock. As a result of this grant the Company recorded a non-cash stock-based
compensation charge of $3.4 million.
F-23
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In May 2000, the Company granted restricted stock awards to employees,
directors and consultants totaling 494,496 Class A shares of common stock. As
a result of these grants, the Company recorded a deferred non-cash stock-based
compensation charge of $6.9 million that is being amortized over the three-
year vesting period beginning in the second quarter of 2000. Approximately
$1.3 million of the deferred charge has been amortized during the year ended
December 31, 2000.
Preferred Stock
The Company is authorized to issue up to 50 million shares of preferred
stock with a par value of $0.0001, in one or more series. The Company's Board
of Directors (the "Board") is authorized to establish the number of shares to
be included in each series, and to fix the designation, powers, preferences
and rights of the shares of each series, as well as the qualifications,
limitations or restrictions. As of December 31, 2000, the Company has
designated 11 million shares as Series A mandatorily redeemable convertible
preferred stock, of which 5,865,102 shares are outstanding.
The Series A preferred stock is convertible into Class A common stock on a
share-per-share basis at the option of the holder at any time and accrues
dividends at 8.5% of the liquidation value ($8.47 per share) per annum,
compounded annually and payable upon the liquidation of the Company or
redemption. There were $1.7 million of dividends in arrears at December 31,
2000. All accrued and unpaid dividends are to be waived and forgiven upon the
conversion of the Series A preferred stock into Class A common stock. The
Series A preferred stock is subject to redemption at face value plus accrued
dividends at the option of the holder at any time after April 2006, and must
be redeemed in full in April 2010. The Company also has the right to redeem
the Series A preferred stock at its option at any time one year after its
issuance, provided that the trading price of the Class A common stock equals
or exceeds 130% of the IPO price of the Class A common stock for
15 consecutive trading days immediately before such redemption. The Series A
redemption price per share is equal to the sum of the original issue price per
share ($15.35) plus accrued and unpaid dividends. The aggregate Series A
redemption price at December 31, 2000 was $91.7 million.
The Company is recording a periodic charge to accumulated deficit to
accrete the Series A preferred stock up to its redemption value. During the
year ended December 31, 2000, the Company recorded a $2.4 million accretion
charge.
12. 2000 OMNIBUS EQUITY INCENTIVE PLAN
In June 2000, the Company adopted a 2000 Omnibus Equity Incentive Plan that
allows for the award of up to 11,500,000 shares of Class A common stock.
Awards under the plan may be in the form of incentive stock options,
nonqualified stock options, stock appreciation rights, restricted stock or
stock units. The Plan is administered by a committee which is appointed by the
Board. This committee determines the type, number, vesting requirements and
other features and conditions of such awards.
The Company issued a total of 5,583,876 stock options in 2000 to various
employees and non-employee directors of the Company under its 2000 Omnibus
Equity Incentive Plan. Included in the total are 1,494,161 stock options which
were granted in exchange for stock options of Z-Spanish Media as a result of
the business acquisition as described in Note 2.
F-24
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following is a summary of stock options outstanding and exercisable for
the year ended December 31, 2000:
[Download Table]
Weighted Average
Options Exercise Price
------- ----------------
(In thousands, except
per share data)
Number of shares under stock options:
Outstanding at beginning of year.................. -- $ --
Granted........................................... 5,584 14.31
Exercised......................................... -- --
Forfeited......................................... 73 12.78
-----
Outstanding at end of year........................ 5,511 14.33
=====
Available to grant at end of year................. 5,989
=====
Exercisable at end of year........................ 1,456
=====
The following table summarizes information about stock options outstanding
at December 31, 2000:
[Enlarge/Download Table]
Options Outstanding Options Exercisable
--------------------------------------- ---------------------
Weighted Weighted Weighted
Average Remaining Average Average
Price Range Number Contractual Life Exercise Price Number Exercise Price
----------- ------ ----------------- -------------- ------ --------------
$16.50.................. 4,055 10 $16.50 -- $ --
$10.03--13.37........... 396 8 11.28 396 11.28
$ 6.69-- 9.03........... 1,060 4 7.15 1,060 7.15
----- ------
5,511 8 14.33 1,456 8.44
===== ======
The Company's fair value calculation for the Z-Spanish Media acquisition
exchange options was made using the Black-Scholes option-pricing model with
the following assumptions: expected life of one year; volatility of 50%; risk-
free interest rate of 5.89% and no dividends during the expected life. The
fair value of these options was recorded as additional purchase price in the
business acquisition and is not included in the pro forma compensation expense
below.
During 2000, the Company recognized $0.7 million of non-cash stock-based
compensation expense relating to the intrinsic value of the unvested options
exchanged in the Z-Spanish Media acquisition.
SFAS No. 123 requires the disclosure of pro forma net income and earnings
per share had the Company adopted the fair value method. Under SFAS No. 123,
the fair value of stock-based awards to employees is calculated through the
use of option-pricing models. These models require subjective assumptions,
including future stock price volatility and expected time to exercise, which
greatly affect the calculated value.
The Company's fair value calculation for pro forma purposes was made using
the Black-Scholes option-pricing model with the following assumptions:
expected life of six years; volatility of 50%; risk-free interest rate of
6.07% and no dividends during the expected life. The weighted average fair
value of options granted during the year December 31, 2000 was approximately
$9.
F-25
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Had compensation expense for the stock option grants been determined based
on the fair value at the grant date for awards consistent with the methods of
SFAS No. 123, the Company's net loss would have increased the pro forma
amounts for the year ended December 31, 2000 as follows:
[Download Table]
Net loss applicable to common stockholders
As reported.................................................... $(94,689)
========
Pro forma...................................................... $(97,231)
========
Net loss per share applicable to common stockholders, basic and
diluted
As reported.................................................... $ (0.27)
========
Pro forma...................................................... $ (0.29)
========
13. LITIGATION AND SUBSEQUENT EVENT
The Company was a defendant to a lawsuit filed in the Superior Court of the
District of Columbia by First Millennium Communications, Inc. to resolve
certain contract disputes arising out of a terminated brokerage-type
arrangement. The litigation primarily concerns the payment of a brokerage fee
alleged to be due in connection with the acquisition of television station
WBSV in Sarasota, Florida for $17.0 million, after taking into account certain
additional capital expenditures, losses, interest expense and management fees.
The parties have reached a confidential settlement and the lawsuit was
dismissed with prejudice by court order. The settlement provides that the
parties will resolve the dispute with respect to television station WBSV
pursuant to binding arbitration.
No accrual has been recorded in the accompanying consolidated financial
statements beyond the amount management believes is the remaining contractual
obligation of $250,000 because the ultimate liability in excess of the amount
recorded, if any, cannot be reasonably estimated. Management does not believe
that the resolution of this litigation is likely to have a material adverse
effect on the Company's financial position, results of operations or cash
flows.
On July 20, 2000, Telemundo Network Group LLC, Telemundo Network, Inc. and
Council Tree Communications, L.L.C. (collectively, "Telemundo") filed an
action against the Company and certain of its Affiliates relating to the
Company's investment in XHAS-TV, Channel 33 in Tijuana, Mexico. On February 2,
2001, Telemundo and the Company reached a settlement relating to this
investment. The actions previously filed were dismissed with prejudice without
either party compensating the other. Additionally, the Company granted
Telemundo an option to purchase the Company's ownership interest in television
station KTLD-LP at a purchase price equal to the Company's cost for such
interest.
14. SEGMENT DATA
During 1999 and 1998, management had determined that the Company had only
one reportable segment. Upon the completion of the business and asset
acquisitions during 2000, management has determined that the Company currently
operates in four reportable segments based upon the type of advertising medium
which consists of television broadcasting, radio broadcasting, outdoor
advertising and newspaper publishing. As a result of the redetermination of
reportable segments in 2000, the 1999 and 1998 financial information has been
retroactively restated to correspond to the current composition of reportable
segments. Information about each of the operating segments follows:
Television Broadcasting
The Company operates 34 television stations primarily in the Southwestern
United States and consisting primarily of Univision affiliates.
F-26
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Radio Broadcasting
The Company operates 56 radio stations (39 FM and 17 AM) located primarily
in Arizona, California, Colorado, Florida, Illinois, Nevada, New Mexico and
Texas.
Outdoor Advertising
The Company's outdoor advertising segment owns approximately 11,200
billboards in Los Angeles and New York.
Newspaper Publishing (Print)
The Company's newspaper publishing operations consist of a publication in
New York.
F-27
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Separate financial data for each of the Company's operating segments is
provided below. Segment operating loss is defined as operating loss before
corporate expenses and non-cash stock-based compensation. There have been no
significant sources of revenue generated outside the United States during the
years ended December 31, 2000, 1999 and 1998. Additionally there are no
significant assets held outside the United States. The Company evaluates the
performance of its operating segments based on the following:
[Download Table]
Twelve Months
Ended December 31,
------------------------------
2000 1999 1998
---------- -------- --------
(In thousands of dollars)
Net revenue:
TV............................................ $ 82,417 $ 56,846 $ 43,752
Radio......................................... 43,338 2,153 1,068
Outdoor....................................... 13,096 -- --
Publishing.................................... 15,170 -- --
---------- -------- --------
Consolidated................................ 154,021 58,999 44,820
---------- -------- --------
Direct expenses:
TV............................................ 34,290 23,165 15,067
Radio......................................... 10,991 1,276 727
Outdoor....................................... 5,494 -- --
Publishing.................................... 8,212 -- --
---------- -------- --------
Consolidated................................ 58,987 24,441 15,794
---------- -------- --------
Selling, general and administrative expenses
TV............................................ 15,642 11,093 8,590
Radio......................................... 16,767 518 287
Outdoor....................................... 1,544 -- --
Publishing.................................... 4,647 -- --
---------- -------- --------
Consolidated................................ 38,600 11,611 8,877
---------- -------- --------
Depreciation and amortization
TV............................................ 20,064 15,277 10,570
Radio......................................... 41,537 705 364
Outdoor....................................... 5,984 -- --
Publishing.................................... 1,653 -- --
---------- -------- --------
Consolidated................................ 69,238 15,982 10,934
---------- -------- --------
Segment operating profit (loss):
TV............................................ 12,421 7,311 9,525
Radio......................................... (25,957) (346) (310)
Outdoor....................................... 74 -- --
Publishing.................................... 658 -- --
---------- -------- --------
Consolidated................................ (12,804) 6,965 9,215
Corporate expenses............................. 12,741 5,809 3,963
Non-cash stock-based compensation.............. 5,822 29,143 500
---------- -------- --------
Operating profit (loss)........................ $ (31,367) $(27,987) $ 4,752
========== ======== ========
Total assets
TV............................................ $ 401,075 $199,360 $127,630
Radio......................................... 856,038 5,657 3,661
Outdoor....................................... 293,887 -- --
Publishing.................................... 9,493 -- --
---------- -------- --------
Consolidated................................ $1,560,493 $205,017 $131,291
========== ======== ========
Capital expenditures
TV............................................ $ 15,749 $ 12,825 $ 3,094
Radio......................................... 7,700 -- --
Outdoor....................................... 164 -- --
Publishing.................................... 62 -- --
---------- -------- --------
Consolidated................................ $ 23,675 $ 12,825 $ 3,094
========== ======== ========
F-28
ENTRAVISION COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations for the
years ended December 31, 2000 and 1999:
[Download Table]
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
-------- -------- -------- -------- --------
(In thousands, except per share data)
Year ended December 31, 2000:
Net revenue................ $ 17,264 $ 35,660 $ 45,049 $ 56,048 $154,021
Net loss................... (36,584) (17,427) (25,212) (13,017) (92,240)
Net loss applicable to
common stockholders....... -- -- (16,581) (14,566) (31,147)
Net loss per share, basic
and diluted............... -- -- (0.14) (0.13) (0.27)
Proforma net loss.......... (34,813) (14,586) (14,598) (22,339) (86,336)
Proforma net loss per
share, basic and diluted.. (1.08) (0.45) (0.30) (0.21) (1.34)
Year ended December 31, 1999:
Net revenue................ $ 11,729 $ 14,486 $ 15,736 $ 17,048 $ 58,999
Net loss................... (9,313) (9,142) (11,180) (10,322) (39,957)
Proforma net loss.......... (8,765) (8,525) (10,875) (9,414) (37,579)
Proforma net loss per
share, basic and diluted.. (0.27) (0.26) (0.34) (0.29) (1.16)
Certain adjustments were recorded in the fourth quarter of 2000 for changes
from preliminary allocations of purchase price for certain purchase business
combinations.
F-29
Dates Referenced Herein and Documents Incorporated by Reference
4 Subsequent Filings that Reference this Filing
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