S-1 1 d916872ds1.htm FORM S-1 Form S-1
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As filed with the Securities and Exchange Commission on July 2, 2015

Registration No. 333-            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

 

Univision Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   4833   20-8616665

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

 

 

605 Third Avenue, 33rd Floor

New York, NY 10158

(212) 455-5200

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Jonathan Schwartz, Esq.

General Counsel

605 Third Avenue, 33rd Floor

New York, NY 10158

(212) 455-5200 (Phone)

(646) 964-6681 (Fax)

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

 

 

Copies to:

 

Alexander D. Lynch, Esq.

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

(212) 310-8000 (Phone)

(212) 310-8007 (Fax)

 

James J. Clark, Esq.

William J. Miller, Esq.

John A. Tripodoro, Esq.

Cahill Gordon & Reindel LLP

Eighty Pine Street

New York, New York 10005

(212) 701-3000 (Phone)

(212) 269-5420 (Fax)

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

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

 

Large accelerated filer  ¨   Accelerated filer  ¨   Non-accelerated filer  x   Smaller reporting company  ¨

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of
Securities to be Registered
  Proposed Maximum
Aggregate
Offering Price(1)(2)
  Amount of
Registration Fee

Class A common stock, $0.01 par value per share

  $100,000,000   $11,620

 

 

(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) promulgated under the Securities Act.
(2) Includes shares of Class A common stock that may be issuable upon exercise of an option to purchase additional shares granted to the underwriters.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS

SUBJECT TO COMPLETION, DATED JULY 2, 2015

             Shares

 

LOGO

Univision Holdings, Inc.

Class A Common Stock

 

 

This is an initial public offering of the shares of Class A common stock of Univision Holdings, Inc. (the “Issuer”). We are offering              shares of our Class A common stock. No public market currently exists for our Class A common stock. We anticipate that the initial public offering price will be between $         and $         per share.

We intend to apply to list our Class A common stock on the New York Stock Exchange (the “NYSE”) or Nasdaq Global Market (“Nasdaq”) under the symbol “UVN.”

 

 

Investing in the Class A common stock involves risks. See “Risk Factors” beginning on page 20.

 

 

PRICE $             A SHARE

 

 

 

      

Price to

Public

      

Underwriting
Discounts

      

Proceeds to
Company(1)

 

Per share

       $                    $                    $            

Total

       $                               $                               $                       

 

(1) We have agreed to reimburse the underwriters for certain FINRA-related expenses. See “Underwriting.”

We have granted the underwriters a 30-day option to purchase up to              additional shares of Class A common stock at the initial public offering price less the underwriting discount.

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of Class A common stock to purchasers on                     , 2015.

 

 

 

Morgan Stanley   Goldman, Sachs & Co.   Deutsche Bank Securities

 

 

                    , 2015


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UNIVISION IS THE LEADING MEDIA COMPANY SERVING HISPANIC AMERICA

 

LOGO


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TABLE OF CONTENTS

 

     Page  

Summary

     1   

Risk Factors

     20   

Forward-Looking Statements

     44   

Use of Proceeds

     46   

Dividend Policy

     47   

Capitalization

     48   

Dilution

     50   

Selected Historical Financial Data

     51   

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     53   

Business

     89   

Management

     117   

Executive and Director Compensation

     126   
 

 

 

You should rely only on the information contained in this prospectus or in any free-writing prospectus we may authorize. Neither we nor the underwriters (or any of our or their respective affiliates) have authorized anyone to provide any other information other than that contained in this prospectus. Neither we nor the underwriters (or any of our or their respective affiliates) take any responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell and seeking offers to buy these securities only in jurisdictions where the offers and sales are permitted. The information contained in this prospectus is only accurate as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospectus may have changed since that date.

Trademarks and Trade Names

We own or have rights to trademarks, service marks or trade names that we use in connection with the operation of our business. We also own or have the rights to copyrights that protect the content of our products. Solely for convenience, the trademarks, service marks, trade names and copyrights referred to in this prospectus are listed without the ©, ® and TM symbols, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks, trade names and copyrights. This prospectus may include trademarks, service marks or trade names of other companies. Our use or display of other parties’ trademarks, service marks, trade names or products is not intended to, and does not imply a relationship with, or endorsement or sponsorship of us by, the trademark, service mark or trade name owners.

Market and Industry Information

Market and industry data used throughout this prospectus, including information regarding market share and market position and industry data pertaining to our business contained in this prospectus are, unless otherwise noted, estimates based on (i) data and reports compiled by industry and government organizations including Nielsen (“Nielsen”), Experian Simmons Information Solutions, Inc., a service provided by Experian Marketing Services (“Experian Marketing Services”), the U.S. Census Bureau (“U.S. Census”), SNL Kagan, LLC (“SNL Kagan”), Burke, Inc. (“Burke”), Joint Center for Housing Studies (“JCHS”) of Harvard University, the Federal Communications Commission (“FCC”), comScore, Adobe Analytics, Kantar Media Intelligence Ltd. (“Kantar Media Intelligence”), ShareThis Inc. (“ShareThis”), BIA/Kelsey, Selig Center for Economic Growth at the University of Georgia (“Selig Center for Economic Growth”), The Wall Street Journal, Partnership for a New American Economy and industry analysts and (ii) our management’s knowledge of our business, markets and

 

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industry and the good faith estimates of management. Consistent with industry practice, in measuring our television station group we have not applied the ultrahigh frequency (“UHF”) “discount,” (the “UHF Discount”) referred to in the FCC’s national television ownership rules which permits television station groups to discount by 50% the reach of their UHF stations for purposes of determining compliance with the FCC’s national cap on such a group’s audience reach.

In this prospectus, we refer to the Nielsen ratings terms “television households,” which means those households that have one or more television receivers whether the set(s) may be out of order or not used, and “pay-TV households,” which means those households that have the ability to receive cable channels via a wire to the home from a cable head-end located in the community or via any other alternate delivery source such as C-Band Satellite Dish, Direct Broadcast Satellite TV systems and wireless cable. “U.S. Hispanic television households” and “U.S. Hispanic pay-TV households” means television households or pay-TV households, respectively, in the U.S. in which the head-of-household is Hispanic.

Unless otherwise specified herein:

 

    references to our networks’ ratings rankings refer to their ratings rankings in primetime (defined as 8-11 PM, Monday through Saturday, and 7-11 PM Sunday) among viewers aged 18 to 49;

 

    references to the “current season” refer to the period from September 22, 2014 to March 29, 2015;

 

    references to “DMAs” refer to designated market areas as measured by Nielsen;

 

    references to our unduplicated audience in comparison to other broadcast and cable networks refer to persons that are not otherwise reached by any other top 10 broadcast or cable network;

 

    references to our unduplicated audience in the context of our reach refer to persons that are not otherwise reached by us as measured by Experian Marketing Services;

 

    television and radio ratings data is sourced from studies or publications of Nielsen;

 

    U.S. population data, population growth projections and voter information are sourced from U.S. Census;

 

    U.S. Hispanic population data, population growth statistics and disposable income data are sourced from the U.S. Census, The Wall Street Journal, Nielsen and Partnership for a New American Economy;

 

    references to “mobile unique visitors,” “unique users” and statistics that are measured “across desktop and mobile” are sourced from data, research, opinions or viewpoints published by comScore;

 

    data relating to, or projections of, buying power and employment growth is sourced from the Selig Center for Economic Growth and The Wall Street Journal;

 

    new U.S. household formation projections are sourced from JCHS;

 

    rankings and data regarding our online and mobile websites by “page views” and “video views” are sourced from Adobe Analytics;

 

    retransmission revenue projections are sourced from SNL Kagan;

 

    estimates of the market size for media advertising targeting Hispanic America are sourced from Kantar Media Intelligence; and

 

    statements regarding the social media habits of U.S. Hispanics are sourced from ShareThis.

 

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SUMMARY

The items in the following summary are described in more detail later in this prospectus. This summary provides an overview of selected information and does not contain all of the information you should consider. Therefore, you should also read the more detailed information set out in this prospectus, including the information presented under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the financial statements and related notes thereto and the other documents to which this prospectus refers before making an investment decision. As used in this prospectus, unless the context otherwise requires, references to “we,” “us,” “our,” the “Company,” or “Univision” refer to Univision Holdings, Inc. and its consolidated subsidiaries. Prior to the consummation of this offering, we will amend and restate our certificate of incorporation to reclassify all of our existing Class A, Class B, Class C and Class D common stock as Class S-1, Class S-2, Class T-1 and Class T-2 common stock, respectively, and authorize new Class A common stock and Class T-3 common stock (the “Equity Recapitalization”). As used in this prospectus, references to “common stock” refer to our existing Class A common stock, Class B common stock, Class C common stock and Class D common stock, collectively, when used to refer to periods prior to the Equity Recapitalization and to our new Class A common stock, Class S-1 common stock, Class S-2 common stock, Class T-1 common stock, Class T-2 common stock and Class T-3 common stock, collectively, when used to refer to periods following the Equity Recapitalization.

MISSION STATEMENT

Our mission is to inform, entertain, and empower Hispanic America.

OVERVIEW

Univision is the leading media company serving Hispanic America. We produce and deliver content across multiple media platforms to inform, entertain, and empower Hispanic America. We have an over 50 year multi-generational relationship with our audience and are the most recognized and trusted brand in Hispanic America. We earned the highest brand equity score among U.S. media brands in a brand equity research study conducted by Burke in 2013. We reach over 49 million unduplicated media consumers monthly and our commitment to high-quality, culturally-relevant programming combined with our multi-platform media properties has enabled us to become the #1 destination for entertainment, sports, and news among U.S. Hispanics. Our flagship network, Univision Network, has been the most-watched U.S. Spanish-language broadcast network since its ratings were first measured by Nielsen in 1992. We have a strategic relationship with Grupo Televisa, S.A.B. and its affiliates (“Televisa”), the largest media company in the Spanish-speaking world and a top programming producer, for exclusive, long-term access to its premium entertainment and sports content in the U.S.

We serve a young, digitally savvy and socially engaged community. U.S. Hispanics are the youngest demographic as of 2012, have experienced the largest growth as of 2012 and have rapidly growing buying power as of February 2014. Marketers are increasingly targeting Hispanic America and its expanding economic, cultural and political influence. We own the leading and growing portfolio of Spanish-language media platforms in the U.S. across broadcast and cable television, digital and radio, enhancing our value to both our distribution and marketing partners as the gateway to Hispanic America. Our local television and radio stations are among the leading stations in their markets, regardless of language, and provide us with a unique ability to connect with our audiences and target advertisers at the local level. Our “must-see” content coupled with our ownership of local television stations allows us to maximize subscription fees from multichannel video programming distributors (“MVPDs”), and to benefit from the largest broadcast spectrum portfolio of any broadcaster in the U.S. as measured by the number of people reached by each megahertz of spectrum (“MHz-Pops”) according to data from BIA/Kelsey. We believe we are well-positioned for growth and have the opportunity to continue to expand our audience and to monetize our attractive audience demographics, leading content across multiple platforms and spectrum assets.

 

 

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Hispanic America continues to be a highly attractive audience demographic, exhibiting strong growth and economic and political influence in the U.S., representing:

 

    57 million people as of December 2014, growing to an estimated 77 million by 2030;

 

    $1.3 trillion of buying power in 2014, projected to grow to $1.7 trillion by 2019;

 

    40% of projected new U.S. household formation from 2015 to 2025;

 

    approximately 75% of expected U.S. employment growth from 2020 to 2034;

 

    the youngest demographic in the U.S. with 60% of the U.S. Hispanic population being 34 or younger as of June 2012; and

 

    a registered voter base of 15.7 million U.S. Hispanics, which is approximately 10% of the total voter base as of March 2015, up 14% from 2012 as compared to a 3% increase for non-Hispanic voters over the same period.

We operate our business through two segments: Media Networks and Radio

 

    Media Networks: Our principal segment is Media Networks, which includes our broadcast and cable networks, local television stations, and digital and mobile properties. We operate two broadcast television networks. Univision Network is the most-watched U.S. Spanish-language broadcast television network, available in approximately 94% of U.S. Hispanic television households. UniMás is among the leading Spanish-language broadcast television networks. In addition, we operate nine cable networks, including Galavisión, the most-watched U.S. Spanish-language cable network, and Univision Deportes, the most-watched Spanish-language sports cable network. We own and operate 60 local television stations, including stations located in the largest markets in the U.S., which represent the largest number of owned and operated local television stations among the major U.S. broadcast networks. In addition, we provide programming to 74 broadcast network station affiliates. Our digital properties include online and mobile websites, which generate, on average, 540 million page views per month. Univision.com is our flagship digital property and is the #1 most visited Spanish-language website among U.S. Hispanics. UVideos is our bilingual digital video network providing on-demand delivery of our programming across multiple devices. Our Media Networks segment accounted for approximately 90% of our revenues in 2014.

 

    Radio: We have the largest Spanish-language radio group in the U.S. and our stations are frequently ranked #1 regardless of language in many major markets. We own and operate 67 radio stations including stations in 16 of the top 25 DMAs. Our radio stations reach over 15 million listeners per week and cover approximately 75% of the U.S. Hispanic population. Our Radio segment also includes Uforia, a comprehensive digital music platform, which includes more than 65 live radio stations and a library of more than 20 million songs. Our Radio segment accounted for approximately 10% of our revenues in 2014.

We have a long standing strategic relationship with Televisa, which owns a significant equity interest in us. Under our program license agreement with Televisa, as amended on July 1, 2015 (the “Televisa PLA”), we have exclusive long-term U.S. broadcast and digital rights (with limited exceptions) to Televisa’s programming, including premium Spanish-language telenovelas, sports, sitcoms, reality series, news programming, and feature films. In 2014, Televisa produced over 94,000 hours of programming. Our long-term collaborative relationship with Televisa provides us with the opportunity to take advantage of the demands of our target demographic, and access to digital media, telenovelas and the broadcast of additional Mexican soccer league games. We utilize this programming to help establish new cable networks and digital platforms. Upon consummation of our initial public offering the term of the Televisa PLA will continue until the later of 2030 or 7.5 years after Televisa has voluntarily sold a specified portion of its shares of our common stock, unless certain change of control events

 

 

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happen, in which case the Televisa PLA will expire on the later of 2025 or 7.5 years after Televisa has voluntarily sold a specified portion of its shares of our common stock. See “—Our Relationship with Televisa.”

We are led by a seasoned executive management team with deep industry knowledge. Mr. Falco has served as our President and Chief Executive Officer since 2011. Under Mr. Falco’s leadership, we have fortified our unique relationship with Hispanic America, expanded our portfolio of cable networks and built our digital and mobile platforms. We have grown our revenue and adjusted operating income before depreciation and amortization (“OIBDA”) (as further described in “—Summary Historical Financial and Other Data”) by approximately 30% since 2011 and maintained a stable cost structure enabling us to generate free cash flow and reinvest in our business. Under our management team and through our strategic relationship with Televisa, we have continued our transformation from a single broadcast network into the leading media company serving Hispanic America.

We generate revenue from advertising on our media networks and radio stations as well as subscription fees, which include retransmission and affiliate fees, paid by our distribution partners. We expect our advertising revenue growth to continue to outperform our English-language media peers and our recurring subscription fees to make up an increasingly larger percentage of our total revenue. For the years ended December 31, 2012, 2013, and 2014 we generated revenue of $2.4 billion, $2.6 billion and $2.9 billion; OIBDA of $0.9 billion, $1.1 billion, and $1.2 billion; Levered Free Cash Flow (as defined in “—Summary Historical Financial and Other Data”) of $69.7 million, $(92.4) million and $335.6 million; and a net loss of $14.4 million, net income of $216.0 million, and net income of $0.9 million, respectively. For the three months ended March 31, 2015, we generated revenue of $624.7 million, OIBDA of $266.5 million, Levered Free Cash Flow of $90.4 million and a net loss of $142.4 million.

THE HISPANIC AMERICA MARKET OPPORTUNITY

Our market opportunity is driven by highly attractive trends within Hispanic America and the power of “must-see” content in today’s media landscape.

 

    Hispanic population growth and increased buying power.

There are more than 57 million U.S. Hispanics comprising more than 17% of the total U.S. population. U.S. Hispanics have experienced the largest growth of any group in the U.S. in recent years, accounting for more than half of the growth of the total population from 2010 to 2015. By 2030, it is estimated that there will be over 77 million U.S. Hispanics, representing nearly 22% of the total U.S. population. In addition, the estimated buying power of U.S. Hispanics is projected to increase from $1.3 trillion in 2014 to $1.7 trillion by 2019.

 

    U.S. Hispanics’ preference for Spanish-language content.

Spanish is the primary language in the homes of most U.S. Hispanics and the number of U.S. Hispanics who speak Spanish in the home is projected to increase from 37 million in 2014 to 55 million by 2034. U.S. Hispanics speaking Spanish in the home are estimated to comprise approximately 65% of the U.S. Hispanic population by 2034. U.S. Hispanics exhibit a strong preference to watch television in their native language. Between 2001 and 2013, the percentage of Spanish-speaking households consuming Spanish-language television rose from 65% to 70%. Over the same period, the percentage of bilingual U.S. Hispanic households consuming Spanish-language television also increased from 36% to 46%. On account of these trends, we believe advertisers and media distributors will increasingly seek to reach U.S. Hispanics through Spanish-language media platforms.

 

 

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    Attractive advertising market dynamics of Hispanic America.

We believe Hispanic America is an attractive demographic for advertisers as a result of the growing population and increased buying power of U.S. Hispanics and that advertisers will continue to increase the amount they spend on Spanish-language advertising targeting U.S. Hispanic consumers. Based on a 2014 Nielsen brand effectiveness study, ads on Spanish-language broadcasts had a higher brand likability score among U.S. Hispanics than ads for the same brand on English-language broadcasts. In addition, the growing size and importance of the U.S. Hispanic voting base, representing approximately 10% of the total voter base as of March 2015, up 14% from 2012 as compared to a 3% increase for non-Hispanic voters over the same period, should result in increased spending on political/advocacy advertising targeted at Hispanic America. While U.S. Hispanic households represented approximately 10% of the total U.S. disposable income, spending in Spanish-language media was only approximately 5% of total advertising in 2014 based on Kantar Media Intelligence. Given the market dynamics of this audience, we believe advertisers will allocate a higher proportion of their advertising dollars targeting Hispanic America as they gain a better understanding of the importance and influence of this audience.

 

    Hispanic pay-TV penetration growth.

U.S. Hispanic pay-TV subscribers are expected to continue to grow significantly, driven by the rapid growth in U.S. Hispanic households and historic trends of pay-TV adoption among U.S. Hispanics. In fact, U.S. Hispanic pay-TV subscribers increased nearly 25% from 2008 to 2014, more than five times greater than the increase in overall U.S. pay-TV subscribers during the same period. This growth also significantly outpaced the U.S. Hispanic television household growth, signaling an increase in demand for pay-TV subscriptions among Hispanic households. As of 2014, 83% of U.S. Hispanic households were pay-TV subscribers. We believe Hispanic pay-TV penetration growth will continue to drive increasing subscription fees for Spanish-language media networks from MVPDs.

 

    Favorable media industry dynamics, subscription fee growth and media consumption trends.

We believe “must-see” content delivered at scale is particularly important in today’s fragmented media environment. Content providers delivering large and loyal audiences who prefer live “event” viewing have the ability to generate increased demand and drive growth in advertising revenue and subscription fees (including retransmission and affiliate fees) from MVPDs. Over the next few years, retransmission revenues for the top four English-language broadcast networks are projected to grow on a percentage basis in the low twenties annually and affiliate fees for the top cable networks are projected to grow on a percentage basis in the high single digits annually. We believe that networks with “must-see” content should capture a disproportionate share of the projected increases in subscription fees.

Media consumption trends are shifting as audiences use media across multiple platforms. Content providers are responding by making their content more broadly available on digital platforms, particularly targeting the millennial audiences who are increasingly seeking to consume content online via smartphones and tablets. The delivery of content on multiple platforms continues to be particularly attractive to Hispanic America. U.S. Hispanics are nearly 10 years younger than the national average of non-Hispanics, they are highly connected (with over 80% owning a smartphone which is higher than the rate among the overall U.S. population) and technologically proficient (as reflected by the higher per user rate of consumption of digital video among U.S. Hispanics as compared to the overall U.S. population). Additionally, U.S. Hispanics are twice as likely to share information via social media as non-Hispanics. We believe that established content providers delivering media across multiple platforms are well-positioned to benefit from these shifting media consumptions trends, particularly with respect to younger consumers.

 

 

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OUR COMPETITIVE STRENGTHS

 

    Trusted brand that fosters unique and deep relationship with the Hispanic audience.

We have an over 50 year multi-generational relationship with Hispanic America. We earned the highest brand equity score among U.S. media brands in a brand equity research study conducted by Burke in 2013 and our score ranked us among the top-tier global brands. We also have the strongest brand likeability for Hispanic audiences among the top five broadcast networks and we have a 55% share of U.S. Spanish-language viewing across the top five broadcast networks. Additionally, Univision has 17 of the top 20 primetime programs across both the U.S. Spanish-speaking and bilingual U.S. Hispanic viewing audiences for the current television season. We believe the strength of our brand combined with our “must-see” Spanish and English-language content enables us to sustain our leading position and offer the platform of choice for marketers seeking to connect with Hispanic America. Our brand and our large footprint of owned and operated local television and radio stations also enable us to inform, empower and serve as a vital resource for important civic, cultural and political information in the national and local communities that we serve. We also work with community-based organizations, government agencies and corporate sponsors to empower U.S. Hispanics and provide access to vital information and resources. From citizenship and voter registration to education, health and personal finance, we support causes that matter to Hispanic America. The effectiveness of our brand has been instrumental in enabling us to launch our media brand extensions across multiple platforms, as well as new products, services and events. In 2014, we enrolled over 3.4 million consumers to our branded products and services that are available in more than 70,000 retail outlets and over 4.6 million people attended our consumer and empowerment events.

 

    Leader in Hispanic media with extensive multi-platform distribution.

We are the leading media company serving Hispanic America and we align our television, radio and digital presence to deliver a Univision branded experience across multiple platforms. Our total unduplicated average monthly audience across our television, radio and digital platforms grew 11% from 2013 to 2014 and we reached over 49 million unduplicated media consumers monthly in the first quarter of 2015. Our audience and multi-platform distribution network position us as the premier gateway to Hispanic America for advertisers and media distributors. Univision Network is the most-watched Spanish-language broadcast television network in the U.S., consistently ranked first among U.S. Hispanic viewers. Additionally, our average primetime television viewer is 40 years old as compared to an average age of 54 for the top four English-language broadcast networks. We own the leading U.S. Spanish-language general entertainment cable network Galavisión, which is available in approximately 68 million households, and we successfully launched our sports network, Univision Deportes. We have long operated the largest Spanish-language television station group in the U.S. with 60 owned and operated local stations. Our owned and operated television stations ranked first among Spanish-language stations during total day in 16 of the 17 DMAs for which such data is available and in primetime viewing in 15 of 17 DMAs for which such data is available among adult viewers aged 18-49. We also own the #1 U.S. Hispanic online platform, which includes Univision.com, the most visited Spanish-language website among U.S. Hispanics. We averaged 24 million video views a month across our online, mobile and apps platforms. Among our social media platforms, we generated organic growth across Facebook, Instagram and Twitter of over 500% since the beginning of 2013. Our radio business has long been the #1 Hispanic radio network in the U.S. with 62 stations in 16 of the top 25 DMAs and we promote key programming events on our other platforms to our radio audience. Our advertising sales strategy is focused on offering advertising solutions across our local TV stations, radio stations and online and mobile websites, allowing us to deliver more effective and integrated solutions to our audiences and advertising partners.

 

 

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    Access to highly differentiated content with a low risk and scalable cost structure.

Our strategic relationship with Televisa gives us exclusive long-term U.S. broadcast and digital rights (with limited exceptions) to Televisa’s programming, including premium Spanish-language telenovelas, sports, sitcoms, reality series, news programming, and feature films. This content is critical to our ability to provide “must-see” programming and results in 91% of our audience consuming our content live as compared to 65% of the audience of the top four English-language broadcast networks. Additionally, 96% of our audience does not change channels during commercial breaks as compared to 81% of the audience for the top four English-language broadcast networks. The Televisa PLA also provides important predictability on our content costs and creates a scalable cost structure as we pay Televisa a fee based on a percentage of our revenue generated by our Spanish-language media networks business. We believe the Televisa PLA reduces the risks associated with procuring and developing premium content, since it limits our failure costs as we are able to select popular content previously aired in Mexico and Latin America. We can also cease airing unsuccessful programs without paying incrementally for unused episodes. Under the Televisa PLA, we can also utilize this programming to help launch new cable networks and digital platforms.

 

    Well-positioned to benefit from media industry trends.

We believe the combination of our exclusive, “must-see” content delivered across all of our media platforms to our audience anytime and anywhere and our track record of innovation and investment, positions us to take advantage of prevailing media industry trends. Our strong brand equity and loyal audience allows us to successfully launch new products and introduce emerging platforms. We have been successful in obtaining significant distribution for the recently launched Univision Deportes and UVideos as well as our English-language cable networks El Rey and Fusion, which have been developed through our strategic relationships with filmmaker Robert Rodriguez and Disney, respectively. Our integrated, cross-platform solutions allow advertisers to reach U.S. Hispanics at scale and on all devices. Our strong relationships with our distribution partners enable us to expand our distribution footprint and drive increased subscription revenues. Ultimately, we believe that we are well-positioned to continue to capture a significant share of the economic value chain, including subscription fees, revenues from digital properties and other emerging channels.

 

    Attractive and resilient business model with compelling long-term cash flow generation.

We have a proven track record of driving revenue growth while maintaining attractive operating margins and generating significant cash flow. Our revenue growth coupled with our focus on operational efficiency has provided us with strong cash flows that have allowed us to continue to invest and drive future growth. Our television ratings have historically remained strong relative to the market, our advertising revenues have continued to increase and our business has demonstrated resilience throughout recent economic cycles. We anticipate that our ratings and audience will increase our recurring subscription revenues paid to us by MVPDs resulting in an increased proportion of our revenue governed by long-term distribution contracts, which will positively impact our profitability and improve our visibility into future revenue. We have also maintained a stable cost structure and our strategic relationship with Televisa has provided access to compelling content under a low-risk, scalable cost structure. Our cash flow potential is further enhanced because we have approximately $1.6 billion in net operating loss carry-forwards that provide for favorable tax attributes and a re-aligned balance sheet with lower borrowing costs as a result of repaying a portion of our outstanding debt with proceeds from this offering.

 

    Experienced management team with proven industry expertise.

Our President and Chief Executive Officer Randy Falco has led our company since 2011. Mr. Falco and his management team are highly experienced with deep industry knowledge. Under their leadership, we have fortified our brand with Hispanic America, expanded our portfolio of cable

 

 

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networks and built our digital and mobile platforms. Over the same period, we have expanded our total unduplicated average monthly media audience reach by 17% to over 49 million unduplicated media consumers monthly across our platforms as of March 2015. Since 2011, our management team has increased revenue and OIBDA by approximately 30% while maintaining a stable cost structure. At the local level, our management team has been focused on ensuring that we remain the “go-to” resource in Hispanic America. Under our management team and through our strategic relationship with Televisa, we have continued our transformation from a single broadcast network into the leading media company serving Hispanic America.

OUR GROWTH STRATEGIES

We believe we are well-positioned for growth and have an opportunity to continue to expand our audience and to monetize our attractive audience demographics, leading content across multiple platforms and our spectrum assets.

 

    Grow audience share and extend the reach of the Univision brand.

We believe we are well-positioned to grow our audience and the reach of our brands by strengthening the bond with our audience and expanding across platforms, languages and brands. We enhance our unique relationship with our audience by ensuring that we are the “go-to” resource anywhere and anytime for Hispanic America. We continue to develop new networks, expand access to our content across multiple platforms and utilize our local reach to offer branded products, services and events that extend beyond our traditional media outlets. We have launched specialized networks in the U.S. targeting specific audience preferences, including sports (Univision Deportes), soap operas (Univision tlnovelas), legacy entertainment (Bandamax, Clasico) and news (ForoTV), and have invested in strategic relationships to launch networks targeted at millennials seeking English-language content (El Rey and Fusion). We have also recently introduced several Univision branded products and services, including Univision Mobile, a service to provide affordable wireless plans and Univision Farmacia, a leading prescription drug discount program available at more than 49,000 retail outlets. In addition, we continue to expand our digital reach to include numerous mobile applications, digital streaming video services and internet music players and apps to deliver content to Hispanic America online and on-the-go.

 

    Increase recurring subscription revenue.

We believe we have a meaningful opportunity to capture increased subscription fees from MVPDs. Broadcasters are expected to experience growth in retransmission fees and we are well-positioned to capture an increased share of these growing fees. As we engage in the next iteration of retransmission fee negotiations with MVPDs, we are confident that we will negotiate increased fees because of our loyal audience, our “must-see” content, and our large number of owned and operated local stations and affiliates. Univision Network has 74 station affiliates in 40 markets across the U.S. We offer 24 programming hours daily to our affiliates, which we believe is significantly more than the top four English-language broadcast networks provide to their affiliates, enabling us to retain a higher percentage of the subscription fees that we negotiate on behalf of our local broadcast TV affiliates. We also believe that our differentiated portfolio of cable networks and increasing size of our cable network audience will enable us to capture growth in affiliate fees from MVPDs.

 

    Expand share of advertising market.

We have an opportunity to continue to improve the monetization of advertising across our media platforms. Revenue from media advertising targeting Hispanic America was over $8 billion in 2014, with leading brands having increased their advertising spend targeting this demographic. Growth of the population, buying power and political influence of Hispanic America are driving marketers to increase their focus on

 

 

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this demographic. We believe our brands offer a compelling way to reach Hispanic America in an effective and trusted manner. We deliver our advertisers a 73% unduplicated audience as compared to an average 10% unduplicated audience among the top four English-language broadcast networks and a 91% live viewing audience as compared to a 65% live viewing audience, on average, for the top four English-language broadcast networks. In addition, the advertising time we air per hour is significantly lower than English-language broadcast networks, suggesting we deliver a less cluttered advertising experience. As a result, we believe we have an opportunity to sell more advertising inventory and increase our advertising pricing across all platforms. We continue to add new brand advertisers every year, reaching more than 495 brands across our national media networks in 2014. However, there are many more brands that have yet to do business with us and we believe we can continue to add more brands and improve advertising monetization across our media networks and platforms.

 

    Expand our content across digital and mobile products and platforms.

We continue to be focused on making our Media Networks and Radio content available virtually anywhere and anytime throughout the evolving media landscape. We leverage our existing content across our digital and mobile initiatives to continue to drive growth as audiences consume content and utilize services across an increasing number of platforms. We are focused on continuing to invest and enhance our digital and mobile distribution platforms, including online and mobile properties. Univision.com and UVideos are our key online and mobile distribution platforms and have driven our advertising revenue growth and established our brand online and on-the-go. We recently launched digital ventures La Fabrica, Variety Latino, and Flama and acquired The Root to expand on the offerings of our digital portfolio. We are investing significantly in mobile products and applications, the fastest growing platform for consuming content, particularly among our target audience, resulting in 58% growth in our mobile unique visitors across all of our digital properties from March 2014 to March 2015. Our digital distribution also includes subscription streaming services. We recently entered into an agreement with Sling TV that includes over-the-top (“OTT”) multi-stream rights for live and Video-On-Demand content. We were one of the initial launch partners on Sling TV, demonstrating the “must-see” nature of our content. In addition, we partnered with DirecTV as its anchor content supplier for its recently launched Spanish-language subscription video service, Yaveo. We expect additional third party streaming services to launch in the future and we believe that our content will be an important part of these offerings.

 

    Evaluate potential monetization of our spectrum assets.

We hold the most broadcast spectrum of any broadcaster in the U.S. (determined on a MHz-Pops basis) and we hold multiple licenses in most of the largest markets in the U.S. Spectrum is a strategic asset, which we believe has significant option value. With the success of the recent AWS-3 spectrum auction, which generated $45 billion of proceeds, the underlying value of our spectrum is substantial. We believe we have an opportunity to realize significant value from our spectrum assets without adversely affecting our existing networks or stations. As the FCC’s planned broadcast TV spectrum incentive auction (the “Broadcast Incentive Auction”) approaches in 2016, we will consider participating in the auction and monetizing a portion of our spectrum assets. If we participate in the Broadcast Incentive Auction, we will work to ensure that our ability to operate our broadcast business will not be adversely affected. In most of our largest markets, we believe we can contribute a 6 MHz channel to the auction and combine our Univision and UniMás networks on the other 6 MHz channel, creating a self-sufficient solution. Beyond the upcoming auction, we believe there are additional opportunities to utilize our spectrum to generate significant value. These opportunities include broadcast delivery of mobile video, data, linear networks, and non-linear content direct to consumers or through relationships with our distribution partners and consumer product manufacturers.

 

 

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OUR RELATIONSHIP WITH TELEVISA

We have a long standing strategic relationship with Televisa. Under the Televisa PLA, we have significant exclusive long-term U.S. broadcast and digital rights (with limited exceptions) to all of Televisa’s programming (for which it has U.S. rights), which includes premium Spanish-language programming, including telenovelas, sports, sitcoms, reality series, news programming, and feature films. At the time of this offering, Televisa beneficially owns              shares, or approximately     % (    % if the underwriters’ option is exercised in full) of our outstanding shares of common stock,              and              shares, or approximately     % (    % if the underwriters’ option is exercised in full) of our outstanding common stock on a fully diluted basis. In addition, Televisa owns convertible debentures that, prior to the consummation of this offering, will be exchanged for warrants exercisable for the number of shares of common stock that Televisa would have received upon the conversion of such debentures. Upon the exercise of these warrants, Televisa would beneficially own              shares, or approximately     % (    % if the underwriters’ option is exercised in full) of our outstanding common stock and              shares, or approximately     % (    % if the underwriters’ option is exercised in full) of our outstanding common stock on a fully diluted basis. See “Description of Capital Stock” and “Principal Stockholders.” Our collaborative relationship with Televisa provides us with the opportunity to take advantage of the demands of our target demographic, including digital media, telenovelas and the broadcast of additional Mexican soccer league games. We utilize this programming to help establish new cable networks and digital platforms. Upon consummation of this offering the term of the Televisa PLA will continue until the later of 2030 or 7.5 years after Televisa voluntarily sells at least two-thirds of the              shares (including the              shares issuable upon the exercise of the warrants) that it held immediately following its investment in us (the “Televisa Sell-Down”), unless certain change of control events happen, in which case the Televisa PLA will expire on the later of 2025 or 7.5 years following a Televisa Sell-Down.

OUR PRINCIPAL STOCKHOLDERS

In March 2007, Univision was acquired by a consortium of private equity sponsors including Madison Dearborn Partners, Providence Equity Partners, Texas Pacific Group, Thomas H. Lee Partners and Saban Capital Group and their respective affiliates (collectively, the “Investors”). In December 2010, Televisa invested $1.2 billion in us and assigned certain other interests to us for a 5% equity stake in us, and debentures convertible into an additional 30% equity stake in us, subject to applicable laws and regulations and certain contractual limitations. On July 1, 2015, we entered into a memorandum of understanding (the “MOU”) with the Investors and Televisa and other specified parties, in which it was agreed that Televisa’s convertible debentures would be exchanged for warrants exercisable for the number of shares of common stock that Televisa would have received upon the conversion of its convertible debentures (the “Televisa Warrants”), the contractual limitations on Televisa’s ownership would be revised and our existing stockholder arrangements and our certificate of incorporation would be amended to effect the Equity Recapitalization. See “Business—Corporate Structure” “Certain Relationships and Related Person Transactions” and “Description of Capital Stock” for more information regarding our corporate structure.”

Madison Dearborn. Madison Dearborn Partners, LLC (“Madison Dearborn” or “MDP”), based in Chicago, is a leading private equity investment firm that has raised over $18 billion of capital. Since its formation in 1992, Madison Dearborn’s investment funds have invested in approximately 130 companies across a broad spectrum of industries, including basic industries; business and government services; consumer; financial and transaction services; healthcare; and telecom, media and technology services. Madison Dearborn’s objective is to invest in companies with strong competitive characteristics that it believes have the potential for significant long-term equity appreciation. To achieve this objective, Madison Dearborn seeks to partner with outstanding management teams that have a solid understanding of their businesses as well as track records of building shareholder value.

Providence Equity. Providence Equity Partners (“Providence Equity” or “PEP”) is a leading global private equity firm specializing in the media, communications, education and information sectors. Providence Equity has

 

 

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over $40 billion in assets under management across complementary private equity and credit businesses and has invested in more than 140 companies since the firm’s inception in 1989. Providence Equity pioneered a sector-focused approach to private equity investing with the vision that a dedicated team of industry experts could build exceptional companies of enduring value. Providence Equity is headquartered in Providence, Rhode Island and has additional offices in New York, Boston, London, New Delhi, Singapore and Hong Kong.

Saban Capital Group. Saban Capital Group, Inc. (“Saban Capital Group” or “Saban”) is a private investment firm specializing in the media, entertainment, communications and real estate industries. Based in Los Angeles with satellite offices in New York, London and Singapore, Saban Capital Group was established in 2001 by Haim Saban. The firm has made strategic investments across North America, Europe, Asia and the Middle East. Saban Capital Group focuses on controlling and minority investments in public and private companies, and adds strategic value from both a financing and operating perspective through its established global relationships and industry operating experience.

TPG. Texas Pacific Group (“TPG”), is a leading global private investment firm founded in 1992 with over $74.8 billion of assets under management as of March 31, 2015 and offices in San Francisco, Fort Worth, Austin, Beijing, Dallas, Hong Kong, Houston, London, Luxembourg, Melbourne, Moscow, Mumbai, New York, São Paulo, Shanghai, Singapore, Tokyo and Toronto. TPG has extensive experience with global public and private investments executed through leveraged buyouts, recapitalizations, spinouts, growth investments, joint ventures and restructurings. The firm’s investments span a variety of industries, including media and communications, financial services, travel and entertainment, technology, industrials, retail, consumer products and healthcare.

THL. Thomas H. Lee Partners, L.P. (“THL”), is one of the world’s oldest and most experienced private equity firms. Founded in 1974, THL has raised approximately $21 billion of equity capital and invested in more than 130 portfolio companies with an aggregate value of over $150 billion. THL invests in growth-oriented businesses, headquartered primarily in North America, across three sectors: business and financial services, consumer and healthcare, and media and information services. The firm partners with portfolio company management to identify and implement operational and strategic improvements for long-term growth.

Televisa. Televisa is the largest media company in the Spanish speaking world and is a top programming producer of premium entertainment and sports content and the largest multimedia company in Latin America. It operates four broadcast channels in Mexico City, produces and distributes 24 pay-TV brands for distribution in Mexico and the rest of the world, and exports most of its programs and formats to the U.S. through us and to other television networks in over 50 countries. Televisa is also an active participant in Mexico’s telecommunications industry. It has a majority interest in Sky, a leading direct-to-home satellite television system operating in Mexico, the Dominican Republic and Central America. Televisa also participates in Mexico’s telecommunications industry in many regions of the country where it offers video, voice, and broadband services. Televisa also has interests in magazine publishing and distribution, radio production and broadcasting, professional sports and live entertainment, feature-film production and distribution, the operation of a horizontal Internet portal, and gaming. We have a long standing strategic relationship with Televisa and have exclusive long-term U.S. broadcast and digital rights (with limited exceptions) to Televisa’s programming (for which it has U.S. rights) under the Televisa PLA.

 

 

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RISKS AFFECTING OUR BUSINESS

Investing in our Class A common stock involves substantial risk. Before participating in this offering, you should carefully consider all of the information in this prospectus, including risks discussed in “Risk Factors” beginning on page 19. Some of our most significant risks are:

 

    a decline in advertising revenue;

 

    adverse global economic conditions;

 

    changes to the U.S. Hispanic population;

 

    lack of audience acceptance or decline of the popularity of our programming;

 

    our failure to renew or reach subscription or retransmission consent agreements with MVPDs;

 

    consolidation in the cable or satellite MVPD industry;

 

    our significant competition;

 

    damage to our brands, particularly the Univision brand;

 

    our failure to retain rights to sports programming;

 

    our reliance on Televisa for programming;

 

    compliance with, and/or changes in, U.S. communications laws or other regulations;

 

    our substantial indebtedness; and

 

    the Investors will have a controlling interest in us, and their interests may be different from or conflict with those of our other shareholders.

CORPORATE INFORMATION

We were initially formed as a Delaware limited liability company on June 6, 2006 and we converted to a Delaware corporation on March 12, 2007 under the name Broadcasting Media Partners, Inc. We changed our name to Univision Holdings, Inc. on June 11, 2015. See “Business—Corporate Structure” for information regarding our corporate structure. Our principal executive offices are located at 605 Third Avenue, 33rd Floor, New York, NY 10158. Our telephone number at our principal executive offices is (212) 455-5200. Our corporate website is www.univision.com. The information that appears on this or any of our other websites is not part of, and is not incorporated into, this prospectus and should not be relied upon in determining whether to make an investment in our Class A common stock.

 

 

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THE OFFERING

 

 

Class A common stock offered by us

            shares (             shares if the underwriters exercise their option to purchase additional shares in full).

 

Class A common stock to be outstanding after this offering

            shares (             shares if the underwriters exercise their option to purchase additional shares in full).

 

Common stock to be outstanding after this offering

            shares (             shares if the underwriters exercise their option to purchase additional shares in full). In addition to shares of Class A common stock issued in this offering, there will be              shares of Class S-1 common stock,              shares of Class S-2 common stock,              shares of Class T-1 common stock,              shares of Class T-2 common stock and one share of Class T-3 common stock outstanding following this offering.

 

Option to purchase additional shares of Class A common stock

The underwriters have the option to purchase up to an additional             shares of Class A common stock from us. The underwriters can exercise this option at any time within 30 days from the date of this prospectus.

 

Use of proceeds

We estimate that the net proceeds to us from our sale of             shares of Class A common stock in this offering will be approximately $             million, after deducting underwriting discounts and commissions and estimated expenses payable by us in connection with this offering. This assumes a public offering price of $             per share, which is the midpoint of the price range set forth on the cover of this prospectus. We intend to use these net proceeds to repay indebtedness and for general corporate purposes. See “Use of Proceeds.”

 

Dividend policy

We do not anticipate paying any dividends on our Class A common stock in the foreseeable future; however, we may change this policy at any time. See “Dividend Policy.”

 

Voting rights

Each share of our Class A common stock will entitle its holder to one vote on all matters to be voted on by stockholders generally. See “Description of Capital Stock.”

 

Risk factors

Investing in our Class A common stock involves a high degree of risk. See “Risk Factors” beginning on page 20 of this prospectus for a discussion of factors you should carefully consider before investing in our Class A common stock.

 

Proposed NYSE or Nasdaq symbol

“UVN.”

 

 

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Unless otherwise indicated, the number of shares of common stock to be outstanding after this offering:

 

    includes              shares of Class A common stock to be sold in this offering;

 

    excludes             shares of our Class A common stock issuable upon exercise of outstanding options, which have a weighted average exercise price of $             per share;

 

    excludes              shares of our Class A common stock issuable upon the vesting of restricted stock units;

 

    excludes             shares of our Class A common stock reserved for future issuance under our 2015 Equity Incentive Plan, which is expected to become effective prior to completion of this offering;

 

    excludes              shares of common stock issuable upon the exercise of the Televisa Warrants;

 

    gives effect to a      - for -     stock split of our common stock;

 

    gives effect to our amended and restated certificate of incorporation, including the Equity Recapitalization, which will be in effect prior to the consummation of this offering; and

 

    assumes no exercise of the underwriters’ option to purchase up to             additional shares of Class A common stock from us.

Unless otherwise indicated, the information in this prospectus assumes an initial public offering price of $             per share, the midpoint of the price range set forth on the cover of this prospectus.

 

 

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SUMMARY HISTORICAL FINANCIAL AND OTHER DATA

The following table sets forth our summary historical financial and other data for the periods and as of the dates indicated. We derived our summary consolidated statement of operations data for the years ended December 31, 2014, 2013 and 2012 from our audited consolidated financial statements contained elsewhere in this prospectus. The summary historical consolidated financial data as of March 31, 2015 and for the three months ended March 31, 2015 and 2014 are derived from our unaudited consolidated financial statements contained elsewhere in this prospectus.

The summary unaudited pro forma balance sheet data as of March 31, 2015 gives effect to the issuance of $810.0 million in aggregate principal amount of additional 5.125% senior secured notes due 2025 (the “additional 2025 notes”) on April 21, 2015 and the repurchase and redemption of the $750.0 million in aggregate principal amount of our 7.875% senior secured notes due 2020 (the “2020 notes”) outstanding as of March 31, 2015. The summary unaudited pro forma as adjusted balance sheet data gives further effect to the issuance of shares of our Class A common stock offered by us in this offering at an assumed initial public offering price of $            , which is the midpoint of the range set forth on the cover of this prospectus, and the application of the net proceeds received by us from this offering as described under “Use of Proceeds.” The following unaudited summary pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the relevant transactions had been consummated on the date indicated, nor is it indicative of future operating results.

Our historical results are not necessarily indicative of future operating results. You should read the information set forth below in conjunction with “Selected Historical Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes thereto contained elsewhere in this prospectus.

 

    Three Months Ended
March 31,
    Year Ended December 31,  
(in thousands, except earnings per share)   2015     2014     2014     2013     2012  
  (unaudited)                    

Statement of Operations and Comprehensive (Loss) Income Data

         

Revenue

  $ 624,700      $ 621,100      $ 2,911,400      $ 2,627,400      $ 2,442,000   

Direct operating expenses

    197,600        212,400        1,013,100        872,200        797,900   

Selling, general and administrative expenses

    170,900        170,800        718,800        712,600        750,400   

Impairment loss

    300               340,500        439,400        90,400   

Restructuring, severance and related charges

    6,200        3,300        41,200        29,400        44,200   

Depreciation and amortization

    42,600        39,300        163,800        145,900        130,300   

Termination of management and technical assistance agreements

    180,000                               
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

  27,100      195,300      634,000      427,900      628,800   

Other expense (income):

Interest expense

  143,400      147,100      587,200      618,200      573,200   

Interest income

  (2,200   (1,400   (6,000   (3,500   (200

Interest rate swap expense (income)

       700      (500   (3,800     

Amortization of deferred financing costs

  3,900      3,900      15,500      14,100      8,300   

Loss on extinguishment of debt

  73,200      17,200      17,200      10,000      2,600   

Loss on equity method investments

  14,900      20,500      85,200      36,200      900   

Other

  300      1,400      600      3,100      (500
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

  (206,400   5,900      (65,200   (246,400   44,500   

(Benefit) provision for income taxes

  (64,000   2,300      (66,100   (462,400   58,900   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

  (142,400   3,600      900      216,000      (14,400

Net loss attributable to non-controlling interest

  (100   (200   (1,000   (200     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income attributable to Univision Holdings, Inc.

$ (142,300 $ 3,800    $ 1,900    $ 216,200    $ (14,400
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

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    Three Months Ended
March 31,
    Year Ended December 31,  
(in thousands, except earnings per share)   2015     2014     2014     2013     2012  
  (unaudited)                    

Earnings per share data

   

Net (loss) income per share:

   

Basic

  $ (13.17   $ 0.35      $ 0.18      $ 20.49      $ (1.36

Diluted

  $ (13.17   $ 0.35      $ 0.17      $ 14.60      $ (1.36

Weighted average shares outstanding:

   

Basic

    10,802        10,791        10,791        10,549        10,552   

Diluted

    10,802        10,912        10,910        15,442        10,552   

Other Operating Data

   

OIBDA(1)

  $ 266,500      $ 245,100      $ 1,223,800      $ 1,078,900      $ 945,900   

Bank Credit OIBDA(1)

  $ 274,200      $ 251,400      $ 1,253,800      $ 1,120,400      $ 1,003,200   

Levered Free Cash Flow(1)

  $ 90,400      $ 54,900      $ 335,600      $ (92,400   $ 69,700   

 

     As of
March 31,
2015
    Pro Forma     Pro Forma
As
Adjusted
 
(unaudited)    Actual      

Balance Sheet Data

      

Current assets

   $ 1,127,100      $ 1,132,500      $                

Total assets

     10,585,600        10,591,000     

Current liabilities

     896,700        896,700     

Long-term debt, including capital leases

     10,375,000        10,435,000     

Stockholders’ deficit

     (1,911,600     (1,911,600  

 

     Three Months Ended
March 31,
    Year Ended December 31,  
     2015     2014     2014     2013     2012  
     (unaudited)              

Cash Flow Data

        

Cash interest paid

   $ 123,600      $ 107,400      $ 589,100      $ 618,500      $ 554,400   

Capital expenditures

     (21,800     (35,400     (133,400     (179,200     (99,500

Net cash provided by operating activities

     53,500        73,600        274,900        79,300        169,100   

Net cash used in investing activities

     (69,000     (38,800     (154,800     (335,200     (102,500

Net cash provided by (used in) financing activities

     208,700        200        (107,200     263,700        (89,200

 

(1)

OIBDA represents operating income before depreciation, amortization and certain additional adjustments to operating income. In calculating OIBDA our operating income is adjusted for share-based compensation and other non-cash charges, restructuring and severance charges, management and technical assistance agreement fees as well as other non-operating related items. Bank Credit OIBDA represents OIBDA with certain additional adjustments permitted under our senior secured credit facilities including specified business optimization expenses, income from unrestricted subsidiaries as defined in our senior secured credit facilities and certain other expenses. Levered Free Cash Flow represents OIBDA less specified cash and non-cash items deducted in calculating OIBDA and less capital expenditures plus the net change in working capital. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—How We Assess Performance of Our Business.” OIBDA, Bank Credit OIBDA and Levered Free Cash Flow eliminate the effects of certain items that we do not consider indicative of our core operating performance. OIBDA, Bank Credit OIBDA and Levered Free Cash Flow are supplemental measures of our operating performance that are not required by, or presented in accordance with, GAAP.

 

 

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  OIBDA, Bank Credit OIBDA and Levered Free Cash Flow are not measurements of our operating performance under GAAP, should not be considered as alternatives to net income, operating income or any other performance measures derived in accordance with GAAP or as alternatives to cash flow from operating activities as measures of our liquidity, and our calculations of OIBDA, Bank Credit OIBDA and Levered Free Cash Flow may not be comparable to those or other similar metrics reported by other companies.

We believe that OIBDA, Bank Credit OIBDA and Levered Free Cash Flow provide management and investors with additional information to measure our operating performance, valuation and our potential for growth. Management uses OIBDA and Bank Credit OIBDA or comparable metrics to evaluate our operating performance, for planning and forecasting future business operations and to measure our ability to service debt and meet our other cash needs. Management uses Levered Free Cash Flow or comparable metrics to assess our cash needs, in particular our capacity to reduce our debt and fund investments. We believe that OIBDA, Bank Credit OIBDA and Levered Free Cash Flow are used in the media industry by analysts, investors and lenders and serve as a valuable performance assessment metric for investors.

The primary material limitations associated with the use of OIBDA, Bank Credit OIBDA and Levered Free Cash Flow as compared to GAAP results are (i) they may not be comparable to similarly titled measures used by other companies in our industry, and (ii) they exclude financial information that some may consider important in evaluating our performance. Because of these limitations, OIBDA, Bank Credit OIBDA and Levered Free Cash Flow should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using OIBDA, Bank Credit OIBDA and Levered Free Cash Flow only supplementally. In addition, we reconcile OIBDA, Bank Credit OIBDA and Levered Free Cash Flow to the most directly comparable GAAP measure, net (loss) income attributable to Univision Holdings, Inc. Further, we also review GAAP measures and evaluate individual measures that are not included in OIBDA, Bank Credit OIBDA or Levered Free Cash Flow. By providing OIBDA, Bank Credit OIBDA and Levered Free Cash Flow with reconciliations to GAAP results, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing strategic initiatives.

 

 

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The following is a reconciliation of OIBDA to net (loss) income attributable to Univision Holdings, Inc., which is the most directly comparable GAAP financial measure:

 

    Three Months Ended
March 31,
    Year Ended December 31,  
    2015     2014     2014     2013     2012  
(in thousands)   (unaudited)                    

Net (loss) income attributable to Univision Holdings, Inc.

  $ (142,300   $ 3,800      $ 1,900      $ 216,200      $ (14,400

Net loss attributable to non-controlling interest

    (100     (200     (1,000     (200       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

  (142,400   3,600      900      216,000      (14,400

(Benefit) provision for income taxes

  (64,000   2,300      (66,100   (462,400   58,900   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

  (206,400   5,900      (65,200   (246,400   44,500   

Other expense (income):

Interest expense

  143,400      147,100      587,200      618,200      573,200   

Interest income

  (2,200   (1,400   (6,000   (3,500   (200

Interest rate swap expense (income)(A)

       700      (500   (3,800     

Amortization of deferred financing costs

  3,900      3,900      15,500      14,100      8,300   

Loss on extinguishment of debt(B)

  73,200      17,200      17,200      10,000      2,600   

Loss on equity method investments(C)

  14,900      20,500      85,200      36,200      900   

Other

  300      1,400      600      3,100      (500
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

  27,100      195,300      634,000      427,900      628,800   

Depreciation and amortization

  42,600      39,300      163,800      145,900      130,300   

Impairment loss(D)

  300           340,500      439,400      90,400   

Restructuring, severance and related charges(E)

  6,200      3,300      41,200      29,400      44,200   

Share-based compensation(F)

  4,300      2,900      14,900      7,800      25,700   

Asset write-offs, net

            500      3,700      1,000   

Termination of management and technical assistance agreements

  180,000                       

Management and technical assistance agreement fees(G)

  5,500      5,000      25,100      22,400      20,000   

Other adjustments to operating income(H)

  500      (700   3,800      2,400      5,500   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OIBDA (unaudited)

$ 266,500    $ 245,100    $ 1,223,800    $ 1,078,900    $ 945,900   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following is a reconciliation of Bank Credit OIBDA to OIBDA (unaudited):

 

    Three Months Ended
March 31,
    Year Ended December 31,  
    2015     2014     2014     2013     2012  
(in thousands)                              

OIBDA

  $ 266,500      $ 245,100      $ 1,223,800      $ 1,078,900      $ 945,900   

Business optimization expense(I)

    3,300        1,800        8,900        12,300        19,900   

Unrestricted subsidiaries loss(J)

    900        700        4,700        12,600        23,400   

Contractual adjustments permitted under senior secured credit facilities(K)

    3,500        3,800        16,400        16,600        14,000   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Bank Credit OIBDA

$ 274,200    $ 251,400    $ 1,253,800    $ 1,120,400    $ 1,003,200   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

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The following is a reconciliation of Levered Free Cash Flow to OIBDA (unaudited):

 

    Three Months Ended
March 31,
    Year Ended December 31,  
    2015     2014     2014     2013     2012  
(in thousands)                        

OIBDA

  $ 266,500      $ 245,100      $ 1,223,800      $ 1,078,900      $ 945,900   

Management and technical assistance agreement fees

    (5,500     (5,000     (25,100     (22,400     (20,000

Asset write-offs, net

                  (500     (3,700     (1,000

Restructuring costs, severance and related charges

    (6,200     (3,300     (41,200     (29,400     (44,200

Other(L)

    (800     (500     (2,100     (300     (1,700

Non-cash deferred advertising revenue(M)

    (15,200     (15,000     (60,000     (60,100     (60,300

Cash interest expense(N)

    (141,600     (146,600     (581,100     (616,200     (575,600

Cash interest income

                  100               100   

Capital expenditures

    (21,800     (35,400     (133,400     (179,200     (99,500

Cash taxes received/(paid)(O)

    600        (700     (4,700     (8,500     (3,800

Changes in assets and liabilities:

         

Accounts receivable, net

    61,400        69,600        (4,100     (87,000     (40,800

Program rights and prepayments

    (600     (45,500     (9,100     (171,700     (85,800

Accounts payable and accrued liabilities

    (60,100     (47,000     3,100        32,200        24,000   

Other

    13,700        39,200        (30,100     (25,000     32,400   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Levered Free Cash Flow

$ 90,400    $ 54,900    $ 335,600    $ (92,400 $ 69,700   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(A) Interest rate swap expense (income) pertains to certain interest rate swap contracts which were or became ineffective due to the Company’s refinancing transactions. See Note 10 to our audited consolidated financial statements for the year ended December 31, 2014 and Note 8 to our unaudited consolidated financial statements for the three months ended March 31, 2015 contained elsewhere in this prospectus.
(B) Loss on extinguishment of debt is a result of our refinancing transactions. See Note 9 to our audited consolidated financial statements for the year ended December 31, 2014 and Note 7 to our unaudited consolidated financial statements for the three months ended March 31, 2015 contained elsewhere in this prospectus.
(C) Loss on equity method investments relates primarily to El Rey for the years ended 2013 and 2014 and to Fusion for the years ended 2012 through 2014. See Note 7 to our audited consolidated financial statements for the year ended December 31, 2014 and Note 5 to our unaudited consolidated financial statements for the three months ended March 31, 2015 contained elsewhere in this prospectus.
(D) Impairment loss relates to the non-cash charges resulting from the write-down to fair value of goodwill, intangible and other assets. See Notes 4 and 18 to our audited consolidated financial statements for the year ended December 31, 2014 and Note 14 to our unaudited consolidated financial statements for the three months ended March 31, 2015 contained elsewhere in this prospectus.
(E) Restructuring costs, severance and related charges primarily relates to broad-based cost-saving initiatives. See Note 3 to our audited consolidated financial statements for the year ended December 31, 2014 and Note 3 to our unaudited consolidated financial statements for the three months ended March 31, 2015 contained elsewhere in this prospectus.
(F) Share-based compensation relates to employee equity awards and a consulting arrangement with an entity controlled by our Chairman. See Note 15 to our audited consolidated financial statements for the year ended December 31, 2014 and Note 12 to our unaudited consolidated financial statements for the three months ended March 31, 2015 contained elsewhere in this prospectus.

 

 

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(G) Management and technical assistance agreement fees relate to management, consulting, advisory and technical assistance services provided by our Investors and Televisa. Effective as of March 31, 2015 we entered into agreements with affiliates of our Investors and Televisa, respectively, to terminate these agreements. See Note 8 to our audited consolidated financial statements for the year ended December 31, 2014 and Note 6 to our unaudited consolidated financial statements for the three months ended March 31, 2015 contained elsewhere in this prospectus.
(H) Other adjustments to operating income primarily relate to gains and losses on asset dispositions and letter of credit fees.
(I) Business optimization expense relates to our efforts to streamline and enhance our operations and primarily include legal, consulting and advisory costs and costs associated with the rationalization of facilities.
(J) Represents the results of early stage ventures which are designated as “unrestricted subsidiaries” under our senior secured credit facilities and excluded from Bank Credit OIBDA under these facilities and the indentures governing our senior notes. The amount for unrestricted subsidiaries above represents the residual adjustments to eliminate the full results of these entities not otherwise eliminated in the other exclusions from Bank Credit OIBDA above.
(K) Contractual adjustments permitted under our senior secured credit facilities relate to adjustments to operating income permitted under our senior secured credit facilities and indentures governing our senior notes primarily related to the treatment of the accounts receivable facility under GAAP that existed when the credit facilities were originally entered into.
(L) Other primarily relates to dividends from unconsolidated investments and costs related to our accounts receivable facility.
(M) Non-cash deferred advertising revenue relates to that portion of deferred contractually committed advertising and promotion time which is recognized when the related advertising and promotion is provided.
(N) Cash interest expense represents the interest on our debt instruments and interest rate swaps that will be settled in cash.
(O) Cash taxes received/(paid) relates to taxes that have been, or that we expect to be, paid in cash.

 

 

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RISK FACTORS

Investing in our Class A common stock involves a high degree of risk. You should consider carefully the following risks and all of the information in this prospectus, including our historical financial statements and related notes thereto before purchasing our Class A common stock. If any of the following risks actually occur, our business, financial condition and results of operations could be materially adversely affected. In that case, the trading price of our Class A common stock could decline, perhaps significantly and you may lose all or some of your investment.

Risks Relating to Our Business and Our Industry

Cancellations, reductions or postponements of advertising, or reduced spending in advertising could reduce our revenues and have a material adverse effect on our business, financial condition and results of operations.

We have in the past derived, and we expect to continue to derive, a significant amount of our revenues from our advertisers, particularly television advertisers. Other than some television network advertising that is presold on an annual basis, we generally have not obtained, and we do not expect to obtain, long-term commitments from advertisers. Therefore, advertisers generally may cancel, reduce or postpone advertising orders without penalty. Cancellations, reductions or postponements in purchases of advertising could, and often do, occur as a result of a general economic downturn; an economic downturn in one or more industries that have historically invested in advertising on our platforms; an economic downturn in one or more major markets such as Los Angeles, New York or Miami-Fort Lauderdale; a strike; changes in population, demographics, audience preferences and other factors beyond our control or a failure to agree on contractual terms with advertisers. Whether as a result of such factors or the desire to preserve more budgetary flexibility, to the extent advertisers reduce their upfront commitments or advertising spending in the earlier part of a year, postponements or reductions would have an impact on timing for our advertising revenues and results of operations. In addition, major incidents of terrorism, war, natural disasters or similar events may require us to program without any advertising which could also lead to reduced advertising revenues. These and other factors could also cause advertisers to lower the rates that they are willing to pay to advertise generally, which could also have a material adverse effect on our business, financial condition and results of operations.

Advertisers’ willingness to purchase advertising from us may also be affected by a decline in audience ratings of our programming, local market dynamics, our inability to retain the rights to popular programming, increasing audience fragmentation caused by new program channels and the proliferation of new media formats, including the Internet and video-on-demand and the deployment of portable digital devices and new services and technologies. Although we continue to develop more opportunities through our digital platforms for advertisers to satisfy their increasing demand for a larger portion of their advertising budgets to shift from television networks to digital advertising to account for the changing viewing habits of consumers, there can be no assurance that we will successfully replace reduced television advertising revenue with revenue from our digital platforms. The range of advertising choices across digital products and platforms and the large inventory of available digital advertising space have also historically resulted in significantly lower rates for digital advertising than television advertising, which may add additional pricing pressure on our television advertising rates and our related revenues. Any material cancellations, reductions or postponements of advertising or reduced advertising rates for any of the foregoing reasons would adversely affect our advertising revenues and could have a material adverse effect on our business, financial condition and results of operations.

Adverse global economic conditions may have a negative impact on our industry and on our business, financial condition and results of operations.

Adverse global economic conditions could have a negative effect on our industry or the industry of those customers who advertise on our platforms, including, among others, the consumer package goods, telecommunications, retail, automotive, restaurant and financial industries, which provide a significant amount of

 

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our advertising revenue. There can be no assurance that we will not experience a material adverse effect on our business, financial condition and results of operations as a result of adverse economic conditions or that any actions that the U.S. Government, Federal Reserve or other governmental and regulatory bodies have taken or may take for the reported purpose of improving the economy or financial markets, such as changes to fiscal or monetary policy, will achieve their intended effect. Additionally, some of these actions may adversely affect financial institutions, capital providers, advertisers or other consumers or our financial condition or results of operations or the trading price of our securities. Potential consequences of a global financial crisis could include:

 

    our ability to borrow capital on terms and conditions that we find acceptable, or at all, may be limited, which could limit our ability to refinance our existing debt or fund our operations;

 

    the possibility that our business partners and our ability to maintain our business relationships with them could be negatively impacted;

 

    the financial condition of companies that advertise on our stations, including, among others, those in the consumer package goods, telecommunications, retail, automotive, restaurant and financial industries, may deteriorate and they may file for bankruptcy protection or face severe cash flow issues, which may result in a significant decline in our advertising revenue;

 

    our ability to pursue the acquisition or divestiture of television or radio assets may be limited;

 

    the possible impairment of some or all of the value of our syndicated programming, goodwill and other intangible assets, including our broadcast licenses; and

 

    the possibility that one or more of the lenders under the credit agreement governing our senior secured credit facilities could refuse to fund its commitment to us or could fail, and we may not be able to replace the financing commitment of any such lenders on favorable terms, or at all.

Any of these consequences could have a material adverse effect on our business, financial condition and results of operations.

We are focused on serving Hispanic America and the demand for our programming and our business, financial condition and results of operations are affected by changes that impact Hispanic America.

Anticipated Growth of the U.S. Hispanic Population and Buying Power

We believe a substantial portion of our growth will result from projected increases in the U.S. Hispanic population and by projected increases in their buying power. Factors that impact the U.S. Hispanic population, including a slow-down in immigration into the U.S. in the future, the impact of federal and state immigration legislation and policies on both the U.S. Hispanic population and persons emigrating from Latin America could affect the growth of the U.S. Hispanic population and, as a result the demand for our Spanish-language programming. If the U.S. Hispanic population grows more slowly than anticipated, the projected buying power of the U.S. Hispanic population may not grow as anticipated. In addition, economic conditions, such as unemployment, that disproportionately impact the U.S. Hispanic population could slow the growth of, or reduce, the projected buying power of U.S. Hispanics. If the U.S. Hispanic population or its buying power grows more slowly than anticipated, it could have a material adverse effect on our business, financial condition and results of operations.

Demand for Spanish-Language Programming Among U.S. Hispanics

We primarily target our Hispanic audience through Spanish-language programming. As U.S. Hispanics become bilingual and as more U.S. Hispanic households subscribe for pay-TV services, demand for our Spanish-language programming could be adversely impacted by competing English-language programming, including programming primarily in English-language targeting the bilingual U.S. Hispanic population. In addition, a shift in policy towards encouraging English-language fluency among U.S. Hispanic immigrants could also impact

 

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demand for Spanish-language programming. While El Rey, Fusion and Flama target the bilingual or English-language speaking U.S. Hispanic market, they may not be successful in attracting a significant audience or in offsetting any decline in demand for our Spanish-language programming. If we are unable to create more programming and networks targeted to this audience, we may lose audience share to competing English-language or bilingual programming which could lead to lower ratings and consequently, lower advertising revenues, which could have a material adverse effect on our business, financial condition and results of operations.

Geographic Concentration

The U.S. Hispanic population is concentrated geographically. Nielsen estimates for 2015 approximately 28% of all U.S. Hispanics will live in the Los Angeles, New York and Miami markets and the top ten U.S. Hispanic markets collectively will account for approximately 50% of the U.S. Hispanic population. We therefore expect our revenues to continue to be concentrated in these key markets. As a result, an economic downturn, increased competition or another significant negative condition in these markets could reduce our revenues and affect our business, financial condition and results of operations more dramatically than other companies that are not as dependent on these markets.

Lack of audience acceptance of our content could decrease our ratings and, therefore, our revenues.

Television and radio content production and distribution are inherently risky businesses because the revenues derived from the production and distribution of a television or radio program, and from the licensing of rights to the intellectual property associated with the program, depend primarily upon their acceptance by the public, which is difficult to predict. The commercial success of a television or radio program also depends upon the quality and acceptance of other competing programs released into the marketplace at or near the same time, the availability of alternative forms of entertainment and leisure time activities, general or specific geographic economic conditions and other tangible and intangible factors, many of which are outside our control. Other television and radio stations may change their formats or programming, a new station may adopt a format to compete directly with one or more of our stations, or stations might engage in aggressive promotional campaigns. Certain of the English-language networks and others are producing Spanish-language programming and simulcasting certain programming in English and Spanish.

A decrease in our audience acceptance, whether because of these factors or otherwise, can lead to lower ratings. Rating points are the primary factors that are weighed when determining the advertising rates that we receive. Advertisers’ willingness to purchase advertising from us may be adversely affected by lower audience ratings. Advertising sales and rates also are dependent on audience measurement methodologies and could be negatively affected if methodologies do not accurately reflect actual viewership levels. The use of new ratings technologies and measurements, and viewership on new platforms or devices that is not being measured, could have an impact on our program ratings. For example, while C3, a current television industry ratings system, measures live commercial viewing plus three days of DVR and video-on-demand playback, the growing viewership occurring on subsequent days of DVR and video-on-demand playback is excluded from C3 ratings. Poor ratings can lead to a reduction in pricing and advertising revenues. As a result of the unpredictability of program performance and of competition for viewership, our stations’ audience ratings, market shares and advertising revenues may decline, which could have a material adverse effect on our business, financial condition and results of operations.

If the popularity of our programming declines or we lose or are otherwise unable to obtain the rights to popular programming, it could have a material adverse effect on our business, financial condition and results of operations. We may also incur an impairment loss in connection with prepayments for certain programming if our prepayments exceed the fair value of such programming.

Our results of operations are impacted by the acceptance of our programming by the public, which is difficult to predict. From time to time, our prime time programming may not be as popular as anticipated or it has

 

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been in past seasons. When this happens, we often launch new programming to replace our under-performing programming. Our new programming may not be successful or result in an increase in ratings. If our programming is not as popular as anticipated or declines in popularity, it could negatively affect our advertising revenue and, if prolonged, our subscription revenue, which could have a material adverse effect on our business, financial condition and results of operations. In addition, we may lose rights to popular programming and may not be able to replace such programming with comparably popular programming. Any shortfall, now or in the future, in the expected popularity of the sports events for which we have acquired rights, or in the television programming we expect to air, could have a material adverse effect on our business, financial condition and results of operations. For example, we had media rights to the 2014 World Cup, which significantly affected our results of operations in a positive manner in 2014 (and the periods in that year in which we recognized revenue connected with the 2014 World Cup). We will not carry the World Cup in 2018, 2022 and 2026, and therefore cannot expect an impact on our results of operations in those years similar to the impact we experienced in 2014.

We acquire programming (including sports programming) and make long-term commitments in advance of a television season and in some cases make multi-year programming commitments even though we cannot predict the ratings the programming will generate. We make prepayments for our rights to broadcast certain periodic sports programming prior to such programming being available. Under applicable accounting rules, as was the case with the 2010 World Cup media rights and the 2014 World Cup media rights, we are sometimes required to take an impairment charge on such programming rights if the prepayment amount for such rights exceeds the fair value of such rights, which is dependent on the amount of advertising sales for such programming. For example, at December 31, 2009, we recognized an impairment charge of $79.6 million in connection with the 2010 World Cup media rights and at September 30, 2013, we recognized an impairment charge of approximately $82.5 million in connection with the 2014 World Cup media rights. We may also incur an impairment loss on our programming rights in future fiscal periods, which may negatively impact our results of operations in such future fiscal periods.

In addition, we must still pay the program license fees pursuant to the Televisa PLA even if the programming supplied under the Televisa PLA is no longer popular or is not utilized to the same extent as previously utilized. We may replace unpopular programming before we recapture any significant portion of the costs incurred in connection with the programming or before we have fully amortized the costs which would negatively impact our results of operations.

Our failure to renew existing subscription or retransmission consent agreements or reach new subscription or retransmission consent agreements with MVPDs on acceptable terms could significantly reduce our carriage and therefore revenues, business, financial condition and results of operations.

We negotiate with MVPDs pursuant to multi-year carriage agreements that provide for the level of carriage that our networks will receive, and if applicable, for annual rate increases. Carriage of our networks is generally determined by package, such as whether our networks are included in the more widely distributed, general entertainment packages or lesser-distributed, specialized packages such as Hispanic or Spanish-language targeted packages, sports packages and movie/music packages. Subscription revenues are largely dependent on the rates negotiated in the subscription agreements, the number of subscribers that receive our networks or content, and the market demand for the content that we provide. The loss of one or more of these arrangements could reduce the distribution of our cable networks and reduce revenues we receive from subscriber fees and advertising, as applicable. Further, the loss of favorable packaging, positioning, pricing or other marketing opportunities with any MVPD could reduce revenues from subscriber fees.

We also periodically negotiate retransmission consent with MVPDs. The Communications Act of 1934, as amended (the “Communications Act”) prohibits MVPDs from retransmitting commercial broadcast television signals without first obtaining the broadcaster’s consent. Granting retransmission consent may involve compensation from the MVPD to the broadcaster for the use of the station’s signal. Alternatively, a local

 

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commercial television broadcast station can elect to require an MVPD to carry its signal, which is commonly referred to as “must-carry.” If the broadcast station elects to assert its must-carry rights in a particular market, the broadcaster cannot demand compensation from the MVPDs in that market.

In each case where we elect retransmission consent, we negotiate a written agreement with the MVPD governing the terms on which our stations will be carried, including compensation from the MVPD. These agreements are renewed or renegotiated periodically. We have reached agreements with MVPDs that, collectively, service substantially all pay-TV households. While we anticipate negotiating increased rates from MVPDs as we renew our agreements, we may not be able to negotiate anticipated rate increases and we cannot predict whether we will be able to renew these agreements or reach new agreements on acceptable terms or on a timely basis. If we are unable to reach agreement with an MVPD, we may choose to require that MVPD to cease carriage of our stations. The non-renewal or termination of retransmission agreements with MVPDs, or continued distribution to MVPDs on less favorable terms, could adversely affect our revenues and our ability to distribute our programming to a broad audience and our ability to sell advertising, which could have a material adverse effect on our business, financial condition and results of operations.

On December 19, 2014, the FCC issued a notice of proposed rulemaking that would expand the definition of MVPD under the FCC’s rules to include certain OTT distributors of video programming that stream content to consumers over the Internet. The proposal, if adopted, could result in changes to how both our television stations’ signals and cable networks are distributed, and to how viewers access our content. We cannot predict the outcome of the rulemaking proceeding or the effect of such a change on our revenues from carriage agreements and from advertising.

Future consolidation in the cable or satellite MVPD industry could have a material adverse effect on our business, financial condition and results of operations.

AT&T Inc. and DirecTV, and Charter Communications, Inc. (“Charter”) and Time Warner Cable, Inc. have entered into agreements to merge their respective companies. In addition, Charter has entered into an agreement to acquire Bright House Networks LLC. The transactions are subject to the prior approval of the FCC and the Department of Justice, which is pending. The AT&T Inc.–DirecTV merger, if approved and consummated, would result in the combination of two of the ten largest cable and satellite MVPDs. The Time Warner Cable - Charter - Bright House merger, if approved and consummated would result in the combination of three of the ten largest cable and satellite MVPDs. The MVPDs involved in these proposed transactions individually and collectively have access to a large percentage of the U.S. Hispanic population. Future consolidation may take place among MVPDs, further concentrating a large percentage of U.S. Hispanic population with fewer MVPDs. As a consequence, we may have less leverage in negotiating with MVPDs for distribution of our networks, which could impact our subscription revenues and have a material adverse effect on our business, financial condition and results of operations. Additionally, some cable and satellite MVPDs are affiliated with competitors of ours (Comcast owns and operates Telemundo, for example), which may negatively affect our negotiations with such MVPDs. If we are not successful in negotiating with such MVPDs for carriage of our networks, we may not be able to reach certain key demographics of the U.S. Hispanic population and this may affect our ability to attract advertisers and generate advertising revenues, which could have a material adverse effect on our business, financial condition and results of operations.

We face increased competition from digital and mobile distribution of media and if we are unable to successfully launch such services or if our digital and mobile distribution services do not gain market acceptance, it could have a material adverse effect on our business, financial condition and results of operations.

Technology used by consumers to access media is changing rapidly. Alternate distribution technologies, such as the Internet and wireless networks, are now viable platforms for the sale, viewing of and listening to content, and we expect that additional distribution technologies will continue to be developed. These alternate distribution technologies enable both the entry of new competitors in the entertainment space, as well as new products and services from existing competitors. These alternate distribution technologies, new competitors, and

 

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new products and services are also driving changes in consumer behavior as consumers seek, and are often given, more control over when, where and how they view or listen to content. Examples of these advances in technologies include delivery of content over the Internet, wireless and mobile platforms, both in linear and on-demand models; satellite radio; place-shifting content from the home to portable devices for viewing or listening outside the home; additional technologies that enable time-shifting both television and radio programs; and online distribution of over-the-air signals, whether authorized or unauthorized. Alternate distribution technologies, new competitors, new products and services, and new consumer behavior could have a material adverse effect on our viewership, and could affect the attractiveness of our programming to advertisers, all of which could have a material adverse effect on our business, financial condition and results of operations.

As alternate technologies enable new distribution, new competitors and new products and services, they also enable new behavior from consumers. Use of live and video streaming sites that provide unauthorized access to copyrighted content has increased as has the use of wireless devices (e.g., iPhones, iPads and Kindles) that allow consumers to view or listen to content in locations and at times of their choosing while avoiding viewership measurement or traditional commercial advertisements. Consumers, as well, have begun creating their own content, made available on user-generated content sites like YouTube. As more competitors, enabled by alternate distribution technologies, enter the market, and more original programming from myriad sources becomes available, consumers may choose to discontinue subscribing to MVPDs’ television services, and may instead choose to pay for less content from another provider (e.g., Netflix, Amazon, Hulu), or may instead choose to simply consume content available for free (e.g., YouTube, Vine). These shifting behaviors may, individually or collectively, adversely affect our viewership, our licensing revenue, our subscription revenue or our television and radio advertising revenues, which could have a material adverse effect on our business, financial condition and results of operations.

Our failure to successfully compete with other broadcasters and other entertainment and news media for our share of advertising revenue could have a material adverse effect on our business, financial condition and results of operations.

We compete with other broadcasters and other entertainment and news media for advertising revenue. There have also been an increasing number of competitors targeting the U.S. Hispanic population. The success of our television networks and radio stations is primarily dependent upon their share of overall advertising revenues within their markets, especially in the New York, Los Angeles and Miami-Fort Lauderdale markets. Our radio stations compete in their respective markets for audiences and advertising revenues with other stations of all formats, as well as with other media, such as satellite radio, cable services, television, digital, and mobile and direct mail, newspapers, magazines, and outdoor advertising. If we fail to compete successfully for our share of advertising revenue, it could have a material adverse effect on our business, financial condition and results of operations.

Damage to our brands, particularly the Univision brand, or our reputation could have a material adverse effect on our business, financial condition and results of operations.

We believe that our brands, particularly the Univision brand, are among our most valuable assets. We believe that our brand image, brand awareness and reputation foster our relationship with Hispanic America and have contributed significantly to the success of our business. We believe that the extension of our brands will contribute to the growth of our business. Maintaining, further enhancing and extending our brands may require us to make significant investments in marketing, programming or new products, services or events. These investments may not be successful. If we are not successful in maintaining or enhancing the image or awareness of our brands, or if our reputation is harmed for any reason, it could have a material adverse effect on our business, financial condition and results of operations.

 

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Our quarterly results of operations may fluctuate significantly, making it difficult to rely on period-to-period comparisons of our results of operations as an indication of our future performance.

Our results of operations may fluctuate from period to period as a result of numerous factors, including, but not limited to:

 

    demand for advertising on our platforms;

 

    global economic conditions;

 

    seasonal advertising patterns and seasonal influences on people’s viewing, reading and listening habits;

 

    changes in ratings;

 

    local market dynamics;

 

    increased consumption of our programming on digital or mobile devices;

 

    coverage of the major soccer tournaments, such as the World Cup or Gold Cup, by us or our competitors;

 

    competing English-language or Spanish-language programming;

 

    elections and other unique programming events;

 

    the timing of retransmission or affiliate agreement renewals; and

 

    other factors impacting the results of operations discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Many of the above factors are discussed in more detail elsewhere in this “Risk Factors” section and in the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” Many of these factors are outside of our control, and the variability and unpredictability of these factors could cause our results of operations to vary significantly from period-to-period and could cause us to fail to meet our expectations for revenues or results of operations for a given period. As a result of the variability of our results of operations, you should not rely on period to period comparisons of our results of operations as an indication of our future performance.

We may need to retain the rights to sports programming to attract advertising revenues, and, even if we retain such rights, there is no assurance that our sports programming will continue to be popular or that associated advertising revenue will generate sufficient revenue to offset the associated costs.

We have traditionally relied, in part, on the broadcasting of certain sports programming to attract advertising revenues. We are facing increasing competition for sports programming from other Spanish-language networks and from companies owning English and Spanish-language networks, and we may have to increase the price we are willing to pay or risk being outbid by our competitors for popular content. For example, while we had the rights to the 2014 World Cup, we did not obtain the rights to the 2018, 2022 and 2026 World Cups and, accordingly, we will not benefit from the expected audience for those events during those years. Moreover, particularly with long-term contracts for sports programming rights, our results of operations and cash flows over the term of a contract depend on a number of factors, including the strength of the advertising market, our audience size for the related programming and the ability to secure distribution from, and impose surcharges or obtain carriage on, MVPDs for the content, and the timing and amount of our rights payments. If we are unable to compete effectively with other networks or distribution channels for sports programming, this could affect our ratings, and result in a decline in advertising revenue. Even if we are able to secure rights to sports programming, there is no assurance that such programming will generate the expected advertising revenue or that the revenue generated by the related programming will exceed our cost, as well as the other costs of producing and distributing the programming. Under the Televisa PLA, we received the U.S. rights to broadcast Mexican First Division soccer league games for which Televisa owns or controls the U.S. rights. However, there is no

 

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assurance as to how the soccer teams will perform or if the Mexican soccer league games will continue to be popular in the U.S. There can be no guarantee that Televisa will maintain the U.S. broadcast rights to Mexican First Division soccer league games to the extent it currently possesses such rights, or at all. If Mexican soccer league games do not continue to be popular or, in the case of the teams not owned by Televisa, if the rights to such games cannot be obtained by us at an acceptable cost or at all, this could affect our ratings, and result in a decline in advertising revenue. In addition, the costs of some rights may increase. If the sports programming we have does not achieve sufficient consumer acceptance, or if we or Televisa cannot obtain or retain rights to popular sports programming on acceptable terms, or at all, this could have a material adverse effect on our business, financial condition and results of operations.

We receive a significant amount of our network programming from Televisa and if such programming is not as popular as it has been in the past or we were to lose access to such programming, it could have a material adverse effect on our business, financial condition and results of operations.

We receive a significant amount of programming for our broadcast television networks and cable offerings from Televisa pursuant to the Televisa PLA. The programming we receive under the Televisa PLA accounts for a majority of our primetime programming on the Univision Network and a substantial portion of the overall programming on our broadcast television networks, cable channels and our media networks digital platforms. Upon consummation of this offering, the Televisa PLA is not set to expire until the later of 2030 or 7.5 years after a Televisa Sell-Down, unless certain change of control events happen, in which case the Televisa PLA will expire on the later of 2025 or 7.5 years following a Televisa Sell-Down. If Televisa were to stop providing us programming for any reason or if the programming Televisa provides to us is not as popular as anticipated or it has been in the past, and if we are unable to replace such programming with new popular programming, this could lead to lower ratings and a decline in advertising revenues. We may also incur increased programming costs if we had to obtain new programming from other third parties or produce it ourselves. The loss or decline in popularity of programming from Televisa could have a material adverse effect on our business, financial condition and results of operations. For a description of the terms of the Televisa PLA, see “Business—Programming—Televisa.”

Scheduled increases in royalty payments under the Televisa PLA could have an adverse effect on our results of operations.

Under the Televisa PLA, Televisa receives royalties from us, based on 11.84% of substantially all of our Spanish-language media networks revenues through December 2017. Additionally, Televisa receives an incremental 2% in royalty payments on any of such media networks revenues above a contractual revenue base of $1.66 billion. After December 2017, the royalty payments to Televisa will increase to 16.13%, and commencing later in 2018, the rate will further increase to 16.45% until the expiration of the Televisa PLA. Additionally, Televisa will receive an incremental 2% in royalty payments (with the revenue base decreasing to $1.63 billion with the second rate increase). If we are not able to take advantage of the increased digital rights we received under the Televisa PLA or otherwise increase our overall margins, the increased royalties could have an adverse effect on our results of operations.

We produce our own programming and have launched new networks, and there is no assurance that our audience will accept our new programming or our new networks.

We launched Univision Studios in 2010 to produce our own programming and have produced limited programming to date. If we choose to increase the use of our own programming instead of using programming from Televisa or other parties, we will have to incur additional costs associated with producing our programming, which could have a material adverse effect on our business, financial condition and results of operations. The revenues derived from the production of such programming will depend primarily upon its acceptance by the public, and our own programming will have to compete with other Spanish-language programming. If our programming is not as popular as programming we receive from Televisa under the Televisa PLA, or from other third parties, this may lead to lower ratings and a decline in our advertising revenues and any such revenues may not offset the costs of producing such programming, which could have a material adverse effect on our business, financial condition and results of operations.

 

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Since 2012, we have launched Univision tlnovelas, Univision Deportes and ForoTV, and have invested in strategic partnerships that launched the Fusion television and digital networks, El Rey and Flama. If these networks are unable to attract or retain a large audience, we may not be able to garner favorable ratings and generate significant advertising revenues from such networks and we may record losses on our investments in these networks. In the three months ended March 31, 2015, the year ended December 31, 2014 and the year ended December 31, 2013, we recorded losses on equity method investments related to our investments in El Rey and Fusion. See Note 7 to our audited consolidated financial statements for the year ended December 31, 2014 and Note 5 to our unaudited consolidated financial statements for the three months ended March 31, 2015 contained elsewhere in this prospectus. In addition, we will need to make additional investments in such networks. If these networks are not successful, we may not be able to generate net gains on our investment, which could have a material adverse effect on our business, financial condition and results of operations.

We may not be able to monetize our content on our digital platforms effectively, which could have a material adverse effect on our business, financial condition and results of operations.

Univision.com is our flagship digital property and our largest digital platform. In 2012 we launched our UVideos Digital Network, which is a new video platform providing on-demand delivery of our programming, which are accessible through multiple devices and platforms including game consoles, smart phones, tablets and Internet-enabled televisions. While we receive digital business revenues from display advertising, we expect that video advertising, subscriber fees for our digital content that is provided on an authenticated basis on Univision.com and UVideos Digital Network digital content licensing, digital sponsorship advertising and other long form video content initiatives will play a larger role in our business going forward. However, our online video initiatives may not be successful in generating sufficient public acceptance or generate significant online revenue. In addition, some of our programming, such as telenovelas, which are often watched live and on a daily basis, may not successfully translate to digital platforms or obtain a significant audience on such platforms. If we are not able to gain a sufficient audience on our digital platforms and monetize our programming on these platforms successfully, it could have a material adverse effect on our business, financial condition and results of operations. We also face competition for online advertising from websites such as Telemundo.com, Yahoo!, en Español, MSN Latino, MaximumTV and ButacaTV and mobile applications, such as Buzzfeed and Vice, which provide Spanish-language digital content, and other online video providers such as Hulu, Netflix and Amazon Prime, for audience share and online advertising revenues, and if we are unable to compete successfully with such providers, it could have a material adverse effect on our business, financial condition and results of operations.

We may not be successful in monetizing our broadcast spectrum assets or receiving the anticipated proceeds from any such monetization.

We are evaluating the potential opportunity to monetize certain of our broadcast spectrum assets by participating in the Broadcast Incentive Auction or otherwise monetizing such assets. The Broadcast Incentive Auction is scheduled to occur in 2016, but may be cancelled, delayed or materially altered. Accordingly, we may not have an opportunity to participate in the Broadcast Incentive Auction on terms that are acceptable to us, or at all. If we do participate, the auction may not generate anticipated proceeds that would justify our participation in the auction. Moreover, any other efforts to monetize such assets that we undertake may not be successful.

The monetization of our spectrum assets could have an adverse effect on our television stations and require us to incur additional costs, which could have a material adverse effect on our business, financial condition and results of operations.

If we decide to monetize certain of our spectrum assets in the Broadcast Incentive Auction, we may elect to migrate certain of our television broadcast operations on a “shared” basis to spectrum already licensed to us or to third parties or otherwise modify our transmission facilities. This could result in new interference to our signals from other stations, reduce our over-the-air signal coverage or cause other service impairments to our television stations, or require us to incur relocation costs, which could have a material adverse effect on our business, financial condition and results of operations.

 

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The failure or destruction of satellites and transmitter facilities that we depend upon to distribute our programming could have a material adverse effect on our business, financial condition and results of operations.

We use satellite systems to transmit our broadcast and cable networks to affiliates. The distribution facilities include uplinks, communications satellites and downlinks. Transmissions may be disrupted as a result of local disasters including extreme weather that impair on-ground uplinks or downlinks, or as a result of an impairment of a satellite. Currently, there are a limited number of communications satellites available for the transmission of programming. If a disruption occurs, we may not be able to secure alternate distribution facilities in a timely manner. Failure to secure alternate distribution facilities in a timely manner could have a material adverse effect on our businesses and results of operations. Each of our television and radio stations and cable networks uses studio and transmitter facilities that are subject to damage or destruction. Failure to restore such facilities in a timely manner in the event of such damage could have a material adverse effect on our business, financial condition and results of operations.

We rely on network and information systems and other technologies for our business activities and certain events, such as computer hackings, viruses or other destructive or disruptive software or activities may disrupt our operations, which could have a material adverse effect on our business, financial condition and results of operations.

Network and information systems and other technologies are important to our business activities and operations. Network and information systems-related events, such as computer hackings, cyber threats, security breaches, viruses, or other destructive or disruptive software, process breakdowns or malicious or other activities could result in a disruption of our services and operations or improper disclosure of personal data or confidential information, which could damage our reputation and require us to expend resources to remedy any such breaches. Moreover, the amount and scope of insurance we maintain against losses resulting from any such events or security breaches may not be sufficient to cover our losses or otherwise adequately compensate us for any disruptions to our businesses that may result, and the occurrence of any such events or security breaches could have a material adverse effect on our business and results of operations. The risk of these systems-related events and security breaches occurring has intensified, in part because we maintain certain information necessary to conduct our businesses in digital form stored on cloud servers. While we develop and maintain systems seeking to prevent systems-related events and security breaches from occurring, the development and maintenance of these systems is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Despite these efforts, there can be no assurance that disruptions and security breaches will not occur in the future. Moreover, we may provide certain confidential, proprietary and personal information to third parties in connection with our businesses, and while we obtain assurances that these third parties will protect this information, there is a risk that this information may be compromised. The occurrence of any of such network or information systems-related events or security breaches could have a material adverse effect on our business, financial condition and results of operations.

We have a significant amount of goodwill and other intangible assets. We may never realize the full value of our intangible assets and any further impairment of a significant portion of our goodwill and other intangible assets could have a material adverse effect on our financial condition and results of operations.

Goodwill and intangible assets totaled approximately $8.2 billion at March 31, 2015 and $8.2 billion at December 31, 2014. At least annually, we test our goodwill and non-amortizable intangible assets for impairment and we continue to assess whether factors or indicators, such as a general economic slowdown, become apparent that would require an interim test. Impairment may result from, among other things, deterioration in our performance, adverse changes in applicable laws and regulations, including changes that restrict the activities of or affect the products or services sold by our businesses and a variety of other factors.

 

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The amount of any quantified impairment must be expensed immediately as a charge to operations. During the three months ended March 31, 2015, we recorded a non-cash impairment loss of $0.3 million related to the write-down of program rights. During the year ended December 31, 2014, we recorded non-cash impairment losses of $340.5 million, which consisted primarily of $182.9 million related to the impairment of Venevision International Enterprises LLC (“Venevision”) related prepaid programming assets made in conjunction with the amendment of the program license agreement with Venevision (the “Venevision PLA”), $133.4 million related to the write-down of broadcast radio licenses, $9.0 million related to the write-down of a trade name, $8.2 million related to the write-down of program rights and $7.0 million related to the write-down of property held for sale. During the year ended December 31, 2013, we recorded non-cash impairment losses of $439.4 million, which consisted primarily of $307.8 million related to the write-off of Radio segment goodwill, approximately $82.5 million related to the write-down of World Cup program rights prepayments, $43.4 million related to the write-down of broadcast radio licenses, and $2.5 million related to the residual write-off of the TeleFutura trade name as the network completed its rebranding as UniMás. During the year ended December 31, 2012, we recorded non-cash impairment losses of $90.4 million, including $47.6 million related to the write-down of a trade name, as a result of a decision to rebrand the TeleFutura Network as UniMás.

Appraisals of any of our segments impacting fair value of our assets or changes in estimates of our future cash flows could affect our impairment analysis in future periods and cause us to record either an additional expense for impairment of assets previously determined to be impaired or record an expense for impairment of other assets. Depending on future circumstances, we may never realize the full value of intangible assets. Any future determination or impairment of a significant portion of our goodwill and other intangibles could have a material adverse effect on our financial condition and results of operations.

Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.

We have incurred significant cumulative net taxable losses in the past. Our unused losses generally carry forward to offset future taxable income, if any, until such unused losses expire. We may be unable to use these losses to offset income before such unused losses expire. In addition, if a corporation undergoes an “ownership change” (generally defined as a greater than 50-percentage-point cumulative change in the equity ownership of certain stockholders over a rolling three-year period) under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), the corporation’s ability to use its pre-change net operating loss carryforwards, or NOLs, and other pre-change tax attributes to offset future taxable income or taxes may be limited. We may experience ownership changes as a result of this offering or future changes in our stock ownership (including dispositions of our stock by the Investors), some of which changes may not be within our control. If we are unable to use our net operating loss carryforwards before they expire, it could have a material adverse effect on our business, financial condition and results of operations.

Our business depends on the performance of our senior executives.

Our business depends on the efforts, abilities and expertise of our senior executives. These individuals are important to our success because they have been instrumental in setting our strategic direction, operating our business, identifying, recruiting and training key personnel and identifying business opportunities. The loss of one or more of these key individuals could impair our business until qualified replacements are found. We cannot assure you that these individuals could quickly be replaced with persons of equal experience and capabilities. Although we have employment agreements with certain of these individuals, we could not prevent them from terminating their employment with us.

Strikes or other union job actions could have a material adverse effect on our business, financial condition and results of operations.

We are directly or indirectly dependent upon highly specialized union members who are essential to our local news programs. We have collective bargaining agreements covering our union employees with varying

 

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expiration dates through 2018. If expiring collective bargaining agreements are not able to be renewed, it is possible that the affected unions could take action in the form of strikes or work stoppages. A strike by, or a lockout of, one or more of the unions could affect our ability to produce our local news programs, which could have a material adverse effect on our business, results of operations and financial condition.

Piracy of our programming and other content, including digital piracy, may decrease revenue received from the exploitation of our programming and other content, and could adversely affect our businesses, financial condition and operating results.

Piracy of programming and other unauthorized uses of content are made easier, and the enforcement of intellectual property rights more challenging, by technological advances allowing the conversion of programming and other content in to digital formats, which facilitates the creation, transmission and sharing of high quality unauthorized copies of our content. Technological advances, which facilitate the streaming of programming via the Internet to television screens and other devices, may increase piracy. In particular, piracy of programming and other content through unauthorized distribution on peer-to-peer computer networks and other platforms continues to present challenges of us. The proliferation of unauthorized access to programming has an adverse effect on our businesses and profitability because these unauthorized actions reduce the revenue that we potentially could receive from the legitimate sale and distribution of our services and products. Also, while legal protections exist, piracy and technological tools with which to carry it out continue to escalate, evolve and present challenges for enforcement. If legal protections fail to adapt to new technologies that facilitate piracy, we may be unable to effectively protect our rights, which could negatively impact our value and further increase our enforcement costs.

Our operations and properties are subject to environmental, health and safety laws and regulations that result in substantial costs and other risks.

Our facilities and operations, like those of other companies engaged in similar businesses, are subject to the requirements of various federal, state and local environmental and occupational safety and health laws and regulations, including those relating to the management, use, storage, disposal, emission and remediation of, and exposure to regulated substances, materials and wastes. We may be subject to fines or penalties if we fail to comply with any of these requirements. In addition, we may be liable for costs of investigation, removal or remediation of soil and groundwater contaminated by hazardous materials as the owner, lessee or operator of real property and facilities, without regard to whether we, as the owner, lessee or operator, knew of, or were responsible for, the contamination. We may also be liable for certain costs of remediating contamination at third party sites to which we sent waste for disposal. The requirements of these laws and regulations are complex, change frequently, and could become more stringent in the future. It is possible that these requirements will change or that liabilities will arise in the future in a manner that could have a material adverse effect on our business, financial condition and results of operations.

Risks Relating to our Federal Regulatory Framework

The Communications Act and FCC regulations limit the ability of non-U.S. citizens and certain other persons to invest in us.

The acquisition and ownership of our securities, directly or indirectly, by a foreign party could cause us to be in violation of the foreign investment limitations of the Communications Act which generally prohibit foreign parties from owning more than 25% of the equity or voting interests of a company owning a broadcast station licensee without the prior authorization of the FCC. Pursuant to the MOU, Televisa and Univision have agreed jointly to file a petition for declaratory ruling with the FCC seeking (a) an increase in the authorized aggregate foreign ownership of Univision’s issued and outstanding shares of common stock from 25% to 49% and (b) to authorize Televisa to hold up to 40% of Univision’s issued and outstanding shares of common stock (in both cases on a voting and an equity basis). Univision and Televisa have agreed to file the petition by the earlier of 30

 

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days after the consummation of Univision’s proposed initial public offering and January 5, 2016. A decision by the FCC not to grant, in whole or in part, the relief requested in the joint petition, could limit the ability of foreign investors to acquire and hold our securities. Separately, under the FCC’s media ownership rules, a direct or indirect owner of our securities could violate the FCC’s structural media ownership limitations if that person owned or acquired an “attributable” interest in certain other television stations nationally or in certain types of media properties in the same market as one or more of our broadcast stations. Under the FCC’s “attribution” policies the following relationships and interests generally are cognizable for purposes of the substantive media ownership restrictions: (1) ownership of 5% or more of a media company’s voting stock (except for investment companies, insurance companies and bank trust departments, whose holdings are subject to a 20% voting stock benchmark); (2) officers and directors of a media company and its direct or indirect parent(s); (3) any general partnership or limited liability company manager interest; (4) any limited partnership interest or limited liability company member interest that is not “insulated,” pursuant to FCC-prescribed criteria, from material involvement in the management or operations of the media company; (5) certain same-market time brokerage agreements; (6) certain same-market joint sales agreements (“JSAs”); and (7) under the FCC’s “equity/debt plus” standard, otherwise non-attributable equity or debt interests in a media company if the holder’s combined equity and debt interests amount to more than 33% of the “total asset value” of the media company and the holder has certain other interests in the media company or in another media property in the same market.

Our amended and restated certificate of incorporation includes provisions that permit us to take certain actions in order to comply with the Communications Act and FCC regulations, as applicable, regarding ownership of securities by such persons, including, but not limited to, the right to refuse to permit the transfer of shares of common stock, to suspend the rights of stock ownership, to require the conversion of shares of common stock into any other class of our common stock or warrants and to redeem shares of common stock. Non-U.S. citizen investors and investors with “attributable” interests in certain types of media properties should consider carefully these provisions in our amended and restated certificate of incorporation prior to investing in our Class A common stock, particularly given Televisa’s ownership of our Class T-3 common stock, which gives Televisa substantial voting rights. These restrictions may decrease the liquidity and value of our Class A common stock by reducing the pool of potential investors in our company and making the acquisition of control of us by third parties more difficult. In addition, these restrictions could adversely affect our ability to attract additional equity financing in the future or consummate an acquisition using shares of our capital stock. See “Description of Capital Stock—Federal Communications Laws Restrictions.”

Compliance with, and/or changes in, U.S. communications laws or other regulations may have an adverse effect on our business, financial condition and results of operations.

The television and radio industries in the U.S. are highly regulated by U.S. federal laws and regulations issued and administered by various federal agencies, including the FCC. See “Business—Federal Regulation.” The television and radio broadcasting industry is subject to extensive regulation by the FCC under the Communications Act. For example, we are required to obtain licenses from the FCC to operate our radio and television stations with maximum terms of eight years, renewable upon application. We cannot assure you that the FCC will approve our future license renewal applications or that the renewals will be for full terms or will not include special operating conditions or qualifications. The non-renewal, or renewal with substantial conditions or modifications, of one or more of our licenses could have a material adverse effect on our business, financial condition and results of operations.

The U.S. Congress and the FCC currently have under consideration, and may in the future adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation of each of our segments and ownership of our radio and television properties. For example, from time to time, proposals have been advanced in the U.S. Congress and at the FCC to shorten license terms for broadcast stations to less than eight years, to mandate the origination of certain levels and types of local programming, or to require radio and television broadcast stations to provide free advertising time to political candidates. Any restrictions on political/advocacy advertising may adversely affect our advertising revenues. In addition, some policymakers

 

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maintain that cable MVPDs should be required to offer a la carte programming to subscribers on a network by network basis or “family friendly” programming tiers. Unbundling packages of program services may increase both competition for carriage on distribution platforms and marketing expenses, which could adversely affect our cable networks’ business, financial condition and results of operations. Legislation could be enacted, which could require broadcasters to pay a performance royalty to record companies and performers of music which is broadcast on radio stations and increase the cost of music programming on our radio stations.

In addition, in a pending rulemaking proceeding, the FCC is seeking comment on a proposal to eliminate the UHF Discount, pursuant to which the audience reach attributed to UHF television stations is discounted by 50% for purposes of determining compliance with the FCC’s 39% national audience reach cap. If the UHF Discount were eliminated, our current reach would exceed the national cap. The FCC has proposed to “grandfather” existing station portfolios, like ours, that would exceed the cap upon elimination of the UHF Discount. However, absent a waiver, a grandfathered station group would have to come into compliance with the cap upon a sale or transfer of control. While this proceeding is pending and we cannot predict its outcome, or whether other similar proposals may be enacted in the future, upon elimination of the UHF Discount we may be required to divest television stations or take other steps to comply with the national cap in the event of a transfer of control of Univision, including a transfer of control to the public stockholders of Univision, or as otherwise may be required, pursuant to the MOU. Elimination of the UHF Discount may also adversely affect our ability to acquire additional television stations. See “Business—Federal Regulation—Ownership Restrictions” and “Certain Relationships and Related Person Transactions—Agreement on FCC Petition and FCC Transfer of Control Application.”

New laws or regulations with respect to retransmission consent or “must-carry” rights could significantly reduce our ability to obtain carriage and therefore revenues.

A number of entities have commenced operation, or announced plans to commence operation, of Internet protocol video systems or internet protocol television (“IPTV”) systems, using digital subscriber line (“DSL”), fiber optic to the home (“FTTH”) and other distribution technologies. In most cases, we have entered into retransmission consent agreements with such entities for carriage of our eligible stations. However, the issue of whether those services are subject to cable television regulations, including must carry or retransmission consent obligations, has not been resolved. If IPTV systems gain a significant share of the video distribution marketplace, and new laws and regulations fail to provide adequate must carry and/or retransmission consent rights, our ability to distribute our programming to the maximum number of potential viewers and to be compensated for such distribution may be limited.

As noted above, on December 19, 2014, the FCC issued a notice of proposed rulemaking that would expand the definition of MVPD under the FCC’s rules to include certain OTT distributors of video programming that stream content to consumers over the Internet. The proposal, if adopted, could result in changes to how both our television stations’ signals and cable networks are distributed, and to how viewers access our content. We cannot predict the outcome of the rulemaking proceeding or the effect of such a change on our revenues from carriage agreements and from advertising.

In early 2010, a number of cable and satellite MVPDs joined in a petition to urge the FCC to initiate a rulemaking proceeding to consider amending its retransmission consent rules. In March 2011, the FCC initiated a formal rulemaking proceeding to evaluate the proposals raised by the petitioners and more broadly to review its retransmission consent rules. Acknowledging its limited jurisdiction, the FCC solicited comments on a series of preliminary proposals intended to clarify certain rules, and provide guidance to the parties, concerning or affecting retransmission consent negotiations. In March 2014, the FCC adopted a rule prohibiting the joint negotiation of retransmission consent agreements by top-4 rated non-commonly-owned stations in the same market, and sought comment on possible changes to its rules regarding television stations’ rights to territorial exclusivity with respect to network and syndicated programming. However, in the STELA Reauthorization Act

 

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(“STELAR”), enacted in December 2014, Congress directed the FCC to undertake additional rulemakings concerning retransmission consent issues, including to adopt regulations to prohibit a television station from coordinating retransmission consent negotiations or negotiating retransmission consent on a joint basis with any other television station in the same market, irrespective of ratings, unless the stations are under common control. The FCC adopted such a rule in February 2015. The rule prohibits Univision and Entravision Communications Corporation (“Entravision”), from negotiating retransmission consent jointly, or from coordinating such negotiations, in six markets where both companies own television stations. Separately, on June 2, 2015, the FCC adopted an order implementing a further directive of STELAR that the FCC streamline its “effective competition” rules for small cable operators. Under the Communications Act, local franchising authorities (LFAs) may regulate a cable operator’s basic cable service tier rates and equipment charges only if the cable operator is not subject to effective competition. Historically the FCC presumed the absence of effective competition unless and until a cable operator rebutted the presumption. The FCC’s order reversed that approach and adopted a rebuttable presumption that all cable operators, regardless of size, are subject to effective competition. Some cable operators have taken the position that cable systems found to be subject to effective competition are not required to place television stations, like ours, that have elected retransmission consent on the basic cable service tier. The FCC’s order does not address this issue. The FCC also must implement other provisions in STELAR that could affect retransmission consent negotiations, including a proceeding launched in March 2015 concerning procedures for modification of a station’s “market” for purposes of determining its entitlement to cable and/or satellite carriage in certain circumstances. We cannot predict the outcome of future rulemakings on these matters.

Increased enforcement or enhancement of FCC indecency and other program content rules could have a material adverse effect on our business, financial condition and results of operations.

FCC rules prohibit the broadcast of obscene material at any time and/or indecent or profane material on television or radio broadcast stations between the hours of 6 a.m. and 10 p.m. Several years ago, the FCC stepped up its enforcement activities as they apply to indecency, and indicated that it would consider initiating license revocation proceedings for “serious” indecency violations. In the past several years, the FCC has found indecent content in a number of cases and has issued fines to the offending licensees. The current maximum permitted fines per station if the violator is determined by the FCC to have broadcast obscene, indecent or profane material are $350,000 per incident and $3,300,000 for a continuing violation, and the amount is subject to periodic adjustment for inflation. Fines have been assessed on a station-by-station basis, so that the broadcast of network programming containing allegedly indecent or profane material has resulted in fines levied against each station affiliated with that network which aired the programming containing such material. In June 2012, the U.S. Supreme Court struck down, on due process grounds, FCC Notices of Apparent Liability issued against stations affiliated with the FOX and ABC television networks in connection with their broadcast of “fleeting” or brief broadcasts of expletives or nudity and remanded the case to the FCC for further proceedings consistent with the Court’s opinion. In September 2012, the Chairman of the FCC directed FCC staff to commence a review of the FCC’s indecency policies, and to focus indecency enforcement on egregious cases while reducing the backlog of pending broadcast indecency complaints. On April 1, 2013, the FCC issued a public notice seeking comment on whether the FCC should make changes to its current broadcast indecency policies or maintain them as they are. The proceeding to review the FCC’s indecency policies is pending, and we cannot predict the timing or outcome of the proceeding. The determination of whether content is indecent is inherently subjective and therefore it can be difficult to predict whether particular content could violate indecency standards, particularly where programming is live and spontaneous. Our violation of the indecency rules could lead to sanctions that could have a material adverse effect on our business, financial condition and results of operations.

The impact of legislation that could result in the reallocation of broadcast spectrum may result in additional costs and affect our ability to provide competitive services, which could have a material adverse effect on our business, financial condition and results of operations.

Federal legislation was enacted in February 2012 that, among other things, authorizes the FCC to conduct a voluntary “incentive auction” in order to reallocate certain spectrum currently occupied by television broadcast

 

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stations to mobile wireless broadband services, to repack television stations into a smaller portion of the existing television spectrum band and to require television stations that do not participate in the auction to modify their transmission facilities, subject to reimbursement for reasonable relocation costs up to an industry-wide total of $1.75 billion.

The FCC has adopted rules concerning the incentive auction and the repacking of the television band, and it has indicated it expects the auction to occur during 2016. Meanwhile, the FCC is expected to adopt additional rules and procedures to implement the February 2012 legislation. Under the auction design proposed by the FCC, television stations will be given an opportunity to offer spectrum for sale to the government in a “reverse” auction while wireless providers will bid to acquire spectrum from the government in a simultaneous “forward” auction.

If some or all of our television stations are required to change frequencies, otherwise modify their operations in a repacking, or accept new interference from other stations, our stations could incur conversion costs, reduction of over-the-air signal coverage or other service impairments, which could have a material adverse effect on our business, financial condition and results of operations.

Risks Relating to Our Indebtedness

If we were to experience net losses in the future and for an extended period of time, our ability to comply with the credit agreement governing our senior secured credit facilities, the indentures governing our senior notes, including financial covenants and ratios, could be adversely affected, which could have a material adverse effect on our business, financial condition and results of operations.

We have in the past and may in the future experience net losses. If we were to experience net losses in the future and for an extended period of time, there could be an adverse effect on our liquidity and capital resources, including but not limited to, an adverse effect as a result of our failure to comply with the financial covenants or ratios in the credit agreement governing our senior secured credit facilities. In addition, if events or circumstances occur such that we were not able to generate positive cash flow and operate our business as it is presently conducted, we may be required to seek a waiver from our banks if we are unable to comply with our financial covenants or ratios, or we will have to take actions such as reducing or delaying capital investments, selling assets, restructuring or refinancing our debt or seeking additional equity capital. We may not, if necessary, be able to effect these actions on commercially reasonable terms, or at all. In addition, the indentures governing our senior notes and the credit agreement governing our senior secured credit facilities may restrict us from taking some of these actions. Any default under the credit agreement governing our senior secured credit facilities, inability to renegotiate such agreement if required, obtain additional financing if needed, or obtain waivers for any failure to comply with financial covenants and ratios would have a material adverse effect on our overall business and financial condition.

Our substantial indebtedness could adversely affect our business and your investment in our Class A common stock.

As of March 31, 2015, after giving pro forma effect to this offering and the application of the net proceeds as described in the “Use of Proceeds,” we estimated that we would have had outstanding total long-term indebtedness of approximately $            billion (excluding discount and premium), including approximately $            million of senior secured indebtedness (including $            million of capital leases but excluding $            million of letters of credit), approximately $            million of borrowings under our accounts receivable sale facility and approximately $            million of senior unsecured indebtedness. Our substantial level of indebtedness and other financial obligations increase the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on, or other amounts due, in respect of our indebtedness or refinance our existing debt prior to it becoming due. Our substantial debt could also have other significant consequences. For example, it could:

 

    increase our vulnerability to general adverse economic, competitive and industry conditions;

 

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    limit our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes on satisfactory terms or at all;

 

    require us to dedicate a substantial portion of our cash flow from operations to the payment of our indebtedness, thereby reducing the funds available to us for operations and any future business opportunities;

 

    expose us to the risk of increased interest rates as certain of our borrowings, including borrowings under our senior secured credit facilities, will be at variable rates of interest;

 

    restrict us from making strategic acquisitions or cause us to make non-strategic divestitures;

 

    limit our planning flexibility for, or ability to react to, changes in our business and the industries in which we operate;

 

    limit our ability to adjust to changing market conditions; and

 

    place us at a competitive disadvantage with competitors who may have less indebtedness and other obligations or greater access to financing.

If we fail to make any required payment under our senior secured credit facilities or to comply with any of the financial and operating covenants included in our senior secured credit facilities, we will be in default. Lenders under such facilities could then vote to accelerate the maturity of the indebtedness and foreclose upon our and our subsidiaries’ assets securing such indebtedness. Other creditors might then accelerate other indebtedness. If any of our creditors accelerate the maturity of the portion of our indebtedness held by such creditors, we may not have sufficient assets to satisfy our obligations under our senior secured credit facilities or our other indebtedness.

Despite our substantial indebtedness, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks associated with our substantial leverage.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. Although our senior secured credit facilities and the indentures governing our senior notes contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the indebtedness we can incur in compliance with these restrictions could be substantial. For example, we may, at our option and subject to certain conditions, increase our senior secured credit facilities in an aggregate amount not to exceed $750.0 million. Moreover, none of our indentures impose any limitation on our incurrence of liabilities that are not considered “Indebtedness” under the indentures, nor do they impose any limitation on liabilities incurred by subsidiaries, such as our subsidiary that operates Flama, that are designated as “unrestricted subsidiaries.” Further, although Televisa has certain approval rights with respect to our ability to incur additional indebtedness, we and our subsidiaries may still be able to incur substantially more debt. If we incur additional debt, the risks associated with our substantial leverage would increase.

Restrictive covenants in the credit agreement governing our senior secured credit facilities and the indentures governing our senior notes may restrict our ability to pursue our business strategies.

The credit agreement governing our senior secured credit facilities and the indentures governing our senior notes contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interests. These agreements governing our indebtedness include covenants restricting, among other things, our ability to:

 

    incur or guarantee additional debt or issue certain preferred stock;

 

    pay dividends or make distributions on our capital stock or redeem, repurchase or retire our capital stock or subordinated debt;

 

    make certain investments;

 

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    create liens on our or our subsidiary guarantors’ assets to secure debt;

 

    create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries that are not guarantors of the notes;

 

    enter into transactions with affiliates;

 

    merge or consolidate with another person or sell or otherwise dispose of all or substantially all of our assets;

 

    sell assets, including capital stock of our subsidiaries;

 

    alter the business that we conduct; and

 

    designate our subsidiaries as unrestricted subsidiaries.

In addition, under the credit agreement governing our senior secured revolving credit facility we are required to maintain a first-lien secured leverage ratio to the extent that usage under our senior secured revolving credit facility exceeds 25% of the commitments thereunder at the end of the applicable fiscal quarter. Our ability to meet that financial ratio can be affected by events beyond our control, and we cannot assure you that we will be able to meet that ratio. We were in compliance with such financial covenants as of March 31, 2015, but there can be no assurance that we will continue to be in compliance with such covenants in the future. A breach of any covenant or restriction contained in either our senior secured credit facilities or the indentures governing the senior notes could result in a default under those agreements. If any such default occurs, the lenders under our senior secured credit facilities or the holders of the senior notes, as the case may be, may elect (after the expiration of any applicable notice or grace periods) to declare all outstanding borrowings, together with accrued and unpaid interest and other amounts payable thereunder, to be immediately due and payable. In addition, an event of default under the indentures governing the senior notes would cause an event of default under our senior secured credit facilities, and the acceleration of debt under our senior secured credit facilities or the failure to pay that debt when due would cause an event of default under the indentures governing the notes and the existing senior notes (assuming the amount of that debt is in excess of $100.0 million for the senior notes). The lenders under our senior secured credit facilities also have the right upon an event of default thereunder to terminate any commitments they have to provide further borrowings. Further, following an event of default under our senior secured credit facilities, the lenders under these facilities will have the right to proceed against the collateral granted to them to secure that debt. If the debt under our senior secured credit facilities or the senior notes were to be accelerated, our assets may not be sufficient to repay in full that debt or any other debt that may become due as a result of that acceleration.

We are dependent upon our lenders for financing to execute our business strategy and meet our liquidity needs. If our lenders are unable to fund borrowings under their credit commitments or we are unable to borrow, it could have a material adverse effect on our business, financial condition and results of operations.

During periods of volatile credit markets, there is risk that any lenders, even those with strong balance sheets and sound lending practices, could fail or refuse to honor their legal commitments and obligations under existing credit commitments, including but not limited to, extending credit up to the maximum permitted by a credit facility. If our lenders are unable to fund borrowings under their revolving credit commitments or we are unable to borrow (such as having insufficient capacity under our borrowing base), it could be difficult in such environments to obtain sufficient funding to execute our business strategy or meet our liquidity needs, which could have a material adverse effect on our business, financial condition and results of operations.

Volatility and weakness in capital markets may adversely affect credit availability and related financing costs for us.

Bank and capital markets can experience periods of volatility and disruption. If the disruption in these markets is prolonged, our ability to refinance, and the related cost of refinancing, some or all of our debt could be

 

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adversely affected. Although we can currently access the bank and capital markets, there is no assurance that such markets will continue to be a reliable source of financing for us. In addition, our access to and cost of borrowing can be affected by our short and long term debt ratings assigned by ratings agencies. These factors, including the tightening of credit markets, or a decrease in our debt ratings, could adversely affect our ability to obtain cost-effective financing. Increased volatility and disruptions in the financial markets also could make it more difficult and more expensive for us to refinance outstanding indebtedness and obtain financing. In addition, the adoption of new statutes and regulations, the implementation of recently enacted laws or new interpretations or the enforcement of older laws and regulations applicable to the financial markets or the financial services industry could result in a reduction in the amount of available credit or an increase in the cost of credit. Disruptions in the financial markets can also adversely affect our lenders, insurers, customers and other counterparties.

Risks Related to This Offering and Ownership of Our Class A Common Stock

An active, liquid trading market for our Class A common stock may not develop.

Prior to this offering, there has been no public market for our Class A common stock. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market or how liquid that market may become. If an active trading market does not develop, you may have difficulty selling any of our shares that you purchase. The initial public offering price of our Class A common stock will be determined by negotiation between us and the underwriters and may not be indicative of prices that will prevail after the completion of this offering. The market price of our Class A common stock may decline below the initial public offering price, and you may not be able to resell your shares at, or above, the initial public offering price.

The price of our Class A common stock may be volatile and you could lose all or part of your investment.

Securities markets worldwide have experienced in the past, and are likely to experience in the future, significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions could reduce the market price of our Class A common stock regardless of our results of operations. The trading price of our Class A common stock is likely to be highly volatile and could be subject to wide price fluctuations in response to various factors, including, among other things, the risk factors described herein, and other factors beyond our control. Factors affecting the trading price of our Class A common stock could include:

 

    market conditions in the broader stock market;

 

    actual or anticipated variations in our quarterly financial and operating results;

 

    variations in operating results of similar companies;

 

    introduction of new services by us, our competitors or our customers;

 

    issuance of new, negative or changed securities analysts’ reports or recommendations or estimates;

 

    investor perceptions of us and the industries in which we or our customers operate;

 

    sales, or anticipated sales, of our stock, including sales by existing stockholders;

 

    additions or departures of key personnel;

 

    regulatory or political developments;

 

    stock-based compensation expense under applicable accounting standards;

 

    litigation and governmental investigations; and

 

    changing economic conditions.

These and other factors may cause the market price and demand for shares of our Class A common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of Class A common

 

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stock and may otherwise negatively affect the liquidity of our Class A common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. Securities litigation against us, regardless of the merits or outcome, could result in substantial costs and divert the time and attention of our management from our business, which could significantly harm our business, profitability and reputation.

Televisa has a significant equity interest in us and various approval rights, which could conflict with our interests or the interests of the other holders of our Class A common stock.

In 2010, Televisa acquired a 5% equity stake in us, and debentures convertible into an additional 30% equity stake in us (which, prior to the consummation of this offering, will be exchanged for the Televisa Warrants), subject to applicable laws and regulations and certain contractual limitations. In addition, pursuant to the MOU, Televisa has the right to designate and elect four members of our board of directors for as long as our board of directors consists of 22 members. Televisa also has approval rights with respect to certain matters as a lender or minority investor, including with respect to certain dividends and distributions, certain stock repurchases, bankruptcy, incurrence of indebtedness above specified levels and changing our core business. Further, certain matters, including entry or modification of material agreements and acquisition and sale of assets require the approval of at least four of the group comprised of Televisa and the Investors and holders of a majority of the shares held by such group. As a result, Televisa may have approval rights with respect to certain important decisions. The interests of Televisa could conflict with our or your interests in certain material respects. See “Certain Relationships and Related Person Transactions.”

Our Investors’ interests may not be aligned with the interests of our public stockholders.

Upon completion of this offering, our Investors will own approximately             shares of Class S-1 common stock, representing     % of our outstanding common stock and approximately     % of the voting power of our outstanding common stock (or approximately     % of our outstanding common stock and approximately     % of the voting power of our outstanding common stock, if the underwriters exercise their option to purchase additional shares in full). As such, our Investors will have significant influence over our reporting and corporate management and affairs, and our Investors will continue to control a majority of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval. Matters over which the Investors will, directly or indirectly, exercise control following this offering include:

 

    the election of our board of directors and the appointment and removal of our officers;

 

    mergers and other business combination transactions, including proposed transactions that would result in our stockholders receiving a premium price for their shares;

 

    other acquisitions or dispositions of businesses or assets;

 

    incurrence of indebtedness and the issuance of equity securities;

 

    repurchase of stock and payment of dividends; and

 

    the issuance of shares to management under our equity incentive plans.

In addition, the Investors have certain director and committee member designation rights. Even if the Investors’ ownership of our shares falls below a majority, they will have certain rights to designate directors and board committee members and may continue to be able to strongly influence or effectively control our decisions. In addition, under our amended and restated certificate of incorporation, the Investors and their affiliates will not have any obligation to present to us, and the Investors may separately pursue corporate opportunities of which they become aware, even if those opportunities are ones that we would have pursued if granted the opportunity, except in the case of Saban Capital Group, which has agreed to inform us of certain business opportunities in limited circumstances.

 

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Our directors, officers or stockholders, with certain exceptions, do not have obligations to present business opportunities to us and may compete with us.

Our amended and restated certificate of incorporation provides that our directors, officers and stockholders (except for such persons who are also our employees, and Saban Capital Group, which has agreed to inform us of certain business opportunities in the Hispanic market, in limited circumstances) do not have any obligation to offer us an opportunity to participate in business opportunities presented to them even if the opportunity is one that we might reasonably have pursued (and therefore may be free to compete with us in the same business or similar businesses), and that, to the extent permitted by law, such directors, officers and stockholders will not be liable to us or our stockholders for breach of any duty by reason of any such activities.

As a result, our stockholders, certain officers and directors and their respective affiliates will not be prohibited from investing in competing businesses or doing business with our customers. Therefore, we may be in competition with our stockholders, certain officers and directors or their respective affiliates, and we may not have knowledge of, or be able to pursue, transactions that could potentially be beneficial to us. Accordingly, we may lose certain corporate opportunities or suffer competitive harm, which could negatively impact our business or prospects. See “Description of Capital Stock—Corporate Opportunities.”

Future sales of our Class A common stock, or the perception in the public markets that these sales may occur, could cause the market price for our Class A common stock to decline.

Upon consummation of this offering, there will be             shares of our Class A common stock outstanding. All shares of Class A common stock sold in this offering will be freely transferable without restriction or further registration under the Securities Act of 1933, as amended (the “Securities Act”). At the time of this offering, we will also have registered             shares of Class A common stock reserved for issuance under our equity incentive plans of which             shares, options to purchase             shares and             restricted stock units are outstanding, which shares may be issued upon issuance and once vested, subject to any applicable lock-up restrictions then in effect. We cannot predict the effect, if any, that market sales of shares of our Class A common stock or the availability of shares of our common stock for sale will have on the market price of our Class A common stock prevailing from time to time. Sales of substantial amounts of shares of our Class A common stock in the public market, or the perception that those sales will occur, could cause the market price of our Class A common stock to decline. Of the remaining shares of common stock outstanding,             will be restricted securities within the meaning of Rule 144 under the Securities Act and subject to certain restrictions on resale following the consummation of this offering, restricted securities may be sold in the public market only if they are registered under the Securities Act or are sold pursuant to an exemption from registration such as Rule 144 or Rule 701, as described in “Shares Eligible for Future Sale.” An additional             shares of our common stock are issuable upon conversion of the Televisa Warrants. See “Certain Relationships and Related Person Transactions—Televisa Commercial Arrangements.” The Investors, Televisa, certain of our executive officers and certain other parties will have registration rights with respect to the shares of Class A common stock that they hold.

We, each of our officers and directors, the Investors and certain of our other stockholders have agreed that (subject to certain exceptions), for a period of 180 days from the date of this prospectus (subject to extension in certain circumstances), we and they will not, without the prior written consent of                      dispose of or hedge any shares or any securities convertible into or exchangeable for our Class A common stock.                      in its sole discretion may release any of the securities subject to these lock-up agreements at any time, which, in the case of officers and directors, shall be with notice. See “Underwriting.” Following the expiration of the applicable lock-up period, all of the issued and outstanding shares of our Class A common stock will be eligible for future sale, subject to the applicable volume, manner of sale, holding period and other limitations of Rule 144. See “Shares Eligible for Future Sale” for a discussion of the shares of Class A common stock that may be sold into the public market in the future.

 

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If you purchase shares of Class A common stock sold in this offering, you will incur immediate and substantial dilution.

The initial public offering price per share is substantially higher than the pro forma net tangible book value per share immediately after this offering. As a result, you will pay a price per share that substantially exceeds the book value of our assets after subtracting the book value of our liabilities. Based on our net tangible book value as of             and assuming an offering price of $         per share, the midpoint of the range set forth on the cover page of this prospectus, you will incur immediate and substantial dilution in the amount of $         per share. See “Dilution.”

We have elected to take advantage of the “controlled company” exemption to the corporate governance rules for publicly-listed companies, which could make our Class A common stock less attractive to some investors or otherwise harm our stock price.

Because we qualify as a “controlled company” under the corporate governance rules for publicly-listed companies, we are not required to have a majority of our board of directors be independent, nor are we required to have a compensation committee or a board committee performing the board nominating function comprised solely of independent directors or in the event we elect to have a compensation committee, it is not required to be comprised solely of independent directors. In light of our status as a controlled company, our board of directors has determined not to have a majority of our board of directors be independent. Accordingly, should the interests of our Investors differ from those of other stockholders, the other stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance rules for publicly-listed companies. Our status as a controlled company could make our Class A common stock less attractive to some investors or otherwise harm our stock price.

Anti-takeover protections in our amended and restated certificate of incorporation, our amended and restated bylaws or our contractual obligations may discourage or prevent a takeover of our company, even if an acquisition would be beneficial to our stockholders.

Provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as amended, as well as provisions of the Delaware General Corporation Law (the “DGCL”), could delay or make it more difficult to remove incumbent directors or could impede a merger, takeover or other business combination involving us or the replacement of our management or discourage a potential investor from making a tender offer for our Class A common stock, which, under certain circumstances, could reduce the market value of our Class A common stock, even if it would benefit our stockholders.

In addition, our board of directors has the authority to cause us to issue, without any further vote or action by the stockholders, up to             shares of preferred stock, par value $0.01 per share, in one or more series, to designate the number of shares constituting any series, and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, voting rights, rights and terms of redemption, redemption price or prices and liquidation preferences of such series. The issuance of shares of preferred stock or the adoption of a stockholder rights plan may have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders, even where stockholders are offered a premium for their shares. See “Description of Capital Stock.”

In addition, under the indentures governing our notes, a change of control would require us to offer to repurchase the applicable notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest. Under our senior secured credit facilities, a change of control would cause us to be in default and the lenders under our senior secured credit facilities would have the right to accelerate their loans, and if so accelerated, we would be required to repay all of our outstanding obligations under our senior secured credit facilities. In addition, from time to time we may enter into contracts that contain change of control provisions that limit the value of, or even terminate, the contract upon a change of control. Under our agreements with the Investors, we may not effect a change of control without written approval of 60% of our outstanding common

 

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stock held by the Investors and the approval of a majority of the Investors. In addition, our agreements with the Investors and Televisa contain provisions that may discourage interested parties from acquiring significant holdings of our common stock, such as transfer restrictions, approval rights and rights of first offer. In addition, specified change of control transactions may result in an earlier termination of the Televisa PLA. See “Business—Programming—Televisa,” “Description of Capital Stock—Approval Rights” and “Certain Relationships and Related Person Transactions—Stockholder Arrangements.” These change of control provisions may discourage a takeover of our company, even if an acquisition would be beneficial to our stockholders.

We will incur increased costs and obligations as a result of being a public company.

While we are in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act as a privately held company, we were not required to comply with certain other corporate governance and financial reporting practices and policies required of a publicly traded company. As a publicly traded company, we will incur additional legal, accounting and other expenses that we were not required to incur in the recent past. After this offering, we will be required to file with the Securities and Exchange Commission (the “SEC”) annual and quarterly information and other reports that are specified in Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We will also become subject to other reporting and corporate governance requirements, including the requirements of the NYSE or Nasdaq, and certain provisions of the Sarbanes-Oxley Act and the regulations promulgated thereunder, which will impose additional compliance obligations upon us. As a public company, we will, among other things:

 

    prepare and distribute periodic public reports and other stockholder communications in compliance with our obligations under the federal securities laws and applicable NYSE or Nasdaq rules;

 

    create or expand the roles and duties of our board of directors and committees of the board;

 

    institute more comprehensive financial reporting and disclosure compliance functions;

 

    enhance our investor relations function; and

 

    involve and retain to a greater degree outside counsel and accountants in the activities listed above.

These changes will require a commitment of additional resources and many of our competitors already comply with these obligations. We may not be successful in implementing these requirements and the commitment of resources required for implementing them could adversely affect our business, financial condition and results of operations.

The changes necessitated by becoming a public company require a significant commitment of resources and management oversight that has increased and may continue to increase our costs and might place a strain on our systems and resources. As a result, our management’s attention might be diverted from other business concerns. If we are unable to offset these costs through other savings then it could have a material adverse effect on our business, financial condition and results of operations.

Our failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business, financial condition and results of operations.

As a privately held company, we currently document and test the compliance of our internal controls on a periodic basis in accordance with Section 404. If we are unable to maintain adequate internal control over financial reporting, we may be unable to report our financial information on a timely basis, may suffer adverse regulatory consequences or violations of applicable stock exchange listing rules, may breach the covenants under our credit facilities and incur additional costs. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements.

 

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We are a holding company and rely on dividends, distributions and other payments, advances and transfers of funds from our subsidiaries to meet our obligations.

We are a holding company that does not conduct any business operations of our own. As a result, we are largely dependent upon cash dividends and distributions and other transfers from our subsidiaries to meet our obligations. The agreements governing the indebtedness of our subsidiaries impose restrictions on our subsidiaries’ ability to pay dividends or other distributions to us. The deterioration of the earnings from, or other available assets of, our subsidiaries for any reason could also limit or impair their ability to pay dividends or other distributions to us.

Because we do not intend to pay cash dividends in the foreseeable future, you may not receive any return on investment unless you are able to sell your Class A common stock for a price greater than your purchase price.

We do not intend in the foreseeable future to pay any dividends to holders of our Class A common stock. We currently intend to retain our future earnings, if any, for the foreseeable future, to repay indebtedness and to support our general corporate purposes. Therefore, you are not likely to receive any dividends on your Class A common stock for the foreseeable future, and the success of an investment in shares of our Class A common stock will depend upon any future appreciation in their value. There is no guarantee that shares of our Class A common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares. However, the payment of future dividends will be at the discretion of our board of directors, subject to applicable law, and will depend on, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions apply to the payment of dividends and other considerations that our board of directors deems relevant. Our debt agreements limit the amounts available to us to pay cash dividends, and, to the extent that we require additional funding, sources may prohibit the payment of a dividend. In addition, our agreements with Televisa provide for certain approval rights that may restrict our ability to pay cash dividends on our Class A common stock. See “Dividend Policy.” As a consequence of these limitations and restrictions, we may not be able to make, or may have to reduce or eliminate, the payment of dividends on our common stock.

If securities or industry analysts publish unfavorable research, about our business, the price of our common stock and our trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently publish research on our company. Once securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our common stock or publish unfavorable research about our business, the price of our common stock would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause the price of our common stock and trading volume to decline.

 

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FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this prospectus are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “should,” “can have,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.

The forward-looking statements contained in this prospectus are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this prospectus, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance anticipated in the forward-looking statements. We believe these factors include, but are not limited to, the following:

 

    cancellation, reductions or postponements of advertising or other changes in advertising practices among our advertisers;

 

    any impact of adverse economic conditions on our business and financial condition, including reduced advertising revenue;

 

    changes in the size of the U.S. Hispanic population, including the impact of federal and state immigration legislation and policies on both the U.S. Hispanic population and persons emigrating from Latin America;

 

    lack of audience acceptance of our content;

 

    varying popularity for programming, which we cannot predict at the time we may incur related costs;

 

    the failure to renew existing agreements or reach new agreements with MVPDs on acceptable subscription or “retransmission consent” terms;

 

    consolidation in the cable or satellite MVPD industry;

 

    the impact of increased competition from new technologies;

 

    competitive pressures from other broadcasters and other entertainment and news media;

 

    damage to our brands or reputation;

 

    fluctuations in our quarterly results, making it difficult to rely on period-to-period comparisons;

 

    failure to retain the rights to sports programming to attract advertising revenue;

 

    the loss of our ability to rely on Televisa for a significant amount of our network programming;

 

    an increase in royalty payments pursuant to the Televisa PLA;

 

    the failure of our new or existing businesses to produce projected revenues or cash flows;

 

    failure to monetize our content on our digital platforms;

 

    failure to monetize our spectrum assets;

 

    the failure or destruction of satellites or transmitter facilities that we depend upon to distribute our programming;

 

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    disruption of our business due to network and information systems-related events, such as computer hackings, viruses, or other destructive or disruptive software or activities;

 

    inability to realize the full value of our intangible assets;

 

    failure to utilize our net operating loss carryforwards;

 

    the loss of key executives;

 

    possible strikes or other union job actions;

 

    piracy of our programming and other content;

 

    environmental, health and safety laws and regulations;

 

    FCC media ownership rules;

 

    compliance with, and/or changes in, the rules and regulations of the FCC;

 

    new laws or regulations concerning retransmission consent or “must carry” rights;

 

    increased enforcement or enhancement of FCC indecency and other programming content rules;

 

    the impact of legislation on the reallocation of broadcast spectrum which may result in additional costs and affect our ability to provide competitive services;

 

    net losses in the future and for an extended period of time;

 

    our substantial indebtedness;

 

    our failure to service our debt or inability to comply with the agreements contained in our senior secured credit facilities and our indentures, including any financial covenants and ratios;

 

    our dependency on lenders to execute our business strategy and our inability to secure financing on suitable terms or at all;

 

    volatility and weakness in the capital markets;

 

    risks related to our ownership; and

 

    the other factors set forth under “Risk Factors.”

Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements. You should evaluate all forward-looking statements made in this prospectus in the context of these risks and uncertainties.

Any forward-looking statement made by us in this prospectus speaks only as of the date on which we make it. Factors or events that could cause our actual operating and financial performance to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

 

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USE OF PROCEEDS

We estimate that the net proceeds to us from our sale of              shares of Class A common stock in this offering will be approximately $         million, after deducting underwriting discounts and commissions and estimated expenses payable by us in connection with this offering. This assumes a public offering price of $         per share, which is the midpoint of the price range set forth on the cover of this prospectus.

We intend to use the net proceeds from this offering to repay indebtedness and for general corporate purposes.

A $1.00 increase (decrease) in the assumed initial public offering price of $         per share would increase (decrease) the net proceeds to us from this offering by $         million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated expenses payable by us.

 

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DIVIDEND POLICY

We do not intend to pay cash dividends on our Class A common stock in the foreseeable future. We are a holding company that does not conduct any business operations of our own. As a result, our ability to pay cash dividends on our Class A common stock is dependent upon cash dividends and distributions and other transfers from our subsidiaries. The amounts available to us to pay cash dividends are restricted by our subsidiaries’ debt agreements. Our ability to pay dividends on our Class A common stock is also subject to certain approval rights of Televisa and related limitations. See “Description of Capital Stock—Approval Rights.” The declaration and payment of dividends also is subject to the discretion of our board of directors and depends on various factors, including our net income, financial condition, cash requirements, future prospects and other factors deemed relevant by our board of directors.

In addition, under Delaware law, our board of directors may declare dividends only to the extent of our surplus (which is defined as total assets at fair market value minus total liabilities, minus statutory capital) or, if there is no surplus, out of our net profits for the then current and/or immediately preceding fiscal year.

Any future determination to pay dividends will be at the discretion of our board of directors, and will take into account:

 

    restrictions in our debt instruments;

 

    general economic business conditions;

 

    our capital requirements and the capital requirements of our subsidiaries;

 

    our financial condition and results of operations;

 

    the ability of our operating subsidiaries to pay dividends and make distributions to us; and

 

    such other factors as our board of directors may deem relevant.

 

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CAPITALIZATION

The following table sets forth our unaudited cash and cash equivalents and our unaudited capitalization as of March 31, 2015:

 

    on an actual basis;

 

    on a pro forma basis to give effect to (i) the issuance of $810.0 million in aggregate principal amount of the additional 2025 notes and the repurchase and redemption of the $750.0 million in aggregate principal amount of the 2020 notes outstanding as of March 31, 2015, (ii) the exchange of Televisa’s convertible debentures for the Televisa Warrants, (iii) a     -for-     stock split and the increase in authorized shares which will occur prior to the consummation of this offering and (iv) the Equity Recapitalization; and

 

    on a pro forma as adjusted basis to give effect to the sale of              shares of our Class A common stock in this offering and the application of the net proceeds received by us from this offering as described under “Use of Proceeds.”

This table should be read in conjunction with “Use of Proceeds,” “Selected Historical Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Capital Stock” and our financial statements and the related notes thereto contained elsewhere in this prospectus.

 

     As of March 31, 2015  
     Actual      Pro Forma      Pro
Forma As
Adjusted(1)
 
(in millions, except share data) (unaudited)                     

Cash and cash equivalents

   $ 250.0       $ 255.4       $                
  

 

 

    

 

 

    

 

 

 

Long-term debt (including current portion; reflects principal amount only):

Senior secured credit facilities:

Senior secured revolving credit facility(2)

$ 180.0    $ 180.0    $     

Senior secured term loan facilities

  4,558.6      4,558.6   
  

 

 

    

 

 

    

 

 

 

Senior secured credit facilities

  4,738.6      4,738.6   

7.875% Senior secured notes due 2020(3)

  750.0        

8.5% Senior notes due 2021

  815.0      815.0   

6.75% Senior secured notes due 2022

  1,107.9      1,107.9   

5.125% Senior secured notes due 2023

  1,200.0      1,200.0   

5.125% Senior secured notes due 2025(3)

  750.0      1,560.0   

Accounts receivable sale facility

  100.0      100.0   

Convertible debentures

  1,125.0        

Warrants

    

Existing capital leases

  75.6      75.6   
  

 

 

    

 

 

    

 

 

 

Total debt

  10,662.1   
  

 

 

    

 

 

    

 

 

 

 

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     As of March 31, 2015  
     Actual     Pro Forma     Pro
Forma As
Adjusted(1)
 
(in millions, except share data) (unaudited)                   

Equity:

      

Class A common stock, par value $0.001 per share, 50,000,000 authorized, and 6,481,609 issued and outstanding, actual;              authorized and none issued and outstanding, pro forma and pro forma as adjusted

      

Class B common stock, par value $0.001 per share, 50,000,000 authorized, and 3,477,917 issued and outstanding, actual; none authorized, issued or outstanding, pro forma and pro forma as adjusted

      

Class C common stock, par value $0.001 per share, 10,000,000 authorized and 842,850 issued and outstanding, actual; none authorized, issued or outstanding, pro forma and pro forma as adjusted

      

Class D common stock, par value $0.001 per share, 10,000,000 authorized and none issued and outstanding, actual; none authorized, issued or outstanding, pro forma and pro forma as adjusted

      

Class S-1 common stock, par value $0.001 per share, none authorized, issued or outstanding, actual;              authorized and              issued and outstanding, pro forma and pro forma as adjusted

      

Class S-2 common stock, par value $0.001 per share, none authorized, issued or outstanding, actual;              authorized and              issued and outstanding, pro forma and pro forma as adjusted

      

Class T-1 common stock, par value $0.001 per share, none authorized, issued or outstanding, actual;              authorized and              issued and outstanding, pro forma and pro forma as adjusted

      

Class T-2 common stock, par value $0.001 per share, none authorized, issued or outstanding, actual;              authorized and              issued and outstanding, pro forma and pro forma as adjusted

      

Class T-3 common stock, par value $0.001 per share, none authorized, issued or outstanding, actual; one share authorized, issued and outstanding, pro forma and pro forma as adjusted

      

Preferred Shares, par value $0.001 per share, 500,000 authorized and none issued and outstanding, actual, pro forma and pro forma as adjusted

      

Additional paid-in-capital

     4,301.0        4,301.0     

Accumulated deficit

     (6,194.7     (6,194.7  

Accumulated other comprehensive loss

     (18.1     (18.1  
  

 

 

   

 

 

   

 

 

 

Total Univision Holdings, Inc. stockholders’ deficit

  (1,911.8   (1,911.8
  

 

 

   

 

 

   

 

 

 

Non-controlling interest

  0.2      0.2   
  

 

 

   

 

 

   

 

 

 

Total stockholders’ deficit

  (1,911.6   (1,911.6
  

 

 

   

 

 

   

 

 

 

Total capitalization

$ 8,750.5    $ 8,810.5    $     
  

 

 

   

 

 

   

 

 

 

 

(1) Assuming the number of shares sold by us in this offering remains the same as set forth on the cover page, a $1.00 increase or decrease in the assumed initial public offering price would increase or decrease, as applicable, our total capitalization by approximately $         million.
(2) Balances do not include outstanding letters of credit and undrawn capacity.
(3) Amounts give pro forma effect to the issuance of $810.0 million in aggregate principal amount of the additional 2025 notes on April 21, 2015 and the repurchase and redemption of the $750.0 million in aggregate principal amount of 2020 notes outstanding as of March 31, 2015.

 

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DILUTION

If you invest in our Class A common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of Class A common stock and the net tangible book value per share of our Class A common stock upon the consummation of this offering. Dilution results from the fact that the per share offering price of our Class A common stock is substantially in excess of the book value per share attributable to our existing investors.

Our net tangible book value as of March 31, 2015 would have been approximately $        , or $         per share, of our Class A common stock. Net tangible book value represents the amount of total tangible assets less total liabilities and net tangible book value per share represents net tangible book value divided by the number of shares of Class A common stock outstanding.

After giving effect to (i) the sale of              shares of Class A common stock in this offering at the assumed initial public offering price of $         per share (the midpoint of the range set forth on the cover of this prospectus) and (ii) the application of the net proceeds from this offering, our pro forma net tangible book value would have been $        , or $         per share. This represents an immediate increase in pro forma net tangible book value of $         per share to our existing investors and an immediate dilution in pro forma net tangible book value of $         per share to new investors.

The following table illustrates this dilution on a per share of Class A common stock basis:

 

Assumed initial public offering price per share

$                

Net tangible book value per share as of March 31, 2015

$                

Increase in net tangible book value per share attributable to new investors

  

 

 

    

Pro forma net tangible book value per share after this offering

     

 

 

 

Dilution in pro forma net tangible book value per share to new investors

$     
     

 

 

 

The following table summarizes, as of March 31, 2015 after giving effect to this offering, the total number of shares of Class A common stock purchased from us, the total cash consideration paid to us and the average price per share paid by our existing investors and by new investors purchasing shares in this offering.

 

     Shares Purchased     Total Consideration     Average
Price
Per Share
 
     Number    Percent     Amount      Percent    

Existing stockholders

               $                             $                

New investors

             $     
  

 

  

 

 

   

 

 

    

 

 

   

Total

  100 $        100 $     
  

 

  

 

 

   

 

 

    

 

 

   

 

 

 

If the underwriters were to fully exercise their option to purchase              additional shares of our Class A common stock, the percentage of shares of our Class A common stock held by existing stockholders would be     %, and the percentage of shares of our Class A common stock held by new investors would be     %.

The above discussion and tables are based on the number of shares outstanding at March 31, 2015. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities could result in further dilution to our stockholders.

 

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SELECTED HISTORICAL FINANCIAL DATA

The following table sets forth our selected historical financial and other data for the periods and as of the dates indicated. The consolidated statement of operations data for each of the fiscal years ended December 31, 2014, 2013 and 2012, respectively, and our consolidated balance sheet data as of December 31, 2014 and 2013 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The consolidated statement of operations data for each of the fiscal years ended December 31, 2011 and 2010 and the consolidated balance sheet data as of December 31, 2012, 2011 and 2010 are derived from our audited consolidated financial statements which are not included elsewhere in this prospectus. The selected historical financial data as of March 31, 2015 and for the three months ended March 31, 2015 and 2014 are derived from our unaudited consolidated financial statements included elsewhere in this prospectus. In our opinion, such financial statements include all adjustments, consisting only of normal recurring adjustments that we consider necessary for a fair presentation of the financial information set forth in those statements.

Our historical results are not necessarily indicative of future operating results. You should read the information set forth below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our financial statements and the related notes thereto included elsewhere in this prospectus.

 

    Three Months
Ended March 31,
    Year Ended December 31,  
(in thousands except earnings per share data)   2015     2014     2014     2013     2012     2011     2010  
    (unaudited)                                

Statement of Operations and Comprehensive (Loss) Income Data

             

Revenue

  $ 624,700      $ 621,100      $ 2,911,400      $ 2,627,400      $ 2,442,000      $ 2,273,500      $ 2,245,200   

Direct operating expenses

    197,600        212,400        1,013,100        872,200        797,900        802,000        791,400   

Selling, general and administrative expenses

    170,900        170,800        718,800        712,600        750,400        621,900        606,900   

Impairment loss

    300               340,500        439,400        90,400        14,200        15,800   

Restructuring, severance and related charges

    6,200        3,300        41,200        29,400        44,200        37,100        13,100   

Televisa settlement and related charges

                                       1,300        452,000   

Depreciation and amortization

    42,600        39,300        163,800        145,900        130,300        124,900        117,800   

Termination of management and technical assistance agreements

    180,000                                             
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    27,100        195,300        634,000        427,900        628,800        672,100        248,200   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other expense (income):

             

Interest expense

    143,400        147,100        587,200        618,200        573,200        531,300        585,500   

Interest income

    (2,200     (1,400     (6,000     (3,500     (200     (2,500     (10,500

Interest rate swap expense (income)

           700        (500     (3,800                   (20,600

Amortization of deferred financing costs

    3,900        3,900        15,500        14,100        8,300        6,300        33,900   

Gain on investments

                                              (6,700

Loss on extinguishment of debt

    73,200        17,200        17,200        10,000        2,600        178,500        195,100   

Loss on equity method investments

    14,900        20,500        85,200        36,200        900                 

Other

    300        1,400        600        3,100        (500     (4,300     (2,600
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

    (206,400     5,900        (65,200     (246,400     44,500        (37,200     (525,900

(Benefit) provision for income taxes

    (64,000     2,300        (66,100     (462,400     58,900        35,200        30,100   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income from continuing operations

    (142,400     3,600        900        216,000        (14,400     (72,400     (556,000

Loss from discontinued operation, net of income taxes

                                              (400
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

  $ (142,400   $ 3,600      $ 900      $ 216,000      $ (14,400   $ (72,400   $ (556,400

Net loss attributable to non-controlling interest

    (100     (200     (1,000     (200                     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income attributable to Univision Holdings, Inc.

  $ (142,300   $ 3,800      $ 1,900      $ 216,200      $ (14,400   $ (72,400   $ (556,400
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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    Three Months
Ended March 31,
    Year Ended December 31,  
(in thousands except earnings per share data)   2015     2014     2014     2013     2012     2011     2010  
    (unaudited)                                

Other comprehensive income (loss), net of tax:

             

Unrealized (loss) gain on hedging activities

    (12,900     (13,300     (37,400     43,800        (15,000     (45,100     (47,000

Amortization of unrealized loss on hedging activities

    2,900        3,000        11,800        19,600                      33,000   

Unrealized gain on available for sale securities

    27,400        9,100        24,300        12,200                        

Currency translation adjustment

    (200     100        (700     200        (100     (1,500     (100
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

    17,200        (1,100     (2,000     75,800        (15,100     (46,600     (14,100
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive (loss) income

  $ (125,200   $ 2,500      $ (1,100   $ 291,800      $ (29,500   $ (119,000   $ (570,500

Comprehensive loss attributable to the non-controlling interest

    (100     (200     (1,000     (200                     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive (loss) income attributable to Univision Holdings, Inc.

  $ (125,100   $ 2,700      $ (100   $ 292,000      $ (29,500   $ (119,000   $ (570,500
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income per share attributable to Univision Holdings, Inc.:

             

Basic

  $ (13.17   $ 0.35      $ 0.18      $ 20.49      $ (1.36   $ (6.87   $ (55.40

Diluted

  $ (13.17   $ 0.35      $ 0.17      $ 14.60      $ (1.36   $ (6.87   $ (55.40

Basic weighted average shares outstanding

    10,802        10,791        10,791        10,549        10,552        10,546        10,044   

Diluted weighted average shares outstanding

    10,802        10,912        10,910        15,442        10,552        10,546        10,044   

 

     Three Months
Ended March 31,
    Year Ended December 31,  
(in thousands)    2015     2014     2013     2012     2011     2010  
     (unaudited)                                

Balance Sheet Data (at period end):

            

Current assets

   $ 1,127,100      $ 976,700      $ 972,200      $ 695,500      $ 655,700      $ 1,893,700   

Total assets

     10,585,600        10,386,300        10,584,700        10,346,700        10,311,400        11,569,500   

Current liabilities

     896,700        579,900        651,600        687,700        679,000        1,846,500   

Total liabilities

     12,497,200        12,174,000        12,504,500        12,567,600        12,528,100        13,687,100   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Long-term debt, including capital leases

     10,375,000        10,320,500        10,491,100        10,083,000        10,065,800        9,992,900   

Total Univision Holdings Inc.’s stockholders’ deficit

     (1,911,800     (1,788,000     (1,921,100     (2,220,900     (2,216,700     (2,117,600

Stockholders’ deficit:

     (1,911,600     (1,787,700     (1,919,800     (2,220,900     (2,216,700     (2,117,600

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with “Selected Financial Data” and our consolidated financial statements and the accompanying notes and the other financial information and operating data included elsewhere in this prospectus. Some of the information in this discussion and analysis, including the information about our industry and our plans and strategy for our business, our liquidity and capital resources and the other non-historical statements, include forward-looking statements. These forward-looking statements involve numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Risk Factors” and “Forward-Looking Statements.” Our actual results may vary materially from those contained in or implied by such forward-looking statements. Historical results of operations are not necessarily indicative of the results to be expected for any future period. Results for any interim period may not necessarily be indicative of the results that may be expected for a full year.

Overview

Univision is the leading media company serving Hispanic America. We have an over 50 year multi-generational relationship with our audience and are the most recognized and trusted brand in Hispanic America. We earned the highest brand equity score among U.S. media brands in a brand equity research study conducted by Burke in 2013. Our commitment to high-quality, culturally-relevant programming combined with our multi-platform media properties has enabled us to become the #1 destination for entertainment, sports, and news among U.S. Hispanics. We reach over 49 million unduplicated media consumers monthly making us increasingly valuable to both our distribution and marketing partners as the gateway to Hispanic America. We have a strategic relationship with Televisa, the largest media company in the Spanish-speaking world and a top programming producer for exclusive, long-term access to its premium entertainment and sports content in the U.S. We believe we are well-positioned for growth and have the opportunity to continue to expand our audience and to monetize our attractive audience demographics, leading content across multiple platforms and spectrum assets.

 

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The following chart sets forth certain historical and projected U.S. Hispanic demographic and Univision statistics:

 

LOGO

 

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Our History

We have established a unique relationship with our audience that leverages our brand and reach across our leading media platforms. Over our history, we have developed and maintained leading U.S. Spanish-language television networks, including the Univision Network, UniMás, Galavisión and Univision Deportes, the leading U.S. Spanish-language radio group (Univision Radio) and the most visited U.S. Spanish-language website (Univision.com). The following chart shows some of the key milestones we have achieved as we expanded our media platforms and extended the reach of our brand to become the leading media company serving Hispanic America.

 

LOGO

Our Segments

We operate our business through two segments: Media Networks and Radio.

 

   

Media Networks: Our principal segment is Media Networks, which includes our broadcast and cable networks, local television stations, and digital and mobile properties. We operate two broadcast television networks. Univision Network is the most-watched U.S. Spanish-language broadcast television network, available in approximately 94% of U.S. Hispanic television households. UniMás is among the leading Spanish-language broadcast television networks. In addition, we operate nine cable networks, including Galavisión, the most-watched U.S. Spanish-language cable network, and Univision Deportes, the most-watched Spanish-language sports cable network. We own and operate 60 local television stations, including stations located in the largest markets in the U.S., which represent the largest number of owned and operated local television stations among the major U.S. broadcast networks. In addition, we provide programming to 74 broadcast network station affiliates. Our digital properties include online and mobile websites, which generate, on average, 540 million page views per month. Univision.com is

 

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our flagship digital property and is the #1 most visited Spanish-language website among U.S. Hispanics. UVideos is our bilingual digital video network providing on-demand delivery of our programming across multiple devices. Our Media Networks segment accounted for approximately 90% of our revenues in 2014.

 

    Radio: We have the largest Spanish-language radio group in the U.S. and our stations are frequently ranked #1 regardless of language in many major markets. We own and operate 67 radio stations including stations in 16 of the top 25 DMAs. Our radio stations reach over 15 million listeners per week and cover approximately 75% of the U.S. Hispanic population. Our Radio segment also includes Uforia, a comprehensive digital music platform, which includes more than 65 live radio stations and a library of more than 20 million songs. Our Radio segment accounted for approximately 10% of our revenues in 2014.

Additionally, we incur and manage shared corporate expenses related to human resources, finance, legal and executive and certain assets separately from our two segments.

The following table provides revenue and OIBDA for each of our segments for the periods presented.

 

(in thousands)    Three Months Ended
March 31,
    Year Ended December 31,  
     2015     2014     2014     2013     2012  
     (unaudited)                    

Revenue

          

Media Networks

   $ 560,900      $ 552,200      $ 2,601,800      $ 2,292,400      $ 2,103,500   

Radio

     63,800        68,900        309,600        335,000        338,500   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated

$ 624,700    $ 621,100    $ 2,911,400    $ 2,627,400    $ 2,442,000   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OIBDA

Media Networks

$ 273,400    $ 254,300    $ 1,225,500    $ 1,063,000    $ 944,400   

Radio

  15,300      14,200      90,300      107,900      97,000   

Corporate

  (22,200   (23,400   (92,000   (92,000   (95,500
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated

$ 266,500    $ 245,100    $ 1,223,800    $ 1,078,900    $ 945,900   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

How We Assess Performance of Our Business

In assessing our performance, we use a variety of financial and operational measures, including revenue, OIBDA, Bank Credit OIBDA, Levered Free Cash Flow and net income.

Revenue

Ratings

Our advertising and subscription revenues are impacted by the strength of our television and radio ratings. The ratings of our programs, which are an indication of market acceptance, directly affect our ability to generate advertising revenues during the airing of the program. In addition, programming with greater market acceptance is more likely to generate incremental revenues through increases in the subscription fees that we are able to negotiate with MVPDs.

Advertising

We generate advertising revenue from the sale of advertising on our broadcast and cable networks, our local television and radio stations and our digital properties and we have increasingly generated revenues by selling advertising across platforms.

 

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For our broadcast and cable networks, we sell advertising time in the upfront and scatter markets. In the upfront market, advertisers buy advertising time for the upcoming season in advance, often at discounted rates. A portion of many upfront advertising commitments includes options whereby advertisers may reduce their purchase commitments. In the scatter market, advertisers buy advertising time close to the time when the commercials will be run and often pay a premium. The mix between the upfront and scatter markets is based upon a number of factors, such as pricing, demand for advertising time, type of programming and economic conditions. In some cases, our network advertising sales are subject to ratings guarantees that require us to provide additional advertising time if the guaranteed audience levels are not achieved.

For our local television and radio stations, we sell national spot advertising and local advertising. National spot advertising represents time sold to advertisers that advertise in more than one DMA. Local advertising revenues are generated from both local merchants and service providers and regional and national businesses and advertising agencies located in a particular DMA. We often sell our local advertising as a package across our platforms, including our local television, radio and related digital properties. We act as the exclusive national sales representative for the sale of all national advertising on our broadcast network affiliate stations and we generally receive commission income equal to 9.4% of our affiliate stations’ total net advertising sales for representing them on national sales.

We also generate Media Networks and Radio segment revenue from the sale of display, mobile and video advertising, as well as sponsorships, on our websites and mobile applications. This advertising is sold on a stand-alone basis and as part of advertising packages on multiple platforms.

Growth in advertising sales comes from increased viewership and pricing, expanded available inventory and the launch of new platforms. Advertising revenue is subject to seasonality, market-based variations, general economic conditions, political cycles and advocacy campaigns, and incremental revenue from major soccer tournaments, including the World Cup.

Subscription

Subscription revenue includes fees charged for the right to view our broadcast and cable networks as well as our content made available to customers through a variety of distribution platforms and viewing devices. Subscription revenue is principally comprised of fees received from MVPDs for carriage of our cable networks as well as for authorizing carriage (“retransmission consent”) of our Univision and UniMás broadcast networks aired on our owned television stations. We also receive retransmission consent fees related to television stations affiliated with our Univision and UniMás broadcast networks that we do not own (referred to as “our affiliates”). We have agreements with substantially all of our affiliates whereby we negotiate the terms of retransmission consent agreements for their Univision and UniMás stations. As part of these arrangements, we share the retransmission consent fees that we receive with our affiliates. As we negotiate new contracts, retransmission fees may increase and may make up an increasingly larger percentage of our revenues. We also receive subscription revenue related to fees for our digital content provided on an authenticated basis.

Typically, our television networks are aired pursuant to multi-year carriage agreements that provide for the level of carriage that our networks will receive, and if applicable, for annual rate increases. Carriage of our networks is generally determined by package, such as whether our networks are included in the more widely distributed, general entertainment packages or lesser-distributed, specialized packages, such as U.S. Hispanic or Spanish-language targeted packages, sports packages, and movies or music packages. Subscription revenues are largely dependent on the rates negotiated in the agreements, the number of subscribers that receive our networks or content, and the market demand for the content that we provide.

Other Revenue

We generate other revenue from contractual commitments (including non-cash advertising and promotional revenue primarily related to Televisa). In addition we license television content initially aired on our networks for digital streaming and to other cable and satellite providers.

 

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OIBDA

OIBDA represents operating income before depreciation, amortization and certain additional adjustments to operating income. In calculating OIBDA our operating income is adjusted for share-based compensation and other non-cash charges, restructuring and severance charges, management and technical assistance agreement fees as well as other non-operating related items. Management uses OIBDA or comparable metrics to evaluate our operating performance, for planning and forecasting future business operations and to measure our ability to service debt and meet our other cash needs. We believe that OIBDA is used in the broadcast industry by analysts, investors and lenders and serves as a valuable performance assessment metric for investors. For important information about OIBDA and a reconciliation of OIBDA to net (loss) income attributable to Univision Holdings, Inc., see “Summary—Summary Historical Financial and Other Data.”

Bank Credit OIBDA

Bank Credit OIBDA represents OIBDA with certain additional adjustments permitted under our senior secured credit facilities including specified business optimization expenses, income from unrestricted subsidiaries as defined in our senior secured credit facilities and certain other expenses. See Note 9 to our audited consolidated financial statements for the year ended December 31, 2014 included elsewhere in this prospectus for more information regarding how Bank Credit OIBDA is calculated in our senior secured credit facilities. Management uses Bank Credit OIBDA to evaluate our operating performance, for planning and forecasting future business operations and to measure our ability to service our debt and meet our other cash needs. For important information about Bank Credit OIBDA and a reconciliation of Bank Credit OIBDA to net (loss) income attributable to Univision Holdings, Inc., see “Summary—Summary Historical Financial and Other Data.”

Levered Free Cash Flow

Levered Free Cash Flow represents OIBDA less specified cash and non-cash items deducted in calculating OIBDA and less capital expenditures plus the net change in working capital. We consider Levered Free Cash Flow as a measure of performance and as a tool to assist our investors in determining valuation and our potential for growth. Management also uses Levered Free Cash Flow to assess our cash needs, in particular our capacity to reduce our debt and fund investments. We believe that Levered Free Cash Flow is used in the media industry by analysts, investors and lenders and serves as a valuable performance assessment metric for investors. For important information about Levered Free Cash Flow and a reconciliation of Levered Free Cash Flow to net (loss) income attributable to Univision Holdings, Inc., See “Summary—Summary Historical Financial and Other Data.”

Other Factors Affecting Our Results of Operations

Direct Operating Expenses

Direct operating expenses consist primarily of programming costs, including license fees, and technical costs. Programming costs also include sports and other special events, news and other original programming. Under the program license agreement with Televisa effective as of February 28, 2011 (the “2011 Televisa PLA”) until the Televisa PLA was amended in July 2015, we paid Televisa royalties, based on 11.91% of substantially all of our Spanish-language media networks revenues through December 2017. Additionally, Televisa received an incremental 2% in royalty payments on any of such media networks revenues above the 2009 revenue base of $1.65 billion. Under the amended terms of the Televisa PLA, effective January 1, 2015, we pay Televisa royalties, based on 11.84% of substantially all of our Spanish-language media networks revenues through December 2017. Additionally, Televisa receives an incremental 2% in royalty payments on any such media networks revenues above a contractual revenue base of $1.66 billion. After December 2017, the royalty payments to Televisa will increase to 16.13%, and commencing later in 2018, the rate will further increase to 16.45% until the expiration of the Televisa PLA. Additionally Televisa will receive an incremental 2% in royalty payments (with the revenue base decreasing to $1.63 billion with the second rate increase). In December 2014, we entered

 

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into a binding term sheet to, among other things, amend the Venevision PLA, which released us from future payment obligations to Venevision and certain other claims. In addition, we agreed to pay approximately $24.0 million per year through December 2017 and Venevision is no longer required to produce a certain number of program hours for us. See Notes 5 and 20 to our audited consolidated financial statements for the year ended December 31, 2014 and Notes 6 and 15 to our unaudited consolidated financial statements for the three months ended March 31, 2015 included elsewhere in this prospectus.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include salaries and benefits for our sales, marketing, management and administrative personnel, selling, research, promotions, management fees, professional fees and other general and administrative expenses. We expect to incur additional legal, accounting and other expenses in connection with being a public company following the consummation of this offering even though we are in compliance with the internal controls requirements of Section 404 of the Sarbanes-Oxley Act at the time of this offering.

Impairment Loss

We test the value of our intangible assets for impairment annually, or more frequently if circumstances indicate that a possible impairment exists. Our intangible assets include goodwill, television and radio broadcast licenses and programming rights under various agreements, including agreements governing our World Cup rights. We record any non-cash write-down of the value of our intangible assets as an impairment loss. See Notes 1, 4, 5 and 18 to our audited consolidated financial statements for the year ended December 31, 2014 and Note 14 to our unaudited consolidated financial statements for the three months ended March 31, 2015 included elsewhere in this prospectus for information related to our impairment losses.

Restructuring, Severance and Related Charges

We incur restructuring, severance and related charges, principally in connection with restructuring activities that we have undertaken from time to time as part of broader-based cost-saving initiatives as well as initiatives to improve performance, collaboration and operational efficiencies across our local media platforms. These charges include employee termination benefits and severance charges, as well as expenses related to consolidating offices and other contract terminations. See Note 3 to our audited consolidated financial statements for the year ended December 31, 2014 and Note 3 to our unaudited consolidated financial statements for the three months ended March 31, 2015 included elsewhere in this prospectus for information related to our restructuring and severance activities.

Interest Rate Swaps

We utilize interest rate swaps as a means to add stability to interest expense and manage our exposure to interest rate movements. For interest rate swap contracts accounted for as cash flow hedges, the effective portion of the change in fair value is recorded in accumulated other comprehensive loss (“AOCL”), net of tax, and is reclassified to earnings as an adjustment to interest expense and the ineffective portion of the change in fair value, if any, is recorded directly to earnings through interest rate swap (income) expense. For interest rate swap contracts not designated as hedging instruments, the interest rate swaps are marked to market with the change in fair value recorded directly in earnings through interest rate swap (income) expense. See “—Debt and Financing Transactions—Interest Rate Swaps.”

Refinancing Transactions

We have concluded a number of debt refinancing transactions over the last few years. In connection with our debt refinancing transactions, to the extent that the transaction qualifies as a debt extinguishment, we

 

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write-off any unamortized deferred financing costs or unamortized discounts or premiums related to the extinguished debt instruments. These charges are included in the loss on extinguishment of debt in the periods in which the debt refinancing transactions occur. Costs related to the new debt instruments are capitalized as deferred financing costs and amortized over the term of the new debt. On April 21, 2015, we utilized the proceeds from the issuance of the additional 2025 notes to repurchase and retire $711.7 million aggregate principal amount of the 2020 notes. Also on April 21, 2015, we issued a redemption notice for the remaining outstanding $38.3 million aggregate principal amount of the 2020 notes. We will record charges related to these extinguishments of debt and costs related to the issuance of the additional 2025 notes for the three months ended June 30, 2015. See Note 9 to our audited consolidated financial statements for the year ended December 31, 2014 and Note 7 to our unaudited consolidated financial statements for the three months ended March 31, 2015 included elsewhere in this prospectus.

Share-based Compensation Expense

We recognize non-cash share-based compensation expense related to equity-based awards to employees and equity awards related to a non-employee consulting arrangement with an entity controlled by our Chairman of the board of directors. In compensation for the consulting services, equity units in various limited liability companies that hold a portion of our common stock owned by the Investors and Televisa were granted to that entity, entitling the entity to payments upon defined liquidation events based on the appreciation in their investments in us. Since the related consulting services were being provided to us, we record an expense upon the vesting of the equity units. A portion of these units vested in 2012 and we recorded non-cash share-based compensation expense of $18.5 million in 2012. Certain other units will only vest at the time of the defined liquidation event and we will record an additional non-cash share-based compensation expense at that time. See Note 15 to our audited consolidated financial statements for the year ended December 31, 2014 and Note 12 to our unaudited consolidated financial statements for the three months ended March 31, 2015 included elsewhere in this prospectus for information related to our share-based compensation.

 

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Results of Operations

Overview

The following table sets forth our consolidated statement of operations for the periods presented:

 

     Three Months Ended
March 31,
    Year Ended December 31,  
     2015     2014     2014     2013     2012  
(in thousands)    (unaudited)                    

Revenue

   $ 624,700      $ 621,100      $ 2,911,400      $ 2,627,400      $ 2,442,000   

Direct operating expenses:

          

Programming excluding variable program license fee

     116,300        110,000        540,500        438,200        388,400   

Variable program license fee

     59,900        79,400        380,400        338,100        311,100   

Other

     21,400        23,000        92,200        95,900        98,400   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  197,600      212,400      1,013,100      872,200      797,900   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Selling, general and administrative expenses

  170,900      170,800      718,800      712,600      750,400   

Impairment loss

  300           340,500      439,400      90,400   

Restructuring, severance and related charges

  6,200      3,300      41,200      29,400      44,200   

Depreciation and amortization

  42,600      39,300      163,800      145,900      130,300   

Termination of management and technical assistance agreements

  180,000                       
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

  27,100      195,300      634,000      427,900      628,800   

Other expense (income):

Interest expense

  143,400      147,100      587,200      618,200      573,200   

Interest income

  (2,200   (1,400   (6,000   (3,500   (200

Interest rate swap expense (income)

       700      (500   (3,800     

Amortization of deferred financing costs

  3,900      3,900      15,500      14,100      8,300   

Loss on extinguishment of debt

  73,200      17,200      17,200      10,000      2,600   

Loss on equity method investments

  14,900      20,500      85,200      36,200      900   

Other

  300      1,400      600      3,100      (500
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

  (206,400   5,900      (65,200   (246,400   44,500   

(Benefit) provision for income taxes

  (64,000   2,300      (66,100   (462,400   58,900   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

  (142,400   3,600      900      216,000      (14,400

Net loss attributable to non-controlling interest

  (100   (200   (1,000   (200     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income attributable to Univision Holdings, Inc.

$ (142,300 $ 3,800    $ 1,900    $ 216,200    $ (14,400
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Three Months Ended March 31, 2015 Compared to Three Months Ended March 31, 2014

In comparing our results of operations for the three months ended March 31, 2015 (“2015”) with the three months ended March 31, 2014 (“2014”), in addition to the factors referenced above affecting our results, the following should be noted:

 

   

In 2015, we had expenses that did not exist in 2014 associated with the termination effective March 31, 2015 of the management agreement among us, our indirect, wholly-owned subsidiary Univision Communications Inc. (“UCI”) and affiliates of the Investors (the “Sponsor Management Agreement”) and the technical assistance agreement with Televisa. Pursuant to such termination agreements, we paid

 

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termination fees of $112.4 million and $67.6 million to affiliates of the Investors and Televisa, respectively, on April 14, 2015 (which were accrued as of March 31, 2015). Under the termination agreements we will continue to pay quarterly aggregate service fees to affiliates of the Investors and Televisa at the same aggregate rate as under the Sponsor Management Agreement and the technical assistance agreement with Televisa until no later than December 31, 2015.

 

    In 2015 and 2014, we recorded $6.2 million and $3.3 million, respectively, in restructuring, severance and related charges. These charges relate to restructuring and severance agreements with employees and executives, as well as costs related to consolidating offices and other contract terminations in 2015 and 2014 (related to restructuring activities across local media platforms initiated in 2014 and other continuing restructuring activities initiated in 2012).

 

    In 2015 and 2014, we recorded a loss on extinguishment of debt of $73.2 million and $17.2 million, respectively, as a result of refinancing our debt. The loss includes a premium, fees, the write-off of certain unamortized deferred financing costs and the write-off of certain unamortized discount and premium related to instruments that were repaid.

Revenue. Revenue was $624.7 million in 2015 compared to $621.1 million in 2014, an increase of $3.6 million or 0.6%, which reflected an increase of 1.6% in the Media Networks segment and a decrease of 7.4% in the Radio segment.

Advertising revenue was $408.8 million in 2015 compared to $427.1 million in 2014, a decrease of $18.3 million or 4.3%. Advertising revenue in 2015 included political/advocacy advertising revenue of $14.1 million. Advertising revenue in 2014 included (i) political/advocacy advertising revenue of $23.5 million and (ii) estimated incremental World Cup advertising revenue of $4.6 million. Non-advertising revenue (which was primarily comprised of subscriber fee revenue, other contractual revenue and content licensing revenue) was $215.9 million in 2015 compared to $194.0 million in 2014, an increase of $21.9 million or 11.3% primarily due to an increase in subscriber fees of $13.6 million primarily due to contractual rate increases and additional distribution of the Univision Deportes network and higher content licensing revenue of $6.6 million. Subscriber fee revenue was $172.2 million in 2015 compared to $158.6 million in 2014.

Media Networks segment revenues were $560.9 million in 2015 compared to $552.2 million in 2014, an increase of $8.7 million or 1.6%. Advertising revenue was $348.4 million in 2015 as compared to $362.3 million in 2014, a decrease of $13.9 million or 3.8%. Advertising revenue in 2015 included political/advocacy advertising revenue of $11.6 million. Advertising revenue in 2014 included (i) political/advocacy advertising revenue of $19.8 million and (ii) estimated incremental World Cup advertising revenue of $4.6 million. Advertising revenue for our television platforms was $334.2 million in 2015 compared to $348.6 million in 2014, a decrease of $14.4 million or 4.1%. Advertising revenue in 2015 for our television platforms included political/advocacy advertising revenue of $11.1 million. Advertising revenue in 2014 for our television platforms included (i) political/advocacy advertising revenue of $19.8 million and (ii) estimated incremental World Cup advertising revenue of $4.4 million. Advertising revenue for the Media Networks digital platform was $14.2 million in 2015 compared to $13.7 million in 2014, an increase of $0.5 million. Advertising revenue for the Media Networks digital platform included political/advocacy revenue of $0.5 million in 2015 and estimated incremental World Cup advertising revenue of $0.2 million in 2014. Non-advertising revenue (which was primarily comprised of subscriber fee revenue, other contractual revenue and content licensing revenue) in the Media Networks segment was $212.5 million in 2015 compared to $189.9 million in 2014, an increase of $22.6 million or 11.9% primarily due to an increase in subscriber fee revenue of $13.6 million and an increase in content licensing revenue of $6.6 million.

Radio segment revenues were $63.8 million in 2015 compared to $68.9 million in 2014, a decrease of $5.1 million or 7.4%. Advertising revenue was $60.4 million in 2015 as compared to $64.8 million in 2014, a decrease of $4.4 million or 6.8%, primarily due to advertising market declines. Advertising revenue in 2015 and 2014 included political/advocacy advertising revenue of $2.5 million and $3.7 million, respectively. Non-advertising revenue in the Radio segment (which was primarily comprised of other contractual revenue) was $3.4 million in 2015 compared to $4.1 million in 2014, a decrease of $0.7 million or 17.1%.

 

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Direct operating expenses—programming excluding variable program license fees. Programming expenses excluding variable program license fees increased to $116.3 million in 2015 from $110.0 million in 2014, an increase of $6.3 million or 5.7%. As a percentage of revenue, our programming expenses excluding variable program license fees increased to 18.6% in 2015 from 17.7% in 2014. Media Networks segment programming expenses excluding variable program license fees were $103.6 million in 2015 compared to $95.7 million in 2014, an increase of $7.9 million or 8.3%, primarily due to increased entertainment programming costs of $10.9 million, partially offset by $2.4 million related to 2014 World Cup programming costs and $0.6 million in other net cost decreases. Radio segment programming expenses were $12.7 million in 2015 and $14.3 million in 2014, a decrease of $1.6 million or 11.2%, primarily due to decreased programming employee related costs.

Direct operating expenses—variable program license fees. The variable program license fees recorded on our Media Networks segment decreased to $59.9 million in 2015 from $79.4 million in 2014, a decrease of $19.5 million or 24.6% primarily as a result of the amendment to the Venevision PLA. On a consolidated basis, as a percentage of revenue, variable program license fees decreased to 9.6% in 2015 from 12.8% in 2014.

Direct operating expenses—other. Other direct operating expenses decreased to $21.4 million in 2015 from $23.0 million in 2014, a decrease of $1.6 million or 7.0%. As a percentage of revenue, our other direct operating expenses decreased to 3.4% in 2015 from 3.7% in 2014. Media Networks segment other direct operating expenses were $17.7 million in 2015 compared to $18.8 million in 2014, a decrease of $1.1 million or 5.9%, primarily due to lower technical related costs. Radio segment other direct operating expenses were $3.7 million in 2015 and $4.2 million in 2014, a decrease of $0.5 million primarily due to lower technical related costs.

Selling, general and administrative expenses. Selling, general and administrative expenses remained relatively flat at $170.9 million in 2015 from $170.8 million in 2014. Media Networks segment selling, general and administrative expenses were $107.5 million in 2015 compared to $104.8 million in 2014, an increase of $2.7 million or 2.6%. Radio segment had selling, general and administrative expenses of $32.2 million in 2015 compared to $36.4 million in 2014, a decrease of $4.2 million or 11.5% primarily due to employee related sales costs. Corporate selling, general and administrative expenses were $31.2 million in 2015 compared to $29.6 million in 2014, an increase of $1.6 million or 5.4%, primarily due to an increase in employee related costs. On a consolidated basis, as a percentage of revenue, our selling, general and administrative expenses decreased to 27.4% in 2015 from 27.5% in 2014.

Impairment loss. In 2015, we recorded non-cash impairment losses of $0.3 million related to the write-down of program rights in the Media Networks segment.

Restructuring, severance and related charges. In 2015, we incurred restructuring, severance and related charges in the amount of $6.2 million. This amount includes a $3.4 million charge related to broader-based cost-saving restructuring initiatives and $2.8 million related to severance charges for individual employees. The severance charge of $2.8 million is related to miscellaneous severance agreements primarily with corporate employees. The restructuring charge of $3.4 million consisted of a $3.4 million charge in the Radio segment and $0.6 million of corporate expenses, partially offset by a $0.6 million benefit in the Media Networks segment, related to employee termination benefits, costs related to consolidating offices, and other contract terminations. In late 2014, we initiated restructuring activities to improve performance, collaboration, and operational efficiencies across our local media platforms. The $3.4 million charge recognized during the period includes $3.0 million resulting from the restructuring activities across local media platforms initiated in 2014 and $0.4 million resulting from other restructuring activities that were initiated in 2012. In 2014, we incurred restructuring, severance and related charges in the amount of $3.3 million. This amount includes a $3.6 million charge related to broader-based cost-saving restructuring initiatives, partially offset by a $0.3 million benefit related to the adjustment of severance charges for individual employees. The severance benefit of $0.3 million was related to miscellaneous severance agreements with corporate employees as well as employees in the Media Networks and Radio segments. The restructuring charge of $3.6 million consists of a $2.1 million charge in the Media Networks segment, $1.3 million in the Radio segment and $0.2 million of corporate expenses, related to

 

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employee termination benefits, costs related to consolidating offices, and other contract terminations. See Note 3 to our unaudited consolidated financial statements for the three months ended March 31, 2015 included elsewhere in this prospectus.

Depreciation and amortization. Depreciation and amortization increased to $42.6 million in 2015 from $39.3 million in 2014, an increase of $3.3 million or 8.4%. Our depreciation expense increased to $28.1 million in 2015 from $24.7 million in 2014, an increase of $3.4 million, primarily related to depreciation on newly acquired assets. We had amortization of intangible assets of $14.5 million in 2015 and $14.6 million in 2014. Depreciation and amortization expense for the Media Networks segment increased by $1.2 million to $35.4 million in 2015 from $34.2 million in 2014. Depreciation and amortization expense for the Radio segment was $1.9 million in 2015 and 2014. Corporate depreciation expense increased by $2.1 million to $5.3 million in 2015 from $3.2 million in 2014.

Operating income. As a result of the factors discussed above and in the results of operations overview, we had operating income of $27.1 million in 2015 and $195.3 million in 2014, a decrease of $168.2 million. The Media Networks segment had operating income of $237.0 million in 2015 and $217.3 million in 2014, an increase of $19.7 million. The Radio segment had operating income of $9.9 million in 2015 and $10.9 million in 2014, a decrease of $1.0 million. Corporate operating loss was $219.8 million and $32.9 million in 2015 and 2014, respectively, an increase in loss of $186.9 million. Contributing to the increase in corporate operating loss was the $180.0 million expense associated with the termination of management and technical assistance agreements, discussed above. The impact of revenue recognition related to certain content licensing agreements contributed $6.4 million in 2015 and $0.7 million in 2014. Political/advocacy advertising contributed $11.7 million in 2015 and $20.4 million in 2014. The estimated incremental impact of the World Cup tournament contributed $1.5 million in 2014.

Interest expense. Interest expense decreased to $143.4 million in 2015 from $147.1 million in 2014, a decrease of $3.7 million. The decrease was primarily due to lower interest expense on the senior secured notes and variable rate debt as a result of refinancing transactions in 2014 and 2015. See Notes 7 and 8 to our unaudited consolidated financial statements for the three months ended March 31, 2015 and Note 9 to our audited consolidated financial statements for the year ended December 31, 2014 included elsewhere in this prospectus.

Interest income. In 2015 and 2014, we recorded interest income of $2.2 million and $1.4 million, respectively, an increase of $0.8 million, primarily related to investments in convertible debt with El Rey.

Interest rate swap expense. In 2014, for interest rate swap contracts that are not designated as cash flow hedges and the ineffective portion of interest rate swap contracts that are designated as cash flow hedges, we recorded expense of approximately $0.7 million, related to interest expense, partially offset by net fair value adjustments. See Note 8 to our unaudited consolidated financial statements for the three months ended March 31, 2015 included elsewhere in this prospectus.

Amortization of deferred financing costs. Amortization of deferred financing costs was $3.9 million in 2015 and 2014. See Note 7 to our unaudited consolidated financial statements for the three months ended March 31, 2015 and Note 9 to our audited consolidated financial statements for the year ended December 31, 2014 included elsewhere in this prospectus.

Loss on extinguishment of debt. In 2015 and 2014, we recorded a loss on the extinguishment of debt in the amount of $73.2 million and $17.2 million, respectively, as a result of our refinancing transactions. See Note 7 to our unaudited consolidated financial statements for the three months ended March 31, 2015 included elsewhere in this prospectus.

Loss on equity method investments. In 2015, we recorded a loss on equity method investments of $14.9 million, primarily related to losses at the two early stage businesses Fusion and El Rey, of $9.6 million and $5.3 million, respectively. In 2014, we recorded a loss on equity method investments of $20.5 million, primarily

 

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related to a loss of $15.2 million for El Rey and a loss of $5.3 million for Fusion. These charges are based on our share of equity loss in unconsolidated subsidiaries and costs funded by us which were incurred prior to our investment in an equity method investee. For El Rey, additionally all losses in these periods have been attributed to us based on the terms of the agreement governing the investment. See Note 5 to our unaudited consolidated financial statements for the three months ended March 31, 2015 included elsewhere in this prospectus.

(Benefit) provision for income taxes. In 2015, we reported an income tax benefit of $64.0 million related to the pre-tax loss for the three months ended March 31, 2015 multiplied by the estimated annual effective tax rate and adjusted for discrete items. In 2014, we reported an income tax provision of $2.3 million related to the pre-tax income for the three months ended March 31, 2014 multiplied by the estimated annual effective tax rate and adjusted for discrete items. Our current estimated effective tax rate adjusted for discrete items as of March 31, 2015 was approximately 31%, which differs from the statutory rate primarily due to permanent tax differences, discrete items and state and local taxes. Our estimated effective tax rate adjusted for discrete items as of March 31, 2014 was approximately 39%, which differs from the statutory rate primarily due to permanent tax differences, discrete items and state and local taxes.

Net (loss) income. As a result of the above factors, we reported a net loss of $142.4 million and net income of $3.6 million in 2015 and 2014, respectively.

Net loss attributable to non-controlling interest. Net loss attributable to non-controlling interest was $0.1 million and $0.2 million in 2015 and 2014, respectively.

Net (loss) income attributable to Univision Holdings, Inc. In 2015 and 2014, we reported a net loss attributable to Univision Holdings, Inc. of $142.3 million and net income attributable to Univision Holdings, Inc. of $3.8 million, respectively.

OIBDA and Bank Credit OIBDA. As a result of the factors discussed above, OIBDA increased to $266.5 million in 2015 from $245.1 million in 2014, an increase of $21.4 million or 8.7% and Bank Credit OIBDA increased to $274.2 million in 2015 from $251.4 million in 2014, an increase of $22.8 million or 9.1%. On a consolidated basis, as a percentage of revenue, our OIBDA increased to 42.7% in 2015 from 39.5% in 2014 and Bank Credit OIBDA increased to 43.9% in 2015 from 40.5% in 2014. The impact of revenue recognition related to certain content licensing agreements contributed $6.4 million in 2015 and $0.7 million in 2014. Political/advocacy advertising contributed $11.7 million in 2015 and $20.4 million in 2014. The estimated incremental impact of the World Cup tournament contributed $1.5 million in 2014.

 

Year Ended December 31, 2014 Compared to Year Ended December 31, 2013

In comparing our results of operations for the year ended December 31, 2014 (“2014”) with that ended December 31, 2013 (“2013”), in addition to the factors referenced above affecting our results, the following should be noted:

 

    In 2014, we had revenues and expenses that did not exist in 2013 associated with the airing of the 2014 Fédération Internationale de Football Association (“FIFA”) World Cup soccer tournament. In 2014, we had consolidated estimated incremental World Cup advertising revenue of $174.2 million and consolidated estimated World Cup operating expenses of $152.1 million. In 2014, the estimated incremental impact of the 2014 World Cup tournament, considering incremental net advertising revenue and operating expenses, was an increase of $22.1 million in operating income, OIBDA and Bank Credit OIBDA.

 

    In 2014, we recorded a non-cash impairment loss of $340.5 million, which is comprised of $198.1 million in the Media Networks segment and $142.4 million in the Radio segment. In 2013, we recorded a non-cash impairment loss of $439.4 million, which is comprised of $87.6 million in the Media Networks segment and $351.8 million in the Radio segment.

 

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    In 2014 and 2013, we reported an income tax benefit of $66.1 million and $462.4 million, respectively. The income tax benefit in 2014 primarily results from the pre-tax financial loss and the settlement of a significant uncertain tax position. The income tax benefit in 2013 primarily results from recording a reduction in our Federal and state deferred tax asset valuation allowance of $468.0 million, as our deferred tax assets became realizable on a more-likely-than-not basis, based upon the realization of our capital loss carryforwards and a portion of our net operating loss carryforwards in 2013, coupled with projections of future taxable income over the period in which the deferred tax assets are recoverable. The reduction in the valuation allowance was partially offset by an increase we recorded in our valuation allowance of $34.5 million relating to our foreign deferred tax assets.

 

    In 2014 and 2013, we recorded $41.2 million and $29.4 million, respectively, in restructuring, severance and related charges. These charges relate to restructuring and severance agreements with employees and executives, as well as costs related to consolidating offices and other contract terminations in 2014 and 2013 (related to restructuring activities across local media platforms initiated in 2014 and other restructuring activities initiated in 2012).

 

    In 2014 and 2013, we recorded a loss on extinguishment of debt of $17.2 million and $10.0 million, respectively, as a result of refinancing our debt. The loss in 2014 includes a premium, fees, the write-off of certain unamortized deferred financing costs and the write-off of certain unamortized discount and premium related to instruments that were repaid. The loss in 2013 includes fees and the write-off of certain unamortized deferred financing costs related to instruments that were repaid.

Revenue. Revenue was $2,911.4 million in 2014 compared to $2,627.4 million in 2013, an increase of $284.0 million or 10.8%, which reflects an increase of 13.5% in the Media Networks segment and a decrease of 7.6% in the Radio segment.

Advertising revenue was $2,101.0 million in 2014 compared to $1,979.5 million in 2013, an increase of $121.5 million or 6.1%. Advertising revenue in 2014 included (i) estimated incremental World Cup advertising revenue of $174.2 million and (ii) political/advocacy advertising revenue of $79.2 million. Advertising revenue in 2013 included (i) Confederation Cup and Gold Cup advertising revenue of $68.0 million and (ii) political/advocacy advertising revenue of $59.1 million.

Non-advertising revenue (which was primarily comprised of subscriber fee revenue, other contractual revenue and content licensing revenue) was $810.4 million in 2014 compared to $647.9 million in 2013, an increase of $162.5 million or 25.1%. The increase in non-advertising revenue was primarily a result of increased subscriber fee revenue of $145.3 million which was primarily due to contractual increases and additional distribution of the Univision Deportes network and increased content licensing revenue of $8.6 million. Subscriber fee revenue was $642.5 million in 2014 compared to $497.2 million in 2013. In 2013, non-advertising revenue included non-cash contractual revenue associated with the commitments to provide advertising made in the sale of our recorded music business which were completely satisfied in the second quarter of 2013 of $7.7 million.

Media Networks segment revenues were $2,601.8 million in 2014 compared to $2,292.4 million in 2013, an increase of $309.4 million or 13.5%. Advertising revenue was $1,812.8 million in 2014 as compared to $1,664.1 million in 2013, an increase of $148.7 million or 8.9%. Advertising revenue in 2014 included (i) estimated incremental World Cup advertising revenue of $181.8 million and (ii) political/advocacy advertising revenue of $62.7 million. Advertising revenue in 2013 included (i) Confederation Cup and Gold Cup advertising revenue of $68.0 million and (ii) political/advocacy advertising revenue of $47.5 million. Advertising revenue for our television platforms was $1,730.3 million in 2014 as compared to $1,606.1 million in 2013, an increase of $124.2 million or 7.7%. Advertising revenue in 2014 for our television platforms included (i) estimated incremental World Cup advertising revenue of $163.3 million and (ii) political/advocacy advertising revenue of $59.1 million. Advertising revenue in 2013 for our television platforms included (i) Confederation Cup and Gold Cup advertising revenue of $65.3 million and (ii) political/advocacy advertising revenue of $47.5 million. Advertising

 

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revenue through the Media Networks digital platform was $82.5 million in 2014 compared to $57.9 million in 2013, an increase of $24.6 million or 42.4%. Advertising revenue through the Media Networks digital platform in 2014 included (i) estimated incremental World Cup advertising revenue of $18.4 million and (ii) political/advocacy advertising revenue of $3.6 million. Advertising revenue through the Media Networks digital platform in 2013 included Confederation Cup and Gold Cup advertising revenue of $2.7 million.

Media Networks non-advertising revenue (which was primarily comprised of subscriber fee revenue, other contractual revenue and content licensing revenue) was $789.0 million in 2014 compared to $628.3 million in 2013, an increase of $160.7 million or 25.6% primarily due to an increase in subscriber fee revenue of $145.3 million and an increase in content licensing revenue of $8.6 million. In 2013, non-advertising revenue included non-cash contractual revenue related to the sale of our recorded music business which was completely satisfied in the second quarter of 2013 of $7.7 million.

Radio segment revenues were $309.6 million in 2014 compared to $335.0 million in 2013, a decrease of $25.4 million or 7.6%. Advertising revenue was $288.2 million in 2014 as compared to $315.4 million in 2013, a decrease of $27.2 million or 8.6%, due to lower ratings, market revenue declines and the impact of estimated World Cup advertising revenue of $7.5 million shifting from the Radio segment to the Media Networks segment. Advertising revenue included political/advocacy advertising revenue of $16.5 million in 2014 and $11.6 million in 2013. Non-advertising revenue (which was primarily comprised of other contractual revenue), was $21.4 million in 2014 compared to $19.6 million in 2013, an increase of $1.8 million or 9.2%.

Direct operating expenses—programming excluding variable program license fees. Programming expenses excluding variable program license fees increased to $540.5 million in 2014 from $438.2 million in 2013, an increase of $102.3 million or 23.3%. As a percentage of revenue, our programming expenses excluding variable program license fees increased to 18.6% in 2014 from 16.7% in 2013. Media Networks segment programming expenses excluding the variable program license fees were $488.2 million in 2014 compared to $376.2 million in 2013, an increase of $112.0 million or 29.8%. The increase was primarily associated with the 2014 World Cup, including programming costs of $116.5 million and an increase in other programming costs of $24.9 million, partially offset by decreases in sports programming of $29.4 million associated with the 2013 Confederation Cup and Gold Cup soccer tournaments. Radio segment programming expenses were $52.3 million in 2014 compared to $62.0 million in 2013, a decrease of $9.7 million or 15.6%, primarily due to a decrease in programming employee related costs.

Direct operating expenses—variable program license fees. Media Networks segment variable program license fees increased to $380.4 million in 2014 from $338.1 million in 2013, an increase of $42.3 million or 12.5% as a result of increased revenue. The impact on the variable program license fees of the associated estimated incremental 2014 World Cup advertising revenue and political/advocacy advertising revenue was an increase of $25.4 million and $0.3 million, respectively. The impact on the variable program license fees associated with the 2013 Confederation Cup and Gold Cup soccer tournaments and non-cash contractual advertising revenue associated with commitments to provide advertising made in the sale of our recorded music business which were completely satisfied in the second quarter of 2013 was a decrease of $9.5 million and $1.4 million, respectively.

Direct operating expenses—other. Other direct operating expenses decreased to $92.2 million in 2014 from $95.9 million in 2013, a decrease of $3.7 million or 3.9%. As a percentage of revenue, other direct operating expenses increased to 3.2% in 2014 from 3.6% in 2013. Media Networks segment other direct operating expenses were $74.4 million in 2014 compared to $79.5 million in 2013, a decrease of $5.1 million or 6.4%, primarily related to a decrease in technical costs. Radio segment other direct operating expenses were $17.8 million in 2014 compared to $16.4 million in 2013, an increase of $1.4 million or 8.5%, primarily due to an increase in technical and employee related costs.

Selling, general and administrative expenses. Selling, general and administrative expenses increased to $718.8 million in 2014 from $712.6 million in 2013, an increase of $6.2 million or 0.9%. Media Networks

 

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segment selling, general and administrative expenses were $440.5 million in 2014 compared to $440.0 million in 2013, an increase of $0.5 million or 0.1%. Radio segment selling, general and administrative expenses were $149.9 million in 2014 compared to $149.3 million in 2013, an increase of $0.6 million. Corporate selling, general and administrative expenses were $128.4 million in 2014 compared to $123.3 million in 2013, an increase of $5.1 million or 4.1%, primarily due to an increase in employee related costs of $5.0 million and other net cost increases of $0.1 million. On a consolidated basis, as a percentage of revenue, our selling, general and administrative expenses decreased to 24.7% in 2014 from 27.1% in 2013.

Impairment loss. In 2014 and 2013, we recorded non-cash impairment losses of $340.5 million and $439.4 million, respectively. The loss in 2014 is comprised of $198.1 million in the Media Networks segment and $142.4 million in the Radio segment. In the Media Networks segment, we recorded approximately $182.9 million related to the impairment of Venevision-related prepaid programming assets made in conjunction with the amendment of the Venevision PLA, $8.2 million related to the write-down of program rights and $7.0 million related to the write-down of property held for sale. In the Radio segment, we recorded $133.4 million related to the write-down of broadcast licenses and $9.0 million related to the write-down of a trade name. The loss in 2013 is comprised of $87.6 million in the Media Networks segment and $351.8 million in the Radio segment. In the Media Networks segment, we recorded approximately $82.5 million related to the write-down of World Cup program rights prepayments, $2.5 million related to the residual write-off of the TeleFutura trade name, as the network has completed its rebranding as UniMás, $2.4 million related to the write-off of other program rights and $0.2 million related to the write-down of assets held for sale. In the Radio segment, based on a review of market conditions and management’s assessment of long-term growth rates, we recorded $307.8 million related to the write-off of goodwill and $43.4 million related to the write-down of broadcast licenses. We also recorded a loss of $0.6 million related to the write-down of other assets in the Radio segment.

Restructuring, severance and related charges. In 2014, we incurred restructuring, severance and related charges in the amount of $41.2 million. This amount includes a $41.4 million charge related to broader-based cost-saving restructuring initiatives, partially offset by a $0.2 million benefit related to the adjustment of severance charges for individual employees. The severance benefit of $0.2 million is related to miscellaneous severance agreements with employees in the Media Networks and Radio segments. The restructuring charge of $41.4 million consists of a $28.3 million charge in the Media Networks segment, an $11.4 million charge in the Radio segment and $1.7 million of corporate expenses related to employee termination benefits, costs related to consolidating offices, and other contract terminations. During 2014, we initiated restructuring activities to improve performance, collaboration, and operational efficiencies across our local media platforms. The $41.4 million charge recognized during the period includes $7.1 million resulting from the restructuring activities across local media platforms initiated in 2014 and $34.3 million resulting from other restructuring activities that were initiated in 2012. In 2013, we incurred restructuring, severance and related charges in the amount of $29.4 million. Of this amount, $5.8 million is related to severance charges for individual employees and $23.6 million related to broader-based cost-saving restructuring initiatives. The severance charge of $5.8 million is related to miscellaneous severance agreements with corporate employees as well as employees in the Media Networks and Radio segments. The restructuring charge of $23.6 million was primarily related to other restructuring activities initiated in 2012 and consists of a $17.6 million charge in the Media Networks segment, a $5.5 million charge in the Radio segment and $0.5 million of corporate expenses, related to employee termination benefits and costs related to consolidating offices. For Media Networks, the $17.6 million charge includes expenses of $19.2 million related to employee termination benefits and costs related to consolidating offices, partially offset by a benefit of $1.6 million related to the elimination of a lease obligation from restructuring activities that were initiated in 2009. For Radio, the $5.5 million charge includes expenses of $7.7 million related to employee termination benefits and costs related to consolidating offices, partially offset by a benefit of $2.2 million related to the elimination of lease obligations. See Note 3 to our audited consolidated financial statements for the year ended December 31, 2014 included elsewhere in this prospectus.

Depreciation and amortization. Depreciation and amortization increased to $163.8 million in 2014 from $145.9 million in 2013, an increase of $17.9 million or 12.3%. Our depreciation expense increased to

 

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$105.5 million in 2014 from $87.6 million in 2013, an increase of $17.9 million, primarily related to depreciation on newly acquired assets. We had amortization of intangible assets of $58.3 million in 2014 and 2013. Depreciation and amortization expense for the Media Networks segment increased by $16.2 million to $138.9 million in 2014 from $122.7 million in 2013. Depreciation and amortization expense for the Radio segment decreased by $3.5 million to $7.8 million in 2014 from $11.3 million in 2013 due to vacating a facility in 2013. Corporate depreciation expense increased by $5.2 million to $17.1 million in 2014 from $11.9 million in 2013.

Operating income. As a result of the factors discussed above and in the results of operations overview, we had operating income of $634.0 million in 2014 and $427.9 million in 2013, an increase of $206.1 million. The Media Networks segment had operating income of $853.1 million in 2014 and $830.2 million in 2013, an increase of $22.9 million. The Radio segment had an operating loss of $71.9 million in 2014 and $261.7 million in 2013, an increase in operating income of $189.8 million. Corporate operating loss was $147.2 million and $140.6 million in 2014 and 2013, respectively, an increase in operating loss of $6.6 million. The impact of revenue recognition related to certain content licensing agreements contributed $18.3 million in 2014 and $10.8 million in 2013. Political/advocacy advertising contributed $67.8 million in 2014 and $48.6 million in 2013. Non-cash contractual revenue associated with the commitments to provide advertising made in the sale of our recorded music business contributed $6.3 million in 2013. The estimated incremental impact of the 2014 World Cup tournament, considering incremental advertising revenue and operating expenses, was an increase of $22.1 million in operating income.

Interest expense. Interest expense decreased to $587.2 million in 2014 from $618.2 million in 2013, a decrease of $31.0 million. The decrease was primarily due to lower interest expense on our variable rate debt as a result of our refinancing transactions in 2013 and 2014 and a decrease in the amortization of fair value adjustments in AOCL related to interest rate swap contracts that are no longer designated as cash flow hedges. This decrease was partially offset by an increase in interest expense related to our senior notes as a result of the additional notes offered in 2013. See Notes 9 and 10 to our audited consolidated financial statements for the year ended December 31, 2014 included elsewhere in this prospectus.

Interest income. In 2014 and 2013, we recorded interest income of $6.0 million and $3.5 million, respectively, an increase of $2.5 million, primarily related to investments in convertible debt with an equity method investee.

Interest rate swap income. In 2014 and 2013, for interest rate swap contracts that are not designated as cash flow hedges and the ineffective portion of interest rate swap contracts that are designated as cash flow hedges, we recorded income of approximately $0.5 million and $3.8 million, respectively, related to net fair value adjustments partially offset by interest expense. See Note 10 to our audited consolidated financial statements for the year ended December 31, 2014 included elsewhere in this prospectus.

Amortization of deferred financing costs. Amortization of deferred financing costs increased to $15.5 million in 2014 from $14.1 million in 2013, an increase of $1.4 million. The increase is a result of our refinancing transactions. See Note 9 to our audited consolidated financial statements for the year ended December 31, 2014 included elsewhere in this prospectus.

Loss on extinguishment of debt. In 2014 and 2013, we recorded a loss on the extinguishment of debt in the amount of $17.2 million and $10.0 million, respectively, as a result of the refinancing of our debt. See Note 9 to our audited consolidated financial statements for the year ended December 31, 2014 included elsewhere in this prospectus.

Loss on equity method investments. In 2014, we recorded a loss on equity method investments of $85.2 million, primarily related to losses at the two early stage businesses El Rey and Fusion, of $73.3 million and $11.9 million, respectively. In 2013, we recorded a loss on equity method investments of $36.2 million, primarily related to a loss of $22.7 million for El Rey and a loss of $13.7 million for Fusion. This charge includes our share

 

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of equity loss in unconsolidated subsidiaries and costs funded by us which were incurred prior to our investment in an equity method investee. For El Rey, additionally all losses in these periods have been attributed to us based on the terms of the agreement governing the investment. See Note 7 to our audited consolidated financial statements for the year ended December 31, 2014 included elsewhere in this prospectus.

Benefit for income taxes. In 2014, we reported an income tax benefit of $66.1 million. In 2013, we reported an income tax benefit of $462.4 million. Our annual effective tax rate as of December 31, 2014 was approximately (101.4%), which differs from the statutory rate primarily due to permanent tax differences, the settlement of a significant uncertain tax position resulting in a significant reduction in the liability for unrecognized tax benefits, state and local taxes, and the amount of these items as compared to book loss. Our annual effective tax rate as of December 31, 2013 was approximately (187.7%), which differs from the statutory rate primarily due to the change in valuation allowance, permanent tax differences, state and local taxes and the amount of these items as compared to book loss. The income tax benefit and high negative effective tax rate in 2013 primarily result from recording a reduction in our Federal and state deferred tax asset valuation allowance of $468.0 million, as our deferred tax assets became realizable on a more-likely-than-not basis, based upon the realization of our capital loss carryforwards and a portion of our net operating loss carryforwards in 2013, coupled with projections of future taxable income over the period in which the deferred tax assets are recoverable. We have approximately $1.6 billion in net operating loss carry-forwards remaining. The reduction in the valuation allowance was partially offset by an increase we recorded in our valuation allowance of $34.5 million relating to our foreign deferred tax assets. We anticipate our annual effective tax rate to be approximately 36%-38% in 2015.

Net income. As a result of the above factors, we reported net income of $0.9 million and $216.0 million in 2014 and 2013, respectively.

Net loss attributable to non-controlling interest. Net loss attributable to non-controlling interest was $1.0 million and $0.2 million in 2014 and 2013, respectively.

Net income attributable to Univision Holdings, Inc. In 2014 and 2013, we reported net income attributable to Univision Holdings, Inc. of $1.9 million and $216.2 million, respectively.

OIBDA and Bank Credit OIBDA. As a result of the factors discussed above, OIBDA increased to $1,223.8 million in 2014 from $1,078.9 million in 2013, an increase of $144.9 million or 13.4% and Bank Credit OIBDA increased to $1,253.8 million in 2014 from $1,120.4 million in 2013, an increase of $133.4 million or 11.9%. On a consolidated basis, as a percentage of revenue, our OIBDA increased to 42.0% in 2014 from 41.1% in 2013 and Bank Credit OIBDA increased to 43.1% in 2014 from 42.6% in 2013. The impact of revenue recognition related to certain content licensing agreements contributed $18.3 million in 2014 and $10.8 million in 2013. Political/advocacy advertising contributed $67.8 million in 2014 and $48.6 million in 2013. Non-cash contractual revenue associated with the commitments to provide advertising made in the sale of our recorded music business contributed $6.3 million in 2013. The estimated incremental impact of the 2014 World Cup tournament, considering incremental advertising revenue and operating expenses, was an increase of $22.1 million.

Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

In comparing our results of operations for the year ended December 31, 2013 with that ended December 31, 2012 (“2012”), in addition to the factors referenced above affecting our results, the following should be noted:

 

    In 2013, we recorded a non-cash impairment loss of $439.4 million, which is comprised of $87.6 million in the Media Networks segment and $351.8 million in the Radio segment. In 2012, we recorded a non-cash impairment loss of $90.4 million, which is comprised of $83.9 million in the Media Networks segment and $6.5 million in the Radio segment.

 

   

In 2013 and 2012, we reported an income tax benefit of $462.4 million and an income tax provision of $58.9 million, respectively. The income tax benefit in 2013 primarily results from recording a

 

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reduction in our Federal and state deferred tax asset valuation allowance of $468.0 million, as our deferred tax assets became realizable on a more-likely-than-not basis, based upon the realization of our capital loss carryforwards and a portion of our net operating loss carryforwards in 2013, coupled with projections of future taxable income over the period in which the deferred tax assets are recoverable. The reduction in the valuation allowance was partially offset by an increase we recorded in our valuation allowance of $34.5 million relating to our foreign deferred tax assets.

 

    In 2013 and 2012, we recorded $29.4 million and $44.2 million, respectively, in restructuring, severance and related charges. These charges relate to restructuring and severance agreements with employees and executives, as well as costs related to consolidating offices in 2013 (related to other restructuring activities initiated in 2012) and 2012.

 

    In 2013 and 2012, we recorded a loss on extinguishment of debt of $10.0 million and $2.6 million, respectively, as a result of refinancing our debt. The loss includes fees and the write-off of certain unamortized deferred financing costs.

Revenue. Revenue was $2,627.4 million in 2013 compared to $2,442.0 million in 2012, an increase of $185.4 million or 7.6%, which reflects an increase of 9.0% in the Media Networks segment and a decrease of 1.0% in the Radio segment.

Advertising revenue was $1,979.5 million in 2013 compared to $1,858.4 million in 2012, an increase of $121.1 million or 6.5%. Advertising revenue in 2013 included (i) Confederation Cup and Gold Cup advertising revenue of $68.0 million and (ii) political/advocacy advertising revenue of $59.1 million. Advertising revenue in 2012 included political/advocacy advertising revenue of $60.5 million.

Non-advertising revenue (which was primarily comprised of subscriber fee revenue, other contractual revenue and content licensing revenue) was $647.9 million in 2013 compared to $583.6 million in 2012, an increase of $64.3 million or 11.0%. The increase in non-advertising revenue was primarily due to an increase in subscriber fees of $85.0 million primarily due to contractual increases partially offset by a decrease in content licensing revenue of $23.5 million due to the timing of revenue recognition of certain content licensing agreements. Subscriber fee revenue was $497.2 million in 2013 compared to $412.2 million in 2012. Non-advertising revenue included non-cash contractual revenue associated with the commitments to provide advertising made in the sale of our recorded music business which were completely satisfied in the second quarter of 2013 of $7.7 million in 2013 and $23.4 million in 2012.

Media Networks segment revenues were $2,292.4 million in 2013 compared to $2,103.5 million in 2012, an increase of $188.9 million or 9.0%. Advertising revenue was $1,664.1 million in 2013 as compared to $1,538.4 million in 2012, an increase of $125.7 million or 8.2%. Advertising revenue in 2013 included (i) Confederation Cup and Gold Cup advertising revenue of $68.0 million and (ii) political/advocacy advertising revenue of $47.5 million. Advertising revenue in 2012 included political/advocacy advertising revenue of $43.6 million. Advertising revenue for our television platforms was $1,606.1 million in 2013 as compared to $1,483.0 million in 2012, an increase of $123.1 million or 8.3%. Advertising revenue in 2013 for our television platforms included (i) Confederation Cup and Gold Cup advertising revenue of $65.3 million and (ii) political/advocacy advertising revenue of $47.5 million. Advertising revenue in 2012 for our television platforms included political/advocacy advertising revenue of $42.1 million. Advertising revenue through the Media Networks digital platform was $57.9 million in 2013 compared to $55.4 million in 2012, an increase of $2.5 million or 4.5%. Advertising revenue through the Media Networks digital platform in 2013 included Confederation Cup and Gold Cup advertising revenue of $2.7 million. Advertising revenue through the Media Networks digital platform included political/advocacy advertising revenue of $1.5 million in 2012. Non-advertising revenue (which was primarily comprised of subscriber fee revenue, other contractual revenue and content licensing revenue) was $628.3 million in 2013 compared to $565.1 million in 2012, an increase of $63.2 million or 11.2% primarily due to an increase in subscriber fee revenue of $85.0 million primarily due to contractual increases partially offset by a decrease in content licensing of $23.5 million due to the timing of revenue recognition of certain content

 

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licensing agreements. Non-advertising revenue included non-cash contractual revenue associated with the commitments to provide advertising made in the sale of our recorded music business which were completely satisfied in the second quarter of 2013 of $7.7 million in 2013 and $23.4 million in 2012.

Radio segment revenues were $335.0 million in 2013 compared to $338.5 million in 2012, a decrease of $3.5 million or 1.0%. Advertising revenue was $315.4 million in 2013 as compared to $320.0 million in 2012, a decrease of $4.6 million or 1.4%. Advertising revenue included political/advocacy advertising revenue of $11.6 million in 2013 and $16.9 million in 2012. Non-advertising revenue (which was primarily comprised of other contractual revenue) was $19.6 million in 2013 compared to $18.5 million in 2012, an increase of $1.1 million or 5.9%.

Direct operating expenses—programming excluding variable program license fees. Programming expenses excluding variable program license fees increased to $438.2 million in 2013 from $388.4 million in 2012, an increase of $49.8 million or 12.8%. As a percentage of revenue, our programming expenses excluding variable program license fees increased to 16.7% in 2013 from 15.9% in 2012. Media Networks segment programming expenses excluding variable program license fees were $376.2 million in 2013 compared to $321.3 million in 2012, an increase of $54.9 million or 17.1%. The increase was primarily related to an increase of $29.4 million related to the 2013 Confederation Cup and Gold Cup soccer tournaments and an increase in other programming costs, primarily sports related programming, of $25.5 million. Radio segment programming expenses were $62.0 million in 2013 compared to $67.1 million in 2012, a decrease of $5.1 million or 7.6%, primarily due to decreases in programming employee related costs.

Direct operating expenses—variable program license fees. The variable program license fees recorded on our Media Networks segment increased to $338.1 million in 2013 from $311.1 million in 2012, an increase of $27.0 million or 8.7% as a result of increased revenue. The impact on the variable program license fees of the 2013 Confederations Cup and Gold Cup soccer tournaments was an increase of $9.5 million, while the impact on the variable program license fees associated with political/advocacy advertising revenue, non-cash contractual advertising revenue associated with commitments to provide advertising made in the sale of our recorded music business which were completely satisfied in the second quarter of 2013 and the timing of revenue recognition of certain content licensing agreements as content is delivered was a decrease of $3.6 million, $3.1 million and $3.3 million, respectively.

Direct operating expenses—other. Other direct operating expenses decreased to $95.9 million in 2013 from $98.4 million in 2012, a decrease of $2.5 million or 2.5%. As a percentage of revenue, other direct operating expenses decreased to 3.6% in 2013 from 4.0% in 2012. Media Networks segment other direct operating expenses were $79.5 million in 2013 compared to $83.9 million in 2012, a decrease of $4.4 million or 5.2%, primarily related to a decrease in technical costs. Radio segment other direct operating expenses were $16.4 million in 2013 compared to $14.5 million in 2012, an increase of $1.9 million or 13.1%, primarily due to an increase in technical costs.

Selling, general and administrative expenses. Selling, general and administrative expenses decreased to $712.6 million in 2013 from $750.4 million in 2012, a decrease of $37.8 million or 5.0%. Media Networks segment selling, general and administrative expenses were $440.0 million in 2013 compared to $450.3 million in 2012, a decrease of $10.3 million or 2.3%. The decrease was primarily due to a decrease of employee related expenses of $12.3 million, partially offset by other net cost increases of $2.0 million. Radio segment selling, general and administrative expenses were $149.3 million in 2013 compared to $161.0 million in 2012, a decrease of $11.7 million or 7.3% primarily related to a decrease in sales related costs of $8.2 million and other net costs decreases of $3.5 million. Corporate selling, general and administrative expenses were $123.3 million in 2013 compared to $139.1 million in 2012, a decrease of $15.8 million or 11.4% primarily due to a decrease of $15.8 million in share-based compensation (resulting from non-employee compensation of $18.5 million in 2012 which did not occur in 2013). On a consolidated basis, as a percentage of revenue, our selling, general and administrative expenses decreased to 27.1% in 2013 from 30.7% in 2012.

 

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Impairment loss. In 2013 and 2012, we recorded non-cash impairment losses of $439.4 million and $90.4 million, respectively. The loss in 2013 is comprised of $87.6 million in the Media Networks segment and $351.8 million in the Radio segment. In the Media Networks segment, we recorded approximately $82.5 million related to the write-down of World Cup program rights prepayments, $2.5 million related to the residual write-off of the TeleFutura trade name as the network had completed its rebranding as UniMás, $2.4 million related to the write-off of other program rights and $0.2 million related to the write-down of assets held for sale. In the Radio segment, based on a review of market conditions and management’s assessment of long-term growth rates, we recorded $307.8 million related to the write-off of goodwill and $43.4 million related to the write-down of broadcast licenses. We also recorded a loss of $0.6 million related to the write-down of other assets in the Radio segment. The loss in 2012 is comprised of $83.9 million in the Media Networks segment and $6.5 million in the Radio segment. In the Media Networks segment, we recorded $47.6 million related to the write-down of a trade name, $31.9 million related to the write-off of television program rights, $2.5 million related to the write-down of land and buildings held for sale, $0.8 million related to the write-off of a broadcast license, $0.8 million related to the write-off of other assets and $0.3 million related to the write-off of an investment. In the Radio segment, we recorded $5.7 million related to the write-down of broadcast licenses, $0.7 million related to the write-off of investments and $0.1 million related to the write-off of other assets.

Restructuring, severance and related charges. In 2013, we incurred restructuring, severance and related charges in the amount of $29.4 million. Of this amount, $5.8 million related to severance charges for individual employees and $23.6 million related to broader-based cost-saving restructuring initiatives. The severance charge of $5.8 million is related to miscellaneous severance agreements with corporate employees as well as employees in the Media Networks and Radio segments. The restructuring charge of $23.6 million is primarily related to other restructuring activities initiated in 2012 and consists of a $17.6 million charge in the Media Networks segment, a $5.5 million charge in the Radio segment and $0.5 million of corporate expenses related to employee termination benefits and costs related to consolidating offices. For Media Networks, the $17.6 million charge includes expenses of $19.2 million related to employee termination benefits and costs related to consolidating offices, partially offset by a benefit of $1.6 million related to the elimination of a lease obligation from restructuring activities that were initiated in 2009. For Radio, the $5.5 million charge includes expenses of $7.7 million related to employee termination benefits and costs related to consolidating offices, partially offset by a benefit of $2.2 million related to the elimination of lease obligations. In 2012, we incurred restructuring, severance and related charges in the amount of $44.2 million. Of this amount, $7.4 million related to severance charges for individual employees and $36.8 million related to broader-based cost-saving restructuring initiatives. The severance charge of $7.4 million is primarily related to miscellaneous severance agreements with corporate employees as well as employees in the Media Networks segment. The restructuring charge of $36.8 million consists of a $24.7 million charge in the Media Networks segment, a $9.1 million charge in the Radio segment and $3.0 million of corporate expenses related to employee termination benefits and costs related to consolidating offices. See Note 3 to our audited consolidated financial statements for the year ended December 31, 2014 included elsewhere in this prospectus.

Depreciation and amortization. Depreciation and amortization increased to $145.9 million in 2013 from $130.3 million in 2012, an increase of $15.6 million or 12.0%. Our depreciation expense increased to $87.6 million in 2013 from $75.3 million in 2012, an increase of $12.3 million, primarily related to depreciation on newly acquired assets. We had amortization of intangible assets of $58.3 million and $55.0 million in 2013 and 2012, respectively, an increase of $3.3 million, primarily related to amortization on the launch rights acquired in 2013. Depreciation and amortization expense for the Media Networks segment increased by $11.6 million to $122.7 million in 2013 from $111.1 million in 2012. Depreciation and amortization expense for the Radio segment increased by $0.8 million to $11.3 million in 2013 from $10.5 million in 2012. Corporate depreciation expense increased by $3.2 million to $11.9 million in 2013 from $8.7 million in 2012.

Operating income. As a result of the factors discussed above and in the results of operations overview, including the impact of the impairment loss in 2013, we had operating income of $427.9 million in 2013 and $628.8 million in 2012, a decrease of $200.9 million. The Media Networks segment had operating income of

 

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$830.2 million in 2013 and $713.1 million in 2012, an increase of $117.1 million. The Radio segment had an operating loss of $261.7 million in 2013 and operating income of $69.7 million in 2012, a decrease of $331.4 million. Corporate operating loss was $140.6 million and $154.0 million in 2013 and 2012, respectively, a decrease of operating loss of $13.4 million. The impact of revenue recognition related to certain content licensing agreements contributed $10.8 million in 2013 and $31.1 million in 2012. Political/advocacy advertising contributed $48.6 million in 2013 and $51.2 million in 2012. Non-cash contractual revenue associated with the commitments to provide advertising made in the sale of our recorded music business contributed $6.3 million in 2013 and $19.2 million in 2012.

Interest expense. Interest expense increased to $618.2 million in 2013 from $573.2 million in 2012, an increase of $45.0 million. The increase is primarily due to an increase in interest expense related to our senior notes, including the additional notes offered in 2012 and 2013, and the amortization of fair value adjustments in AOCL related to interest rate swap contracts that are no longer designated as cash flow hedges. This was partially offset by lower interest expense on our variable rate debt as a result of our refinancing transactions in 2012 and 2013 and by a decrease in interest charges on the interest rate swap contracts. For contracts that are not designated as cash flow hedges and the ineffective portion of interest rate swap contracts that are designated as cash flow hedges, interest charges are recorded to interest rate swap expense rather than interest expense. See Notes 9 and 10 to our audited consolidated financial statements for the year ended December 31, 2014 included elsewhere in this prospectus.

Interest income. Interest income increased to $3.5 million in 2013 from $0.2 million in 2012, an increase of $3.3 million. The interest income in 2013 is primarily related to a convertible note investment with an equity method investee.

Interest rate swap income. In 2013, for interest rate swap contracts that are not designated as cash flow hedges and the ineffective portion of interest rate swap contracts that are designated as cash flow hedges, we recorded income of approximately $3.8 million related to income from net fair value adjustments, partially offset by net interest expense. No interest rate swap income was recognized in 2012. See Note 10 to our audited consolidated financial statements for the year ended December 31, 2014 included elsewhere in this prospectus.

Amortization of deferred financing costs. Amortization of deferred financing costs increased to $14.1 million in 2013 from $8.3 million in 2012, an increase of $5.8 million. The increase is a result of our refinancing transactions. See Note 9 to our audited consolidated financial statements for the year ended December 31, 2014.

Loss on extinguishment of debt. In 2013 and 2012, we recorded a loss on the extinguishment of debt in the amount of $10.0 million and $2.6 million, respectively, as a result of the refinancing of our debt. See Note 9 to our audited consolidated financial statements for the year ended December 31, 2014 included elsewhere in this prospectus.

Loss on equity method investments. In 2013, we recorded a loss on equity method investments of $36.2 million, primarily related to a loss of $22.7 million for El Rey and a loss of $13.7 million for Fusion. In 2012, we recorded a loss on equity method investments of $0.9 million, primarily related to Fusion. This charge includes our share of equity loss in unconsolidated subsidiaries and costs funded by us which were incurred prior to our investment in an equity method investee. See Note 7 to our audited consolidated financial statements for the year ended December 31, 2014.

(Benefit) provision for income taxes. In 2013, we reported an income tax benefit of $462.4 million. In 2012, we reported an income tax provision of $58.9 million. Our annual effective tax rate as of December 31, 2013 and 2012, respectively, was approximately (187.7%) and 132.3%, which differs from the statutory rate primarily due to the change in valuation allowance, permanent tax differences, and the amount of these items as compared to estimated book income (loss). The income tax benefit and high negative effective tax rate in 2013 primarily result from recording a reduction in our Federal and state deferred tax asset valuation allowance of $468.0 million, as our deferred tax assets became realizable on a more-likely-than-not basis, based upon the realization

 

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of our capital loss carryforwards and a portion of our net operating loss carryforwards in 2013, coupled with projections of future taxable income over the period in which the deferred tax assets are recoverable. The reduction in the valuation allowance was partially offset by an increase we recorded in our valuation allowance of $34.5 million relating to our foreign deferred tax assets.

Net income (loss). As a result of the above factors, we reported net income of $216.0 million in 2013 and a net loss of $14.4 million 2012.

Net loss attributable to non-controlling interest. In 2013, net loss attributable to non-controlling interest was $0.2 million. There was no non-controlling interest in 2012.

Net income (loss) attributable to Univision Holdings, Inc. In 2013, we reported net income attributable to Univision Holdings, Inc. of $216.2 million. In 2012, we reported a net loss attributable to Univision Holdings, Inc. of $14.4 million.

OIBDA and Bank Credit OIBDA. As a result of the factors discussed above, OIBDA increased to $1,078.9 million in 2013 from $945.9 million in 2012, an increase of $133.0 million or 14.1% and Bank Credit OIBDA increased to $1,120.4 million in 2013 from $1,003.2 million in 2012, an increase of $117.2 million or 11.7%. See Note 18 to our audited consolidated financial statements for the year ended December 31, 2014 included elsewhere in this prospectus. On a consolidated basis, as a percentage of revenue, our OIBDA increased to 41.1% in 2013 from 38.7% in 2012 and Bank Credit OIBDA increased to 42.6% in 2013 from 41.1% in 2012. The impact of revenue recognition related to certain content licensing agreements contributed $10.8 million in 2013 and $31.1 million in 2012. Political/advocacy advertising contributed $48.6 million in 2013 and $51.2 million in 2012. Non-cash contractual revenue associated with the commitments to provide advertising made in the sale of our recorded music business contributed $6.3 million in 2013 and $19.2 million in 2012.

 

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Quarterly Results

The following table sets forth our historical unaudited quarterly consolidated statement of operations data for the first quarter of 2015 and each of the fiscal quarters of 2014 and 2013. This unaudited quarterly information has been prepared on the same basis as our annual audited consolidated financial statements appearing elsewhere in this prospectus, and includes all adjustments, consisting of normal recurring adjustments, that we consider necessary to present fairly the financial information for the fiscal quarters presented. This unaudited quarterly information should be read in conjunction with our audited consolidated financial statements and the related notes appearing elsewhere in this prospectus.

 

(in thousands)

  First
Quarter
2015
    Fourth
Quarter
2014
    Third
Quarter
2014
    Second
Quarter
2014
    First
Quarter
2014
    Fourth
Quarter
2013
    Third
Quarter
2013
    Second
Quarter
2013
    First
Quarter
2013
 

Revenue

  $ 624,700 (a)    $ 727,700 (b)    $ 728,900 (b)    $ 833,700 (b)    $ 621,100 (b)    $ 696,200 (e)    $ 692,700 (e)    $ 676,500 (e)    $ 562,000 (e) 

Direct operating expenses

    197,600        240,000 (c)      248,500 (c)      312,200 (c)      212,400 (c)      236,300        230,000 (f)      217,000 (f)      188,900   

Selling, general and administrative expenses

    170,900        176,100        184,700        187,200        170,800        186,600        179,900        179,100        167,000   

Impairment loss

    300        328,200 (d)      12,300                      352,600 (g)      84,300 (g)             2,500   

Restructuring, severance and related charges

    6,200        27,800        8,000        2,100        3,300        13,500        3,700        10,000        2,200   

Depreciation and amortization

    42,600        43,800        40,200        40,500        39,300        39,300        35,100        34,300        37,200   

Termination of management and technical assistance agreements

    180,000                                                           
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

    27,100        (88,200     235,200        291,700        195,300        (132,100     159,700        236,100        164,200   

Other expense (income):

                 

Interest expense

    143,400        146,700        146,700        146,700        147,100        153,100        153,600        157,900        153,600   

Interest income

    (2,200     (1,700     (1,400     (1,500     (1,400     (1,300     (2,100            (100

Interest rate swap (income) expense

           (400            (800     700        (400     1,100        (4,800     300   

Amortization of deferred financing costs

    3,900        3,900        3,800        3,900        3,900        3,900        3,800        3,700        2,700   

Loss on extinguishment of debt

    73,200                             17,200               400        6,000        3,600   

Loss on equity method investments

    14,900        3,000        29,100        32,600        20,500        14,300        9,400        11,700        800   

Other

    300        100        (1,000     100        1,400        (2,000     3,600        1,300        200   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

    (206,400     (239,800     58,000        110,700        5,900        (299,700     (10,100     60,300        3,100   

(Benefit) provision for income taxes

    (64,000     (101,500     17,800        15,300        2,300        (490,500 )(h)      8,300        23,200        (3,400
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

    (142,400     (138,300     40,200        95,400        3,600        190,800        (18,400     37,100        6,500   

Net loss attributable to non-controlling interest

    (100     (300     (200     (300     (200     (200                     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income attributable to Univision Holdings, Inc.

  $ (142,300   $ (138,000   $ 40,400      $ 95,700      $ 3,800      $ 191,000      $ (18,400   $ 37,100      $ 6,500   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) 2015 first quarter revenue was impacted by several factors. Content licensing revenue contributed $7.4 million of revenue and political/advocacy advertising revenue contributed $14.1 million of advertising revenue.
(b) 2014 revenue was impacted by several factors. The most significant of which was the World Cup soccer tournament, which contributed $277.1 million (an estimated $174.2 million on an incremental basis) in advertising revenue in 2014. Other factors impacting revenue in 2014 were political/advocacy advertising revenue which contributed $79.2 million of advertising revenue and content licensing revenue which contributed $21.2 million of revenue. On a quarterly basis, the World Cup soccer tournament contributed $7.3 million (an estimated $4.6 million on an incremental basis) to advertising revenue in the first quarter, $184.5 million (an estimated $115.5 million on an incremental basis) in the second quarter and $85.3 million (an estimated $54.1 million on an incremental basis) in the third quarter. There was no contribution in the fourth quarter. Political/advocacy advertising revenue was $23.5 million in the first quarter, $11.2 million in the second quarter, $16.2 million in the third quarter and $28.3 million in the fourth quarter. Content licensing revenue was $0.8 million in the first quarter, $2.1 million in the second quarter, $3.0 million in the third quarter and $15.3 million in the fourth quarter.
(c) 2014 direct operating expenses were impacted by the World Cup soccer tournament. Direct expenses related to the World Cup were $141.9 million including $25.4 million related to the program license fee. World Cup direct expenses were $3.1 million (program license fee $0.7 million) in the first quarter, $95.9 million (program license fee $16.9 million) in the second quarter, $43.1 million (program license fee $7.8 million) in the third quarter and ($0.2) million in the fourth quarter.
(d) Impairment losses during the fourth quarter of 2014 include approximately $182.9 million related to the impairment of Venevision-related prepaid programming assets and $133.4 million related to the write-down of radio broadcast licenses.

 

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(e) 2013 revenue was impacted by several factors. The Confederation Cup and the Gold Cup soccer tournaments occurred in 2013. The Confederation Cup soccer tournament contributed $22.9 million in advertising revenue to the second quarter. The Gold Cup soccer tournament contributed $45.1 million in advertising revenue to the third quarter. Other factors impacting revenue in 2013 were political/advocacy advertising revenue which contributed $59.1 million of advertising revenue and content licensing revenue which contributed $12.6 million of revenue. Political/advocacy advertising revenue was $5.3 million in the first quarter, $15.1 million in the second quarter, $17.7 million in the third quarter and $21.0 million in the fourth quarter. Content licensing revenue was $2.9 million in the first quarter, $3.7 million in the second quarter, $4.6 million in the third quarter and $1.4 million in the fourth quarter.
(f) 2013 direct operating expenses were impacted by the Confederation Cup and Gold Cup soccer tournaments. Direct expenses in the second quarter related to the Confederation Cup were $14.2 million including $3.2 million related to the program license fee. Direct expenses in the third quarter related to the Gold Cup were $24.8 million including $6.3 million related to the program license fee.
(g) Impairment losses during the third quarter of 2013 include approximately $82.5 million related to the write-off of World Cup program rights prepayments. Impairment losses during the fourth quarter of 2013 include $307.8 million related to the write-off of Radio segment goodwill and $43.4 million related to the write-down of radio broadcast licenses.
(h) The income tax benefit in the fourth quarter of 2013 was impacted by a reduction in our Federal and state deferred tax asset valuation allowance of $468.0 million. The aforementioned goodwill impairment was a permanent tax difference and therefore did not impact the income tax benefit.

Liquidity and Capital Resources

Cash Flows

Cash Flows from Operating Activities. Cash flows from operating activities for the three months ended March 31, 2015 and 2014 and for the years ended December 31, 2014, 2013 and 2012 were as follows:

Cash flows from operating activities for the three months ended March 31, 2015 were $53.5 million compared to cash flows from operating activities for the three months ended March 31, 2014 of $73.6 million. Excluding the impact of the accrual of the management and technical assistance termination payment obligations and the charge taken for such obligations, the most significant factors leading to the decrease in cash provided by operating activities in 2015 compared to 2014, after further excluding the impact of the non-cash items, were the changes in net income, spending for program rights and accrued interest. The difference in spending for program rights was primarily related to sports programming (not related to the World Cup) and the difference in accrued interest was due to debt refinancings that impacted these periods.

Cash flows from operating activities for the year ended December 31, 2014 were $274.9 million compared to cash flows from operating activities for the year ended December 31, 2013 of $79.3 million. Excluding the impact of non-cash items, the increase in cash provided by operating activities in 2014 as compared to 2013 reflects higher net income and improvements in working capital. Net income in 2014 was favorably impacted by the World Cup which ended in July 2014. The activity in 2014 reflects the collection of World Cup accounts receivable as well as lower prepaids, program rights and accounts payable balances. In addition, during 2014, we incurred approximately $177.5 million in program rights prepayments associated with our amendment of the Venevision PLA. In 2013, we incurred approximately $136.8 million related to World Cup program rights prepayments. In 2013, deferred revenue primarily related to our facility-sharing agreement with Fusion.

Cash flows from operating activities for the year ended December 31, 2013 were $79.3 million compared to cash flows from operating activities for the year ended December 31, 2012 of $169.1 million. The decrease in cash from operating activities in 2013 as compared to 2012 was primarily due to the payment schedule associated with the 2014 World Cup. In 2013, we incurred approximately $136.8 million related to World Cup program rights prepayments. In 2012, we incurred approximately $86.8 million in World Cup and other soccer property program rights prepayments. In 2013, deferred revenue primarily related to our facility-sharing agreement with Fusion. In 2012, deferred revenue primarily related to our former music business.

Cash Flows Used in Investing Activities. Cash flows used in investing activities for the three months ended March 31, 2015 and 2014 and for the years ended December 31, 2014, 2013 and 2012 were as follows:

Cash flows used in investing activities were $69.0 million for the three months ended March 31, 2015 compared to cash flows used in investing activities of $38.8 million for the three months ended March 31, 2014.

 

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The increase in cash used in investing activities was due primarily to increased contributions to El Rey and Fusion of $30.0 million and $12.8 million, respectively. These increases were partially offset by a decrease in capital expenditures of $13.6 million.

Cash flows used in investing activities were $154.8 million for the year ended December 31, 2014 compared to cash flows used in investing activities of $335.2 million for the year ended December 31, 2013. The reduction in cash used for investing activities was due primarily to lower capital expenditures of $45.8 million, lower investments primarily in El Rey and no launch rights acquired in 2014.

Cash flows used in investing activities were $335.2 million for the year ended December 31, 2013 as compared to cash flows used in investing activities of $102.5 million for the year ended December 31, 2012. The increase in cash used in investing activities was due primarily to higher capital expenditures of $79.7 million, investments in 2013 in both El Rey and Fusion and the acquisition of launch rights in 2013 for $81.3 million.

Cash Flows from (Used in) Financing Activities. Cash flows from (used in) financing activities for the three months ended March 31, 2015 and 2014 and the years ended December 31, 2014, 2013 and 2012 were as follows:

Cash flows from financing activities were $208.7 million for the three months ended March 31, 2015 compared to cash flows from financing activities of $0.2 million for the three months ended March 31, 2014. The cash flows provided by financing activities reflected net borrowings related to our debt of $208.7 million in 2015. Cash flows from financing activities for the three months ended March 31, 2014 included replacing term loans under our senior secured credit facility with term loans with a lower interest rate as a result of an amendment to our senior secured credit facilities in January 2014.

Cash flows used in financing activities were $107.2 million for the year ended December 31, 2014 compared to cash flows from financing activities of $263.7 million for the year ended December 31, 2013. The cash flows used in financing activities reflect net repayments related to our debt of $232.6 million in 2014, partially offset by the issuance of equity of $124.3 million and other items. Cash flows used in financing activities for the year ended December 31, 2014 include an amendment to our senior secured credit facilities in January 2014 which facilitated the incurrence of replacement term loans at a modified interest rate. Overall borrowings under our senior secured credit facilities decreased by approximately $46.4 million in 2014. In addition, we redeemed approximately $119.8 million of our 6.75% senior secured notes due 2022 (the “2022 notes”) and reduced our borrowings under the accounts receivable facility by $60.0 million.

Cash flows from financing activities were $263.7 million for the year ended December 31, 2013 compared to cash flows used in financing activities of $89.2 million for the year ended December 31, 2012. The cash flows from financing activities primarily reflect net proceeds from debt borrowings of $263.7 million in 2013. Cash flows from financing activities in 2013 include the issuance of $700.0 million 5.125% senior secured notes due 2023 (the “2023 notes”) and amendments to our senior secured credit facilities in February and May 2013 which extended our term loans. Overall borrowings under our senior secured credit facilities decreased by approximately $324.7 million in 2013. In addition, we reduced our borrowings under the accounts receivable facility by $55.0 million.

Anticipated Cash Requirements. Our current financing strategy is to fund operations through our cash flow from operations, our bank senior secured revolving credit facility, our accounts receivable sale facility and anticipated access to public and private debt markets. We monitor our cash flow liquidity, availability, fixed charge coverage, capital base, programming acquisitions and leverage ratios with the long-term goal of maintaining our credit worthiness.

Capital Expenditures

Capital expenditures for the three months ended March 31, 2015 totaled $21.8 million, not reflecting the impact of approximately $5.0 million of accruals as of March 31, 2015. These expenditures included $7.5 million

 

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related to normal capital purchases or improvements, $6.7 million related to information technology, $6.6 million related to facilities upgrades, including those related to consolidation of operations and $1.0 million related to television station transmitter projects. Our capital expenditures excluded the expenditures financed with capitalized lease obligations.

Capital expenditures for the year ended December 31, 2014 totaled $133.4 million. These expenditures included $71.6 million related to normal capital purchases or improvements, $45.5 million related to information technology, $11.8 million related to television station transmitter and HDTV conversion projects and $4.5 million related to new facilities. Our capital expenditures excluded the expenditures financed with capitalized lease obligations. The capital expenditures for the year ended December 31, 2014 included $32.5 million of accruals as of December 31, 2013, but excluded $15.1 million of accruals as of December 31, 2014.

For the full fiscal year 2015, our capital expenditure plan is for approximately $107.0 million, plus approximately $15.1 million of capital purchases that were accrued as of December 31, 2014. These anticipated expenditures include $48.1 million related to normal capital purchases or improvements, $37.5 million related to facilities upgrades, including those related to consolidation of operations, $33.9 million related to information technology, and $2.6 million related to television station transmitter projects.

Restrictions on Dividends

As a holding company, our investments in our operating subsidiaries constitute all of our operating assets. Our subsidiaries conduct all of our consolidated operations and own substantially all of our consolidated assets. As a result, we must rely on dividends and other advances and transfers of funds from our subsidiaries to meet our debt obligations. The ability of our subsidiaries to pay dividends or make other advances and transfers of funds will depend on their respective results of operations and may be restricted by, among other things, applicable laws limiting the amount of funds available for payment of dividends and agreements of those subsidiaries. The credit agreement governing our senior secured credit facilities and the indentures governing the senior notes create restrictions on the ability of UCI to pay dividends or make distributions on its capital stock.

 

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Debt and Financing Transactions

As of March 31, 2015, we had total committed capacity, defined as maximum available borrowings under various existing debt arrangements plus cash and cash equivalents, of $11,506.5 million. Of this committed capacity, $910.3 million was unused and $10,586.5 million was outstanding as debt. As of March 31, 2015, total committed capacity, outstanding letters of credit, outstanding debt and total unused committed capacity were as follows.

 

     Committed
Capacity
     Letters of
Credit
     Outstanding
Debt
     Unused
Committed
Capacity
 
     (in thousands)  

Cash and cash equivalents

   $ 250,000       $       $       $ 250,000   

Bank senior secured revolving credit facility maturing in 2018 – alternate bases

     550,000         9,700         180,000         360,300   

Bank senior secured term loans maturing in 2020—LIBOR with a 1.0% floor + 3.0%(a)

     4,558,600                 4,558,600           

Televisa convertible debentures due 2025—1.5%(a)(b)

     1,125,000                 1,125,000           

Senior secured notes due 2020—7.875%

     750,000                 750,000           

Senior notes due 2021—8.5%(a)

     815,000                 815,000           

Senior secured notes due 2022—6.75%(a)

     1,107,900                 1,107,900           

Senior secured notes due 2023—5.125%(a)

     1,200,000                 1,200,000           

Senior secured notes due 2025—5.125%

     750,000                 750,000           

Accounts receivable facility maturing in 2018—LIBOR + 2.25%

     400,000                 100,000         300,000   
  

 

 

    

 

 

    

 

 

    

 

 

 
$ 11,506,500    $ 9,700    $ 10,586,500    $ 910,300   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) Amounts represent the principal balance and do not include any discounts and premiums.

 

(b) On July 1, 2015, we entered into the MOU in which it was agreed that, prior to the consummation of this offering, Televisa’s convertible debentures would be exchanged for the Televisa Warrants.

For further information regarding our indebtedness, see “Description of Certain Indebtedness.” See also Note 9 to our audited consolidated financial statements for the year ended December 31, 2014 and Note 7 to our unaudited consolidated financial statements for the three months ended March 31, 2015 included elsewhere in this prospectus.

Our senior secured credit facilities are guaranteed by Broadcast Media Partners Holdings, Inc. (“Holdings”) and UCI’s material, wholly-owned restricted domestic subsidiaries (subject to certain exceptions). Our senior secured notes and senior notes are guaranteed by all of the current and future domestic subsidiaries that guarantee the senior secured credit facilities. The senior secured notes and senior notes are not guaranteed by Holdings.

Our senior secured credit facilities are secured by, among other things:

 

   

a first priority security interest, subject to permitted liens, in substantially all of the assets of UCI and Univision of Puerto Rico Inc. (“UPR”), as borrowers, Holdings and UCI’s material restricted domestic subsidiaries (subject to certain exceptions), including without limitation, all receivables, contracts, contract rights, equipment, intellectual property, inventory and other tangible and intangible assets, but excluding, among other things, cash and cash equivalents, deposit and securities accounts, motor vehicles, FCC licenses to the extent that applicable law or regulation prohibits the grant of a security interest therein, equipment that is subject to restrictions on liens pursuant to purchase money

 

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obligations or capital lease obligations, interests in joint ventures and non-wholly owned subsidiaries that cannot be pledged without the consent of a third party, trademark applications and receivables subject to our accounts receivable securitization;

 

    a pledge of (i) the present and future capital stock of each of UCI’s, UPR’s, and each subsidiary guarantor’s direct domestic subsidiaries (other than interests in joint ventures and non-wholly owned subsidiaries that cannot be pledged without the consent of a third party or to the extent a pledge of such capital stock would cause us to be required to file separate financial statements for such subsidiary with the SEC) and (ii) 65% of the voting stock of each of UCI’s, UPR, and each subsidiary guarantor’s material direct foreign subsidiaries (other than interests in non-wholly owned subsidiaries that cannot be pledged without the consent of a third party), in each case, subject to certain exceptions; and

 

    all proceeds and products of the property and assets described above.

Our senior secured notes are secured by substantially all of UCI’s and the guarantors’ property and assets that secure our senior secured credit facilities. The senior secured notes are not secured by the assets of Holdings, including a pledge of the capital stock of UCI.

The agreements governing the senior secured credit facilities and the senior notes contain various covenants, which, among other things, limit the incurrence of indebtedness, making of investments, payment of dividends, transactions with affiliates, asset sales, acquisitions, mergers and consolidations, prepayments of other indebtedness, liens and encumbrances and other matters customarily restricted in such agreements. The credit agreement and the indentures governing the senior notes thereunder allow UCI to make certain pro forma adjustments for purposes of calculating certain financial ratios, some of which would be applied to Bank Credit OIBDA. UCI is in compliance with these covenants under the agreements governing its senior secured credit facilities and the existing senior notes as of March 31, 2015.

A breach of any covenant could result in an event of default under those agreements. If any such event of default occurs, the lenders of the senior secured credit facilities or the holders of the existing senior notes or other notes may elect (after the expiration of any applicable notice or grace periods) to declare all outstanding borrowings, together with accrued and unpaid interest and other amounts payable thereunder, to be immediately due and payable. In addition, an event of default under the indentures governing the existing senior notes or the notes would cause an event of default under the senior secured credit facilities, and the acceleration of debt under the senior secured credit facilities or the failure to pay that debt when due would cause an event of default under the indentures governing the existing senior notes or the notes (assuming certain amounts of that debt were outstanding at the time). The lenders under the senior secured credit facilities also have the right upon an event of default thereunder to terminate any commitments they have to provide further borrowings. Further, following an event of default under the senior secured credit facilities, the lenders will have the right to proceed against the collateral.

UCI owns several wholly-owned early stage ventures, including the subsidiary that operates Flama, which have been designated as “unrestricted subsidiaries” for purposes of its credit agreement governing the senior secured credit facilities and indentures governing the senior notes. The results of these unrestricted subsidiaries are excluded from Bank Credit OIBDA in accordance with the definition in the credit agreement and the indentures governing the senior notes. As unrestricted subsidiaries, the operations of these subsidiaries are excluded from, among other things, covenant compliance calculations and compliance with the affirmative and negative covenants of the credit agreement governing the senior secured credit facilities and indentures governing the senior notes. UCI may redesignate these subsidiaries as restricted subsidiaries at any time at its option, subject to compliance with the terms of its credit agreement governing the senior secured credit facilities and indentures governing the senior notes.

UCI and its subsidiaries, affiliates or significant shareholders may from time to time, in their sole discretion, purchase, repay, redeem or retire certain of our debt or equity securities (including any publicly traded debt securities), in privately negotiated or open market transactions, by tender offer or otherwise.

 

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Interest Rate Swaps

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish these objectives, we primarily use interest rate swaps as part of our interest rate risk management strategy. These interest rate swaps involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. We have agreements with each of our interest rate swap counterparties which provide that we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness.

As of March 31, 2015, we had two effective cash flow hedges with a combined notional amount of $2.5 billion. These contracts mature in February 2020. Our current interest rate swap contracts designated in cash flow hedging relationships effectively convert the interest payable on $2.5 billion of variable rate debt into fixed rate debt, at a weighted-average rate of approximately 2.25%.

As of March 31, 2015, we had three interest rate swap contracts not designated as hedges (“nondesignated instruments”). These contracts mature in June 2016. Two of these interest rate swap contracts were originally designated in cash flow hedging relationships, but we ceased applying cash flow hedge accounting as a result of refinancing the senior secured credit facilities. Subsequent to the discontinuation of cash flow hedge accounting, those interest rate swap contracts are marked to market, with the change in fair value recorded directly in earnings. The unrealized gain/loss up to the point cash flow hedge accounting was discontinued is being amortized from AOCL into earnings. The third nondesignated instrument (“reverse swap”) was entered into to offset the effect of the other nondesignated instruments. The effective notional amount of these three instruments is zero. The first two nondesignated instruments have a combined notional amount of $1.25 billion and pay fixed interest and receive floating interest, while the reverse swap has a notional amount of $1.25 billion and receives an offsetting amount of floating interest while paying fixed interest.

Other

General

Based on our current level of operations, planned capital expenditures and major contractual obligations, we believe that our cash flow from operations, together with available cash and availability under our senior secured revolving credit facility and the revolving component of our accounts receivable sale facility will provide sufficient liquidity to fund our current obligations, projected working capital requirements and capital expenditures for a period that includes at least the next year.

Acquisitions

We continue to explore acquisition and joint venture opportunities to complement and capitalize on our existing business and management. The purchase price for any future acquisitions and investments in joint ventures may be paid with cash derived from operating cash flow, proceeds available under our senior secured revolving credit facility, proceeds from future debt offerings or any combination thereof.

 

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Contractual Obligations

Below is a summary of our major contractual payment obligations as of December 31, 2014:

Major Contractual Obligations

As of December 31, 2014

Payments Due By Period

 

    2015     2016     2017     2018     2019     Thereafter     TOTAL  
    (in thousands)  

Senior notes(a)

  $      $      $      $      $ 1,200,000      $ 3,372,900      $ 4,572,900   

Bank senior secured term loans(a)

    45,800        46,300        46,300        46,300        46,300        4,339,600        4,570,600   

Televisa convertible debentures(a)

                                       1,125,000        1,125,000   

Interest on fixed rate debt(b)

    338,400        338,400        338,400        338,400        297,100        613,500        2,264,200   

Operating leases

    32,100        28,500        29,500        28,500        19,600        165,200        303,400   

Capital leases(c)

    9,500        9,500        9,400        9,100        8,300        94,900        140,700   

Accounts receivable facility(d)

                         100,000                      100,000   

Programming(e)

    182,300        128,600        111,200        57,800        44,800        76,000        600,700   

Contributions to investments

    2,500                                           2,500   

Research tools

    81,200        79,700        68,600        70,900        2,100        4,300        306,800   

Music license fees

    1,300                                           1,300   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
$ 693,100    $ 631,000    $ 603,400    $ 651,000    $ 1,618,200    $ 9,791,400    $ 13,988,100   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Amounts represent the principal amount and are not necessarily the balance of our debt, which include discount and premium amounts. Amounts do not give pro forma effect to (i) the issuance of $1,250.0 million in aggregate principal amount of senior notes on February 19, 2015, (ii) the purchase and redemption of the $1,200.0 million in aggregate principal amount of 6.875% senior secured notes due 2019 (the “2019 notes”) outstanding as of December 31, 2014, (iii) the issuance of $810.0 million in aggregate principal amount of additional 2025 notes on April 21, 2015, (iv) the purchase and redemption of the $750.0 million in aggregate principal amount of 2020 notes outstanding as of March 31, 2015, and (v) the exchange of Televisa’s convertible debentures for the Televisa Warrants, which exchange will occur prior to the consummation of this offering.
(b) Amounts represent anticipated cash interest payments related to our fixed rate debt, which includes the senior notes and Televisa convertible debentures. Amounts do not give pro forma effect to (i) the issuance of $1,250.0 million in aggregate principal amount of senior notes on February 19, 2015, (ii) the purchase and redemption of the $1,200.0 million in aggregate principal amount of 2019 notes outstanding as of December 31, 2014, (iii) the issuance of $810.0 million in aggregate principal amount of additional 2025 notes on April 21, 2015, (iv) the purchase and redemption of the $750.0 million in aggregate principal amount of 2020 notes outstanding as of March 31, 2015, and (v) the exchange of Televisa’s convertible debentures for the Televisa Warrants, which exchange will occur prior to the consummation of this offering.
(c) Amounts are based on anticipated cash payments. See Note 16 to our audited consolidated financial statements for the year ended December 31, 2014 included elsewhere in this prospectus for reconciliation to the capital lease obligations recognized on our balance sheet as of December 31, 2014.
(d) Amounts reflect our accounts receivable sale facility which matures in 2018. The outstanding balance is classified as current debt due to the revolving nature of the facility.

 

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(e) Amounts exclude the license fees that will be paid in accordance with the Televisa PLA and the amended Venevision PLA.

Our tax liability for uncertain tax positions as of December 31, 2014 is $18.1 million, including $3.6 million of accrued interest and penalties. Until formal resolutions are reached between us and the tax authorities, the timing and amount of a possible settlement for uncertain tax benefits is not determinable. Therefore, the obligation is not included in the table of major contractual obligations above. See Note 14 to our audited consolidated financial statements for the year ended December 31, 2014 included elsewhere in this prospectus.

Off-Balance Sheet Arrangements

As of March 31, 2015 and December 31, 2014, we do not have any off-balance sheet transactions, arrangements or obligations (including contingent obligations) that would have a material effect on our results of operations.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to fluctuations in interest rates. Our primary interest rate exposure results from short-term interest rates applicable to our variable interest rate loans. To partially mitigate this risk, we have entered into interest rate swap contracts. As of March 31, 2015 and December 31, 2014, we had approximately $2.0 billion in principal amount in variable interest rate loans outstanding in which our exposure to variable interest rates is not limited by interest rate swap contracts. As of both March 31, 2015 and December 31, 2014, a hypothetical change of 10% in the floating interest rate that we receive would result in a change to interest expense of less than approximately $0.1 million on pre-tax earnings and pre-tax cash flows over a one-year period related to the borrowings in excess of the hedged contracts. See “—Debt and Financing Transactions—Interest Rate Swaps.”

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements require us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. These estimates, assumptions and judgments are based on our historical experience, terms of existing contracts, our evaluation of trends in the industry, information provided by our customers and suppliers/partners and information available from other outside sources, as appropriate. However, they are subject to an inherent degree of uncertainty. As a result, our actual results in these areas may differ significantly from these estimates. We believe that the following critical accounting policies are critical to an understanding of our financial condition and results of operations and require the most significant judgments and estimates used in the preparation of our consolidated financial statements and changes in these judgments and estimates may impact future results of operations and financial condition.

Revenue Recognition

Revenue is comprised of gross revenues from the Media Networks and Radio segments, including advertising revenue, subscriber fees, content licensing revenue, sales commissions on national advertising aired on Univision and UniMás affiliated television stations, less agency commissions and volume and prompt payment discounts. Media Networks television and Radio station advertising revenues are recognized when advertising spots are aired and performance guarantees, if any, are achieved. The achievement of performance guarantees is based on audience ratings from an independent research company. Subscriber fees received from cable and satellite MVPDs are recognized as revenue in the period that services are provided. The digital

 

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platform recognizes revenue primarily from video and display advertising, subscriber fees where digital content is provided on an authenticated basis, digital content licensing and sponsorship advertisement revenue. Video and display advertising revenue is recognized as “impressions” are delivered and sponsorship revenue is recognized ratably over the contract period and as performance guarantees, if any, are achieved. “Impressions” are defined as the number of times that an advertisement appears in pages viewed by users of our Internet properties. We view the licensing of digital content as a separate earnings process and content licensing revenue is recognized when the content is delivered, all related obligations have been satisfied and all other revenue recognition criteria have been met. All revenue is recognized only when collection of the resulting receivable is reasonably assured.

We have certain contractual commitments, with Televisa and others, to provide a future annual guaranteed amount of advertising and promotion time. The obligation associated with each of these commitments was recorded as deferred revenue at an amount equal to the fair value of the advertising and promotion time as of the date of the agreements providing for these commitments. Deferred revenue is earned and revenue is recognized as the related advertising and promotion time is provided. For the three months ended March 31, 2015 and 2014, we recognized revenue of $15.2 million and $15.0 million, respectively, related to these commitments. Our deferred revenue, which is primarily related to the commitments with Televisa, resulted in revenue of $60.1 million, $67.8 million and $83.7 million respectively, for the years ended December 31, 2014, 2013 and 2012. Pursuant to the Televisa PLA, we will have the right, on an annual basis, to reduce the minimum amount of advertising we have to provide to Televisa by up to 20% for our use to sell advertising or satisfy ratings guarantees to certain advertisers. See Note 8 to our audited consolidated financial statements for the year ended December 31, 2014 and Note 6 to our unaudited consolidated financial statements for the three months ended March 31, 2015 included elsewhere in this prospectus.

Accounting for Goodwill, Other Intangibles and Long-Lived Assets

Goodwill and other intangible assets with indefinite lives are tested annually for impairment on October 1 or more frequently if circumstances indicate a possible impairment exists.

We have the option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. If the qualitative assessment determines that it is more likely than not that the fair value of the segment is more than its carrying amount, then we conclude that goodwill is not impaired. If we do not choose to perform the qualitative assessment, or if the qualitative assessment determines that it is more likely than not that the fair value of the segment is less than its carrying amount, then we proceed to the first step of the two-step quantitative goodwill impairment test.

If a quantitative test is performed for goodwill, the estimated fair value of a segment is compared to its carrying value, including goodwill (the “Step 1 Test”). In the Step 1 Test, we estimate the fair value of our segments using a combination of discounted cash flows and market-based valuation methodologies. Developing estimates of fair value requires significant judgments, including making assumptions about appropriate discount rates, perpetual growth rates, relevant comparable market multiples and the amount and timing of expected future cash flows. The cash flows employed in the valuation analysis are based on our best estimates considering current marketplace factors and risks as well as assumptions of growth rates in future years. The fair value of our segments is classified as a Level 3 measurement. There is no assurance that actual results in the future will approximate these forecasts. If the calculated fair value is less than the current carrying value, impairment of the segment goodwill may exist.

When the Step 1 Test indicates potential impairment, a second test is required to measure the impairment loss (the “Step 2 Test”). In the Step 2 Test, we will calculate an implied fair value of goodwill for the segment. The implied fair value of goodwill is determined in a manner similar to how goodwill is calculated in a business combination, where the fair value of the segment is allocated to all of the assets and liabilities of the segment with any residual value being allocated to goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill assigned to the segment, the excess amount is recorded as an impairment charge. An

 

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impairment charge cannot exceed the carrying value of goodwill assigned to a segment, but may indicate that certain long-lived and intangible assets associated with the segment may require additional impairment testing.

If a qualitative assessment is performed for goodwill, we consider relevant events and circumstances that could affect a segment’s fair value. Considerations may include macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and entity-specific events, business plans, and strategy. We consider the same key assumptions that would have been used in a quantitative test. We consider the totality of these events, in the context of the segment, and determine if it is more likely than not that the fair value of the segment is less than its carrying amount.

We also have indefinite-lived intangible assets, such as trade names and television and radio broadcast licenses. We have the option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test.

If the qualitative assessment determines that it is more likely than not that the fair value of the intangible asset is more than its carrying amount, then we conclude that the intangible asset is not impaired. If we do not choose to perform the qualitative assessment, or if the qualitative assessment determines that it is more likely than not that the fair value of the intangible asset is less than its carrying amount, then we calculate the fair value of the intangible asset and compare it to the corresponding carrying value. If the carrying value of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized for the excess carrying value over the fair value.

If a quantitative test is performed, we will calculate the fair value of the intangible assets. The fair value of the television and radio broadcast licenses is determined using the direct valuation method, for which the key assumptions are market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values. For trade names, we assess recoverability by utilizing the relief from royalty method to determine the estimated fair value. Key assumptions used in this model include discount rates, royalty rates, growth rates, sales projections and terminal value rates. The fair value of the intangible assets is classified as a Level 3 measurement. When a qualitative test is performed, we consider the same key assumptions that would have been used in a quantitative test to determine if these factors would negatively affect the fair value of the intangible assets.

Univision Network and UniMás network programming is broadcast on our television stations. FCC broadcast licenses associated with the Univision Network and UniMás stations are tested for impairment at their respective network level. Broadcast licenses for television stations that are not dependent on network programming are tested for impairment at the local market level. Radio broadcast licenses are tested for impairment at the local market level.

Long-lived assets, such as property and equipment, intangible assets with definite lives and program right prepayments are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to its estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Program and Sports Rights for Television Broadcast

Televisa and Venevision provide our two broadcast television networks (Univision and UniMás) and nine of our cable offerings (Galavisión, De Película, De Película Clásico, Bandamax, Ritmoson, Telehit, Univision

 

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tlnovelas, Univision Deportes and ForoTV) with a substantial amount of programming. Effective December 20, 2010, Televisa made a substantial investment in our business and entered into a revised program license agreement with Televisa, amending the program license agreement then in effect. The 2011 Televisa PLA, the Televisa PLA and all other agreements with Televisa are related party transactions following December 20, 2010. See Note 8 to our audited consolidated financial statements for the year ended December 31, 2014 and Note 6 to our unaudited consolidated financial statements for the three months ended March 31, 2015 included elsewhere in this prospectus. In December 2014, we entered into a binding term sheet to, among other things, amend the Venevision PLA to eliminate Venevision’s obligation to provide a minimum number of hours of programming per year.

We acquire rights to programming to exhibit on our broadcast and cable networks. Costs incurred to acquire television programs are capitalized when (i) the cost of the programming is reasonably determined, (ii) the programming has been accepted in accordance with the terms of the agreement, (iii) the programming is available for its first showing or telecast and (iv) the license period has commenced. Costs incurred in connection with the production of or purchase of rights to programs that are available and scheduled to be broadcast within one year are classified as current assets, while costs of those programs to be broadcast beyond a one-year period are considered non-current. Program rights and prepayments on our balance sheet are subject to regular recoverability assessments.

The costs of programming rights for television shows, novelas and movies licensed under programming agreements are capitalized and classified as programming prepayments if the rights payments are made before the related economic benefit has been received. Program rights for television shows and movies are amortized over the program’s life, which is the period in which an economic benefit is expected to be generated, based on the estimated relative value of each broadcast of the program over the program’s life. Program costs are charged to operating expense as the programs are broadcast.

The costs of programming rights licensed under multi-year sports programming agreements are capitalized and classified as programming prepayments if the rights payments are made before the related economic benefit has been received. Program rights for multi-year sports programming arrangements are amortized over the license period based on the ratio of current-period direct revenues to estimated remaining total direct revenues over the remaining contract period. Program costs are charged to operating expense as the programs are broadcast.

The accounting for program rights and prepayments requires judgment, particularly in the process of estimating the revenues to be earned over the life of the contract and total costs to be incurred (“ultimate revenues”). These judgments are used in determining the amortization of, and any necessary impairment of, capitalized costs. Estimated revenues are based on factors such as historical performance of similar programs, actual and forecasted ratings and the genre of the program. Such measurements are classified as Level 3 within the fair value hierarchy as key inputs used to value program and sports rights include ratings and undiscounted cash flows. If planned usage patterns or estimated relative values by year were to change significantly, amortization of our rights costs may be accelerated or slowed. See further discussion regarding the review of program rights prepayments for impairment above in “—Accounting for Goodwill, Other Intangibles and Long-Lived Assets.”

Share-Based Compensation

Compensation expense relating to share-based payments is recognized in earnings using a fair-value measurement method. We use the straight-line attribution method of recognizing compensation expense over the vesting period. The estimated fair value of employee awards is expensed on a straight-line basis over the period from grant date to remaining requisite service period which is generally the vesting period. The fair value of each new stock option award is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. Restricted stock units classified as liability awards are measured at fair value at the end of each reporting period until vested. The fair value of equity units awarded to non-employees, including units issued under our consulting arrangement, is estimated as the units vest using a Monte Carlo simulation analysis.

 

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Income taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when management determines that it is more likely than not that some portion or all of the deferred tax asset will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We recognize interest and penalties, if any, related to uncertain income tax positions in income tax expense. There is considerable judgment involved in assessing whether deferred tax assets will be realized and in determining whether positions taken on our tax returns are more likely than not of being sustained.

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-04, which amended Accounting Standards Codification (“ASC”) 405, Liabilities. The amendments provide guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation (within the scope of this guidance) is fixed at the reporting date. Examples of obligations within the scope of ASU 2013-04 include debt arrangements, other contractual obligations, and settled litigation and judicial rulings. We adopted ASU 2013-04 during the first quarter of 2014. The adoption of ASU 2013-04 did not have a significant impact on our consolidated financial statements or disclosures.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASC 606). The amendments provide guidance to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards. For public entities, the amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The FASB has proposed a one year delay of ASU 2014-09 implementation. We are currently evaluating the impact ASU 2014-09 will have on our consolidated financial statements and disclosures.

 

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BUSINESS

Overview

Univision is the leading media company serving Hispanic America. We produce and deliver content across multiple media platforms to inform, entertain, and empower Hispanic America. We have an over 50 year multi-generational relationship with our audience and are the most recognized and trusted brand in Hispanic America. We earned the highest brand equity score among U.S. media brands in a brand equity research study conducted by Burke in 2013. We reach over 49 million unduplicated media consumers monthly and our commitment to high-quality, culturally-relevant programming combined with our multi-platform media properties has enabled us to become the #1 destination for entertainment, sports, and news among U.S. Hispanics. Our flagship network, Univision Network, has been the most-watched U.S. Spanish-language broadcast network since its ratings were first measured by Nielsen in 1992. We have a strategic relationship with Televisa, the largest media company in the Spanish-speaking world and a top programming producer, for exclusive, long-term access to its premium entertainment and sports content in the U.S.

We serve a young, digitally savvy and socially engaged community. U.S. Hispanics are the youngest demographic as of 2012, have experienced the largest growth as of 2012 and have rapidly growing buying power as of February 2014. Marketers are increasingly targeting Hispanic America and its expanding economic, cultural and political influence. We own the leading and growing portfolio of Spanish-language media platforms in the U.S. across broadcast and cable television, digital and radio, enhancing our value to both our distribution and marketing partners as the gateway to Hispanic America. Our local television and radio stations are among the leading stations in their markets, regardless of language, and provide us with a unique ability to connect with our audiences and target advertisers at the local level. Our “must-see” content coupled with our ownership of local television stations allows us to maximize subscription fees from MVPDs, and to benefit from the largest broadcast spectrum portfolio of any broadcaster in the U.S. as measured by MHz-Pops according to data from BIA/Kelsey. We believe we are well-positioned for growth and have the opportunity to continue to expand our audience and to monetize our attractive audience demographics, leading content across multiple platforms and spectrum assets.

Hispanic America continues to be a highly attractive audience demographic, exhibiting strong growth and economic and political influence in the U.S., representing:

 

    57 million people as of December 2014, growing to an estimated 77 million by 2030;

 

    $1.3 trillion of buying power in 2014, projected to grow to $1.7 trillion by 2019;

 

    40% of projected new U.S. household formation from 2015 to 2025;

 

    approximately 75% of expected U.S. employment growth from 2020 to 2034;

 

    the youngest demographic in the U.S. with 60% of the U.S. Hispanic population being 34 or younger as of June 2012; and

 

    a registered voter base of 15.7 million U.S. Hispanics, which is approximately 10% of the total voter base as of March 2015, up 14% from 2012 as compared to a 3% increase for non-Hispanic voters over the same period.

We operate our business through two segments: Media Networks and Radio

 

   

Media Networks: Our principal segment is Media Networks, which includes our broadcast and cable networks, local television stations, and digital and mobile properties. We operate two broadcast television networks. Univision Network is the most-watched U.S. Spanish-language broadcast television network, available in approximately 94% of U.S. Hispanic television households. UniMás is among the leading Spanish-language broadcast television networks. In addition, we operate nine cable networks, including Galavisión, the most-watched U.S. Spanish-language cable network, and Univision Deportes, the most-watched Spanish- language sports cable network. We own and operate 60 local television stations, including stations located in the largest markets in the U.S., which represent the

 

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largest number of owned and operated local television stations among the major U.S. broadcast networks. In addition, we provide programming to 74 broadcast network station affiliates. Our digital properties include online and mobile websites, which generate, on average, 540 million page views per month. Univision.com is our flagship digital property and is the #1 most visited Spanish-language website among U.S. Hispanics. UVideos is our bilingual digital video network providing on-demand delivery of our programming across multiple devices. Our Media Networks segment accounted for approximately 90% of our revenues in 2014.

 

    Radio: We have the largest Spanish-language radio group in the U.S. and our stations are frequently ranked #1 regardless of language in many major markets. We own and operate 67 radio stations including stations in 16 of the top 25 DMAs. Our radio stations reach over 15 million listeners per week and cover approximately 75% of the U.S. Hispanic population. Our Radio segment also includes Uforia, a comprehensive digital music platform, which includes more than 65 live radio stations and a library of more than 20 million songs. Our Radio segment accounted for approximately 10% of our revenues in 2014.

We have a long standing strategic relationship with Televisa, which owns a significant equity interest in us. Under the Televisa PLA, we have exclusive long-term U.S. broadcast and digital rights (with limited exceptions) to Televisa’s programming, including premium Spanish-language telenovelas, sports, sitcoms, reality series, news programming, and feature films. In 2014, Televisa produced over 94,000 hours of programming. Our long-term collaborative relationship with Televisa provides us with the opportunity to take advantage of the demands of our target demographic, and access to digital media, telenovelas and the broadcast of additional Mexican soccer league games. We utilize this programming to help establish new cable networks and digital platforms. Upon consummation of this offering, the term of the Televisa PLA will continue until the later of 2030 or 7.5 years after a Televisa Sell-Down, unless certain change of control events happen, in which case the Televisa PLA will expire on the later of 2025 or 7.5 years after a Televisa Sell-Down. See “Summary—Our Relationship with Televisa.”

We are led by a seasoned executive management team with deep industry knowledge. Mr. Falco has served as our President and Chief Executive Officer since 2011. Under Mr. Falco’s leadership, we have fortified our unique relationship with Hispanic America, expanded our portfolio of cable networks and built our digital and mobile platforms. We have grown our OIBDA (as further described in “Summary—Summary Historical Financial and Other Data”) by approximately 30% since 2011 and maintained a stable cost structure enabling us to generate free cash flow and reinvest in our business. Under our management team and through our strategic relationship with Televisa, we have continued our transformation from a single broadcast network into the leading media company serving Hispanic America.

We generate revenue from advertising on our media networks and radio stations as well as subscription fees, which include retransmission and affiliate fees, paid by our distribution partners. We expect our advertising revenue growth to continue to outperform our English-language media peers and our recurring subscription fees to make up an increasingly larger percentage of our total revenue. For the years ended December 31, 2012, 2013, and 2014 we generated revenue of $2.4 billion, $2.6 billion and $2.9 billion; OIBDA of $0.9 billion, $1.1 billion, and $1.2 billion; Levered Free Cash Flow (as defined in “Summary—Summary Historical Financial and Other Data”) of $69.7 million, $(92.4) million and $335.6 million; and a net loss of $14.4 million, net income of $216.0 million, and net income of $0.9 million, respectively. For the three months ended March 31, 2015, we generated revenue of $624.7 million, OIBDA of $266.5 million, Levered Free Cash Flow of $90.4 million and a net loss of $142.4 million.

 

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The Hispanic America Market Opportunity

Our market opportunity is driven by highly attractive trends within Hispanic America and the power of “must-see” content in today’s media landscape.

 

    Hispanic population growth and increased buying power.

There are more than 57 million U.S. Hispanics comprising more than 17% of the total U.S. population. U.S. Hispanics have experienced the largest growth of any group in the U.S. in recent years, accounting for more than half of the growth of the total population from 2010 to 2015. By 2030, it is estimated that there will be over 77 million U.S. Hispanics, representing nearly 22% of the total U.S. population. In addition, the estimated buying power of U.S. Hispanics is projected to increase from $1.3 trillion in 2014 to $1.7 trillion by 2019.

 

    U.S. Hispanics’ preference for Spanish-language content.

Spanish is the primary language in the homes of most U.S. Hispanics and the number of U.S. Hispanics who speak Spanish in the home is projected to increase from 37 million in 2014 to 55 million by 2034. U.S. Hispanics speaking Spanish in the home are estimated to comprise approximately 65% of the U.S. Hispanic population by 2034. U.S. Hispanics exhibit a strong preference to watch television in their native language. Between 2001 and 2013, the percentage of Spanish-speaking households consuming Spanish-language television rose from 65% to 70%. Over the same period, the percentage of bilingual U.S. Hispanic households consuming Spanish-language television also increased from 36% to 46%. On account of these trends, we believe advertisers and media distributors will increasingly seek to reach U.S. Hispanics through Spanish-language media platforms.

 

    Attractive advertising market dynamics of Hispanic America.

We believe Hispanic America is an attractive demographic for advertisers as a result of the growing population and increased buying power of U.S. Hispanics and that advertisers will continue to increase the amount they spend on Spanish-language advertising targeting U.S. Hispanic consumers. Based on a 2014 Nielsen brand effectiveness study, ads on Spanish-language broadcasts had a higher brand likability score among U.S. Hispanics than ads for the same brand on English-language broadcasts. In addition, the growing size and importance of the U.S. Hispanic voting base, representing approximately 10% of the total voter base as of March 2015, up 14% from 2012 as compared to a 3% increase for non-Hispanic voters over the same period, should result in increased spending on political/advocacy advertising targeted at Hispanic America. While U.S. Hispanic households represented approximately 10% of the total U.S. disposable income, spending in Spanish-language media was only approximately 5% of total advertising in 2014 based on Kantar Media Intelligence. Given the market dynamics of this audience, we believe advertisers will allocate a higher proportion of their advertising dollars targeting Hispanic America as they gain a better understanding of the importance and influence of this audience.

 

    Hispanic pay-TV penetration growth.

U.S. Hispanic pay-TV subscribers are expected to continue to grow significantly, driven by the rapid growth in U.S. Hispanic households and historic trends of pay-TV adoption among U.S. Hispanics. In fact, U.S. Hispanic pay-TV subscribers increased nearly 25% from 2008 to 2014, more than five times greater than the increase in overall U.S. pay-TV subscribers during the same period. This growth also significantly outpaced the U.S. Hispanic television household growth, signaling an increase in demand for pay-TV subscriptions among Hispanic households. As of 2014, 83% of U.S. Hispanic households were pay-TV subscribers. We believe Hispanic pay-TV penetration growth will continue to drive increasing subscription fees for Spanish-language media networks from MVPDs.

 

    Favorable media industry dynamics, subscription fee growth and media consumption trends.

We believe “must-see” content delivered at scale is particularly important in today’s fragmented media environment. Content providers delivering large and loyal audiences who prefer live “event” viewing have the ability to generate increased demand and drive growth in advertising revenue and subscription

 

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fees (including retransmission and affiliate fees) from MVPDs. Over the next few years, retransmission revenues for the top four English-language broadcast networks are projected to grow on a percentage basis in the low twenties annually and affiliate fees for the top cable networks are projected to grow on a percentage basis in the high single digits annually. We believe that networks with “must-see” content should capture a disproportionate share of the projected increases in subscription fees.

Media consumption trends are shifting as audiences use media across multiple platforms. Content providers are responding by making their content more broadly available on digital platforms, particularly targeting the millennial audiences who are increasingly seeking to consume content online via smartphones and tablets. The delivery of content on multiple platforms continues to be particularly attractive to Hispanic America. U.S. Hispanics are nearly 10 years younger than the national average of non-Hispanics, they are highly connected (with over 80% owning a smartphone which is higher than the rate among the overall U.S. population) and technologically proficient (as reflected by the higher per user rate of consumption of digital video among U.S. Hispanics as compared to the overall U.S. population). Additionally, U.S. Hispanics are twice as likely to share information via social media as non-Hispanics. We believe that established content providers delivering media across multiple platforms are well-positioned to benefit from these shifting media consumptions trends, particularly with respect to younger consumers.

Our Competitive Strengths

 

    Trusted brand that fosters unique and deep relationship with the Hispanic audience.

We have an over 50 year multi-generational relationship with Hispanic America. We earned the highest brand equity score among U.S. media brands in a brand equity research study conducted by Burke in 2013 and our score ranked us among the top-tier global brands. We also have the strongest brand likeability for Hispanic audiences among the top five broadcast networks and we have a 55% share of U.S. Spanish-language viewing across the top five broadcast networks. Additionally, Univision has 17 of the top 20 primetime programs across both the U.S. Spanish-speaking and bilingual U.S. Hispanic viewing audiences for the current television season. We believe the strength of our brand combined with our “must-see” Spanish and English-language content enables us to sustain our leading position and offer the platform of choice for marketers seeking to connect with Hispanic America. Our brand and our large footprint of owned and operated local television and radio stations also enable us to inform, empower and serve as a vital resource for important civic, cultural and political information in the national and local communities that we serve. We also work with community-based organizations, government agencies and corporate sponsors to empower U.S. Hispanics and provide access to vital information and resources. From citizenship and voter registration to education, health and personal finance, we support causes that matter to Hispanic America. The effectiveness of our brand has been instrumental in enabling us to launch our media brand extensions across multiple platforms, as well as new products, services and events. In 2014, we enrolled over 3.4 million consumers to our branded products and services that are available in more than 70,000 retail outlets and over 4.6 million people attended our consumer and empowerment events.

 

    Leader in Hispanic media with extensive multi-platform distribution.

We are the leading media company serving Hispanic America and we align our television, radio and digital presence to deliver a Univision branded experience across multiple platforms. Our total unduplicated average monthly audience across our television, radio and digital platforms grew 11% from 2013 to 2014 and we reached over 49 million unduplicated media consumers monthly in the first quarter of 2015. Our audience and multi-platform distribution network position us as the premier gateway to Hispanic America for advertisers and media distributors. Univision Network is the most-watched Spanish-language broadcast television network in the U.S., consistently ranked first among U.S. Hispanic viewers. Additionally, our average primetime television viewer is 40 years old as compared to an average age of 54 for the top four English-language broadcast networks. We own the leading U.S. Spanish-language general entertainment cable network Galavisión, which is available in approximately 68 million

 

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households, and we successfully launched our sports network, Univision Deportes. We have long operated the largest Spanish-language television station group in the U.S. with 60 owned and operated local stations. Our owned and operated television stations ranked first among Spanish-language stations during total day in 16 of the 17 DMAs for which such data is available and in primetime viewing in 15 of 17 DMAs for which such data is available among adult viewers aged 18-49. We also own the #1 U.S. Hispanic online platform, which includes Univision.com, the most visited Spanish-language website among U.S. Hispanics. We averaged 24 million video views a month across our online, mobile and apps platforms. Among our social media platforms, we generated organic growth across Facebook, Instagram and Twitter of over 500% since the beginning of 2013. Our radio business has long been the #1 Hispanic radio network in the U.S. with 62 stations in 16 of the top 25 DMAs and we promote key programming events on our other platforms to our radio audience. Our advertising sales strategy is focused on offering advertising solutions across our local TV stations, radio stations and online and mobile websites, allowing us to deliver more effective and integrated solutions to our audiences and advertising partners.

 

    Access to highly differentiated content with a low risk and scalable cost structure.

Our strategic relationship with Televisa gives us exclusive long-term U.S. broadcast and digital rights (with limited exceptions) to Televisa’s programming, including premium Spanish-language telenovelas, sports, sitcoms, reality series, news programming, and feature films. This content is critical to our ability to provide “must-see” programming and results in 91% of our audience consuming our content live as compared to 65% of the audience of the top four English-language broadcast networks. Additionally, 96% of our audience does not change channels during commercial breaks as compared to 81% of the audience for the top four English-language broadcast networks. The Televisa PLA also provides important predictability on our content costs and creates a scalable cost structure as we pay Televisa a fee based on a percentage of our revenue generated by our Spanish-language media networks business. We believe the Televisa PLA reduces the risks associated with procuring and developing premium content, since it limits our failure costs as we are able to select popular content previously aired in Mexico and Latin America. We can also cease airing unsuccessful programs without paying incrementally for unused episodes. Under the Televisa PLA, we can also utilize this programming to help launch new cable networks and digital platforms.

 

    Well-positioned to benefit from media industry trends.

We believe the combination of our exclusive, “must-see” content delivered across all of our media platforms to our audience anytime and anywhere and our track record of innovation and investment, positions us to take advantage of prevailing media industry trends. Our strong brand equity and loyal audience allows us to successfully launch new products and introduce emerging platforms. We have been successful in obtaining significant distribution for the recently launched Univision Deportes and UVideos as well as our English-language cable networks El Rey and Fusion, which have been developed through our strategic relationships with filmmaker Robert Rodriguez and Disney, respectively. Our integrated, cross-platform solutions allow advertisers to reach U.S. Hispanics at scale and on all devices. Our strong relationships with our distribution partners enable us to expand our distribution footprint and drive increased subscription revenues. Ultimately, we believe that we are well-positioned to continue to capture a significant share of the economic value chain, including subscription fees, revenues from digital properties and other emerging channels.

 

    Attractive and resilient business model with compelling long-term cash flow generation.

We have a proven track record of driving revenue growth while maintaining attractive operating margins and generating significant cash flow. Our revenue growth coupled with our focus on operational efficiency has provided us with strong cash flows that have allowed us to continue to invest and drive future growth. Our television ratings have historically remained strong relative to the market, our advertising revenues have continued to increase and our business has demonstrated resilience throughout recent economic cycles. We anticipate that our ratings and audience will increase our recurring subscription revenues paid to us by MVPDs resulting in an increased proportion of our revenue governed by long-term distribution contracts, which will positively impact our profitability

 

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and improve our visibility into future revenue. We have also maintained a stable cost structure and our strategic relationship with Televisa has provided access to compelling content under a low-risk, scalable cost structure. Our cash flow potential is further enhanced because we have approximately $1.6 billion in net operating loss carry-forwards that provide for favorable tax attributes and a re- aligned balance sheet with lower borrowing costs as a result of repaying a portion of our outstanding debt with proceeds from this offering.

 

    Experienced management team with proven industry expertise.

Our President and Chief Executive Officer Randy Falco has led our company since 2011. Mr. Falco and his management team are highly experienced with deep industry knowledge. Under their leadership, we have fortified our brand with Hispanic America, expanded our portfolio of cable networks and built our digital and mobile platforms. Over the same period, we have expanded our total unduplicated average monthly media audience reach by 17% to over 49 million unduplicated media consumers monthly across our platforms as of March 2015. Since 2011, our management team has increased revenue and OIBDA by approximately 30% while maintaining a stable cost structure. At the local level, our management team has been focused on ensuring that we remain the “go-to” resource in Hispanic America. Under our management team and through our strategic relationship with Televisa, we have continued our transformation from a single broadcast network into the leading media company serving Hispanic America.

Our Growth Strategies

We believe we are well-positioned for growth and have an opportunity to continue to expand our audience and to monetize our attractive audience demographics, leading content across multiple platforms and our spectrum assets.

 

    Grow audience share and extend the reach of the Univision brand.

We believe we are well-positioned to grow our audience and the reach of our brands by strengthening the bond with our audience and expanding across platforms, languages and brands. We enhance our unique relationship with our audience by ensuring that we are the “go-to” resource anywhere and anytime for Hispanic America. We continue to develop new networks, expand access to our content across multiple platforms and utilize our local reach to offer branded products, services and events that extend beyond our traditional media outlets. We have launched specialized networks in the U.S. targeting specific audience preferences, including sports (Univision Deportes), soap operas (Univision tlnovelas), legacy entertainment (Bandamax, Clasico) and news (ForoTV), and have invested in strategic relationships to launch networks targeted at millennials seeking English-language content (El Rey and Fusion). We have also recently introduced several Univision branded products and services, including Univision Mobile, a service to provide affordable wireless plans and Univision Farmacia, a leading prescription drug discount program available at more than 49,000 retail outlets. In addition, we continue to expand our digital reach to include numerous mobile applications, digital streaming video services and internet music players and apps to deliver content to Hispanic America online and on-the-go.

 

    Increase recurring subscription revenue.

We believe we have a meaningful opportunity to capture increased subscription fees from MVPDs. Broadcasters are expected to experience growth in retransmission fees and we are well-positioned to capture an increased share of these growing fees. As we engage in the next iteration of retransmission fee negotiations with MVPDs, we are confident that we will negotiate increased fees because of our loyal audience, our “must-see” content, and our large number of owned and operated local stations and affiliates. Univision Network has 74 station affiliates in 40 markets across the U.S. We offer 24 programming hours daily to our affiliates, which we believe is significantly more than the top four English-language broadcast networks provide to their affiliates, enabling us to retain a higher

 

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percentage of the subscription fees that we negotiate on behalf of our local broadcast TV affiliates. We also believe that our differentiated portfolio of cable networks and increasing size of our cable network audience will enable us to capture growth in affiliate fees from MVPDs.

 

    Expand share of advertising market.

We have an opportunity to continue to improve the monetization of advertising across our media platforms. Revenue from media advertising targeting Hispanic America was over $8 billion in 2014, with leading brands having increased their advertising spend targeting this demographic. Growth of the population, buying power and political influence of Hispanic America are driving marketers to increase their focus on this demographic. We believe our brands offer a compelling way to reach Hispanic America in an effective and trusted manner. We deliver our advertisers a 73% unduplicated audience as compared to an average 10% unduplicated audience among the top four English-language broadcast networks and a 91% live viewing audience (as compared to a 65% live viewing audience, on average, for the top four English-language broadcast networks). In addition, the advertising time we air per hour is significantly lower than English-language broadcast networks, suggesting we deliver a less cluttered advertising experience. As a result, we believe we have an opportunity to sell more advertising inventory and increase our advertising pricing across all platforms. We continue to add new brand advertisers every year, reaching more than 495 brands across our national media networks in 2014. However, there are many more brands that have yet to do business with us and we believe we can continue to add more brands and improve advertising monetization across our media networks and platforms.

 

    Expand our content across digital and mobile products and platforms.

We continue to be focused on making our Media Networks and Radio content available virtually anywhere and anytime throughout the evolving media landscape. We leverage our existing content across our digital and mobile initiatives to continue to drive growth as audiences consume content and utilize services across an increasing number of platforms. We are focused on continuing to invest and enhance our digital and mobile distribution platforms, including online and mobile properties. Univision.com and UVideos are our key online and mobile distribution platforms and have driven our advertising revenue growth and established our brand online and on-the-go. We recently launched digital ventures La Fabrica, Variety Latino, and Flama and acquired The Root to expand on the offerings of our digital portfolio. We are investing significantly in mobile products and applications, the fastest growing platform for consuming content, particularly among our target audience, resulting in 58% growth in our mobile unique visitors across all of our digital properties from March 2014 to March 2015. Our digital distribution also includes subscription streaming services. We recently entered into an agreement with Sling TV that includes OTT multi-stream rights for live and Video-On-Demand content. We were one of the initial launch partners on Sling TV, demonstrating the “must-see” nature of our content. In addition, we also partnered with DirecTV as its anchor content supplier for its recently launched Spanish-language subscription video service, Yaveo. We expect additional third party streaming services to launch in the future and we believe that our content will be an important part of these offerings.

 

    Evaluate potential monetization of our spectrum assets.

We hold the most broadcast spectrum of any broadcaster in the U.S. (determined on a MHz-Pops basis) and we hold multiple licenses in most of the largest markets in the U.S. Spectrum is a strategic asset, which we believe has significant option value. With the success of the recent AWS-3 spectrum auction, which generated $45 billion of proceeds, the underlying value of our spectrum is substantial. We believe we have an opportunity to realize significant value from our spectrum assets without adversely affecting our existing networks or stations. As the Broadcast Incentive Auction approaches in 2016, we will consider participating in the auction and monetizing a portion of our spectrum assets. If we participate in the Broadcast Incentive Auction, we will work to ensure that our ability to operate our broadcast business will not be impacted. In most of our largest markets, we believe we can contribute a

 

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6 MHz channel to the auction and combine our Univision and UniMás networks on the other 6 MHz channel, creating a self-sufficient solution. Beyond the upcoming auction, we believe there are a number of additional opportunities to utilize our spectrum to generate significant value. These opportunities include broadcast delivery of mobile video, data, linear networks, and non-linear content direct to consumers or through relationships with our distribution partners and consumer product manufacturers.

Our Businesses

We operate our business through two segments, Media Networks and Radio. The following table sets forth our principal properties:

 

Media Networks

Broadcast Networks

 

LOGO

 

Univision Network is the #1 Spanish-language broadcast television network in the U.S.

 

LOGO

 

 

UniMás is a 24-hour general-interest Spanish-language broadcast network.

Cable Networks

 

LOGO

Galavisión is the leading Spanish-language cable television network.

 

LOGO

 

Univision Deportes is the most-watched Spanish-language sports network.

 

LOGO

 

De Película is a 24-hour Spanish-language cable television network dedicated to movies.

 

LOGO

 

De Película Clásico is a 24-hour Spanish-language cable television network dedicated to movies of the 1930s, 1940s, 1950s and 1960s.

 

LOGO

 

Bandamax is a 24-hour Spanish-language cable television network dedicated to music.

 

LOGO

 

Ritmoson is a 24-hour Spanish-language cable television network dedicated to music videos.

 

LOGO

 

Telehit is a 24-hour Spanish-language cable television network dedicated to music and general-interest content for youth.

 

LOGO

 

Univision tlnovelas is a 24-hour Spanish-language cable television network dedicated to telenovelas.

 

LOGO

 

 

ForoTV is a 24-hour Spanish-language cable television network dedicated to international news.

 

Local Stations

 

LOGO

 

 

We own and operate 60 television stations in the U.S. and Puerto Rico, the largest Spanish-language television station group among the major U.S. broadcast networks.

 

Digital and Mobile

 

LOGO

 

Univision.com is the #1 most visited Spanish-language website for U.S. Hispanics.

 

LOGO

 

UVideos is our bilingual digital video network serving Hispanic America.

 

LOGO

 

 

Flama is an English-language digital media network dedicated to general entertainment, including comedy, music, lifestyle, sports and documentaries.

 

LOGO The Root is a leading online news, opinion and culture destination for African-Americans.

 

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Strategic Investments

LOGO

El Rey is a 24-hour English-language cable television network dedicated to general

entertainment targeting young, adult, English-speaking Hispanic audiences.

LOGO

Fusion is a 24-hour English-language news and lifestyle cable television network and

digital network targeting young English-speaking Hispanics and their peers.

Radio

 

LOGO

 

 

Univision Radio is the leading Hispanic radio group in the U.S.

LOGO Uforia is a digital music platform featuring multimedia music content.

Media Networks

Our principal segment is Media Networks, which includes our broadcast and cable television networks, local television stations, and digital and mobile properties.

Broadcast Networks

Univision Network is our flagship network and is the most-watched Spanish-language television network in the U.S., available in approximately 94% of all U.S. Hispanic television households. Univision Network programming primarily consists of entertainment, news and sports. Univision Network also features talent and content familiar to the U.S. Hispanic audience. Univision Network is consistently ranked first among all U.S. Hispanic viewers. Univision Network provides its affiliates with 24 hours per day of Spanish-language programming which includes novelas, reality series and competitions, daily national news shows, entertainment news shows and movies with a primetime schedule of substantially all first-run programming (i.e., no re-runs) throughout the year. On an average monthly basis, Univision Network was distributed to 94 million households during the 12 months ended March 31, 2015. Univision Network is available in all of our local television markets and is provided to all of our MVPD subscribers.

UniMás (formerly TeleFutura), a 24-hour, general-interest, Spanish-language broadcast network was launched in 2002 and is available in approximately 88% of all U.S. Hispanic television households. UniMás aims to bring a fresh perspective to Spanish-language television and its primetime schedule primarily consists of alternative television series (non-Mexican productions), marquee sports events and movie packages. During the current season, UniMás delivered more viewers aged 18-49 during primetime than the combined audience of Azteca America, Estrella TV and MundoFox. UniMás offers original Spanish-language movies, primetime Hollywood movies dubbed in Spanish, primetime game shows and sports, including Mexican First Division soccer league games. On an average monthly basis, UniMás was distributed to 69.8 million households during the 12 months ended March 31, 2015.

Cable Networks

In addition to our broadcast networks, we have nine cable networks, including Galavisión and Univision Deportes. Galavisión is the leading U.S. Spanish-language general entertainment cable television network. Galavisión is programmed for the modern U.S. Hispanic family with programming featuring reality shows, family dramas, comedies and docufictions. As of March 2015, it was available in approximately 68.2 million U.S. pay-TV households and more than 10 million, or approximately 85% of U.S. Hispanic pay-TV households. As of March 2015, Galavisión is available in approximately 38% more U.S. Hispanic homes than its nearest competitor.

 

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Univision Deportes is the most-watched U.S. Spanish-language sports cable television network. Univision Deportes is dedicated to live broadcasting, debating and analyzing sports. Its portfolio includes sports that we believe the U.S. Hispanic audience is passionate about, including soccer, Formula 1 and boxing. Univision Deportes obtains rights to major soccer tournaments including Gold Cup and the CONCACAF Champions League. As of March 2015, Univision Deportes was available in approximately 41.1 million U.S. pay-TV households and 7 million or approximately 56% of U.S. Hispanic pay-TV households.

Our other seven cable television offerings are De Película, De Película Clásico, Bandamax, Ritmoson, Telehit, Univision tlnovelas, and ForoTV. These additional cable networks provide a variety of content to balance out our portfolio of programming offerings and expand our reach and frequency of interaction with Hispanic America.

Local Television Stations

We own and operate 60 television stations in 26 DMAs, which are generally the largest markets in the U.S. Our stations comprise the largest number of owned local television stations among the major U.S. broadcast networks. As of March 31, 2015, our owned television stations consisted of 41 full-power and 19 low-power stations (full power stations operate at a higher power level and serve a larger geographic area than low power stations). We have a longstanding relationship with Entravision, a Spanish language media company, which is our largest local affiliate. Entravision provides us with certain operational services and support to six of our owned stations located in the Boston, Washington, Tampa, Orlando, Albuquerque and Denver DMAs pursuant to joint sales and marketing agreements. All but one of our full-power stations broadcast our programming, and most produce local news and other programming of local importance and cover special events. One of our full-power stations is a MyNetworkTV affiliate. 35 of our full-power stations are located in the top 15 DMAs in terms of number of U.S. Hispanic households. Our full-power stations include three television stations in Puerto Rico.

Our television stations are ranked first in total day and primetime viewing among Spanish-language stations among adult viewers aged 18-34 in 16 of 17 DMAs in which we own and operate stations and for which audience data is available. In total day viewing, our owned and operated television stations ranked first among all other broadcast stations in the market (Spanish and English-language) among adult viewers aged 18-34 and adult viewers aged 18-49 in Los Angeles, Houston, Dallas and Fresno.

The following table sets forth certain information for our owned and operated television stations by DMA in the U.S.:

 

Television(1)

DMA Rank(2)

 

Market

  

Stations(3)

  

DMA Rank(2)

 

Market

 

Stations(3)

1

  Los Angeles, CA    KMEX Univision 34 KFTR UniMás 46    16   Philadelphia, PA  

WUVP Univision 65

WFPA UniMás 28

2

  New York, NY   

WXTV Univision 41

WFUT UniMás 68 WFTY Satellite 67

   17   Denver, CO   KTFD UniMás 14

3

  Miami, FL   

WLTV Univision 23

WAMI UniMás 69

   19   Washington, DC   WFDC Univision 14

4

  Houston, TX   

KXLN Univision 45

KFTH UniMás 67

   20   Tampa-St. Pete, FL   WFTT UniMás 66

5

  Chicago, IL   

WGBO Univision 66

WXFT UniMás 60

   21   Austin, TX  

KAKW Univision 62

KTFO UniMás 31

6

  Dallas, TX   

KUVN Univision 23

KSTR UniMás 49

KUVN-CA

   22   Boston, MA   WUTF UniMás 66

 

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Television(1)

DMA Rank(2)

 

Market

  

Stations(3)

  

DMA Rank(2)

 

Market

 

Stations(3)

7

  San Antonio, TX   

KWEX Univision 41

KNIC UniMás 17

KNIC-CA

   23   Atlanta, GA  

WUVG Univision 34

EUVG UniMás 34.2

8

  San Francisco, CA   

KDTV Univision 14

KFSF UniMás 66

KDTV-CD

   25   Tucson, AZ  

KUVE Univision 38

KFTU UniMás 3

KUVE-CA

KFTU-CD

9

  Phoenix, AZ   

KTVW Univision 33

KFPH UniMás 35

KDOS-CD

KTVW-CD

KZOL-LP

K16FB-D

K21GC

KFPH-CD

   30   Bakersfield, CA  

KABE Univision 39

KBTF UniMás 31

KTFB-CA

KUVI (MyNetworkTV affiliate)

11

  Sacramento, CA   

KUVS Univision 19

KTFK UniMás 64

KEZT-CD

   32   Salt Lake City, UT   KUTH Univision 32

14

  Fresno, CA   

KFTV Univision 21

KTFF UniMás 61

KTFF-LD

   33   Raleigh, NC  

WUVC Univision 40

WTNC UniMás 26

15

  Orlando, FL    WOTF UniMás 43       

 

(1) Table does not include 4 full-power stations in Puerto Rico.
(2) The DMAs are ranked by number of U.S. Hispanic households as of January 2015 according to Nielsen.
(3) Our owned and operated stations maintain affiliated websites that provide locally-driven content.

Affiliates

In addition to our owned and operated stations, we provide programming to our broadcast network station affiliates. As of March 31, 2015, we had 24 full-power and 50 low-power broadcast network station affiliates in 40 markets and approximately 1,774 cable affiliate systems. Entravision is our largest local affiliate with 48 stations. Each broadcast network affiliation agreement (including the master affiliation agreements we have with Entravision, for certain Entravision stations) grants the affiliate the right to broadcast over the air the entire program schedule of Univision Network or UniMás Network. Each of our broadcast network affiliates has the right to preempt (i.e., to decline to broadcast at all or at the time scheduled by us), without our prior permission, any and all of our programming that it deems unsatisfactory, unsuitable or contrary to the public interest or to substitute programming it believes is of greater local or national importance. We may direct an affiliate to reschedule substituted programming. The broadcast network affiliation agreements generally provide that a percentage of all advertising time be retained by us to sell as network advertising and the remaining amount is allocated to the affiliate for local and national spot advertising sales. This allocation may be modified at our discretion. We also receive commission income equal to a percentage of national sales by our broadcast affiliates. We may, from time to time, enter into affiliation agreements with additional stations in new DMAs based upon the market’s potential growth and opportunity for Spanish-language television.

We also have cable affiliates that enable us to reach communities that cannot support a broadcast affiliate because of the relatively small number of U.S. Hispanic television households. These cable affiliation agreements may cover an individual system operator or a multiple system operator. Our cable affiliation agreements are all non-exclusive, which give us the right to license all forms of distribution in cable markets. Cable affiliates generally receive our programming for a fee based on the number of subscribers.

 

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Digital and Mobile Properties

We have digital properties including online and mobile websites and mobile applications and products. Our digital properties include Univision.com, the #1 most visited Spanish-language website among U.S. Hispanics for the last 11 years, which features comprehensive entertainment, news and information. In 2014, Univision.com generated over 27 million visits per month on average across desktop and mobile, which is more than seven times the number of visits generated by our closest U.S. Spanish-language competitor.

Our other digital properties include:

 

    UVideos, our bilingual digital video network providing on-demand delivery of our programming and available on connected devices across multiple platforms, including iOS, Android and Kindle Fire;

 

    Flama, our first online-only media network with original short form content, predominantly English-language based, targeting a general 15-to-34 year old audience interested in Latin culture;

 

    The Root, our leading online news, opinion and culture destination targeting African-Americans, which we acquired in May 2015 and which has reached an average of five million mobile unique users per month in 2015, according to comScore;

 

    online and mobile websites associated with our local television and radio stations; and

 

    Univision Partner Group, a specialized advertising and publisher network (“UPG”).

This collection of online and mobile sites and applications provides advertisers with turnkey marketing solutions to effectively extend their reach in targeting U.S. Hispanics. We are able to further extend the reach beyond the Univision properties through UPG. UPG provides advertisers seeking both a broad and targeted online and mobile U.S. Hispanic audience a network of third party controlled websites in addition to the Univision sites. During the three months ended March 31, 2015, our digital properties generated on average 540 million page views and 24 million video views per month. We receive advertising, distribution and sponsorship revenue from our digital properties and in connection with the third party sites accessed through the UPG network.

Strategic Investments

We also offer two additional cable networks through strategic relationships. Through a joint venture with Walt Disney Company’s ABC News, we launched Fusion, a 24-hour English-language news and lifestyle TV and digital network targeted at young English-speaking U.S. Hispanics and their peers in October 2013. Our most recent investments in Fusion have included amounts to enhance its digital presence.

Through a strategic relationship with maverick filmmaker Robert Rodriguez and FactoryMade Ventures, we invested in El Rey, a 24-hour English-language general entertainment cable network targeting young adult audiences in December 2013.

Radio

We own and operate 67 radio stations, including 62 stations in 16 of the top 25 U.S. Hispanic DMAs and own and operate five radio stations in Puerto Rico. Our stations cover approximately 75% of the U.S. Hispanic population. We program 57 individual or simulcast radio stations in the U.S. Most music formats are primarily variations of regional Mexican, Latin adult, tropical, reggaetón, tejano and contemporary music styles. In addition, we offer Uforia, a digital platform music application featuring multimedia music content, including 65 radio stations, videos, exclusive digital channels, and a custom radio offering with more than 20 million songs.

 

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The following table sets forth information regarding our owned and operated radio stations by DMA:

 

Radio

DMA Rank(1)

  

Market

  

Stations(2)

  DMA Rank(1)   

Market

  

Stations(2)

1    Los Angeles, CA   

KLVE-FM

KRCD-FM

KRCV-FM

KSCA-FM

KTNQ-AM

  9    Phoenix, AZ   

KHOT-FM

KHOV-FM

KKMR-FM

KOMR -FM

KQMR-FM

2    New York, NY   

WADO-AM

WXNY-FM

WQBU-FM

  10    McAllen, TX   

KBTQ-FM

KGBT-FM

KGBT-AM

3    Miami, FL   

WAMR-FM

WAQI-AM

WQBA-AM

WRTO-FM

  12    Albuquerque, NM   

KIOT-FM

KJFA-FM

KKRG-FM

KKSS-FM

4    Houston, TX   

KLAT-AM

KLTN-FM

KOVE-FM

KAMA-FM

KQBU-FM

  13    San Diego, CA   

KLNV-FM

KLQV-FM

5    Chicago, IL   

WOJO-FM

WPPN-FM

WRTO-AM

WVIV-FM

WVIX-FM

  14    Fresno, CA   

KLLE-FM

KOND-FM

KRDA-FM

6    Dallas, TX   

KESS-FM

KDXX-FM

KFLC-AM

KFZO-FM

KLNO-FM

  18    El Paso, TX   

KBNA-FM

KAMA-AM

KQBU-AM

7    San Antonio, TX   

KBBT-FM

KCOR-AM

KMYO-FM

KROM-FM

KXTN-FM

  21    Austin, TX   

KLJA-FM

KLQB-FM

8    San Francisco, CA   

KBRG-FM

KSOL-FM

KSQL-FM

KVVZ-FM

KVVF-FM

  24    Las Vegas, NV   

KISF-FM

KLSQ-AM

KRGT-FM

 

(1) The DMAs are ranked by number of U.S. Hispanic households as of January 2015 according to Nielsen.
(2) Table does not include 5 radio stations in Puerto Rico.

Ratings and Total Media Reach

As of December 26, 2005, Univision Network ratings became available on Nielsen’s national ratings service, Nielsen Television Index (“NTI”), which provides television ratings for all of the major U.S. networks. NTI is based on the Nielsen National People Meter (“NPM”) sample which is comprised of over 21,000 households and

 

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is subscribed to by broadcast networks, cable networks, syndicators, advertisers and advertising agencies nationwide. Effective August 27, 2007, the NPM sample became the sole sample for both English-language media and Spanish-language media. From this sample, Nielsen continues to measure Hispanic viewing, calling the new service NTI-H (Nielsen Television Index—Hispanic).

Television

During the last six years, Univision Network has consistently ranked first in primetime television among all Hispanic 18 to 49 year olds and has consistently had between 80% and 95% of the 20 most widely watched programs among all U.S. Hispanic television households according to Nielsen.

In the 2013-2014 season, 43% or more of all Hispanic viewers aged 18 to 34, and 47% of all Hispanic viewers aged 18 to 49 in the U.S. who watch television in primetime watch Spanish-language programs. The following table shows that our total combined networks’ share was nearly twice that of all other Spanish-language networks combined.

During the last five years, our total Spanish-language share of primetime television among adults 18-49 has risen from 8.31% total share to 8.56% total share. Over the same period despite increased competition across Spanish-language networks, our share remained stable as compared to the English-language broadcast networks in general. In the 2013-2014 season, approximately 6% of the U.S. primetime television audience 18-49 watched our NTI-rated networks.

In addition, Univision Network had a higher rating than one or more of the top four English-language broadcast networks in primetime among viewers aged 18-34 every night during the first quarter of 2015, as compared to 74 nights in the first quarter of 2014. Univision Network also had a higher rating than one or more of the top four English-language broadcast networks in primetime among viewers aged 18-49 during 66 nights in the first quarter of 2015, as compared to 59 nights in the first quarter of 2014.

Univision Networks’ Share—Adults Aged 18 to 49 in Primetime(1)

 

     2009/2010
Average
%Share
     2010/2011
Average
%Share
     2011/2012
Average
%Share
     2012/2013
Average
% Share
     2013/2014
Average
% Share
 

UNIVISION COMBINED NETWORKS’ SHARE

     6.07         5.95         5.86         5.88         5.67   

UNIVISION

     4.58         4.72         4.72         4.59         4.14   

UNIMÁS

     1.25         0.93         0.92         0.88         1.07   

GALAVISIÓN

     0.24         0.29         0.22         0.24         0.22   

UNIVISION DEPORTES

                             0.17         0.21   

BANDAMAX

                                     0.03   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

ALL OTHER SPANISH-LANGUAGE NETWORKS

  2.23      2.48      2.55      2.80      2.89   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL SPANISH-LANGUAGE NETWORKS

  8.30      8.43      8.41      8.68      8.56   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

ENGLISH-LANGUAGE BROADCAST NETWORKS

  36.04      32.93      32.26      30.16      30.63   

ABC

  7.47      7.17      6.66      6.45      6.49   

NBC

  8.26      6.77      7.31      7.13      6.91   

CBS

  7.67      7.88      8.86      7.65      8.07   

FOX

  8.11      8.32      6.90      6.27      5.86   

CW

  2.10      1.75      1.55      1.60      1.73   

OTHER

  2.43      1.03      0.98      1.07      1.57   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

ENGLISH-LANGUAGE AD-SUPPORTED CABLE NETWORKS

  55.66      58.64      59.33      61.16      60.81   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL ENGLISH-LANGUAGE NETWORKS

  91.70      91.57      91.59      91.32      91.44   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL

  100      100      100      100      100   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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(1) Based on Nielsen, NPM and NPM for Hispanic subset (by year, 12/28/2009 through 12/28/2014), M-Sat 8pm-11pm and Sun 7pm-11pm. Based on Ad-Supported English-language & Spanish-language broadcast and cable networks. Univision, UniMás, Galavisión and Univision Deportes based on originator data, and all others based on time period/affiliate data. % Share is based on sum of impressions. Spanish-language TV Other includes remaining broadcast & cable networks. English-language & Spanish-language independent networks excluded.

In addition, according to the February 2015 Nielsen Station Index:

 

    Among the 17 DMAs for which such data is available, our owned and operated stations ranked first in 16 of 17 DMAs among Spanish-language television stations in “total day;”

 

    Among the 17 DMAs for which such data is available, our owned and operated stations ranked first in four DMAs in “total day,” English or Spanish-language; and

 

    Among the 24 DMAs for which such data is available our affiliate stations ranked first in 21 DMAs among Spanish-language television stations in “total day.”

No audience data is available for two of our owned and operated stations and 14 affiliate stations.

Radio 

Radio ratings are measured by Nielsen Audio (previously Arbitron), a marketing and research firm serving primarily the media industry and specializing in audience ratings-measurement for marketing to advertisers. Nielsen Audio measures radio station listening by market, in various day-parts and demographics, with data collected from areas throughout a given market. In 2007, Arbitron (now Nielsen Audio) began implementing a new electronic measurement system called Portable People Meter (“PPM”), which replaced the diary-based method that had been used historically in top markets. This methodology is available nationwide, including Houston, New York, Los Angeles and Miami-Fort Lauderdale. Audience trend data is now available on a weekly basis and ratings books are released on a monthly basis. The PPM rating system that was introduced in most of our radio markets, including New York, Los Angeles and Miami-Fort Lauderdale, was challenged by the PPM Coalition, which claimed that the PPM methodology undercounted and misrepresented the number and loyalty of minority radio listeners. In April 2010, the PPM Coalition and Arbitron (now Nielsen Audio) agreed on a plan that, when fully implemented over the next several years, we expect will address many of our concerns about the PPM system and deliver a more reliable ratings system for the radio industry. Because we believed the PPM ratings system did not accurately reflect our audience, we did not subscribe to the PPM ratings in 2009 and most of 2010 in the PPM-rated radio markets in which we operated to sell advertising time, except Houston. As a result of lack of ratings to use in negotiating advertising rates, advertising sales in 2009 and for most of 2010 in the PPM-rated radio markets in which we operated were adversely affected. In November 2010, we signed an agreement with Arbitron (now Nielsen Audio) to subscribe to the PPM ratings in 12 of our radio markets starting in December 2010 (in addition to our ongoing subscription to PPM in Houston which is accredited by the Media Rating Council).

While many of the improvements have been made, Nielsen Audio has not yet met accreditation standards in several of our radio markets and our ratings could decline as a result of sample quality. Our radio group is the leading Hispanic radio group in the U.S. with 62 radio stations in 16 of the top 25 U.S. Hispanic markets and our stations deliver over 15 million listeners every week, covering approximately 75% of the U.S. Hispanic population.

Digital

We use comScore to measure the number of visitors to our websites across desktop and mobile, Adobe Analytics to measure the number of page views and video views across our online, mobile and apps platforms and ShareThis to measure our followers on social media.

Univision.com is our flagship digital property and is the #1 most visited Spanish-language website among U.S. Hispanics. In 2014, Univision.com generated over 27 million visits per month on average across desktop and

 

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mobile, which is more than seven times the number of visits generated by our closest U.S. Spanish-language competitor. In addition, we averaged 24 million video views a month across our online, mobile and apps platforms and our digital properties generated, on average, 540 million page views per month. In May 2015, we acquired the online magazine The Root, which has reached an average of five million mobile unique users per month in 2015, according to comScore. Among our social media platforms, we generated organic growth across Facebook, Instagram and Twitter of over 500% since the beginning of 2013.

Total Media Reach

In the first quarter of 2015 our television platforms reached an average unduplicated monthly total television audience (“Television Reach”) of 41 million media consumers, our radio platforms reached an average unduplicated monthly total radio audience (“Radio Reach”) of 20 million media consumers and our digital platforms reached an average unduplicated monthly total digital audience (“Digital Reach”) of 15 million media consumers. Our “Total Media Reach” is defined as our average monthly total unduplicated reach across all our media platforms. Based on Experian Marketing Services’ “Fall 2014 Simmons Hispanic National Consumer Study, 12 Months” we estimate that on average our total Television Reach represented approximately 84% of our Total Media Reach. Therefore, we estimate that our Total Media Reach was 49 million unduplicated media consumers per month in the first quarter of 2015. Our Total Media Reach was approximately 42 million, 41 million, 43 million and 47 million for 2011, 2012, 2013 and 2014, respectively. We also engage our audience through consumer and empowerment events and branded products and services. Although not included in our unduplicated audience measurement, 4.6 million people participated in our consumer and empowerment events in 2014 and we have enrolled over 3.4 million consumers to branded products and services that are available in more than 70,000 retail outlets.

The following chart shows Total Media Reach for our television, radio and digital platforms:

 

LOGO

 

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(1) Total Media Reach based on Experian Marketing Services “Fall 2014 Simmons Hispanic National Consumer Study, 12 Months” which we use to estimate that our Television Reach accounts for approximately 84% of our Total Media Reach.

Advertising and Marketing

Our television and radio advertising revenues are derived from network advertising, national spot advertising and local advertising, and come from diverse industries, with advertising for food and beverages, personal care products, automobiles, other household goods and telephone services representing the majority of network advertising revenues. National spot advertising primarily represents time sold to advertisers that advertise in more than one DMA and is the means by which most new national and regional advertisers begin marketing. To a lesser degree, national spot advertising comes from advertisers wanting to enhance network advertising in a given market. Local advertising revenues are generated from both local merchants and service providers and regional and national businesses and advertising agencies located in a particular DMA. During the last three years, no single advertiser has accounted for more than 10% of our advertising revenues.

In some cases our local television and radio stations do not receive advertising revenues commensurate with their share of the local audience. We have addressed this by emphasizing a cross-platform marketing approach and continuing to educate local businesses on the importance of the Hispanic consumer in their markets. Across our local markets we have integrated our local sales teams to approach advertisers with a broad portfolio offering including television, radio and digital advertising opportunities. We believe this approach is simpler for advertisers and will help us generate increasing local advertising revenue.

Media Networks 

Our television network and station marketing sales account executives are divided into three groups: network sales, multi-market sales and single market sales. The network sales force is responsible for accounts that advertise nationally. The multi-market sales force represents the owned-and-operated stations and broadcast affiliates and is responsible for accounts that buy in more than one market. The single market sales force represents the owned-and-operated stations and is responsible for accounts with large growth potential in a single market.

In addition, our television network and station marketing sales departments utilize research, including both ratings and demographic information, to negotiate sales contracts as well as target major national advertisers that are not purchasing advertising time or who are under-purchasing advertising time on Spanish-language television. We also market our products across our digital and mobile platforms, generating advertising revenues from top tier advertisers and data services in the U.S., and are represented by a cross platform sales force.

Radio 

Our radio network and station marketing account executives are divided into three groups: network sales, multi-market sales and single market sales. The network sales force is responsible for accounts that advertise nationally. The multi-market sales force is responsible for accounts that buy in more than one market. The single market sales force is responsible for accounts with large growth potential in a single market. In addition, Univision Radio stations’ sales departments utilize research to negotiate sales contracts as well as target major local, regional, and national advertisers that are not purchasing advertising time or that are under-purchasing advertising time on Spanish-language and Hispanic-targeted radio stations. The owned-and-operated stations also derive sales from the sponsorship and organization of various special events.

Retail Direct

Our retail direct account executives represent our owned-and-operated television and radio stations and local interactive properties and develop and manage advertising sales from local, small and medium sized clients within a single market. These executives focus on new clients and sell packages across all of our local platforms.

 

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Subscription

We negotiate with MVPDs pursuant to multi-year agreements that provide for retransmission and affiliate fees. We also negotiate the level of carriage that our broadcast and cable networks will receive, and if applicable, for annual rate increases.

Every three years, each of our operated television stations must elect, with respect to its retransmission by MVPDs within its DMA, either “must carry” status, pursuant to which the MVPD’s carriage of the station is mandatory, or “retransmission consent,” pursuant to which the station gives up its right to mandatory retransmission in order to negotiate consideration in return for consenting to retransmission. We elected the retransmission consent option in substantially all cases for the three-year periods beginning January 1, 2009, January 1, 2012 and January 1, 2015, and continued to pursue a systematic process of seeking monetary consideration for retransmission consent. Electing the retransmission consent option provides us with opportunities to capture increased subscription fees from distributors. We have subsequently reached agreements with MVPDs that, collectively, service substantially all pay-TV households. The multi-year agreements with these MVPDs have different expiration dates. Under certain conditions, we may renew these agreements prior to their expiration date.

We also negotiate retransmission consents on behalf of 74 affiliates in 40 markets across the U.S. We supply 24 hours of daily programming to our affiliates, which we believe is significantly more than the top four English-language broadcast networks provide their affiliates, enabling us to retain a higher percentage of the subscription fees that we negotiate on behalf of our local TV broadcast affiliates.

Carriage of our cable networks is generally determined by package, such as whether our cable networks are included in the more widely distributed, general entertainment packages or lesser-distributed, specialized packages such as Hispanic or Spanish-language targeted packages, sports packages and movie packages.

Licensing

We negotiate licensing agreements with OTT and video-on-demand services that include linear and on-demand entertainment, news and sports content from across our portfolio. These agreements provide rights for live and video-on-demand content from Univision Network, UniMás, Univision Deportes Network, Galavisión, El Rey, Bandamax, De Película, De Película Clásico, Telehit, tlnovelas, ForoTV, as well as, in certain cases, Univision and UniMás broadcast stations nationwide. We recently entered into a licensing agreement with Sling TV that includes OTT multi-stream rights for live and Video-On-Demand content and we anticipate pursuing agreements with other OTT providers.

Under our license agreement with an affiliate of Televisa, we have granted Televisa the exclusive right for the term of the Televisa PLA, to broadcast in Mexico all Spanish-language programming produced by or for us (with limited exceptions) (the “Mexico License”). The terms for the Mexico License are generally reciprocal to those under the Televisa PLA, except, among other things, the only royalty payable by Televisa to us is a $17.3 million annual payment through December 31, 2025 for the rights to our programming that is produced for or broadcast on the UniMás network, and we only have the right to purchase advertising on Televisa channels at certain preferred rates to advertise our businesses. See “—Programming—Televisa.”

In connection with entering into the Mexico License, we engaged Televisa to act as our exclusive sales agent for the term of the Mexico License to sell or license worldwide outside of the U.S. and Mexico our programming originally produced in the Spanish language or with Spanish subtitles to the extent we have rights in the applicable territories and to the extent we choose to make such programming available to third parties in such territories (subject to limited exceptions). Televisa will receive a fee equal to 20% of gross receipts actually received from licensees and reimbursement of certain expenses. We have no obligation to pay a fee or reimburse

 

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expenses with respect to any direct broadcast by us of our programming or under certain non-exclusive worldwide arrangements we enter into for its programming. We have not recognized any revenue or expense related to this arrangement.

Programming

Our programming is a combination of licensed and original programming that includes primetime novelas, exclusive sports rights, award winning news programs, annual award shows, reality television, daily magazine shows and variety shows that are culturally relevant for our audience. The majority of our programming is provided through our strategic relationship with Televisa. Our relationship has allowed us historically to work closely with Televisa in developing and evaluating our programming schedule. Recently we have worked with Televisa to enable key novelas to have a high probability of success in our markets. We are working with their teams to monitor key talent pipeline planning as well as to develop storylines that are relevant for U.S. Hispanic audiences.

Televisa

Through the Televisa PLA, we have the exclusive right to broadcast in the U.S. all Spanish-language programming produced by or for them for which they have U.S. rights (with limited exceptions). In 2014, this represented over 94,000 hours of Spanish-language programming, including premium telenovelas, sports, sitcoms, reality series, news programming, and feature films. Upon consummation of this offering, the Televisa PLA will expire on the later of 2030 or 7.5 years after a Televisa Sell-Down, unless certain change of control events happen, in which case the Televisa PLA will expire on the later of 2025 or 7.5 years following a Televisa Sell-Down. The Televisa PLA provides our television and cable networks with access to programming that could fill a significant amount of our networks’ daily schedules.

The Televisa PLA allows us long-term access to Televisa programming, the ability to choose Televisa programming based upon its success in Mexico and the ability to cease airing programs that prove to be unsuccessful in the U.S. and replace it with other Televisa programming without paying incrementally for the episodes that are not broadcast. This program availability and flexibility permits us to, effectively, pre-screen Televisa programming in Mexico and to later adjust our programming on all of our networks to best meet the tastes of our viewers.

Under the Televisa PLA, we have exclusive access to an extensive suite of U.S. Spanish-language broadcast rights, and, in addition, we have exclusive U.S. Spanish-language digital rights to Televisa’s audiovisual programming (with limited exceptions), including the U.S. rights owned or controlled by Televisa to broadcast Mexican First Division soccer league games. We have the ability to use Televisa online, network and pay-television programming on our current and future Spanish-language television networks (including Univision, UniMás and Galavisión) and on current and future digital platforms (Univision.com, UVideos and Video on Demand). Televisa programming available to us under the Televisa PLA includes, among other things, all audiovisual programming produced by or for Televisa originally produced in the Spanish language or with Spanish subtitles subject to certain exceptions, including certain content produced for websites associated with magazines published by Televisa, certain rights for movies whose U.S. rights are controlled by an affiliate of Televisa, the right to distribute Televisa content by physical home video products (such as DVDs), and certain programs which are co-produced or acquired by Televisa. Televisa and its affiliates have agreed to certain obligations with respect to different types of co-produced and acquired programming ranging from assisting us in acquiring rights in such programming to, in the case of novelas, making all such co-produced and acquired programming that Televisa broadcasts in Mexico and that is originally produced in the Spanish language or with Spanish subtitles included as programming under the Televisa PLA (with limited exceptions). Under the Televisa PLA, we are allowed to sublicense English-language rights to the Televisa owned or controlled U.S. rights to Mexican First Division soccer league games and revenue received from licensing English-language Mexican soccer (including the rights obtained from Televisa) is subject to the royalty payable to Televisa under the Televisa PLA.

 

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In addition, Televisa must use good faith efforts not to structure arrangements or agreements with respect to programs in a manner intended to cause such programs not to be available to us pursuant to the Televisa PLA.

In consideration for access to the programming of Televisa, we pay royalties to Televisa. Televisa receives royalties, based on 11.84% of substantially all of our Spanish-language media networks revenues through December 2017. Additionally, Televisa receives an incremental 2% in royalty payments on any such media networks revenues above a contractual revenue base of $1.66 billion. After December 2017, the royalty payments to Televisa will increase to 16.13%, and commencing later in 2018, the rate will further increase to 16.45% until the expiration of the Televisa PLA. Additionally, Televisa will receive an incremental 2.0% in royalty payments (with the revenue base decreasing to $1.63 billion with the second rate increase). In addition, pursuant to the Televisa PLA, we are committed to provide Televisa a specified minimum amount of advertising on certain of our media properties at no cost to Televisa. In 2014, we were obligated to provide approximately $73.5 million of such advertising to Televisa. This amount will increase for each year through the term by a factor that approximates the annual consumer price index. Pursuant to the Televisa PLA, we will have the right, on an annual basis to reduce the minimum amount of advertising we have to provide to Televisa by up to 20% for our use to sell advertising or satisfy ratings guarantees to certain advertisers. In addition, Televisa will have the right to use, without cost to Televisa and subject to limitations, a portion of the advertising time that we do not either sell to advertisers or use for our own purposes.

The obligations of Televisa and its affiliates have been guaranteed by Grupo Televisa S.A.B. Pursuant to its respective guarantee, Televisa has agreed to produce each year for our use at least 8,531 hours of programs, which will be of the quality of programs produced by Televisa during the calendar year 2010.

Other Programming

In addition to the content that we license from Televisa, we also produce original entertainment, sports and news programming. Our original programming is allocated across platforms and features talent and content familiar to our audience. Our original programming diversifies our portfolio of content and complements the programming that we receive from Televisa.

Entertainment

Our entertainment programming ranges from our early morning programming, such as Despierta America, to daytime entertainment news shows, such as El Gordo Y La Flaca and Sal y pimiento, to our primetime reality competition series, such as Nuestra Belleza Latina and La Banda, set to debut in September 2015. Additionally, we continue to invest in special events that engage our audience, including the Latin Grammy’s, Premio Lo Nuestro and Premios Juventud. Additionally, our cable channels produce and co-produce reality shows, dramatic series and other programming. Our strategic investment in El Rey and Fusion also produce original programming. We also produce original content for our digital platform that supplements our television content for special events such as red-carpet exclusives and behind the scenes footage. Additionally, we produce original content for regular visitors to our sites that is not tied to any corresponding television content, such as entertainment news, horoscopes and slideshows.

Sports

We frequently obtain the rights to sports programming, including major soccer tournaments, such as the Gold Cup. We currently have the rights to broadcast the Gold Cup, CONCACAF Champions League games, U.S. Men’s National Team soccer games and Formula 1 racing through at least 2022 and to broadcast Mexican Men’s National Team soccer games through at least 2017. We also have the rights to the 2016 Centennial Copa America and the 2016 Copa Centroamericana. Under the Televisa PLA, we have the right to broadcast Mexican First Division soccer league games for which Televisa owns or controls the U.S. rights. We also produce sports

 

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discussion programs, such as Republica Deportivo on multiple broadcast cable networks and real-time clips from each soccer game for use by our digital platform. In addition, we create digitally-only best-of-videos, interviews and must-see plays from around the world. We have recently signed agreements with the MLS, NFL and NBA to produce digital-only content for those brands.

News

Our award-winning news division offers a blend of in-depth coverage of the issues that are important to U.S. Hispanics and more immediate U.S. national and local content that U.S. Hispanics rely on to stay informed and connected to their communities. Our in-depth coverage focuses on topics that impact U.S. Hispanic viewers including, but not limited to politics and immigration policy as well as topics that are loosely tied to our community empowerment platforms. Our news programming includes national programs such as the flagship Noticiero Univision, Primer Impacto, Al Punto and our local news programs servicing the largest top U.S. Hispanic DMAs. Our digital news content is generally unique to our digital platforms due in part to the real time nature of news. In addition to covering breaking news, we create content related to editorials, investigative journalism, data-driven projects and special features. We provide news content in both article and video formats and enhance our content using data, infographics and social media.

Spectrum

We hold the most broadcast spectrum of any broadcaster in the U.S. (determined on a MHz-Pops basis) and we hold multiple licenses in most of the largest markets in the U.S. Our spectrum holdings are a strategic asset, which we believe has significant option value. With the success of the recent AWS-3 spectrum auction, which generated $45 billion of proceeds, the underlying value of our spectrum is substantial. We believe we have an opportunity to realize significant value from our spectrum assets without adversely affecting our existing networks or stations. As the Broadcast Incentive Auction approaches in 2016, we will consider participating in the auction and monetizing a portion of our spectrum assets. If we participate in the Broadcast Incentive Auction, we will work to ensure that our ability to operate our broadcast business will not be adversely affected. In most of our largest markets, we believe we can contribute a 6 MHz channel to the auction and combine our Univision and UniMás networks on the other 6 MHz channel, creating a self-sufficient solution. Beyond the upcoming auction, we believe there are additional opportunities to utilize our spectrum to generate significant value. These opportunities include broadcast delivery of mobile video, data, linear networks, and non-linear content direct to consumers or through relationships with our distribution partners and consumer product manufacturers.

Competition

Our Media Networks business is highly competitive. Competition for advertising revenues is based on the size of the market that the particular medium can reach, the cost of such advertising and the effectiveness of such medium.

Our television business competes for viewers and revenues with other Spanish-language and English-language television stations and networks, including five English-language broadcast television networks (ABC, CBS, NBC, FOX, and CW) and four Spanish-language broadcast television networks (TEL, ETV, AZA and MFX) as well as 100+ daily-measured ad-supported cable networks. Many of these competitors are owned by companies much larger than us. Additionally, some English-language networks are producing Spanish-language programming and simulcasting certain programming in English and Spanish. Several MVPDs offer Spanish-language programming options as well. Our television affiliates located near the Mexican border also compete for viewers with television stations operated in Mexico, many of which are affiliated with a Televisa network and are owned by Televisa but outside of our exclusivity rights.

The television broadcasting industry is subject to competition from video-on-demand, DVD and Blu-ray players, other personal video systems and fragmentation of viewership driven by the ever expanding cable-network landscape. Additionally, consumers continue to change viewing habits, increasingly gravitating towards

 

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wireless devices (e.g., iPhones, iPads and Kindles), live streaming of short-form and long-form content from the Internet and online video services. Our broadcast, cable and digital networks compete with pay content providers such as Netflix, Amazon and Hulu and free content providers such as YouTube and Vine.

Our share of overall television audience has remained stable over the past five years. We attribute this to the growth of the U.S. Hispanic population, the quality of our programming and the quality and experience of our management. Telemundo, a subsidiary of NBC, a division of Comcast Corporation, is our largest television competitor that broadcasts Spanish-language television programming. In most of our DMAs, our affiliates compete for advertising dollars directly with a station owned by or affiliated with Telemundo, as well as with other Spanish-language and English-language stations.

Univision.com and other websites face various competitors, including websites such as Telemundo.com, Yahoo! en Español, MSN Latino, MaximumTV and ButacaTV and mobile applications, such as Buzzfeed and Vice, which feature Spanish-language digital content. We also compete for online advertising dollars with social media providers such as Facebook and Twitter, search engines such as Google, Yahoo! or Bing and other websites.

Our Radio business competes for audiences and advertising revenues with other radio stations of all formats. iHeart Media (formerly Clear Channel), the largest radio operator in the U.S., CBS Radio, Spanish Broadcasting System, Liberman Broadcasting and Entravision are our largest radio competitors that broadcast Spanish-language radio programming in several of our DMAs. Additionally, we face competition from English-language stations that offer programming targeting Hispanic audiences. iHeart Radio converted several stations to Hispanic targeted formats, and has established a Hispanic radio division creating its own iHeart Hispanic Radio Network as of 2014. Spanish Broadcasting Systems created a new Spanish-language network in 2013, called AIRE Radio Networks, to syndicate popular Hispanic content and personalities nationally and in markets where we compete. In addition, the radio broadcasting industry is subject to competition from (1) Sirius XM Satellite Radio and other satellite radio services; (2) audio programming by MVPDs and other digital audio providers and (3) streaming music businesses such as Spotify and Pandora.

Many of our competitors have more television and radio stations, more Internet platforms, greater resources (financial or otherwise) and broader relationships with advertisers than we do. Furthermore, because our English-language competitors are perceived to reach a broader audience than we do, they have been able to attract more advertisers and command higher advertising rates than we have.

We also compete for audience and revenues with other media, newspapers, magazines and other forms of entertainment and advertising.

The rules and policies of the FCC encourage increased competition among different electronic communications media. As a result of rapidly developing technology, we may experience increased competition from other free or pay systems by which information and entertainment are delivered to consumers, such as direct broadcast satellite and video dial tone services.

Employees

As of March 31, 2015, we employed approximately 3,778 full-time employees. Approximately 6.3% of these employees are represented by unions and are located in Chicago, Los Angeles, San Francisco, Bakersfield, New Jersey, New York and Puerto Rico. We have collective bargaining agreements covering the union employees with varying expiration dates through 2018. We are negotiating collective bargaining agreements, which have expired, at our New York television station, New York radio station, and our Chicago television station, which account for 1.1% of our full-time employees. Management believes that its relations with its non-union and union employees, as well as with the union representatives, are generally good.

 

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Properties

At March 31, 2015, the principal buildings we owned or leased and used primarily by the Media Networks and Radio segments are described below:

 

Location(1)

   Aggregate Size of
Property in
Square Feet
(Approximate)
     Owned or
Leased
     Lease
Expiration
Date
 

Houston, TX

     107,489         Owned           

Los Angeles, CA

     166,366         Owned           

Miami, FL

     310,108         Owned           

Miami, FL

     100,000         Leased         05/31/27   

Miami, FL

     33,139         Leased         12/31/15   

Teaneck, NJ

     78,529         Leased         12/31/22   

New York, NY

     194,601         Leased         12/31/28   

Puerto Rico

     92,500         Leased         05/01/58   

 

(1) The Miami and New York locations are used primarily by the Media Networks business.

The Miami owned facilities primarily house Univision Network and UniMás administration, operations (including uplink facilities), sales, production and news as well as Fusion operations. In addition, Galavisión operations occupy space in Univision Network’s facilities. Our Miami television stations, WLTV and WAMI, occupy leased facilities. We broadcast our programs to our affiliates on three separate satellites from four transponders. In addition, we use a fifth transponder for news feeds.

We own or lease remote antenna space and microwave transmitter space near each of our owned-and-operated stations. Also, we lease space in public warehouses and storage facilities, as needed, near some of our owned-and-operated stations.

We believe that our principal properties, whether owned or leased, are suitable and adequate for the purposes for which they are used and are suitably maintained for such purposes. Except for the inability to renew any leases of property on which antenna towers stand or under which we lease transponders, the inability to renew any lease would not have a material adverse effect on our financial condition or results of operations since we believe alternative space on reasonable terms is available in each city.

Corporate Structure

In March 2007, Univision was acquired by the Investors. In December 2010, Televisa invested $1.2 billion in us and contributed its equity interest in certain jointly owned cable networks for a 5% equity stake in us, debentures convertible into an additional 30% equity stake in us (which prior to the consummation of this offering will be exchanged for the Televisa Warrants), subject to applicable laws and regulations and certain contractual limitations. Concurrently, Univision and Televisa amended the program license agreement then in effect, extending it to at least 2025. In July 2015, the 2011 Televisa PLA was amended to extend the term of the program license agreement, upon consummation of this offering to at least 2030 (unless a change of control event accelerates the minimum term to 2025).

 

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The following chart shows our organizational structure immediately prior to the consummation of this offering and having given effect to the Equity Recapitalization:

 

LOGO

Legal Proceedings

We are subject to various lawsuits and other claims in the normal course of business. In addition, from time to time, we receive communications from government or regulatory agencies concerning investigations or allegations of noncompliance with law or regulations in jurisdictions in which we operate. We are not involved in any legal proceedings that would reasonably be expected to have a material effect on our business, financial condition or results of operations.

Federal Regulation

The ownership, operation and sale of television and radio broadcast stations are subject to the jurisdiction of the FCC under the Communications Act. The Communications Act and FCC regulations establish an extensive system of regulation to which our stations are subject. The FCC may impose substantial penalties for violation of its regulations, including fines, license revocations, denial of license renewal or renewal of a station’s license for less than the normal term.

Licenses and Applications. Each television and radio station that we own must be licensed by the FCC. Licenses are granted for periods of up to eight years and we must obtain renewal of licenses as they expire in order to continue operating the stations. We must also obtain FCC approval prior to the acquisition or disposition of a station, the construction of a new station or modification of the technical facilities of an existing station. Interested parties may petition to deny or object to such applications and the FCC may decline to renew or approve the requested authorization in certain circumstances. Although we have generally received such renewals and approvals in the past, there can be no assurance that we will continue to do so in the future.

Programming and Operation. The Communications Act requires broadcasters to serve the public interest through programming that is responsive to local community needs, interests and concerns. Our stations must also

 

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adhere to various content regulations that govern, among other things, political and commercial advertising, payola and sponsorship identification, contests and lotteries, television programming and advertising addressed to children, and obscene and indecent broadcasts.

Ownership Restrictions. Under the FCC’s “Local Television Multiple Ownership Rule” (the “TV Duopoly Rule”), we may own up to two television stations within the same DMA (i) provided certain specified signal contours of the stations do not overlap, (ii) where certain specified signal contours of the stations overlap but no more than one of the stations is a top 4-rated station and the market will continue to have at least eight independently-owned full-power stations after the station combination is created or (iii) where certain waiver criteria are met. The FCC’s Local Radio Ownership Rule limits the number of radio stations that we may own in any single market (defined by Nielsen Audio or by certain signal strength contours), pursuant to a sliding scale based on market size. The FCC’s “Radio-Television Cross-Ownership Rule” permits us to own both television and radio stations in the same local market in certain cases, depending primarily on the number of independent media voices in that market and subject to compliance with each of the TV Duopoly Rule and the Local Radio Multiple Ownership Rule. The “National Television Multiple Ownership Rule” prohibits us from owning television stations that, in the aggregate, reach more than 39% of total U.S. television households, subject to the UHF Discount. These structural ownership rules are applied to certain “attributable” interests generally including (i) voting stock interests of at least five percent; (ii) any equity interest in a limited partnership or limited liability company, unless properly “insulated” from management activities; (iii) equity and/or debt interests that in the aggregate exceed 33 percent of a licensee’s total assets, if the interest holder supplies more than 15 percent of the station’s total weekly programming or is a same-market broadcast licensee or daily newspaper publisher; (iv) certain same-market time brokerage agreements; (v) certain same-market JSAs; and (vi) officer or director positions in a licensee or its direct or indirect parent(s). We believe that we comply with the FCC’s structural ownership restrictions pursuant to the terms of prior FCC decisions. Certain of these structural ownership restrictions are subject to FCC review as part of a statutorily-mandated quadrennial regulatory review process. The FCC issued a notice of proposed rulemaking in April 2014 to begin the latest quadrennial review. We cannot predict the outcome of this proceeding. Also in April 2014, the FCC released an order making attributable all same-market television JSAs that account for more than 15 percent of the weekly advertising time of the brokered television station. (A similar rule was already in effect for radio JSAs.) Pursuant to that order and related legislation, existing JSAs that create impermissible duopolies must be unwound or revised to come into compliance by December 19, 2016. A judicial appeal of the order is pending. Certain of our television stations receive sales services under JSAs with Entravision. Based on current market conditions, we believe that Entravision is permitted to have attributable interests in the pertinent television stations and that the JSAs accordingly may remain in place. On September 26, 2013, the FCC issued a Notice of Proposed Rulemaking seeking public comment on a proposal to eliminate the UHF Discount. If the UHF Discount were eliminated, our current reach would exceed the 39% national cap. The FCC has proposed to “grandfather” existing station portfolios, like ours, that would exceed the 39% cap upon elimination of the UHF Discount. However, under the FCC’s proposal, absent a waiver, a grandfathered station group would have to come into compliance with the modified cap upon a sale or transfer of control. The proceeding is pending. We cannot predict whether the FCC will adopt this or other changes to the current rules, or whether any such changes would have an adverse impact on our operations.

Foreign Ownership. The Communications Act prohibits foreign parties from owning more than 20% of the equity or voting interests of a broadcast station licensee. The FCC has discretion under the Communications Act to permit foreign parties to own more than 25% of the equity or voting interests of the parent company of a broadcast licensee, but has rarely done so. In a Declaratory Ruling released on November 14, 2013, the FCC announced that it will exercise its discretion to consider, on a case-by-case basis, proposals for foreign investment in broadcast licensee parent companies above the 25% benchmark. In May 2015, the FCC issued a declaratory ruling authorizing foreign investors to hold up to an aggregate of 49.99% in voting and/or equity interests in Pandora Media Inc., a publicly-traded company which proposed, through a subsidiary, to acquire a radio broadcast license. We believe that, as presently organized, we comply with the FCC’s foreign ownership restrictions.

 

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Network Regulation. FCC rules affect the network-affiliate relationship. Among other things, these rules require that network affiliation agreements (i) prohibit networks from requiring affiliates to clear time previously scheduled for other use, (ii) permit affiliates to preempt network programs that they believe are unsuitable for their audience and (iii) permit affiliates to substitute programs that they believe are of greater local or national importance for network programs. We believe that our network affiliation agreements are in material conformity with those rules, as presently interpreted.

Cable and Satellite MVPD Carriage. FCC rules permit television stations to make an election every three years between either “must-carry” or “retransmission consent” with respect to carriage of their signals on cable MVPDs. Stations which fail to make a carriage election are deemed to have elected “must-carry.” Stations electing must-carry may require carriage on certain channels on cable MVPDs within their market if certain conditions are met. MVPDs are prohibited from carrying the signals of a station electing retransmission consent until a written agreement is negotiated with that station. We have made retransmission consent elections with respect to substantially all MVPDs in the markets where we own television stations and have subsequently reached agreements with cable MVPDs that, collectively, service substantially all cable pay-TV households.

Satellite MVPDs provide television programming on a subscription basis to consumers that have purchased and installed a satellite signal receiving dish and associated decoder equipment. Under the Satellite Home Improvement Act and subsequent extensions of and amendments thereto, satellite MVPDs are permitted to retransmit a local television station’s signal into its local market with the consent of the local television station. If a satellite MVPD elects to carry one local station in a market, it must carry the signals of all local television stations that also request mandatory carriage. Stations which fail to make a carriage election in the satellite MVPD context are deemed to have elected retransmission consent. We have made retransmission consent elections with respect to satellite MVPDs in most of the markets where we own television stations and have reached agreement with satellite MVPDs with respect to carriage of those stations.

A number of entities have commenced operation or announced plans to commence operation of Internet protocol video systems, using DSL, FTTH and other distribution technologies, some of which claim they are not subject to regulation as MVPDs. The issue of whether those services are subject to the existing MVPD regulations, including must-carry obligations, has not been resolved. In most cases, we have entered into retransmission consent agreements with such entities for carriage of our eligible stations. On December 19, 2014, the FCC issued a notice of proposed rulemaking that would expand the definition of MVPD under the FCC’s rules to include certain OTT distributors of video programming that stream content to consumers over the open Internet. The proposal, if adopted, could result in changes to how both our television stations’ signals and cable networks are distributed, and to how viewers access our content. We cannot predict the outcome of the rulemaking proceeding or the effect of such a change on our revenues from carriage agreements and from advertising.

In early 2010, a number of cable and satellite MVPDs joined in a petition to urge the FCC to initiate a rulemaking proceeding to consider amending its retransmission consent rules. In March 2011, the FCC initiated a formal rulemaking proceeding to evaluate the proposals raised by the petitioners and more broadly to review its retransmission consent rules. Acknowledging its limited jurisdiction, the FCC solicited comments on a series of preliminary proposals intended to clarify certain rules, and provide guidance to the parties, concerning or affecting retransmission consent negotiations. In March 2014, the FCC adopted a rule prohibiting the joint negotiation of retransmission consent agreements by top-4 rated non-commonly-owned stations in the same market, and sought comment on possible changes to its rules regarding television stations’ rights to territorial exclusivity with respect to network and syndicated programming. However, in STELAR, enacted in December 2014, Congress directed the FCC to undertake additional rulemakings concerning retransmission consent issues, including to adopt (within nine months) regulations that will prohibit a television station from coordinating retransmission consent negotiations or negotiating retransmission consent on a joint basis with another television station in the same market, irrespective of ratings, unless such stations are under common control. The FCC adopted such a rule in February 2015. The rule will prohibit Univision and Entravision from negotiating

 

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retransmission consent jointly, or from coordinating such negotiations, in any market where both companies own television stations on a going forward basis. Separately, on June 2, 2015, the FCC adopted an order implementing a further directive of STELAR that the FCC streamline its “effective competition” rules for small cable operators. Under the Communications Act, local franchising authorities (LFAs) may regulate a cable operator’s basic cable service tier rates and equipment charges only if the cable operator is not subject to effective competition. Historically the FCC presumed the absence of effective competition unless and until a cable operator rebutted the presumption. The FCC’s order reversed that approach and adopted a rebuttable presumption that all cable operators, regardless of size, are subject to effective competition. Some cable operators have taken the position that cable systems found to be subject to effective competition are not required to place television stations, like ours, that have elected retransmission consent on the basic cable service tier. The FCC’s order does not address this issue. The FCC also must implement other provisions in STELAR that could affect retransmission consent negotiations, including a proceeding launched in March 2015 concerning procedures for modification of a station’s “market” for purposes of determining its entitlement to cable and/or satellite carriage in certain circumstances. We cannot predict the outcome of future rulemakings on these matters.

Other Matters. The FCC has numerous other regulations and policies that affect its licensees, including rules requiring closed-captioning and video description to assist television viewing by the hearing- and visually-impaired; sponsorship identification rules requiring disclosure of any consideration paid or promised for the broadcast of any content; an equal employment opportunities rule which, among other things, requires broadcast licensees to provide equal opportunity in employment to all qualified job applicants and prohibits discrimination against any person by broadcast stations based on race, color, religion, national origin or gender; and a requirement that all broadcast station advertising contracts contain nondiscrimination clauses. Licensees are required to collect, submit to the FCC and/or maintain for public inspection extensive documentation regarding a number of aspects of their station operations. Television broadcasters are required to post most of the material in their existing public inspection files, including political/advocacy advertising information, online at the FCC’s website. In August 2014, the FCC sought comments on whether to expand the online public file system to radio stations. We cannot predict the outcome of this proceeding. Other decisions permit unlicensed wireless operations on television channels in so-called “White Spaces,” subject to certain requirements. We cannot predict whether such operations will result in interference to broadcast transmissions.

Federal legislation was enacted in February 2012 that, among other things, authorizes the FCC to conduct voluntary “incentive auctions” in order to reallocate certain spectrum currently occupied by television broadcast stations to mobile wireless broadband services, to “repack” television stations into a smaller portion of the existing television spectrum band, and to require television stations that do not participate in the auction to modify their transmission facilities, subject to reimbursement for reasonable relocation costs up to an industry-wide total of $1.75 billion.

The FCC has adopted rules concerning the incentive auction and the repacking of the television band, and it has indicated it expects the auction to occur during 2016. Meanwhile, the FCC is expected to adopt additional rules and procedures to implement the February 2012 legislation. Under the auction design tentatively proposed by the FCC, television stations will be given an opportunity to offer spectrum for sale to the government in a “reverse” auction while wireless providers will bid to acquire spectrum from the government in a simultaneous “forward” auction. In June 2015, the U.S. Court of Appeals for the District of Columbia Circuit denied separate appeals by the National Association of Broadcasters and Sinclair Broadcast Group of certain aspects of the FCC’s auction rules. In February 2015, jointly with certain other major broadcast station group owners, we advised the FCC that our evaluation of whether and how to participate in the incentive auction depends on the adoption of clear and effective auction implementation rules, including with respect to spectrum clearing targets, reserve prices, bidding methodology and post-auction channel sharing, that maximize the value of the potential opportunity for all broadcasters.

If some or all of our television stations are required to change frequencies or otherwise modify their operations, our stations could incur substantial conversion costs, reduction or loss of over-the-air signal coverage

 

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or an inability to provide high definition programming and additional program streams, including mobile video services. More generally, we cannot predict the likelihood, timing or outcome of any additional FCC regulatory action in this regard or its impact upon our business.

The foregoing does not purport to be a complete summary of all of the provisions of the Communications Act, or of the regulations and policies of the FCC thereunder. Proposals for additional or revised regulations and requirements are pending before, and are considered by, Congress and federal regulatory agencies from time to time. We generally cannot predict whether new legislation, court action or regulations, or a change in the extent of application or enforcement of current laws and regulations, would have an adverse impact on our operations.

 

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MANAGEMENT

The following table sets forth certain information, as of the date set forth on the cover of this prospectus, regarding our executive officers, key officers and directors:

 

Name

  

Age

  

Position

Randel A. Falco

   61   

President and Chief Executive Officer, Director

Roberto Llamas

   68   

Executive Vice President and Corporate Officer, Human Resources and Community Empowerment

Francisco J. Lopez-Balboa

   54   

Executive Vice President and Chief Financial Officer

Peter H. Lori

   49   

Executive Vice President, Deputy Chief Financial Officer and Chief Accounting Officer

Jonathan Schwartz

   53   

General Counsel and Executive Vice President, Government Relations

Alberto Ciurana

   58   

President, Programming and Content

Kevin Conroy

   55   

Chief Strategy and Data Officer and President, Enterprise Development

Kevin Cuddihy

   58   

President, Local Media

John W. Eck

   55   

Executive Vice President, Technology, Operations and Engineering

Isaac Lee

   44   

President, Univision News and Digital and Chief Executive Officer, Fusion

Tonia O’Connor

   46   

President, Content Distribution and Corporate Business Development

Jessica Rodriguez

   42   

Executive Vice President and Chief Marketing Officer

Juan Carlos Rodriguez

   50   

President of Univision Deportes

Mónica Talán

   43   

Executive Vice President, Corporate Communications and Public Relations

Keith Turner

   61   

President of Sales and Marketing

Haim Saban

   70   

Chairman and Director

Zaid F. Alsikafi

   40   

Director

Alfonso de Angoitia

   53   

Director

Emilio Azcárraga Jean

   47   

Director

José Antonio Bastón Patiño

   47   

Director

Adam Chesnoff

   51   

Director

Henry G. Cisneros

   68   

Director

Michael P. Cole

   43   

Director

Kelvin L. Davis

   51   

Director

David Goel

   45   

Director

Michael N. Gray

   42   

Director

Jonathan M. Nelson

   59   

Director

James N. Perry, Jr.

   54   

Director

Enrique F. Senior Hernández

   71   

Director

David Trujillo

   39   

Director

Tony Vinciquerra

   60   

Director

 

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Mr. Randel A. Falco has been our President and Chief Executive Officer and a member of our board of directors since June 2011. From January 2011 to June 2011, Mr. Falco served as our Executive Vice President and Chief Operating Officer. From November 2006 to March 2009, Mr. Falco served as Chairman and Chief Executive Officer of AOL, LLC where he was responsible for all business and strategic operations for the web services provider, after which he briefly retired before joining us. From May 2004 to November 2006, Mr. Falco served as President and Chief Operating Officer of NBC Universal Television Networks Group of NBC Universal, Inc. Mr. Falco holds a B.S. in Finance, an M.B.A and an honorary doctorate from Iona College. Mr. Falco is a member of the board of directors of Ronald McDonald House.

Mr. Roberto Llamas has been our Executive Vice President and Corporate Officer, Human Resources and Community Empowerment since February 2011. From June 2007 to February 2011, Mr. Llamas served as Chief Human Resources and Public Affairs officer for The Nielsen Company where he helped implement leadership and talent development systems and also implemented human capital and community-based strategies to invest in Nielsen’s markets and communities, including developing markets. From 2004 to 2007, Mr. Llamas served as Chief Administrative Officer for The Cleveland Clinic. From 2000 to 2002, Mr. Llamas served as Chief Human Resources Officer for Lehman Brothers. Mr. Llamas holds a B.S. in Marketing Management from California Polytechnic University and a M.S. in Organizational Development from Pepperdine University.

Mr. Francisco J. Lopez-Balboa has been our Executive Vice President and Chief Financial Officer and Executive Vice President since May 2015. From 1997 to 2013, Mr. Lopez-Balboa served as a Managing Director and Head of Telecom, Media and Technology Investment Grade Financing at Goldman Sachs & Co., after which he briefly retired before joining us. While at Goldman Sachs, in addition to leading his group, Mr. Lopez-Balboa served on the Investment Banking Division’s Credit Markets Capital Committee. From 1991 until 1997, Mr. Lopez-Balboa ran Goldman Sachs’ debt capital markets efforts across multiple industries in the Midwest and West Coast regions including Industrial, Retail, Automotive and Telecom companies. Prior to joining Goldman Sachs in 1991, he was a Director in the Capital Markets Group at Merrill, Lynch & Co. Mr. Lopez-Balboa graduated from Columbia University with a B.A. in Economics and received his MBA from Harvard Business School.

Mr. Peter H. Lori is our Executive Vice President, Deputy Chief Financial Officer and Chief Accounting Officer and has been our Executive Vice President-Finance and Chief Accounting Officer since January 2010. Mr. Lori previously served as our Interim Chief Financial Officer from February 2015 until May 2015. From April 2005 to December 2009, Mr. Lori served as our Senior Vice President, Corporate Controller and Chief Accounting Officer. From June 2002 to March 2005, Mr. Lori served as an audit partner of KPMG LLP. Mr. Lori holds a B.S. in Accounting from Montclair State University. Mr. Lori is on the Board of Directors and is the Chairman of the Audit Committee of Union Community Partners, LLC, a publicly-traded real estate development company.

Mr. Jonathan Schwartz has been our General Counsel and Executive Vice President, Government Relations since December 2012. From January 2010 to December 2012, Mr. Schwartz served as Managing Director and General Counsel for JPMorgan’s Investment Bank, where he led the Legal and Compliance functions for the global investment bank. From 2003 to 2009, Mr. Schwartz served as Executive Vice President and General Counsel of Cablevision Systems Corporation. From August 2002 to July 2003, Mr. Schwartz served as Senior Vice President and Deputy General Counsel of Time Warner Inc. From May 2001 to August 2002, Mr. Schwartz served as General Counsel of Napster, an online music company. Earlier in his career, Mr. Schwartz held various government positions. He served as a judicial law clerk to Judge Harry T. Edwards on the U.S. Court of Appeals for the D.C. Circuit and to Justice Thurgood Marshall on the U.S. Supreme Court. He also served as a federal prosecutor in the U.S. Attorney’s Office for the Southern District of New York and a senior advisor to the Attorney General and the Deputy Attorney General at the U.S. Department of Justice in Washington, D.C. Mr. Schwartz holds a B.S. in Economics from the University of Pennsylvania, a J.D. from Stanford Law School and an M.Phil in International Relations from Cambridge University.

Mr. Alberto Ciurana has been our President, Programming and Content since November 2012. From January 1980 to October 2012, Mr. Ciurana served as Vice President of Programming of Televisa where he was

 

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in charge of programming, content acquisitions and strategy for all of Televisa’s broadcast networks, including its flagship channel “Canal de las Estrellas,” Mexico’s most watched network. During his 30 years at Televisa, Mr. Ciurana served in various roles including Vice President of Broadcasting, Vice President of International Operations, Managing Director of Eurovisa (Televisa’s European operations subsidiary based in London) and Vice President of Production at S.I.N (Spanish International Network), the first Spanish-language television network in the United States, which later would become Univision. He began his career in Televisa working as an executive producer for “Siempre en Domingo” one of Latin America’s most beloved shows.

Mr. Kevin Conroy has been our Chief Strategy and Data Officer and President, Enterprise Development since February 2015. From January 2009 to January 2015, Mr. Conroy served as our President, Digital and Enterprise Development. From January 2001 to December 2008, Mr. Conroy served in various roles including Executive Vice President of Global Products and Marketing, Executive Vice President and Chief Operating Officer of AOL for Broadband and Senior Vice President and General Manager of AOL Entertainment at AOL, Inc. Mr. Conroy holds a B.A. from Bowdoin College.

Mr. Kevin Cuddihy has been our President, Local Media since August 2014. From May 2011 to August 2014, Mr. Cuddihy served as our President of Univision Television Group. From August 2009 to May 2011, Mr. Cuddihy served as our Executive Vice President of TV Advertising sales for Univision Television Station Group. From October 2006 to December 2008, Mr. Cuddihy served as Senior Vice President of Advertising Sales at Comcast Spotlight Sales. Mr. Cuddihy holds a B.A. in Broadcast Journalism from Drake University.

Mr. John W. Eck has been our Chief Operations Officer and Executive Vice President, Technology, Operations and Engineering since November 2011. From 2005 to 2011, Mr. Eck served as President of Media Works at NBC Universal where he ran NBC affiliate relations production and post-production operations, information technology and real estate and facilities. From 1993 to 2005, Mr. Eck served in various roles including EVP, Integration (NBC and Universal); President, Broadcast and Network Operations; EVP, Six Sigma; CFO, NBC International and other financial roles while at NBC Universal. Mr. Eck holds a B.S. in Business from Indiana University.

Mr. Isaac Lee has been President of Univision News since December 2010 and President of Univision Digital since February 2015. He is also Chief Executive Officer of Fusion since October 2013. From 2006 to 2010, Mr. Lee served as Founder and Editor in Chief at Page One Media. From 2000 to 2005 Mr. Lee served as Editor in Chief at Zoom Media Group. From 1997 to 2000, Mr. Lee served as the Editor in Chief at Grupo Semana in Colombia. From 1996 to 1997 Mr. Lee served as Editor in Chief at Revista Cromos. He was also the founder of Animal Politico, Mexico’s successful political website. Mr. Lee serves on the board of directors of the Associated Press (AP), the Committee to Protect Journalists (CPJ), ICFJ and on the Journalism Advisory board of ProPublica. He is a Member of the Council on Foreign Relations and Foro IberoAmerica. He has produced an award-winning feature film, an international EMY nominated TV series for TVE and several documentaries. Mr. Lee studied Psychology at the Hebrew University of Jerusalem and received a M.A. in Journalism from the Universidad de Los Andes.

Mrs. Tonia O’Connor has been our President, Content Distribution and Corporate Business Development since January 2011. From January 2008 to January 2011, Mrs. O’Connor served as our Executive Vice President of Distribution Sales and Marketing. From December 1994 to December 2007, Mrs. O’Connor served in various roles including Executive Vice President, Affiliate Sales and Marketing and Senior Vice President of National Accounts of TV Guide Affiliates Sales of Gemstar TV Guide. Mrs. O’Connor holds a B.A. in Broadcast Journalism and a B.A. in International Relations from Syracuse University.

Mrs. Jessica Rodriguez has been our Executive Vice President and Chief Marketing Officer since August 2014. From June 2012 to August 2014, Mrs. Rodriguez served as our Executive Vice President of Program Scheduling and Promotions. From March 2011 to May 2012, Mrs. Rodriguez served as our Senior Vice President of Univision Cable Networks. From October 2009 to February 2011, Mrs. Rodriguez served as our Vice

 

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President, Special Assistant to the President of Univision Networks. Mrs. Rodriguez holds a B.S. in Economics and Finance from Fordham University and an M.B.A. from Stanford University.

Mr. Juan Carlos Rodriguez has been our President of Univision Deportes since September 2012. From September 2009 to May 2012, Mr. Rodriguez served as Chief Executive Officer of Televisa Deportes Network at Televisa where he oversaw the launch of Televisa Deportes Network, among other networks and radio brands, and negotiated and acquired television and radio rights from worldwide vendors, including FIFA, NFL, MLB, NBA and UEFA, for over 10,000 hours of sports programming. From December 1999 to July 2009, Mr. Rodriguez served as Co-Founder and Chief Executive Officer of Grupo Estadio, which, as a precursor to Televisa Deportes Network, was later acquired by Televisa. Mr. Rodriguez holds a B.S. in Business Administration from the Universidad Iberoamericana.

Mrs. Mónica Talán has been our Executive Vice President, Corporate Communications and Public Relations since March 2013. Mrs. Talán joined as Vice President of Corporate Communications in January 2008 and was promoted to Senior Vice President in September 2011. From 2000 to 2008, Mrs. Talán served in various roles including Senior Vice President/Partner and Senior Counselor and Strategist of Fleishman-Hillard Inc., a public relations and marketing agency. Mrs. Talán holds a B.A. in Journalism from The University of Texas at Austin.

Mr. Keith Turner has been our President of Sales and Marketing since September 2012. From September 2009 to September 2012, Mr. Turner served as Senior Vice President of Media Sales and Sponsorship at the NFL where he oversaw the NFL sponsorship business as well as advertising sales for all NFL media platforms, including NFL Network, NFL.com and NFL Mobile. From March 1987 to January 2007, Mr. Turner served in various roles including President of Sales and Marketing, Senior Vice President of Olympic and Sports Sales, Vice President of Olympic Sports Sales and Vice President of Sport Sales of NBC Universal. Mr. Turner holds a B.S. in Business Management and Marketing from C.W. Post.

Mr. Haim Saban has been the Chairman and a member of our board of directors since April 2007. Mr. Saban has served as Chairman and Chief Executive Officer of Saban Capital Group since May 2003. From June 1997 to October 2001, Mr. Saban served as Chairman and Chief Executive Officer of Fox Family Worldwide. Mr. Saban currently serves on the board of directors of Saban Capital Group and some of its affiliates. Mr. Saban previously served on the board of directors of ProSiebenSat.1 Media AG as chairman of the supervisory board, Television Francaise 1 and DirecTV, Inc.

Mr. Zaid F. Alsikafi has been a member of our board of directors since March 2007. Mr. Alsikafi is a Managing Director at Madison Dearborn. Prior to joining Madison Dearborn in 1999, Mr. Alsikafi was an investment banking analyst at Goldman Sachs & Co. Mr. Alsikafi currently serves on the boards of directors of Centennial Towers, Quickplay Media and Q9 Networks. Mr. Alsikafi holds a B.S. from the University of Pennsylvania and an MBA from Harvard University.

Mr. Alfonso de Angoitia has been a member of our board of directors since December 2010. Mr. Angoitia has served as Executive Vice President, Member of the Executive Office of the Chairman and Member of the Executive Committee of Grupo Televisa S.A.B. (“Grupo Televisa”) since November 1999. From 1994 to 1999, Mr. Angoitia was a founding partner of the law firm Mijares, Angoitia, Cortés y Fuentes, S.C. Mr. Angoitia currently serves on the boards of directors of Grupo Televisa, Grupo Financiero Banorte and (as an alternate member) Fomento Económico Mexicano, S.A.B. de C.V. Mr. Angoitia holds a law degree from Universidad Nacional Autonoma de Mexico.

Mr. Emilio Azcárraga Jean has been a member of our board of directors since December 2010. Mr. Azcárraga has served as President, Chief Executive Officer and Chairman of the board of directors of Televisa since April 1997. Mr. Azcárraga currently serves on the boards of directors of Televisa and Banco Nacional de México, S.A. Mr. Azcárraga holds a B.A. in Industrial Relations from Iberoamericana University and an M.B.A. Honoris Causa from the Business Institute of Madrid, Spain.

 

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Mr. José Antonio Bastón Patiño has been a member of our board of directors since December 2011. Mr. Bastón Patiño has served as President of Television and Contents of Grupo Televisa since November 2008. From 2001 to 2008, Mr. Bastón Patiño served as Corporate Vice President of Television of Grupo Televisa. Mr. Bastón Patiño currently serves on the boards of directors of Grupo Televisa and several of its subsidiaries and other affiliated companies.

Mr. Adam Chesnoff has been a member of our board of directors since March 2007. Mr. Chesnoff has served as the President and Chief Operating Officer of Saban Capital Group since January 2002. From February 1997 to October 2001, Mr. Chesnoff served as Vice President of Fox Family Worldwide. Mr. Chesnoff currently serves on the boards of directors of Partner Communications (Chairman), Saban Capital Group, Inc. and other affiliates of Saban Capital Group, Celestial Tiger Entertainment Ltd. and Media Nusantara Cinta Tbk. In addition, Mr. Chesnoff serves as a member of the board of commissioners of MNC and MNC Sky Vision. Mr. Chesnoff previously served on the boards of directors of ProSiebenSat.1 Media AG and Bezeq. Mr. Chesnoff holds a B.A. in Economics and Management from Tel Aviv University and an M.B.A. from the University of California, Los Angeles.

Mr. Henry G. Cisneros has been a member of our board of directors since June 2007. Mr. Cisneros has served as a Chairman of CityView America, a joint venture to build affordable homes in metropolitan areas which he founded, since 2005. From August 2000 to June 2005, Mr. Cisneros served as Chairman of American CityVista, a joint venture with KB Home which he founded. From January 1997 to August 2000, Mr. Cisneros served as our President, Chief Operating Officer and a member of our board of directors. Mr. Cisneros currently serves on the boards of directors of CityView, La Quinta, New America Alliance and the San Antonio Hispanic Chamber of Commerce. Mr. Cisneros has previously served on the boards of directors of KB Home, Countrywide Financial Corporation and Live Nation. Mr. Cisneros holds a B.A. and an M.A. in Urban and Regional Planning from Texas A&M University, an M.P.A. from the John F. Kennedy School of Government at Harvard University and a Doctor in Public Administration from George Washington University.

Mr. Michael P. Cole has been a member of our board of directors since April 2007. Mr. Cole has served as President of MAEVA Group, a turnaround-oriented merchant bank since April 2014. From August 1997 to March 2014, Mr. Cole served in positions of increasing responsibility with Madison Dearborn, including as a Managing Director since 2007. Mr. Cole holds an A.B. from Harvard College.

Mr. Kelvin L. Davis has been a member of our board of directors since April 2007. Mr. Davis is a Senior Partner of TPG and the Founder and Co-Head of TPG Real Estate. He is also a member of TPG Holding’s Executive Committee. From March 2000-2009, Mr. Davis led TPG Capital’s North American Buyout Group, encompassing investments in all non-technology industry sectors. Prior to joining TPG in March 2000, Mr. Davis was President and Chief Operating Officer of Colony Capital, LLC, a private international real estate investment firm in Los Angeles, which he co-founded in 1991. Mr. Davis currently serves on the boards of directors of Caesars Entertainment Corporation (formerly Harrah’s Entertainment Inc.), Catellus Development Corporation, Taylor Morrison Home Corporation, Parkway Properties, Inc., AV Homes, Inc. and Enlivant (fka Assisted Living Concepts). Mr. Davis previously served on the boards of directors of Northwest Investments, LLC, Altivity Packaging LLC, Aleris International Inc., Graphic Packaging Holding Company, Kraton Polymers LLC, Kraton Performance Polymers, Inc., Metro-Goldwyn Mayer, Inc. and Texas Genco LLC. Mr. Davis holds a B.A. in Economics from Stanford University and an M.B.A. from Harvard University.

Mr. David Goel has been a member of our board of directors since January 2014. Mr. Goel is a co-founder of Matrix Capital Management Company, LLC and has served as Managing General Partner since October 1999. Prior to forming Matrix in 1999, Mr. Goel was a Member and Technology Research Analyst at Tiger Management. Previously, he was an Associate at General Atlantic Partners and a Financial Analyst at Morgan Stanley, focusing on Technology Investment Banking. Mr. Goel is a Director of Popular, Inc., a bank with operations in New York and Puerto Rico. Mr. Goel is a Trustee of Phillips Exeter Academy and a Trustee of the Museum of Fine Arts, Boston, MA. Mr. Goel received a B.A., magna cum laude, from Harvard University and is a graduate of Phillips Exeter Academy.

 

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Mr. Michael N. Gray has been a member of our board of directors since April 2011. Mr. Gray is a Managing Director of Providence Equity. Prior to joining Providence Equity in August 2004, Mr. Gray served as a Vice President of First Union Capital Partners. Currently, Mr. Gray also serves on the board of directors of Grupo TorreSur, ikaSystems and Trilogy International Partners. Mr. Gray holds a B.S. in Business Administration and a Master of Accounting from the University of North Carolina at Chapel Hill and an M.B.A. from the Stanford Graduate School of Business.

Mr. Jonathan M. Nelson has been a member of our board of directors since April 2007. Mr. Nelson has served as Chief Executive Officer and founder of Providence Equity since 1989. Mr. Nelson currently serves on the boards of directors of The Chernin Group, Television Broadcasts Limited, “Hong Kong,” Soccer United Marketing, L.L.C., an affiliate of Major League Soccer and Sports Network, Inc. Mr. Nelson has previously served on the boards of directors of AT&T Canada, Inc., Bresnan Broadband Holdings, LLC, Brooks Fiber Properties, Inc. (now Verizon Communications Inc.), Eircom plc, Hulu, Metro-Goldwyn-Mayer Inc., Language Line, Voice Stream Wireless Corp. (now Deutsche Telekom A.G.), Warner Music Group Corp., Wellman Inc. and Western Wireless Corporation (now Alltel Corp.), Yankees Entertainment and Sports Network (YES) as well as numerous privately-held companies affiliated with Providence Equity and Narragansett Capital Inc. Mr. Nelson holds a B.A. from Brown University and an M.B.A. from Harvard University.

Mr. James N. Perry, Jr. has been a member of our board of directors since March 2007. Mr. Perry is a Managing Director at Madison Dearborn, a position he has held since 1999. Prior to co-founding Madison Dearborn, Mr. Perry was with First Chicago Venture Capital for eight years. Prior to that, Mr. Perry worked at The First National Bank of Chicago. Mr. Perry currently serves on the boards of directors of Asurion Corporation, Centennial Towers, Quickplay Media, The Topps Company and Chicago Public Media. Over the last ten years Mr. Perry has served on the boards of directors of Cbeyond Communications, Cinemark, MetroPCS, and T-Mobile USA. Mr. Perry holds a B.A. in Economics from the University of Pennsylvania and an M.B.A. from The University of Chicago Booth School of Business.

Mr. Enrique F. Senior Hernández has been a member of our board of directors since December 2010. Mr. Senior Hernández has served as a Managing Director of Allen & Company, LLC since July 1972. Mr. Senior Hernández currently serves on the boards of directors of Televisa, Coca-Cola FEMSA, S.A.B. de C.V., Fomento Económico Mexicano, S.A.B. de C.V. and Cinemark Holdings, Inc. Mr. Senior Hernández holds a B.A. in Architecture, a B.E. in Electrical Engineering and a B.S. in Industrial Administration from Yale University, an M.B.A. from the Harvard University, and an honorary J.D. from Emerson College.

Mr. David I. Trujillo is a Partner of TPG and leads TPG’s Internet, Media and Communications investing efforts. Prior to joining TPG in January 2006, Mr. Trujillo was a Vice President of GTCR Golder Rauner, LLC from January 1998 through December 2005 and an investment banker at Merrill Lynch & Co. Mr. Trujillo is currently a Director of Creative Artists Agency (CAA), Lynda.com and RentPath. Mr. Trujillo led TPG’s growth equity investments in Airbnb and Uber, as well as TPG’s historic credit investments in Citadel Broadcasting and Clear Channel Communications. Mr. Trujillo previously served on the boards of Fenwal Therapeutics, Sorenson Communications, HSM Electronic Protection Services and Triad Financial. Mr. Trujillo received a B.A. in Economics from Yale University and an M.B.A. from the Stanford Graduate School of Business.

Mr. Tony Vinciquerra has been a member of our board of directors since October 2011. Mr. Vinciquerra has served as Senior Advisor of TPG Capital since September 2011. From September 2008 to February 2011, Mr. Vinciquerra served as Chairman and Chief Executive Officer of Fox Networks Group. Mr. Vinciquerra currently serves on the compensation and nominating and governance committees of DirecTV. Mr. Vinciquerra previously served on the board of directors of Motorola Mobility, where he served as the lead director. Mr. Vinciquerra holds a B.S. in Marketing from State University of New York at Albany.

 

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Board of Directors

Our business and affairs are managed under the direction of our board of directors. Our bylaws provide that our board of directors shall have 20 members or such number as may be fixed from time to time by resolution of at least a majority of our board of directors then in office. The amended and restated principal investor agreement (“PIA”) that we entered into with the Investors and Televisa grants each of the Investors and Televisa the right to appoint directors based on the dollar amount of their investment in our common stock. As of the date of this prospectus, each of the Investors may appoint three directors to the board of directors except for Saban Capital Group, which may appoint two directors. Since 2007, THL has elected not to appoint any members to the board of directors and instead has appointed three observers to the board of directors. Pursuant to the PIA, Televisa has the right to appoint three directors to the board of directors until such time as Televisa holds less than 95% of the shares of our common stock held by Televisa immediately following the closing of Televisa’s investment in us on December 20, 2010 (The “Televisa Closing”). Our board also included two independent directors. In 2011, our board of directors was expanded to 22 members pursuant to the resolutions of our board of directors and the consent of our stockholders in order to appoint an independent director and an additional Televisa designee. Due to certain vacancies and THL’s decision not to appoint any members to our board of directors, our board of directors is currently composed of seventeen directors. Our executive officers and key employees serve at the discretion of our board of directors. For more information regarding the director designation rights of the Investors and Televisa, please see “Description of Capital Stock—Director Designation Rights.”

Background and Experience of Directors

The members of our board of directors were selected to serve as directors for the following reasons:

Mr. Saban—was nominated to our board of directors by Saban pursuant to their rights under the PIA.

Mr. Alsikafi—was nominated to our board of directors by Madison Dearborn pursuant to their rights under the PIA.

Mr. Angoitia—was nominated to our board of directors by Televisa pursuant to their rights under the PIA.

Mr. Azcárraga—was nominated to our board of directors by Televisa pursuant to their rights under the PIA.

Mr. Bastón Patiño—was nominated to our board of directors by Televisa pursuant to their rights under the PIA.

Mr. Chesnoff—was nominated to our board of directors by Saban pursuant to their rights under the PIA.

Mr. Cisneros—was elected to our board of directors based on his extensive history with and knowledge of Univision through his prior service as President and Chief Operating Officer, his business experience both before and after he joined us and his experience serving on the boards of other companies.

Mr. Cole—was nominated to our board of directors by Madison Dearborn pursuant to their rights under the PIA;

Mr. Davis—was nominated to our board of directors by TPG Capital pursuant to their rights under the PIA.

Mr. Falco—was elected to our board of directors based on his service as President and Chief Executive Officer and his business experience both before and after he joined us.

Mr. Goel—was elected to our board of directors based on his strong business experience and leadership skills, including as co-founder and Managing General Partner of Matrix Capital Management Company.

Mr. Gray—was nominated to our board of directors by Providence Equity pursuant to their rights under the PIA.

 

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Mr. Nelson—was nominated to our board of directors by Providence Equity pursuant to their rights under the PIA.

Mr. Perry—was nominated to our board of directors by Madison Dearborn pursuant to their rights under the PIA.

Mr. Senior Hernández—was elected to our board of directors based on his strong business experience and leadership skills, including as Managing Director of Allen & Company, and his experience serving on the boards of other companies.

Mr. Trujillo—was nominated to our board of directors by TPG Capital pursuant to their rights under the PIA.

Mr. Vinciquerra—was nominated to our board of directors by TPG Capital pursuant to their rights under the PIA.

Director Independence

Our board of directors has affirmatively determined that                      are independent directors under the applicable rules of the NYSE or Nasdaq.

Board Committees

Our board of directors has the authority to appoint committees to perform certain management and administration functions. Pursuant to the PIA, each committee of the board of directors shall be comprised of at least one director appointed by each Investor and Televisa, unless the Investor or Televisa waive such requirement. Since THL has elected not to appoint any directors, they are not represented on any committees.

Audit Committee

The primary purpose of our audit committee is to assist the board’s oversight of our accounting and financial reporting processes. David Trujillo, Zaid Alsikafi, Alfonso de Angoitia, Adam Chesnoff and Michael Gray serves on the audit committee and James Carlisle, a THL appointee, serves as an observer.                      qualifies as an “audit committee financial expert” as such term has been defined by the SEC in Item 401(h)(2) of Regulation S-K. Our board of directors has affirmatively determined that                      meet the definition of an “independent director” for the purposes of serving on the audit committee under applicable SEC and NYSE or Nasdaq rules. Our audit committee is not currently comprised entirely of independent members. We intend to comply with these independence requirements for all members of the audit committee within the time periods specified therein. The audit committee is governed by a charter that complies with the applicable rules of NYSE or Nasdaq.

Compensation Committee

The primary purpose of our compensation committee is to determine, approve and administer compensation policies and programs. Michael Gray, Alfonso de Angoitia, Adam Chesnoff, Michael Cole and Kelvin Davis serves on the compensation committee and James Carlisle serves as an observer. Upon the consummation of this offering, our compensation committee will meet the requirements of the applicable rules of NYSE or Nasdaq. The compensation committee is governed by a charter that complies with the applicable rules of NYSE or Nasdaq.

 

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Nominating and Corporate Governance Committee

The primary purposes of our nominating and corporate governance committee are to identify and screen individuals qualified to serve as directors and recommend to the board of directors candidates for nomination for election; evaluate, monitor and make recommendations to the board of directors with respect to our corporate governance guidelines; coordinate and oversee the annual self-evaluation of the board of directors and its committees and management; and review our overall corporate governance and recommend improvements for approval by the board of directors where appropriate. Upon the consummation of this offering,                      will serve on the nominating and corporate governance committee, and                      will serve as the chairman. The nominating and corporate governance committee is governed by a charter that complies with the applicable rules of NYSE or Nasdaq.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves, or in the past year has served, as a member of the board of directors or compensation committee (or other committee performing equivalent functions) of any entity that has one or more executive officers serving on our board of directors or compensation committee. No interlocking relationship exists between any member of the compensation committee (or other committee performing equivalent functions) and any executive, member of the board of directors or member of the compensation committee (or other committee performing equivalent functions) and of any other company.

Code of Conduct

We have adopted a code of conduct that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. These standards are designed to deter wrongdoing and to promote honest and ethical conduct. The code of conduct will be available on our website at www.univision.net. After this offering, any waiver to or amendment of the code for directors or executive officers may be made only by our board of directors and will be promptly disclosed to our stockholders as required by applicable U.S. federal securities laws and the corporate governance rules of the NYSE or Nasdaq, as applicable. We will make any legally required disclosures regarding amendments to, or waivers of, provisions of our code of conduct on our website.

Corporate Governance Guidelines

Our board of directors will adopt corporate governance guidelines in accordance with the corporate governance rules of the NYSE or Nasdaq, as applicable, that serve as a framework within which our board of directors and its committees operate. A copy of our corporate governance guidelines will be posted on our website.

Indemnification of Officers and Directors

Our amended and restated certificate of incorporation provides that we will indemnify our directors and officers to the fullest extent permitted by the DGCL. We have established directors’ and officers’ liability insurance that insures such persons against the costs of defense, settlement or payment of a judgment under certain circumstances. Our amended and restated certificate of incorporation further provides that our directors will not be liable for monetary damages for breach of fiduciary duty, except to the extent that exculpation from liability is not permitted under the DGCL. We have also entered into indemnification agreements with each of our directors. These agreements, among other things, require us to indemnify each director to the fullest extent permitted by Delaware law, including indemnification of expenses such as attorneys’ fees, judgments, fines and settlement amounts incurred by the director in any action or proceeding, including any action or proceeding by or in right of us, arising out of the person’s services as a director.

 

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EXECUTIVE AND DIRECTOR COMPENSATION

The following discussion and analysis of compensation arrangements should be read with the compensation tables and related disclosures set forth below. This discussion contains forward-looking statements that are based on our current plans and expectations regarding future compensation programs. The actual compensation programs that we adopt may differ materially from the programs summarized in this discussion.

Overview

This compensation discussion and analysis discusses our executive compensation philosophy, objectives, and design; our compensation-setting process, our executive compensation program components; and decisions made in 2014 with respect to the compensation of each of our named executive officers. Our named executive officers for 2014 were:

 

    Randel A. Falco, President and Chief Executive Officer;

 

    Andrew W. Hobson, former Senior Executive Vice President and Chief Financial Officer;

 

    Jonathan Schwartz, General Counsel and Executive Vice President, Government Relations;

 

    Roberto Llamas, Executive Vice President, Chief Human Resources and Community Empowerment Officer; and

 

    Peter H. Lori, Executive Vice President, Deputy Chief Financial Officer and Chief Accounting Officer.

Mr. Hobson resigned effective February 13, 2015. Peter H. Lori, who held the position of Executive Vice President-Finance and Chief Accounting Officer since January 2010, also served as Interim Chief Financial Officer from February 13, 2015 until May 6, 2015. On May 7, 2015, Francisco J. Lopez-Balboa was named Chief Financial Officer and Executive Vice President, effective immediately. See “—Management.”

Executive Compensation Program Objectives and Philosophy

We place great importance on our ability to attract, retain, motivate and reward experienced executives who enable us to achieve strong financial and operational performance and sustainable increases in stockholder value. To achieve our objectives, we need a highly talented team comprised of managers and employees experienced in cable programming, broadcast networks, digital or other media. Our named executive officers have extensive experience in each of these and related areas.

We offer both short-term and long-term incentive compensation programs in which overall compensation is tied to key strategic, operational and financial goals such as our Bank Credit OIBDA, subscription revenue and comparative market performance based on advertising revenue.

As we transition from being a privately-held company, we will evaluate our executive compensation programs, including both the design of direct and indirect compensation plans, as well as the magnitude of total compensation opportunities as circumstances require, based on our business objectives and the competitive environment for talent. In doing so, we will maintain an appropriate balance between (1) short-term and long-term compensation, (2) cash and equity-based compensation and (3) awards tied to specific performance objectives versus those tied to continued service. It is our intention to continue our emphasis on pay-for-performance and long-term incentive compensation for our executive officers. We plan to adopt a new equity incentive plan as discussed further below.

 

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Setting Compensation

Role of Compensation Committee

Our executive compensation program is overseen by our compensation committee. Among other responsibilities, the compensation committee (1) directs our executive compensation policies and practices, (2) reviews and determines the compensation of our President and Chief Executive Officer and other executive officers and (3) oversees our executive compensation policies and plans including reviewing, approving and administering compensation plans, policies and programs and determining the size and structure of equity awards.

Role of Compensation Consultant

The compensation committee has the authority to engage outside consultants and advisers to assist in the performance of its duties and responsibilities. The compensation committee did not retain the services of an outside compensation consultant to provide advice with respect to executive compensation programs for 2014. The compensation committee has engaged Frederic W. Cook & Co., Inc. as its independent compensation consultant to assist the compensation committee in designing and establishing compensation programs and determining decisions for 2015 and future periods.

Role of Management

From time to time, our President and Chief Executive Officer, our Chief Financial Officer, our General Counsel and Executive Vice President, Government Relations and our Executive Vice President, Chief Human Resources and Community Empowerment Officer attend meetings of the compensation committee to present information and answer questions. Our President and Chief Executive Officer makes recommendations to the compensation committee regarding compensation for the other named executive officers. Other members of senior management provide support to the compensation committee as needed. No executive officer participated directly in the deliberations or determinations regarding his or her own compensation package.

Reference Book

The compensation committee annually reviews an executive reference book that is provided by our Executive Vice President, Chief Human Resources Officer. The reference book serves to provide a “tally sheet” summary of base salary, bonus and equity awards granted to the named executive officers for the completed fiscal year. The reference book also sets forth individual performance highlights, employment contract details and historical compensation. For 2014, the compensation committee considered the reference book and other internal factors, including experience, skills, position, level of responsibility, historic and current compensation levels, internal relationship of compensation levels between executives, as well as attraction and retention of executive talent to determine appropriate level of compensation. In determining 2014 compensation, the compensation committee did not use a formula for taking into account these different factors and the total compensation for our named executive officers was not determined based on any pre-set or specified percentile of market. Rather, we sought to compensate our executive officers at a level that would allow us to successfully recruit and retain the best possible talent for our executive team at a market-competitive and affordable level of cost that is supported by performance. We rely heavily on the knowledge and experience of the compensation committee in determining the appropriate compensation levels and mix for our executive officers.

Benchmarking

The compensation committee did not undertake any formal benchmarking in 2014. However, from time to time, the compensation committee and our senior management takes into consideration the aggregated survey results from the CTHRA Cable Programmers / Broadcast Networks Compensation Survey, a participant-only compensation survey conducted annually to provide compensation data for positions in television broadcast and

 

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programming. The identity of individual companies comprising the survey data is not disclosed to or considered by, the compensation committee or senior management in its evaluation process. Therefore, the compensation committee does not consider the identity of the companies comprising the survey data to be material for this purpose.

Elements of Compensation

Our executive compensation program consists of three principal elements, each of which is important to our desire to attract, retain, motivate and reward highly-qualified executives and to support our primary objective of aligning pay with performance. The three principal compensation elements are base salary, annual cash incentive bonuses and long-term equity incentives. In addition, each executive officer is also eligible to receive certain benefits, which are generally provided to all other eligible employees, and certain perquisites described below.

The compensation committee reviews our historical compensation and other information provided by senior management and other factors such as experience, performance and length of service to determine the appropriate level and mix of compensation for executive officers, by position and grade level. In support of our pay-for-performance philosophy, a significant percentage of total compensation opportunity is allocated to incentive compensation. To ensure that the executives who are most responsible for developing and executing our short- and long-term strategic plan are held most accountable for the outcome, the portion of total compensation opportunity delivered through variable incentives varies in direct proportion to each executive’s level and role within the organization.

The table below summarizes the current elements of our executive compensation program and what each element is designed to reward:

 

Compensation Element

  

Description

Base Salary

  

•       Fixed level of compensation

 

•       Determined within a competitive range

 

•       Provides minimum level of cash compensation to attract and retain executives

Annual Incentive Bonus   

•       Performance-based cash incentive opportunity

 

•       Motivates executives to achieve specific company and individual performance goals and objectives in each fiscal year

Long-Term Equity Incentive Award (Restricted Stock Units and Stock Options)   

•       Aligns the executive’s interest with long-term stockholder interests

 

•       Variable pay based on increases in our stock price over time

 

•       Motivates executives to achieve long-term objectives

Other Compensation and Benefits   

•       Health and welfare benefits and perquisites provide a cost-efficient manner to attract and retain executives

 

•       401(k) Plan provides an opportunity for tax-efficient savings and long-term financial security

The compensation committee believes that the combination of these elements offers the best approach to achieving our compensation goals, including attracting and retaining talented and capable executive officers and motivating them to expend maximum effort to improve business results, earnings and the overall value of our business.

 

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Base Salaries

The compensation committee is responsible for setting the base salaries of the named executive officers. Base salaries for these executives have been set at levels that are intended to reflect the competitive marketplace in attracting and retaining talented executives. The employment agreements of each of the named executive officers contain a minimum base salary level. For information regarding these minimum base salary levels, please see “—Employment Agreements” below. The compensation committee currently reviews the salaries of the named executive officers on an annual basis and may increase executive salaries. Based on an evaluation of the executive’s performance, experience, grade level and the competitive marketplace, and in accordance with the terms of the employment agreements, the compensation committee, in its discretion, has increased base salaries for the named executive officers typically at 12 to 15 month intervals. The compensation committee reviewed the base salaries of the named executive officers in 2014 and based on its evaluation, increased the annualized base salaries in 2014 over 2013 as follows:

 

Named Executive Officer

   2014 Base Salary      2013 Base Salary  

Randel A. Falco(1)

   $ 1,750,000       $ 1,500,000   

Andrew W. Hobson(2)

   $ 1,333,333       $ 1,250,000   

Jonathan Schwartz(3)

   $ 968,750       $ 950,000   

Roberto Llamas(4)

   $ 712,500       $ 687,500   

Peter H. Lori(5)

   $ 581,799       $ 560,833   

 

(1) Mr. Falco’s base salary increased to $1,750,000 effective as of January 1, 2014.
(2) Mr. Hobson’s base salary increased to $1,350,000 effective as of March 1, 2014.
(3) Mr. Schwartz’s base salary increased to $975,000 effective as of April 1, 2014.
(4) Mr. Llamas’ base salary increased to $725,000 effective as of July 1, 2014.
(5) Mr. Lori’s base salary increased to $585,000 effective as of March 1, 2014.

Annual Incentive Bonus

The compensation committee has the authority to award annual performance bonuses to our named executive officers. We believe that annual bonuses based on performance serve to align the interests of senior management and stockholders, and our annual bonus program is primarily designed to reward increases in Bank Credit OIBDA, subscription revenue and market performance. We consider these to be key measures of our operating performance.

Annual incentive compensation for 2014 for our named executive officers was allocated from a target incentive bonus pool for all of our senior management established in the first fiscal quarter of 2014, 70% of which was based on our Bank Credit OIBDA for the year ended December 31, 2014, 15% of which is based on comparative market performance based on advertising revenue reported by third-party sources and 15% of which is based on the subscription revenue for the year ended December 31, 2014.

Bank Credit OIBDA represents operating income before depreciation, amortization and certain additional adjustments to operating income permitted under our senior secured credit facilities. Management uses Bank Credit OIBDA to evaluate our operating performance, for planning and forecasting future business operations and to measure our ability to service our debt and meet our other cash needs. A reconciliation of Bank Credit OIBDA to net (loss) income attributable to Univision Holdings, Inc., which is the most directly comparable GAAP financial measure, is presented in “Summary—Summary Historical Financial and Other Data.”

 

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For 2014, our target and actual performance across the components used to determine our incentive bonus pool for all of our senior management were as follows:

 

     Target    Actual    % of Target
Earned
 

Performance Components:

        

Bank Credit OIBDA (70%)

   $1,250.0 million    $1,253.8 million      100.3

Comparative market performance based on advertising revenue reported by third-party sources (15%)

   425.0 bps    301.7 bps      71.0

Subscription revenue (15%)

   $691.0 million    $694.0 million      100.4

Incentive Bonus Pool(1)

   $34.0 million    $33.6 million      98.8

 

(1) Our 2014 incentive bonus pool for all of our senior management was subject to an overall cap of $47.7 million. The actual payout of our 2014 incentive compensation pool was $33.6 million.

Individual bonuses are performance based and as such, can be highly variable from year to year. The annual incentive bonuses for our named executive officers are determined by our compensation committee and, except with respect to his own bonus, our President and Chief Executive Officer. The annual incentive award targets for named executive officers are generally based on a percentage of annual base salary. The employment agreement of each named executive officer contains a target bonus level. For information regarding these target bonus levels, please see “—Employment Agreements” below.

The compensation committee currently reviews the target bonus levels of the named executive officers on an annual basis. The compensation committee evaluates each executive’s performance, experience and grade level and may adjust, upward or downward, executive target bonus levels accordingly. While the compensation committee uses each executive’s target bonus as a guideline, the actual bonus paid out under the plan is determined by the compensation committee in a discretionary manner based on its evaluation of the executive’s performance during the year, taking into account the recommendation of our President and Chief Executive Officer (except with respect to his own compensation), based on his annual evaluation of each executive’s performance and contributions during the year.

For 2014, each of our named executive officers earned the following annual incentive award:

 

Named Executive Officer

   2014 Target Bonus      2014 Annual Incentive
Bonus
 

Randel A. Falco(1)

   $ 2,905,000       $ 3,400,000   

Andrew W. Hobson(2)

   $ 1,890,000       $ 1,975,000   

Jonathan Schwartz(3)

   $ 1,384,500       $ 1,385,000   

Roberto Llamas(4)

   $ 725,000       $ 850,000   

Peter H. Lori(5)

   $ 585,000       $ 615,000   

 

(1) Mr. Falco’s 2014 target bonus was 166% of his effective base salary as of January 1, 2014.
(2) Mr. Hobson’s 2014 target bonus was 140% of his effective base salary as of March 1, 2014.
(3) Mr. Schwartz’s 2014 target bonus was 142% of his effective base salary as of April 1, 2014.
(4) Mr. Llamas’ 2014 target bonus was 100% of his effective base salary as of July 1, 2014.
(5) Mr. Lori’s 2014 target bonus was 100% of his effective base salary as of March 1, 2014.

Long-Term Equity Incentive Awards

The named executive officers received awards under our long-term incentive program in 2014, which consisted of time-based vesting nonqualified stock option awards, issued in connection with the settlement of a portion of the restricted stock unit awards granted in 2013. We believe restricted stock units and stock options provide the named executive officers with an incentive to improve our stock price performance and create a direct alignment with stockholders’ interests, as well as a continuing stake in our long-term success.

 

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Restricted Stock Units

We did not grant any restricted stock unit awards to our named executive officers in 2014. We granted restricted stock unit awards in 2013, which vested 25% on July 15, 2014 and will vest 25% on each July 15, 2015, 2016 and 2017 as long as the recipient is continuously employed on the applicable vesting date, provided that all or a portion of a recipient’s award may vest upon termination of employment under certain circumstances. Information regarding restricted stock units granted prior to 2014 for the named executive officers appears in the “Outstanding Equity Awards at December 31, 2014” and “Potential Payments upon Termination or Change in Control” tables below.

Stock Options

Each nonqualified stock option granted to our named executive officers in 2014 was issued in connection with the settlement of a portion of the restricted stock unit awards granted in 2013. Each such nonqualified stock option was granted with respect to the number of shares surrendered to cover such officers’ withholding tax obligations upon net settlement of the vested restricted stock units at an exercise price no less than the fair market value of the shares of common stock underlying such option on the grant date of such option. This grant of nonqualified stock options enabled the named executive officers to maintain their percentage ownership in us in connection with the net settlement of their restricted stock units. Such nonqualified stock options vest over three years, at a rate of 33.3% per year, beginning on July 15, 2015. Nonqualified stock options granted in 2014 fully vest upon a liquidity event (including a change of control or the commencement of this offering) or termination of employment under certain circumstances. Information regarding nonqualified stock options granted for the named executive officers is set forth under “2014 Summary Compensation Table” and “2014 Grants of Plan Based Awards” below. More information regarding nonqualified stock option granted during and prior to 2014 for the named executive officers appears in the “Outstanding Equity Awards at December 31, 2014” and “Potential Payments upon Termination or Change in Control” tables below.

In 2014, our compensation committee made grants of stock options to our named executive officers in the following amounts:

 

Named Executive Officer

   2014 Option Award(1)  

Randel A. Falco

   $ 699,974   

Andrew W. Hobson

   $ 280,312   

Jonathan Schwartz

   $   

Roberto Llamas

   $ 82,496   

Peter H. Lori

   $ 86,599   

 

(1) Amounts shown in the column “2014 Option Awards” presents the aggregate grant date fair value of option awards granted in the fiscal year in accordance with ASC 718, Compensation—Stock Compensation. The estimated grant date fair value was based on a valuation of $264.40 per share. For a description of the assumptions used in calculating the fair value of equity awards in 2014 under ASC 718, see Notes 1 and 15 to our audited consolidated financial statements for the year ended December 31, 2014 included elsewhere in this prospectus. These amounts reflect our cumulative accounting expense over the vesting period and do not correspond to the actual values that were to be realized by the named executive officers. The estimated fair value of our stock was based on a valuation made by an independent third-party that took into consideration the lack of control and limited marketability of the securities.

Other Compensation and Benefits

Health and Welfare Benefits

The named executive officers are eligible to participate in the same health and welfare benefit plans made available to the other benefits-eligible employees, including, for example, medical, dental, vision, life insurance

 

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and disability coverage. In addition to the standard life insurance available to all employees (based on a multiple of base salary, up to a $4.0 million cap on the total amount of life insurance), in 2014, we provided Mr. Hobson with term life insurance coverage in an amount of $3.0 million and long-term disability benefits of $561,000 per year and in 2015 and future periods, will provide Mr. Falco with term life insurance coverage in an amount of $3.0 million and long-term disability benefits of $561,000 per year. The expected death benefits are expected to grow over time to the extent that the dividends payable on the policy values exceed the premiums required to fund the death benefit. Information regarding premiums paid by us are set forth in the “2014 Summary Compensation Table” below.

Perquisites

We provide perquisites to certain executive officers, which may include financial and tax services, commuting expenses, automobile allowance, de minimis holiday gifts and reimbursement for annual physical examinations. The aggregate value of perquisites received by the named executive officers is set forth in the “2014 Summary Compensation Table” below.

401(k) Plan

Under the Univision Savings Tax Advantage Retirement Plan (the “401(k) Plan”), a tax-qualified retirement savings plan, participating employees, including executive officers, may contribute into their plan accounts a percentage of their eligible pay on a before-tax basis as well as a percentage of their eligible pay on an after-tax basis. In 2014, we made a matching contribution of $0.50 for each $1.00 for the first 3% of eligible pay contributed by participating employees and, in 2015, will continue to make matching contributions of $0.50 for each $1.00 for the first 3% of eligible pay contributed (up to a cap of $3,975 per participating employee). Our matching contributions are not subject to vesting limitations. Matching contributions made by us under the 401(k) Plan to the named executive officers in 2014 are set forth in the “2014 Summary Compensation Table” below.

Post-Termination Compensation

Our executives have helped build us into the successful enterprise that we are today and we believe that post-termination benefits are integral to our ability to attract and retain talented executives.

Under certain circumstances, payments or other benefits may be provided to employees upon the termination of their employment with us. The amount and type of any payment or benefit will depend upon the circumstances of the termination of employment. These may include termination by us without “cause,” termination by the employee for “good reason,” voluntary resignation by the employee without “good reason,” death, disability, or termination following a change in control. The definitions of “cause” and “good reason” vary among the different employment agreements with the named executive officers and the equity award agreements.

For a description and quantification of the severance and other benefits payable to each of the named executive officers and accelerated equity award vesting under the different circumstances of termination, please see “Potential Payments Upon Termination or Change in Change in Control” below.

Employment Agreements

We have written employment agreements with our current named executive officers and had an employment agreement with Mr. Hobson, who resigned effective February 13, 2015. For a description of the terms and provisions of the employment agreements, see “—Employment Agreements” below.

 

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Parachute Tax Gross-Up

If the Company’s stock is readily tradable on an established securities market or otherwise for purposes of Section 280G of the Code, Mr. Falco is entitled to tax gross-up payments in the event that any payment or benefit to such individual would be an “excess parachute payment” as defined in Section 280G of the Code and subject to the excise tax imposed by Section 4999 of the Code, as well as indemnification by the Company for any interest, penalties or additions to tax payable by the executive as a result of the imposition of such excise tax or gross-up payment.

Tax Deductibility of Compensation

Section 162(m) of the Code generally disallows publicly held companies a tax deduction for compensation in excess of $1 million paid to their chief executive officer and the next three most highly compensated executive officers (other than the chief financial officer) unless such compensation qualifies for an exemption for certain compensation that is based on performance. Section 162(m) of the Code provides transition relief for privately held companies that become publicly held, pursuant to which the foregoing deduction limit does not apply to any remuneration paid pursuant to compensation plans or agreements in existence during the period in which the corporation was not publicly held if, in connection with an initial public offering, the prospectus accompanying the initial public offering discloses information concerning those plans or agreements that satisfies all applicable securities laws then in effect. If the transition requirements are met in connection with an initial public offering, the transition relief continues until the earliest of (i) the expiration of the plan or agreement, (ii) the material modification of the plan or agreement, (iii) the issuance of all employer stock and other compensation that has been allocated under the plan or (iv) the first meeting of the stockholders at which directors are to be elected that occurs after the close of the third calendar year following the calendar year in which the initial public offering occurs. Our intent generally is to design and administer executive compensation programs in a manner that will preserve the deductibility of compensation paid to our executive officers, and we believe that a substantial portion of our current executive compensation program will satisfy the requirements for exemption from the $1 million deduction limitation, to the extent applicable. However, we reserve the right to design programs that recognize a full range of performance criteria important to our success, even where the compensation paid under such programs may not be deductible. The compensation committee will monitor the tax and other consequences of our executive compensation program as part of its primary objective of ensuring that compensation paid to our executive officers is reasonable, performance based and consistent with our goals and the goals of our stockholders.

 

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2014 Summary Compensation Table

The following table sets forth certain information with respect to compensation earned by our named executive officers for the year ended December 31, 2014.

 

Name and Principal Position

  Year     Salary
($)
    Bonus
($)
    Stock
Awards

($)
    Option
Awards

($)(1)
    Non-Equity
Incentive Plan
Compensation

($)(2)
    Changes in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings

($)
    All Other
Compensation

($)(3)
    Total
($)
 

Randel A. Falco

    2014        1,750,000                      699,974        3,000,000               97,694        5,547,668   

President and Chief Executive Officer

                 

Andrew W. Hobson

    2014        1,333,333                      280,312        1,650,000               39,136        3,302,781   

former Senior Executive Vice President and Chief Financial Officer(4)

                 

Jonathan Schwartz

    2014        968,750                             1,350,000               4,388        2,323,138   

Executive Vice President, General Counsel and Secretary

                 

Roberto Llamas

    2014        712,500                      82,496        950,000               1,885        1,746,881   

Executive Vice President, Chief Human Resources and Community Empowerment

                 

Peter H. Lori

    2014        581,799                      86,599        700,000               4,391        1,372,789   

Executive Vice President, Deputy Chief Financial Officer and Chief Accounting Officer

                 

 

(1) Amounts shown in the column “Option Awards” presents the aggregate grant date fair value of option awards granted in the fiscal year in accordance with ASC 718, Compensation—Stock Compensation. The estimated grant date fair value was based on a valuation of $264.40 per share. For a description of the assumptions used in calculating the fair value of equity awards in 2014 under ASC 718, see Notes 1 and 15 to our audited consolidated financial statements for the year ended December 31, 2014 included elsewhere in this prospectus. These amounts reflect our cumulative accounting expense over the vesting period and do not correspond to the actual values that were to be realized by the named executive officers. The estimated fair value of our stock was based on a valuation made by an independent third-party that took into consideration the lack of control and limited marketability of the securities.
(2) Reflects performance bonuses awarded under our annual incentive plan. See “—Elements of Compensation—Annual Incentive Bonus.”
(3) Reflects contributions to the 401(k) Plans, premiums paid for life insurance, reimbursed commuting expenses, reimbursed automobile allowances and de minimis holiday gifts, as set forth in the below table.

 

Name

   Contributions
to 401(k) Plan
     Premiums
Paid for Life
Insurance
     Commuting
Expenses
     Automobile
Allowance
     Holiday Gifts  

Randel A. Falco

   $       $       $ 96,794       $       $ 901   

Andrew W. Hobson

     3,900         16,440         11,108         7,200         488   

Jonathan Schwartz

     3,900                                 488   

Roberto Llamas

                                     1,885   

Peter H. Lori

     3,900                                 491   

 

(4) Mr. Hobson resigned as Senior Executive Vice President and Chief Financial Officer effective February 13, 2015. Peter H. Lori, who held the position of Executive Vice President-Finance and Chief Accounting Officer since January 2010, also served as Interim Chief Financial Officer from February 13, 2015 until May 6, 2015. See “—Management.”

 

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2014 Grants of Plan-Based Awards

The following table summarizes plan-based awards granted to our named executive officers for the year ended December 31, 2014.

 

              Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
    All Other
Option
Awards:
Number
Securities
Underlying
Options(1)
    Exercise
or Base
Price of
Option
Awards
    Grant
Date Fair
Value of
Stock and
Option
Awards(2)
 

Name

 

Award

  Grant
Date
    Threshold
($)
    Target
($)
    Maximum
(#)
    (#)     ($/Sh)     ($)  

Randel A. Falco

  Non-Equity Incentive Award                   3,400,000                               
  Stock Option Grant     12/12/14                             4,777        264.40        699,974   

Andrew W. Hobson

  Non-Equity Incentive Award                   1,975,000                               
  Stock Option Grant     12/12/14                             1,913        264.40        280,312   

Jonathan Schwartz

  Non-Equity Incentive Award                   1,385,000                               

Roberto Llamas

  Non-Equity Incentive Award                   950,000                               
  Stock Option Grant     12/12/14                             563        264.40        82,496   

Peter H. Lori

  Non-Equity Incentive Award                   700,000                               
  Stock Option Grant     12/12/14                             591        264.40        86,599   

 

(1) Nonqualified stock options granted in 2014 vest over three years, at a rate of 33.3% per year, beginning on July 15, 2015.
(2) Amounts shown in the column “Grant Date Fair Value of Stock and Option Awards” presents the aggregate grant date fair value of option awards granted in the fiscal year in accordance with ASC 718, Compensation—Stock Compensation. The estimated grant date fair value was based on a valuation of $264.40 per share. For a description of the assumptions used in calculating the fair value of equity awards in 2014 under ASC 718, see Notes 1 and 15 to our audited consolidated financial statements for the year ended December 31, 2014 included elsewhere in this prospectus. These amounts reflect our cumulative accounting expense over the vesting period and do not correspond to the actual values that were to be realized by the named executive officers. The estimated fair value of our stock was based on a valuation made by an independent third-party that took into consideration the lack of control and limited marketability of the securities.

 

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Outstanding Equity Awards at December 31, 2014

The following table sets forth certain information with respect to outstanding equity awards held by our named executive officers at December 31, 2014.

 

    Option Awards     Stock Awards  

Name

  Grant
Date
    Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable(1)
    Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
    Option
Exercise
Price
($)
    Option
Expiration
Date
    Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#)(2)
    Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested(3)
    Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
    Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested ($)
 

Randel A. Falco

    1/17/11        15,968        10,645               197.95        1/17/21                               
    1/17/11        9,463        6,308               395.90        1/17/21                               
    10/24/11        7,984        5,323               197.95        9/15/21                               
    10/24/11        4,731        3,154               395.90        9/15/21                               
    12/12/14               4,777               264.40        12/12/19                               
    9/18/13                                           30,000        11,408,400                 

Andrew W. Hobson

    4/29/11        6,358                      306.67        4/29/21                               
    4/29/11        27,550                      494.88        4/29/21                               
    4/29/11        2,119                      593.85        4/29/21                               
    12/12/14               1,913               264.40        12/12/19                               
    9/18/13                                           12,750        4,848,570                 

Jonathan Schwartz

    12/1/12        6,353        9,980               197.95        12/1/22                               
    12/1/12        3,943        5,914               395.90        12/1/22                               

Roberto Llamas

    3/31/11        5,988        3,992               197.95        3/31/21                               
    3/31/11        3,548        2,366               395.90        3/31/21                               
    12/12/14               563               264.40        12/12/19                               
    9/18/13                                           3,750        1,426,050                 

Peter H. Lori

    1/3/11        6,653                      197.95        1/3/21                               
    1/3/11        3,948                      395.90        1/3/21                               
    12/12/14               591               264.40        12/12/19                               
    9/18/13                                           3,938        1,497,353                 

 

(1) Nonqualified stock options granted to Mr. Falco in January 2011, to Mr. Schwartz in 2012 and to Mr. Llamas in 2011 vest over five years, at a rate of 20% per year, beginning on the first anniversary of their grant date. Nonqualified stock options granted to Mr. Falco in October 2011 vest over five years, at a rate of 20% per year, beginning on January 17, 2011. Nonqualified stock options granted in 2014 vest over three years, at a rate of 33.3% per year, beginning on July 15, 2015. All of the nonqualified stock options granted in 2014 fully vest upon a liquidity event (including a change of control or commencement of this offering). More information regarding accelerated stock option vesting appears in the “Potential Payments upon Termination or Change in Control” table below. Nonqualified stock options granted to Mr. Hobson and Mr. Lori in 2011 were fully vested as of December 31, 2014.
(2) Restricted stock units awarded in 2013 vest over four years at a rate of 25% per year, beginning on July 15, 2014. Information regarding accelerated stock award vesting appears in the “Potential Payments upon Termination or Change in Control” table below.
(3) Reflects an estimated fair value of our stock of $380.28 per share based on a subsequent valuation as of December 31, 2014 made by an independent third-party that took into consideration the lack of control and limited marketability of the securities.

 

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Options Exercised and Stock Vested in 2014

The following table sets forth certain information with respect to restricted stock unit awards vested by our named executive officers in fiscal year 2014. None of our named executive officers exercised stock options during 2014.

 

     Stock Awards  

Name

   Number of Shares
Acquired on
Vesting (#)
     Value Realized
on Vesting
($)(1)
 

Randel A. Falco

     10,000         2,644,000   

Andrew W. Hobson

     4,250         1,123,700   

Jonathan Schwartz

               

Roberto Llamas

     1,250         330,500   

Peter H. Lori

     1,313         347,025   

 

(1) Reflects an estimated fair value of our stock of $264.40 per share based on a valuation made by an independent third-party that took into consideration the lack of control and limited marketability of the securities.

Pension Benefits

Our named executive officers did not participate in any defined benefit pension plan during 2014.

Nonqualified Deferred Compensation

Our named executive officers did not receive nonqualified deferred compensation and had no deferred compensation benefits during 2014.

Employment Agreements

Randel A. Falco

We entered into an employment agreement with Mr. Falco on January 14, 2011, which was amended effective as of June 29, 2011, and then again effective as of February 19, 2014. Mr. Falco’s contract period continues until January 31, 2018 and automatically renews thereafter on an annual basis, unless he is terminated by certain agreed upon terms or either we or Mr. Falco provide notice of nonrenewal at least six months prior to the end of the then current term. The agreement provides that Mr. Falco will receive an initial annualized base salary of $1,750,000. Mr. Falco’s annual base salary will be reviewed annually (but will not be decreased) by the board of directors with respect to any term of employment under the agreement following the initial term ending January 31, 2018. The agreement also provides that Mr. Falco is eligible for an annual cash performance bonus with an annual target of 166% of his annual base salary, subject to satisfaction of performance and other criteria (including discretionary components in accordance with our practices) established and approved by the compensation committee. Pursuant to the agreement, Mr. Falco is also eligible for consideration for equity grants, including an initial grant of a nonqualified stock option.

If we terminate Mr. Falco’s employment without “cause,” Mr. Falco resigns for “good reason,” or if we elect not to renew the then-current employment term under the terms of the employment agreement, then, in addition to any accrued but unpaid base salary, we must provide Mr. Falco with, subject to his execution of a release of claims and his continued compliance with the restrictive covenants under his employment agreement, (i) an amount equal to the sum of 24 months’ base salary and his annual target bonus for the fiscal year of termination, payable in substantially equal installments over 24 months, (ii) any earned but unpaid annual bonus with respect to a prior fiscal year, (iii) a pro-rata portion of his annual target bonus for the fiscal year of termination (determined by multiplying the amount of such annual target bonus which would be due for the full

 

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fiscal year by a fraction, the numerator of which is the number of days in such fiscal year through the date of termination and the denominator of which is 365), (iv) two years of continued life insurance coverage (ceasing earlier if Mr. Falco becomes eligible for life insurance with a subsequent employer), (v) monthly cash payments for a period of two years (ceasing earlier if Mr. Falco becomes eligible for medical coverage from a subsequent employer) equal to the monthly amount, grossed-up for taxes, of the COBRA continuation coverage premiums due under our group medical plans for Mr. Falco and his eligible dependents less an amount equal to the portion of the premium Mr. Falco would have paid were he an active employee, and (vi) any other amounts or benefits due executive in accordance with our benefit plans, programs or policies (other than severance). Mr. Falco shall also be entitled to treatment of his equity awards as provided in the applicable equity plan or award agreement. Upon termination due to death or disability, in addition to any accrued but unpaid base salary, we must provide Mr. Falco (or his estate) with (ii), (iii) and (vi) above.

For purposes of the termination provisions described above, “good reason” means, without the executive’s written consent, any of the following, provided, that the executive provides notice to the board of directors within 90 days of executive’s knowledge of the specific facts and circumstances constituting “good reason” stating such specific facts and circumstances and we are provided a reasonable opportunity to cure such circumstances (if curable) within 30 days of receipt of such notice and, if not cured, executive’s employment shall terminate for good reason on the day following expiration of such 30-day cure period:

 

    a failure of executive to hold the title of President and Chief Executive Officer other than by reason of the executive’s termination of employment;

 

    a significant diminution of the executive’s duties in executive’s role as President and Chief Executive Officer;

 

    any change in the reporting structure so that executive reports to someone other than the board;

 

    any willful, material breach of any material obligation of us to the executive under the executive’s employment agreement or any equity agreements;

 

    failure of a successor to all or substantially all of our assets to assume the employment contract; and

 

    any requirement that the executive relocate his principal place of employment from the New York, NY metropolitan area.

For purposes of the termination provisions described above, “cause” means any of the following, provided that the board of directors has provided notice to the executive, within 90 days of obtaining knowledge of specific facts and circumstances constituting “cause”, stating such specific facts and circumstances and executive is provided a reasonable opportunity to cure such circumstances (if curable) within 90 days after any such notice:

 

    executive’s willful failure to perform executive’s services under the executive’s employment agreement in any material way or willful, material breach of fiduciary duty;

 

    executive’s conviction of (or pleading guilty to or nolo contendere in respect of) a felony (other than driving while intoxicated) or any lesser, willful, material offense involving dishonesty, moral turpitude or our or our affiliates’ property; and

 

    material willful misconduct or willful material breach by executive of any of the provisions of the executive’s employment agreement.

Andrew W. Hobson

We entered into an employment agreement with Mr. Hobson as of December 30, 2008, which was amended effective as of April 29, 2011, and then again effective as of October 16, 2014. The agreement provides that Mr. Hobson will receive an initial annualized base salary of $1,350,000 effective as of March 1, 2014. Mr. Hobson’s annual base salary will be reviewed annually by the board of directors and may be increased (but will not decrease). The agreement also provides that Mr. Hobson is eligible for an annual cash performance

 

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bonus with an annual target of 140% of his annual base salary, subject to performance goals established by the board of directors in good faith. Pursuant to the agreement, Mr. Hobson was also eligible for consideration for equity grants, including an initial grant of a nonqualified stock option.

Mr. Hobson resigned effective February 13, 2015. The Company and Mr. Hobson are currently discussing the terms of Mr. Hobson’s separation.

Jonathan Schwartz

We entered into an employment agreement with Mr. Schwartz on November 13, 2012. Mr. Schwartz’s contract provides for an initial term through December 31, 2015 and automatically renews thereafter on an annual basis unless either party provides six months’ notice that the term of employment will not be extended. The agreement provides that Mr. Schwartz will receive an annualized base salary of $950,000, subject to annual review by our President and Chief Executive Officer and compensation committee, who have discretion to increase (but not decrease) the base salary level then in effect. The agreement also provides that Mr. Schwartz is eligible for an annual cash performance bonus with a target of 142% of his annual base salary, subject to satisfaction of performance and other criteria (including discretionary components in accordance with our practices) established and approved by the President and Chief Executive Officer and compensation committee who have discretion to increase (but not decrease) the target. Pursuant to the agreement, Mr. Schwartz is also eligible for consideration for equity grants, including an initial grant of a nonqualified stock option.

If we terminate Mr. Schwartz’s employment without “cause” or Mr. Schwartz resigns for “good reason,” then, in addition to any accrued but unpaid base salary, we must provide Mr. Schwartz with, subject to his execution of a release of claims and his continued compliance with the restrictive covenants under his employment agreement, (i) an amount equal to his annual base salary, (ii) any earned but unpaid annual bonus with respect to a prior fiscal year, (iii) (a) within 30 days of termination, a 70% pro-rata portion of his annual target bonus for the fiscal year of termination (determined by multiplying the amount of such annual target bonus which would be due for the full fiscal year by a fraction, the numerator of which is the number of days in such fiscal year through the date of termination and the denominator of which is 365) and (b) at such time as bonuses are determined and paid to other executives, the remaining pro-rata portion of his annual target bonus (which portion may be reduced to be consistent with the percentage of the target bonus paid to other executives) and (iv) monthly cash payments for a period of one year (ceasing earlier if Mr. Schwartz becomes eligible for medical coverage from a subsequent employer) equal to the monthly amount of the COBRA continuation coverage premiums due under our group medical plans for Mr. Schwartz and his eligible dependents less an amount equal to the portion of the premium Mr. Schwartz would have paid were he an active employee. Mr. Schwartz shall also be entitled to treatment of his equity awards as provided in the applicable equity plan or award agreement. Upon termination due to death or disability, in addition to any accrued but unpaid base salary, we must provide Mr. Schwartz (or his estate) with (ii), (iii) and (iv) above.

For purposes of the termination provisions described above, “good reason” means, without the executive’s written consent, any of the following, provided, that the executive provides notice to us within 90 days of executive’s knowledge of the specific facts and circumstances constituting “good reason” stating such specific facts and circumstances and we are provided a reasonable opportunity to cure such circumstances (if curable) within 30 days of receipt of such notice and, if not cured, executive terminates his employment no later than six months after the initial occurrence of such facts and circumstances:

 

    any material reduction in the executive’s duties, responsibilities or authorities;

 

    no longer reporting to the President and Chief Executive Officer;

 

    an adverse change in title;

 

    a relocation of the executive’s primary office location at least 50 miles farther from both executive’s then primary office location and the executive’s then primary residence; and

 

    a material breach by us of the executive’s employment or other agreements.

 

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For purposes of the termination provisions described above, “cause” means any of the following:

 

    willful misconduct in connection with the performance of the executive’s duties;

 

    gross negligence that is materially damaging to us;

 

    theft, fraud or other illegal conduct in connection with the performance of the executive’s duties;

 

    willful refusal or unwillingness to perform material duties;

 

    sexual or other unlawful harassment in connection with the performance of the executive’s duties;

 

    conviction (or pleading guilty to or nolo contendere) of a felony or a crime involving moral turpitude;

 

    material violation of a fiduciary duty or of the duty of loyalty; and

 

    material breach of the executive’s employment agreement, which is not cured within twenty days of written notice.

Francisco J. Lopez-Balboa

We entered into an amended and restated employment agreement with Mr. Lopez-Balboa on June 30, 2015. Mr. Lopez-Balboa’s contract period continues until May 31, 2018 and automatically renews thereafter on an annual basis until May 31, 2020, unless he is terminated by certain agreed upon terms or either we or Mr. Lopez-Balboa provide notice of nonrenewal at least six months prior to the end of the then current term. The agreement provides that Mr. Lopez-Balboa will receive an initial annualized base salary of $1,000,000. Mr. Lopez-Balboa’s annual base salary will be reviewed annually (but will not decrease, except in the event of an across-the-board proportionate reduction applicable to substantially all senior executives of the Company) by the board of directors. The agreement also provides that Mr. Lopez-Balboa is eligible for an annual cash performance bonus with an annual target of 100% of his annual base salary, subject to satisfaction of performance goals established and approved by the compensation committee in consultation with the Chief Executive Officer. Pursuant to the agreement, Mr. Lopez-Balboa is also eligible for consideration for equity grants. In connection with the consummation of Mr. Lopez-Balboa’s employment, Mr. Lopez-Balboa was granted nonqualified stock options to purchase 13,755 shares of our Class A common stock with an exercise price of $592 per share and 3,000 restricted stock units each of which vest in substantially equal installments on the first three anniversaries of the dates of grant. Such options were subsequently cancelled and, at the time of this offering, we intend to grant new options to purchase shares of our Class A common stock (and/or such other form of equity incentive award) with a value at the time of this offering equal to $5,272,000 reduced by the product of (i) the number of shares of our Class A common stock covered by Mr. Lopez-Balboa’s restricted stock units described above and (ii) the offering price of the Class A common stock issued in this offering.

If we terminate Mr. Lopez-Balboa’s employment without “cause” or Mr. Lopez-Balboa resigns for “good reason,” then, in addition to any accrued but unpaid base salary, we must provide Mr. Lopez-Balboa with, subject to his execution of a release of claims and his continued compliance with the restrictive covenants under his employment agreement, (i) an amount equal to the sum of 12 months’ base salary and his annual target bonus for the fiscal year of termination, payable in substantially equal installments over 12 months, (ii) any earned but unpaid annual bonus with respect to a prior fiscal year, (iii) a pro-rata portion of his annual bonus for the fiscal year of termination based on actual corporate results for such year (determined by multiplying the amount of such annual bonus which would be due for the full fiscal year if Mr. Lopez-Balboa had been continually employed for the full fiscal year by a fraction, the numerator of which is the number of days in such fiscal year through the date of termination and the denominator of which is 365), (iv) monthly cash payments equal to the monthly amount of the COBRA continuation coverage premiums due under the Company’s group medical plans for Mr. Lopez-Balboa less an amount equal to the portion of the premium Mr. Lopez-Balboa would have paid

 

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were he an active employee until the earliest of (x) 18 months after the date of termination of employment, (y) the date Mr. Lopez-Balboa obtains other employment that offers medical benefits for which he is then eligible and (z) the date Mr. Lopez-Balboa ceases to be eligible for COBRA coverage, and (v) any other amounts or benefits due executive in accordance with the Company’s benefit plans, programs or policies (other than severance). Mr. Lopez-Balboa shall also be entitled to treatment of his equity awards as provided in the applicable equity plan or award agreement. Upon termination due to death or disability, in addition to any accrued but unpaid base salary, we must provide Mr. Lopez-Balboa (or his estate) with (ii), (iii), (iv) and (v) above.

For purposes of the termination provisions described above, “good reason” means, without the executive’s written consent, any of the following, provided, that the executive provides notice to the Company within 60 days of the initial occurrence of such Good Reason event stating the specific facts and circumstances constituting “good reason” and the Company is provided a reasonable opportunity to cure such circumstances (if curable) within 30 days of receipt of such notice and, if not cured, executive’s employment shall terminate for Good Reason on the day following expiration of such 30-day cure period:

 

    any significant diminution in the executive’s responsibilities, authorities or duties, or reporting lines;

 

    any material reduction in executive’s salary or target bonus opportunity percentage of base salary;

 

    a relocation of executive’s office by more than fifty (50) miles from its then location; or

 

    any material breach by the Company of the employment agreement.

For purposes of the termination provisions described above, “cause” means any of the following:

 

    willful failure to perform duties or to follow the lawful direction of the Chief Executive Officer, which is not cured, if curable, within ten (10) days of written notice thereof;

 

    indictment for, conviction of (or pleading guilty or nolo contendere in respect of) a felony or any lesser offense involving dishonesty, fraud or moral turpitude;

 

    willful misconduct or material breach of the Company’s Code of Conduct or similar written policies, with regard to the Company, any of its affiliates, or any employees, officers or directors thereof, including theft, fraud, dishonesty or breach of fiduciary duty;

 

    willful misconduct unrelated to the Company or its affiliates having, or likely to have, a material negative impact on the Company (economically or reputation-wise) in the good faith opinion of the Chief Executive Officer;

 

    material breach of any of the provisions of the employment agreement which (if curable) is not cured within ten (10) days of written notice; or

 

    misrepresentation that the execution of the employment agreement and the performance of the duties thereunder do not constitute a breach of any terms of any other agreement to which the executive is a party.

Roberto Llamas

We entered into an employment agreement with Mr. Llamas effective on October 1, 2013. Mr. Llamas’s contract provides for an initial term through July 31, 2016. The agreement provides that Mr. Llamas will receive an annualized base salary of $700,000, subject to annual review by our President and Chief Executive Officer and compensation committee, who have discretion to increase the base salary level then in effect. The agreement also provides that Mr. Llamas is eligible for an annual cash performance bonus with a target of 100% of his annual base salary, subject to the satisfaction of individual and our performance as determined by the President and Chief Executive Officer and compensation committee.

If we terminate Mr. Llamas’s employment without “cause” then, in addition to any accrued but unpaid base salary, we must provide Mr. Llamas with, subject to his execution of a release of claims and his continued

 

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compliance with the restrictive covenants under his employment agreement, (i) an amount equal to his annual base salary (or less if Mr. Llamas finds alternative employment within one year of his termination and we elect to waive the restrictive non-competition covenants under his employment agreement) and (ii) an amount equal the pro-rata portion of Mr. Llamas’s annual bonus for the fiscal year in which his termination occurs based on actual results (determined by multiplying the amount of such annual bonus which would be due for the full fiscal year by a fraction, the numerator of which is the number of days in such fiscal year through the date of termination and the denominator of which is 365).

For purposes of the termination provisions described above, “cause” includes any of the following:

 

    habitual neglect of the duties that executive is required to perform;

 

    willful misconduct or gross negligence;

 

    theft, fraud or other illegal conduct;

 

    refusal or unwillingness to perform duties;

 

    failure to perform all his duties and obligations in a manner that is satisfactory to us;

 

    sexual or other unlawful harassment;

 

    conduct that reflects adversely upon us, any of our affiliates, or any of our or our affiliates’ officers, directors or boards, including, making disparaging remarks;

 

    arrest for or conviction of a crime involving moral turpitude;

 

    insubordination;

 

    any willful act that is likely to or does in fact have the effect of injuring the reputation of the executive or the reputation, business, or a business relationship of ours, any of our affiliates, or any of our or our affiliates’ officers, directors or boards;

 

    violation of any fiduciary duty;

 

    violation of any duty of loyalty; or

 

    breach of the executive’s employment agreement.

Peter H. Lori

We entered into an employment agreement with Mr. Lori effective on March 1, 2014. Mr. Lori’s contract provides for an initial term through January 1, 2017. The agreement provides that Mr. Lori will receive an annualized base salary of $585,000, subject to annual review by our President and Chief Executive Officer and compensation committee, who have discretion to increase the base salary level then in effect. The agreement also provides that Mr. Lori is eligible for an annual cash performance bonus with a target of 100% of his annual base salary, subject to the satisfaction of individual and our performance as determined by the President and Chief Executive Officer and compensation committee.

If we terminate Mr. Lori’s employment without “cause” then, in addition to any accrued but unpaid base salary, we must provide Mr. Lori with, subject to his execution of a release of claims and his continued compliance with the restrictive covenants under his employment agreement, an amount equal to his annual base salary (or less if Mr. Lori finds alternative employment within one year of his termination and we elect to waive the restrictive non-competition covenants under his employment agreement). If such termination of employment occurs within 12 months following a “change of control” (as defined in the employment agreement), we must provide Mr. Lori with double the amount that would be payable upon a termination without “cause”.

For purposes of the termination provisions described above, “cause” includes any of the following:

 

    habitual neglect of the duties that executive is required to perform;

 

    willful misconduct or gross negligence;

 

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    theft, fraud or other illegal conduct;

 

    refusal or unwillingness to perform duties;

 

    failure to perform all his duties and obligations in a manner that is satisfactory to us;

 

    sexual or other unlawful harassment;

 

    conduct that reflects adversely upon us, any of our affiliates, or any of our or our affiliates’ officers, directors or boards, including, making disparaging remarks;

 

    arrest for or conviction of a crime involving moral turpitude;

 

    insubordination;

 

    any willful act that is likely to or does in fact have the effect of injuring the reputation of the executive or the reputation, business, or a business relationship of ours, any of our affiliates, or any of our or our affiliates’ officers, directors or boards;

 

    violation of any fiduciary duty;

 

    violation of any duty of loyalty; or

 

    breach of the executive’s employment agreement.

Potential Payments upon Termination or Change in Control

The information below describes and quantifies certain compensation that would become payable under our executive compensation programs and each named executive officer’s employment contract if his employment had terminated on December 31, 2014.

Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be different. Factors that could affect these amounts include the timing during the year of any such event.

The Company and Mr. Hobson are currently discussing the terms of Mr. Hobson’s separation. The following table summarizes the potential payments to our other named executive officers assuming that such events occurred as of December 31, 2014.

 

Name

  Severance
Amounts

($)
    Pro-rata
Non-Equity
Incentive
Award

($)
    Continued
Health and
Welfare
Benefits

($)
    Accelerated
Stock Option
Vesting

($)(1)
    Accelerated
Stock
Award
Vesting

($)(1)
    Total
($)
 

Randel A. Falco

           

Termination for cause or without good reason

                                         

Termination without cause or with good reason

    6,405,000        2,905,000        103,163        7,768,667 (2)(3)      5,563,548 (7)      22,745,378   

Death or disability

           2,905,000               7,768,667 (2)(3)      5,563,548 (7)      16,237,215   

Termination following change of control

    6,405,000        2,905,000        103,163        7,832,172 (2)(4)      11,408,400 (8)      28,653,735   

Jonathan Schwartz

           

Termination for cause or without good reason

                                         

Termination without cause or with good reason

    975,000        1,384,500        13,118                      2,372,618   

Death or disability

           1,384,500        13,118        2,011,365 (5)             3,408,983   

Termination following change of control

    975,000        1,384,500        13,118        4,829,922 (6)             7,202,540   

Roberto Llamas

           

Termination for cause or without good reason

                                         

Termination without cause or with good reason

    725,000        725,000               65,240 (2)             1,515,240   

Death or disability

                         1,432,224 (2)(5)      220,094 (9)      1,652,317   

Termination following change of control

    725,000        725,000               1,884,894 (2)(6)      1,426,050 (10)      4,760,944   

Peter H. Lori

           

Termination for cause or without good reason

                                         

Termination without cause or with good reason

    585,000                      68,485 (2)             653,485   

Death or disability

                         68,485 (2)      231,098 (9)      299,583   

Termination following change of control

    1,170,000                      65,485 (2)      1,497,353 (10)      2,735,838   

 

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(1) Reflects an estimated fair value of our stock of $380.28 per share based on a subsequent valuation as of December 31, 2014 made by an independent third-party that took into consideration the lack of control and limited marketability of the securities. Amounts shown in the column “Accelerated Stock Option Vesting” present the intrinsic value of accelerated stock options based on such estimated fair value per share of our stock.
(2) Nonqualified stock options granted in 2014 fully vest upon a liquidity event (including a change of control or the commencement of this offering) or upon termination by us without cause, by an executive for good reason or due to death or disability.
(3) Nonqualified stock options granted in 2011 to Mr. Falco vest pro rata, plus an additional 12 months of service credit, upon termination by us without cause, resignation by Mr. Falco for good reason or due to death or disability.
(4) Nonqualified stock options granted in 2011 to Mr. Falco fully vest upon termination by us without cause or if Mr. Falco resigns for good reason, in each case within 180 days prior to a change of control, or upon termination by us without cause, resignation by Mr. Falco for good reason or upon death or disability, in each case anytime following a change of control.
(5) Nonqualified stock options granted in 2011 to Mr. Llamas and in 2012 to Mr. Schwartz vest pro rata upon termination due to their respective death or disability.
(6) Nonqualified stock options granted in 2011 to Mr. Llamas and in 2012 to Mr. Schwartz fully vest upon termination by us without cause or resignation by an executive for good reason within two years following a change of control.
(7) Restricted stock units granted in 2013 to Mr. Falco vest pro rata, plus an additional 12 months of service credit, upon termination by us without cause, by Mr. Falco for good reason or due to death or disability.
(8) Restricted stock units granted in 2013 to Mr. Falco fully vest upon termination by us without cause or if Mr. Falco resigns for good reason, in each case within 180 days prior to a change of control, or upon termination by us without cause, resignation by Mr. Falco for good reason or upon death or disability, in each case anytime following a change of control.
(9) Restricted stock units granted in 2013 to Mr. Llamas and Mr. Lori vest pro rata upon termination due to death or disability.
(10) Restricted stock units granted in 2013 to Mr. Llamas and Mr. Lori fully vest upon termination by us without cause or by an executive for good reason within two years following a change of control.

Non-Competition, Non-Solicitation and Confidentiality

The employment agreements of our named executive officers contain non-competition, non-solicitation and confidentiality covenants. Pursuant to such covenants, these executive officers have agreed not to compete with us for a specified period following such executive officer’s date of termination. In addition, these executive officers may not solicit any of our employees during the term of his employment or for a specified period thereafter or disclose any confidential information provided by our employment.

Equity Incentive Plan

In connection with this offering, our board of directors expects to adopt, and our stockholders expect to approve, the 2015 Equity Incentive Plan prior to the completion of this offering.

Director Compensation

During 2014, our directors who were either our employees or affiliated with the Sponsors did not receive any fees or other compensation for their services as our directors. We reimburse all of our directors for travel expenses and other out-of-pocket costs incurred in connection with attendance at meetings of the board.

 

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The following table set forth all non-employee, non-affiliated compensation information for our directors for the year ended December 31, 2014:

2014 Director Compensation Table

 

Name

   Fees
Earned
or Paid
in Cash

($)
     Stock
Awards

($)
     Option
Awards

($)
     Non-
Equity
Incentive
Plan
Compensation

($)
     Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings

($)
     All Other
Compensation

($)(1)
     Total
Compensation

($)
 

Henry G. Cisneros

     100,000                                         5,000         105,000   

Gloria Estefan(2)

     100,000                                                 100,000   

David Zaslav(3)

     100,000                                                 100,000   

 

(1) Represents reimbursement of travel expenses.
(2) Effective January 30, 2014, Ms. Gloria Estefan ceased to be a director of the board.
(3) Effective March 18, 2015, Mr. David Zaslav ceased to be a director of the board.

 

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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

Set forth below is a description of certain relationships and related person transactions, which are transactions between us or our subsidiaries, and (i) our directors (including director nominees) or executive officers, (ii) any 5% record or beneficial owner of our voting securities or (iii) any immediate family member of any person specified in (i) and (ii) above, each a “related person.”

Televisa Commercial Agreements

On December 20, 2010, we entered into a revised program license agreement with Televisa, amending the program license agreement then in effect, the Mexico License and a sales agency agreement with Televisa whereby we act as its exclusive sales agent to sell or license certain of our programming worldwide outside of the U.S. and Mexico (the “Sales Agency Agreement”). Both the program license agreement with Televisa and Mexico License were amended and restated as of February 28, 2011. The 2011 Televisa PLA and Mexico License were further amended on July 1, 2015 and in connection therewith, together with the other documents entered into at the same time, including the MOU, we are making a one-time payment of $4.5 million to Televisa. For a description of the terms of the Televisa PLA, Mexico License, and Sales Agency Agreement, see “Business—Licensing” and “Business—Programming—Televisa.” In addition, in connection with the assignment on December 20, 2010 to us of Televisa’s 50% interest in our joint venture that owned five cable networks operated by us, we agreed to continue engaging Televisa for existing services and granted a right of first negotiation for new services to be provided to these networks—De Película, De Película Clásico, Bandamax, Ritmoson and Telehit. Televisa is also providing similar services to Univision tlnovelas. Televisa and one of its subsidiaries also represent us in Mexico in connection with our advertising sales to Mexico-based clients on a non-exclusive basis and we pay Televisa a commission based on a certain percentage of revenue received by us from the sale of such advertising. Televisa and one of our subsidiaries also entered into a representation agreement pursuant to which we act as Televisa’s exclusive sales agent for certain consumer products owned or controlled by Televisa, and we receive a license fee based on certain percentages of the revenue generated, in Canada, the U.S. and Puerto Rico by reducing the amount of our revenue received from the customer remitted to Televisa. From time to time, we have granted and received waivers under the 2011 Televisa PLA. We have also, from time to time, entered into production, co-production, program license, advertising, technical services and other ordinary course agreements with Televisa and its affiliates, that are not amendments or waivers of the 2011 Televisa PLA or the Mexico License, which have resulted in payments to or from Televisa. We made aggregate payments to Televisa, net of withholdings, under our commercial agreements with them, including the 2011 Televisa PLA, of $64.7 million, $313.2 million, $343.0 million and $241.0 million for the three months ended March 31, 2015 and the years ended December 31, 2014, 2013 and 2012, respectively. We received aggregate payments from Televisa under our commercial agreements with them, including the Mexico License, of $3.0 million, $21.2 million, $17.8 million and $17.6 million for the three months ended March 31, 2015 and the years ended December 31, 2014, 2013 and 2012, respectively.

2011 Televisa PLA Amendments

Since 2012, we have entered in the following agreements that amended or modified certain terms of the 2011 Televisa PLA:

 

    In 2013, the 2011 Televisa PLA was amended to permit Univision to sublicense to third parties English-language broadcast rights to certain Mexican First Division soccer matches owned or controlled by Televisa. In consideration, Univision agreed that the revenue received by Univision from licenses to third parties of any English-language broadcast rights to soccer matches, whether or not such rights are licensed to Univision by Televisa, was to be included in the revenue subject to the royalty payable by Univision to Televisa under the 2011 Televisa PLA. The terms of this arrangement have been included as part of the Televisa PLA.

 

   

In 2014, Televisa notified Univision that the cost to acquire the rights to certain Mexican First Division soccer league games not owned or controlled by Televisa were greater than expected. We agreed to pay

 

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Televisa a fixed license fee per season for the U.S. rights to these games. Over the term of the license these fees are expected to be in aggregate approximately $2.4 million more than the amounts that would have been payable for these rights under the 2011 Televisa PLA.

 

    In 2014, Univision and Televisa entered into an amendment to the 2011 Televisa PLA related to provisions that gave Univision free television rights and certain rights of first negotiation/refusal for other rights to motion pictures produced or acquired by Pantelion Films (“Pantelion”), a Televisa affiliate. In order to better allow Pantelion to bid against other distributors effectively, Univision agreed to waive its free television rights related to Pantelion’s motion pictures (subject to a right to withdraw the waiver) in exchange for, among other things, a credit that will result in at least a 30% reduction to the license fee for any rights acquired pursuant to the first negotiation/refusal rights.

Since 2012, Univision has also entered into the following agreements with Televisa: (i) an agreement pursuant to which Televisa licenses certain scripted programming to Univision, (ii) an agreement in 2013 and an agreement in 2014 for Televisa’s production of branded entertainment segments for one of our advertising clients, for which Univision paid Televisa $205,000 in 2013 and $207,000 in 2014; (iii) an agreement in 2013 to license to Televisa the broadcast rights in Mexico to a World Cup qualifying match in exchange for a payment by Televisa to Univision of $2.0 million and Televisa’s provision of broadcast rights to another World Cup qualifying match; (v) an agreement in 2013 for Televisa’s production of a singing competition series for which Univision paid $6.5 million to Televisa; (vi) an agreement in 2014 for Televisa’s provision of satellite and fiber optic services in Brazil for the World Cup to Univision in exchange for a payment of $214,270; and (vii) an extension in 2014 of a technical services agreement with an affiliate of Televisa to insert virtual integrations sold by Univision into programming airing on Univision networks in exchange for 15% of the amount generated from the sale by Univision of such virtual integrations.

Televisa Convertible Debentures and Warrants

Pursuant to the Televisa transactions, we issued convertible debentures to Televisa, maturing in 2025, with an aggregate principal amount of $1,125.0 million. The debentures accrue interest at a fixed rate of 1.5% per annum payable quarterly in arrears in cash. Subject to applicable laws and regulations and certain contractual limitations, the debentures are convertible at the election of Televisa into                  shares of our Class T-1 common stock (originally our Class C common stock). If a person other than Televisa converted the debentures, the holder would receive shares of our Class A common stock. We made interest payments to Televisa under the convertible debentures of $3.6 million, $14.3 million, $14.3 million and $14.3 million for the three months ended March 31, 2015 and the years ended December 31, 2014, 2013 and 2012, respectively.

Prior to the consummation of this offering, Televisa will convert its debentures into the Televisa Warrants which will be exercisable, for nominal consideration, into the same number of shares of our common stock that Televisa would have received upon conversion of the Televisa debentures on the date of the receipt of the Televisa Warrants, provided that the Televisa Warrants will be exercisable into Class T common stock as of the closing of this offering. If a person other than Televisa exercises the Televisa Warrants, the holder would receive shares of our Class A common stock. In connection with the conversion of the Televisa debentures, we will pay Televisa a total of $135.1 million.

Prior to the consummation this offering, Televisa will exercise a portion of the Televisa Warrants for shares of Class T-1 common stock in order to increase its direct ownership percentage of our common stock to 10% on a pro forma basis for the issuance of shares in this offering.

 

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Stockholder Arrangements

Investor and Televisa Memorandum of Understanding

On July 1, 2015, we entered into the MOU to, among other things, amend our amended and restated certificate of incorporation, amended and restated bylaws, the PIA, the Stockholders Agreement (as defined below), the PRRCA (as defined below) and the Investment Agreement with Televisa (as defined below). The following description of our stockholder agreements and the description of our capital stock reflect the agreed upon amendments to the aforementioned documents.

Principal Investor Agreement

On December 20, 2010, we entered into the PIA with the Investors and Televisa, which together with the amendments to the PIA contemplated by the MOU, contains various provisions described below.

Director Designation Rights

Pursuant to the PIA, the Investors and Televisa have certain director designation rights. See “Description of Capital Stock—Director Designation Rights.”

Approval Rights of the Investors and Televisa

Pursuant to the PIA, the Investors and Televisa have approval rights with respect to certain matters. See “Description of Capital Stock—Approval Rights.”

Indemnification Rights

The PIA provides each of the Investors and Televisa with certain indemnification rights.

Agreement on FCC Petition and FCC Transfer of Control Application

Pursuant to the MOU, we and Televisa have agreed to jointly file a petition for declaratory ruling at the FCC seeking (a) an increase in our permitted ownership by non-U.S. persons from the current 25% ownership limitation (the “Current FCC Foreign Ownership Cap”) to 49% of our common stock (on a voting and equity basis) and (b) to authorize Televisa to hold up to 40% of our common stock (on a voting and equity basis) (the “FCC Petition”). We and Televisa have agreed to file this petition no later than the earlier of 30 days after the consummation or abandonment of this offering and January 5, 2016. Pursuant to the MOU, we may be required to file subsequent petitions if the FCC Petition is not granted or is withdrawn.

Pursuant to the MOU, promptly after the Investors have transferred at least 75% of the shares of our common stock held by the Investors immediately following the time of the closing of Televisa’s investment in us on December 20, 2010 (the “Calculation Date”), we shall submit the FCC TOC Application for any required FCC approval of a transfer of control of the Company to the public stockholders of the Company or as otherwise may be required. In the event that the FCC grants approval of the FCC TOC Application (the “TOC Approval”), the Investors may, but are not obligated to continue to transfer our common stock. If the FCC denies or otherwise fails to approve the FCC TOC Application, the FCC TOC Application may be dismissed with the consent of Televisa and the Majority Principal Investors or we may (but shall not be required to) submit any other FCC TOC Application. In that circumstance, the Investors may not transfer more than 98% of the shares of our common stock held by the Investors on the Calculation Date without Televisa’s approval until TOC Approval has been obtained which approval shall not be required following a Televisa Sell-Down.

Stockholders Agreement

On December 20, 2010, we entered into that certain amended and restated stockholders agreement (the “Stockholders Agreement”) with the Investors, Televisa, Bank of America, Credit Suisse, Deutsche Bank,

 

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Lehman Brothers, Royal Bank of Scotland, Wachovia and certain individuals (the “Holders”), which together with the amendments to the PIA contemplated by the MOU, contains various provisions including those described below.

Televisa Ownership Limitations

Pursuant to the Stockholders Agreement, Televisa may not hold more than, for the period of time described in the Stockholders Agreement, 10% of our outstanding common stock (the “Maximum Equity Percentage”). The remaining amount of non-U.S. ownership available under the Current FCC Foreign Ownership Cap will be available to the Investors and our other stockholders. Notwithstanding that Televisa is limited to the Maximum Equity Percentage, Televisa will hold shares of our common stock that provide Televisa with enhanced voting power (at least 22% of our common stock) on matters other than for the election of directors to be elected exclusively by the separate vote of our Class S-1 common stock and Class T-1 common stock. See “Description of Capital Stock — Common Stock — Voting Rights.”

In addition, subject to certain exceptions provided for in the Stockholders Agreement, Televisa may not hold more than, for the period of time described in the Stockholders Agreement, 40% of our outstanding common stock including for this purpose shares of our common stock underlying our convertible securities held by Televisa (“Maximum Capital Percentage”).

Upon approval by the FCC of any increase in or elimination of the Current FCC Foreign Ownership Cap, Televisa will be allocated 83.33% of the approved foreign ownership capacity above the Current FCC Foreign Ownership Cap, up to an amount that would entitle Televisa to hold directly our common stock equal to the Maximum Capital Percentage, subject to any lower percentage ownership limitation on our common stock adopted by the FCC and applicable to Televisa (the “FCC Individual Cap”). The Maximum Equity Percentage will be increased by Televisa’s share of the increase in such foreign ownership capacity. The remaining portion of the increase in the Current FCC Foreign Ownership Cap shall be available to our other stockholders, including without limitation, any portion of the excess that Televisa cannot use due to the FCC Individual Cap.

The Maximum Equity Percentage shall not apply after the Investor Exit (as defined and discussed in “Description of Capital Stock — Common Stock — Election of Directors”) and receipt of a TOC Approval and, to the extent permitted by law, Televisa may convert any convertible securities or shares of our non-voting common stock into our voting common stock. The termination of the Maximum Capital Percentage limitation is described below.

Transfer Restrictions

The Stockholders Agreement restricts transfers of our shares by the Investors, Televisa and the Holders to certain of our competitors without the prior written approval of our board of directors or as otherwise permitted under the Stockholders Agreement. In addition, the Investors and the Holders may not transfer their shares to certain restricted persons without the approval of Televisa or as otherwise permitted under the Stockholders Agreement, provided that this transfer restriction shall expire upon the Televisa Sell-Down.

For a period of 18 months (subject to reduction under limited circumstances) commencing on the later of (i) the filing of the FCC Petition and (ii) the date on which we make an underwritten public offering of our common stock that, in the aggregate with any previous underwritten offering of our common stock, exceeds $500.0 million and meets certain other conditions under our Stockholders Agreement (the “Lock-up Start Date”), Televisa shall not transfer (other than to certain permitted transferees) any equity interest in the Company, including shares of our common stock and convertible securities.

In the event that the FCC approves the FCC Petition to permit Televisa to hold and vote directly at least 33% of our issued and outstanding common stock, for a period of two years from the later of such FCC approval and 12 months from the Lock-up Start Date, Televisa may not transfer (other than to certain permitted transferees) any equity interest in the Company exceeding, in the aggregate for all such transfers, 30% of its fully converted equity interest in the Company at the time of such approval.

 

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    In the event that the FCC approves the FCC Petition to permit Televisa to hold and vote directly more than 25% of our issued and outstanding common stock, but less than 33% of the issued and outstanding common stock, Televisa has agreed, for a number of months following the later of such FCC approval and 12 months from the Lock-up Start Date equal to 24 times a fraction with (x) a numerator equal to the percentage of our direct equity Televisa is allowed to hold and vote after the FCC approval less 25% and (y) a denominator equal to eight percent, not to transfer (other than to certain permitted transferees) any equity interest in the Company exceeding in the aggregate for all such transfers, 30% of its fully converted equity interest in the Company as of the time of such approval.

Televisa is not obligated to accept any condition that may be imposed by the FCC in order for Televisa to increase its level of ownership of our common stock (except for any total ownership cap imposed by the FCC).

In the event that Televisa transfers any interest in our capital stock or convertible securities, Televisa must first transfer the shares underlying the Televisa warrants before transferring shares of our common stock.

Drag-Along Rights

Pursuant to the Stockholders Agreement, the members of the group comprised of the Investors that, in the aggregate, hold at least sixty percent of shares of our common stock held by the Investors (the “Majority Principal Investors”) may at any time compel the Investors and the Holders, but not Televisa, to sell all or a portion of their shares in a change of control transaction (the “Change of Control Drag-Along”). Further, the members of the group comprised of the Investors and Televisa that, in the aggregate, hold the majority of outstanding common stock held by all of the members of such group (provided that such calculation shall only include the shares of our common stock held directly by Televisa that do not exceed 10% of the aggregate shares of our outstanding common stock) (the “Majority PITV Investors”) may, at any time, require the Investors and the Holders, but not Televisa, to exchange, convert or transfer all of a portion of their shares in a recapitalization transaction (the “Recapitalization Drag-Along”). The Change of Control Drag-Along and the Recapitalization Drag-Along expire at the time the Investors collectively sell 66 23% of the shares of our common stock held by the Investors immediately following the Calculation Date (the “Principal Investor Two-Thirds Sell-Down”).

Right of First Offer

If a stockholder party to the Stockholders Agreement proposes to sell any of our shares in a private sale, subject to certain exceptions, the selling stockholder must first offer to the Investors and Televisa the opportunity to purchase such shares (the “ROFO”), provided that this right shall not apply to a change of control transaction initiated by the Investors or us in compliance with the terms of the Stockholders Agreement. Televisa may not exercise the ROFO until at least one Investor exercises the ROFO on the proposed sale of shares. In addition, Televisa’s ROFO rights shall expire if Televisa transfers our shares to any person (other than certain permitted transferees under the Stockholders Agreement) in an amount equal to, or greater than, 1% of our shares held by Televisa immediately following the Calculation Date. The ROFO terminates upon the Principal Investor Two-Thirds Sell-Down.

Tag-Along Rights

If any stockholder party to the Stockholders Agreement proposes to sell our shares in a private sale, each of the other stockholder parties to the Stockholders Agreement, except for management stockholders, shall have the opportunity to participate in such sale on the same terms and conditions as the selling stockholder. The tag-along rights for the stockholder parties to the Stockholders Agreement (except for Televisa) expire upon the earlier of (i) a change of control and (ii) the Principal Investor Two-Thirds Sell-Down, provided that the tag-along rights for certain bank investors shall only expire upon the Principal Investor Two-Thirds Sell-Down.

Investor Sale of Control

Pursuant to the Stockholders Agreement and subject to the Televisa sale process rights described below, the Investors have the right to sell their shares of our common stock or effectuate a merger to transfer control of the

 

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Company to a purchaser and, in each case, deliver the collective rights and obligations of the Investors to the purchaser, including the Investors’ rights and obligations under the Stockholders Agreement, PRRCA, PIA, our amended and restated certificate of incorporation and amended and restated bylaws. The Investors’ right to effectuate such a change of control transaction in accordance with the Stockholders Agreement expires upon the Principal Investor Two-Thirds Sell-Down.

Televisa Sale Process Rights

In the event that the Investors or the Company effectuate a change of control transaction in compliance with the terms of the Stockholders Agreement, Televisa will have the right to tag-along on such sale as described above or Televisa may retain their shares or, if applicable, roll-over their shares into the acquiring entity, provided that these tag-along and roll-over rights shall expire upon a Televisa Sell-Down. In addition, the Stockholders Agreement provides Televisa with certain information and access rights in connection with a change of control transaction initiated by the Investors or the Company, including the opportunity to meet with the prospective purchaser prior to their final bid and establishing an arbitration process to resolve any disputes between the Company or the Investors, on the one hand, and Televisa, on the other hand, related to the sale process.

Televisa Post-IPO Participation Right

Pursuant to the Stockholders Agreement, Televisa will have the opportunity to purchase from the Investors up to 50% of the shares of our common stock being transferred by the Investors following this offering up to an agreed maximum number of shares. See “Description of Capital Stock—Pre-emptive Rights; Post-IPO Sale Participation Right.”

Voting Agreement

Subject to the terms of the Stockholders Agreement, each Investor and each Holder, but not Televisa, has agreed to vote their shares as instructed by the Majority Principal Investors or Majority PITV Investors, as applicable, with respect to a change of control transaction, recapitalization transaction, the election of the board of directors and any amendments to our certificate of incorporation.

Televisa Standstill

On December 20, 2010, we entered into an investment agreement (the “Investment Agreement”) with Televisa pursuant to which Televisa purchased their interest in our capital stock and convertible debentures. Pursuant to the Investment Agreement, following the consummation of this offering, Televisa will be subject to standstill provisions that restrict Televisa from making certain shareholder proposals, soliciting proxies and engaging in certain actions in order to increase its ownership of our capital stock above the Maximum Equity Percentage or Maximum Capital Percentage, including through third party purchases, or as part of a group that would collectively own, directly or indirectly, more than the Maximum Equity Percentage or the Maximum Capital Percentage (the “Televisa Standstill”). However, the Televisa Standstill shall not prevent (i) the directors of our board of directors appointed by Televisa from serving and acting in their capacity as directors consistent with their fiduciary duties, (ii) Televisa from submitting, on a confidential basis, proposals to our board of directors or the Investors relating to any matter including, without limitation, the actions prohibited by the Televisa Standstill and (iii) Televisa from exercising its convertible securities, preferential rights or any of its other rights under our certificate of incorporation, the PIA, the Stockholders Agreement, the Investment Agreement and the PRRCA.

Pursuant to the MOU, the Televisa Standstill provisions will expire upon the earlier of (a) 180 days after an Investor Exit and receipt of a TOC Approval and (b) the first date at or following both an Investor Exit and receipt of a TOC Approval on which a person other than Televisa solicits proxies or consents, proposes a competing director slate or makes a tender offer for our common stock, or we put ourselves up for sale. However, upon the expiration of the Televisa Standstill, Televisa, whether alone or as part of a group, may not acquire more than the Maximum Capital Percentage unless Televisa, alone or as part of a group, makes a public offer to

 

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our shareholders to acquire all of our outstanding shares that Televisa does not already own and such offer is accepted or approved by the holders of a majority of shares of our common stock not held by Televisa. Notwithstanding the foregoing, if Televisa acquires a controlling stake in our equity interests from the Investors and as a result would exceed the Maximum Capital Percentage, Televisa will not be required to make an offer to acquire all of our outstanding shares that Televisa does not already own.

Participation, Registration Rights and Coordination Agreement

On December 20, 2010, we entered into that certain amended and restated participation, registration rights and coordination agreement (the “PRRCA”) with the Investors, Televisa and certain other holders of our common stock which contains various provisions including those described below.

Televisa Participation Right

Pursuant to the PRRCA, Televisa has certain participation rights with respect to sales of our capital stock. See “Description of Capital Stock—Pre-emptive Rights; Post-IPO Sale Participation Right.”

Registration Rights

Pursuant to the PRRCA, the parties thereto have certain registration rights with respect to our common stock. See “Description of Capital Stock—Registration Rights.”

Sale Coordination

Pursuant to the PRRCA, the parties thereto may be required to coordinate the sale of their shares of our common stock. See “Description of Capital Stock—Sale Coordination.”

Sponsor Management Agreement

On March 27, 2007, we entered into the Sponsor Management Agreement, which was amended and restated on December 20, 2010, with the Investors under which certain affiliates of the Investors agreed to provide us with management, consulting and advisory services. Effective as of March 31, 2015, we entered into an agreement with the Investors to terminate the Sponsor Management Agreement. Under that agreement, we agreed to pay a reduced termination fee and quarterly service fees in full satisfaction of our obligations to the Investors under the Sponsor Management Agreement. Pursuant to such termination agreement, we paid a termination fee of $112.4 million in April 2015 (which was accrued as of March 31, 2015) to the Investors and will continue to pay a quarterly aggregate service fee of 1.26% of operating income before depreciation and amortization, subject to certain adjustments, until the earlier of (i) the consummation of this offering or (ii) December 31, 2015.

Prior to termination, the Investors received a quarterly aggregate service fee based on operating income before depreciation and amortization, subject to certain adjustments, as well as reimbursement of out-of-pocket expenses. The management fee was $3.6 million for the three months ended March 31, 2015 and $16.3 million, $14.6 million and $13.0 million for the years ended December 31, 2014, 2013 and 2012, respectively. The out-of-pocket expenses were $0.3 million for the three months ended March 31, 2015 and $1.0 million, $0.8 million and $1.0 million for the years ended December 31, 2014, 2013 and 2012, respectively. The management service fees and out-of-pocket expenses are recorded as selling, general and administrative expenses.

Televisa Technical Assistance Agreement

Televisa entered into an agreement with Univision under which Televisa provides us with technical assistance related to our business. Effective as of March 31, 2015, we entered into an agreement with Televisa to

 

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terminate the technical assistance agreement. Under this agreement, we agreed to pay a reduced termination fee and quarterly service fees in full satisfaction of our obligations to Televisa under the technical assistance agreement. Pursuant to such termination agreement, we paid a termination fee of $67.6 million in April 2015 (which was accrued as of March 31, 2015) to Televisa and will continue to pay a quarterly aggregate service fee of 0.74% of operating income before depreciation and amortization, subject to certain adjustments, until the earlier of (i) the consummation of this offering or (ii) December 31, 2015.

Prior to termination, Televisa received a quarterly fee based on operating income before depreciation and amortization, subject to certain adjustments, as well as reimbursement of out-of-pocket expenses. The fee for the three months ended March 31, 2015 was $1.9 million. The fees for the years ended December 31, 2014, 2013 and 2012 were $8.8 million, $7.8 million and $7.0 million, respectively. The technical assistance fee and out-of-pocket expenses are recorded as selling, general and administrative expenses.

Consulting Arrangement

We have a consulting arrangement with SCG Investments IIB LLC (“SCG”), an entity controlled by the Chairman of our board of directors. In compensation for the consulting services provided by our Chairman, equity units in various LLCs that hold a portion of our common stock on behalf of the Investors and Televisa were granted to SCG. The equity grants provide for payments to SCG upon defined liquidation events based on the appreciation realized by the Investors and Televisa in their investments in us in excess of certain preferred returns and performance thresholds. A portion of these equity grants have vested and the remainder will only vest, and their related payments will only be made, if our Chairman is providing services to us at the time of the defined liquidity event. The term of the consulting arrangement is indefinite, subject to the right of either party to terminate the arrangement for any reason on thirty days’ notice. We recorded non-cash share-based compensation expense of $18.5 million in 2012. We will record an additional non-cash compensation expense upon the vesting of the remaining units.

In addition, under the consulting arrangement, SCG is entitled to reimbursement for reasonable expenses incurred by SCG in connection with Mr. Saban’s services, including his direct operating costs for use of a private plane in connection with his performance of such services, not to exceed $720,000 in any calendar year. The out-of-pocket expenses reimbursed to SCG in connection with Mr. Saban’s services are included in the out-of-pocket expense amounts referenced above under “—Stockholder Arrangements—Sponsor Management Agreement.” SCG is also entitled to certain indemnification protections under the consulting arrangement.

Transactions with other Sponsor-affiliated companies

The Investors are private investment firms that have investments in companies that may do business with Univision. No individual Sponsor has a controlling ownership interest in us. However, the Investors may have a controlling ownership interest or an ownership interest with significant influence in companies that do business with us. Since January 1, 2012, in the ordinary course of business, we received goods and services from, and made payments for technology, talent agency and other services, on an arm’s length basis from such companies.

In addition, in the ordinary course of business, we received advertising revenues on an arm’s length basis from such companies. Notably, we received ratings services from Nielsen Company/Nielsen Media Research for which we paid $59.2 million in 2012 and $67.8 million in 2013. THL, one of the Investors, had more than a 10% equity interest in Nielsen Company/Nielsen Media Research at that time. In addition, Univision has previously announced plans for a musical competition television show scheduled to be broadcast on the Univision Network in the fall season of 2015, based on an agreement with the owners of the rights to the program, including an entity controlled by Saban Capital Group. In connection with this arrangement, the owners of the program have agreed to grant to Televisa certain broadcast rights in Mexico to the show, together with certain format and exploitation rights. In 2014, we entered into an agreement with an affiliate of Providence Equity to develop and market research panels and provide marketing services for the panels, pursuant to which we received a fee in the form of a revenue share with a minimum guarantee

 

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of $250,000 and up to $1.25 million annually. Through the first quarter of 2015, we received $150,000 in fees of the $250,000 minimum guarantee. With respect to affiliates of Investors for which we made payments in excess of $120,000 per year under commercial agreements, we made aggregate payments to such affiliates of $14.1 million, $95.5 million and $72.6 million for the years ended December 31, 2014, 2013 and 2012, respectively. We made aggregate payments to such affiliates of $5.5 million for the three months ended March 31, 2015.

In 2013, Univision entered into two agreements with a sales representation company owned by the spouse of one of our directors, pursuant to which the company serves as our exclusive national sales representative for particular advertising and infomercials on certain networks and channels in exchange for a commission based on net sales of such advertisements and infomercials and related services. The fees for the three months ended March 31, 2015 and the years ended December 31, 2014 and 2013 were $0.2 million, $0.7 million and $0.1 million, respectively.

Launch Rights

In March 2013 we entered into agreements with Televisa and Emilio Azcarraga Jean, Televisa’s chairman and one of our directors, as a result of which we obtained for our benefit the right to launch certain networks on the carriage platform of an MVPD that distributes our broadcast and cable networks. Pursuant to these agreements we paid an aggregate of $81 million to Mr. Azcarraga and Televisa and agreed to provide Televisa, for promotion of Televisa’s and its affiliates’ businesses, certain unsold advertising inventory at no cost on two of the networks to be carried by this MVPD.

Indemnification Agreements

We have entered into indemnification agreements with each of our directors. These agreements, among other things, require us to indemnify each director to the fullest extent permitted by Delaware law, including indemnification of expenses such as attorneys’ fees, judgments, fines and settlement amounts incurred by the director in any action or proceeding, including any action or proceeding by or in right of us, arising out of the person’s services as a director.

Policies for Approval of Related Person Transactions

The related person transactions as described above have been approved by our board of directors. In connection with this offering, we will adopt a written policy relating to the identification, review and approval and/or ratification of related person transactions. In addition to the description above, related person transactions also include: (i) transactions in which we participate with an entity that employs or is controlled by (or under common control with) a related person, and (ii) transactions in which we participate with an entity in which a related person has an ownership or material financial interest.

Our policy will require that all related persons report all potential transactions or arrangements that could be related person transactions in advance (or otherwise at the earliest possible opportunity) to our general counsel or his designee for review and consideration. The general counsel will determine whether a proposed transaction is a related person transaction, and if he or she determines that a transaction is a related person transaction, he or she will submit such transaction for review and approval to the board of directors or a committee thereof, pursuant to this policy. If a member of the board of directors has an interest in or is involved in a related person transaction, such person will be recused from the voting and discussion on such transaction by the board of directors.

In connection with approving or ratifying a related person transaction, the board of directors or a committee thereof will consider, in light of the relevant facts and circumstances, whether or not the transaction is in, or not inconsistent with, our best interests, including consideration of the following factors, to the extent pertinent:

 

    the position within or relationship of the related person with us;

 

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    the materiality of the transaction to the related person and us, including the dollar value of the transaction, without regard to profit or loss and the nature of the related person’s interest in the transaction;

 

    the business purpose for and reasonableness of the transaction (including the anticipated profit or loss from the transaction), taken in the context of the alternatives available to us for attaining the purposes of the transaction;

 

    whether the transaction is comparable to a transaction that could be available on an arms-length basis or is on terms that we offer generally to persons who are not related persons;

 

    whether the transaction is in the ordinary course of our business and was proposed and considered in the ordinary course of business; and

 

    the effect of the transaction on our business and operations, including on our internal control over financial reporting and system of disclosure controls and procedures, and any additional conditions or controls (including reporting and review requirements) that should be applied to such transaction.

In addition, the board of directors or a committee thereof may, from time to time, delegate to the general counsel, the authority to approve certain related person transactions, subject to notification or ratification by the board of directors as determined in its sole discretion.

 

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PRINCIPAL STOCKHOLDERS

Security Ownership

The following table shows information regarding the beneficial ownership of our common stock (1) immediately following the Equity Recapitalization but prior to this offering and (2) as adjusted to give effect to this offering by:

 

    each person or group who is known by us to own beneficially more than 5% of our common stock;

 

    each of our named executive officers and each member of our board of directors; and

 

    all of our named our executive officers and members of our board of directors as a group.

For further information regarding material transactions between us and certain of our selling stockholders, see “Certain Relationships and Related Person Transactions.”

Beneficial ownership of shares is determined under rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power. Except as noted by footnote, and subject to community property laws where applicable, we believe based on the information provided to us that the persons and entities named in the table below have sole voting and/or investment power with respect to all shares of our common stock shown as beneficially owned by them. The shares of Class A common stock, Class S-1 common stock, Class T-1 common stock and Class T-3 common stock carry voting rights as further described in “Description of Capital Stock.” Percentage of beneficial ownership is based on                  shares of common stock outstanding as of                     , 2015 and                  shares of common stock outstanding after giving effect to this offering, assuming no exercise of the underwriters’ option to purchase additional shares, or                  shares of common stock, assuming the underwriters exercise their option to purchase additional shares in full. Shares of common stock subject to options currently exercisable or exercisable within 60 days of the date of this prospectus are deemed to be outstanding and beneficially owned by the person holding the options for the purposes of computing the percentage of beneficial ownership of that person and any group of which that person is a member, but are not deemed outstanding for the purpose of computing the percentage of beneficial ownership for any other person. Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to all shares of capital stock held by them.

Unless otherwise indicated, the address for each holder listed below is 605 Third Avenue, 33rd Floor, New York, NY 10158. Unless otherwise indicated, the address of each beneficial holder is c/o Univision Holdings, Inc. 605 Third Avenue, 33rd Floor, New York, NY 10158.

 

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    Shares of common stock beneficially
owned before this offering
  Shares of common stock beneficially
owned after this offering
(assuming no exercise of the option to
purchase additional shares)
  Shares of common stock beneficially
owned after this offering
(assuming full exercise of the option to
purchase additional shares)
    Class A
common
stock
  Class S
common
stock
  Class T
common
stock
  Class A
common
stock
  Class S
common
stock
  Class T
common
stock
  Class A
common
stock
  Class S
common
stock
  Class T
common
stock

Name and address of beneficial owner

  Number   Percent   Number   Percent   Number   Percent   Number   Percent   Number   Percent   Number   Percent   Number   Percent   Number   Percent   Number   Percent

5% stockholders:

                                   

Madison Dearborn Funds

                                   

Providence Equity Funds

                                   

SCG Investments II, LLC

                                   

TPG Funds

                                   

THL Funds

                                   

Multimedia Telecom S.A. de C.V.

                                   

Named executive officers and directors:

                                   

Zaid Alsikafi

                                   

Alfonso de Angoitia

                                   

Emilio Azcarraga Jean

                                   

José Antonio Bastón Patiño

                                   

Adam Chesnoff

                                   

Henry G. Cisneros

                                   

Michael P. Cole

                                   

Kelvin L. Davis

                                   

Randel A. Falco

                                   

David Goel

                                   

Michael N. Gray

                                   

Andrew W. Hobson

                                   

Roberto Llamas

                                   

Peter Lori

                                   

Jonathan M. Nelson

                                   

James N. Perry, Jr.

                                   

Haim Saban

                                   

Enrique F. Senior Hernandez

                                   

Jonathan Schwartz

                                   

David Trujillo

                                   

Tony Vinciquerra

                                   

All named executive officers and directors as a group (21 persons)

                                   

 

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DESCRIPTION OF CERTAIN INDEBTEDNESS

Senior Secured Credit Facilities

UCI, along with UPR, as borrowers, are parties to a credit agreement governing our senior secured credit facilities with Deutsche Bank AG New York Branch, as administrative agent, various lenders, and other financial institutions party thereto. As a result of amendments we entered into in February and May 2013, our previously existing revolving credit facilities were refinanced and replaced in full with a revolving credit facility of $550.0 million that will mature on March 1, 2018. Loans under our 2013 revolving credit facility bear interest at a floating rate, which can be either an adjusted LIBOR rate plus an applicable margin (ranging from 275-350 basis points) or, at our option, an alternate base rate (defined as the highest of (x) the Deutsche Bank AG New York Branch prime rate, (y) the federal funds effective rate plus 0.50% per annum and (z) the one-month adjusted LIBOR rate plus 1% plus an applicable margin (ranging from 175-250 basis points).

As a result of the 2013 amendments, the existing term loans were converted into and/or refinanced with the proceeds of $2,350.0 million new term loans maturing on March 1, 2020 of which approximately $1,250.0 million constituted new or converted incremental term loans (the “2013 incremental loans”). As a result of the amendment we entered into in March 2014, the then-existing term loans (other than the 2013 incremental loans) were converted into and/or refinanced with the proceeds of replacement term loans of approximately $3,376.7 million maturing on March 1, 2020. The 2014 replacement term loans (together with the 2013 incremental loans, the “current term loans”) bear interest at a floating rate, which can either be an adjusted LIBOR rate (subject to a floor of 100 basis points) plus an applicable margin of 300 basis points or, at our option, an alternate base rate (as described above) plus an applicable margin of 200 basis points.

The credit agreement governing our senior secured credit facilities also provides that we may increase our existing revolving credit facilities and/or term loans facilities by up to $750.0 million if certain conditions are met. Additionally, we are permitted to further refinance (whether by repayment, conversion or extension) our existing senior secured credit facilities (including the current term loans described above) with certain permitted additional first-lien, second-lien, senior and/or subordinated indebtedness, in each case if certain conditions are met.

Our senior secured credit facilities are secured by, among other things:

 

    a first priority security interest, subject to permitted liens, in substantially all of the assets of UCI, UPR, Holdings and UCI’s material restricted domestic subsidiaries (subject to certain exceptions), including without limitation, all receivables, contracts, contract rights, equipment, intellectual property, inventory and other tangible and intangible assets, but excluding, among other things, cash and cash equivalents, deposit and securities accounts, motor vehicles, FCC licenses to the extent that applicable law or regulation prohibits the grant of a security interest therein, equipment that is subject to restrictions on liens pursuant to purchase money obligations or capital lease obligations, interests in joint ventures and non-wholly owned subsidiaries that cannot be pledged without the consent of a third party, certain trademark applications and receivables subject to our accounts receivable securitization;

 

    a pledge of (i) the present and future capital stock of each of UCI’s, UPR’s, and each subsidiary guarantor’s direct domestic subsidiaries (other than interests in joint ventures and non-wholly owned subsidiaries that cannot be pledged without the consent of a third party or to the extent a pledge of such capital stock would cause us to be required to file separate financial statements for such subsidiary with the SEC) and (ii) 65% of the voting stock of each of UCI’s, UPR’s, and each subsidiary guarantor’s material direct foreign subsidiaries (other than interests in non-wholly owned subsidiaries that cannot be pledged without the consent of a third party), in each case, subject to certain exceptions; and

 

    all proceeds and products of the property and assets described above.

The priority of security interests and related creditors’ rights are set forth in an intercreditor agreement.

 

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Our senior secured credit facilities are guaranteed by Holdings and UCI’s material, wholly-owned restricted domestic subsidiaries (subject to certain exceptions).

For adjusted LIBOR loans, we may select interest periods of one, two, three or six months or, with the consent of all relevant affected lenders, nine or twelve months. Interest will be payable at the end of the selected interest period, but no less frequently than every three months within the selected interest period.

Our senior secured credit facilities also require payment of a commitment fee on the difference between committed amounts and amounts actually borrowed under the revolving credit facility and customary letter of credit fees. Prior to the applicable maturity date, funds borrowed or utilized under the revolving credit facility may be borrowed, repaid and reborrowed, without premium or penalty.

The current term loans are subject to amortization in equal quarterly installments of principal in an aggregate annual amount equal to 1.0% per annum of the original principal balance of the current term loans, with the remaining balance payable at the relevant date of maturity.

In addition, mandatory prepayments will be required to prepay amounts outstanding under our senior secured credit facilities in an amount equal to:

 

    100% (which percentage will be reduced upon the achievement of specified performance targets) of net cash proceeds from certain asset dispositions by us or any of our restricted subsidiaries, subject to certain exceptions, ratable offer provisions and reinvestment provisions;

 

    100% of the net cash proceeds from the issuance or incurrence after the closing date of any additional debt by us or any of our restricted subsidiaries (excluding debt permitted under our senior secured credit facilities, other than any indebtedness which serves to refinance or extend indebtedness then outstanding under our senior secured credit facilities, which shall be required to prepay loans (or reduce revolving commitments, as applicable) as set forth in our credit agreement); and

 

    50% (which percentage will be reduced upon the achievement of specified performance targets) of excess cash flow, as defined in our senior secured credit facilities.

Voluntary prepayments of principal amounts outstanding under our senior secured credit facilities are permitted at any time; however, if a prepayment of principal is made with respect to an adjusted LIBOR loan on a date other than the last day of the applicable interest period, the lenders will require compensation for any funding losses and expenses incurred as a result of the prepayment.

Our senior secured credit facilities contain certain restrictive covenants which, among other things, limit the incurrence of additional indebtedness, investments, dividends, transactions with affiliates, asset sales, acquisitions, mergers and consolidations, prepayments of other indebtedness, liens and encumbrances and other matters customarily restricted in such agreements. In addition, under the senior secured revolving credit facility, we are required to maintain a first-lien secured leverage ratio as of the end of each fiscal quarter, to the extent that, as of the last day of such fiscal quarter, usage under the senior secured revolving credit facility exceeds 25% of the commitments thereunder. The Issuer and Holdings are not subject to the covenants listed here.

Our senior secured credit facilities contain customary events of default, including without limitation, payment defaults, breaches of representations and warranties, covenant defaults (with special provisions applicable to the financial covenant applicable to the revolving facility), cross-defaults to certain other indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, judgment defaults in excess of specified amounts, failure of any material provision of any guaranty or security document supporting our senior secured credit facilities to be in full force and effect, and a change of control.

 

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2021 Notes

UCI issued, pursuant to an Indenture, as supplemented from time to time, dated November 23, 2010 among UCI, the guarantors party thereto and Wilmington Trust, National Association, as successor by merger to Wilmington Trust FSB, as trustee, $500.0 million in aggregate principal amount of 8.50% senior notes due 2021 (the “2021 notes”). UCI issued an additional $315.0 million in aggregate principal amount of the 2021 notes on January 13, 2011. The 2021 notes bear interest at 8.50% and pay interest on May 15th and November 15th of each year.

Maturity. The 2021 notes mature on May 15, 2021.

Guarantee. All of our current and future domestic subsidiaries that guarantee our senior secured credit facilities, the 5.125% senior secured notes due 2025 (the “2025 notes”), the 2023 notes and the 2022 notes guarantee the 2021 notes. The 2021 notes are not guaranteed by Holdings. Each guarantor provides a full and unconditional guarantee of payment of principal of and premium, if any, and interest on the 2021 notes.

Ranking. The 2021 notes and the guarantees are our and the guarantors’ senior unsecured obligations. Accordingly, they:

 

    rank equal in right of payment with all of our and our guarantors’ existing and future senior debt and other obligations that are not, by their terms, expressly subordinated in right of payment to the 2021 notes;

 

    rank senior in right of payment to our and our guarantors’ future debt and other obligations that are, by their terms, expressly subordinated in right of payment to the 2021 notes;

 

    be effectively subordinated in right of payment to all of our and our guarantors’ existing and future senior secured debt and other obligations (including our senior secured credit facilities, the 2025 notes, the 2023 notes and the 2022 notes), to the extent of the value of the collateral securing such indebtedness; and

 

    are structurally subordinated to all obligations of each of our subsidiaries that is not a guarantor of the 2021 notes.

Mandatory Redemption; Offer to Purchase; Open Market Purchases. We are not required to make any sinking fund payments with respect to the 2021 notes. However, under certain circumstances in the event of an asset sale or, as described under “Change of Control” below, we may be required to offer to purchase the 2021 notes. We may from time to time purchase the 2021 notes in the open market or otherwise.

Optional Redemption. We may redeem some or all of the 2021 notes at any time prior to November 15, 2015 at a redemption price equal to 100% of the principal amount of 2021 notes redeemed and an applicable premium as of the date of redemption, plus accrued and unpaid interest to the redemption date. The applicable premium means, with respect to the 2021 notes on any redemption date, the greater of: (a) 1.0% of the principal amount of the 2021 notes on such redemption date; and (b) the excess, if any, of (i) the present value at such redemption date of (A) the redemption price of 2021 notes at November 15, 2015 (such redemption price being set forth in the table below), plus (B) all required interest payments due on the 2021 notes through November 15, 2015 (excluding accrued but unpaid interest to the redemption date) computed using a discount rate equal to the treasury rate as of such redemption date plus 50 basis points; over (ii) the principal amount of 2021 notes on such redemption date.

 

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On and after November 15, 2015, the 2021 notes may be redeemed, at our option, in whole or in part, at any time and from time to time at the applicable redemption prices (expressed as percentages of principal amount of the 2021 notes to be redeemed) plus accrued and unpaid interest thereon to the applicable redemption date, subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the twelve-month period beginning on November 15 of each of the years indicated below:

 

Year

   Percentage  

2015

     104.250

2016

     102.833

2017

     101.417

2018 and thereafter

     100.000

In addition, until November 15, 2013, we could have, at our option, redeemed up to 35% of the then outstanding aggregate principal amount of 2021 notes at a redemption price equal to 108.500% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon to the applicable redemption date, subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date, with the net cash proceeds of one or more equity offerings to the extent such net cash proceeds are contributed to us; provided that at least 50% of the sum of the aggregate principal amount of 2021 notes originally issued and any additional 2021 notes issued under the indenture after the original issue date remains outstanding immediately after the occurrence of each such redemption; provided further that each such redemption occurs within 180 days of the date of closing of each such equity offering or sale.

We may provide in such notice that payment of the redemption price and performance of our obligations with respect thereto may be performed by another person.

Change of Control. If we experience a change of control (as defined in the 2021 notes indenture), we must give holders of the 2021 notes the opportunity to sell us their 2021 notes at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase.

Covenants. The 2021 notes indenture contains covenants limiting our ability and the ability of our restricted subsidiaries to, among other things:

 

    incur additional debt or issue certain preferred stock;

 

    pay dividends or make distributions on our capital stock or redeem, repurchase or retire our capital stock or subordinated debt;

 

    make certain investments;

 

    create liens on our or our subsidiary guarantors’ assets to secure debt;

 

    create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries that are not guarantors of the 2021 notes;

 

    enter into transactions with affiliates;

 

    merge or consolidate with another person or sell or otherwise dispose of all or substantially all of our assets;

 

    sell assets, including capital stock of our subsidiaries; and

 

    designate our subsidiaries as unrestricted subsidiaries.

The Issuer and Holdings are not subject to the covenants listed above.

 

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Events of Default. The 2021 notes indenture also provides for customary events of default, including, without limitation, payment defaults, covenant defaults, cross-defaults to certain other indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, judgment defaults in excess of specified amounts and the failure of any guaranty by a significant party to be in full force and effect. If any such event of default occurs, it may permit or require the principal, premium, if any, interest and any other monetary obligations on all the then outstanding 2021 notes issued under the 2021 notes indenture to be due and payable immediately.

2022 Notes

UCI issued, pursuant to an Indenture, as supplemented from time to time, dated August 29, 2012 among UCI, the guarantors party thereto and Wilmington Trust, National Association, as trustee, $625.0 million in aggregate principal amount of the 2022 notes on August 29, 2012. UCI issued an additional $600.0 million in aggregate principal amount of the 2022 notes on September 19, 2012. The 2022 notes bear interest at 6.750% and pay interest on March 15th and September 15th of each year, commencing on March 15, 2013. On March 20, 2014, UCI redeemed $117.1 million aggregate principal amount of the 2022 notes at a redemption price equal to 106.750% of the aggregate principal amount of the 2022 notes redeemed, plus accrued and unpaid interest thereon.

Security. The 2022 notes are secured by a first-priority security interest in the collateral (subject to permitted liens) granted to the collateral agent for the benefit of the holders of the 2022 notes and the trustee for the 2022 notes. These liens are pari passu with certain of the liens securing our senior secured credit facilities, the 2025 notes and the 2023 notes and any liens securing future pari passu obligations. The collateral securing the 2022 notes are substantially all of UCI’s and the guarantors’ property and assets that secure our senior secured credit facilities. The 2022 notes are not secured by the assets of Holdings, including a pledge of the capital stock of UCI. To the extent the collateral agent for the lenders under our senior secured credit facilities releases any liens on any collateral, subject to limited exceptions, the liens on such collateral securing the obligations under the 2022 notes and its guarantees will also be released.

Maturity. The 2022 notes mature on September 15, 2022.

Guarantee. All of our current and future domestic subsidiaries that guarantee our senior secured credit facilities, the 2025 notes, the 2023 notes and the 2021 notes guarantee the 2022 notes. The 2022 notes are not guaranteed by Holdings. Each guarantor provides a full and unconditional guarantee of payment of principal of and premium, if any, and interest on the 2022 notes.

Ranking. The 2022 notes and the guarantees are our and the guarantors’ senior obligations. Accordingly, they:

 

    are secured by a first-priority security interest, subject to permitted liens, in the collateral granted to the collateral agent for the benefit of the holders of the 2022 notes, which liens are pari passu (subject to intervening liens) with certain of the liens securing our senior secured credit facilities, the 2023 notes and the 2025 notes;

 

    rank equal in right of payment with all of our and our guarantors’ existing and future senior debt (including our senior secured credit facilities, the 2025 notes, the 2023 notes and the 2021 notes) and other obligations that are not, by their terms, expressly subordinated in right of payment to the 2022 notes;

 

    rank senior in right of payment to our and our guarantors’ future debt and other obligations that are, by their terms, expressly subordinated in right of payment to the 2022 notes;

 

    are effectively equal in right of payment with all of our and our guarantors’ existing and future secured debt and other obligations (including our senior secured credit facilities the 2025 notes, the 2023 notes and the 2021 notes) (subject to intervening liens) that are secured on a pari passu basis by the collateral to the extent of the value of the collateral securing the 2022 notes and such indebtedness;

 

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    are effectively senior in right of payment to all of our and our guarantors’ existing and future unsecured debt and other obligations (including the 2021 notes) (subject to intervening liens) to the extent of the value of the collateral securing the 2022 notes;

 

    are structurally subordinated to all obligations of each of our subsidiaries that is not a guarantor of the 2022 notes; and

 

    are effectively subordinated in right of payment to all of our and our guarantors’ secured debt and other secured obligations to the extent of the collateral securing such indebtedness which is not also secured by the 2022 notes (including liens that secure our senior secured credit facilities but which do not secure the 2022 notes).

Mandatory Redemption; Offer to Purchase; Open Market Purchases. We are not required to make any sinking fund payments with respect to the 2022 notes. However, under certain circumstances in the event of an asset sale or, as described under “Change of Control” below, we may be required to offer to purchase 2022 notes. We may from time to time purchase 2022 notes in the open market or otherwise.

Optional Redemption. We may redeem some or all of the 2022 notes at any time prior to September 15, 2017 at a redemption price equal to 100% of the principal amount of 2022 notes redeemed plus accrued and unpaid interest to the redemption date and premium equal to the greater of (i) 1.0% of the principal amount of the 2022 notes redeemed on the redemption date and (ii) the excess, if any, of (a) the present value at the redemption date, of the redemption price of such 2022 notes at September 15, 2017 (such redemption price being set forth in the table appearing below) and all required interest payments due on such 2022 notes through September 15, 2015 (excluding accrued but unpaid interest to the redemption date) computed using a discount rate equal to the treasury rate as of the redemption date plus 50 basis points, over (b) the principal amount of such 2022 notes on the redemption date, and without duplication, accrued and unpaid interest on to the redemption date.

On and after September 15, 2017, the 2022 notes may be redeemed, at our option, in whole or in part, at any time and from time to time at the redemption prices set forth below. The 2022 notes will be redeemable at the applicable redemption price (expressed as percentages of principal amount of the 2022 notes to be redeemed) plus accrued and unpaid interest thereon to the applicable redemption date, subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the twelve-month period beginning on September 15 of each of the years indicated below:

 

Year Percentage

      

2017

     103.375

2018

     102.250

2019

     101.125

2020 and thereafter

     100.000

In addition, until September 15, 2015, we may, at our option, redeem up to 40% of the then outstanding aggregate principal amount of 2022 notes at a redemption price equal to 106.750% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon to the applicable redemption date, subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date, with the net cash proceeds of one or more equity offerings to the extent such net cash proceeds are contributed to us; provided that at least 50% of the sum of the aggregate principal amount of 2022 notes originally issued and any additional 2022 notes issued under the indenture after the original issue date remains outstanding immediately after the occurrence of each such redemption; provided further that each such redemption occurs within 180 days of the date of closing of each such equity offering or sale.

 

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We may provide in such notice that payment of the redemption price and performance of our obligations with respect thereto may be performed by another person.

Change of Control. If we experience a change of control (as defined in the 2022 notes indenture), we must give holders of the 2022 notes the opportunity to sell us their 2022 notes at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase.

Covenants. The 2022 notes indenture contains covenants limiting our ability and the ability of our restricted subsidiaries to, among other things:

 

    incur additional debt or issue certain preferred stock;

 

    pay dividends or make distributions on our capital stock or redeem, repurchase or retire our capital stock or subordinated debt;

 

    make certain investments;

 

    create liens on our or our subsidiary guarantors’ assets to secure debt;

 

    create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries that are not guarantors of the 2022 notes;

 

    enter into transactions with affiliates;

 

    merge or consolidate with another person or sell or otherwise dispose of all or substantially all of our assets;

 

    sell assets, including capital stock of our subsidiaries; and

 

    designate our subsidiaries as unrestricted subsidiaries.

The Issuer and Holdings are not subject to the covenants listed above.

Events of Default. The 2022 notes indenture also provides for customary events of default, including, without limitation, payment defaults, covenant defaults, cross-defaults to certain other indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, judgment defaults in excess of specified amounts and the failure of any guaranty by a significant party to be in full force and effect. If any such event of default occurs, it may permit or require the principal, premium, if any, interest and any other monetary obligations on all the then outstanding 2022 notes issued under the 2022 notes indenture to be due and payable immediately.

2023 Notes

UCI issued, pursuant to an Indenture, as supplemented from time to time, dated May 21, 2013 among UCI, the guarantors party thereto and Wilmington Trust, National Association, as trustee, $700.0 million in aggregate principal amount of the 2023 notes on May 21, 2013. UCI issued an additional $500.0 million in aggregate principal amount of the 2023 notes on February 19, 2015 (the “additional 2023 notes”). The 2023 notes bear interest at 5.125% and pay interest on May 15th and November 15th of each year, commencing on May 15, 2015 for the additional notes.

Security. The 2023 notes are secured by a first-priority security interest in the collateral (subject to permitted liens) granted to the collateral agent for the benefit of the holders of the 2023 notes and the trustee for the 2023 notes. These liens are pari passu with certain of the liens securing our senior secured credit facilities, the 2025 notes and the 2022 notes and any liens securing future pari passu obligations. The collateral securing the 2023 notes is substantially all of UCI’s and the guarantors’ property and assets that secure our senior secured credit facilities. The 2023 notes are not secured by the assets of Holdings, including a pledge of the capital stock of UCI. To the extent the collateral agent for the lenders under our senior secured credit facilities releases any liens on any collateral, subject to limited exceptions, the liens on such collateral securing the obligations under the 2023 notes and its guarantees will also be released.

 

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Maturity. The 2023 notes mature on May 15, 2023

Guarantee. All of our current and future domestic subsidiaries that guarantee our senior secured credit facilities, the 2025 notes, the 2022 notes and the 2021 notes guarantee the 2023 notes. The 2023 notes are not guaranteed by Holdings. Each guarantor provides a full and unconditional guarantee of payment of principal of and premium, if any, and interest on the 2023 notes.

Ranking. The 2023 notes and the guarantees are our and the guarantors’ senior obligations. Accordingly, they:

 

    are secured by a first-priority security interest, subject to permitted liens, in the collateral granted to the collateral agent for the benefit of the holders of the 2023 notes, which liens are pari passu (subject to intervening liens) with certain of the liens securing our senior secured credit facilities, the 2025 notes and the 2022 notes;

 

    rank equal in right of payment with all of our and our guarantors’ existing and future senior debt (including our senior secured credit facilities, the 2025 notes, the 2022 notes and the 2021 notes) and other obligations that are not, by their terms, expressly subordinated in right of payment to the 2023 notes;

 

    rank senior in right of payment to our and our guarantors’ future debt and other obligations that are, by their terms, expressly subordinated in right of payment to the 2023 notes;

 

    are effectively equal in right of payment with all of our and our guarantors’ existing and future secured debt and other obligations (including our senior secured credit facilities the 2025 notes, the 2022 notes and the 2021 notes) (subject to intervening liens) that are secured on a pari passu basis by the collateral to the extent of the value of the collateral securing the 2023 notes and such indebtedness;

 

    are effectively senior in right of payment to all of our and our guarantors’ existing and future unsecured debt and other obligations (including the 2021 notes) (subject to intervening liens) to the extent of the value of the collateral securing the 2023 notes;

 

    are structurally subordinated to all obligations of each of our subsidiaries that is not a guarantor of the 2023 notes; and

 

    are effectively subordinated in right of payment to all of our and our guarantors’ secured debt and other secured obligations to the extent of the collateral securing such indebtedness which is not also secured by the 2023 notes (including liens that secure our senior secured credit facilities but which do not secure the 2023 notes).

Mandatory Redemption; Offer to Purchase; Open Market Purchases. We are not required to make any sinking fund payments with respect to the 2023 notes. However, under certain circumstances in the event of an asset sale or, as described under “Change of Control” below, we may be required to offer to purchase 2023 notes. We may from time to time purchase 2023 notes in the open market or otherwise.

Optional Redemption. We may redeem some or all of the 2023 notes at any time prior to May 15, 2018 at a redemption price equal to 100% of the principal amount of 2023 notes redeemed plus accrued and unpaid interest to the redemption date and premium equal to the greater of (i) 1.0% of the principal amount of the 2023 notes redeemed on the redemption date and (ii) the excess, if any, of (a) the present value at the redemption date, of the redemption price of such 2023 notes at May 15, 2018 (such redemption price being set forth in the table appearing below) and all required interest payments due on such 2023 notes through May 15, 2018 (excluding accrued but unpaid interest to the redemption date) computed using a discount rate equal to the treasury rate as of the redemption date plus 50 basis points, over (b) the principal amount of such 2023 notes on the redemption date, and without duplication, accrued and unpaid interest on to the redemption date.

 

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On and after May 15, 2018, the 2023 notes may be redeemed, at our option, in whole or in part, at any time and from time to time at the redemption prices set forth below. The 2023 notes will be redeemable at the applicable redemption price (expressed as percentages of principal amount of the 2023 notes to be redeemed) plus accrued and unpaid interest thereon to the applicable redemption date, subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the twelve-month period beginning on September 15 of each of the years indicated below:

 

Year Percentage

      

2018

     102.563

2019

     101.708

2020

     100.854

2021 and thereafter

     100.000

In addition, until May 15, 2016, we may, at our option, redeem up to 40% of the then outstanding aggregate principal amount of 2023 notes at a redemption price equal to 105.125% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon to the applicable redemption date, subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date, with the net cash proceeds of one or more equity offerings to the extent such net cash proceeds are contributed to us; provided that at least 50% of the sum of the aggregate principal amount of 2023 notes originally issued and any additional 2023 notes issued under the indenture after the original issue date remains outstanding immediately after the occurrence of each such redemption; provided further that each such redemption occurs within 180 days of the date of closing of each such equity offering or sale.

We may provide in such notice that payment of the redemption price and performance of our obligations with respect thereto may be performed by another person.

Change of Control. If we experience a change of control (as defined in the 2023 notes indenture), we must give holders of the 2023 notes the opportunity to sell us their 2023 notes at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase.

Covenants. The 2023 notes indenture contains covenants limiting our ability and the ability of our restricted subsidiaries to, among other things:

 

    incur additional debt or issue certain preferred stock;

 

    pay dividends or make distributions on our capital stock or redeem, repurchase or retire our capital stock or subordinated debt;

 

    make certain investments;

 

    create liens on our or our subsidiary guarantors’ assets to secure debt;

 

    create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries that are not guarantors of the 2023 notes;

 

    enter into transactions with affiliates;

 

    merge or consolidate with another person or sell or otherwise dispose of all or substantially all of our assets;

 

    sell assets, including capital stock of our subsidiaries; and

 

    designate our subsidiaries as unrestricted subsidiaries.

The Issuer and Holdings are not subject to the covenants listed above

Events of Default. The 2023 notes indenture also provides for customary events of default, including, without limitation, payment defaults, covenant defaults, cross-defaults to certain other indebtedness in excess of

 

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specified amounts, certain events of bankruptcy and insolvency, judgment defaults in excess of specified amounts and the failure of any guaranty by a significant party to be in full force and effect. If any such event of default occurs, it may permit or require the principal, premium, if any, interest and any other monetary obligations on all the then outstanding 2023 notes issued under the 2023 notes indenture to be due and payable immediately.

2025 Notes

UCI issued, pursuant to an Indenture, as supplemented from time to time, dated February 19, 2015 among UCI, the guarantors party thereto and Wilmington Trust, National Association, as trustee, $750.0 million in aggregate principal amount of the 2025 notes on February 19, 2015. UCI issued an additional $810.0 million aggregate principal amount of the 2025 notes on April 13, 2015. The 2025 notes bear interest at 5.125% and pay interest on February 15th and August 15th of each year, commencing on August 15, 2015.

Security. The 2025 notes are secured by a first-priority security interest in the collateral (subject to permitted liens) granted to the collateral agent for the benefit of the holders of the 2025 notes and the trustee for the 2025 notes. These liens are pari passu with certain of the liens securing our senior secured credit facilities, the 2023 notes and the 2022 notes and any liens securing future pari passu obligations. The collateral securing the 2025 notes is substantially all of UCI’s and the guarantors’ property and assets that secure our senior secured credit facilities. The 2025 notes are not secured by the assets of Holdings, including a pledge of the capital stock of UCI. To the extent the collateral agent for the lenders under our senior secured credit facilities releases any liens on any collateral, subject to limited exceptions, the liens on such collateral securing the obligations under the 2025 notes and its guarantees will also be released.

Maturity. The 2025 notes mature on February 15, 2025

Guarantee. All of our current and future domestic subsidiaries that guarantee our senior secured credit facilities, the 2023 notes, the 2022 notes and the 2021 notes guarantee the 2025 notes. The 2025 notes are not guaranteed by Holdings. Each guarantor provides a full and unconditional guarantee of payment of principal of and premium, if any, and interest on the 2025 notes.

Ranking. The 2025 notes and the guarantees are our and the guarantors’ senior obligations. Accordingly, they:

 

    are secured by a first-priority security interest, subject to permitted liens, in the collateral granted to the collateral agent for the benefit of the holders of the 2025 notes, which liens are pari passu (subject to intervening liens) with certain of the liens securing our senior secured credit facilities, the 2022 notes and the 2023 notes;

 

    rank equal in right of payment with all of our and our guarantors’ existing and future senior debt (including our senior secured credit facilities, the 2023 notes, the 2022 notes, the 2021 notes and other obligations that are not, by their terms, expressly subordinated in right of payment to the 2025 notes;

 

    rank senior in right of payment to our and our guarantors’ future debt and other obligations that are, by their terms, expressly subordinated in right of payment to the 2025 notes;

 

    are effectively equal in right of payment with all of our and our guarantors’ existing and future secured debt and other obligations (including our senior secured credit facilities the 2023 notes, the 2022 notes and the 2021 notes) (subject to intervening liens) that are secured on a pari passu basis by the collateral to the extent of the value of the collateral securing the 2025 notes and such indebtedness;

 

    are effectively senior in right of payment to all of our and our guarantors’ existing and future unsecured debt and other obligations (including the 2021 notes) (subject to intervening liens) to the extent of the value of the collateral securing the 2025 notes;

 

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    are structurally subordinated to all obligations of each of our subsidiaries that is not a guarantor of the 2025 notes; and

 

    are effectively subordinated in right of payment to all of our and our guarantors’ secured debt and other secured obligations to the extent of the collateral securing such indebtedness which is not also secured by the 2025 notes (including liens that secure our senior secured credit facilities but which do not secure the 2025 notes).

Mandatory Redemption; Offer to Purchase; Open Market Purchases. We are not required to make any sinking fund payments with respect to the 2025 notes. However, under certain circumstances in the event of an asset sale or, as described under “Change of Control” below, we may be required to offer to purchase 2023 notes. We may from time to time purchase 2023 notes in the open market or otherwise.

Optional Redemption. We may redeem some or all of the 2025 notes at any time prior to February 15, 2020 at a redemption price equal to 100% of the principal amount of 2025 notes redeemed plus accrued and unpaid interest to the redemption date and premium equal to the greater of (i) 1.0% of the principal amount of the 2025 notes redeemed on the redemption date and (ii) the excess, if any, of (a) the present value at the redemption date, of the redemption price of such 2025 notes at February 15, 2020 (such redemption price being set forth in the table appearing below) and all required interest payments due on such 2025 notes through February 15, 2020 (excluding accrued but unpaid interest to the redemption date) computed using a discount rate equal to the treasury rate as of the redemption date plus 50 basis points, over (b) the principal amount of such 2025 notes on the redemption date, and without duplication, accrued and unpaid interest on to the redemption date.

On and after February 15, 2020, the 2025 notes may be redeemed, at our option, in whole or in part, at any time and from time to time at the redemption prices set forth below. The 2025 notes will be redeemable at the applicable redemption price (expressed as percentages of principal amount of the 2025 notes to be redeemed) plus accrued and unpaid interest thereon to the applicable redemption date, subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the twelve-month period beginning on February 15 of each of the years indicated below:

 

Year Percentage

      

2020

     102.563

2021

     101.708

2022

     100.854

2023 and thereafter

     100.000

In addition, until February 15, 2018, we may, at our option, redeem up to 40% of the then outstanding aggregate principal amount of 2025 notes at a redemption price equal to 105.125% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon to the applicable redemption date, subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date, with the net cash proceeds of one or more equity offerings to the extent such net cash proceeds are contributed to us; provided that at least 50% of the sum of the aggregate principal amount of 2025 notes originally issued and any additional 2025 notes issued under the indenture after the original issue date remains outstanding immediately after the occurrence of each such redemption; provided further that each such redemption occurs within 180 days of the date of closing of each such equity offering or sale.

We may provide in such notice that payment of the redemption price and performance of our obligations with respect thereto may be performed by another person.

Change of Control. If we experience a change of control (as defined in the 2025 notes indenture), we must give holders of the 2025 notes the opportunity to sell us their 2025 notes at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase.

 

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Covenants. The 2025 notes indenture contains covenants limiting our ability and the ability of our restricted subsidiaries to, among other things:

 

    incur additional debt or issue certain preferred stock;

 

    pay dividends or make distributions on our capital stock or redeem, repurchase or retire our capital stock or subordinated debt;

 

    make certain investments;

 

    create liens on our or our subsidiary guarantors’ assets to secure debt;

 

    create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries that are not guarantors of the 2025 notes;

 

    enter into transactions with affiliates;

 

    merge or consolidate with another person or sell or otherwise dispose of all or substantially all of our assets;

 

    sell assets, including capital stock of our subsidiaries; and

 

    designate our subsidiaries as unrestricted subsidiaries.

The Issuer and Holdings are not subject to the covenants listed above.

Events of Default. The 2025 notes indenture also provides for customary events of default, including, without limitation, payment defaults, covenant defaults, cross-defaults to certain other indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, judgment defaults in excess of specified amounts and the failure of any guaranty by a significant party to be in full force and effect. If any such event of default occurs, it may permit or require the principal, premium, if any, interest and any other monetary obligations on all the then outstanding 2025 notes issued under the 2025 notes indenture to be due and payable immediately.

Convertible Debenture

The convertible debentures are 15 year debentures maturing December 31, 2025, totaling $1,125.0 million in aggregate principal amount. Interest on the debentures accrues at a fixed rate of 1.5% per annum and is payable quarterly in arrears in cash. The Issuer’s obligation to pay interest under the debentures is supported by a letter of credit, as required by the terms of the debentures, as more fully described below. In connection with Televisa’s investment in the Issuer, the Issuer issued these debentures, which are convertible into 4,858,485 shares (subject to adjustment as provided in the debentures) of Class C common stock (or, in certain circumstances, Class A or Class D common stock or warrants convertible into Class A, Class C or Class D common stock, as applicable, of the Issuer) (which represents 30% of the equity interests of the Issuer on a fully-diluted, as-converted basis). The debentures are held by an affiliate of Televisa, by BMPI Services II, LLC and by BMPI Services IV, LLC and, in each case, their successors and permitted assigns.

Conversion of the debentures is subject to applicable laws and regulations and certain contractual limitations. Generally, the holder of the debentures may convert the debentures, subject to certain limitations, as follows:

 

    at any time after December 20, 2011, provided that if such holder is a Non-U.S. Holder (as defined in the debentures) that is not a Televisa Investor (as defined in the debentures), such holder must transfer the shares received upon conversion to a third party who is a U.S. Person (as defined in the debentures) within two business days of such conversion;

 

    at any time if such conversion would not cause Televisa to exceed the ownership caps set forth in the Amended and Restated Stockholders’ Agreement dated as of December 20, 2010 by and among the Issuer, Holdings, UCI and certain stockholders of the Issuer (the “Stockholders Agreement”) or the shares resulting from the conversion are sold to a U.S. Person other than a Televisa Investor;

 

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    into warrants exercisable for shares of Class A, Class C or Class D, as applicable, common stock at any time, if (a) a Televisa Investor notifies the Issuer that holding debentures instead of warrants would have a significant negative economic or regulatory impact on Televisa and (b) the board of directors of the Issuer determines that Televisa’s ownership of warrants would be permitted under applicable laws (including FCC foreign ownership restrictions) and would not impact the FCC’s approval of a change of control transaction;

 

    into warrants on the second business day prior to the Issuer’s redemption of the debentures; and

 

    at any time after the 60th day prior to the maturity date of December 31, 2025.

The holders of the debentures receive certain anti-dilution protections, including an adjustment of the conversion price in the event of a stock split, dividend, recapitalization or reclassification of certain classes of the Issuer’s stock and certain distributions made in respect of certain classes of the Issuer’s stock. Additionally the Issuer is subject to certain restrictive covenants preventing it from taking certain actions, including without limitation, issuing preferred stock and entering into certain business combinations. The Issuer is also subject to certain information reporting requirements.

In certain circumstances, the Issuer is required to pay a make-whole payment to the holders of the debentures in an amount equal to the present value of all required interest payments payable through the maturity date. These circumstances include, but are not limited to (i) an acceleration of all payments due under the debentures due to the existence of an event of default, (ii) our exercise of our right to redeem the debentures on or after December 31, 2024 and prior to maturity or after a change of control (or Televisa’s exercise of its right to convert the debentures prior to such redemption), and (iii) in the event of a change of control of the Issuer in which Televisa rolls its interest into ownership interests in the acquiring entity, and the receipt of such ownership interests would cause Televisa to exceed the ownership caps set forth in the Stockholders’ Agreement. The fair value of the Issuer’s make-whole obligation was estimated by management and was determined to be immaterial.

In connection with the debentures, on December 20, 2010, the Issuer entered into an agreement with Deutsche Bank Trust Company Americas (“Deutsche Bank”) relating to the issuance of standby letters of credit. Under that agreement, Deutsche Bank agreed to issue a letter of credit with an initial face amount of $90.0 million to support the payment of the Issuer’s interest obligations under the debentures. The letter of credit may only be drawn by the holders of the debentures under limited circumstances, including a payment event of default or bankruptcy event of default under the debentures. The Issuer’s payment obligations under the letter of credit are fully cash collateralized by $92.7 million held in an interest-bearing account which is reflected as restricted cash on our balance sheet as of March 31, 2015. The Issuer’s agreement with Deutsche Bank contains certain restrictions on the activities of the Issuer, including making certain modifications to the debentures and engaging in material business activities or having material liabilities other than those associated with its ownership of its subsidiaries and obligations in respect of the letter of credit documents and the Televisa transaction documents.

On July 1, 2015, we entered into the MOU, in which it was agreed that, prior to the consummation of this offering, Televisa’s convertible debentures would be exchanged for the Televisa Warrants.

Accounts Receivable Sale Facility

On June 28, 2013, we entered into an amendment to the accounts receivable sale facility, which, among other things, (i) extended the maturity date of the accounts receivable sale facility to June 28, 2018 (or, if earlier, the ninetieth (90th) day prior to the scheduled maturity of any indebtedness in an aggregate principal amount greater than or equal to $250,000,000 outstanding under our senior secured credit facilities, (ii) increased the borrowing capacity under the accounts receivable sale facility by $100.0 million, to $400.0 million, (iii) reduced the term component of the accounts receivable sale facility to $100.0 million and increased the borrowing capacity under the revolving component to $300.0 million, subject to the availability of qualifying receivables, (iv) lowered the interest rate on the borrowings under the accounts receivable sale facility to a LIBOR rate (without a floor) plus a margin of 2.25% per annum and (v) lowered the commitment fee on the unused portion of the accounts receivable sale facility to 0.50% per annum. Interest is paid monthly on the accounts receivable sale facility.

 

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Under the terms of the accounts receivable sale facility, certain of our subsidiaries sell accounts receivable on a true sale and non-recourse basis to their respective wholly-owned special purpose subsidiaries, and these special purpose subsidiaries in turn sell such accounts receivable to Univision Receivables Co., LLC, a bankruptcy-remote subsidiary in which Univision Holdings, Inc. and certain special purpose subsidiaries, each holds a 50% voting interest (the “Receivables Entity”). Thereafter, the Receivables Entity sells to investors, on a revolving non-recourse basis, senior undivided interests in such accounts receivable pursuant to the receivables purchase agreement relating to the receivables sale facility (the “Receivables Purchase Agreement”). UCI (through certain special purpose subsidiaries) holds a 100% economic interest in the Receivables Entity. The assets of the special purpose entities and the Receivables Entity are not available to satisfy the obligations of Univision or its other subsidiaries.

The accounts receivable sale facility is comprised of a $100.0 million term component and a $300.0 million revolving component subject to the availability of qualifying receivables. In addition, the Receivables Entity is obligated to pay a commitment fee to the purchasers, such fee to be calculated based on the unused portion of the accounts receivable sale facility. The Receivables Purchase Agreement contains customary default and termination provisions, which provide for the early termination of the accounts receivable sale facility upon the occurrence of certain specified events including, but not limited to, failure by the Receivables Entity to pay amounts due, defaults on certain indebtedness, change in control, bankruptcy and insolvency events. The Receivables Entity is consolidated in our consolidated financial statements.

 

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DESCRIPTION OF CAPITAL STOCK

The following is a description of the material terms of our amended and restated certificate of incorporation, amended and restated bylaws, the PIA, the Stockholders Agreement and the PRRCA as they will be in effect at the time of the consummation of this offering and which implement certain changes thereto reflected in the MOU. We refer you to our amended and restated certificate of incorporation, amended and restated bylaws, the PIA, the Stockholders Agreement and the PRRCA, copies of which will be filed as exhibits to the registration statement of which this prospectus is a part.

Authorized Capitalization

Our authorized capital stock shall consist of:

 

                shares of Class A common stock, par value $0.001 per share, of which             shares are issued and outstanding;

 

                shares of Class S-1 common stock, par value $0.001 per share, of which             shares are issued and outstanding;

 

                shares of Class S-2 common stock, par value $0.001 per share, of which             shares are issued and outstanding;

 

                shares of Class T-1 common stock, par value $0.001 per share, of which             shares are issued and outstanding;

 

                shares of Class T-2 common stock, par value $0.001 per share, of which             shares are issued and outstanding;

 

    one share of Class T-3 common stock, par value $0.001 per share, of which one share is issued and outstanding; and

 

                shares of preferred stock, par value $0.001 per share, of which no shares are issued and outstanding.

All outstanding shares are, and all shares of Class A common stock offered by this prospectus will be, when sold, validly issued, fully paid and nonassessable.

Common Stock

Holders of our common stock are entitled to the following rights.

Voting Rights

Holders of Class A common stock, Class S-1 common stock, Class T-1 common stock and Class T-3 common stock have all voting powers and voting rights. Class S-2 common stock and Class T-2 common stock do not have any voting power or voting rights other than as required by applicable law.

Holders of Class A common stock, Class S-1 common stock and Class T-1 common stock shall be entitled to one vote per share, provided that pursuant to our amended and restated certificate of incorporation the voting rights of Class A common stock held by non-U.S. persons (other than Televisa and the Investors) will be automatically eliminated or suspended (in whole or in part) in order to maintain our compliance with federal communications laws. Under the Current FCC Foreign Ownership Cap, because the Class T-1 and Class T-3 common stock will collectively be entitled to at least 22% of the outstanding voting power of the Company, as further described below, and some portion of the Class S-1 common stock may be deemed to be held by non-U.S. persons, the voting rights of the Class A common stock held by such non-U.S. persons are highly likely to be entirely or almost entirely eliminated or suspended in order to comply with the federal communications laws. For information on actions that our board of directors may take to maintain the Company’s compliance with federal communications laws, see “Description of Capital Stock — Federal Communications Laws Restrictions.”

 

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Except as (i) required by law and (ii) for the election of certain directors (as discussed below under “Election of Directors”), the Class A common stock, Class S-1 common stock, Class T-1 common stock and Class T-3 common stock shall vote together as a single class.

The Class T-3 common stock provides its holder with special voting rights that, in the absence of a significant increase in the Current FCC Foreign Ownership Cap, will result in Televisa’s voting power being significantly greater than its ownership percentage of our outstanding common stock. Such voting power will be equal to (a) (1) the FCC foreign percentage ownership limitation on voting capital stock of corporations that own broadcast licensees that may be held by non-U.S. persons (as amended or modified from time to time, the “FCC Voting Cap”) or (2) if higher than the percentage referred to in clause (1), any FCC Voting Cap adopted by the FCC and applicable to Televisa less (b) the percentage of our voting common stock held by the Investors, Glade Brook and certain bank investors that is attributable to non-U.S. persons for FCC purposes at such time (but in no event greater than 3%) less (c) the percentage of our voting common stock (other than Class T-3 common stock) held by Televisa. As our common stock held by the Investors, Glade Brook and certain bank investors that is attributable to non-U.S. persons for FCC purposes is sold to third parties, Televisa’s voting power will increase on a share-for-share basis. Notwithstanding the foregoing, Televisa’s voting power provided by the Class T-3 common stock may not result in Televisa’s percentage of the voting power of our common stock exceeding (x) Televisa’s percentage ownership of our common stock (assuming, for this purpose, that Televisa has exercised all of its warrants for our common stock) or (y) the then applicable FCC aggregate percentage limitation on voting power of corporations that own broadcast licensees that may be held by non-U.S. persons that may be adopted by the FCC and applicable to Televisa. The Class T-3 common stock shall convert into one share of T-1 common stock at such time as Televisa holds its entire equity interest (including being allowed to convert its warrants) in the form of Class T-1 common stock and/or Class T-2 common stock.

Directors will be elected by a plurality of the votes present in person or represented by proxy at a stockholders’ meeting and entitled to be cast with respect to a particular director as set forth below and pursuant to the PIA. Except as required by law, all matters to be voted on by our stockholders (other than matters relating to the election and removal of directors to be elected exclusively by the holders of Class S-1 common stock and Class T-1 common stock, as described below) must be approved by a majority of the shares present in person or by proxy at the meeting and entitled to vote on the subject matter with each share (other than Class T-3 common stock) entitled to one vote and Class T-3 common stock entitled to the number of votes described above or by a written resolution of the stockholders representing the number of affirmative votes required for such matter at a meeting.

Election of Directors

Our board of directors shall initially consist of 22 members or such other number as shall be fixed in accordance with our bylaws and the PIA. Upon the consummation of this offering, our board of directors shall be comprised of 14 directors appointed by holders of our Class S-1 common stock, four directors appointed by holders of our Class T-1 common stock, our chief executive officer and three independent directors (see “Director Designation Rights” below). Our board of directors shall be reduced to 11 members or such other number as shall be fixed in accordance with our bylaws and the PIA upon the earliest of (i) the transfer by the Investors of at least 95% of our common stock held collectively by the Investors on the Calculation Date (the “Principal Investor 95% Sell-Down”), (ii) 36 months after the transfer by the Investors of at least 85% of our common stock held collectively by the Investors on the Calculation Date and (iii) any time after the transfer by the Investors of at least 85% of our common stock held collectively by the Investors on the Calculation Date if at such time our remaining common stock then held by the Investors is not held by (A) at least three of the Investors who each hold at least 15% of the collective remaining interest of the Investors in our common stock, or (B) if the Saban Capital Group continues to hold more than a de minimis amount of our common stock at such time, at least two of the Investors who each hold at least 15% of the collective remaining interest of the Investors in our common stock (the earliest of clauses (i), (ii) and (iii), the “Investor Exit”).

 

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Election of Directors – Prior to an Investor Exit

Prior to an Investor Exit, the holders of our Class S-1 common stock, voting as a separate class, shall be entitled to elect 14 directors to our board of directors (collectively, the “Class S Directors”), provided that, following an Investor Exit and receipt of a TOC Approval, the holders of our Class S-1 common stock shall not have the right to elect any of our directors. After an Investor Exit and prior to receipt of a TOC Approval, the number of directors will be reduced and elected as set forth below under “Election of Directors – After an Investor Exit, but Prior to Receipt of a TOC Approval.” The holders of our Class S-1 common stock, voting as a separate class, shall have the right to remove any Class S Director with or without cause. Prior to an Investor Exit, any vacancy in the office of a Class S director shall be filled solely by the holders of our Class S-1 common stock, voting as a separate class. The 14 Class S Directors will be designated by the Investors as described below in “Director Designation Rights.”

Prior to an Investor Exit, the holders of our Class T-1 common stock, voting as a separate class, shall be entitled to elect four directors to our board of directors (collectively, the “Class T Directors”). The holders of our Class T-1 common stock, voting as a separate class, shall have the right to (i) remove any Class T Director with or without cause and (ii) fill any vacancy in the office of a Class T director. Televisa shall lose its right to appoint one or more directors to our board of directors upon certain voluntary transfers of our common stock as described below in “Director Designation Rights.”

Prior to an Investor Exit, the holders of our Class S-1 common stock and Class T-1 common stock, voting together as a single class, shall be entitled to elect one director who shall be our chief executive officer (the “CEO Director”). The holders of our Class S-1 common stock and Class T-1 common stock shall have the right, voting together as a single class, (a) to remove the CEO Director in the event that such individual is no longer our chief executive officer and (b) fill any vacancy in the office of the CEO Director.

The holders of our Class S-1 common stock, Class T-1 common stock and Class T-3 common stock, voting together as a single class, shall be entitled to elect one director (the “GB Director”) who shall be designated by Glade Brook, provided that (i) this right (the “GB Designation Right”) shall expire if Glade Brook transfers any of our shares to a person other than an affiliate of Glade Brook and (ii) the GB Director must meet the NYSE or Nasdaq standard for independence, as applicable (the “Independence Standard”). Upon the termination or expiration of the GB Designation Right, the GB Director shall be re-designated as an Independent Director (as defined below) and the holders of our Class A common stock, Class S-1 common stock, Class T-1 common stock and Class T-3 common stock, voting as a separate class, shall be entitled to fill this board seat and shall not be required to elect a Glade Brook designee. Unless the position of the GB Director has been re-designated as a position for an Independent Director, the holders of our Class S-1 common stock and Class T-1 common stock shall have the right, voting together as a single class, to fill any vacancy in the office of the GB Director.

Prior to an Investor Exit, the holders of our Class A common stock, Class S-1 common stock, Class T-1 common stock and Class T-3 common stock, voting together as a single class, shall be entitled to elect the number of directors equal to the then authorized number of directors constituting our board of directors less the total numbers of director that the holders of our Class S-1 common stock and Class T-1 common stock are entitled to elect (whether as a separate class or together as a single class) at such time, as discussed above (the “Independent Directors”). At the time of this offering, holders of our Class A common stock, Class S-1 common stock, Class T-1 common stock and Class T-3 common stock, voting as a single class, shall be entitled to elect two directors to our board of directors. Prior to an Investor Exit, each individual elected as an Independent Director (including as a result of a re-designation of the GB Director position) shall (i) meet the Independence Standard and be recommended by a unanimous vote of our nominating committee, provided that if a candidate for an Independent Director position is not approved by our nominating committee on one of the first three votes for such position then the next candidate for such position will be recommended by a majority vote of the nominating committee. Upon the approval of the nominating committee, each Independent Director candidate will be presented to our board of directors and must be approved by the majority vote of our board of directors.

 

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The holders of our Class A common stock, Class S-1 common stock, Class T-1 common stock and Class T-3 common stock, voting as a single class, shall have the right to (a) remove an Independent Director with or without cause and (b) fill any vacancy in the office of an Independent Director or any newly created directorship.

Election of Directors – After an Investor Exit, but Prior to Receipt of a TOC Approval

Our board of directors shall be fixed at 11 directors after an Investor Exit, but prior to receipt of a TOC Approval, the holders of our Class S-1 common stock, voting as a separate class, shall be entitled to elect six directors to our board of directors (collectively, the “Investor Exit Investor Directors”), provided that five of such directors must be independent of the Company, the Investors and any stockholder holding more than 15% of our common or voting stock in accordance with the Independence Standard. Each Investor shall have the right to appoint one of the Investor Exit Investor Directors and the remaining Investor Exit Investor Directors shall be selected by the Majority Principal Investors (see “Director Designation Rights”). The holders of our Class S-1 common stock, voting as a separate class, shall have the right to remove any Investor Exit Investor Directors with or without cause. Prior to both an Investor Exit and receipt of a TOC Approval, any vacancy in the office of an Investor Exit Investor Director shall be filled solely by the holders of our Class S-1 common stock, voting as a separate class. Following an Investor Exit and a TOC Approval, the holders of our Class S-1 common stock shall not have the right to elect any of our directors.

Following an Investor Exit, but prior to receipt of a TOC Approval, the holders of our Class T-1 common stock, voting as a separate class, shall be entitled to elect three directors (the “Investor Exit Televisa Directors”), provided that (a) upon a Televisa Sell-Down, Televisa’s minimum number of board designees shall be reduced from three to two and (b) upon the voluntary the transfer by Televisa of at least 80% of the shares of our common stock (including shares issuable upon conversion of our convertible securities) held by Televisa on the Calculation Date (“Televisa 80% Sell-Down”), Televisa shall lose all rights to designate directors to our board of directors. The holders of our Class T-1 common stock, voting as a separate class, shall have the right to (i) remove any Investor Exit Televisa Directors with or without cause and (ii) fill any vacancy in the office of an Investor Exit Televisa Director.

The remaining board seats shall be filled by (i) the CEO Director elected as described above in “Election of Directors – Prior to an Investor Exit” and (ii) an independent director who shall meet the Independence Standard and will be recommended for nomination, nominated and elected in the same manner as the Independent Directors (the “Pre-TOC Approval Independent Director”).

In the event that an Investor Exit is triggered pursuant to clause (iii) of the definition of an Investor Exit, the changes to our board of directors described in this section will not occur immediately and instead shall occur upon a date determined by the Investors, provided that such date must be no later than one year from the date of such event.

Election of Directors – Upon the Occurrence of Both an Investor Exit and Receipt of a TOC Approval

Our board of directors shall be fixed at 11 directors upon the occurrence of both an Investor Exit and receipt of a TOC Approval. Following the occurrence of both an Investor Exit and receipt of a TOC Approval, the holders of our Class T-1 common stock, voting as a separate class, shall be entitled to elect that number of directors equal to the greater of (i) three and (ii) such number of directors that would represent a percentage of our entire board of directors equivalent to Televisa’s percentage ownership of our outstanding voting common stock at such time (the “Post-TOC Approval Televisa Directors”), provided that (a) upon a Televisa Sell-Down, Televisa’s minimum number of board designees shall be reduced from three to two and (b) upon a Televisa 80% Sell-Down, Televisa shall lose its rights to designate directors to our board of directors. The holders of our Class T-1 common stock, voting as a separate class, shall have the right to (i) remove any Post-TOC Approval Televisa Directors with or without cause and (ii) fill any vacancy in the office of a Post-TOC Approval Televisa Director.

 

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The board seats that the holders of our Class T-1 common stock do not have the right to designate shall be filled by (i) the CEO Director and (ii) independent directors that meet the Independence Standard (the “Post-Investor Exit Independent Directors”). The Post-Investor Exit Independent Directors shall be elected by a vote of the holders of our Class A common stock, Class T-1 common stock and Class T-3 common stock, voting as a single class. The Post-Investor Exit Independent Directors shall be recommended for nomination by majority approval of all of the members of our nominating committee and, until a Televisa Sell-Down, nominated by the unanimous approval of all of the members of our board of directors. Following the occurrence of both an Investor Exit and receipt of a TOC Approval, our nominating committee shall be comprised of three independent directors, one of whom shall be a director designated by directors elected by the separate class vote of the Class T-1 common stock.

Following the occurrence of both an Investor Exit and receipt of a TOC Approval, all shareholder action shall be taken at a meeting called for such purpose, and not by the written consent of the shareholders. In all cases, a restricted person (as defined in our Stockholders Agreement) shall not serve on our board of directors until the transfer by the Investors of at least 98% of our common stock held collectively by the Investors on the Calculation Date.

Dividend Rights

Holders of our Class A, Class S and Class T common stock will share, on a pro rata basis, in any dividend declared by our board of directors, subject to the rights of the holders of any outstanding preferred stock, the approval rights in the PIA and our amended and restated certificate of incorporation described below.

Stock Split, Reverse Stock Splits, Stock Dividends and Stock Buybacks

In the event of a subdivision, increase or combination in any manner (by stock split, reverse stock split, stock dividend or other similar manner) of the outstanding shares of any one class of common stock, the outstanding shares of the other classes of common stock will be adjusted proportionally, subject to the approval rights in our amended and restated certificate of incorporation described below.

In the event the Company effects any buybacks of shares and the buyback results in Televisa’s ownership of our common stock exceeding any FCC ownership limit or FCC Individual Cap applicable to Televisa, Televisa’s equity interests in excess of such limitation shall be held as non-voting common stock (to the maximum extent such limitation permits) and the balance shall be held as warrants.

If as a result of a buyback of our shares, Televisa’s fully converted equity interest in the Company exceeds the Maximum Capital Percentage then Televisa’s equity interests in excess of the Maximum Capital Percentage shall be held by Televisa, at our election, as non-voting common stock and/or warrants.

Conversion Rights

Optional Conversions. Each outstanding share of Class S-1 common stock may, at the option of the holder thereof, be converted at any time into one share of Class S-2 common stock, and subject to stock ownership limits on non-U.S. persons under the federal communications laws and our amended and restated certificate of incorporation, each outstanding share of Class S-2 common stock may, at the option of the holder thereof, be converted into one share of Class S-1 common stock. Each outstanding share of Class T-1 common stock may, at the option of the holder thereof, be converted at any time into one share of Class T-2 common stock, and subject to stock ownership limits on non-U.S. persons under the federal communications laws and our amended and restated certificate of incorporation, each outstanding share of Class T-2 common stock may, at the option of the holder thereof, be converted into one share of Class T-1 common stock.

 

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Mandatory Conversions. Each share of Class S-1 common stock and Class S-2 common stock acquired by Televisa shall automatically convert to one share of Class T-1 common stock or, if such conversion would exceed Televisa’s Maximum Equity Percentage, to one share of Class T-2 common stock. Each share of Class T-1 common stock and Class T-2 common stock automatically converts to one share of Class A common stock immediately upon any transfer of such Class T common stock from Televisa to a third party, with limited exceptions. Each outstanding share of Class T-1 common stock automatically converts to one share of Class T-2 common stock upon any event that would cause Televisa’s voting equity percentage to exceed its Maximum Equity Percentage. Each share of Class S-1 common stock and Class S-2 common stock held by an Investor shall automatically convert to one share of Class A common stock upon any transfer of such share to any person that is not an Investor or Televisa or an affiliate thereof. Upon an Investor Exit and receipt of a TOC Approval, each share of Class S common stock outstanding shall automatically convert into Class A common stock. Once Televisa holds its entire equity interest in the Company in common stock, the share of Class T-3 common stock shall automatically convert into one share of Class T-1 common stock. The share of Class T-3 common stock also shall automatically convert into one share of T-1 common stock upon a transfer of Class T-3 common stock to a third party, with limited exceptions.

Liquidation Rights

In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, holders of our common stock would be entitled to share ratably in our assets that are legally available for distribution to stockholders after payment of liabilities. If we have any preferred stock outstanding at such time, holders of the preferred stock may be entitled to distribution and/or liquidation preferences. In either such case, we must pay the applicable distribution to the holders of our preferred stock before we may pay distributions to the holders of our common stock.

Director Designation Rights

The PIA provides that prior to an Investor Exit we will have a 22 member board of directors and grants each Investor and Televisa the right to appoint directors. Pursuant to the PIA, each of the Investors may designate three Class S Directors to the board of directors except for Saban Capital Group, which may designate two Class S Directors. Since 2007, THL has elected not to appoint any members to the board of directors and instead has appointed three observers to the board of directors. THL could elect to appoint its three Class S Directors in the future. Each of the Investors shall have the right to appoint such directors until such Investor sells more than 95% of the shares of our common stock held by such Investor on the Calculation Date (98% in certain cases, as described below) and thereafter shall no longer have a right to designate any directors to our board of directors. Prior to an Investor Exit, if an Investor is no longer entitled to appoint any director to our board of directors, the resulting vacancies for Class S Directors shall be filled upon the approval of both (a) the majority of the remaining Investors and (z) Investors holding at least 60% of the shares our common stock held by the remaining Investors at such time, provided that if there are only two Investors at such time, then the vacancy shall be filled with solely the approval of the Investors holding at least 60% of the shares of our common stock held by such remaining Investors.

Following an Investor Exit, but prior to receipt of a TOC Approval, the Investors, as holders of Class S-1 common stock, shall have the right to elect six directors to our board of directors, provided that five of the directors must meet the Independence Standard. Each Investor shall have the right to appoint one of the Investor Exit Investor Directors and the remaining Investor Exit Investor Directors shall be selected by the Majority Principal Investors. A holder of Class S-1 common stock shall lose its right to elect directors to our board of directors upon the occurrence of both an Investor Exit and receipt of a TOC Approval.

Prior to an Investor Exit, Televisa shall have the right to designate four directors to our board of directors. Prior to an Investor Exit, Televisa shall no longer be entitled to appoint any directors to our board of directors if Televisa voluntarily transfers any shares of our common stock (other than to a permitted transferee) and after giving effect to

 

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such transfer Televisa holds less than 95% our common stock held by Televisa as of the Calculation Date and Televisa fails to increase its ownership of our common stock to such 95% ownership threshold within 60 days of receiving notice from the Company of falling below such threshold. Notwithstanding the foregoing, Televisa may assign its right to designate (i) a Class T Director to a person if such person acquires from Televisa less than 10% of our fully-diluted shares of common stock as of the Calculation Date, (ii) two Class T Directors to a person if such person acquires from Televisa 10% or more, but less than 20% of our fully-diluted shares of our common stock as of the Calculation Date and (iii) three Class T Directors to a person if such person acquires from Televisa 20% or more, but less than 30% of our fully-diluted shares of our common stock as of the Calculation Date.

Following an Investor Exit, but prior to receipt of a TOC Approval, Televisa shall have the right to designate three directors to our board of directors, provided that (a) upon a Televisa Sell-Down, Televisa’s minimum number of board designees shall be reduced from three to two and (b) upon a Televisa 80% Sell-Down, Televisa loses all rights to designate directors to our board of directors.

Upon the occurrence of both an Investor Exit and receipt of a TOC Approval, Televisa shall have the right to designate a number of directors to our board of directors equal to the greater of (i) three and (ii) such number of directors that would represent a percentage of our entire board of directors equivalent to Televisa’s percentage ownership of our outstanding voting common stock at such time, provided that (a) upon a Televisa Sell-Down, Televisa’s minimum number of board designees shall be reduced from three to two and (b) upon a Televisa 80% Sell-Down, Televisa loses all rights to designate directors to our board of directors.

The Investors and Televisa’s voting agreement with Glade Brook requires that one directorship be filled by the GB Director as described above. The PIA requires the Investors and Televisa to (a) prior to an Investor Exit, cause the chief executive officer to be elected as a director, and fill two directorships (three directorships if Glade Brook no longer has the right to appoint a GB Director) with Independent Directors and (b) following an Investor Exit but prior to a TOC Approval, to cause the chief executive officer to be elected as a director, and to elect one Independent Director (other than the five Independent Directors to be designated by the Investors as described above). Prior to an Investor Exit and receipt of a TOC Approval, each Investor and Televisa has the right to appoint a director to serve on each committee of the board of directors.

In the case of any vacancy on our board of directors, prior to both an Investor Exit and receipt of a TOC Approval, created by the removal or resignation of a director appointed by an Investor or Televisa, the applicable Investor or Televisa will have the right to fill the vacancy with its own designee, provided that an Investor’s right to fill a vacancy shall expire when such Investor sells more than 95% (98% if TOC Approval is not obtained following an Investor Exit) of the shares of our common stock held by such Investor on the Calculation Date and Televisa’s right to fill a vacancy with its own designee shall expire upon a Televisa 80% Sell-Down. Subject to the terms of the PIA, the Investors and Televisa have agreed to vote their shares in favor of the election of the directors nominated by the other Investors and Televisa.

Approval Rights

Approval Rights of Majority PITV Investors

Under the PIA, the Investors and/or Televisa have approval rights with respect to certain business matters. Specifically, we are required to obtain the approval of both (i) at least four members of the group comprised of Televisa and the Investors and (ii) the Majority PITV Investors, in connection with, among other things, the following actions:

 

    Any amendment to the certificate of incorporation, bylaws and certain governing documents of Univision;

 

    Authorize or issue new equity securities or convertible securities of Univision other than in certain limited circumstances;

 

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    Incur indebtedness or issue debt securities in an aggregate amount in excess of $100,000,000, other than borrowings under Univision’s then existing debt documents or any other debt agreement approved by the Majority PITV Investors;

 

    Voluntarily prepay debt of Univision in excess of $100,000,000 in any 12 month period or amend or waive the provisions of any agreement or instrument governing indebtedness with a principal amount in excess of $100,000,000;

 

    Commence a voluntary case under any applicable bankruptcy or insolvency laws;

 

    Enter into, modify or amend any agreement providing for the payment to or by Univision of more than $100,000,000 other than in certain limited circumstances;

 

    Enter into transactions involving the purchase or sale of (i) any assets having a fair market value in excess of $250,000,000 other than certain ordinary course of business transactions, (ii) any radio station or television station in a top 20 designated market area for consideration having a fair market value in excess of $100,000,000 or (iii) any programming involving payments in excess of $100,000,000; or

 

    Make any loan, advance or capital contribution to any third party in an amount in excess of $250,000,000 per transaction or in certain circumstances in excess of $100,000,000.

The approval rights of the Majority PITV Investors will expire upon the earlier to occur of (i) a Principal Investor Two-Thirds Sell-Down and (ii) the Televisa Sell-Down.

Approval Rights of the Majority Principal Investors

We are also required to obtain the approval of both (i) at least three of the five Investors and (ii) the Majority Principal Investors, in order to, among other things, enter into a change of control transaction, exercise any right of the Majority Principal Investors under the Company’s governing documents, exercise drag-along rights under the Stockholders Agreement or modify the Televisa PLA, Mexico License, the Sales Agency Agreement or enter into agreements with Televisa related to similar programming. The approval rights of the Majority Principal Investors will expire upon an Investor Exit and receipt of a TOC Approval.

Approval Rights on Certain Related Party Transactions

In order for us to enter into a transaction with an Investor or Televisa, the PIA requires that we receive the approval of both (i) the majority of members of the group comprised of the Investors and Televisa who are not involved in the applicable transaction and (ii) the members of such unaffiliated group who hold a majority of our common stock held by such group, provided that this approval shall not be necessary if each of the Investors and Televisa are participating in the transaction on pro rata basis. This approval requirement expires upon the earlier to occur of (i) both an Investor Exit and receipt of a TOC Approval and (ii) the Televisa Sell-Down.

Following an Investor Exit and receipt of a TOC Approval, we will be required to obtain the approval of our audit committee (or other committee comprised solely of Independent Directors) in order to enter into an agreement or a transaction with Televisa or an affiliate of Televisa. Each director serving on such committee shall meet the Independence Standard and shall evaluate the transaction to determine if it is in our best interest.

Approval Rights of the Investors and Televisa

The PIA provides (i) each Investor customary minority approval rights over the amendment or modification of certain provisions of the PIA, Stockholders Agreement and the PRRCA which shall continue until none of the Investors are subject to the PIA and (ii) Televisa approval rights over certain amendments to our governing documents that would adversely affect Televisa’s rights under such governing documents; provided that such approval rights shall expire upon a Televisa Sell-Down except for certain Televisa approval rights that continue for so long as Televisa owns any of our shares or retains the right to designate at least one director to our board of directors.

 

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Televisa Approval Rights

Pursuant to our amended and restated certificate of incorporation, Televisa has, subject to continuing to hold a specified minimum interest in us, approval rights with respect to various matters, including, but not limited to, the payment and declaration of dividends and distributions, certain stock repurchases, bankruptcy filings, any amendment to our certificate of incorporation or by-laws that discriminates against Televisa, incurrence of indebtedness above specified levels, changing Univision’s core business and equity issuances to certain restricted persons. Televisa’s approval rights with respect to bankruptcy filings and incurrence of indebtedness above a specified level will terminate at the time Televisa converts all of our convertible securities that it holds into our common stock. Further, Televisa’s approval rights with respect to dividends and distributions, spin-offs and split-offs and stock repurchases shall not apply at any time that Televisa does not hold convertible securities exercisable for our common stock.

Prior to a Televisa 80% Sell-Down, unless required by law or applicable stock exchange rules in the case of clauses (vi) (in respect of procedural matters) and (ix) below, we will not take any of the following actions without Televisa’s prior written consent (i) implement a poison pill that would limit Televisa’s ownership stake in the Company, (ii) issue equity securities of the Company that entitle their holder to multiple votes per security or similar special voting rights, (iii) seek a court or regulatory approval to void or limit a right of Televisa under our governing documents and the Televisa investment documents to invalidate or make unenforceable such right (e.g. on the basis of it being against public policy), (iv) petition the FCC, or take any action support any petition filed by a third party, to request a reduction in the Current FCC Foreign Ownership Cap including any FCC Voting Cap, as increased from time to time, or in the FCC Individual Cap (whether on equity or voting interests) applicable to Televisa, (v) amend our amended and restated certificate of incorporation or the bylaws to permit the removal of a director other than for cause (other than directors appointed exclusively by the Investors), (vi) limit Televisa’s right to call a special meeting of the Company’s stockholders, (vii) create any new requirements for approvals by a supermajority of the board or stockholders or a separate class of directors or stock, (viii) amend our amended and restated certificate of incorporation to implement a classified board of directors, (ix) add new director qualification requirements that would result in excluding the Televisa designees to our board of directors or (x) amend the provisions of our amended and restated certificate of incorporation that prohibit us from using against Televisa or securities held by Televisa certain remedies to reduce foreign ownership.

Transfer Restrictions

If the Investors or Televisa transfer our shares of common stock to certain permitted transferees in accordance with the Stockholders Agreement, the permitted transferees must enter into an agreement to be bound by the PIA. If the Investors sell their shares in a change of control transaction in compliance with the Stockholders Agreement, the Investors’ collective rights and obligations under our certificate of incorporation, the PIA, the Stockholders Agreement, the Investment Agreement, and the PRRCA will be transferred to and assumed by the acquirer.

Televisa may not transfer our Class T-3 common stock, with limited exceptions, until after an Investor Exit has occurred at which time Televisa may transfer Class T-3 common stock in connection with a transfer of all of our Class T common stock to a non-U.S. person. Subject to certain exceptions provided for in the Stockholders Agreement, Televisa may not transfer its other contractual rights under the PIA, the Stockholders Agreement, the Investment Agreement and the PRRCA. In the event that Televisa transfers all of the Class T common stock after an Investor Exit, the Investors shall have the right to sell their common stock to the acquirer in such transfer on terms and conditions consistent with the Investors’ tag-along rights in the Stockholders Agreement.

Until TOC Approval has been obtained, without Televisa’s approval, the Investors shall not transfer more than 98% of the shares of our common stock held by the Investors on the Calculation Date, provided that such approval shall not be required following a Televisa Sell-Down.

 

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For a description of additional transfer restrictions under the Stockholders Agreement, see “Certain Relationships and Related Person Transactions — Stockholders Agreement — Transfer Restrictions.”

Federal Communications Laws Restrictions

Our amended and restated certificate of incorporation requires us to restrict the rights and ownership or proposed ownership of a public stockholder or any other stockholder (excluding Televisa, the Investors or their permitted transferees) if such rights or ownership would (i) be inconsistent with or violate federal communications laws, (ii) limit or impair any of our business activities or proposed business activities under federal communication laws, (iii) could subject us to any law, regulation or policy under federal communications laws which we would not be subject to, but for such ownership or proposed ownership (collectively, “FCC Regulatory Limitations”) or (iv) cause or could cause Televisa’s ownership or proposed ownership of any of our securities to result in an FCC Regulatory Limitation. If we believe that the rights or ownership or proposed ownership of our capital stock may result in a FCC Regulatory Limitation, the applicable stockholder or potential stockholder must furnish any information that we request. Following this offering, if a stockholder or potential stockholder does not furnish the requested information or if we conclude in our sole discretion that such person’s rights or ownership would result in a FCC Regulatory Limitation, we may take steps to prevent the FCC Regulatory Limitation, including (a) refusing to permit the sale of our capital stock to such person, (b) suspending, reducing or eliminating the rights of such person’s capital stock, (c) redeeming such person’s capital stock, (d) requiring the conversion of all or any of such person’s shares to non-voting stock, warrants or other securities, (e) transferring such person’s shares to an FCC approved trust or (f) seeking any and all appropriate remedies, at law or in equity, as necessary to prevent or cure the FCC Regulatory Limitation.

Given the special voting rights provided to our Class T-3 common stock, it is highly likely that the voting rights of our Class A common stock held by non-U.S. persons (other than Televisa and the Investors) will be entirely or almost entirely eliminated or suspended in order to comply with the FCC Regulatory Limitations for the foreseeable future unless the Current FCC Foreign Ownership Cap is increased significantly. Further, at the time of this offering, because Televisa (a non-U.S. person) is expected to own 10% of our common stock, other non-U.S. persons may only own 15% of our outstanding common stock under applicable law. As a result, our board of directors may be required to take additional actions to reduce ownership of our common stock by non-U.S. persons (other than Televisa). Pursuant to our amended and restated certificate of incorporation, the aforementioned actions may not be taken against Televisa, the Investors or their permitted transferees.

In 2013, the FCC announced that it would consider proposals to exceed the current 25% foreign ownership limitation for media companies on a case by case basis. We plan to file a petition for declaratory ruling with the FCC requesting an increase in our aggregate permitted foreign ownership to 49% of our common stock (on a voting and equity basis) and Televisa’s permitted ownership to 40% of our common stock (on a voting and equity basis).

Pre-emptive Rights; Post-IPO Sale Participation Right

Except for certain excluded transactions, the PRRCA provides Televisa with the right to participate in any issuance by the Company or any Company subsidiary of shares of its capital stock (common stock, preferred stock or otherwise) (the “Televisa Participation Right”), provided that (x) Televisa may not purchase shares in excess of its contractual ownership limitations in the Stockholders Agreement and (y) following this offering the Televisa Participation Right shall not apply to any issuances for cash. Televisa has waived its right to exercise its pre-emptive rights in connection with this offering. The Televisa Participation Right shall expire upon a Televisa Sell-Down.

Upon any transfer (other than to permitted transferees) by the Investors after the IPO (“Post-IPO Sale”), Televisa shall have the right to acquire a number of shares equal to 50% of the shares of our common stock (or warrants if acquiring shares would result in Televisa being above the FCC Individual Cap or any contractual

 

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limitation in the Stockholders Agreement) being proposed to be transferred by the Investors in such Post-IPO Sale at the same price and terms being offered to the buyer, less, in the case of a registered public sale or block trade, any underwriting or placement fees payable by the Investors with respect to the portion of the shares that Televisa is not acquiring in connection with such Post-IPO Sale. Televisa will be eligible to acquire from the Investors in the Post-IPO Sale a number of shares of our common stock that, in the aggregate, will allow Televisa to acquire the same aggregate percentage ownership (approximately 39%) that Televisa would have been able to acquire if it exercised its existing preferential and participation rights under the PRRCA in connection with this offering.

We have agreed to cooperate with Televisa to the extent requested to exchange any Class A common stock and Class S common stock acquired by Televisa for Class T-1 common stock and Class T-2 common stock or warrants therefor.

Preferred Stock

Subject to certain approval rights of the Investors and Televisa provided for in the PIA and our amended and restated certificate of incorporation, our board of directors is authorized to provide for the issuance of preferred stock in one or more series and except in respect of the particulars fixed for a series by our board of directors as permitted by our amended and restated certificate of incorporation, all shares of preferred stock shall be alike in every particular, except that shares of any one series issued at different times may differ as to the dates of the preferred stock from which dividends thereon shall be cumulative. Our board of directors may fix the preferences, powers and relative, participating, optional or other special rights and qualifications, limitations or restrictions of the preferred stock, including the dividend rate, conversion rights, voting rights, redemption rights and liquidation preference and fix the number of shares to be included in any such series without any further vote or action by our stockholders. Any preferred stock so issued may rank senior to our common stock with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up, or both. In addition, any such shares of preferred stock may have class or series voting rights. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders and may adversely affect the voting and other rights of the holders of our common stock.

Registration Rights

The PRRCA provides the stockholders party thereto with specified (i) demand registration rights, which require us to effect the registration of the offer and sale of shares of common stock held by the Investors and Televisa, (ii) shelf registration rights, which require us to amend or supplement a shelf-registration statement, if in effect, to register the offer and sale of shares of common stock held by any such stockholder(s) pursuant to the shelf registration statement and (iii) piggyback registration rights, which require us to include shares of common stock held by such stockholders in a registration statement filed by us on our or another stockholder’s behalf. We are required to pay all registration expenses, other than underwriting discounts and commission and transfer taxes, in connection with any registration of shares by the Investors, Televisa and the other stockholder parties to the PRRCA. In addition, we have agreed to indemnify the Investors, Televisa and the other stockholder parties to the PRRCA against specified liabilities in connection to registrations made pursuant to the above-mentioned registration rights.

Sale Coordination

The PRRCA requires the stockholder parties to the PRRCA to transfer their shares pursuant to Rule 144 under the Securities Act (“Rule 144”), in a block sale to a financial institution or in a private transfer in accordance with the Stockholders Agreement, provided that the selling stockholders may be required to make reasonable efforts to coordinate their sales as determined by the coordination committee established in accordance with the PRRCA. The coordination committee is comprised of one designee from each of the Investors and Televisa. In addition, the selling stockholders must comply with the PRRCA’s volume limitations

 

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in connection with such sales other than certain private transfers. If the coordination committee requires coordination, the selling stockholders may only sell the number of our shares that the stockholder would have been permitted to transfer under Rule 144 as part of a group that includes the parties to the PRRCA. If the coordination committee does not require coordination, the selling stockholders may sell in a given calendar year, the lesser of (i) 2% of our total capital stock outstanding and (ii) 20% of our total capital stock owned by the selling stockholder, in each case, as calculated on the first day of such calendar year. The PRRCA’s coordination requirements and volume limitations expire five years from the consummation of this offering, provided that the coordination committee can exclude the stockholder parties to the PRCCA from the coordination requirements and volume limitations at any time.

Section 203 of the DGCL

Our amended and restated certificate of incorporation provides that the provisions of Section 203 of the DGCL, which relate to business combinations with interested stockholders, do not apply to us. Section 203 of the DGCL prohibits a publicly held Delaware corporation from engaging in a business combination transaction with an interested stockholder (a stockholder who owns more than 15% of our common stock) for a period of three years after the interested stockholder became such unless the transaction fits within an applicable exemption, such as board approval of the business combination or the transaction that resulted in such stockholder becoming an interested stockholder. These provisions would apply even if the business combination could be considered beneficial by some stockholders. Although we have elected to opt out of the statute’s provisions, we could elect to be subject to Section 203 in the future.

Corporate Opportunities

Our amended and restated certificate of incorporation provides that our directors, officers and stockholders (except for such persons who are also our employees) do not have any obligation to offer us an opportunity to participate in business opportunities presented to such directors, officers and stockholders even if the opportunity is one that we might reasonably have pursued (and therefore may be free to compete with us in the same business or similar businesses), and that, to the extent permitted by law, such directors, officers and stockholders will not be liable to us or our stockholders for breach of any duty by reason of any such activities.

Pursuant to our amended and restated services agreement with SCG, Saban Capital Group and our chairman must inform us of certain business opportunities in the Hispanic market that are presented to them, and offer us the option to participate in such opportunities. Specifically, Saban Capital Group and the Chairman of our board of directors must inform us of any business opportunities that either (i) presently generates at least 50% of its revenue from the Hispanic market in the U.S., or (ii) is projected to or reasonably expected to generate at least 50% of its revenues from the Hispanic market in the United States in the current fiscal year or in the next five succeeding years. Saban Capital Group’s and our chairman’s obligations continue for the term of the amended and restated services agreement and for one year thereafter.

Listing

We intend to apply to have our common stock listed on the NYSE or Nasdaq under the symbol “UVN.”

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is             .

 

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our Class A common stock. Future sales of our Class A common stock in the public market, or the perception that sales may occur, could materially adversely affect the prevailing market price of our Class A common stock at such time and our ability to raise equity capital in the future.

Sale of Restricted Securities

Upon consummation of this offering, we will have              shares of our Class A common stock outstanding (or             shares, if the underwriters exercise their option to purchase additional shares in full). Of these shares, all shares sold in this offering will be freely tradable without further restriction or registration under the Securities Act, except that any shares purchased by our affiliates may generally only be sold in compliance with Rule 144, which is described below. Of the remaining outstanding shares,             shares will be deemed “restricted securities” under the Securities Act.

Lock-Up Arrangements and Registration Rights

In connection with this offering, we, each of our directors, executive officers and the selling stockholders, as well as certain other stockholders, will enter into lock-up agreements described under “Underwriting” that restrict the sale of our securities for up to 180 days after the date of this prospectus, subject to certain exceptions or an extension in certain circumstances.

In addition, following the expiration of the lock-up period, certain stockholders will have the right, subject to certain conditions, to require us to register the sale of their shares of our Class A common stock under federal securities laws. See “Certain Relationships and Related Person Transactions—Stockholders Agreement.” If these stockholders exercise this right, our other existing stockholders may require us to register their registrable securities.

Following the lock-up periods described above, all of the shares of our Class A common stock that are restricted securities or are held by our affiliates as of the date of this prospectus will be eligible for sale in the public market in compliance with Rule 144 under the Securities Act.

Rule 144

The shares of our Class A common stock sold in this offering will generally be freely transferable without restriction or further registration under the Securities Act, except that any shares of our Class A common stock held by an “affiliate” of ours may not be resold publicly except in compliance with the registration requirements of the Securities Act or under an exemption under Rule 144 or otherwise. Rule 144 permits our Class A common stock that has been acquired by a person who is an affiliate of ours, or has been an affiliate of ours within the past three months, to be sold into the market in an amount that does not exceed, during any three-month period, the greater of:

 

    one percent of the total number of shares of our Class A common stock outstanding; or

 

    the average weekly reported trading volume of our Class A common stock for the four calendar weeks prior to the sale.

Such sales are also subject to specific manner of sale provisions, a six-month holding period requirement, notice requirements and the availability of current public information about us.

Approximately             shares of our Class A common stock that are not subject to lock-up arrangements described above will be eligible for sale under Rule 144 immediately upon the closing.

 

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Rule 144 also provides that a person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has for at least six months beneficially owned shares of our Class A common stock that are restricted securities, will be entitled to freely sell such shares of our Class A common stock subject only to the availability of current public information regarding us. A person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned for at least one year shares of our Class A common stock that are restricted securities, will be entitled to freely sell such shares of our Class A common stock under Rule 144 without regard to the current public information requirements of Rule 144.

Additional Registration Statements

We intend to file a registration statement on Form S-8 under the Securities Act to register             shares of our Class A common stock to be issued or reserved for issuance under our equity incentive plans. Such registration statement is expected to be filed soon after the date of this prospectus and will automatically become effective upon filing with the SEC. Accordingly, shares registered under such registration statement will be available for sale in the open market, unless such shares are subject to vesting restrictions with us or the lock-up restrictions described above.

 

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MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS FOR NON-U.S. HOLDERS

The following is a discussion of the material U.S. federal income and estate tax consequences of the purchase, ownership and disposition of our Class A common stock that may be relevant to you if you are a non-U.S. Holder (as defined below), and is based upon the Code, the Treasury Department regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as of the date hereof and all of which are subject to change, possibly with retroactive effect. This discussion is limited to non-U.S. Holders who hold shares of our Class A common stock as capital assets within the meaning of Section 1221 of the Code. Moreover, this discussion does not address all of the tax consequences that may be relevant to you in light of your particular circumstances, nor does it discuss special tax provisions, which may apply to you if you are subject to special treatment under U.S. federal income tax laws, such as for certain financial institutions or financial services entities, insurance companies, tax-exempt entities, dealers in securities or currencies, traders in securities that elect to apply a mark-to-market method of tax accounting, entities that are treated as partnerships for U.S. federal income tax purposes (and investors in such entities), “controlled foreign corporations,” “passive foreign investment companies,” former U.S. citizens or long-term residents, persons deemed to sell Class A common stock under the constructive sale provisions of the Code, and persons that hold Class A common stock as part of a straddle, hedge, conversion transaction, or other integrated investment or Class A common stock received as compensation. In addition, this discussion does not address the Medicare tax on certain investment income, any state, local or foreign tax laws or any U.S. federal tax law other than U.S. federal income and estate tax law (such as gift tax laws). We have not sought and will not seek any rulings from the Internal Revenue Service regarding the matters discussed below. There can be no assurance that the Internal Revenue Service will not take positions concerning the purchase, ownership and disposition of our Class A common stock that are different from that discussed below.

As used in this discussion, the term “non-U.S. Holder” means a beneficial owner of our Class A common stock that is not, for U.S. federal income tax purposes:

 

    an individual who is a citizen or resident of the U.S.;

 

    a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) that is created or organized in or under the laws of the U.S., any state thereof or the District of Columbia;

 

    an estate the income of which is subject to U.S. federal income taxation regardless of its source;

 

    a trust if (i) a court within the U.S. is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) it has a valid election in effect under applicable Treasury Department regulations to be treated as a domestic trust for U.S. federal income tax purposes; or

 

    an entity or arrangement treated as a partnership for U.S. federal income tax purposes.

If you are an individual, you may be deemed to be a resident alien, as opposed to a nonresident alien, by virtue of being present in the U.S. (1) for at least 183 days during the calendar year or (2) for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. For purposes of (2), all the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year are counted. You are also a resident alien if you are a lawful permanent resident of the U.S. (i.e., a “green card” holder). Resident aliens are subject to U.S. federal income tax as if they were U.S. citizens.

If any entity or arrangement treated as a partnership for U.S. federal income tax purposes is a holder of our Class A common stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner, the activities of the partnership and certain determinations made at the partner level. A holder that is a partnership, and the partners in such partnership, should consult their own tax advisors regarding the tax consequences of the purchase, ownership and disposition of our Class A common stock.

 

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EACH PROSPECTIVE PURCHASER OF OUR CLASS A COMMON STOCK IS ADVISED TO CONSULT A TAX ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF OUR CLASS A COMMON STOCK, AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY U.S. STATE, MUNICIPALITY OR OTHER TAXING JURISDICTION, IN LIGHT OF THE PROSPECTIVE PURCHASER’S PARTICULAR CIRCUMSTANCES.

U.S. Trade or Business Income

For purposes of the discussion below, dividends and gains on the sale, exchange or other disposition of our Class A common stock will be considered to be “U.S. trade or business income” if such income or gain is:

 

    effectively connected with the non-U.S. Holder’s conduct of a U.S. trade or business; and

 

    in the case where an income tax treaty requires, attributable to a permanent establishment (or, in the case of an individual, a fixed base) maintained by the non-U.S. Holder in the U.S. within the meaning of such treaty.

Generally, U.S. trade or business income is subject to U.S. federal income tax on a net income basis at regular graduated U.S. federal income tax rates. Any U.S. trade or business income received by a non-U.S. Holder that is a corporation also may, under specific circumstances, be subject to an additional “branch profits tax” at a 30% rate (or a lower rate that may be specified by an applicable income tax treaty).

Distributions on Class A Common Stock

We do not anticipate making any distributions on our Class A common stock. See “Dividend Policy.” If distributions (other than certain stock distributions) are paid on shares of our Class A common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. If a distribution exceeds our current and accumulated earnings and profits, such excess will constitute a return of capital that reduces, but not below zero, a non-U.S. Holder’s tax basis in our Class A common stock. Any remainder will constitute gain from the sale or exchange of our Class A common stock (as described in “—Dispositions of Class A Common Stock” below). If dividends are paid, as a non-U.S. Holder, you will be subject to withholding of U.S. federal income tax at a 30% rate, or a lower rate as may be specified by an applicable income tax treaty (unless the dividends are considered U.S. trade or business income as described below). To claim the benefit of a lower rate under an income tax treaty, you must properly file with the payor an Internal Revenue Service Form W-8BEN, W-8BEN-E or other applicable form, claiming an exemption from or reduction in withholding tax under the applicable income tax treaty. Such form must be provided to us or our paying agent prior to the payment of dividends and must be updated periodically.

If dividends are considered U.S. trade or business income, those dividends will be subject to U.S. federal income tax on a net basis at applicable graduated individual or corporate rates and potential branch profits tax (as described in “—U.S. Trade or Business Income” above) but will not be subject to withholding tax, provided a properly executed Internal Revenue Service Form W-8ECI, or other applicable form, is filed with the payor. Such form must be provided to us or our paying agent prior to the payment of dividends and must be updated periodically.

You must comply with the certification procedures described above, or, in the case of payments made outside the U.S. with respect to an offshore account, certain documentary evidence procedures, directly or, under certain circumstances, through an intermediary, to obtain the benefits of a reduced withholding rate under an income tax treaty with respect to dividends paid on your Class A common stock. In addition, if you are required to provide an Internal Revenue Service Form W-8BEN, W-8BEN-E or other applicable form to claim income tax treaty benefits or Internal Revenue Service Form W-8ECI or other applicable form, both as discussed above, you may also be required to provide your U.S. taxpayer identification number.

 

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If you are eligible for a reduced rate of U.S. federal withholding tax with respect to a distribution on our Class A common stock, you may obtain a refund from the Internal Revenue Service of any excess amounts withheld by timely filing an appropriate claim for refund with the Internal Revenue Service.

Dispositions of Class A Common Stock

Subject to the discussion below under “—Information Reporting and Backup Withholding Tax” and “—Other Withholding Requirements,” as a non-U.S. Holder, you generally will not be subject to U.S. federal income or withholding tax on any gain recognized on a sale or other disposition of Class A common stock unless:

 

    the gain is U.S. trade or business income;

 

    you are an individual who is present in the U.S. for 183 or more days in the taxable year of the sale or other disposition and certain other conditions are met; or

 

    we are, or have been, a U.S. real property holding corporation (a “USRPHC”) for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition of our Class A common stock and the non-U.S. Holder’s holding period for our Class A common stock.

If you are a non-U.S. Holder described in the first bullet above, you generally will be subject to tax as described in “—U.S. Trade or Business Income.” If you are a non-U.S. Holder described in the second bullet point above, you generally will be subject to a flat tax at a 30% rate (or lower applicable income tax treaty rate) on the gain, which may be offset by certain U.S. source capital losses.

Generally, a corporation is a USRPHC if the fair market value of its “United States real property interests” equals 50% or more of the sum of the fair market value of (a) its worldwide property interests and (b) its other assets used or held for use in a trade or business. We believe that we are not currently, and do not anticipate becoming, a USRPHC for U.S. federal income tax purposes. However, no assurance can be given that we will not become a USRPHC.

The tax relating to the disposition of stock in a USRPHC does not apply to a non-U.S. Holder whose holdings, actual and constructive, amount to 5% or less of our Class A common stock at all times during the applicable period, provided that our Class A common stock is regularly traded on an established securities market for U.S. federal income tax purposes.

No assurance can be given that we will not be a USRPHC or that our Class A common stock will be considered regularly traded on an established securities market when a non-U.S. Holder disposes of shares of our Class A common stock. Non-U.S. Holders are urged to consult with their tax advisors to determine the application of these rules to their disposition of our Class A common stock.

Federal Estate Tax

Individuals who are not citizens or residents of the U.S. (as defined for U.S. federal estate tax purposes), or an entity the property of which is includable in an individual’s gross estate for U.S. federal estate tax purposes, should note that Class A common stock held at the time of such individual’s death will be included in such individual’s gross estate for U.S. federal estate tax purposes and may be subject to U.S. federal estate tax, unless an applicable estate tax treaty provides otherwise.

Information Reporting and Backup Withholding Tax

We must report annually to the Internal Revenue Service and to you the amount of dividends paid to you and the tax withheld with respect to those dividends, regardless of whether withholding was required. Copies of the information returns reporting those dividends and withholding may also be made available to the tax authorities in the country in which you reside under the provisions of an applicable income tax treaty or other applicable agreements.

 

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Backup withholding is generally imposed (currently at a 28% rate) on certain payments to persons that fail to furnish the necessary identifying information to the payor. You generally will be subject to backup withholding tax with respect to dividends paid on your Class A common stock unless you certify to the payor your non-U.S. status. Dividends subject to withholding of U.S. federal income tax as described above in “—Distributions on Class A Common Stock” would not be subject to backup withholding.

The payment of proceeds of a sale of Class A common stock effected by or through a U.S. office of a broker is subject to both backup withholding and information reporting unless you provide the payor with your name and address and you certify your non-U.S. status or you otherwise establish an exemption. In general, backup withholding and information reporting will not apply to the payment of the proceeds of a sale of Class A common stock by or through a foreign office of a broker. If, however, such broker is, for U.S. federal income tax purposes, a U.S. person or has certain enumerated relationships with the U.S., backup withholding will not apply but such payments will be subject to information reporting, unless such broker has documentary evidence in its records that you are a non-U.S. Holder and certain other conditions are met or you otherwise establish an exemption.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against your U.S. federal income tax liability provided the required information is furnished in a timely manner to the Internal Revenue Service.

Other Withholding Requirements

Under an information reporting regime commonly referred to as the Foreign Account Tax Compliance Act, or FATCA, a 30% U.S. federal withholding tax generally will be imposed on dividends paid by U.S. issuers, and on the gross proceeds from the disposition of stock of U.S. issuers, paid to or through a “foreign financial institution” (as specially defined under these rules; whether or not such foreign financial institution is the beneficial owner with respect to the payments), unless such institution (i) enters into an agreement with the U.S. Treasury Department to collect and provide to the U.S. Treasury Department substantial information regarding U.S. account holders, including certain account holders that are foreign entities with U.S. owners, with such institution or (ii) is deemed compliant with, or otherwise exempt from, FATCA. In certain circumstances, the information may be provided to local tax authorities pursuant to intergovernmental agreements between the U.S. and a foreign country. FATCA also generally imposes a U.S. federal withholding tax of 30% on the same types of payments to or through a non-financial foreign entity (whether or not such foreign entity is the beneficial owner with respect to the payments) unless such entity (i) provides the withholding agent with a certification that it does not have any substantial U.S. owners (as defined under these rules) or a certification identifying the direct and indirect substantial U.S. owners of the entity or (ii) is deemed compliant with, or otherwise exempt from, FATCA. FATCA would apply to any dividends paid on our Class A common stock, and to the gross proceeds from the sale or other disposition of our Class A common stock after December 31, 2016. Under certain circumstances, a holder may be eligible for refunds or credits of such taxes. Intergovernmental agreements and laws adopted thereunder may modify or supplement the rules under FATCA. You should consult your tax advisor regarding the possible implications of FATCA on your investment in our Class A common stock.

 

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UNDERWRITING

Under the terms and subject to the conditions in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. LLC, Goldman, Sachs & Co. and Deutsche Bank Securities Inc. are acting as representatives, have severally agreed to purchase, and we have agreed to sell to them, severally, the number of shares indicated below:

 

Name

   Number of Shares

Morgan Stanley & Co. LLC

  

Goldman, Sachs & Co.

  

Deutsche Bank Securities Inc.

  
  

 

Total:

  

 

The underwriters and the representatives are collectively referred to as the “underwriters” and the “representatives,” respectively. The underwriters are offering the shares of Class A common stock subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of Class A common stock offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of Class A common stock offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters’ option to purchase additional shares described below.

The underwriters initially propose to offer part of the shares of Class A common stock directly to the public at the offering price listed on the cover page of this prospectus and part to certain dealers. After the initial offering of the shares of Class A common stock, the offering price and other selling terms may from time to time be varied by the representatives.

We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to                 additional shares of Class A common stock at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional shares of Class A common stock as the number listed next to the underwriter’s name in the preceding table bears to the total number of shares of Class A common stock listed next to the names of all underwriters in the preceding table.

The following table shows the per share and total public offering price, underwriting discounts and commissions, and proceeds before expenses to us. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase up to an additional             shares of Class A common stock.

 

     Per Share      Total  
        No Exercise      Full Exercise  

Public offering price

   $                    $                    $                

Underwriting discounts

   $         $         $     

Proceeds, before expenses, to the Company

   $         $         $     

The estimated offering expenses payable by us, exclusive of the underwriting discounts, are approximately $        . We have agreed to reimburse the underwriters for expense relating to clearance of this offering with the Financial Industry Regulatory Authority up to $        .

The underwriters have informed us that they do not intend sales to discretionary accounts to exceed 5% of the total number of shares of Class A common stock offered by them.

 

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We intend to apply to list our Class A common stock for listing on the NYSE or Nasdaq under the trading symbol “UVN.”

We and all directors and officers and the holders of all of our outstanding stock and stock options have agreed that, without the prior written consent of                      on behalf of the underwriters, we and they will not, subject to certain limited exceptions, during the period ending 180 days after the date of this prospectus (the “restricted period”):

 

    offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of Class A common stock or any securities convertible into or exercisable or exchangeable for shares of Class A common stock;

 

    file any registration statement with the SEC relating to the offering of any shares of Class A common stock or any securities convertible into or exercisable or exchangeable for Class A common stock; or

 

    enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Class A common stock.

whether any such transaction described above is to be settled by delivery of Class A common stock or such other securities, in cash or otherwise. In addition, we and each such person agree that, without the prior written consent of the representatives on behalf of the underwriters, we or such other person will not, during the restricted period, make any demand for, or exercise any right with respect to, the registration of any shares of Class A common stock or any security convertible into or exercisable or exchangeable for Class A common stock.

The restricted period described in the preceding paragraph will be extended if:

 

    during the last 17 days of the restricted period we issue an earnings release or material news event relating to us occurs, or

 

    prior to the expiration of the restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the restricted period or provide notification to of any earnings release or material news or material event that may give rise to an extension of the initial restricted period,

in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

The representatives, in their sole discretion, may release the Class A common stock and other securities subject to the lock-up agreements described above in whole or in part at any time.

In order to facilitate the offering of the Class A common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the Class A common stock. Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short position is no greater than the number of shares available for purchase by the underwriters under the option to purchase additional shares. The underwriters can close out a covered short sale by exercising the option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available under the option to purchase additional shares. The underwriters may also sell shares in excess of the option to purchase additional shares, creating a naked short position. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be

 

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downward pressure on the price of the Class A common stock in the open market after pricing that could adversely affect investors who purchase in this offering. As an additional means of facilitating this offering, the underwriters may bid for, and purchase, shares of Class A common stock in the open market to stabilize the price of the Class A common stock. These activities may raise or maintain the market price of the Class A common stock above independent market levels or prevent or retard a decline in the market price of the Class A common stock. The underwriters are not required to engage in these activities and may end any of these activities at any time.

We and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.

A prospectus in electronic format may be made available on websites maintained by one or more underwriters, or selling group members, if any, participating in this offering. The representatives may agree to allocate a number of shares of Class A common stock to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters that may make Internet distributions on the same basis as other allocations.

Other Relationships

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities.

Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. From time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future. Specifically, Deutsche Bank Securities Inc. or its affiliates acted as arrangers and an affiliate of Deutsche Bank AG New York Branch serves as administrative agent and first-lien collateral agent under our senior secured credit facilities. In addition, affiliates of Morgan Stanley & Co. LLC, Goldman Sachs & Co. and Deutsche Bank Securities, Inc. or their respective affiliates serve as lenders under our senior secured credit facilities. See “Description of Certain Indebtedness—Senior Secured Credit Facilities.” To the extent a portion of the net proceeds of this offering are used to repay borrowings under our senior secured credit facilities, affiliates of the underwriters will receive their pro rata portion of such net proceeds. See “Use of Proceeds” and “Capitalization.” In addition, Morgan Stanley & Co. LLC and Deutsche Bank Securities, Inc. or their respective affiliates acted as initial purchasers of certain of our outstanding notes, for which they received customary discounts and commissions. See “Description of Certain Indebtedness.”

In addition, in the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments, including serving as counterparts to certain derivative or hedging arrangements, and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve our securities and instruments. The underwriters and their respective affiliates may also make investment recommendations or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long or short positions in such securities and instruments.

 

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Pricing of the Offering

Prior to this offering, there has been no public market for our Class A common stock. The initial public offering price was determined by negotiations between us and the representatives. In addition to prevailing market conditions, the factors to be considered in in determining the initial public offering are: the valuation multiples of publicly traded companies that the representatives believe to be comparable to us, our financial information, the history of, and the prospects for, our company and the industry in which we compete, an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues, the present state of our development, the general condition of the securities markets at the time of this offering and the foregoing factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.

Selling Restrictions

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) an offer to the public of any shares of our Class A common stock may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any shares of our Class A common stock may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

 

(a) to any legal entity which is a qualified investor as defined in the Prospectus Directive;

 

 

(b) to fewer than 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the representatives for any such offer; or

 

(c) in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of shares of our Class A common stock shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer to the public” in relation to any shares of our Class A common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares of our Class A common stock to be offered so as to enable an investor to decide to purchase any shares of our Class A common stock, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State. The expression “Prospectus Directive” means Directive 2003/71/EC (as amended, including by Directive 2010/73/EU), and includes any relevant implementing measure in the Relevant Member State.

United Kingdom

Each underwriter has represented and agreed that:

 

(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (“FSMA”) received by it in connection with the issue or sale of the shares of our Class A common stock in circumstances in which Section 21(1) of the FSMA does not apply to us; and

 

(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares of our Class A common stock in, from or otherwise involving the United Kingdom.

 

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Hong Kong

The shares may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. Where the shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the shares under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by operation of law.

Japan

The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law) and each underwriter has agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

 

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LEGAL MATTERS

Weil, Gotshal & Manges LLP, New York, New York, has passed upon the validity of the Class A common stock offered hereby on behalf of us. Certain legal matters will be passed upon on behalf of the underwriters by Cahill Gordon & Reindel LLP.

EXPERTS

The consolidated financial statements of Univision Holdings, Inc. and subsidiaries as of December 31, 2014 and 2013 and for each of the three years in the period ended December 31, 2014 appearing in this prospectus and registration statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

The consolidated financial statements of El Rey Holdings LLC as of December 31, 2014 and 2013, and for the year ended December 31, 2014 and the period from May 8, 2013 (inception) through December 31, 2013 appearing in this prospectus and registration statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form S-1 with the SEC for the stock we are offering by this prospectus. This prospectus does not include all of the information contained in the registration statement. You should refer to the registration statement and its exhibits for additional information. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document. When we complete this offering, we will also be required to file annual, quarterly and current reports, proxy statements and other information with the SEC.

You can read our SEC filings, including the registration statement, over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section at the SEC at 100 F Street, NE, Room 1580, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.

You may obtain a copy of any of our filings, at no cost, by writing or telephoning us at:

Univision Holdings, Inc.

605 Third Avenue, 33rd Floor

New York, NY 10158

(212) 455-5200

Attn: Corporate Secretary

 

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INDEX TO FINANCIAL STATEMENTS

 

     Page  

AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF UNIVISION HOLDINGS, INC.:

  

Management’s Report on Internal Control Over Financial Reporting

     F-2   

Report of Independent Registered Public Accounting Firm

     F-3   

Report of Independent Registered Public Accounting Firm

     F-4   

Consolidated Balance Sheets at December 31, 2014 and 2013

     F-5   

Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012

     F-6   

Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2014, 2013 and 2012

     F-7   

Consolidated Statements of Changes in Stockholders’ Deficit for the years ended December  31, 2014, 2013 and 2012

     F-8   

Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012

     F-9   

Notes to Consolidated Financial Statements

     F-10   

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF UNIVISION HOLDINGS, INC.:

  

Consolidated Balance Sheets at March 31, 2015 (unaudited) and December 31, 2014

     F-69   

Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014 (unaudited)

     F-70   

Consolidated Statements of Comprehensive (Loss) Income for the three months ended March  31, 2015 and 2014 (unaudited)

     F-71   

Consolidated Statements of Changes in Stockholders’ Deficit for the three months ended March  31, 2015 and 2014 (unaudited)

     F-72   

Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014 (unaudited)

     F-73   

Notes to Consolidated Financial Statements (unaudited)

     F-74   

AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF EL REY HOLDINGS LLC:

  

Report of Independent Auditors

     F-100   

Consolidated Balance Sheets at December 31, 2014 and 2013

     F-101   

Consolidated Statements of Operations for the year ended December 31, 2014 and for the period May  8, 2013 (Inception) through December 31, 2013

     F-102   

Consolidated Statements of Changes in Members’ Deficit for the year ended December  31, 2014 and for the period May 8, 2013 (Inception) through December 31, 2013

     F-103   

Consolidated Statements of Cash Flows for the year ended December 31, 2014 and for the period May  8, 2013 (Inception) through December 31, 2013

     F-104   

Notes to Consolidated Financial Statements

     F-105   

 

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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

As of the end of our 2014 fiscal year, management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations for the Treadway Commission (1992 framework). Based on our evaluation under that framework, management concluded our internal control over financial reporting as of December 31, 2014 was effective.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on our financial statements.

The consolidated financial statements included in this Registration Statement on Form S-1 have been audited by our independent registered public accounting firm, Ernst & Young LLP, in accordance with auditing standards generally accepted in the United States and, accordingly, they have expressed their professional opinion on the financial statements in their report included herein. The attestation report issued by Ernst & Young LLP on our internal control over financial reporting is also included herein.

Because of their inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Therefore, even those systems, controls and procedures determined to be effective can only provide reasonable assurance with respect to financial statement preparation and presentation.

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders of

Univision Holdings, Inc. and subsidiaries

We have audited the accompanying consolidated balance sheets of Univision Holdings, Inc. and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive (loss) income, changes in stockholders’ deficit and cash flows for each of the three years in the period ended December 31, 2014. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 consolidated financial position of Univision Holdings, Inc. and subsidiaries at December 31, 2014 and 2013, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), Univision Holdings, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated July 1, 2015 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

New York, NY

July 1, 2015

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders of

Univision Holdings, Inc. and subsidiaries

We have audited Univision Holdings, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). Univision Holdings, Inc. and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention, or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Univision Holdings, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Univision Holdings, Inc. and subsidiaries as of December 31, 2014 and 2013 and the related consolidated statements of operations, comprehensive (loss) income, changes in stockholders’ deficit and cash flows for each of the three years in the period ended December 31, 2014 and our report dated July 1, 2015 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

New York, NY

July 1, 2015

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per-share data)

 

     December 31,
2014
    December 31,
2013
 
ASSETS     

Current assets:

    

Cash and cash equivalents

   $ 56,800      $ 43,900   

Accounts receivable, less allowance for doubtful accounts of $5,600 in 2014 and $6,100 in 2013

     641,000        638,300   

Program rights and prepayments

     103,200        143,400   

Deferred tax assets

     134,200        94,200   

Prepaid expenses and other

     41,500        52,400   
  

 

 

   

 

 

 

Total current assets

     976,700        972,200   

Property and equipment, net

     810,500        812,700   

Intangible assets, net

     3,592,500        3,795,000   

Goodwill

     4,591,800        4,591,800   

Deferred financing costs

     74,400        91,000   

Program rights and prepayments

     95,600        59,500   

Investments

     78,300        88,500   

Restricted cash

     92,700        92,700   

Other assets

     73,800        81,300   
  

 

 

   

 

 

 

Total assets

   $ 10,386,300      $ 10,584,700   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ DEFICIT     

Current liabilities:

    

Accounts payable and accrued liabilities

   $ 233,100      $ 241,800   

Deferred revenue

     80,800        76,000   

Accrued interest

     55,800        58,200   

Accrued license fees

     39,400        38,800   

Program rights obligations

     19,400        22,800   

Current portion of long-term debt and capital lease obligations

     151,400        214,000   
  

 

 

   

 

 

 

Total current liabilities

     579,900        651,600   

Long-term debt and capital lease obligations

     10,320,500        10,491,100   

Deferred tax liabilities

     567,400        594,700   

Deferred revenue

     570,200        635,700   

Other long-term liabilities

     136,000        131,400   
  

 

 

   

 

 

 

Total liabilities

     12,174,000        12,504,500   
  

 

 

   

 

 

 

Stockholders’ deficit:

    

Class A Common Stock, par value $.001 per share, 50,000,000 authorized, 6,481,609 issued at December 31, 2014 and 6,228,600 issued at December 31, 2013

              

Class B Common Stock, par value $.001 per share, 50,000,000 authorized, 3,477,917 issued at December 31, 2014 and December 31, 2013

              

Class C Common Stock, par value $.001 per share, 10,000,000 authorized, 842,850 issued at December 31, 2014 and December 31, 2013

              

Class D Common Stock, par value $.001 per share, 10,000,000 authorized, none issued at December 31, 2014 and December 31, 2013

              

Preferred Shares, par value $.001 per share, 500,000 authorized, none issued at December 31, 2014 and December 31, 2013

              

Additional paid-in-capital

     4,299,700        4,166,500   

Accumulated deficit

     (6,052,400     (6,054,300

Accumulated other comprehensive loss

     (35,300     (33,300
  

 

 

   

 

 

 

Total Univision Holdings, Inc. stockholders’ deficit

     (1,788,000     (1,921,100

Non-controlling interest

     300        1,300   
  

 

 

   

 

 

 

Total stockholders’ deficit

     (1,787,700     (1,919,800
  

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $ 10,386,300      $ 10,584,700   
  

 

 

   

 

 

 

See Notes to Consolidated Financial Statements.

 

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Table of Contents

UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31,

(In thousands, except per share data)

 

     2014     2013     2012  

Revenue

   $ 2,911,400      $ 2,627,400      $ 2,442,000   

Direct operating expenses

     1,013,100        872,200        797,900   

Selling, general and administrative expenses

     718,800        712,600        750,400   

Impairment loss

     340,500        439,400        90,400   

Restructuring, severance and related charges

     41,200        29,400        44,200   

Depreciation and amortization

     163,800        145,900        130,300   
  

 

 

   

 

 

   

 

 

 

Operating income

  634,000      427,900      628,800   

Other expense (income):

Interest expense

  587,200      618,200      573,200   

Interest income

  (6,000   (3,500   (200

Interest rate swap income

  (500   (3,800     

Amortization of deferred financing costs

  15,500      14,100      8,300   

Loss on extinguishment of debt

  17,200      10,000      2,600   

Loss on equity method investments

  85,200      36,200      900   

Other

  600      3,100      (500
  

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

  (65,200   (246,400   44,500   

(Benefit) provision for income taxes

  (66,100   (462,400   58,900   
  

 

 

   

 

 

   

 

 

 

Net income (loss)

  900      216,000      (14,400

Net loss attributable to non-controlling interest

  (1,000   (200     
  

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Univision Holdings, Inc.

$ 1,900    $ 216,200    $ (14,400
  

 

 

   

 

 

   

 

 

 

Net income (loss) per share attributable to Univision Holdings, Inc.

Basic

$ 0.18    $ 20.49    $ (1.36

Diluted

$ 0.17    $ 14.60    $ (1.36

Weighted average shares outstanding

Basic

  10,791      10,549      10,552   

Diluted

  10,910      15,442      10,552   

See Notes to Consolidated Financial Statements.

 

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Table of Contents

UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

For the Years Ended December 31,

(In thousands)

 

     2014     2013     2012  

Net income (loss)

   $ 900      $ 216,000      $ (14,400
  

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income, net of tax:

Unrealized (loss) gain on hedging activities

  (37,400   43,800      (15,000

Amortization of unrealized loss on hedging activities

  11,800      19,600        

Unrealized gain on available for sale securities

  24,300      12,200        

Currency translation adjustment

  (700   200      (100
  

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income

  (2,000   75,800      (15,100
  

 

 

   

 

 

   

 

 

 

Comprehensive (loss) income

  (1,100   291,800      (29,500

Comprehensive loss attributable to the non-controlling interest

  (1,000   (200     
  

 

 

   

 

 

   

 

 

 

Comprehensive (loss) income attributable to Univision Holdings, Inc.

$ (100 $ 292,000    $ (29,500
  

 

 

   

 

 

   

 

 

 

See Notes to Consolidated Financial Statements.

 

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Table of Contents

UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’ DEFICIT

For the Years Ended December 31, 2012, 2013 and 2014

(In thousands)

 

    Univision Holdings, Inc. Stockholders’ Deficit     Non-
controlling
Interest
    Total
Equity
 
  Common
Stock
    Additional
Paid-in-Capital
    Accumulated
Deficit
    Accumulated
Other
Comprehensive
Loss
    Total      

Balance, January 1, 2012

  $      $ 4,133,400      $ (6,256,100   $ (94,000   $ (2,216,700   $      $ (2,216,700

Net loss

                  (14,400            (14,400            (14,400

Other comprehensive loss

                         (15,100     (15,100            (15,100

Purchase of treasury shares

           (400                   (400            (400

Share-based compensation

           25,700                      25,700               25,700   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2012

  $      $ 4,158,700      $ (6,270,500   $ (109,100   $ (2,220,900   $      $ (2,220,900

Net income (loss)

                  216,200               216,200        (200     216,000   

Other comprehensive income

                         75,800        75,800               75,800   

Share-based compensation

           7,800                      7,800               7,800   

Capital contribution of non-controlling interest

                                       1,500        1,500   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2013

  $      $ 4,166,500      $ (6,054,300   $ (33,300   $ (1,921,100   $ 1,300      $ (1,919,800

Net income (loss)

                  1,900               1,900        (1,000     900   

Other comprehensive loss

                         (2,000     (2,000            (2,000

Proceeds from issuance of equity

           124,300                      124,300               124,300   

Purchase of treasury shares

           (400                   (400            (400

Share-based compensation

           9,300                      9,300               9,300   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2014

  $      $ 4,299,700      $ (6,052,400   $ (35,300   $ (1,788,000   $ 300      $ (1,787,700
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See Notes to Consolidated Financial Statements.

 

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Table of Contents

UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31,

(In thousands)

 

     2014     2013     2012  

Cash flows from operating activities:

      

Net income (loss)

   $ 900      $ 216,000      $ (14,400

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

      

Depreciation

     105,500        87,600        75,300   

Amortization of intangible assets

     58,300        58,300        55,000   

Amortization of deferred financing costs

     15,500        14,100        8,300   

Deferred income taxes

     (72,500     (469,800     52,600   

Non-cash deferred advertising revenue

     (60,000     (60,100     (60,300

Non-cash PIK interest income

     (5,900     (3,400       

Non-cash interest rate swap activity

     6,800        (300       

Loss on equity method investments

     85,200        36,200        900   

Impairment loss

     341,800        442,600        90,400   

Loss on extinguishment of debt

     400        2,400        2,600   

Share-based compensation

     14,900        7,800        25,700   

Other non-cash items

     1,900        (200     2,500   

Changes in assets and liabilities:

      

Accounts receivable, net

     (4,100     (87,000     (40,800

Program rights and prepayments

     (186,600     (171,700     (85,800

Prepaid expenses and other

     9,500        (15,500     5,700   

Accounts payable and accrued liabilities

     3,100        32,200        24,000   

Accrued interest

     (2,400     500        32,200   

Accrued license fees

     600        2,100        2,000   

Program rights obligations

     (5,900     (14,600     34,400   

Deferred revenue

     (700     17,300        (24,500

Other long-term liabilities

     (9,600     3,100        6,500   

Other

     (21,800     (18,300     (23,200
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     274,900        79,300        169,100   

Cash flows from investing activities:

      

Proceeds from sale of music business

                   6,500   

Proceeds from sale of fixed assets and other

     8,900        11,600        1,600   

Investments

     (30,300     (86,300     (11,000

Acquisition of launch rights

            (81,300       

Capital expenditures

     (133,400     (179,200     (99,500

Other, net

                   (100
  

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (154,800     (335,200     (102,500
  

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

      

Proceeds from issuance of long-term debt

     3,376,700        3,033,000        1,837,800   

Proceeds from issuance of short-term debt

     408,000        775,000        593,000   

Payments of refinancing fees

     (500     (49,600     (30,600

Payments of long-term debt and capital leases

     (3,546,800     (2,616,700     (1,826,000

Payments of short-term debt

     (470,000     (878,000     (663,000

Purchase of treasury shares

     (400            (400

Proceeds from issuance of equity

     124,300                 

Non-controlling interest capital contribution

     1,500                 
  

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (107,200     263,700        (89,200
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     12,900        7,800        (22,600

Cash and cash equivalents, beginning of period

     43,900        36,100        58,700   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 56,800      $ 43,900      $ 36,100   
  

 

 

   

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

      

Interest paid

   $ 589,100      $ 618,500      $ 554,400   

Income taxes paid

   $ 4,700      $ 8,500      $ 3,800   

Capital lease obligations incurred to acquire assets

   $ 1,100      $ 38,200      $ 3,300   

See Notes to Consolidated Financial Statements.

 

F-9


Table of Contents

UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

1. Summary of Significant Accounting Policies

Nature of operations—Univision Holdings, Inc. is a holding company and the ultimate parent of Univision Communications Inc. Univision Holdings, Inc. (formerly known as Broadcasting Media Partners, Inc.) owns Broadcast Media Partners Holdings, Inc. (“Broadcast Holdings”) which owns Univision Communications Inc. (together with its subsidiaries, collectively referred to herein as “UCI”). Univision Holdings, Inc., together with its subsidiaries are collectively referred to herein as the “Company” or “Univision.” The Company has no operations outside of UCI. The Company is controlled by Madison Dearborn Partners, LLC, Providence Equity Partners Inc., Saban Capital Group, Inc., TPG Capital, Thomas H. Lee Partners, L.P. (collectively, the “Original Sponsors”) and their respective affiliates and Grupo Televisa S.A.B. and its affiliates (“Televisa”). Univision is the leading media company serving Hispanic America and has operations in two segments: Media Networks and Radio.

The Company’s Media Networks segment includes Univision Network; UniMás (formerly Telefutura); nine cable networks, including Galavisión and Univision Deportes Network; and the Company’s owned and/or operated television stations. The Media Networks segment also includes digital properties consisting of online and mobile websites and applications including Univision.com and UVideos, a bilingual digital video network. The Radio segment includes the Company’s owned and operated radio stations; Uforia, a comprehensive digital music platform; and any audio-only elements of Univision.com. Additionally, the Company incurs and manages corporate expenses separate from the two segments which include general corporate overhead and unallocated, shared company expenses related to human resources, finance, legal and executive which are centrally managed and support the Company’s operating and financing activities. In addition, unallocated assets include deferred financing costs and fixed assets that are not allocated to the segments.

Principles of consolidation—The consolidated financial statements include the accounts and operations of the Company and its majority owned and controlled subsidiaries. The Company has consolidated the special purpose entities associated with its accounts receivable facility and the four limited liability corporations associated with the Company’s consulting arrangement with its chairman of the Board of Directors, as the Company has determined that they are variable interest entities for which the Company is the primary beneficiary. This determination was based on the fact that these special purpose entities lack sufficient equity to finance their activities without additional support from the Company and, additionally, that the Company retains the risks and rewards of their activities. The consolidation of these special purpose entities does not have a significant impact on the Company’s consolidated financial statements. All intercompany accounts and transactions have been eliminated.

The Company accounts for investments over which it has significant influence but not a controlling financial interest using the equity method of accounting. Accordingly, the Company’s share of the earnings and losses of these companies is included in loss on equity method investments in the accompanying consolidated statements of operations of the Company. For certain equity method investments, the Company’s share of earnings and losses is based on contractual liquidation rights. For investments in which the Company does not have significant influence, the cost method of accounting is used. Under the cost method of accounting, the Company does not record its share in the earnings and losses of the companies in which it has an investment. Investments are reviewed for impairment when events or circumstances indicate that there may be a decline in fair value that is other than temporary.

Use of estimates—The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial

 

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Table of Contents

UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

statements and the reported amounts of revenue and expenses, including impairments, during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of fixed assets; allowances for doubtful accounts; the valuation of derivatives, deferred tax assets, program rights and prepayments, fixed assets, intangibles, goodwill and share-based compensation; and reserves for income tax uncertainties and other contingencies.

Fair Value Measurements—The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

 

    Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

 

    Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

 

    Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

Revenue recognition—Revenue is comprised of gross revenues from the Media Networks and Radio segments, including advertising revenue, subscriber fees, content licensing revenue, sales commissions on national advertising aired on Univision and UniMás affiliated television stations, less agency commissions and volume and prompt payment discounts. The amounts deducted from gross revenues for agency commissions and volume and prompt payment discounts aggregate to $361.1 million, $343.5 million and $323.3 million for the years ended December 31, 2014, 2013 and 2012, respectively. Media Networks television and Radio station advertising revenues are recognized when advertising spots are aired and performance guarantees, if any, are achieved. The achievement of performance guarantees is based on audience ratings from an independent research company. Subscriber fees received from cable and satellite multichannel video programming distributors (“MVPDs”) are recognized as revenue in the period that services are provided. The digital platform recognizes revenue primarily from video and display advertising, subscriber fees where digital content is provided on an authenticated basis, digital content licensing, and sponsorship advertisement revenue. Video and display advertising revenue is recognized as “impressions” are delivered and sponsorship revenue is recognized ratably over the contract period and as performance guarantees, if any, are achieved. “Impressions” are defined as the number of times that an advertisement appears in pages viewed by users of the Company’s Internet properties. Content licensing revenue is recognized when the content is delivered, all related obligations have been satisfied and all other revenue recognition criteria have been met. All revenue is recognized only when collection of the resulting receivable is reasonably assured.

UCI has certain contractual commitments, with Televisa and others, to provide a future annual guaranteed amount of advertising and promotion time. The obligation associated with each of these commitments was recorded as deferred revenue at an amount equal to the fair value of the advertising and promotion time as of the date of the agreements providing for these commitments. Deferred revenue is earned and revenue is recognized as the related advertising and promotion time is provided. The Company’s deferred revenue, which is primarily related to the commitments with Televisa, resulted in revenue of $60.1 million, $67.8 million and $83.7 million, respectively, for the years ended December 31, 2014, 2013 and 2012.

 

F-11


Table of Contents

UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

Accounting for Goodwill, Other Intangibles and Long-Lived Assets—Goodwill and other intangible assets with indefinite lives are tested annually for impairment on October 1 or more frequently if circumstances indicate a possible impairment exists.

The Company has the option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. If the qualitative assessment determines that it is more likely than not that the fair value of the segment is more than its carrying amount, then the Company concludes that goodwill is not impaired. If the Company does not choose to perform the qualitative assessment, or if the qualitative assessment determines that it is more likely than not that the fair value of the segment is less than its carrying amount, then the Company proceeds to the first step of the two-step quantitative goodwill impairment test.

If a quantitative test is performed for goodwill, the estimated fair value of a segment is compared to its carrying value, including goodwill (the “Step 1 Test”). In the Step 1 Test, the Company estimates the fair value of each of its segments using a combination of discounted cash flows and market-based valuation methodologies. Developing estimates of fair value requires significant judgments, including making assumptions about appropriate discount rates, perpetual growth rates, relevant comparable market multiples and the amount and timing of expected future cash flows. The cash flows employed in the valuation analysis are based on the Company’s best estimates considering current marketplace factors and risks as well as assumptions of growth rates in future years. The fair value of the segments is classified as a Level 3 measurement. There is no assurance that actual results in the future will approximate these forecasts. If the calculated fair value is less than the current carrying value, impairment of the segment goodwill may exist.

When the Step 1 Test indicates potential impairment, a second test is required to measure the impairment loss (the “Step 2 Test”). In the Step 2 Test, the Company will calculate an implied fair value of goodwill for the segment. The implied fair value of goodwill is determined in a manner similar to how goodwill is calculated in a business combination, where the fair value of the segment is allocated to all of the assets and liabilities of the segment with any residual value being allocated to goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill assigned to the segment, the excess amount is recorded as an impairment charge. An impairment charge cannot exceed the carrying value of goodwill assigned to a segment but may indicate that certain long-lived and intangible assets associated with the segment may require additional impairment testing.

If a qualitative assessment is performed for goodwill, the Company considers relevant events and circumstances that could affect a segment’s fair value. Considerations may include macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and entity-specific events, business plans, and strategy. The Company considers the same key assumptions that would have been used in a quantitative test. The Company considers the totality of these events, in the context of the segment, and determines if it is more likely than not that the fair value of the segment is less than its carrying amount.

The Company also has indefinite-lived intangible assets, such as trade names and television and radio broadcast licenses. The Company has the option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test.

If the qualitative assessment determines that it is more likely than not that the fair value of the intangible asset is more than its carrying amount, then the Company concludes that the intangible asset is not impaired. If the Company does not choose to perform the qualitative assessment, or if the qualitative assessment determines

 

F-12


Table of Contents

UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

that it is more likely than not that the fair value of the intangible asset is less than its carrying amount, then the Company calculates the fair value of the intangible asset and compares it to the corresponding carrying value. If the carrying value of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized for the excess carrying value over the fair value.

If a quantitative test is performed, the Company will calculate the fair value of the intangible assets. The fair value of the television and radio broadcast licenses is determined using the direct valuation method, for which the key assumptions are market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values. For trade names, the Company assesses recoverability by utilizing the relief from royalty method to determine the estimated fair value. Key assumptions used in this model include discount rates, royalty rates, growth rates, sales projections and terminal value rates. The fair value of the intangible assets is classified as a Level 3 measurement. When a qualitative test is performed, the Company considers the same key assumptions that would have been used in a quantitative test to determine if these factors would negatively affect the fair value of the intangible assets.

Univision Network and UniMás network programming is broadcast on the television stations. Federal Communication Commission (“FCC”) broadcast licenses associated with the Univision Network and UniMás stations are tested for impairment at their respective network level. Broadcast licenses for television stations that are not dependent on network programming are tested for impairment at the local market level. Radio broadcast licenses are tested for impairment at the local market level.

Long-lived assets, such as property and equipment, intangible assets with definite lives and program right prepayments are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to its estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Derivative instruments—The Company recognizes all derivative instruments as either assets or liabilities in the balance sheet at their respective fair values. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.

For all hedging relationships, the Company formally documents the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging instrument, the hedged transaction, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method used to measure ineffectiveness. The Company also formally assesses, both at the inception of the hedging relationship and on an ongoing basis, whether the derivatives that are used in hedging relationships are highly effective in offsetting changes in cash flows of hedged transactions. For derivative instruments that are designated and qualify as part of a cash flow hedging relationship, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings through interest rate swap (income) expense.

 

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Table of Contents

UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

The Company discontinues hedge accounting prospectively when (i) it determines that the derivative is no longer effective in offsetting cash flows attributable to the hedged risk; (ii) the derivative expires or is sold, terminated, or exercised; (iii) the cash flow hedge is de-designated because a forecasted transaction is not probable of occurring; or (iv) management determines to remove the designation of the cash flow hedge. In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the Company continues to carry the derivative at its fair value on the balance sheet and recognizes any subsequent changes in its fair value in earnings through interest rate swap (income) expense, and any associated balance in accumulated other comprehensive income (loss) will be reclassified into earnings through interest expense in the same periods during which the forecasted transactions that originally were being hedged occur. When it is probable that a forecasted transaction will not occur, the Company discontinues hedge accounting and recognizes immediately in earnings gains and losses that were accumulated in other comprehensive income (loss) related to the hedging relationship.

Property and Equipment and Related Depreciation—Property and equipment are carried at historical cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. The Company removes the cost and accumulated depreciation of its property and equipment upon the retirement of such assets and the resulting gain or loss, if any, is then recognized. Land improvements are depreciated up to 15 years, buildings and improvements are depreciated up to 50 years, broadcast equipment over 5 to 20 years and furniture, computer and other equipment over 3 to 7 years. Property and equipment financed with capital leases are amortized over the shorter of their useful life or the remaining life of the lease. Repairs and maintenance costs are expensed as incurred.

Deferred financing costs—Deferred financing costs consist of payments made by the Company in connection with the Company’s and UCI’s debt offerings, primarily ratings fees, legal fees, accounting fees, private placement fees and costs related to the offering circular and other related expenses. Deferred financing costs are amortized over the life of the related debt using the effective interest method.

Program and sports rights for television broadcast—The Company acquires rights to programming to exhibit on its broadcast and cable networks. Costs incurred to acquire television programs are capitalized when (i) the cost of the programming is reasonably determined, (ii) the programming has been accepted in accordance with the terms of the agreement, (iii) the programming is available for its first showing or telecast and (iv) the license period has commenced. Costs incurred in connection with the production of or purchase of rights to programs that are available and scheduled to be broadcast within one year are classified as current assets, while costs of those programs to be broadcast beyond a one-year period are considered non-current. Program rights and prepayments on the Company’s balance sheet are subject to regular recoverability assessments.

The costs of programming rights for television shows, novelas and movies licensed under programming agreements are capitalized and classified as programming prepayments if the rights payments are made before the related economic benefit has been received. Program rights for television shows and movies are amortized over the program’s life, which is the period in which an economic benefit is expected to be generated, based on the estimated relative value of each broadcast of the program over the program’s life. Program costs are charged to operating expense as the programs are broadcast.

The costs of programming rights licensed under multi-year sports programming agreements are capitalized and classified as programming prepayments if the rights payments are made before the related economic benefit has been received. Program rights for multi-year sports programming arrangements are amortized over the license period based on the ratio of current-period direct revenues to estimated remaining total direct revenues over the remaining contract period. Program costs are charged to operating expense as the programs are broadcast.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

The accounting for program rights and prepayments requires judgment, particularly in the process of estimating the revenues to be earned over the life of the contract and total costs to be incurred (“ultimate revenues”). These judgments are used in determining the amortization of, and any necessary impairment of, capitalized costs. Estimated revenues are based on factors such as historical performance of similar programs, actual and forecasted ratings and the genre of the program. Such measurements are classified as Level 3 within the fair value hierarchy as key inputs used to value program and sports rights include ratings and undiscounted cash flows. If planned usage patterns or estimated relative values by year were to change significantly, amortization of the Company’s rights costs may be accelerated or slowed.

Legal costs—Legal costs are expensed as incurred unless required by GAAP to be capitalized.

Advertising and promotional expenses—The Company expenses advertising and promotional costs in the period in which they are incurred.

Share-based compensation—Compensation expense relating to share-based payments is recognized in earnings using a fair-value measurement method. The Company uses the straight-line attribution method of recognizing compensation expense over the vesting period. The estimated fair value of employee awards is expensed on a straight-line basis over the period from grant date to remaining requisite service period which is generally the vesting period. The fair value of each new stock option award is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. The Black-Scholes-Merton option-pricing model was developed for use in estimating the value of traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions. Inherent in this model are assumptions related to stock price, expected stock-price volatility, expected term, risk-free interest rate and dividend yield. The risk-free interest rate is based on data derived from public sources. The estimated stock price is based on comparable public company information and the Company’s estimated discounted cash flows. The expected stock-price volatility is primarily based on comparable public company information. Expected term and dividend yield assumptions are based on management’s estimates. Restricted stock units classified as liability awards are measured at fair value at the end of each reporting period until vested.

The fair value of equity units awarded to non-employees is measured as the units vest using a Monte Carlo simulation analysis. The Monte Carlo simulation approach models future liquidation proceeds under a risk-neutral framework. Under a risk-neutral framework, the total capital value of the Company is assumed to follow a random statistical process and is expected to grow at an annual rate of return (drift) equal to the appropriate risk-free interest rate. In constructing the Monte Carlo simulation model, certain input parameters such as the initial total equity-based capital value as of the valuation date, the expected annual equity-based capital volatility, the expected time until liquidation, the annual risk-free rate of return, and the annual dividend yield are obtained or calculated. The valuation is classified as a Level 3 measurement.

Income taxes—Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when management determines that it is more likely than not that some portion or all of the deferred tax asset will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company recognizes interest and penalties, if any, related to uncertain income tax positions in income tax expense. There is considerable judgment involved in assessing whether deferred tax assets will be realized and in determining whether positions taken on the Company’s tax returns are more likely than not of being sustained.

Concentration of credit risk—Financial instruments that potentially subject the Company to concentrations of credit risk include primarily cash and cash equivalents, trade receivables and financial instruments used in hedging activities. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company’s objective for its cash and cash equivalents is to invest in high-quality money market funds that are prime AAA rated, have diversified portfolios and have strong financial institutions backing them. The Company sells its services and products to a large number of diverse customers in a number of different industries, thus spreading the trade credit risk. No one customer represented more than 10% of revenue of the Company for the years ended December 31, 2014, 2013 or 2012. The Company extends credit based on an evaluation of the customers’ financial condition. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses. The counterparties to the agreements relating to the Company’s financial instruments consist of major, international institutions. The Company does not believe that there is significant risk of nonperformance by these counterparties as the Company monitors the credit ratings of such counterparties and limits the financial exposure with any one institution.

Securitizations—Securitization transactions in connection with UCI’s accounts receivable facility are classified as debt on the Company’s balance sheet and the related cash flows from any advances or reductions are reflected as cash flows from financing activities. UCI sells to investors, on a revolving non-recourse basis, a percentage ownership interest in certain accounts receivable through wholly owned special purpose entities. UCI retains interests in the accounts receivable that have not been sold to investors. The retained interest is subordinated to the sold interest in that it absorbs 100% of any credit losses on the sold receivable interests. UCI services the receivables sold under the facility.

Reclassifications—Certain reclassifications have been made to the prior year financial statements to conform to the current period presentation.

New accounting pronouncements—In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-04, which amended Accounting Standards Codification (“ASC”) 405, Liabilities. The amendments provide guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation (within the scope of this guidance) is fixed at the reporting date. Examples of obligations within the scope of ASU 2013-04 include debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The Company adopted ASU 2013-04 during the first quarter of 2014. The adoption of ASU 2013-04 did not have a significant impact on the Company’s consolidated financial statements or disclosures.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASC 606). The amendments provide guidance to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards. For public entities, the amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the impact ASU 2014-09 will have on its consolidated financial statements and disclosures.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

2. Property and Equipment

Property and equipment consists of the following:

 

     December 31,
2014
    December 31,
2013
 

Land and improvements

   $ 129,900      $ 149,500   

Buildings and improvements

     388,900        371,200   

Broadcast equipment

     399,300        371,100   

Furniture, computer and other equipment

     233,800        224,500   

Land, building, transponder equipment and vehicles financed with capital leases

     94,500        93,700   
  

 

 

   

 

 

 
  1,246,400      1,210,000   

Accumulated depreciation

  (435,900   (397,300
  

 

 

   

 

 

 
$ 810,500    $ 812,700   
  

 

 

   

 

 

 

Depreciation expense on property and equipment was $105.5 million, $87.6 million and $75.3 million for the years ended December 31, 2014, 2013 and 2012, respectively. Accumulated depreciation related to assets financed with capital leases at December 31, 2014 and 2013 is $28.7 million and $22.5 million, respectively.

As of December 31, 2013, the Company classified $0.3 million of land and buildings in the Media Networks segment as held for sale, which is included in prepaid expenses and other on the consolidated balance sheet. The carrying value reflects the estimated selling price based on market data, which is a Level 2 input. There were no properties classified as held for sale as of December 31, 2014. During the years ended December 31, 2014, 2013 and 2012, the Company recorded an impairment loss of $7.0 million, $0.2 million and $2.5 million, respectively, related to the write-down of assets held for sale, as the book value of some of the properties was in excess of their fair value less costs to sell. All of the properties held for sale as of December 31, 2013 were sold during the first quarter of 2014.

3. Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of the following:

 

     December 31,
2014
     December 31,
2013
 

Accounts payable and accrued liabilities

   $ 166,400       $ 159,600   

Accrued compensation

     66,700         82,200   
  

 

 

    

 

 

 
$ 233,100    $ 241,800   
  

 

 

    

 

 

 

Restructuring, Severance and Related Charges

During the year ended December 31, 2014, the Company incurred restructuring, severance and related charges in the amount of $41.2 million. This amount includes a $41.4 million charge related to broader-based cost-saving restructuring initiatives, partially offset by a $0.2 million benefit related to the adjustment of severance charges for individual employees. The severance benefit of $0.2 million is related to miscellaneous severance agreements with employees in the Media Networks and Radio segments.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

During 2014, the Company initiated restructuring activities to improve performance, collaboration, and operational efficiencies across its local media platforms. The $41.4 million charge recognized during the year ended December 31, 2014 includes $7.1 million resulting from the restructuring activities across local media platforms and $34.3 million resulting from other restructuring activities that were initiated in 2012, as presented in the tables below:

Restructuring Activities Across Local Media Platforms Initiated in 2014

 

     Employee
Termination
Benefits
     Contract
Termination
Costs
     Total  

Media Networks

   $ 3,400       $       $ 3,400   

Radio

     2,900         800         3,700   
  

 

 

    

 

 

    

 

 

 

Consolidated

$ 6,300    $ 800    $ 7,100   
  

 

 

    

 

 

    

 

 

 

Other Restructuring Activities Initiated in 2012

 

     Employee
Termination
Benefits
     Contract
Termination
Costs
     Total  

Media Networks

   $ 24,300       $ 600       $ 24,900   

Radio

     7,300         400         7,700   

Corporate

     1,500         200         1,700   
  

 

 

    

 

 

    

 

 

 

Consolidated

$ 33,100    $ 1,200    $ 34,300   
  

 

 

    

 

 

    

 

 

 

All balances related to restructuring employee termination benefits are expected to be paid within twelve months from December 31, 2014. Balances related to restructuring lease obligations will be settled over the remaining lease term. As of December 31, 2014, future charges associated with the aforementioned restructuring activities cannot be reasonably estimated.

During the year ended December 31, 2013, the Company incurred restructuring, severance and related charges in the amount of $29.4 million. Of this amount, $5.8 million related to severance charges for individual employees and $23.6 million related to broader-based cost-saving restructuring initiatives. The severance charge of $5.8 million is related to miscellaneous severance agreements with corporate employees as well as employees in the Media Networks and Radio segments. The restructuring charge of $23.6 million includes a charge of $25.2 million related to restructuring activities initiated in 2012 (which includes a charge of $27.4 million and a benefit of $2.2 million in the Radio segment related to the elimination of lease obligations) and a benefit of $1.6 million in the Media Networks segment related to the elimination of a lease obligation from restructuring activities that were initiated in 2009. The restructuring charge consists of the following:

 

     Employee
Termination
Benefits
     Contract
Termination
Costs
     Other
Qualifying
Restructuring
Costs
     Total  

Media Networks

   $ 13,900       $ 3,300       $ 400       $ 17,600   

Radio

     2,600         2,200         700         5,500   

Corporate

     500                         500   
  

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated

$ 17,000    $ 5,500    $ 1,100    $ 23,600   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

During the year ended December 31, 2012, the Company incurred restructuring, severance and related charges in the amount of $44.2 million. Of this amount, $7.4 million related to severance charges for individual employees and $36.8 million related to broader-based cost-saving restructuring activities. The severance charge of $7.4 million is primarily related to miscellaneous severance agreements with corporate employees as well as employees in the Media Networks segment. The restructuring charge of $36.8 million consists of the following:

 

     Employee
Termination
Benefits
     Contract
Termination
Costs
     Other
Qualifying
Restructuring
Costs
     Total  

Media Networks

   $ 24,300       $ 100       $ 300       $ 24,700   

Radio

     4,200         4,300         600         9,100   

Corporate

     3,000                         3,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated

$ 31,500    $ 4,400    $ 900    $ 36,800   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the activity in the restructuring liabilities during the year ended December 31, 2014, related to restructuring activities across local media platforms.

 

     Restructuring Activities Across Local
Media Platforms Initiated in 2014
 
     Employee
Termination
Benefits
    Contract
Termination
Costs
    Total  

Restructuring expense

   $ 6,300      $ 800      $ 7,100   

Cash payments

     (4,400     (700     (5,100

Transfers

            1,000        1,000   
  

 

 

   

 

 

   

 

 

 

Accrued restructuring as of December 31, 2014

$ 1,900    $ 1,100    $ 3,000   
  

 

 

   

 

 

   

 

 

 

Of the $3.0 million accrued as of December 31, 2014 related to restructuring activities across local media platforms, $2.0 million is included in current liabilities and $1.0 million is included in non-current liabilities.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

The following table presents the activity in the restructuring liabilities during the year ended December 31, 2014, related to other restructuring activities initiated in 2012 and prior.

 

     Restructuring Plan Initiated in 2012     Restructuring
Plan Initiated
in 2011
       
     Employee
Termination
Benefits
    Contract
Termination
Costs
    Other
Qualifying
Restructuring
Costs
    Employee
Termination
Benefits
    Total  

Accrued restructuring as of December 31, 2011

   $      $      $      $ 4,700      $ 4,700   

Restructuring expense

     32,400        4,400        900               37,700   

Reversals

     (200                   (700     (900

Cash payments

     (18,900     (2,000     (500     (3,700     (25,100

Transfers

            800                      800   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accrued restructuring as of December 31, 2012

$ 13,300    $ 3,200    $ 400    $ 300    $ 17,200   

Restructuring expense

  19,600      8,800      1,700           30,100   

Reversals

  (2,600   (1,500   (700   (100   (4,900

Cash payments

  (17,400   (5,700   (1,100   (200   (24,400

Transfers

       300                300   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accrued restructuring as of December 31, 2013

$ 12,900    $ 5,100    $ 300    $    $ 18,300   

Restructuring expense

  35,300      1,900                37,200   

Reversals

  (2,200   (700             (2,900

Cash payments

  (21,700   (2,300   (200        (24,200
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accrued restructuring as of December 31, 2014

$ 24,300    $ 4,000    $ 100    $    $ 28,400   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Of the $28.4 million accrued as of December 31, 2014 related to other restructuring activities initiated in 2012, $25.5 million is included in current liabilities and $2.9 million is included in non-current liabilities. The Company has paid substantially all of its liability related to restructuring activities initiated prior to 2012.

Of the $18.3 million accrued as of December 31, 2013 related to other restructuring activities initiated in 2012, $14.6 million is included in current liabilities and $3.7 million is included in non-current liabilities.

4. Goodwill and Other Intangible Assets

Goodwill and other intangible assets with indefinite lives, such as television and radio broadcast licenses and trade names, are not amortized and are tested for impairment annually or more frequently if circumstances indicate a possible impairment exists.

Goodwill is associated with the Company’s Media Networks segment. The goodwill associated with the Company’s Radio segment was fully impaired as of December 31, 2013. The fair value of the Company’s segments is classified as a Level 3 measurement due to the significance of unobservable inputs based on company-specific information. The Company used the income approach to measure the fair value of each of its

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

segments. Under the income approach, the Company calculated the fair value of each segment based on the present value of the estimated future cash flows. Cash flow projections were based on management’s estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions. The discount rate used for each segment was based on the weighted-average cost of capital (“WACC”) adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the segment’s ability to execute on the projected cash flows. The discount rate also reflected adjustments required when comparing the sum of the fair values of the Company’s segments to the Company’s overall valuation. The unobservable inputs used to estimate the fair value of these segments included projected revenue growth rates, profitability and the risk factors added to the discount rate. For the Company’s fiscal 2014 goodwill impairment testing, significant unobservable inputs utilized included discount rates ranging from 9.0% to 13.5% and a terminal growth rate of 3.0%.

The television and radio broadcast licenses have indefinite lives because the Company expects to renew them and renewals are routinely granted with little cost, provided that the licensee has complied with the applicable rules and regulations of the FCC. Historically, all material television and radio licenses that have been up for renewal have been renewed. The Company is unable to predict the effect that further technological changes will have on the television and radio industry or the future results of its television and radio broadcast businesses. The television and radio broadcast licenses and the related cash flows are expected to continue indefinitely, and as a result the broadcast licenses have an indefinite useful life. The fair value of the television and radio broadcast licenses is determined using the direct valuation method which is classified as a Level 3 measurement. Under the direct valuation method, the fair value of the television and radio broadcast licenses is calculated at the network or market level, as applicable. The application of the direct valuation method attempts to isolate the income that is properly attributable to the television and radio broadcast licenses alone (that is, apart from tangible and identified intangible assets and goodwill). It is based upon modeling a hypothetical “greenfield” build-up to a “normalized” enterprise that, by design, lacks inherent goodwill and whose only other assets have essentially been paid for (or added) as part of the build-up process. Under the direct valuation method, it is assumed that rather than acquiring television and radio broadcast licenses as part of a going concern business, the buyer hypothetically develops television and radio broadcast licenses and builds a new operation with similar attributes from inception. Thus, the buyer incurs start-up costs during the build-up phase. Initial capital costs are deducted from the discounted cash flow model which results in a value that is directly attributable to the indefinite-lived intangible assets. The key assumptions using the direct valuation method are market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values. The market revenue growth rate assumption is impacted by, among other things, factors affecting the local advertising market for television and radio stations. This data is populated using industry normalized information representing an average FCC license within a market. For the Company’s fiscal 2014 broadcast license impairment testing, significant unobservable inputs utilized included a discount rate of 9.0% and terminal growth rates ranging from 0.5% to 3.0%.

For trade names assessed for impairment quantitatively, the Company assesses recoverability by utilizing the relief from royalty method to determine the estimated fair value for each indefinite-lived intangible asset which is classified as a Level 3 measurement. The relief from royalty method estimates the Company’s theoretical royalty savings from ownership of the intangible asset. Key assumptions used in this model include discount rates, royalty rates, growth rates, sales projections and terminal value rates. Discount rates, royalty rates, growth rates and sales projections are the assumptions most sensitive and susceptible to change as they require significant management judgment. Discount rates used are similar to the rates estimated by the WACC

 

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Table of Contents

UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

considering any differences in Company-specific risk factors. Royalty rates are established by management and are periodically substantiated by third-party valuation consultants. Operational management, considering industry and Company-specific historical and projected data, develops growth rates and sales projections associated with the trademarks. Terminal value rate determination follows common methodology of capturing the present value of perpetual sales estimates beyond the last projected period assuming a constant WACC and constant long-term growth rates.

For the year ended December 31, 2014, the Company recognized impairment losses in the Radio segment of $133.4 million related to the write-down of broadcast licenses and $9.0 million related to the write-down of a trade name based on a review of market conditions and management’s assessment of long-term growth rates. The fair value of the Media Networks segment’s total assets exceeded the carrying value by more than 50%.

For the year ended December 31, 2013, the Company recognized an impairment loss of $2.5 million in the Media Networks segment related to the residual write-off of the TeleFutura trade name, as the network had completed its rebranding as UniMás by the end of 2013. Based on a review of market conditions and management’s assessment of long-term growth rates in the Radio segment, the Company recognized an impairment loss of $307.8 million related to goodwill, resulting in a write off of the entire goodwill balance and $43.4 million related to the write-down of broadcast licenses. The fair value of the Media Networks segment’s total assets exceeded the carrying value by more than 50%.

For the year ended December 31, 2012, in the Media Networks segment, the Company recognized impairment losses of $47.6 million related to the write-down of a trade name, as a result of a decision to rebrand the TeleFutura network as UniMás, and $0.8 million related to the write-off of a broadcast license. In the Radio segment, the Company recognized an impairment loss of $5.7 million related to the write-off of broadcast licenses.

The Company has various intangible assets with definite lives that are being amortized on a straight-line basis. Advertiser related intangible assets are primarily being amortized through 2026, and the multiple system operator contracts and relationships and broadcast affiliate agreements and relationships are primarily being amortized through 2027 and 2031, respectively. For the years ended December 31, 2014, 2013 and 2012, the Company incurred amortization expense of $58.3 million, $58.3 million and $55.0 million, respectively. The remaining weighted average amortization period for the amortizable intangible assets is approximately 15 years.

 

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Table of Contents

UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

The following is an analysis of the Company’s intangible assets currently being amortized, intangible assets not being amortized and estimated amortization expense for the years 2015 through 2019:

 

     As of December 31, 2014  
     Gross
Carrying
Amount
     Accumulated
Amortization
     Net
Carrying
Amount
 

Intangible Assets Being Amortized

        

Multiple system operator contracts and relationships and broadcast affiliate agreements

   $ 1,124,500       $ 354,500       $ 770,000   

Advertiser related intangible assets, primarily advertiser contracts

     91,300         57,600         33,700   
  

 

 

    

 

 

    

 

 

 

Total

$ 1,215,800    $ 412,100      803,700   
  

 

 

    

 

 

    

 

 

 

Intangible Assets Not Being Amortized

Broadcast licenses

  2,473,300   

Trade names and other assets

  315,500   
        

 

 

 

Total

  2,788,800   
        

 

 

 

Total intangible assets, net

$ 3,592,500   
        

 

 

 

 

     As of December 31, 2013  
     Gross Carrying
Amount
     Accumulated
Amortization
     Net Carrying
Amount
 

Intangible Assets Being Amortized

        

Multiple system operator contracts and relationships and broadcast affiliate agreements

   $ 1,124,500       $ 304,200       $ 820,300   

Advertiser related intangible assets, primarily advertiser contracts

     91,300         49,700         41,600   
  

 

 

    

 

 

    

 

 

 

Total

$ 1,215,800    $ 353,900      861,900   
  

 

 

    

 

 

    

 

 

 

Intangible Assets Not Being Amortized

Broadcast licenses

  2,608,600   

Trade names and other assets

  324,500   
        

 

 

 

Total

  2,933,100   
        

 

 

 

Total intangible assets, net

$ 3,795,000   
        

 

 

 

Estimated amortization expense through 2019 is as follows:

 

Year

   Amount  

2015

   $ 55,000   

2016

   $ 53,900   

2017

   $ 53,900   

2018

   $ 53,900   

2019

   $ 52,900   

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

The following table presents the goodwill balance at December 31, 2014 and 2013:

 

     December 31, 2014
and 2013
 

Gross goodwill

   $ 6,160,100   

Accumulated impairment losses

     (1,568,300
  

 

 

 

Net goodwill

$ 4,591,800   
  

 

 

 

5. Program Rights and Prepayments Impairments

In December 2014, UCI entered into a binding term sheet to, among other things, amend the program license agreement (the “Venevision PLA”) between UCI and Venevision International, LLC (“Venevision”), pursuant to which UCI paid Venevision $177.5 million in December 2014 for amounts that would otherwise be due to Venevision through the December 2017 expiration of the Venevision PLA, and UCI received from Venevision a full release of payment and certain other claims under the Venevision PLA. The amendment releases Venevision from its obligation to produce a certain number of program hours per year for UCI and terminates UCI’s exclusive right to select and exploit Venevision produced or controlled content in the U.S., subject to limited exceptions. UCI will also pay a license fee to Venevision of approximately $24.0 million per year through December 2017 for the rights to certain programs. The amendment triggered an impairment review on Venevision-related prepaid assets which resulted in an impairment charge of approximately $182.9 million for the year-ended December 31, 2014. Fair value was determined using Level 3 inputs by assessing the discounted cash inflows associated with the advertising revenue retained and the direct cash outflows associated primarily with the licensing costs of such programming.

On November 2, 2005, UCI entered into a contract (as amended) to acquire the Spanish-language broadcast rights in the U.S. to the 2014 Fédération Internationale de Football Association (“FIFA”) World Cup soccer games and other FIFA events through 2014. As of December 31, 2013, UCI paid the full contractual amount of $170.8 million for the 2014 World Cup media rights. Because the World Cup games were not available for broadcast until 2014, the Company recorded these payments as program rights prepayments in the consolidated balance sheet. Based upon the Company’s then current financial estimates, the program rights prepayments were reviewed for impairment. The Company believed that the fair value of the 2014 World Cup media rights declined as compared to its carrying value. Fair value was determined using Level 3 inputs by assessing the incremental cash inflows associated with the World Cup games in excess of the direct cash outflows associated with production, licensing and media rights payments (all costs associated with advertising, promotion and broadcast of the World Cup games, as well as the production of certain television programming related to the World Cup games). Using a discounted cash flow model, the Company measured the fair value of the 2014 World Cup media rights, as compared to the amounts recorded on its balance sheet, and recorded an impairment loss of approximately $82.5 million during the year ended December 31, 2013.

During the years ended December 31, 2014, 2013 and 2012, the Company recognized impairment losses of $8.2 million, $2.4 million and $31.9 million, respectively, related to the write-off of other program related rights due to revised estimates of ultimate revenues.

6. Financial Instruments and Fair Value Measures

The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

Interest Rate Swaps—Currently, the Company uses interest rate swaps to manage its interest rate risk. The interest rate swap asset of $0.9 million and the interest rate swap liability of $51.9 million as of December 31, 2014 and the interest rate swap asset of $27.2 million and the interest rate swap liability of $29.5 million as of December 31, 2013 were measured at fair value primarily using significant other observable inputs (Level 2). In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

The majority of inputs into the valuations of the Company’s interest rate derivatives include market-observable data such as interest rate curves, volatilities, and information derived from, or corroborated by market-observable data. Additionally, a specific unobservable input used by the Company in determining the fair value of its interest rate derivatives is an estimation of current credit spreads to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. The inputs utilized for the Company’s own credit spread are based on implied spreads from its privately placed debt securities with an established trading market. For counterparties with publicly available credit information, the credit spreads over the London Interbank Offered Rate (“LIBOR”) used in the calculations represent implied credit default swap spreads obtained from a third party credit data provider. Once these spreads have been obtained, they are used in the fair value calculation to determine the credit valuation adjustment (“CVA”) component of the derivative valuation. The Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

The CVAs associated with the Company’s derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by its counterparties. If the CVA is a significant component of the derivative valuation, the Company will classify the fair value of the derivative as a Level 3 measurement. If required, any transfer between Level 2 and Level 3 will occur at the end of the reporting period. At December 31, 2014 and 2013, the Company has assessed the significance of the impact of the CVAs on the overall valuation of its derivative positions and has determined that the CVAs are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified as Level 2 measurements.

Available-for-Sale Securities—The Company’s available-for-sale securities relate to its investment in convertible notes with an equity method investee. The convertible notes are recorded at fair value through adjustments to other comprehensive income (loss). The fair value of the convertible notes is classified as a Level 3 measurement due to the significance of unobservable inputs which utilize company-specific information. The Company uses an income approach to value the notes’ fixed income component and the Black-Scholes model to value the conversion feature. Key inputs to the Black-Scholes model include the underlying security value, strike price, volatility, time-to-maturity and risk-free rate. See Note 7. Investments.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

Fair Value of Debt Instruments—The carrying value and fair value of the Company’s and UCI’s debt instruments as of December 31, 2014 and 2013 are set out in the following tables. The fair values of the credit facilities are based on market prices (Level 1). The fair values of the senior notes are based on industry curves based on credit rating (Level 2). The fair value of the convertible debentures is estimated using a valuation method based on assumptions including expected volatility, risk-free interest rate, bond yield, recovery rate, and expected term (Level 3). The accounts receivable facility carrying value approximates fair value (Level 1).

 

     As of December 31, 2014  
     Carrying Value      Fair Value  

Bank senior secured revolving credit facility maturing in 2018

   $       $   

Incremental bank senior secured term loan facility maturing in 2020

     1,228,000         1,198,800   

Replacement bank senior secured term loan facility maturing in 2020

     3,329,700         3,246,500   

Senior secured notes—6.875% due 2019

     1,197,000         1,249,400   

Senior secured notes—7.875% due 2020

     750,000         803,000   

Senior notes—8.5% due 2021

     818,900         873,700   

Senior secured notes—6.75% due 2022

     1,120,800         1,214,500   

Senior secured notes—5.125% due 2023

     700,000         714,400   

Convertible debentures—1.5% due 2025

     1,150,500         1,966,100   

Accounts receivable facility maturing in 2018

     100,000         100,000   
  

 

 

    

 

 

 
$ 10,394,900    $ 11,366,400   
  

 

 

    

 

 

 

 

     As of December 31, 2013  
     Carrying Value      Fair Value  

Bank senior secured revolving credit facility maturing in 2018

   $ 2,000       $ 2,000   

Bank senior secured term loan facility maturing in 2020

     3,361,500         3,386,700   

Incremental bank senior secured term loan facility maturing in 2020

     1,240,600         1,248,400   

Senior secured notes—6.875% due 2019

     1,196,500         1,284,700   

Senior secured notes—7.875% due 2020

     750,000         829,700   

Senior notes—8.5% due 2021

     819,300         904,800   

Senior secured notes—6.75% due 2022

     1,240,600         1,365,800   

Senior secured notes—5.125% due 2023

     700,000         703,100   

Convertible debentures—1.5% due 2025

     1,152,600         1,599,400   

Accounts receivable facility maturing in 2018

     160,000         160,000   
  

 

 

    

 

 

 
$ 10,623,100    $ 11,484,600   
  

 

 

    

 

 

 

7. Investments

The carrying value of the Company’s investments is as follows:

 

     December 31,
2014
     December 31,
2013
 

Investments in equity method investees

   $ 74,000       $ 83,900   

Cost method investments

     4,300         4,600   
  

 

 

    

 

 

 
$ 78,300    $ 88,500   
  

 

 

    

 

 

 

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

Equity method investments primarily includes UCI’s investment in Fusion Media Network, LLC (“Fusion”), a joint venture with Walt Disney Company’s ABC News, which is a 24-hour English language news and lifestyle TV and digital network targeted at young English speaking Hispanics and their peers, and UCI’s investment in El Rey Holdings LLC (“El Rey”) which owns and operates, among other assets, the El Rey television network, a 24-hour English-language general entertainment cable network targeting young adult audiences.

Fusion (formerly known as Univision ABC News Network, LLC) was formed in July 2012 and provides programming on both linear and digital platforms. The Fusion linear network launched in October 2013. UCI holds a 50% non-controlling interest in the joint venture, which is accounted for as an equity method investment. During the years ended December 31, 2014, 2013 and 2012, UCI contributed $4.3 million, $11.2 million and $11.0 million, respectively, to the investment in Fusion. During the years ended December 31, 2014, 2013 and 2012, the Company recognized a loss of $11.9 million, $13.7 million and $0.9 million, respectively, related to its share of Fusion’s net losses. As of December 31, 2014, UCI’s share of Fusion’s net losses exceeded UCI’s equity investment in Fusion, resulting in an investment balance of zero. As of December 31, 2013, the net investment balance was $7.6 million. UCI is not obligated to fund any future losses of Fusion and will only recognize profits once the losses for which UCI did not participate in have been recovered.

The following table presents the summary financial information of Fusion for the period or as of the date indicated.

 

     Year Ended
December 31, 2014
    Year Ended
December 31, 2013
    Year Ended
December 31, 2012
 

Operating data:

      

Revenues

   $ 28,100      $ 3,000      $   

Operating expenses

   $ 63,400      $ 30,300      $ 1,800   

Net loss

   $ (35,000   $ (27,400   $ (1,800

 

     As of
December 31, 2014
     As of
December 31, 2013
 

Balance sheet data:

     

Current assets

   $ 26,100       $ 37,800   

Long-term assets

   $ 27,500       $ 35,600   

Current liabilities

   $ 12,000       $ 13,600   

Long-term liabilities

   $       $   

El Rey was formed in May 2013, and the El Rey television network launched in December 2013. On May 14, 2013, UCI invested approximately $2.6 million for a 4.99% equity and voting interest in El Rey. Additionally, UCI invested approximately $72.4 million in the form of a convertible note subject to restrictions on transfer. The convertible note is a twelve year note that bears interest at 7.5%. Interest is added to principal as it accrues annually. A portion of the initial principal of the note may be converted into equity after two years and the entire initial principal may be converted following four years after the launch of the network; provided that the maximum voting interest for UCI’s combined equity interest cannot exceed 49% for the first six years after the network’s launch. In November 2014, UCI invested an additional $25 million in El Rey in the form of a convertible note on the same terms as the original convertible note as contemplated under the El Rey limited liability company agreement. For a period following December 1, 2020 UCI has a right to call, and the initial majority equity owners have the right to put, in each case at fair market value, a portion of such owners’ equity interest in El Rey. For a period following December 1, 2023 UCI has a similar right to call, and such owners have a similar right to put, all of such owners’ equity interest in El Rey.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

UCI accounts for its equity investment under the equity method of accounting due to the fact that although UCI has less than a 20% interest, it exerts significant influence over El Rey. UCI’s share of earnings and losses is recorded based on contractual liquidation rights and not on relative equity ownership. To the extent that UCI’s share of El Rey’s losses exceeds UCI’s equity investment, UCI reduces the carrying value of its investment in El Rey’s convertible note. As a result, the carrying value of UCI’s equity investment in El Rey does not equal UCI’s proportionate ownership in El Rey’s net assets. During the years ended December 31, 2014 and 2013, the Company recognized a loss of $73.3 million and $22.7 million, respectively, related to its share of El Rey’s net losses.

The El Rey convertible notes are debt securities which are classified as available-for-sale securities. For the year ended December 31, 2014, the Company recorded unrealized gains of approximately $40.1 million to other comprehensive income (loss) to adjust the convertible debt, including all interest, to their fair value of $73.5 million. Through December 31, 2013, the Company recorded unrealized gains of approximately $20.1 million to other comprehensive income (loss) to adjust the convertible note entered into in May 2013 to its fair value of $72.4 million. During the year ended December 31, 2014 and 2013, the Company recorded interest income of $5.9 million, and $3.4 million, respectively, related to the convertible debt. As of December 31, 2014 and 2013, the net investment balance was $73.5 million and $75.8 million, respectively.

The following table presents the summary financial information of El Rey for the period or as of the date indicated.

 

     Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

Operating data:

    

Revenues

   $ 44,900      $ 200   

Operating expenses

   $ 109,000      $ 11,900   

Net loss (excluding pre-acquisition costs)

   $ (72,300   $ (15,000

 

     As of
December 31, 2014
     As of
December 31, 2013
 

Balance sheet data:

     

Current assets

   $ 64,600       $ 59,700   

Long-term assets

   $ 9,000       $ 1,800   

Current liabilities

   $ 42,100       $ 9,100   

Long-term liabilities

   $ 124,300       $ 72,400   

During the years ended December 31, 2014 and 2013, the Company recognized an impairment loss of $1.3 million and $3.1 million, respectively, in other non-operating expense related to the impairment of a cost method investment in the Media Networks segment, as the Company determined that the investment incurred an other than temporary decline in fair value. During the year ended December 31, 2012, the Company recognized an impairment loss of $0.7 million in the Radio segment and $0.3 million in the Media Networks segment related to the write-off of cost method investments, as the Company determined that the investments incurred an other than temporary decline in fair value.

At December 31, 2014, the Company had 9.4 million shares of Entravision Communications Corporation (“Entravision”) Class U shares which have limited voting rights and are not publicly traded but are convertible into Class A common stock. The investment is reviewed for impairment when events or circumstances indicate

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

that there may be a decline in fair value that is other than temporary. The fair value of the Company’s investment in Entravision is based on Level 1 inputs. The Company monitors Entravision’s Class A common stock, which is publicly traded, as well as Entravision’s financial results, operating performance and the outlook for the media industry in general for indicators of impairment. The fair value of the Company’s investment in Entravision was approximately $60.6 million at December 31, 2014 based on the market value of Entravision’s Class A common stock on that date.

8. Related Party Transactions

Original Sponsors

Management Fee Agreement

Univision and the Original Sponsors entered into a management agreement with UCI (the “Sponsor Management Agreement”) under which certain affiliates of the Original Sponsors provide UCI with management, consulting and advisory services for a quarterly aggregate service fee of 1.3% of operating income before depreciation and amortization, subject to certain adjustments, as well as reimbursement of out-of-pocket expenses. The management fee for the years ended December 31, 2014, 2013 and 2012 was $16.3 million, $14.6 million and $13.0 million, respectively. The out-of-pocket expenses for the years ended December 31, 2014, 2013 and 2012 were $1.0 million, $0.8 million and $1.0 million, respectively. The management fee and out-of-pocket expenses are included in selling, general and administrative expenses on the statements of operations. In addition, certain affiliates of the Original Sponsors will receive under this agreement an aggregate fee in connection with certain extraordinary transactions involving the Company, including certain change of control transactions, equal to 1% (minus the percentage paid to Televisa for such transaction as described below under “Technical Assistance Agreement”) of the gross transaction value. The management agreement has a 10 year evergreen term. In the event of an initial public offering or a change of control transaction, this agreement will terminate (unless otherwise determined by a majority of the Original Sponsors and Televisa taken together) and UCI will have to pay to certain affiliates of the Original Sponsors (i) unpaid service fees and expenses if any and (ii) the net present values of the service fees that would have been payable to the Original Sponsors from the date of termination until the expiration date then in effect immediately prior to such termination based on an agreed assumed growth rate. No transaction fee was payable in connection with the refinancing transactions described in Note 9. Debt.

Other Agreements and Transactions

Univision has a consulting arrangement with an entity controlled by the Chairman of the Board of Directors. See Note 15. Performance Awards and Incentive Plans.

The Original Sponsors are private investment firms that have investments in companies that may do business with UCI. No individual Original Sponsor has a controlling ownership interest in UCI. The Original Sponsors have controlling ownership interests or ownership interests with significant influence with companies that do business with UCI.

UCI has previously announced plans for a musical competition television show scheduled to be broadcast on the Univision Network in the fall season of 2015, based on an agreement UCI has reached with the owners of the rights to the program, including an entity controlled by Saban Capital Group, Inc. 

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

Televisa Related Transactions

On December 20, 2010, Televisa invested $1,255.0 million in Univision, sold its 50% interest in TuTV (now known as Univision Emerging Networks LLC), UCI’s 50/50 joint venture with Televisa, to UCI for $55.0 million and completed the other transactions contemplated by an investment agreement with Univision and the other parties thereto (collectively the “Televisa transactions”). In exchange for Televisa’s investment, Televisa received an initial 5% equity stake in Univision, which issued 526,336 shares of Class C common stock in connection therewith. In addition, Univision issued debentures, maturing in 2025, to Televisa which are convertible into an additional 30% equity stake, and Televisa also received an option to acquire an additional 5% equity stake in Univision at the fair market value at the time of exercise. Both the convertible debentures and additional equity are subject to applicable laws and regulations and certain contractual limitations, including without limitation the FCC’s alien ownership and multiple ownership limitations. In connection with the Televisa transactions, Televisa contributed approximately 3% of the initial equity stake in Univision that it acquired to a limited liability corporation associated with the Company’s consulting arrangement with its chairman of the Board of Directors.

As a result of the Televisa transactions, Televisa has, subject to continuing to hold a specified minimum interest in Univision, certain approval rights with respect to certain non-ordinary course of business matters consistent with customary lender or minority investor protections, including, but not limited to, certain dividends and distributions, certain stock repurchases, related party transactions, bankruptcy, incurrence of indebtedness above specified levels, changing the Company’s core business and equity issuances to employees in excess of certain levels. Further, certain non-ordinary course of business matters, including entry or modification of material agreements and acquisition and sale of assets require the approval of both (i) the holders of a majority of the shares of Univision, as held by Televisa and the Original Sponsors, and (ii) at least four members of the group compromising Televisa and the five Original Sponsors.

With the closing of the Televisa transactions, Televisa became a related party to the Company as of such date. In connection with the Televisa transactions, UCI entered into the following agreements with Televisa:

Program License Agreement (“PLA”)

In connection with the Televisa transactions, UCI entered into a new program license agreement with Televisa on December 20, 2010, as amended and restated as of February 28, 2011 (the “PLA”), replacing the prior program license agreement, as amended on January 22, 2009 that was in effect until December 31, 2010 (the “Prior PLA”), and certain other agreements with Televisa. Under the PLA, UCI has exclusive access to an extensive suite of U.S. Spanish-language broadcast rights, and, in addition, UCI has exclusive U.S. Spanish-language digital rights to Televisa’s audiovisual programming (with limited exceptions), including the U.S. rights owned or controlled by Televisa to broadcast Mexican First Division soccer league games. UCI has the ability to use Televisa online, network and pay-television programming on its current and future Spanish-language networks and on current and future digital platforms. The PLA will expire the later of 2025 or seven and one-half years after Televisa has sold two thirds of its initial investment in Univision.

Under the PLA, Televisa receives royalties, which are based on 11.91% of substantially all of UCI’s audiovisual and interactive revenues through December 2017. Additionally, Televisa receives an incremental 2% in royalty payments on any of UCI’s annual audiovisual revenues above the 2009 revenue base of $1,648.9 million. After December 2017, the royalty payments to Televisa will increase to 16.22%, and commencing later in 2018, the rate will further increase to 16.54% until the expiration of the Televisa PLA. Additionally, after

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

December 2017 Televisa will continue to receive the same incremental 2% in royalty payments as it currently receives under the PLA.

Pursuant to the PLA and Prior PLA, UCI committed to provide future advertising and promotion time at no charge to Televisa with a cumulative historical fair value of $970.0 million. These commitments extend through 2025, the earliest fixed date for termination of the PLA. The advertising revenues from Televisa will be recognized into revenues through 2025 as UCI provides the advertising to satisfy the commitments. The book value remaining under these commitments as of December 31, 2014 and December 31, 2013 was $607.4 million and $667.4 million, respectively, based on the fair value of UCI’s advertising commitments at the dates the Prior PLA and PLA were entered into. For the years ended December 31, 2014, 2013, and 2012, the Company recognized revenue of $60.0 million, $60.1 million, and $60.3 million, respectively, based on the fair value of UCI’s advertising commitments at the dates the Prior PLA and PLA were entered into. UCI is contractually obligated to provide approximately $74.1 million of such advertising to Televisa in 2015. The amount will increase for each year thereafter and through 2025 by a factor that approximates the annual consumer price index.

In December 2013, the PLA was amended to (i) allow UCI to sublicense English language rights to the Televisa owned or controlled U.S. rights to Mexican First Division soccer league games and (ii) include revenue received from licensing English language rights to Mexican soccer in the revenues subject to the royalty under the PLA starting January 2013.

In 2014, Televisa notified UCI that the cost to acquire the rights to certain Mexican First Division soccer leagues games not owned or controlled by Televisa were greater than expected. As obtaining the U.S. rights to Mexican First Division soccer leagues games and other sports programming is important to the Company’s strategy, UCI agreed to pay Televisa a fixed license fee per season for the U.S. rights to these games that over the term of the license is expected to be in aggregate approximately $2.4 million more than the amounts that would have been payable for these rights under the PLA.

For the years ended December 31, 2014, 2013, and 2012, of the Company’s total license fees of $380.4 million, $338.1 million and $311.1 million, respectively, the license fee to Televisa related to the PLA was $289.5 million, $248.8 million and $224.1 million, respectively. The license fees are included in direct operating expenses on the statements of operations. As of December 31, 2014 and December 31, 2013, of the Company’s total accrued license fees of $39.4 million and $38.8 million, respectively, the Company had accrued license fees to Televisa related to the PLA of $31.7 million and $31.1 million, respectively.

The PLA was amended in July 2015 to, among other things, extend the term of the agreement and revise the royalty payments to Televisa. See Note 20. Subsequent Events.

Mexico License Agreement

Under a program license agreement entered into with an affiliate of Televisa for the territory of Mexico (the “Mexico License”), UCI has granted Televisa the exclusive right for the term of the PLA to broadcast in Mexico all Spanish-language programming produced by or for UCI (with limited exceptions). The terms for the Mexico License are generally reciprocal to those under the PLA, except, among other things, the only royalty payable by Televisa to UCI is a $17.3 million annual payment through December 31, 2025 for the rights to UCI’s programming that is produced for or broadcast on the UniMás network, and UCI has the right to purchase advertising on Televisa channels at certain preferred rates to advertise its businesses.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

Sales Agency Arrangement

In connection with entering into the Mexico License, UCI engaged Televisa to act as its exclusive sales agent for the term of the Mexico License to sell or license worldwide outside of the United States and Mexico UCI’s programming originally produced in the Spanish language or with Spanish subtitles to the extent UCI has rights in the applicable territories and to the extent UCI chooses to make such programming available to third parties in such territories (subject to limited exceptions). Following the agreement to terminate Venevision’s rights to UCI’s programing in Venezuela and other international territories in December 2014 in connection with the amendment of the Venevision PLA, Televisa’s rights to sell UCI’s programming now include Venezuela. Televisa will receive a fee equal to 20% of gross receipts actually received from licensees and reimbursement of certain expenses. UCI has no obligation to pay a fee or reimburse expenses with respect to any direct broadcast by UCI of its programming or under certain non-exclusive worldwide arrangements UCI enters into for its programming. The Company has not recognized any revenue or expense related to this arrangement.

Technical Assistance Agreement

In connection with its investment in Univision, Televisa entered into an agreement with Univision and UCI under which Televisa provides UCI with technical assistance related to UCI’s business for a quarterly fee of 0.7% of operating income before depreciation and amortization, subject to certain adjustments, as well as reimbursement of out-of-pocket expenses. The fees for the years ended December 31, 2014, 2013 and 2012 were $8.8 million, $7.8 million and $7.0 million, respectively. The technical assistance fee and out-of-pocket expenses are included in selling, general, and administrative expenses on the statements of operations.

In addition, Televisa will receive under this agreement a fee in connection with certain extraordinary transactions involving the Company, including certain change of control transactions, equal to 0.35%, subject to certain adjustments, of the gross transaction value. The technical assistance agreement has a 10 year evergreen term. Upon the termination of the Sponsor Management Agreement, this agreement will terminate and UCI will have to pay to Televisa (i) unpaid service fees and expenses if any and (ii) the net present values of the service fees that would have been payable to Televisa from the date of termination until the expiration date then in effect immediately prior to such termination based on an agreed assumed growth rate. No transaction fee was payable in connection with the refinancing transactions described in Note 9. Debt.

Launch Rights

In March 2013, UCI paid approximately $81.0 million to Televisa and its chairman, a director of Univision, in an arrangement that resulted in UCI obtaining for its benefit certain launch rights to be provided by a multiple system operator that distributes UCI’s networks on its carriage platform. The Company has recorded an intangible asset for the launch rights and will amortize the asset over its estimated economic life of approximately 20 years. During the twelve months ended December 31, 2014 and 2013, the Company recognized amortization expense of $4.1 million and $3.2 million, respectively. As of December 31, 2014 and December 31, 2013, the net asset value of the launch rights was $74.0 million and $78.1 million, respectively.

Other Televisa Transactions

From time to time UCI enters into licensing arrangements with respect to certain programming rights obtained by UCI from third parties and not covered by the Sales Agency Arrangement. In 2013, UCI sublicensed certain rights in Mexico to sports programming to Televisa in exchange for $2.0 million and authorization for UCI to sublicense certain rights outside of Mexico to a third party.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

Capital Contribution

On January 30, 2014, a group of institutional investors invested $125.0 million in the Company in exchange for Class A common stock representing approximately 1.5% of the fully diluted equity pursuant to an Investment Agreement dated January 30, 2014 with the Company and the other parties named therein. The Company contributed $124.4 million, net of offering costs, to UCI. UCI used this contribution to repurchase a portion of its 6.75% senior secured notes due 2022. See Note 9. Debt.

Fusion

In connection with its investment in Fusion, UCI provides certain facilities support and capital assets, engineering and operations support, field acquisition/newsgathering and business services (the “support services”). In return, UCI receives reimbursement of certain costs. During the years ended December 31, 2014, 2013 and 2012, the Company recognized $10.5 million, $8.7 million and $0.3 million, respectively, related to the support services. As of December 31, 2014, and 2013, the Company has a receivable of $1.6 million and $6.9 million, respectively, due from Fusion. The Company has recorded a liability of $27.2 million and $31.6 million as of December 31, 2014 and 2013, respectively, related to advance payments associated with the future use of certain facilities and capital assets. In addition, UCI licenses certain content and other intellectual property to Fusion on a royalty-free basis and UCI is reimbursed for third-party costs in connection with the use of such content.

El Rey

In connection with its investment in El Rey, UCI provides certain distribution, advertising sales and back office/technical services to El Rey for fees generally based on incremental costs incurred by UCI in providing such services, including compensation costs for certain dedicated UCI employees performing such services, an allocation of certain UCI facilities costs and a use fee during the useful life of certain UCI assets used by El Rey in connection with the provision of the services. UCI also receives an annual $3.0 million management fee which is recorded as a component of revenue. UCI has also agreed to provide certain English-language soccer programming in exchange for a license fee and promotional support to the El Rey television network. During the years ended December 31, 2014 and 2013, the Company recognized $12.4 million and $4.6 million, respectively, for the management fee and reimbursement of costs. As of December 2014 and 2013, the Company has a receivable of $2.2 million and $1.5 million, respectively, related to these management fees and costs.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

9. Debt

Long-term debt consists of the following as of:

 

     December 31,
2014
    December 31,
2013
 

Bank senior secured revolving credit facility maturing in 2018

   $      $ 2,000   

Bank senior secured term loan facility maturing in 2020

            3,361,500   

Incremental bank senior secured term loan facility maturing in 2020

     1,228,000        1,240,600   

Replacement bank senior secured term loan facility maturing in 2020

     3,329,700          

Senior secured notes—6.875% due 2019

     1,197,000        1,196,500   

Senior secured notes—7.875% due 2020

     750,000        750,000   

Senior notes—8.5% due 2021

     818,900        819,300   

Senior secured notes—6.75% due 2022

     1,120,800        1,240,600   

Senior secured notes—5.125% due 2023

     700,000        700,000   

Convertible debentures—1.5% due 2025

     1,150,500        1,152,600   

Accounts receivable facility maturing in 2018

     100,000        160,000   

Capital lease obligations

     77,000        82,000   
  

 

 

   

 

 

 
  10,471,900      10,705,100   

Less current portion

  (151,400   (214,000
  

 

 

   

 

 

 

Long-term debt and capital lease obligations

$ 10,320,500    $ 10,491,100   
  

 

 

   

 

 

 

Recent Financing Transactions

January 2014 Amendment to the Senior Secured Credit Facilities

On January 23, 2014, UCI entered into an amendment (the “January 2014 Amendment”) to its bank credit agreement governing UCI’s senior secured revolving credit facility and senior secured term loan facility, which are referred to collectively as the “Senior Secured Credit Facilities.” The January 2014 Amendment, among other things, facilitated the incurrence of replacement term loans in an aggregate principal amount of approximately $3,376.7 million (comprising (x) new replacement term loans in an aggregate principal amount of approximately $288.4 million and (y) converted replacement term loans in an aggregate principal amount of approximately $3,088.3 million) to refinance and/or modify the interest rate with respect to certain existing term loans due 2020. The replacement term loans mature on March 1, 2020 and bear interest, at UCI’s option, either at the alternate base rate plus an applicable margin of 2.0% per annum or an adjusted LIBO Rate (with an interest rate floor of 1.0%) plus an applicable margin of 3.0% per annum.

June 2013 Amendment to the Accounts Receivable Sale Facility

On June 28, 2013, UCI entered into an amendment to its accounts receivable sale facility (as amended, the “Facility”). The amendment, among other things, increased the borrowing capacity from $300.0 million to $400.0 million and extended the maturity date of the Facility from June 4, 2016 to June 28, 2018 (or, if earlier, the ninetieth (90th) day prior to the scheduled maturity of any indebtedness in an aggregate principal amount greater than or equal to $250,000,000 outstanding under UCI’s Credit Agreement (as defined in the receivables purchase agreement relating to the Facility (as amended, the “Receivables Purchase Agreement”)). The amendment also lowered the interest rate on the borrowings under the Facility to a LIBOR rate (without a floor) plus a margin of 2.25% per annum.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

May 2013 Amendment to the Senior Secured Credit Facilities

On May 29, 2013, UCI entered into an amendment (the “May 2013 Amendment”) to its bank credit agreement governing UCI’s Senior Secured Credit Facilities. The May 2013 Amendment, among other things, (a) increased the commitments under the existing revolving credit facility from $487.6 million to $550.0 million and paid an upfront fee with respect to such new commitments under the existing revolving credit facility in an amount equal to 0.50% thereof; (b) increased the aggregate principal amount of term loans outstanding under the existing term loan facility by an aggregate principal amount of $400.0 million; and (c) facilitated the incurrence of $850.0 million of additional indebtedness to extend (by way of refinancing indebtedness) the maturity dates of UCI’s existing outstanding term loans due 2017, on terms and conditions substantially similar to UCI’s existing term loans due 2020 discussed below. The increased and newly extended term loans mature on March 1, 2020 and bear interest, at UCI’s option, either at the alternate base rate plus an applicable margin of 2.0% per annum or an adjusted LIBO Rate (with an interest floor of 1.0%) plus an applicable margin of 3.0% per annum. The increased revolving commitments were issued at and subject to the same terms as the new revolving credit commitments from the February 2013 Amendment discussed below. The May 2013 Amendment also included certain other non-economic modifications to the Senior Secured Credit Facilities.

May 2013 Offering of the 2023 Senior Secured Notes

On May 21, 2013, UCI issued $700.0 million aggregate principal amount of the 5.125% senior secured notes due 2023 (the “2023 senior secured notes”). The net proceeds from the sale of the 2023 senior secured notes were used to repay all of the remaining $153.1 million of UCI’s senior secured term loans due 2014 and $534.9 million of UCI’s senior secured term loans due 2017, plus, in each case, accrued and unpaid interest thereon plus any fees and expenses related thereto. See “Debt Instruments—Senior Secured Notes—5.125% due 2023” below.

February 2013 Amendment to the Senior Secured Credit Facilities

On February 28, 2013, UCI entered into an amendment (the “February 2013 Amendment”) to its credit agreement governing UCI’s Senior Secured Credit Facilities. The February 2013 Amendment, among other things, extended the maturity dates of all or a portion of its existing term loans having maturity dates in 2014 and 2017 and its existing revolving credit commitments having maturity dates in 2014 and 2016. Such extensions were achieved through a combination of rollovers (or cashless conversions) of its existing term loans and/or its existing revolving credit commitments and with the proceeds of new term loans and new revolving credit commitments made by one or more new or existing lenders. The newly extended term loans were issued at 99.5% of par value, mature on March 1, 2020 and bear interest, at UCI’s option, either at the alternate base rate plus an applicable margin of 2.5% per annum or an adjusted LIBO Rate (with an interest rate floor of 1.25%) plus an applicable margin of 3.5% per annum, in each case, subject to step-downs in the margin similar to those applicable to its existing term loan facility. The new revolving credit commitments were subject to an upfront fee of 0.50% of the amount of such facility, mature on March 1, 2018, are subject to an unused line fee consistent with that previously applicable to the existing revolving credit facility and bear interest, at UCI’s option, either at the alternate base rate plus an applicable margin of 2.5% per annum or an adjusted LIBO Rate (with no interest rate floor) plus an applicable margin of 3.5% per annum, in each case, subject to step-downs in the margin similar to those applicable to its previous revolving credit facility. The February 2013 Amendment also included certain other non-economic modifications to the Senior Secured Credit Facilities.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

September 2012 Offering of the Additional 2022 Senior Secured Notes

On September 19, 2012, UCI issued an additional $600.0 million aggregate principal amount of the 6.75% senior secured notes due 2022 (the “additional 2022 senior secured notes,” and together with the initial 2022 senior secured notes issued in August 2012, the “2022 senior secured notes”). The proceeds from the sale of the additional 2022 senior secured notes were used to repay $45.6 million of UCI’s senior secured term loans due 2014 and $562.7 million of UCI’s senior secured term loans due 2017, plus, in each case, accrued and unpaid interest thereon plus any fees and expenses related thereto. See “Debt Instruments—Senior Secured Notes—6.75% due 2022” below.

August 2012 Offering of the Initial 2022 Senior Secured Notes

On August 29, 2012, UCI issued $625.0 million aggregate principal amount of the 6.75% senior secured notes due 2022 (the “initial 2022 senior secured notes”). The proceeds from the sale of the initial 2022 senior secured notes were used to repay $46.1 million of UCI’s senior secured term loans due 2014 and $569.5 million of UCI’s senior secured term loans due 2017, plus, in each case, accrued and unpaid interest thereon plus any fees and expenses related thereto. See “Debt Instruments—Senior Secured Notes—6.75% due 2022” below.

February 2012 Offering of the Additional 2019 Senior Secured Notes

On February 7, 2012, UCI issued an additional $600.0 million aggregate principal amount of the 6.875% senior secured notes due 2019 (the “additional 2019 senior secured notes,” and together with the initial 2019 senior secured notes issued in May 2011, the “2019 senior secured notes”). The net proceeds from the sale of the additional 2019 senior secured notes were used to repay $596.0 million of UCI’s senior secured term loans due 2014, plus related fees and expenses. See “Debt Instruments—Senior Secured Notes—6.875% due 2019” below.

Loss on Extinguishment of Debt

For the years ended December 31, 2014, 2013 and 2012, the Company recorded a loss on extinguishment of debt of $17.2 million, $10.0 million and $2.6 million, respectively, as a result of refinancing UCI’s debt. The loss includes a premium, fees, the write-off of certain unamortized deferred financing costs and the write-off of certain unamortized discount and premium related to instruments that were repaid.

Debt Instruments

Senior Secured Credit Facilities

Bank senior secured revolving credit facility—The February 2013 Amendment established a revolving credit facility of $487.6 million that will mature on March 1, 2018, replacing UCI’s prior revolving credit facility, discussed below under “—Extinguished Debt Instruments.” The size of the new revolving credit facility can be increased upon receipt of additional commitments therefor up to $550.0 million without otherwise impacting the amount available for revolving credit commitment increases under the Senior Secured Credit Facilities’ incremental facility provisions. The applicable margin payable as interest thereon is either 2.5% per annum with respect to revolving loans bearing interest at the alternate base rate or 3.5% per annum with respect to revolving loans bearing interest at an adjusted LIBO Rate, in each case, with no interest rate floor (subject to agreed-upon step-downs in such margins upon the achievement of certain leverage ratios). In May 2013, UCI achieved a step-down in the applicable margin of 0.25%.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

The May 2013 Amendment increased the amount of commitments under the revolving credit facility that will mature on March 1, 2018 to $550.0 million. The applicable margin payable as interest thereon following the May 2013 Amendment is the same as the new applicable margin payable on the new revolving credit facility from the February 2013 Amendment described above.

At December 31, 2014, there were no loans outstanding on the revolving credit facility. At December 31, 2014, after giving effect to borrowings and outstanding letters of credit, UCI has $540.3 million available on the revolving credit facility.

Bank senior secured term loan facility maturing in 2020—The February 2013 Amendment established a new term loan facility maturing on March 1, 2020. The May 2013 Amendment then increased the aggregate principal amount outstanding under the term loan facility established by the February 2013 Amendment by $400 million and facilitated the incurrence of $850 million of additional indebtedness by extending (by way of refinancing indebtedness) the maturity dates of UCI’s existing outstanding term loans due 2017 until March 1, 2020. The new term loans under the increased term loan facility and the refinanced term loans bear interest, at UCI’s option, either at the alternate base rate plus an applicable margin of 2.0% per annum or an adjusted LIBO Rate (with an interest rate floor of 1.0%) plus an applicable margin of 3.0% per annum. Commencing June 28, 2013, UCI has been required to make a quarterly payment of 0.25% of the aggregate principal amount of this facility. As of December 31, 2014, the total aggregate principal amount was $1,228.0 million.

The January 2014 Amendment, among other things, facilitated the incurrence of replacement term loans in an aggregate principal amount of approximately $3,376.7 million (comprising (x) new replacement term loans in an aggregate principal amount of approximately $288.4 million and (y) converted replacement term loans in an aggregate principal amount of approximately $3,088.3 million) to refinance and/or modify the interest rate with respect to certain existing term loans due 2020. The replacement term loans mature on March 1, 2020 and bear interest, at UCI’s option, either at the alternate base rate plus an applicable margin of 2.0% per annum or an adjusted LIBO Rate (with an interest rate floor of 1.0%) plus an applicable margin of 3.0% per annum. Commencing March 31, 2014, UCI has been required to make a quarterly payment of 0.25% of the aggregate principal amount of this facility. As of December 31, 2014, the total aggregate principal amount was $3,342.6 million and the remaining unamortized original issue discount (which had been associated with the term loans that were modified) was $12.9 million. The original issue discount is amortized over the term of the replacement term loans.

For the year ended December 31, 2014, the effective interest rate related to UCI’s senior secured term loans in total was 4.76%, including the impact of the interest rate swaps, and 4.09% excluding the impact of the interest rate swaps.

The credit agreement governing the Senior Secured Credit Facilities also provides that UCI may increase its revolving credit facilities and/or term loan facilities by up to $750.0 million if certain conditions are met (including the receipt of commitments therefor). Additionally, UCI is permitted to further refinance (whether by repayment, conversion or extension) UCI’s Senior Secured Credit Facilities (including the extended credit facilities) with certain permitted additional first-lien, second-lien, senior and/or subordinated indebtedness, in each case, if certain conditions are met.

Senior Secured Notes—6.875% due 2019

The 2019 senior secured notes are eight year notes. UCI issued $600.0 million aggregate principal amount of the initial 2019 senior secured notes on May 9, 2011 pursuant to an indenture dated as of May 9, 2011. On

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

February 7, 2012, UCI issued $600.0 million aggregate principal amount of the additional 2019 senior secured notes under the same indenture. The 2019 senior secured notes offered in May 2011 and February 2012 are treated as a single series and have the same terms. The 2019 senior secured notes mature on May 15, 2019 and pay interest on May 15 and November 15 of each year. Interest on the 2019 senior secured notes accrues at a fixed rate of 6.875% per annum and is payable in cash. At December 31, 2014, the outstanding principal balance of the 2019 senior secured notes was $1,200.0 million and the remaining unamortized original issue discount was $3.0 million. The 2019 senior secured notes are secured by a first priority lien (subject to permitted liens) on substantially all assets that currently secure UCI’s Senior Secured Credit Facilities.

On and after May 15, 2015, the 2019 senior secured notes may be redeemed, at UCI’s option, in whole or in part, at any time and from time to time at the redemption prices set forth below. The 2019 senior secured notes will be redeemable at the applicable redemption price (expressed as percentages of principal amount of the 2019 senior secured notes to be redeemed) plus accrued and unpaid interest thereon to the applicable redemption date if redeemed during the twelve month period beginning on May 15 of each of the following years: 2015 (103.438%), 2016 (101.719%), 2017 and thereafter (100.0%). UCI also may redeem any of the 2019 senior secured notes at any time prior to May 15, 2015 at a price equal to 100% of the principal amount plus a make-whole premium and accrued interest. If UCI undergoes a change of control, it may be required to offer to purchase the 2019 senior secured notes from holders at a purchase price equal to 101% of the principal amount plus accrued interest. Subject to certain exceptions and customary reinvestment rights, UCI is required to offer to repay 2019 senior secured notes at par with the proceeds of certain assets sales.

Senior Secured Notes—7.875% due 2020

The 7.875% senior secured notes due 2020 (the “2020 senior secured notes”) are ten year notes maturing November 1, 2020 and paying interest on May 1 and November 1 of each year. Interest on the 2020 senior secured notes accrues at a fixed rate of 7.875% per annum and is payable in cash. The 2020 senior secured notes were issued on October 26, 2010. At December 31, 2014, the outstanding principal balance of the 2020 senior secured notes was $750.0 million. The 2020 senior secured notes are secured by a first priority lien (subject to permitted liens) on substantially all assets that currently secure UCI’s Senior Secured Credit Facilities.

On or after November 1, 2015, the 2020 senior secured notes may be redeemed, at UCI’s option, in whole or in part, at any time and from time to time at the redemption prices set forth below. The 2020 senior secured notes will be redeemable at the applicable redemption price (expressed as percentages of principal amount of the 2020 senior secured notes to be redeemed) plus accrued and unpaid interest thereon to the applicable redemption date if redeemed during the twelve month period beginning on November 1 of each of the following years: 2015 (103.938%), 2016 (102.625%), 2017 (101.313%), 2018 and thereafter (100.0%). UCI also may redeem any of the 2020 senior secured notes at any time prior to November 1, 2015 at a price equal to 100% of the principal amount plus a make-whole premium and accrued interest. If UCI undergoes a change of control, it may be required to offer to purchase the 2020 senior secured notes from holders at a purchase price equal to 101% of the principal amount plus accrued interest. Subject to certain exceptions and customary reinvestment rights, UCI is required to offer to repay 2020 senior secured notes at par with the proceeds of certain assets sales.

Senior Notes—8.5% due 2021

The 8.5% senior notes due 2021 (the “2021 senior notes”) are ten year notes. UCI issued $500.0 million aggregate principal amount of the initial 2021 senior notes (the “initial 2021 senior notes”) on November 23,

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

2010 pursuant to an indenture dated as of November 23, 2010. On January 13, 2011, UCI issued an additional $315.0 million aggregate principal amount of the additional 2021 senior notes (the “additional 2021 senior notes” and together with the initial 2021 senior notes, the “2021 senior notes”) under the same indenture. The initial 2021 senior notes and the additional 2021 senior notes are treated as a single series and have the same terms. They mature on May 15, 2021 and pay interest on May 15 and November 15 of each year. Interest on the 2021 senior notes accrues at a fixed rate of 8.5% per annum and is payable in cash. At December 31, 2014, the outstanding principal balance of the 2021 senior notes was $815.0 million and the remaining unamortized premium was $3.9 million.

On or after November 15, 2015, the 2021 senior notes may be redeemed, at UCI’s option, in whole or in part, at any time and from time to time at the redemption prices set forth below. The 2021 senior notes will be redeemable at the applicable redemption price (expressed as percentages of principal amount of the 2021 senior notes to be redeemed) plus accrued interest and unpaid interest thereon to the applicable redemption date if redeemed during the twelve-month period beginning on November 15 of each of the following years: 2015 (104.250%), 2016 (102.833%), 2017 (101.417%), 2018 and thereafter (100.0%). UCI also may redeem any of the 2021 senior notes at any time prior to November 15, 2015 at a price equal to 100% of the principal amount plus a make-whole premium and accrued interest. If UCI undergoes a change of control, it may be required to offer to purchase the 2021 senior notes from holders at a purchase price equal to 101% of the principal amount plus accrued interest. Subject to certain exceptions and customary reinvestment rights, UCI is required to offer to repay 2021 senior notes at par with the proceeds of certain assets sales.

Senior Secured Notes—6.75% due 2022

The 2022 senior secured notes are ten year notes. UCI issued $625.0 million aggregate principal amount of the initial 2022 senior secured notes on August 29, 2012 pursuant to an indenture dated as of August 29, 2012. On September 19, 2012, UCI issued $600.0 million aggregate principal amount of the additional 2022 senior secured notes under the same indenture. The initial 2022 senior secured notes and the additional 2022 senior secured notes are treated as a single series and have the same terms. The 2022 senior secured notes mature on September 15, 2022 and pay interest on March 15 and September 15 of each year. Interest on the 2022 senior secured notes accrues at a fixed rate of 6.75% per annum and is payable in cash. On March 20, 2014 UCI redeemed $117.1 million aggregate principal amount of the 2022 senior secured notes at a redemption price equal to 106.750% of the aggregate principal amount of the 2022 senior secured notes redeemed, plus accrued and unpaid interest thereon, pursuant to the Equity Claw (as defined below). At December 31, 2014, the outstanding principal balance of the 2022 senior secured notes was $1,107.9 million and the remaining unamortized premium was $12.9 million. The 2022 senior secured notes are secured by a first priority lien (subject to permitted liens) on substantially all assets that currently secure UCI’s Senior Secured Credit Facilities.

On and after September 15, 2017, the 2022 senior secured notes may be redeemed, at UCI’s option, in whole or in part, at any time and from time to time at the redemption prices set forth below. The 2022 senior secured notes will be redeemable at the applicable redemption price (expressed as percentages of principal amount of the 2022 senior secured notes to be redeemed) plus accrued and unpaid interest thereon to the applicable redemption date if redeemed during the twelve month period beginning on September 15 of each of the following years: 2017 (103.375%), 2018 (102.250%), 2019 (101.125%), 2020 and thereafter (100.0%). In addition, until September 15, 2015, UCI may redeem up to 40% of the outstanding 2022 senior secured notes with the net proceeds it raises in one or more equity offerings at a redemption price equal to 106.750% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to the applicable redemption

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

date (the “Equity Claw”). UCI also may redeem any of the 2022 senior secured notes at any time prior to September 15, 2017 at a price equal to 100% of the principal amount plus a make-whole premium and accrued interest. If UCI undergoes a change of control, it may be required to offer to purchase the 2022 senior secured notes from holders at a purchase price equal to 101% of the principal amount plus accrued interest. Subject to certain exceptions and customary reinvestment rights, UCI is required to offer to repay 2022 senior secured notes at par with the proceeds of certain assets sales.

Senior Secured Notes—5.125% due 2023

The 2023 senior secured notes are ten year notes. UCI issued $700.0 million aggregate principal amount of the 2023 senior secured notes on May 21, 2013 pursuant to an indenture dated as of May 21, 2013. The 2023 senior secured notes mature on May 15, 2023 and pay interest on May 15 and November 15 of each year. Interest on the 2023 senior secured notes accrues at a fixed rate of 5.125% per annum and is payable in cash. At December 31, 2014, the outstanding principal balance of the 2023 senior secured notes was $700.0 million. The 2023 senior secured notes are secured by a first priority lien (subject to permitted liens) on substantially all assets that currently secure UCI’s Senior Secured Credit Facilities.

On and after May 15, 2018, the 2023 senior secured notes may be redeemed, at UCI’s option, in whole or in part, at any time and from time to time at the redemption prices set forth below. The 2023 senior secured notes will be redeemable at the applicable redemption price (expressed as percentages of principal amount of the 2023 senior secured notes to be redeemed) plus accrued and unpaid interest thereon to the applicable redemption date if redeemed during the twelve month period beginning on May 15 of each of the following years: 2018 (102.563%), 2019 (101.708%), 2020 (100.854%), 2021 and thereafter (100.0%). In addition, until May 15, 2016, UCI may redeem up to 40% of the outstanding 2023 senior secured notes with the net proceeds it raises in one or more equity offerings at a redemption price equal to 105.125% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to the applicable redemption date. UCI also may redeem any of the 2023 senior secured notes at any time prior to May 15, 2018 at a price equal to 100% of the principal amount plus a make-whole premium and accrued interest. If UCI undergoes a change of control, it may be required to offer to purchase the 2023 senior secured notes from holders at a purchase price equal to 101% of the principal amount plus accrued interest. Subject to certain exceptions and customary reinvestment rights, UCI is required to offer to repay 2023 senior secured notes at par with the proceeds of certain assets sales.

Convertible Debentures—1.5% due 2025

The convertible debentures are 15 year debentures maturing December 31, 2025, totaling $1,125.0 million in aggregate principal amount. Interest on the debentures accrues at a fixed rate of 1.5% per annum and is payable quarterly in arrears in cash. Univision’s obligation to pay interest under the debentures is supported by a letter of credit, as required by the terms of the debentures, as more fully described below. In connection with Televisa’s investment in Univision, Univision issued these debentures, which are convertible into 4,858,485 shares (subject to adjustment as provided in the debentures) of Class C common stock (or, in certain circumstances, Class A or Class D common stock or warrants convertible into Class A, Class C or Class D common stock, as applicable, of Univision) (which represents 30% of the equity interests of Univision on a fully-diluted, as-converted basis). The debentures are held by affiliates of Televisa, by limited liability corporations associated with the Company’s consulting arrangement with its chairman of the Board of Directors and, in each case, their successors and permitted assigns. At December 31, 2014, the outstanding principal balance of the convertible debentures was $1,125.0 million and the remaining unamortized premium was $25.5 million.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

Conversion of the debentures is subject to applicable laws and regulations and certain contractual limitations. Generally, the holder of the debentures may convert the debentures, subject to certain limitations, as follows:

 

    at any time after December 20, 2011, provided that if such holder is a Non-U.S. Holder (as defined in the debentures) that is not a Televisa Investor (as defined in the debentures), such holder must transfer the shares received upon conversion to a third party who is a U.S. Person (as defined in the debentures) within two business days of such conversion;

 

    at any time if such conversion would not cause Televisa to exceed the ownership caps set forth in the Amended and Restated Stockholders’ Agreement dated as of December 20, 2010 by and among Univision, Broadcast Holdings, UCI and certain stockholders of Univision (the “Stockholders Agreement”);

 

    into warrants exercisable for shares of Class A, Class C or Class D, as applicable, common stock at any time, if (a) a Televisa Investor notifies Univision that holding debentures instead of warrants would have a significant negative economic or regulatory impact on Televisa and (b) the Board of Directors of Univision determines that Televisa’s ownership of warrants would be permitted under applicable laws (including FCC foreign ownership restrictions) and would not impact the FCC’s approval of a change of control transaction;

 

    into warrants on the second business day prior to Univision’s redemption of the debentures; and

 

    at any time after the 60th day prior to the maturity date of December 31, 2025.

The holders of the debentures receive certain anti-dilution protections, including an adjustment of the conversion price in the event of a stock split, dividend, recapitalization or reclassification of certain classes of Univision’s stock and certain distributions made in respect of certain classes of Univision’s stock. Additionally Univision is subject to certain restrictive covenants preventing it from taking certain actions, including without limitation, issuing preferred stock and entering into certain business combinations. Univision is also subject to certain information reporting requirements.

In certain circumstances, Univision is required to pay a make-whole payment to the holders of the debentures in an amount equal to the present value of all required interest payments payable through the maturity date. These circumstances include, but are not limited to (i) an acceleration of all payments due under the debentures due to the existence of an event of default, (ii) the Company’s exercise of its right to redeem the debentures on or after December 31, 2024 and prior to maturity or after a change of control (or Televisa’s exercise of its right to convert the debentures prior to such redemption), and (iii) in the event of a change of control of Univision in which Televisa rolls its interest into ownership interests in the acquiring entity, and the receipt of such ownership interests would cause Televisa to exceed the ownership caps set forth in the Stockholders’ Agreement. The fair value of Univision’s make-whole obligation was estimated by management and was determined to be immaterial.

In connection with the debentures, on December 20, 2010, Univision entered into an agreement with Deutsche Bank Trust Company Americas (“Deutsche Bank”) relating to the issuance of standby letters of credit. Under that agreement, Deutsche Bank agreed to issue a letter of credit with an initial face amount of $90.0 million to support the payment of Univision’s interest obligations under the debentures. The letter of credit may only be drawn by the holders of the debentures under limited circumstances, including a payment event of default or bankruptcy event of default under the debentures. Univision’s payment obligations under the letter of credit

 

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December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

are fully cash collateralized by $92.7 million held in an interest-bearing account which is reflected as restricted cash on the Company’s balance sheet. Univision’s agreement with Deutsche Bank contains certain restrictions on the activities of Univision, including making certain modifications to the debentures and engaging in material business activities or having material liabilities other than those associated with its ownership of its subsidiaries and obligations in respect of the letter of credit documents and the Televisa transaction documents.

Accounts Receivable Facility

On June 28, 2013, UCI entered into an amendment to the Facility, which, among other things, (i) extended the maturity date of the Facility to June 28, 2018 (or, if earlier, the ninetieth (90th) day prior to the scheduled maturity of any indebtedness in an aggregate principal amount greater than or equal to $250,000,000 outstanding under UCI’s Credit Agreement (as defined in the Receivables Purchase Agreement)), (ii) increased the borrowing capacity under the Facility by $100.0 million, to $400.0 million, (iii) reduced the term component of the Facility to $100.0 million and increased the borrowing capacity under the revolving component to $300.0 million, subject to the availability of qualifying receivables, (iv) lowered the interest rate on the borrowings under the Facility to a LIBOR rate (without a floor) plus a margin of 2.25% per annum and (v) lowered the commitment fee on the unused portion of the Facility to 0.50% per annum. Interest is paid monthly on the Facility. At December 31, 2014, the amount outstanding under the Facility was $100.0 million and the interest rate was 2.41%.

Under the terms of the Facility, certain subsidiaries of UCI sell accounts receivable on a true sale and non-recourse basis to their respective wholly-owned special purpose subsidiaries, and these special purpose subsidiaries in turn sell such accounts receivable to Univision Receivables Co., LLC, a bankruptcy-remote subsidiary in which certain special purpose subsidiaries of UCI and its parent, Univision, each holds a 50% voting interest (the “Receivables Entity”). Thereafter, the Receivables Entity sells to investors, on a revolving non-recourse basis, senior undivided interests in such accounts receivable pursuant to the Receivables Purchase Agreement. UCI (through certain special purpose subsidiaries) holds a 100% economic interest in the Receivables Entity. The assets of the special purpose entities and the Receivables Entity are not available to satisfy the obligations of UCI or its other subsidiaries.

The Facility is comprised of a $100.0 million term component and a $300.0 million revolving component subject to the availability of qualifying receivables. At December 31, 2014, UCI had $100.0 million outstanding under the term component and no balance outstanding under the revolving component. In addition, the Receivables Entity is obligated to pay a commitment fee to the purchasers, such fee to be calculated based on the unused portion of the Facility. The Receivables Purchase Agreement contains customary default and termination provisions, which provide for the early termination of the Facility upon the occurrence of certain specified events including, but not limited to, failure by the Receivables Entity to pay amounts due, defaults on certain indebtedness, change in control, bankruptcy and insolvency events. The Receivables Entity is consolidated in the Company’s consolidated financial statements.

During the years ended December 31, 2014, 2013 and 2012, the Company recorded interest expense of $3.0 million, $5.8 million and $8.9 million, respectively, related to the Facility.

Extinguished Debt Instruments

Bank senior secured term loan facility maturing in 2020—The February 2013 Amendment established a new term loan facility maturing on March 1, 2020. The new term loan facility was funded through a combination

 

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December 31, 2014

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of rollovers (or cashless conversions) of UCI’s existing term loans and with the proceeds of new term loans made by one or more new or existing lenders. UCI converted $108.8 million and $2,193.4 million of borrowings under the non-extended and extended portions, respectively, of the original term loans and received $1,100.0 million in proceeds from the new senior secured term loans. The February 2013 Amendment required the payment of original issue discount in respect thereof of $17.0 million, which is 0.50% of the principal amount thereof, resulting in a lower effective yield. Prior to the January 2014 Amendment, the total aggregate principal amount was $3,376.7 million and the remaining unamortized original issue discount was $15.1 million. The facility was replaced by the January 2014 Amendment which, among other things, facilitated the incurrence of replacement term loans in an aggregate principal amount of approximately $3,376.7 million that will mature on March 1, 2020. See “Recent Financing Transactions—January 2014 Amendment to the Senior Secured Credit Facilities” above.

Bank senior secured revolving credit facility maturing in 2014 or 2016—Prior to the February 2013 Amendment, UCI had borrowings under a previous bank senior secured revolving credit facility. The facility was bifurcated so that borrowings under the non-extended revolving credit facility would have matured on March 29, 2014 and borrowings under the extended revolving credit facility would have matured on March 29, 2016. The commitments in respect of the extended and non-extended revolving facility were $409.0 million and $43.2 million, respectively, prior to the February 2013 Amendment. The facility was replaced with a new revolving credit facility of $550.0 million that will mature in March 2018. See “Recent Financing Transactions—May 2013 Amendment to the Senior Secured Credit Facilities,” “Recent Financing Transactions—February 2013 Amendment to the Senior Secured Credit Facilities” and “Debt Instruments—Senior Secured Credit Facilities” above.

Bank senior secured term loan facility maturing in 2014 or 2017—As of December 31, 2012, UCI had borrowings under a bank senior secured term loan facility which consisted of non-extended term loans maturing on September 29, 2014 and extended term loans maturing on March 31, 2017. The borrowings in respect of these term loans have since been refinanced into the bank senior secured term loan facility maturing in 2020, the 2023 senior secured notes, and the incremental bank senior secured term loan facility maturing in 2020 described above. The commitments in respect of the extended and non-extended term loans were $4,513.2 million and $365.6 million, respectively, prior to the refinancing. See “Recent Financing Transactions—May 2013 Amendment to the Senior Secured Credit Facilities,” “Recent Financing Transactions—May 2013 Offering of the 2023 Senior Secured Notes” and “Recent Financing Transactions—February 2013 Amendment to the Senior Secured Credit Facilities” above.

Other Matters Related to Debt

Voluntary prepayment of principal amounts outstanding under the Senior Secured Credit Facilities is permitted at any time; however, if a prepayment of principal is made with respect to an adjusted LIBO loan on a date other than the last day of the applicable interest period, the lenders will require compensation for any funding losses and expenses incurred as a result of the prepayment. In addition, the Senior Secured Credit Facilities contain provisions requiring mandatory prepayments if UCI achieves certain levels of excess cash flow as defined in the credit agreement or from the proceeds of asset dispositions, casualty events or debt incurrences.

The agreements governing the Senior Secured Credit Facilities and the senior notes contain various covenants and a breach of any covenant could result in an event of default under those agreements. If any such event of default occurs, the lenders of the Senior Secured Credit Facilities or the holders of the senior notes may elect (after the expiration of any applicable notice or grace periods) to declare all outstanding borrowings,

 

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December 31, 2014

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together with accrued and unpaid interest and other amounts payable thereunder, to be immediately due and payable. In addition, an event of default under the indentures governing the senior notes would cause an event of default under the Senior Secured Credit Facilities, and the acceleration of debt under the Senior Secured Credit Facilities or the failure to pay that debt when due would cause an event of default under the indentures governing the senior notes (assuming certain amounts of that debt were outstanding at the time). The lenders under the Senior Secured Credit Facilities also have the right upon an event of default thereunder to terminate any commitments they have to provide further borrowings. Further, following an event of default under the Senior Secured Credit Facilities, the lenders will have the right to proceed against the collateral. The Senior Secured Credit Facilities, the 2023 senior secured notes, the 2022 senior secured notes, the 2020 senior secured notes and the 2019 senior secured notes are secured by, among other things (a) a first priority security interest in substantially all of the assets of UCI, and UCI’s material restricted domestic subsidiaries (subject to certain exceptions), as defined, including without limitation, all receivables, contracts, contract rights, equipment, intellectual property, inventory, and other tangible and intangible assets, subject to certain customary exceptions; (b) a pledge of (i) all of the present and future capital stock of each subsidiary guarantor’s direct domestic subsidiaries and the direct domestic subsidiaries of UCI and (ii) 65% of the voting stock of each of UCI’s and each guarantor’s material direct foreign subsidiaries, subject to certain exceptions; and (c) all proceeds and products of the property and assets described above. In addition, the Senior Secured Credit Facilities (but not the 2023 senior secured notes, the 2022 senior secured notes, the 2020 senior secured notes or the 2019 senior secured notes) are secured by all of the assets of Broadcast Holdings and a pledge of the capital stock of UCI and all proceeds of the foregoing.

Additionally, the agreements governing the Senior Secured Credit Facilities and the senior notes include various restrictive covenants (including in the credit agreement when there are certain amounts outstanding under the senior secured revolving credit facility on the last day of a fiscal quarter, a first lien debt ratio covenant) which, among other things, limit the incurrence of indebtedness, making of investments, payment of dividends, transactions with affiliates, asset sales, acquisitions, mergers and consolidations, prepayments of other indebtedness, liens and encumbrances and other matters customarily restricted in such agreements. The credit agreement and the indentures governing the senior notes thereunder allow UCI to make certain pro forma adjustments for purposes of calculating certain financial ratios, some of which would be applied to adjusted operating income before depreciation and amortization (“Bank Credit OIBDA”). UCI is in compliance with these covenants under the agreements governing its Senior Secured Credit Facilities and senior notes.

UCI owns several wholly-owned early stage ventures which have been designated as “unrestricted subsidiaries” for purposes of its credit agreement governing the Senior Secured Credit Facilities and indentures governing the senior notes. The results of these unrestricted subsidiaries are excluded from Bank Credit OIBDA in accordance with the definition in the credit agreement and the indentures governing the senior notes. As unrestricted subsidiaries, the operations of these subsidiaries are excluded from, among other things, covenant compliance calculations and compliance with the affirmative and negative covenants of the credit agreement governing the Senior Secured Credit Facilities and indentures governing the senior notes. UCI may redesignate these subsidiaries as restricted subsidiaries at any time at its option, subject to compliance with the terms of its credit agreement governing the Senior Secured Credit Facilities and indentures governing the senior notes.

The subsidiary guarantors under UCI’s Senior Secured Credit Facilities and senior notes are substantially all of UCI’s domestic subsidiaries. The subsidiaries that are not guarantors include certain immaterial subsidiaries, special purpose subsidiaries that are party to UCI’s Facility and the designated unrestricted subsidiaries. The guarantees are full and unconditional and joint and several. Univision Communications Inc. has no independent assets or operations.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

UCI and its subsidiaries, affiliates or significant shareholders may from time to time, in their sole discretion, purchase, repay, redeem or retire any of UCI’s outstanding debt or equity securities (including any privately placed debt securities with an established trading market), in privately negotiated or open market transactions, by tender offer or otherwise.

Contractual maturities of long-term debt for the five years subsequent to December 31, 2014 are as follows:

 

Year

   Amount  

2015

   $ 45,800   

2016

     46,300   

2017

     46,300   

2018(a)

     146,300   

2019

     1,246,300   

Thereafter

     8,837,500   
  

 

 

 
$ 10,368,500   

Less current portion

  (145,800
  

 

 

 

Long-term debt, excluding capital leases

$ 10,222,700   
  

 

 

 

 

(a) Includes UCI’s revolving credit facility and accounts receivable sale facility which mature in 2018.

10. Interest Rate Swaps

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. UCI has agreements with each of its interest rate swap counterparties which provide that UCI could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to UCI’s default on the indebtedness.

For interest rate swap contracts accounted for as cash flow hedges, the effective portion of the change in fair value is recorded in accumulated other comprehensive loss (“AOCL”), net of tax, and is reclassified to earnings as an adjustment to interest expense in the same period or periods that the hedged transactions impact earnings. The ineffective portion of the change in fair value, if any, is recorded directly to current period earnings through interest rate swap (income) expense. For interest rate swap contracts not designated as hedging instruments, the interest rate swaps are marked to market with the change in fair value recorded directly in earnings through interest rate swap (income) expense. While UCI does not enter into interest rate swap contracts for speculative purposes, three out of five of its interest rate swap contracts as of December 31, 2014 are not accounted for as cash flow hedges (“nondesignated instruments”). For two of the nondesignated instruments, the Company ceased applying hedge accounting as a result of debt refinancing. The third nondesignated instrument was entered into to offset the effect of the other nondesignated instruments.

UCI’s current interest rate swap contracts as discussed below effectively convert the interest payable on $2.5 billion of variable rate debt into fixed rate debt, at a weighted-average rate of approximately 2.25% through the expiration of the term loans in the first quarter of 2020.

 

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December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

Interest Rate Swaps Entered into in 2010—In June 2010, UCI entered into three interest rate swap contracts related to UCI’s senior secured term loan with a combined notional value of $4.0 billion (the “2010 interest rate swap contracts”) which expired in June 2013. Initially, these interest rate swaps were accounted for as cash flow hedges. Due to the February 2013 Amendment and May 2013 Amendment to the Senior Secured Credit Facilities, the Company ceased applying hedge accounting on the 2010 interest rate swap contracts. Subsequent to the discontinuation of cash flow hedge accounting, the 2010 interest rate swap contracts were marked to market, with the change in fair value recorded directly in earnings, and the unrealized loss related to these interest rate swaps up to the point cash flow hedge accounting was discontinued was amortized from AOCL into earnings.

The amortization of unrealized loss in AOCL of $19.8 million occurred through the original maturity of the 2010 interest rate swap contracts (June 2013) as an increase to interest expense. All of the 2010 interest rate swap contracts expired during 2013. There are no amounts remaining on the balance sheet, and all amounts in AOCL have been amortized to earnings.

Interest Rate Swaps Entered into in 2011—In November 2011, UCI entered into two interest rate swap contracts with notional amounts of $2.0 billion and $500.0 million, related to UCI’s senior secured term loans, which were to become effective in June 2013 and expire in June 2016. Initially, these interest rate swap contracts were accounted for as cash flow hedges. On February 28, 2013, the Company ceased applying cash flow hedge accounting on both the $2.0 billion notional amount interest rate swap and the $500.0 million notional amount interest rate swap as a result of the February 2013 Amendment to the Senior Secured Credit Facilities. On March 4, 2013, the $2.0 billion notional amount interest rate swap was renegotiated, resulting in a partial termination and replacement of $1.25 billion of its notional amount with a new swap, discussed below under “—Interest Rate Swaps Entered into in 2013.” For the remaining portion of the original contract with a notional amount of $750.0 million and the $500.0 million notional amount interest rate swap (collectively referred to as the “2011 interest rate swap contracts”), UCI will pay weighted average fixed interest of 1.497% and receive in exchange LIBOR-based floating interest, which is equivalent to the Eurodollar rate. The 2011 interest rate swap contracts became effective at the end of June 2013 and expire in June 2016. The Company redesignated the 2011 interest rate swap contracts as cash flow hedges at the time of the February 2013 Amendment to the Senior Secured Credit Facilities.

On May 21, 2013, the Company ceased applying cash flow hedge accounting on the 2011 interest rate swap contracts as a result of the May 2013 Amendment to the Senior Secured Credit Facilities. Subsequent to the discontinuation of cash flow hedge accounting, the 2011 interest rate swap contracts were marked to market, with the change in fair value recorded directly in earnings. The unrealized loss up to the point cash flow hedge accounting was discontinued (inclusive of the unrealized losses from the discontinuation of cash flow hedge accounting at the time of the February 2013 Amendment to the Senior Secured Credit Facilities noted above) is being amortized from AOCL into earnings. The amortization of $76.0 million of unrealized losses in AOCL will occur through the original maturity of the 2011 interest rate swap contracts (June 2016) as an increase to interest expense.

Interest Rate Swaps Entered into in 2013—As discussed above, on March 4, 2013, UCI renegotiated the $2.0 billion notional amount interest rate swap contract entered into in November 2011, resulting in a partial termination and replacement with a new interest rate swap contract with a notional amount of $1.25 billion and a remaining portion of the original swap with a notional amount of $750.0 million. For the new interest rate swap contract with a notional amount of $1.25 billion, UCI will pay fixed interest of 2.563% and receive in exchange LIBOR-based floating interest, subject to a minimum of 1.25%. This contract became effective at the end of June

 

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December 31, 2014

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2013 and expires in February 2020. The Company designated this contract as a cash flow hedge at its inception. As part of the January 2014 Amendment to the Senior Secured Credit Facilities, UCI renegotiated this interest rate swap contract in order to reflect the interest rate floor of 1.0% on the new term loans. Under the amended contract, UCI will pay fixed interest of 2.4465% and receive in exchange LIBOR-based floating interest, subject to a minimum of 1.0%. The contract was de-designated and redesignated at the time of the amendment on January 23, 2014. The amortization of $26.1 million of unrealized gains in AOCL at the time of de-designation will occur through the maturity date of the contract (February 2020) as a decrease to interest expense.

On May 29, 2013, UCI entered into two interest rate swap contracts. The first contract has a notional value of $1.25 billion, and UCI will pay LIBOR-based floating interest and receive in exchange fixed interest of 0.60% (the “reverse swap”). The reverse swap became effective at the end of June 2013 and expires in June 2016. The reverse swap is marked to market, with the change in fair value recorded directly in earnings. The reverse swap was executed to offset the future mark-to-market amounts that will be recognized in earnings on the 2011 interest rate swap contracts that were de-designated on May 21, 2013. UCI also entered into a second interest rate swap contract with a notional value of $1.25 billion (which together with the $1.25 billion notional amount interest rate swap discussed above that was executed in March 2013 are collectively referred to as the “2013 interest rate swap contracts”), and UCI will pay fixed interest of 2.0585% and receive in exchange LIBOR-based floating interest, subject to a minimum of 1.00%. This contract became effective at the end of June 2013 and expires in February 2020. The Company designated this contract as a cash flow hedge at its inception. The contract was then de-designated as of November 30, 2013 and redesignated as of December 1, 2013 to better align with UCI’s forecasted interest payments. The amortization of $11.0 million of unrealized gains in AOCL at the time of de-designation will occur through the maturity date of the contract (February 2020) as a decrease to interest expense.

Derivatives Designated as Hedging Instruments

As of December 31, 2014, the Company has two effective cash flow hedges, outlined below. These contracts mature in February 2020.

 

     Number of Instruments    Notional  

Interest Rate Derivatives

     

2013 Interest Rate Swap Contracts

   2    $ 2,500,000,000   

Derivatives Not Designated as Hedging Instruments

As of December 31, 2014, the Company has three derivatives not designated as hedges, outlined below. These contracts mature in June 2016.

 

     Number of Instruments    Notional  

Interest Rate Derivatives

     

2011 Interest Rate Swap Contracts and the Reverse Swap

   3    $ 2,500,000,000   

The effective notional amount of the above three instruments is zero. The 2011 interest rate swaps have a combined notional amount of $1.25 billion and pay fixed interest and receive floating interest, while the reverse swap has a notional amount of $1.25 billion and receives an offsetting amount of floating interest while paying fixed interest.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

Impact of Interest Rate Derivatives on the Consolidated Financial Statements

The table below presents the fair value of the Company’s derivative financial instruments (both designated and non-designated), as well as their classification on the consolidated balance sheets:

 

     Consolidated Balance Sheet
Location
   As of
December 31, 2014
     As of
December 31, 2013
 

Derivatives Designated as Hedging Instruments

        

Interest Rate Swaps—Non-Current Asset

   Other assets    $       $ 27,200   

Interest Rate Swaps—Non-Current Liability

   Other long-term liabilities      34,300         100   

Derivatives Not Designated as Hedging Instruments

        

Interest Rate Swaps—Non-Current Asset

   Other assets      900           

Interest Rate Swaps—Non-Current Liability

   Other long-term liabilities      17,600         29,400   

The Company does not offset the fair value of interest rate swaps in an asset position against the fair value of interest rate swaps in a liability position on the balance sheet. As of December 31, 2014, UCI has not posted any collateral related to any of the interest rate swap contracts. If UCI had breached any of these default provisions at December 31, 2014, it could have been required to settle its obligations under the agreements at their termination value of $55.2 million.

The table below presents the effect of the Company’s derivative financial instruments designated as cash flow hedges on the consolidated statements of operations and the consolidated statements of comprehensive income (loss) for the years ended December 31, 2014, 2013 and 2012:

 

Derivatives Designated as
Cash Flow Hedges

  Amount of
Gain
or (Loss)
Recognized in
Other
Comprehensive
Income (Loss)

on Derivative
(Effective
Portion)
    Location of
Gain
or (Loss)
Reclassified

from AOCL
into Income
(Effective
Portion)
  Amount of
Gain
or (Loss)

Reclassified
from
AOCL into
Income
(Effective
Portion)(a)
    Location of Gain or
(Loss) Recognized in
Income on Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)
    Amount of Gain or
(Loss) Recognized in
Income on Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)
 

For the year ended December 31, 2014

  $ (92,100   Interest expense   $ (49,900    
 
Interest rate swap
income/(expense)
  
  
  $ (800

For the year ended December 31, 2013

  $ 41,700      Interest expense   $ (62,700    
 
Interest rate swap
income/(expense)
  
  
  $ 1,600   

For the year ended December 31, 2012

  $ (73,100   Interest expense   $ (58,100    
 
Interest rate swap
income/(expense)
  
  
  $   

 

(a) The amount of gain or (loss) reclassified from AOCL into income includes amounts that have been reclassified related to current effective hedging relationships as well as amortizing AOCL amounts related to discontinued cash flow hedging relationships. For the years ended December 31, 2014 and 2013, the Company amortized $19.4 million and $32.3 million, respectively, of net unrealized losses on hedging activities from accumulated other comprehensive loss into interest expense. No amounts of net unrealized losses on hedging activities were amortized from accumulated other comprehensive loss into interest expense during the year ended December 31, 2012.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

During the next twelve months, from December 31, 2014, approximately $51.2 million of net unrealized losses will be amortized to interest expense (inclusive of the amounts being amortized related to discontinued cash flow hedging relationships).

The table below presents the effect of the Company’s derivative financial instruments not designated as hedging instruments on the consolidated statements of operations for the years ended December 31, 2014, 2013 and 2012:

 

Derivatives Not Designated

as Hedging Instruments

  

Location of Gain or (Loss) Recognized
in Income on Derivative

  

Amount of Gain or (Loss) Recognized

in Income on Derivative

 
     

    2014    

       2013              2012      

For the years ended December 31,

           

Interest Rate Swaps

   Interest rate swap income/(expense)    $1,300    $ 2,200       $   

11. Earnings (Loss) Per Share

Basic earnings (loss) per share (“EPS”) is calculated by dividing net income (loss) attributable to Univision Holdings, Inc. by the weighted average number of shares of common stock outstanding. The diluted EPS calculation includes the dilutive effect of the Company’s convertible debentures and shares issuable under the Company’s equity-based compensation plans.

The table below presents a reconciliation of net income (loss) attributable to Univision Holdings, Inc. and weighted average shares outstanding used in the calculation of basic and diluted EPS.

 

(in thousands)

   2014      2013      2012  

Net income (loss) attributable to Univision Holdings, Inc. for basic EPS

   $ 1,900       $ 216,200       $ (14,400

After tax impact of convertible debentures

             9,200           
  

 

 

    

 

 

    

 

 

 

Net income (loss) attributable to Univision Holdings, Inc. for diluted EPS

$ 1,900    $ 225,400    $ (14,400
  

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding for basic EPS

  10,791      10,549      10,552   

Dilutive effect of shares associated with convertible debentures

       4,858        

Dilutive effect of equity awards

  119      35        
  

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding for diluted EPS

  10,910      15,442      10,552   
  

 

 

    

 

 

    

 

 

 

Approximately 0.5 million shares for each of the years ended December 31, 2014, 2013 and 2012 which are issuable under the Company’s equity-based compensation plans are excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive. The assumed conversion of the Company’s convertible debentures was anti-dilutive during the years ended December 31, 2014 and 2012, and approximately 4.9 million shares are excluded from the calculation of diluted EPS for each of those periods.

12. Capital Stock

The Company’s authorized capital stock consists of:

 

    50,000,000 shares of Class A Common Stock, par value $0.001 per share (“Class A Common Stock”), of which 6,481,609 shares are issued and outstanding at December 31, 2014 and 6,228,600 shares are issued and outstanding at December 31, 2013;

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

    50,000,000 shares of Class B Common Stock, par value $0.001 per share (“Class B Common Stock”), of which 3,477,917 shares are issued and outstanding at December 31, 2014 and 2013;

 

    10,000,000 shares of Class C Common Stock, par value $0.001 per share (“Class C Common Stock”), of which 842,850 shares are issued and outstanding at December 31, 2014 and 2013;

 

    10,000,000 shares of Class D Common Stock, par value $0.001 per share (“Class D Common Stock,” and, collectively with Class A Common Stock, Class B Common Stock and Class C Common Stock, the, “common stock”), of which no shares are issued and outstanding at December 31, 2014 and 2013; and

 

    500,000 shares of Preferred Stock, par value $0.001 per share (“preferred stock”), of which no shares are issued and outstanding at December 31, 2014 and 2013.

Holders of the Company’s common stock are entitled to the following rights.

Voting Rights—Holders of Class A Common Stock and Class C Common Stock have all voting powers and voting rights, and vote together as a single class, with each share entitled to one vote. Class B Common Stock and Class D Common Stock do not have any voting power or voting rights.

Directors will be elected by the stockholders subject to the board designation rights of certain stockholders set forth in the Amended and Restated Principal Investor Agreement by and among Univision, Broadcast Holdings, UCI, Televisa, and the Original Sponsors, dated as of December 20, 2010 (the “Principal Investor Agreement”).

Dividend Rights—Holders of common stock will share, on a pro rata basis, in any dividend declared by Univision’s board, subject to the rights of the holders of any outstanding preferred stock and subject to Televisa’s approval rights with respect to certain stock dividends provided for in the Principal Investor Agreement and Univision’s amended and restated certificate of incorporation.

Stock Split, Reverse Stock Splits and Stock Dividends—In the event of a subdivision, increase or combination in any manner (by stock split, reverse stock split, stock dividend or other similar manner) of the outstanding shares of any class of common stock, the outstanding shares of the other classes of common stock will be adjusted proportionally, subject to Televisa’s approval rights with respect to certain dividends and distributions provided for in the Principal Investor Agreement and Univision’s amended and restated certificate of incorporation.

Conversion Rights

Optional Conversions. The following conversion rights are exercisable at the holder’s option, subject in certain cases to federal stock ownership regulations applicable to U.S. broadcast companies and restrictions set forth in the Company’s certificate of incorporation and the Stockholders Agreement:

 

    Each share of Class A Common Stock may be converted at any time into one share of Class B Common Stock and each share of Class B Common Stock may be converted into one share of Class A Common Stock;

 

    Each share of Class C Common Stock may be converted at any time into one share of Class D Common Stock, and each share of Class D Common Stock may be converted into one share of Class C Common Stock; and

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

    Each share of Class C Common Stock may be converted into one share of Class A Common Stock and each share of Class D Common Stock may be converted into one share of Class A Common Stock in connection with certain transfers by Televisa of shares of Class C Common Stock or Class D Common Stock, and subject to certain stock ownership limitations in the Stockholders Agreement.

Mandatory Conversions. The following conversion rights occur automatically:

 

    Each share of Class A Common Stock and Class B Common Stock acquired by Televisa pursuant to Televisa’s exercise of its preferential rights to acquire shares under the Stockholders Agreement (which includes, among other things, the right to acquire shares from the Company in connection with a new issuance or from other stockholders in connection with proposed transfers to third parties), or its participation rights under the Amended and Restated Participation, Registration Rights, and Coordination Agreement, dated as of December 20, 2010, by and among, Univision, Broadcast Holdings, UCI, Televisa and certain stockholders of Univision, will automatically convert to one share of Class C Common Stock or, if such conversion would exceed the cap on Televisa’s equity ownership in the Stockholders Agreement, to one share of Class D Common Stock, so that Televisa always holds shares of either Class C Common Stock or Class D Common Stock;

 

    Each share of Class C Common Stock automatically converts to one share of Class A Common Stock and each share of Class D Common Stock automatically converts into one share of Class A Common Stock immediately upon any transfer of such Class C Common Stock or Class D Common Stock from Televisa to a third party;

 

    Each share of Class C Common Stock automatically converts to one share of Class D Common Stock upon any event that would cause Televisa’s ownership to exceed the cap set forth in the Stockholders Agreement; and

 

    Each share of Class A Common Stock held by Televisa automatically converts to one share of Class C Common Stock and each share of Class B Common Stock held by Televisa automatically converts to one share of Class D Common Stock in the event of a change of control transaction that complies with the procedures and requirements set forth in the Stockholders Agreement (a “Compliant Change of Control Transaction”), that is structured as a merger and with respect to which Televisa does not exercise its right to sell as part of its tag along rights set forth in the Stockholders Agreement.

Liquidation Rights—In the event of voluntary or involuntary liquidation, dissolution or winding up of the Company’s affairs occurring prior to a certain public offering that complies with the requirements set forth in the Stockholders Agreement (a “Qualified Public Offering”) or a Compliant Change of Control Transaction (any such event, a “Liquidation Event”), holders of shares of Class C Common Stock and Class D Common Stock are entitled to share in the Company’s assets legally available for distribution to the stockholders (the “Proceeds”), prior to Class A Common Stock or Class B Common Stock, an amount per share equal to the Televisa Liquidation Preference Amount (defined, generally, as the aggregate amount paid by Televisa for its shares acquired in connection with its initial investment, the conversion of any convertible securities or the exercise of its preferential rights, divided by the number of shares held by it).

After distribution of the full Televisa Liquidation Preference Amount, each holder of Class A Common Stock and/or Class B Common Stock would be entitled to receive from the remaining Proceeds an amount per share equal to the Televisa Liquidation Preference Amount (the “Catch-Up Liquidation Preference Amount”). After distribution of the full Catch-Up Liquidation Preference Amount to the holders of Class A Common Stock

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

and Class B Common Stock, any remaining Proceeds would be distributed ratably among the holders of common stock, based on the number of shares of common stock held by each such holder. Televisa and its affiliates’ right to the Televisa Liquidation Preference Amount terminates upon the earlier of a Qualified Public Offering or a Compliant Change of Control.

Preferred Stock—Subject to the consent rights of various parties under the Principal Investor Agreement and Univision’s amended and restated certificate of incorporation, the Company’s board is authorized to provide for the issuance of preferred stock in one or more series.

13. Comprehensive Income (Loss)

Comprehensive income (loss) is reported in the Consolidated Statements of Comprehensive (Loss) Income and consists of net income (loss) and other gains (losses) that affect stockholders’ equity but, under GAAP, are excluded from net income (loss). For the Company, items included in other comprehensive income (loss) are foreign currency translation adjustments, unrealized gain (loss) on hedging activities, the amortization of unrealized loss on hedging activities and unrealized gain on available for sale securities.

The following tables present the changes in accumulated other comprehensive loss by component. All amounts are net of tax.

 

     Gains and
(Losses) on
Hedging
Activities
    Gains and
(Losses) on
Available for
Sale Securities
     Currency
Translation
Adjustment
    Total  

Balance as of December 31, 2011

   $ (92,000   $       $ (2,000   $ (94,000

Net other comprehensive loss

     (15,000             (100     (15,100
  

 

 

   

 

 

    

 

 

   

 

 

 

Balance as of December 31, 2012

  (107,000        (2,100   (109,100
  

 

 

   

 

 

    

 

 

   

 

 

 

Other comprehensive income before reclassifications

  43,800      12,200      200      56,200   

Amounts reclassified from accumulated other comprehensive loss

  19,600                19,600   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net other comprehensive income

  63,400      12,200      200      75,800   
  

 

 

   

 

 

    

 

 

   

 

 

 

Balance as of December 31, 2013

  (43,600   12,200      (1,900   (33,300
  

 

 

   

 

 

    

 

 

   

 

 

 

Other comprehensive (loss) income before reclassifications

  (37,400   24,300      (700   (13,800

Amounts reclassified from accumulated other comprehensive loss

  11,800                11,800   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net other comprehensive (loss) income

  (25,600   24,300      (700   2,000   
  

 

 

   

 

 

    

 

 

   

 

 

 

Balance as of December 31, 2014

$ (69,200 $ 36,500    $ (2,600 $ (35,300
  

 

 

   

 

 

    

 

 

   

 

 

 

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

The following table presents the activity within other comprehensive income (loss) and the tax effect related to such activity.

 

     Pretax     Tax (provision)
benefit
    Net of tax  

Year Ended December 31, 2012

      

Unrealized loss on hedging activities

   $ (15,000   $      $ (15,000

Currency translation adjustment

     (100            (100
  

 

 

   

 

 

   

 

 

 

Other comprehensive loss

$ (15,100 $    $ (15,100
  

 

 

   

 

 

   

 

 

 

Year Ended December 31, 2013

Unrealized gain on hedging activities

$ 72,100    $ (28,300 $ 43,800   

Amortization of unrealized loss on hedging activities

  32,300      (12,700   19,600   

Unrealized gain on available for sale securities

  20,100      (7,900   12,200   

Currency translation adjustment

  200           200   
  

 

 

   

 

 

   

 

 

 

Other comprehensive income

$ 124,700    $ (48,900 $ 75,800   
  

 

 

   

 

 

   

 

 

 

Year Ended December 31, 2014

Unrealized loss on hedging activities

$ (61,600 $ 24,200    $ (37,400

Amortization of unrealized loss on hedging activities

  19,400      (7,600   11,800   

Unrealized gain on available for sale securities

  40,100      (15,800   24,300   

Currency translation adjustment

  (700        (700
  

 

 

   

 

 

   

 

 

 

Other comprehensive loss

$ (2,800 $ 800    $ (2,000
  

 

 

   

 

 

   

 

 

 

Amounts reclassified from accumulated other comprehensive loss related to hedging activities are recorded to interest expense. See Note 10. Interest Rate Swaps for further information related to amounts reclassified from accumulated other comprehensive loss.

14. Income Taxes

The income tax provision for continuing operations for the years ended December 31, 2014, 2013 and 2012 comprised the following charges and (benefits):

 

     Year Ended
December 31, 2014
    Year Ended
December 31, 2013
    Year Ended
December 31, 2012
 

Current:

      

Federal

   $      $ 1,200      $   

State

     3,900        3,000        5,300   

Foreign

     2,500        3,100        1,000   
  

 

 

   

 

 

   

 

 

 

Total current income tax expense (benefit)

  6,400      7,300      6,300   
  

 

 

   

 

 

   

 

 

 

Deferred:

Federal

  (65,400   (446,300   39,800   

State

  (8,900   (47,800   8,900   

Foreign

  1,800      24,400      3,900   
  

 

 

   

 

 

   

 

 

 

Total deferred income tax (benefit) expense

  (72,500   (469,700   52,600   
  

 

 

   

 

 

   

 

 

 

Income tax (benefit) expense

$ (66,100 $ (462,400 $ 58,900   
  

 

 

   

 

 

   

 

 

 

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

The Company’s deferred tax assets and liabilities as of December 31, 2014 and 2013 are as follows:

 

     2014     2013  

Deferred tax assets:

    

Accrued liabilities

   $ 22,100      $ 14,000   

Tax loss carry-forwards

     676,600        580,300   

Investments related

     74,500        68,800   

Debt related costs

     34,800        18,300   

Deferred revenue

     7,800        10,500   

Programming impairment

     14,600        43,800   

Compensation related costs

     17,000        13,400   

Other

     39,300        50,100   

Valuation allowance

     (125,800     (120,100
  

 

 

   

 

 

 

Total deferred tax assets

  760,900      679,100   
  

 

 

   

 

 

 

Deferred tax liabilities:

Property, equipment and intangible assets

  (1,159,500   (1,162,500

Other

  (34,600   (17,100
  

 

 

   

 

 

 

Total deferred tax liability

  (1,194,100   (1,179,600
  

 

 

   

 

 

 

Net deferred tax liability

$ (433,200 $ (500,500
  

 

 

   

 

 

 

At December 31, 2014, the Company has net operating loss carryforwards for federal income tax purposes of $1.6 billion, which will expire in 2027-2034. Also, the Company has various state tax effected net operating loss carryforwards of approximately $65.0 million (based on the current state income apportionment, the Company would require approximately $1.5 billion of future taxable income to fully utilize such net operating loss carryforwards), which will begin to expire in 2015-2034.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. At December 31, 2014, the Company maintained a valuation allowance in the amount of $125.8 million primarily associated with foreign deferred tax assets of $64.5 million and deferred tax assets related to certain capital assets of $60.6 million as it is more likely than not that the benefits of these deductible differences will not be realized. During 2014, the Company recorded an increase in the valuation allowance of $5.7 million primarily associated with foreign deferred tax assets.

During 2013, the Company recorded a reduction in its federal and state deferred tax asset valuation allowance of $468.0 million. The reduction in the valuation allowance was partially offset by an increase in valuation allowance of $34.5 million relating to its foreign deferred tax assets and $2.1 million relating to certain capital assets. The remaining valuation allowance in the amount of $120.1 million is associated with foreign deferred tax assets of $58.9 million, deferred tax assets related to certain capital assets of $60.4 million and other deferred tax assets of $0.8 million.

During 2012, the Company recorded an increase in the valuation allowance of $92.1 million which consisted of $87.2 million associated with federal and state deferred tax assets and $4.9 million associated with foreign deferred tax assets.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

 

Balance at December 31, 2011

$ 21,300   

Addition based on tax positions related to current year

  7,400   

Lapse in statute of limitations

  (700
  

 

 

 

Balance at December 31, 2012

$ 28,000   

Addition based on tax positions related to current year

  6,800   

Reduction for tax position of prior years

  (2,100

Lapse in statute of limitations

  (1,900
  

 

 

 

Balance at December 31, 2013

$ 30,800   

Addition based on tax positions related to current year

  3,000   

Reduction for tax position of prior years

  (16,100

Lapse in statute of limitations

  (3,200
  

 

 

 

Balance at December 31, 2014

$ 14,500   
  

 

 

 

For the years ended December 31, 2014, 2013 and 2012 the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is approximately $9.4 million, $9.0 million and $8.6 in the aggregate respectively. The Company recognizes interest and penalties, if any, related to uncertain income tax positions in income tax expense. The Company had approximately $2.9 million and $2.2 million of accrued interest and penalties related to uncertain tax positions as of December 31, 2014 and 2013, respectively. The Company recognized interest expense and penalties of $0.7 million, $0.6 million and $1.0 million related to uncertain tax positions for the years ended December 31, 2014, 2013 and 2012, respectively. It is reasonably possible that certain income tax examinations may be concluded, or statutes of limitation may lapse, during the next twelve months, which could result in a decrease in unrecognized tax benefits of approximately $1.1 million that would, if recognized, impact the effective tax rate. The Company effectively settled a federal matter during 2014 which resulted in the recognition of a net tax benefit of $16.1 million.

The Company files a consolidated federal income tax return. The Company has substantially concluded all U.S. federal income tax matters for years through 2013. The Company has concluded substantially all income tax matters for all major jurisdictions through 2009.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

For the years ended December 31, 2014, 2013 and 2012, a reconciliation of the federal statutory tax rate to the Company’s effective tax rate for continuing operations is as follows:

 

     Year Ended
December 31,
2014
    Year Ended
December 31,
2013
    Year Ended
December 31,
2012
 

Federal statutory tax rate

     (35.0 )%      (35.0 )%      35.0

State and local income taxes, net of federal tax benefit

     (7.4     (18.1     19.8   

Valuation allowance

            (171.1     101.6   

Goodwill impairment

            43.7          

Uncertain tax positions

     (31.9     0.5        0.4   

Televisa settlements (non-taxable)

     (32.2     (8.5     (47.4

Non-employee share-based compensation (non-deductible)

                   14.6   

Meals and entertainment

     1.7        0.4        2.3   

Foreign taxes

     1.3        1.3        1.7   

Other

     2.1        (0.9     4.3   
  

 

 

   

 

 

   

 

 

 

Total effective tax rate

  (101.4 )%    (187.7 )%    132.3
  

 

 

   

 

 

   

 

 

 

15. Performance Awards and Incentive Plans

On December 1, 2010, Univision established the 2010 Equity Incentive Plan (the “2010 Plan”), which replaced the amended and restated 2007 Equity Incentive Plan (the “2007 Plan”). The 2010 Plan reflects a recapitalization of Univision and Broadcast Holdings whereby the original Class A common stock and Class L common stock of Univision and shares of preferred stock of Broadcast Holdings were converted to new classes of stock of Univision. Shares and strike prices for awards made under the 2007 Plan have been converted to reflect the new capital structure and remain outstanding. The 2010 Plan is administered by the Board of Directors or, at its election, by one or more committees consisting of one or more members who have been appointed by the Board of Directors (the “Plan Committee”). The Plan Committee shall have such authority and be responsible for such functions as may be delegated to it by the Board of Directors and any reference to the Board of Directors in the 2010 Plan shall be construed as a reference to the Plan Committee with respect to functions delegated to it. If no Plan Committee is appointed, the entire Board of Directors shall administer the 2010 Plan.

The 2010 Plan was adopted to attract, retain and motivate officers and employees of, consultants to, and non-employee directors of the Company. Under the original provisions of the 2010 Plan, the maximum number of shares that may be issued pursuant to awards made under the plan is 600,711 shares of common stock and such additional securities in such amounts as the Board of Directors or Plan Committee may approve. Additional awards may also be made under the 2010 Plan, in the Board of Directors or Plan Committee’s sole discretion, in assumption of, or substitution for, outstanding awards previously granted by Univision or an affiliate or a company acquired by Univision or an affiliate or with which Univision combines. During 2013, the amount of authorized shares was increased by 92,850 to 693,561.

The price of the options granted pursuant to the 2010 and 2007 Plan may not be less than 100% of the fair market value of the shares on the date of grant. Award grants may be in the form of nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, dividend equivalent rights or other stock-based awards. No nonqualified stock option or stock appreciation right award will be exercisable after ten years from the date granted. The number of shares subject to an award, the consequences of a participant’s termination of service with Univision or any subsidiary or affiliate, and the dates and events on which all or any installment of an award shall be vested and nonforfeitable shall be set out in an individual award agreement.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

Compensation expense relating to share-based payments is recognized in net income using a fair-value measurement method. Under the fair value method, the estimated fair value of awards is expensed on a straight-line basis over the period from grant date to remaining requisite service period which is generally the vesting period. See Note 1. Summary of Significant Accounting Policies.

Stock Options

A summary of the Company’s share-based compensation expense is presented below:

 

     Year Ended
December 31,
2014
     Year Ended
December 31,
2013
     Year Ended
December 31,
2012
 

Employee share-based compensation

   $ 14,900       $ 7,800       $ 7,200   

Non-employee share-based compensation

                     18,500   
  

 

 

    

 

 

    

 

 

 

Total

$ 14,900    $ 7,800    $ 25,700   
  

 

 

    

 

 

    

 

 

 

A summary of stock options as of December 31, 2014 and the changes during the year then ended is presented below:

 

     Stock
Options
    Weighted
Average
Exercise
Price
     Weighted
Average
Remaining
Contractual
Term
(years)
     Aggregate
Intrinsic
Value
(thousands)
 

Balance at December 31, 2013

     478,219      $ 288.90         

Granted

     23,512      $ 309.48         

Forfeited, canceled, or expired

     (4,439   $ 295.62         
  

 

 

         

Outstanding at December 31, 2014

  497,292    $ 289.81      6.9    $ 17,300   
  

 

 

         

Exercisable at December 31, 2014

  324,449    $ 295.89    $ 10,600   
  

 

 

         

The weighted-average grant-date fair value of options granted during the years ended December 31, 2014, 2013 and 2012 was $170.96, $101.84 and $60.35, respectively. The Company’s stock options vest between three and five years. During the years ended December 31, 2014, 2013 and 2012, the Company recorded a cumulative adjustment to income of $0.6 million, $2.0 million and $1.0 million, respectively, related to an increase in the estimated forfeiture rate of equity awards. Total unrecognized compensation cost related to unvested stock option awards as of December 31, 2014 is $15.2 million, which is expected to be recognized over a weighted-average period of 3.1 years.

The table below reflects the volatility, dividend, expected term and risk-free interest rate for grants made during 2014, 2013 and 2012. The Company calculated volatility based on an assessment of volatility for the Company’s selected peer group, adjusted for the Company’s leverage.

 

     2014     2013     2012  

Volatility

     84.0     97.0     88.0

Dividend yield

     0.00     0.00     0.00

Expected term (years)

     5.09        6.77        6.69   

Risk-free interest rate

     2.36     1.16     1.39

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

Restricted Stock Units

The Company awarded 92,850 restricted stock units to employees during the year ended December 31, 2013. The awards vest within four years from the date of grant. The Company determined that these awards should be classified as liabilities as they permit the holder to net share settle in an amount in excess of the minimum statutory requirement. The Company remeasured the awards at fair value as of December 31, 2014 and recorded incremental compensation cost of $4.2 million. The restricted stock units will be measured at fair value at the end of each reporting period until vested. No restricted stock units were granted during the years ended December 31, 2014 and December 31, 2012.

The following table presents the changes in the number of restricted stock unit awards during the year ended December 31, 2014:

 

     Restricted Stock
Unit Awards
    Weighted
Average Price
 

Outstanding at December 31, 2013

     92,850      $ 139.69   

Granted

              

Issued

     (12,416   $ 264.40   

Surrendered/Canceled

     (10,797   $ 264.40   
  

 

 

   

Outstanding at December 31, 2014

  69,638    $ 264.40   
  

 

 

   

Total unrecognized compensation cost related to unvested restricted stock units as of December 31, 2014 is $15.6 million, which is expected to be recognized over a weighted-average period of 2.5 years.

Consulting Arrangement

Univision has a consulting arrangement with an entity controlled by Univision’s Chairman of the Board of Directors. The term of the consulting arrangement is indefinite, subject to the right of either party to terminate the arrangement for any reason on thirty days’ notice. In compensation for the consulting services provided by Univision’s Chairman, equity units in various limited liability companies that hold a portion of Univision’s common stock were granted to that entity. Certain of these units provide that upon a defined liquidation event, the entity will receive a payment based on a portion of the defined appreciation realized by the Original Sponsors, Televisa and co-investors on their investments in Univision in excess of certain preferred returns and performance thresholds. These units fully vested in 2012. Certain other units have substantially similar terms, except that these units have not vested and will only vest, and their related payments will only be made, if the Chairman is providing services to the Company at the time of the defined liquidation event.

Since the services for which the equity units were granted were being provided to the Company, the Company records an expense upon the vesting of the equity units. Any such expense is recorded as share-based compensation expense. As the services provided by the Chairman under the consulting arrangement are considered beyond the scope of the Chairman of the Board of Directors, the Company considers the grants of the equity units to be equity awards to a non-employee.

For the year ended December 31, 2012, the Company recorded share-based compensation expense related to the vested equity units of approximately $18.5 million, with a corresponding increase to accumulated paid-in-capital, as the grants were deemed to be equity awards. The Company did not recognize any related expense in the years ended December 31, 2014 and December 31, 2013. Due to the contingent nature of the vesting, the Company will recognize the compensation expense associated with the unvested units only upon the occurrence of a defined liquidation event.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

16. Contingencies and Commitments

Contingencies

The Company maintains insurance coverage for various risks, where deemed appropriate by management, at rates and terms that management considers reasonable. The Company has deductibles for various risks, including those associated with windstorm and earthquake damage. The Company self-insures its employee medical benefits and its media errors and omissions exposures. In management’s opinion, the potential exposure in future periods, if uninsured losses were to be incurred, should not be material to the consolidated financial position or results of operations.

The Company is subject to various lawsuits and other claims in the normal course of business. In addition, from time to time, the Company receives communications from government or regulatory agencies concerning investigations or allegations of noncompliance with law or regulations in jurisdictions in which the Company operates.

The Company establishes reserves for specific liabilities in connection with regulatory and legal actions that the Company deems to be probable and estimable. The Company believes the amounts accrued in its financial statements are sufficient to cover all probable liabilities. In other instances, the Company is not able to make a reasonable estimate of any liability because of the uncertainties related to the outcome and/or the amount or range of loss. The Company does not expect that the ultimate resolution of pending regulatory and legal matters in future periods will have a material effect on our financial condition or result of operations.

Commitments

In the normal course of business, UCI enters into multi-year contracts for programming content, sports rights, research and other service arrangements and in connection with joint ventures.

UCI has long-term operating leases expiring on various dates for office, studio, automobile and tower rentals. UCI’s operating leases, which are primarily related to buildings and tower properties, have various renewal terms and escalation clauses. UCI also has long-term capital lease obligations for its transponders that are used to transmit and receive its network signals.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

The following is a schedule by year of future minimum payments under programming contracts and future minimum rental payments under noncancelable operating and capital leases as of December 31, 2014:

 

Year

   Programming
and Other(a)
     Operating
Leases
     Capital
Leases
 

2015

   $ 267,300       $ 32,100       $ 9,500   

2016

     208,300         28,500         9,500   

2017

     179,800         29,500         9,400   

2018

     128,700         28,500         9,100   

2019

     46,900         19,600         8,300   

Thereafter

     80,300         165,200         94,900   
  

 

 

    

 

 

    

 

 

 

Total minimum payments

$ 911,300    $ 303,400    $ 140,700   
  

 

 

    

 

 

    

Executory costs

  (1,100
        

 

 

 

Net minimum lease payments

  139,600   

Interest and other

  (62,600
        

 

 

 

Total present value of minimum lease payments

  77,000   

Current portion

  (5,600
        

 

 

 

Capital lease obligation, less current portion

$ 71,400   
        

 

 

 

 

(a) Amounts include commitments associated with research tools, contributions to investments and music license fees, but exclude the license fees that will be paid in accordance with the PLA with Televisa and the amended Venevision PLA.

Rent expense totaled $46.4 million, $44.4 million and $39.4 million for the years ended December 31, 2014, 2013 and 2012, respectively.

17. Employee Benefits

UCI has a 401(k) retirement savings plan (the “401(k) Plan”) covering all eligible employees over the age of 21. The 401(k) Plan allows the employees to defer a portion of their annual compensation, and UCI may match a portion of the employees’ contributions generally after one year of service. For 2014, 2013 and 2012, UCI matched 50% of the first 3% of eligible employee compensation that was contributed to the 401(k) Plan. For the years ended December 31, 2014, 2013 and 2012, the Company recognized expense for matching cash contributions to the 401(k) Plan totaling $3.6 million, $3.4 million and $3.8 million, respectively.

18. Segments

The Company’s segments have been determined in accordance with the Company’s internal management structure, which is organized based on operating activities that are reviewed by the Company’s chief operating decision maker. The Company evaluates performance based on several factors. In addition to considering primary financial measures including revenue, management evaluates operating performance for planning and forecasting future business operations, as well as measuring the Company’s ability to service debt and meet other cash needs by considering Bank Credit OIBDA (as defined below). Based on its customers and type of content, the Company has operations in two segments, Media Networks and Radio. The Company’s principal segment is Media Networks, which includes Univision Network; UniMás (formerly Telefutura); nine cable networks,

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

including Galavisión and Univision Deportes Network; and the Company’s owned and/or operated television stations. The Media Networks segment also includes digital properties consisting of online and mobile websites and applications including Univision.com and UVideos, a bilingual digital video network. The Radio segment includes the Company’s owned and operated radio stations; Uforia, a comprehensive digital music platform; and any audio-only elements of Univision.com. Additionally, the Company incurs and manages shared corporate expenses related to human resources, finance, legal and executive and certain assets separately from its two segments. The segments have separate financial information which is used by the chief operating decision maker to evaluate performance and allocate resources. The segment results reflect how management evaluates its financial performance and allocates resources and are not necessarily indicative of the results of operations that each segment would have achieved had they operated as stand-alone entities during the periods presented.

Bank Credit OIBDA represents adjusted operating income before depreciation and amortization. Bank Credit OIBDA eliminates the effects of items that are not considered indicative of the Company’s core operating performance. Bank Credit OIBDA is determined in accordance with the definition of earnings before interest, tax, depreciation and amortization (“EBITDA”) in UCI’s senior secured credit facilities and the indentures governing the senior notes, except that Bank Credit OIBDA from redesignated restricted subsidiaries only includes their results since the beginning of the quarter in which they were redesignated as restricted.

Bank Credit OIBDA is not, and should not be used as, an indicator of or alternative to operating income or net income as reflected in the consolidated financial statements. It is not a measure of financial performance under GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Since the definition of Bank Credit OIBDA may vary among companies and industries, it should not be used as a measure of performance among companies. We are providing on a consolidated basis a reconciliation of the non-GAAP term Bank Credit OIBDA to net income (loss) attributable to Univision Holdings, Inc., which is the most directly comparable GAAP financial measure.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

Segment information is presented in the table below:

 

     Year Ended
December 31, 2014
    Year Ended
December 31, 2013
    Year Ended
December 31, 2012
 

Revenue:

      

Media Networks

   $ 2,601,800      $ 2,292,400      $ 2,103,500   

Radio

     309,600        335,000        338,500   
  

 

 

   

 

 

   

 

 

 

Consolidated

$ 2,911,400    $ 2,627,400    $ 2,442,000   
  

 

 

   

 

 

   

 

 

 

Depreciation and amortization:

Media Networks

$ 138,900    $ 122,700    $ 111,100   

Radio

  7,800      11,300      10,500   

Corporate

  17,100      11,900      8,700   
  

 

 

   

 

 

   

 

 

 

Consolidated

$ 163,800    $ 145,900    $ 130,300   
  

 

 

   

 

 

   

 

 

 

Operating income (loss):

Media Networks

$ 853,100    $ 830,200    $ 713,100   

Radio

  (71,900   (261,700   69,700   

Corporate

  (147,200   (140,600   (154,000
  

 

 

   

 

 

   

 

 

 

Consolidated

$ 634,000    $ 427,900    $ 628,800   
  

 

 

   

 

 

   

 

 

 

Bank Credit OIBDA:

Media Networks

$ 1,238,300    $ 1,088,600    $ 983,500   

Radio

  92,400      108,200      98,000   

Corporate

  (76,900   (76,400   (78,300
  

 

 

   

 

 

   

 

 

 

Consolidated

$ 1,253,800    $ 1,120,400    $ 1,003,200   
  

 

 

   

 

 

   

 

 

 

Capital expenditures:

Media Networks

$ 82,000    $ 133,200    $ 73,200   

Radio

  7,300      9,700      10,300   

Corporate

  44,100      36,300      16,000   
  

 

 

   

 

 

   

 

 

 

Consolidated

$ 133,400    $ 179,200    $ 99,500   
  

 

 

   

 

 

   

 

 

 

 

     December 31,
2014
     December 31,
2013
 

Total assets:

     

Media Networks

   $ 8,197,700       $ 8,268,400   

Radio

     1,120,300         1,263,400   

Corporate

     1,068,300         1,052,900   
  

 

 

    

 

 

 

Consolidated

$ 10,386,300    $ 10,584,700   
  

 

 

    

 

 

 

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

Presented below is a reconciliation of Bank Credit OIBDA to net income (loss) attributable to Univision Holdings, Inc., which is the most directly comparable GAAP financial measure:

 

     Year Ended
December 31,
2014
    Year Ended
December 31,
2013
    Year Ended
December 31,
2012
 

Bank Credit OIBDA

   $ 1,253,800      $ 1,120,400      $ 1,003,200   

Less expenses excluded from Bank Credit OIBDA but included in operating income:

      

Depreciation and amortization

     163,800        145,900        130,300   

Impairment loss(a)

     340,500        439,400        90,400   

Restructuring, severance and related charges

     41,200        29,400        44,200   

Shared-based compensation

     14,900        7,800        25,700   

Business optimization expense(b)

     8,900        12,300        19,900   

Asset write-offs, net

     500        3,700        1,000   

Management and technical assistance agreement fees

     25,100        22,400        20,000   

Unrestricted subsidiaries(c)

     4,700        12,600        23,400   

Other adjustments to operating income(d)

     20,200        19,000        19,500   
  

 

 

   

 

 

   

 

 

 

Operating income

  634,000      427,900      628,800   

Other expense (income):

Interest expense

  587,200      618,200      573,200   

Interest income

  (6,000   (3,500   (200

Interest rate swap income

  (500   (3,800     

Amortization of deferred financing costs

  15,500      14,100      8,300   

Loss on extinguishment of debt

  17,200      10,000      2,600   

Loss on equity method investments

  85,200      36,200      900   

Other

  600      3,100      (500
  

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

  (65,200   (246,400   44,500   

(Benefit) provision for income taxes

  (66,100   (462,400   58,900   
  

 

 

   

 

 

   

 

 

 

Net income (loss)

  900      216,000      (14,400

Net loss attributable to non-controlling interest

  (1,000   (200     
  

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Univision Holdings, Inc.

$ 1,900    $ 216,200    $ (14,400
  

 

 

   

 

 

   

 

 

 

 

(a)

For the year ended December 31, 2014, the impairment loss of $340.5 million includes $198.1 million in the Media Networks segment and $142.4 million in the Radio segment. In the Media Networks segment, the Company recorded approximately $182.9 million related to the impairment of Venevision-related prepaid programming assets made in conjunction with the amendment of the Venevision PLA, $8.2 million related to the write-down of program rights and $7.0 million related to the write-down of property held for sale. In the Radio segment, the Company recorded $133.4 million related to the write-down of broadcast licenses and $9.0 million related to the write-down of a trade name. For the year ended December 31, 2013, the impairment loss of $439.4 million includes $87.6 million in the Media Networks segment and $351.8 million in the Radio segment. In the Media Networks segment, the Company recorded approximately $82.5 million related to the write-down of World Cup program rights prepayments, $2.5 million related to the residual write-off of the TeleFutura trade name, as the network had completed its rebranding as UniMás by the end of 2013, $2.4 million related to the write-off of other program rights and $0.2 million related to the write-down of assets held for sale. In the Radio segment, the Company recorded $307.8 million related to

 

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December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

  the write-off of goodwill, $43.4 million related to the write-down of broadcast licenses, and $0.6 million related to the write-down of other assets. For the year ended December 31, 2012, the impairment loss of $90.4 million includes $83.9 million in the Media Networks segment and $6.5 million in the Radio segment. In the Media Networks segment, the Company recorded $47.6 million related to the write-down of a trade name due to a decision to rebrand the TeleFutura network, $31.9 million related to the write-off of television program rights due to revised estimates of ultimate revenues, $2.5 million related to the write-down of land and buildings held for sale, $0.8 million related to the write-off of other assets, $0.8 million related to the write-off of a broadcast license and $0.3 million related to the write-off of an investment. In the Radio segment, the Company recorded $5.7 million related to the write-down of broadcast licenses, $0.7 million related to the write-off of investments and $0.1 million related to the write-off of other assets.
(b) Business optimization expense relates to the Company’s efforts to streamline and enhance its operations and primarily includes legal, consulting and advisory costs and costs associated with the rationalization of facilities.
(c) UCI owns several wholly-owned early stage ventures which have been designated as “unrestricted subsidiaries” for purposes of the credit agreement governing UCI’s Senior Secured Credit Facilities and indentures governing UCI’s senior notes. The amount for unrestricted subsidiaries above represents the residual adjustment to eliminate the results of the unrestricted subsidiaries which are not otherwise eliminated in the other exclusions from Bank Credit OIBDA above. UCI may redesignate these subsidiaries as restricted subsidiaries at any time at its option, subject to compliance with the terms of the credit agreement and indentures. The Bank Credit OIBDA from redesignated restricted subsidiaries as presented herein only includes the results of restricted subsidiaries since the beginning of the quarter in which they were redesignated as restricted.
(d) Other adjustments to operating income comprises adjustments to operating income provided for in the credit agreement governing UCI’s Senior Secured Credit Facilities and indentures in calculating EBITDA.

The Company is providing the supplemental information below which is the portion of the Company’s revenue equal to the royalty base used to determine the license fee payable by UCI under the PLA, as set forth below:

 

     Year Ended
December 31, 2014
    Year Ended
December 31, 2013
    Year Ended
December 31, 2012
 

Consolidated revenue

   $ 2,911,400      $ 2,627,400      $ 2,442,000   

Less:

      

Radio segment revenue (excluding Radio digital revenue)

     (302,000     (329,700     (336,300

Other adjustments to arrive at revenue included in royalty base

     (117,200     (96,800     (88,200
  

 

 

   

 

 

   

 

 

 

Royalty base used to calculate Televisa license fee

$ 2,492,200    $ 2,200,900    $ 2,017,500   
  

 

 

   

 

 

   

 

 

 

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

19. Quarterly Financial Information (unaudited)

 

(In thousands, except per-share data)

   1st
Quarter
     2nd
Quarter
     3rd
Quarter
     4th
Quarter
    Total
Year
 

2014

             

Revenue

   $ 621,100       $ 833,700       $ 728,900       $ 727,700      $ 2,911,400   

Net income (loss)

   $ 3,600       $ 95,400       $ 40,200       $ (138,300   $ 900   

Net income (loss) attributable to Univision Holdings, Inc.

   $ 3,800       $ 95,700       $ 40,400       $ (138,000   $ 1,900   

Basic net income (loss) per share attributable to Univision Holdings, Inc.

   $ 0.35       $ 8.87       $ 3.74       $ (12.78   $ 0.18   

Diluted net income (loss) per share attributable to Univision Holdings, Inc.

   $ 0.35       $ 6.23       $ 2.71       $ (12.78   $ 0.17   

 

     1st
Quarter
     2nd
Quarter
     3rd
Quarter
    4th
Quarter
     Total
Year
 

2013

             

Revenue

   $ 562,000       $ 676,500       $ 692,700      $ 696,200       $ 2,627,400   

Net income (loss)

   $ 6,500       $ 37,100       $ (18,400   $ 190,800       $ 216,000   

Net income (loss) attributable to Univision Holdings, Inc.

   $ 6,500       $ 37,100       $ (18,400   $ 191,000       $ 216,200   

Basic net income (loss) per share attributable to Univision Holdings, Inc.

   $ 0.62       $ 3.52       $ (1.74   $ 18.11       $ 20.49   

Diluted net income (loss) per share attributable to Univision Holdings, Inc.

   $ 0.62       $ 2.65       $ (1.74   $ 12.16       $ 14.60   

20. Subsequent Events

February 2015 Tender Offer and Offering of the 2025 Senior Secured Notes and Additional 2023 Senior Secured Notes

On February 11, 2015, UCI commenced a cash tender offer (the “February tender offer”) to purchase any and all of its outstanding 6.875% senior secured notes due 2019 (the “2019 senior secured notes”). The aggregate principal amount of the 2019 senior secured notes outstanding as of February 11, 2015 was $1,200.0 million. The February tender offer expired on February 18, 2015, and UCI utilized the proceeds from the issuance of $750.0 million aggregate principal amount of the 5.125% senior secured notes due 2025 (the “initial 2025 senior secured notes”) and an additional $500.0 million aggregate principal amount of the 5.125% senior secured notes due 2023 (the “additional 2023 senior secured notes”) to repurchase and retire $1,145.0 million aggregate principal amount of the 2019 senior secured notes. UCI issued a redemption notice on February 19, 2015 for the remaining $55.0 million aggregate principal amount of 2019 senior secured notes, which redemption UCI effectuated on March 23, 2015.

The additional 2023 senior secured notes were issued under the same indenture governing the initial $700.0 million senior secured notes due 2023 which had been issued on May 21, 2013 (the “initial 2023 senior secured notes,” and together with the additional 2023 senior secured notes, the “2023 senior secured notes”). The additional 2023 senior secured notes were priced at 103%, with a premium of $15.0 million. After giving effect to the issuance of the additional 2023 senior secured notes, the Company has $1,200.0 million aggregate

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014

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principal amount of the 2023 senior secured notes outstanding. The additional 2023 senior secured notes are treated as a single series with the initial 2023 senior secured notes and have the same terms as the initial 2023 senior secured notes.

April 2015 Tender Offer and Offering of the Additional 2025 Senior Secured Notes

On April 13, 2015, UCI commenced a cash tender offer (the “April tender offer”) to purchase any and all of its outstanding 7.875% senior secured notes due 2020 (the “2020 senior secured notes”). The aggregate principal amount of the 2020 senior secured notes outstanding as of April 13, 2015 was $750.0 million. The April tender offer expired on April 20, 2015, and UCI utilized the proceeds from the issuance of $810.0 million aggregate principal amount of the 5.125% senior secured notes due 2025 (the “additional 2025 senior secured notes,” and together with the initial 2025 senior secured notes, the “2025 senior secured notes”) to repurchase and retire $711.7 million aggregate principal amount of the 2020 senior secured notes. UCI issued a redemption notice on April 21, 2015 for the remaining $38.3 million aggregate principal amount of 2020 senior secured notes, which redemption UCI effectuated on May 21, 2015.

The additional 2025 senior secured notes were issued under the same indenture governing the initial 2025 senior secured notes which had been issued on February 19, 2015. The additional 2025 senior secured notes were priced at 101.375%, with a premium of $11.1 million. After giving effect to the issuance of the additional 2025 senior secured notes, the Company has $1,560.0 million aggregate principal amount of the 2025 senior secured notes outstanding. The additional 2025 senior secured notes are treated as a single series with the initial 2025 senior secured notes and have the same terms as the initial 2025 senior secured notes.

Investments in equity method investees

On February 23, 2015, UCI invested an additional $30 million in El Rey in exchange for convertible notes issued by El Rey. The new notes have substantially the same terms as the original notes, except that (i) the conversion of the new notes will be based upon a $0.40 / unit conversion price (as opposed to a $1.00 / unit conversion price for the original notes), and (ii) following conversion, the units received in respect of the new notes are entitled to proceeds in a priority position as compared to the units received in respect of the original and additional notes and are also entitled to a specified additional return once the investment on the original and additional notes is recouped.

On March 13, 2015, as part of a capital investment by the two joint venture partners, UCI invested $11.5 million in Fusion for general use and an additional $5.6 million for use solely in the development of Fusion’s digital business.

Termination of management and technical assistance agreements

Effective as of March 31, 2015, UCI and the Company entered into agreements with affiliates of the Original Sponsors and Televisa, respectively, to terminate as of such date the Sponsor Management Agreement under which certain affiliates of the Original Sponsors provide UCI with management, consulting and advisory services for a quarterly aggregate service fee of 1.3% of operating income before depreciation and amortization, subject to certain adjustments, as well as reimbursement of out-of-pocket expenses and Televisa’s technical assistance agreement under which Televisa provides UCI with technical assistance related to UCI’s business for a quarterly fee of 0.7% of operating income before depreciation and amortization, subject to certain adjustments, as well as reimbursement of out-of-pocket expenses. Under these agreements, the Company agreed to pay reduced

 

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termination fees and certain quarterly service fees in full satisfaction of UCI’s obligations to the affiliates of the Original Sponsors and Televisa under such agreements. Pursuant to the termination agreements, the Company paid termination fees of $112.4 million and $67.6 million on April 14, 2015 (which were accrued as of March 31, 2015) to affiliates of the Original Sponsors in the aggregate and to Televisa, respectively, and the Company will continue to pay quarterly service fees at the same aggregate rate as was required under the Sponsor Management Agreement and Televisa’s technical assistance agreement, until no later than December 31, 2015.

Amendment of Program License Agreement and Memorandum of Understanding with Televisa

On July 1, 2015, the Company and Televisa entered into a Memorandum of Understanding (“MOU”) and UCI entered into an amendment to the existing PLA (the “PLA Amendment”).

Under the PLA Amendment, the terms of the existing strategic relationship between Univision and Televisa have been amended as follows:

 

    Term Extension—Upon consummation of Univision’s initial public offering of its common stock, the PLA Amendment extends the term of the PLA from its current expiration date of the later of 2025 or 7.5 years after Televisa voluntarily sells at least two-thirds of the shares (including shares resulting from the conversion of its convertible debentures) that it held immediately following its investment in Univision (the “Televisa Sell-Down”), to the later of 2030 or 7.5 years after a Televisa Sell-Down.

 

    Reduced Royalty Rates; Additional Revenue Subject to Royalties—In exchange for UCI agreeing to make certain additional revenue subject to the royalty, effective January 1, 2015, Televisa receives reduced royalties from UCI based on 11.84 percent, compared to 11.91 percent under the prior terms, of substantially all of UCI’s Spanish-language media networks revenues through December 2017. At that time, royalty payments to Televisa will increase by a comparable amount to 16.13 percent, compared to 16.22 percent. Additionally, Televisa will continue to receive an incremental 2 percent in royalty payments on such media networks revenues above an increased revenue base of $1.66 billion, compared to the prior revenue base of $1.65 billion. The PLA Amendment further states that the royalty rate will again increase by a comparable amount to 16.45 percent starting later in 2018, compared to the prior rate of 16.54 percent, for the remainder of the term. With this second rate increase, Televisa will receive an incremental 2 percent in royalty payments above a reduced revenue base of $1.63 billion.

 

    Advertising Commitment—UCI will have the right, on an annual basis to reduce the minimum amount of advertising it has committed to provide to Televisa by up to 20% for UCI’s use to sell advertising or satisfy ratings guarantees to certain advertisers.

At the same time UCI and Televisa amended the Mexico License to conform to certain other amendments contained in the PLA Amendment.

In addition, under the terms of the MOU, Univision and Televisa have agreed to the following:

 

   

FCC Matters—Televisa and Univision agreed jointly to file a petition for declaratory ruling with the FCC seeking (a) an increase in the authorized aggregate foreign ownership of Univision’s issued and outstanding shares of common stock from 25% to 49% and (b) to authorize Televisa to hold up to 40% of Univision’s issued and outstanding shares of common stock (in both cases on a voting and an equity

 

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December 31, 2014

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

 

 

basis). Univision and Televisa have agreed to file the petition by the earlier of 30 days after the consummation of Univision’s recently announced proposed initial public offering and January 5, 2016. In addition, Univision agreed that, after its Original Sponsors have sold 75% of their common stock, Univision will file an application for any required FCC approval of a transfer of control of Univision.

 

    Equity Capitalization Amendment—The equity capitalization of Univision will be adjusted to realign the economic and voting interests of Televisa and Univision’s other stockholders. As a result, Televisa will hold common stock with approximately 22% of the voting rights of Univision’s common stock and may obtain additional voting rights depending on its future equity ownership and the outcome of the FCC petition process described above. The classes of Univision’s shares of common stock to be held by Televisa will also provide Televisa the right to designate a minimum number of directors to Univision’s board of directors.

 

    Conversion of Debentures—Televisa will convert $1.125 billion of the Company’s debentures into warrants that are exercisable for new classes of Univision’s common stock. Univision has agreed to pay Televisa a one-time fee of $135.1 million as consideration for the conversion.

In consideration for the PLA Amendment, the MOU and other agreements entered into at the same time, Univision is making a one-time payment of $4.5 million to Televisa.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per-share data)

 

    March 31,
2015
    December 31,
2014
 
    (Unaudited)        
ASSETS    

Current assets:

   

Cash and cash equivalents

  $ 250,000      $ 56,800   

Accounts receivable, less allowance for doubtful accounts of $6,000 in 2015 and $5,600 in 2014

    579,600        641,000   

Program rights and prepayments

    110,200        103,200   

Deferred tax assets

    134,200        134,200   

Prepaid expenses and other

    53,100        41,500   
 

 

 

   

 

 

 

Total current assets

    1,127,100        976,700   

Property and equipment, net

    794,600        810,500   

Intangible assets, net

    3,578,000        3,592,500   

Goodwill

    4,591,800        4,591,800   

Deferred financing costs

    81,700        74,400   

Program rights and prepayments

    88,900        95,600   

Investments

    157,900        78,300   

Restricted cash

    92,700        92,700   

Other assets

    72,900        73,800   
 

 

 

   

 

 

 

Total assets

  $ 10,585,600      $ 10,386,300   
 

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ DEFICIT    

Current liabilities:

   

Accounts payable and accrued liabilities

  $ 346,000      $ 233,100   

Deferred revenue

    83,800        80,800   

Accrued interest

    81,800        55,800   

Accrued license fees

    30,900        39,400   

Program rights obligations

    23,200        19,400   

Current portion of long-term debt and capital lease obligations

    331,000        151,400   
 

 

 

   

 

 

 

Total current liabilities

    896,700        579,900   

Long-term debt and capital lease obligations

    10,375,000        10,320,500   

Deferred tax liabilities

    514,600        567,400   

Deferred revenue

    553,900        570,200   

Other long-term liabilities

    157,000        136,000   
 

 

 

   

 

 

 

Total liabilities

    12,497,200        12,174,000   
 

 

 

   

 

 

 

Stockholders’ deficit:

   

Class A Common Stock, par value $.001 per share, 50,000,000 authorized, 6,481,609 issued at March 31, 2015 and December 31, 2014

             

Class B Common Stock, par value $.001 per share, 50,000,000 authorized, 3,477,917 issued at March 31, 2015 and December 31, 2014

             

Class C Common Stock, par value $.001 per share, 10,000,000 authorized, 842,850 issued at March 31, 2015 and December 31, 2014

             

Class D Common Stock, par value $.001 per share, 10,000,000 authorized, none issued at March 31, 2015 and December 31, 2014

             

Preferred Shares, par value $.001 per share, 500,000 authorized, none issued at March 31, 2015 and December 31, 2014

             

Additional paid-in-capital

    4,301,000        4,299,700   

Accumulated deficit

    (6,194,700     (6,052,400

Accumulated other comprehensive loss

    (18,100     (35,300
 

 

 

   

 

 

 

Total Univision Holdings, Inc. stockholders’ deficit

    (1,911,800     (1,788,000

Non-controlling interest

    200        300   
 

 

 

   

 

 

 

Total stockholders’ deficit

    (1,911,600     (1,787,700
 

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

  $ 10,585,600      $ 10,386,300   
 

 

 

   

 

 

 

See Notes to Consolidated Financial Statements.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except per-share data)

 

     Three Months Ended
March 31,
 
     2015     2014  

Revenue

   $ 624,700      $ 621,100   

Direct operating expenses

     197,600        212,400   

Selling, general and administrative expenses

     170,900        170,800   

Impairment loss

     300          

Restructuring, severance and related charges

     6,200        3,300   

Depreciation and amortization

     42,600        39,300   

Termination of management and technical assistance agreements

     180,000          
  

 

 

   

 

 

 

Operating income

  27,100      195,300   

Other expense (income):

Interest expense

  143,400      147,100   

Interest income

  (2,200   (1,400

Interest rate swap expense

       700   

Amortization of deferred financing costs

  3,900      3,900   

Loss on extinguishment of debt

  73,200      17,200   

Loss on equity method investments

  14,900      20,500   

Other

  300      1,400   
  

 

 

   

 

 

 

(Loss) income before income taxes

  (206,400   5,900   

(Benefit) provision for income taxes

  (64,000   2,300   
  

 

 

   

 

 

 

Net (loss) income

  (142,400   3,600   

Net loss attributable to non-controlling interest

  (100   (200
  

 

 

   

 

 

 

Net (loss) income attributable to Univision Holdings, Inc.

$ (142,300 $ 3,800   
  

 

 

   

 

 

 

Net income per share attributable to Univision Holdings, Inc.

Basic

$ (13.17 $ 0.35   

Diluted

$ (13.17 $ 0.35   

Weighted average shares outstanding

Basic

  10,802      10,791   

Diluted

  10,802      10,912   

See Notes to Consolidated Financial Statements.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited and in thousands)

 

     Three Months Ended
March 31,
 
     2015     2014  

Net (loss) income

   $ (142,400   $ 3,600   
  

 

 

   

 

 

 

Other comprehensive income (loss), net of tax:

Unrealized loss on hedging activities

  (12,900   (13,300

Amortization of unrealized loss on hedging activities

  2,900      3,000   

Unrealized gain on available for sale securities

  27,400      9,100   

Currency translation adjustment

  (200   100   
  

 

 

   

 

 

 

Other comprehensive income (loss)

  17,200      (1,100
  

 

 

   

 

 

 

Comprehensive (loss) income

  (125,200   2,500   

Comprehensive loss attributable to the non-controlling interest

  (100   (200
  

 

 

   

 

 

 

Comprehensive (loss) income attributable to Univision Holdings, Inc.

$ (125,100 $ 2,700   
  

 

 

   

 

 

 

See Notes to Consolidated Financial Statements.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’ DEFICIT

(Unaudited and in thousands)

 

    Univision Holdings, Inc. Stockholders’ Deficit              
    Common
Stock
    Additional
Paid-in-Capital
    Accumulated
Deficit
    Accumulated
Other
Comprehensive
Loss
    Total     Non-
controlling
Interest
    Total
Equity
 

Balance, December 31, 2013

  $      $ 4,166,500      $ (6,054,300   $ (33,300   $ (1,921,100   $ 1,300      $ (1,919,800

Net income (loss)

                  3,800               3,800        (200     3,600   

Other comprehensive loss

                         (1,100     (1,100            (1,100

Proceeds from issuance of equity

           124,400                      124,400               124,400   

Share-based compensation

           2,900                      2,900               2,900   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, March 31, 2014

  $      $ 4,293,800      $ (6,050,500   $ (34,400   $ (1,791,100   $ 1,100      $ (1,790,000
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2014

  $      $ 4,299,700      $ (6,052,400   $ (35,300   $ (1,788,000   $ 300      $ (1,787,700

Net loss

                  (142,300            (142,300     (100     (142,400

Other comprehensive income

                         17,200        17,200               17,200   

Share-based compensation

           1,300                      1,300               1,300   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, March 31, 2015

  $      $ 4,301,000      $ (6,194,700   $ (18,100   $ (1,911,800   $ 200      $ (1,911,600
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See Notes to Consolidated Financial Statements.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)

 

     Three Months Ended
March 31,
 
     2015     2014  

Cash flows from operating activities:

    

Net (loss) income

   $ (142,400   $ 3,600   

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

    

Depreciation

     28,100        24,700   

Amortization of intangible assets

     14,500        14,600   

Amortization of deferred financing costs

     3,900        3,900   

Deferred income taxes

     (64,100     1,200   

Non-cash deferred advertising revenue

     (15,200     (15,000

Non-cash PIK interest income

     (2,200     (1,400

Non-cash interest rate swap activity

     2,200        1,500   

Loss on equity method investments

     14,900        20,500   

Impairment loss

     300        1,300   

Loss on extinguishment of debt

     14,600        400   

Share-based compensation

     4,300        2,900   

Other non-cash items

            200   

Changes in assets and liabilities:

    

Accounts receivable, net

     61,400        69,600   

Program rights and prepayments

     (600     (45,500

Prepaid expenses and other

     (11,800     (8,300

Accounts payable and accrued liabilities

     119,900        (47,000

Accrued interest

     26,100        40,700   

Accrued license fees

     (8,500     (900

Program rights obligations

     4,200        3,300   

Deferred revenue

     1,800        3,600   

Other long-term liabilities

            (1,900

Other

     2,100        1,600   
  

 

 

   

 

 

 

Net cash provided by operating activities

     53,500        73,600   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Proceeds from sale of fixed assets and other

     100        900   

Investments

     (47,300     (4,300

Capital expenditures

     (21,800     (35,400
  

 

 

   

 

 

 

Net cash used in investing activities

     (69,000     (38,800
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of long-term debt

     1,265,000        3,376,700   

Proceeds from issuance of short-term debt

     180,000        167,000   

Payments of refinancing fees

     (22,900     (200

Payments of long-term debt and capital leases

     (1,213,400     (3,507,200

Payments of short-term debt

            (162,000

Proceeds from issuance of equity

            124,400   

Non-controlling interest capital contribution

            1,500   
  

 

 

   

 

 

 

Net cash provided by financing activities

     208,700        200   
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     193,200        35,000   

Cash and cash equivalents, beginning of period

     56,800        43,900   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 250,000      $ 78,900   
  

 

 

   

 

 

 

See Notes to Consolidated Financial Statements.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

1. Summary of Significant Accounting Policies

Nature of operations—Univision Holdings, Inc. is a holding company and the ultimate parent of Univision Communications Inc. Univision Holdings, Inc. (formerly known as Broadcasting Media Partners, Inc.) owns Broadcast Media Partners Holdings, Inc. (“Broadcast Holdings”) which owns Univision Communications Inc. (together with its subsidiaries, collectively referred to herein as “UCI”). Univision Holdings, Inc., together with its subsidiaries are collectively referred to herein as the “Company” or “Univision.” The Company has no operations outside of UCI. The Company is controlled by Madison Dearborn Partners, LLC, Providence Equity Partners Inc., Saban Capital Group, Inc., TPG Capital, Thomas H. Lee Partners, L.P. (collectively, the “Original Sponsors”) and their respective affiliates and Grupo Televisa S.A.B. and its affiliates (“Televisa”). Univision is the leading media company serving Hispanic America and has operations in two segments: Media Networks and Radio.

The Company’s Media Networks segment includes Univision Network; UniMás (formerly Telefutura); nine cable networks, including Galavisión and Univision Deportes Network; and the Company’s owned and/or operated television stations. The Media Networks segment also includes digital properties consisting of online and mobile websites and applications including Univision.com and UVideos, a bilingual digital video network. The Radio segment includes the Company’s owned and operated radio stations; Uforia, a comprehensive digital music platform; and any audio-only elements of Univision.com. Additionally, the Company incurs and manages corporate expenses separate from the two segments which include general corporate overhead and unallocated, shared company expenses related to human resources, finance, legal and executive which are centrally managed and support the Company’s operating and financing activities. In addition, unallocated assets include deferred financing costs and fixed assets that are not allocated to the segments.

Basis of presentation—The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States for interim financial statements. The interim financial statements are unaudited, but include all adjustments, which are of a normal recurring nature, that management considers necessary to fairly present the financial position, the results of operations and cash flows for such periods. Results of operations of interim periods are not necessarily indicative of results for a full year. These financial statements should be read in conjunction with the audited consolidated financial statements in the Company’s 2014 Year End Financial Information.

Principles of consolidation—The consolidated financial statements include the accounts and operations of the Company and its majority owned and controlled subsidiaries. The Company has consolidated the special purpose entities associated with its accounts receivable facility and the four limited liability corporations associated with the Company’s consulting arrangement with its chairman of the Board of Directors, as the Company has determined that they are variable interest entities for which the Company is the primary beneficiary. This determination was based on the fact that these special purpose entities lack sufficient equity to finance their activities without additional support from the Company and, additionally, that the Company retains the risks and rewards of their activities. The consolidation of these special purpose entities does not have a significant impact on the Company’s consolidated financial statements. All intercompany accounts and transactions have been eliminated.

The Company accounts for investments over which it has significant influence but not a controlling financial interest using the equity method of accounting. Accordingly, the Company’s share of the earnings and losses of these companies is included in loss on equity method investments in the accompanying consolidated statements of operations of the Company. For certain equity method investments, the Company’s share of

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

earnings and losses is based on contractual liquidation rights. For investments in which the Company does not have significant influence, the cost method of accounting is used. Under the cost method of accounting, the Company does not record its share in the earnings and losses of the companies in which it has an investment. Investments are reviewed for impairment when events or circumstances indicate that there may be a decline in fair value that is other than temporary.

Use of estimates—The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses, including impairments, during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of fixed assets; allowances for doubtful accounts; the valuation of derivatives, deferred tax assets, program rights and prepayments, fixed assets, intangibles, goodwill and share-based compensation; and reserves for income tax uncertainties and other contingencies.

Fair Value Measurements—The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

 

    Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

 

    Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

 

    Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

Revenue recognition—Revenue is comprised of gross revenues from the Media Networks and Radio segments, including advertising revenue, subscriber fees, content licensing revenue, sales commissions on national advertising aired on Univision and UniMás affiliated television stations, less agency commissions and volume and prompt payment discounts. Media Networks television and Radio station advertising revenues are recognized when advertising spots are aired and performance guarantees, if any, are achieved. The achievement of performance guarantees is based on audience ratings from an independent research company. Subscriber fees received from cable and satellite multichannel video programming distributors (“MVPDs”) are recognized as revenue in the period that services are provided. The digital platform recognizes revenue primarily from video and display advertising, subscriber fees where digital content is provided on an authenticated basis, digital content licensing, and sponsorship advertisement revenue. Video and display advertising revenue is recognized as “impressions” are delivered and sponsorship revenue is recognized ratably over the contract period and as performance guarantees, if any, are achieved. “Impressions” are defined as the number of times that an advertisement appears in pages viewed by users of the Company’s Internet properties. Content licensing revenue is recognized when the content is delivered, all related obligations have been satisfied and all other revenue recognition criteria have been met. All revenue is recognized only when collection of the resulting receivable is reasonably assured.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

UCI has certain contractual commitments, with Televisa and others, to provide a future annual guaranteed amount of advertising and promotion time. The obligation associated with each of these commitments was recorded as deferred revenue at an amount equal to the fair value of the advertising and promotion time as of the date of the agreements providing for these commitments. Deferred revenue is earned and revenue is recognized as the related advertising and promotion time is provided. The Company’s deferred revenue, which is primarily related to the commitments with Televisa, resulted in revenue of $15.2 million, and $15.1 million, respectively, for the three months ended March 31, 2015 and 2014.

Program and sports rights for television broadcast—The Company acquires rights to programming to exhibit on its broadcast and cable networks. Costs incurred to acquire television programs are capitalized when (i) the cost of the programming is reasonably determined, (ii) the programming has been accepted in accordance with the terms of the agreement, (iii) the programming is available for its first showing or telecast and (iv) the license period has commenced. Costs incurred in connection with the production of or purchase of rights to programs that are available and scheduled to be broadcast within one year are classified as current assets, while costs of those programs to be broadcast beyond a one-year period are considered non-current. Program rights and prepayments on the Company’s balance sheet are subject to regular recoverability assessments.

The costs of programming rights for television shows, novelas and movies licensed under programming agreements are capitalized and classified as programming prepayments if the rights payments are made before the related economic benefit has been received. Program rights for television shows and movies are amortized over the program’s life, which is the period in which an economic benefit is expected to be generated, based on the estimated relative value of each broadcast of the program over the program’s life. Program costs are charged to operating expense as the programs are broadcast.

The costs of programming rights licensed under multi-year sports programming agreements are capitalized and classified as programming prepayments if the rights payments are made before the related economic benefit has been received. Program rights for multi-year sports programming arrangements are amortized over the license period based on the ratio of current-period direct revenues to estimated remaining total direct revenues over the remaining contract period. Program costs are charged to operating expense as the programs are broadcast.

The accounting for program rights and prepayments requires judgment, particularly in the process of estimating the revenues to be earned over the life of the contract and total costs to be incurred (“ultimate revenues”). These judgments are used in determining the amortization of, and any necessary impairment of, capitalized costs. Estimated revenues are based on factors such as historical performance of similar programs, actual and forecasted ratings and the genre of the program. Such measurements are classified as Level 3 within the fair value hierarchy as key inputs used to value program and sports rights include ratings and undiscounted cash flows. If planned usage patterns or estimated relative values by year were to change significantly, amortization of the Company’s rights costs may be accelerated or slowed.

Reclassifications—Certain reclassifications have been made to the prior year financial statements to conform to the current period presentation.

New accounting pronouncements—In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-04, which amended Accounting Standards Codification

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

(“ASC”) 405, Liabilities. The amendments provide guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation (within the scope of this guidance) is fixed at the reporting date. Examples of obligations within the scope of ASU 2013-04 include debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The Company adopted ASU 2013-04 during the first quarter of 2014. The adoption of ASU 2013-04 did not have a significant impact on the Company’s consolidated financial statements or disclosures.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASC 606). The amendments provide guidance to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards. For public entities, the amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The FASB has proposed a one year delay of ASU 2014-09 implementation. The Company is currently evaluating the impact ASU 2014-09 will have on its consolidated financial statements and disclosures.

2. Property and Equipment

Property and equipment consists of the following:

 

     March 31,
2015
    December 31,
2014
 

Land and improvements

   $ 130,000      $ 129,900   

Buildings and improvements

     399,300        388,900   

Broadcast equipment

     409,400        399,300   

Furniture, computer and other equipment

     224,500        233,800   

Land, building, transponder equipment and vehicles financed with capital leases

     94,400        94,500   
  

 

 

   

 

 

 
  1,257,600      1,246,400   

Accumulated depreciation

  (463,000   (435,900
  

 

 

   

 

 

 
$ 794,600    $ 810,500   
  

 

 

   

 

 

 

During the three months ended March 31, 2015, the Company entered into approximately $0.1 million of capital leases.

3. Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of the following:

 

     March 31,
2015
     December 31,
2014
 

Termination of management and technical assistance agreements

   $ 180,000       $   

Accounts payable and accrued liabilities

     125,400         166,400   

Accrued compensation

     40,600         66,700   
  

 

 

    

 

 

 
$ 346,000    $ 233,100   
  

 

 

    

 

 

 

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

Termination of management and technical assistance agreements

Effective as of March 31, 2015, UCI and the Company entered into agreements with affiliates of the Original Sponsors and Televisa, respectively, to terminate as of such date the management agreement among the Company, UCI, and the Original Sponsors (the “Sponsor Management Agreement”) under which certain affiliates of the Original Sponsors provide UCI with management, consulting and advisory services for a quarterly aggregate service fee of 1.3% of operating income before depreciation and amortization, subject to certain adjustments, as well as reimbursement of out-of-pocket expenses and Televisa’s technical assistance agreement under which Televisa provides UCI with technical assistance related to UCI’s business for a quarterly fee of 0.7% of operating income before depreciation and amortization, subject to certain adjustments, as well as reimbursement of out-of-pocket expenses. Under these agreements, the Company agreed to pay reduced termination fees and certain quarterly service fees in full satisfaction of UCI’s obligations to the affiliates of the Original Sponsors and Televisa under such agreements. Pursuant to the termination agreements, the Company paid termination fees of $112.4 million and $67.6 million on April 14, 2015 (which were accrued as of March 31, 2015) to the affiliates of the Original Sponsors in the aggregate and to Televisa, respectively, and the Company will continue to pay quarterly service fees at the same aggregate rate as was required under the Sponsor Management Agreement and Televisa’s technical assistance agreement, until no later than December 31, 2015. See “Notes to Consolidated Financial Statements—6. Related Party Transactions.”

Restructuring, Severance and Related Charges

During the three months ended March 31, 2015, the Company incurred restructuring, severance and related charges in the amount of $6.2 million. This amount includes a $3.4 million charge related to broader-based cost-saving restructuring initiatives and $2.8 million related to severance charges for individual employees. The severance charge of $2.8 million is related to miscellaneous severance agreements primarily with corporate employees.

During 2014, the Company initiated restructuring activities to improve performance, collaboration, and operational efficiencies across its local media platforms. The $3.4 million charge recognized during the three months ended March 31, 2015 includes $3.0 million resulting from the restructuring activities across local media platforms and $0.4 million resulting from other restructuring activities that were initiated in 2012, as presented in the tables below:

 

     Restructuring Activities Across Local Media Platforms
Initiated in 2014
 
     Employee
Termination
Benefits
    Contract
Termination
Costs
     Other
Qualifying
Restructuring
Costs
     Total  

Media Networks

   $ (100   $       $       $ (100

Radio

     900        2,100         100         3,100   
  

 

 

   

 

 

    

 

 

    

 

 

 

Consolidated

$ 800    $ 2,100    $ 100    $ 3,000   
  

 

 

   

 

 

    

 

 

    

 

 

 

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

     Other Restructuring Activities Initiated in 2012  
     Employee
Termination
       Benefits       
    Contract
Termination
       Costs       
            Total         

Media Networks

   $ (600   $ 100       $ (500

Radio

     200        100         300   

Corporate

     600                600   
  

 

 

   

 

 

    

 

 

 

Consolidated

$ 200    $ 200    $ 400   
  

 

 

   

 

 

    

 

 

 

All balances related to restructuring employee termination benefits are expected to be paid within twelve months from March 31, 2015. Balances related to restructuring lease obligations will be settled over the remaining lease term. As of March 31, 2015, future charges associated with the aforementioned restructuring activities cannot be reasonably estimated.

During the three months ended March 31, 2014, the Company incurred restructuring, severance and related charges in the amount of $3.3 million. This amount includes a $3.6 million charge related to broader-based cost-saving restructuring initiatives, partially offset by a $0.3 million benefit related to the adjustment of severance charges for individual employees. The severance benefit of $0.3 million is related to miscellaneous severance agreements with corporate employees as well as employees in the Media Networks and Radio segments. The restructuring charge of $3.6 million consists of the following:

 

     Employee
Termination
Benefits
     Contract
Termination
Costs
     Other
Qualifying
Restructuring
Costs
     Total  

Media Networks

   $ 1,200       $ 900       $       $ 2,100   

Radio

     1,300                         1,300   

Corporate

             200                 200   
  

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated

$ 2,500    $ 1,100    $    $ 3,600   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the activity in the restructuring liabilities during the three months ended March 31, 2015, related to restructuring activities across local media platforms.

 

     Restructuring Activities Across Local Media Platforms
Initiated in 2014
 
     Employee
Termination
Benefits
    Contract
Termination
Costs
    Other
Qualifying
Restructuring
Costs
    Total  

Accrued restructuring as of December 31, 2014

   $ 1,900      $ 1,100      $      $ 3,000   

Restructuring expense

     900        2,100        100        3,100   

Reversals

     (100                   (100

Transfers

            300               300   

Cash payments

     (1,800     (300     (100     (2,200
  

 

 

   

 

 

   

 

 

   

 

 

 

Accrued restructuring as of March 31, 2015

$ 900    $ 3,200    $    $ 4,100   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

Of the $4.1 million accrued as of March 31, 2015 related to restructuring activities across local media platforms, $2.0 million is included in current liabilities and $2.1 million is included in non-current liabilities.

Of the $3.0 million accrued as of December 31, 2014 related to restructuring activities across local media platforms, $2.0 million is included in current liabilities and $1.0 million is included in non-current liabilities.

The following table presents the activity in the restructuring liabilities during the three months ended March 31, 2015 and 2014, related to other restructuring activities initiated in 2012.

 

     Other Restructuring Activities Initiated in 2012  
     Employee
Termination
Benefits
    Contract
Termination
Costs
    Other
Qualifying
Restructuring
Costs
    Total  

Accrued restructuring as of December 31, 2013

   $ 12,900      $ 5,100      $ 300      $ 18,300   

Restructuring expense

     3,500        1,100               4,600   

Reversals

     (1,000                   (1,000

Cash payments

     (6,900     (900     (200     (8,000
  

 

 

   

 

 

   

 

 

   

 

 

 

Accrued restructuring as of March 31, 2014

$ 8,500    $ 5,300    $ 100    $ 13,900   
  

 

 

   

 

 

   

 

 

   

 

 

 

Accrued restructuring as of December 31, 2014

$ 24,300    $ 4,000    $ 100    $ 28,400   

Restructuring expense

  2,700      200           2,900   

Reversals

  (2,500             (2,500

Cash payments

  (11,700   (400        (12,100
  

 

 

   

 

 

   

 

 

   

 

 

 

Accrued restructuring as of March 31, 2015

$ 12,800    $ 3,800    $ 100    $ 16,700   
  

 

 

   

 

 

   

 

 

   

 

 

 

Of the $16.7 million accrued as of March 31, 2015 related to the restructuring activities initiated in 2012, $14.1 million is included in current liabilities and $2.6 million is included in non-current liabilities.

Of the $28.4 million accrued as of December 31, 2014 related to the restructuring plan initiated in 2012, $25.5 million is included in current liabilities and $2.9 million is included in non-current liabilities.

4. Financial Instruments and Fair Value Measures

The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value.

Interest Rate Swaps—Currently, the Company uses interest rate swaps to manage its interest rate risk. The interest rate swap asset of $2.8 million and the interest rate swap liability of $72.4 million as of March 31, 2015 and the interest rate swap asset of $0.9 million and the interest rate swap liability of $51.9 million as of December 31, 2014 were measured at fair value primarily using significant other observable inputs (Level 2). In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

The majority of inputs into the valuations of the Company’s interest rate derivatives include market-observable data such as interest rate curves, volatilities, and information derived from, or corroborated by

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

market-observable data. Additionally, a specific unobservable input used by the Company in determining the fair value of its interest rate derivatives is an estimation of current credit spreads to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. The inputs utilized for the Company’s own credit spread are based on implied spreads from its privately placed debt securities with an established trading market. For counterparties with publicly available credit information, the credit spreads over the London Interbank Offered Rate (“LIBOR”) used in the calculations represent implied credit default swap spreads obtained from a third party credit data provider. Once these spreads have been obtained, they are used in the fair value calculation to determine the credit valuation adjustment (“CVA”) component of the derivative valuation. The Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

The CVAs associated with the Company’s derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by its counterparties. If the CVA is a significant component of the derivative valuation, the Company will classify the fair value of the derivative as a Level 3 measurement. If required, any transfer between Level 2 and Level 3 will occur at the end of the reporting period. At March 31, 2015 and December 31, 2014, the Company has assessed the significance of the impact of the CVAs on the overall valuation of its derivative positions and has determined that the CVAs are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified as Level 2 measurements.

Available-for-Sale Securities—The Company’s available-for-sale securities relate to its investment in convertible notes with an equity method investee. The convertible notes are recorded at fair value through adjustments to other comprehensive income (loss). The fair value of the convertible notes is classified as a Level 3 measurement due to the significance of unobservable inputs which utilize company-specific information. The Company uses an income approach to value the notes’ fixed income component and the Black-Scholes model to value the conversion feature. Key inputs to the Black-Scholes model include the underlying security value, strike price, volatility, time-to-maturity and risk-free rate. See Note 5. Investments.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

Fair Value of Debt Instruments—The carrying value and fair value of the Company’s and UCI’s debt instruments as of March 31, 2015 and December 31, 2014 are set out in the following tables. The fair values of the credit facilities are based on market prices (Level 1). The fair values of the senior notes are based on industry curves based on credit rating (Level 2). The fair value of the convertible debentures is estimated using a valuation method based on assumptions including expected volatility, risk-free interest rate, bond yield, recovery rate, and expected term (Level 3). The accounts receivable facility carrying value approximates fair value (Level 1).

 

     As of March 31, 2015  
     Carrying Value      Fair Value  

Bank senior secured revolving credit facility maturing in 2018

   $ 180,000       $ 180,000   

Incremental bank senior secured term loan facility maturing in 2020

     1,224,800         1,223,200   

Replacement bank senior secured term loan facility maturing in 2020

     3,321,500         3,321,500   

Senior secured notes—7.875% due 2020

     750,000         803,000   

Senior notes—8.5% due 2021

     818,800         873,500   

Senior secured notes—6.75% due 2022

     1,120,500         1,214,200   

Senior secured notes—5.125% due 2023

     1,214,800         1,239,900   

Senior secured notes—5.125% due 2025

     750,000         767,300   

Convertible debentures—1.5% due 2025

     1,150,000         2,467,100   

Accounts receivable facility maturing in 2018

     100,000         100,000   
  

 

 

    

 

 

 
$ 10,630,400    $ 12,189,700   
  

 

 

    

 

 

 

 

     As of December 31, 2014  
     Carrying Value      Fair Value  

Bank senior secured revolving credit facility maturing in 2018

   $       $   

Incremental bank senior secured term loan facility maturing in 2020

     1,228,000         1,198,800   

Replacement bank senior secured term loan facility maturing in 2020

     3,329,700         3,246,500   

Senior secured notes—6.875% due 2019

     1,197,000         1,249,400   

Senior secured notes—7.875% due 2020

     750,000         803,000   

Senior notes—8.5% due 2021

     818,900         873,700   

Senior secured notes—6.75% due 2022

     1,120,800         1,214,500   

Senior secured notes—5.125% due 2023

     700,000         714,400   

Convertible debentures—1.5% due 2025

     1,150,500         1,966,100   

Accounts receivable facility maturing in 2018

     100,000         100,000   
  

 

 

    

 

 

 
$ 10,394,900    $ 11,366,400   
  

 

 

    

 

 

 

5. Investments

The carrying value of the Company’s investments is as follows:

 

     March 31,
2015
     December 31,
2014
 

Investments in equity method investees

   $ 153,600       $ 74,000   

Cost method investments

     4,300         4,300   
  

 

 

    

 

 

 
$ 157,900    $ 78,300   
  

 

 

    

 

 

 

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

Equity method investments primarily includes UCI’s investment in Fusion Media Network, LLC (“Fusion”), a joint venture with Walt Disney Company’s ABC News, which is a 24-hour English language news and lifestyle TV and digital network targeted at young English speaking Hispanics and their peers, and UCI’s investment in El Rey Holdings LLC (“El Rey”) which owns and operates, among other assets, the El Rey television network, a 24-hour English-language general entertainment cable network targeting young adult audiences.

Fusion (formerly known as Univision ABC News Network, LLC) was formed in July 2012 and provides programming on both linear and digital platforms. The Fusion linear network launched in October 2013. UCI holds a 50% non-controlling interest in the joint venture, which is accounted for as an equity method investment. During the three months ended March 31, 2014, UCI contributed $4.3 million, respectively, to the investment in Fusion. During the three months ended March 31, 2015, as part of a capital investment by the two joint venture partners, UCI invested $11.5 million in Fusion for general use and an additional $5.6 million for use solely in the development of Fusion’s digital business. During the three months ended March 31, 2015 and 2014, the Company recognized a loss of $9.6 million and $5.3 million, respectively, related to its share of Fusion’s net losses. As of March 31, 2015, the net investment balance was $7.5 million. As of December 31, 2014, UCI’s share of Fusion’s net losses exceeded UCI’s equity investment in Fusion, resulting in an investment balance of zero.

El Rey was formed in May 2013, and the El Rey television network launched in December 2013. On May 14, 2013, UCI invested approximately $2.6 million for a 4.99% equity and voting interest in El Rey. Additionally, UCI invested approximately $72.4 million in the form of a convertible note subject to restrictions on transfer. The convertible note is a twelve year note that bears interest at 7.5%. Interest is added to principal as it accrues annually. A portion of the initial principal of the note may be converted into equity after two years and the entire initial principal may be converted following four years after the launch of the network; provided that the maximum voting interest for UCI’s combined equity interest cannot exceed 49% for the first six years after the network’s launch. In November 2014, UCI invested an additional $25 million in El Rey in the form of a convertible note on the same terms as the original convertible note as contemplated under the El Rey limited liability company agreement. For a period following December 1, 2020 UCI has a right to call, and the initial majority equity owners have the right to put, in each case at fair market value, a portion of such owners’ equity interest in El Rey. For a period following December 1, 2023 UCI has a similar right to call, and such owners have a similar right to put, all of such owners’ equity interest in El Rey. On February 23, 2015, UCI invested an additional $30 million in El Rey in exchange for convertible notes issued by El Rey. The new notes have substantially the same terms as the original notes, except that (i) the conversion of the new notes will be based upon a $0.40 / unit conversion price (as opposed to a $1.00 / unit conversion price for the original notes), and (ii) following conversion, the units received in respect of the new notes are entitled to proceeds in a priority position as compared to the units received in respect of the original and additional notes and are also entitled to a specified additional return once the investment on the original and additional notes is recouped.

UCI accounts for its equity investment under the equity method of accounting due to the fact that although UCI has less than a 20% interest, it exerts significant influence over El Rey. UCI’s share of earnings and losses is recorded based on contractual liquidation rights and not on relative equity ownership. To the extent that UCI’s share of El Rey’s losses exceeds UCI’s equity investment, UCI reduces the carrying value of its investment in El Rey’s convertible notes. As a result, the carrying value of UCI’s equity investment in El Rey does not equal UCI’s proportionate ownership in El Rey’s net assets. During the three months ended March 31, 2015 and 2014, the Company recognized a loss of $5.3 million and $15.2 million, respectively, related to its share of El Rey’s net losses.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

The El Rey convertible notes are debt securities which are classified as available-for-sale securities. For the three months ended March 31, 2015, the Company recorded unrealized gains of approximately $45.1 million to other comprehensive income (loss) to adjust the convertible debt, including all interest, to their fair value of $145.5 million. During the three months ended March 31, 2014, the Company recorded unrealized gains of approximately $15.2 million to other comprehensive income (loss) to adjust the convertible note entered into in May 2013 to its fair value of $72.4 million. During the three months ended March 31, 2015 and 2014, the Company recorded interest income of $2.2 million, and $1.4 million, respectively, related to the convertible debt. As of March 31, 2015 and December 31 2014, the net investment balance was $145.5 million and $73.5 million, respectively.

6. Related Party Transactions

Original Sponsors

Management Fee Agreement

The Company and affiliates of the Original Sponsors entered into the Sponsor Management Agreement with UCI under which certain affiliates of the Original Sponsors provide UCI with management, consulting and advisory services for a quarterly aggregate service fee of 1.3% of operating income before depreciation and amortization, subject to certain adjustments, as well as reimbursement of out-of-pocket expenses. The management fee for the three months ended March 31, 2015 and 2014 was $3.6 million and $3.3 million, respectively. The out-of-pocket expenses for the three months ended March 31, 2015 and 2014 were $0.3 million and $0.4 million, respectively. Effective as of March 31, 2015, the Company and UCI entered into an agreement with affiliates of the Original Sponsors to terminate the Sponsor Management Agreement. Under this agreement, UCI agreed to pay a reduced termination fee and the quarterly service fees referenced below in full satisfaction of its obligations to the affiliates of the Original Sponsors under the Sponsor Management Agreement. Pursuant to such termination agreement, the Company paid a termination fee of $112.4 million on April 14, 2015 (which was accrued as of March 31, 2015) to affiliates of the Original Sponsors and will continue to pay a quarterly aggregate service fee of 1.26% of operating income before depreciation and amortization, subject to certain adjustments, until no later than December 31, 2015.

Other Agreements and Transactions

Univision has a consulting arrangement with an entity controlled by the Chairman of the Board of Directors. No compensation expense was recognized during the three months ended March 31, 2015 or 2014.

The Original Sponsors are private investment firms that have investments in companies that may do business with UCI. No individual Original Sponsor has a controlling ownership interest in UCI. The Original Sponsors have controlling ownership interests or ownership interests with significant influence with companies that do business with UCI.

Univision has previously announced plans for a musical competition television show scheduled to be broadcast on the Univision Network in the fall season of 2015, based on an agreement Univision has reached with the owners of the rights to the program, including an entity controlled by Saban Capital Group, Inc. In connection with this arrangement, the owners of the program have agreed to grant to Televisa certain broadcast rights in Mexico to the show, together with certain format and exploitation rights.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

Televisa

Program License Agreement (“PLA”)

Pursuant to the program license agreement (the “PLA”) and a predecessor program license agreement (the “Prior PLA”) between Televisa and UCI, UCI committed to provide future advertising and promotion time at no charge to Televisa with a cumulative historical fair value of $970.0 million. The book value remaining under these commitments as of March 31, 2015 and December 31, 2014 was $592.2 million and $607.4 million, respectively, based on the fair value of UCI’s advertising commitments at the dates the Prior PLA and PLA were entered into. For the three months ended March 31, 2015 and 2014, the Company recognized revenue of $15.2 million, and $15.0 million, respectively, based on the fair value of UCI’s advertising commitments at the dates the Prior PLA and PLA were entered into.

During the three months ended March 31, 2015 and 2014, of the Company’s total license fees of $59.9 million, and $79.4 million, respectively, the license fee to Televisa related to the PLA was $59.9 million, and $58.8 million, respectively. As of March 31, 2015 and December 31, 2014, of the Company’s total accrued license fees of $30.9 million and $39.4 million, respectively, the Company had accrued license fees to Televisa related to the PLA of $30.9 million and $31.7 million, respectively.

The PLA was amended in July 2015 to, among other things, extend the term of the agreement and revise the royalty payments to Televisa. See Note 15. Subsequent Events.

Technical Assistance Agreement

In connection with its investment in Univision, Televisa entered into an agreement with Univision and UCI under which Televisa provides UCI with technical assistance related to UCI’s business for a quarterly fee of 0.7% of operating income before depreciation and amortization, subject to certain adjustments, as well as reimbursement of out-of-pocket expenses. The fees for the three months ended March 31, 2015 and 2014 were $1.9 million and $1.8 million, respectively. Effective as of March 31, 2015, the Company and UCI entered into an agreement with Televisa to terminate the technical assistance agreement. Under this agreement, UCI agreed to pay a reduced termination fee and the quarterly service fees referenced below in full satisfaction of UCI’s obligations to Televisa under the technical assistance agreement. Pursuant to such termination agreement, the Company paid a termination fee of $67.6 million on April 14, 2015 (which was accrued as of March 31, 2015) to Televisa and will continue to pay a quarterly service fee of 0.74% of operating income before depreciation and amortization, subject to certain adjustments, until no later than December 31, 2015.

Capital Contribution

On January 30, 2014, a group of institutional investors invested $125.0 million in the Company in exchange for Class A common stock representing approximately 1.5% of the fully diluted equity pursuant to an Investment Agreement dated January 30, 2014 with the Company and the other parties named therein. The Company contributed $124.4 million, net of offering costs, to UCI. UCI used this contribution to repurchase a portion of its 6.75% senior secured notes due 2022. See Note 7. Debt.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

Fusion

In connection with its investment in Fusion, UCI provides certain facilities support and capital assets, engineering and operations support, field acquisition/newsgathering and business services (the “support services”). In return, UCI receives reimbursement of certain costs. During the three months ended March 31, 2015 and 2014, the Company recognized $2.6 million and $3.2 million, respectively, related to the support services. As of March 31, 2015 and December 31, 2014, the Company has a receivable of $1.6 million, due from Fusion. The Company has recorded a liability of $26.0 million and $27.2 million as of March 31, 2015 and December 31, 2014, respectively, related to advance payments associated with the future use of certain facilities and capital assets. In addition, UCI licenses certain content and other intellectual property to Fusion on a royalty-free basis and UCI is reimbursed for third-party costs in connection with the use of such content.

El Rey

In connection with its investment in El Rey, UCI provides certain distribution, advertising sales and back office/technical services to El Rey for fees generally based on incremental costs incurred by UCI in providing such services, including compensation costs for certain dedicated UCI employees performing such services, an allocation of certain UCI facilities costs and a use fee during the useful life of certain UCI assets used by El Rey in connection with the provision of the services. UCI also receives an annual $3.0 million management fee which is recorded as a component of revenue. UCI has also agreed to provide certain English-language soccer programming in exchange for a license fee and promotional support to the El Rey television network. During the three months ended March 31, 2015 and 2014, the Company recognized $3.7 million and $2.7 million, respectively, for the management fee and reimbursement of costs. As of March 31, 2015 and December 31, 2014, the Company has a receivable of $2.4 million and $2.2 million, respectively, related to these management fees and costs.

7. Debt

Long-term debt consists of the following as of:

 

     March 31,
2015
    December 31,
2014
 

Bank senior secured revolving credit facility maturing in 2018

   $ 180,000      $   

Incremental bank senior secured term loan facility maturing in 2020

     1,224,800        1,228,000   

Replacement bank senior secured term loan facility maturing in 2020

     3,321,500        3,329,700   

Senior secured notes—6.875% due 2019

            1,197,000   

Senior secured notes—7.875% due 2020

     750,000        750,000   

Senior notes—8.5% due 2021

     818,800        818,900   

Senior secured notes—6.75% due 2022

     1,120,500        1,120,800   

Senior secured notes—5.125% due 2023

     1,214,800        700,000   

Senior secured notes—5.125% due 2025

     750,000          

Convertible debentures—1.5% due 2025

     1,150,000        1,150,500   

Accounts receivable facility maturing in 2018

     100,000        100,000   

Capital lease obligations

     75,600        77,000   
  

 

 

   

 

 

 
  10,706,000      10,471,900   

Less current portion

  (331,000   (151,400
  

 

 

   

 

 

 

Long-term debt and capital lease obligations

$ 10,375,000    $ 10,320,500   
  

 

 

   

 

 

 

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

Recent Financing Transactions

February 2015 Tender Offer and Offering of the 2025 Senior Secured Notes and Additional 2023 Senior Secured Notes

On February 11, 2015, UCI commenced a cash tender offer (the “February tender offer”) to purchase any and all of its outstanding 6.875% senior secured notes due 2019 (the “2019 senior secured notes”). The aggregate principal amount of the 2019 senior secured notes outstanding as of February 11, 2015 was $1,200.0 million. The February tender offer expired on February 18, 2015, and UCI utilized the proceeds from the issuance of $750.0 million aggregate principal amount of the 5.125% senior secured notes due 2025 (the “initial 2025 senior secured notes”) and an additional $500.0 million aggregate principal amount of the 5.125% senior secured notes due 2023 (the “additional 2023 senior secured notes”) to repurchase and retire $1,145.0 million aggregate principal amount of the 2019 senior secured notes. UCI issued a redemption notice on February 19, 2015 for the remaining $55.0 million aggregate principal amount of 2019 senior secured notes, which redemption UCI effectuated on March 23, 2015.

The additional 2023 senior secured notes were issued under the same indenture governing the initial $700.0 million senior secured notes due 2023 which had been issued on May 21, 2013 (the “initial 2023 senior secured notes,” and together with the additional 2023 senior secured notes, the “2023 senior secured notes”). The additional 2023 senior secured notes were priced at 103%, with a premium of $15.0 million. After giving effect to the issuance of the additional 2023 senior secured notes, the Company has $1,200.0 million aggregate principal amount of the 2023 senior secured notes outstanding. The additional 2023 senior secured notes are treated as a single series with the initial 2023 senior secured notes and have the same terms as the initial 2023 senior secured notes. See “Debt Instruments—Senior Secured Notes—5.125% due 2025” below.

April 2015 Tender Offer and Offering of the Additional 2025 Senior Secured Notes

On April 13, 2015, UCI commenced a cash tender offer (the “April tender offer”) to purchase any and all of its outstanding 7.875% senior secured notes due 2020 (the “2020 senior secured notes”). The aggregate principal amount of the 2020 senior secured notes outstanding as of April 13, 2015 was $750.0 million. The April tender offer expired on April 20, 2015, and UCI utilized the proceeds from the issuance of $810.0 million aggregate principal amount of the 5.125% senior secured notes due 2025 (the “additional 2025 senior secured notes,” and together with the initial 2025 senior secured notes, the “2025 senior secured notes”) to repurchase and retire $711.7 million aggregate principal amount of the 2020 senior secured notes. UCI issued a redemption notice on April 21, 2015 for the remaining $38.3 million aggregate principal amount of 2020 senior secured notes, which redemption UCI effectuated on May 21, 2015.

The additional 2025 senior secured notes were issued under the same indenture governing the initial 2025 senior secured notes which had been issued on February 19, 2015. The additional 2025 senior secured notes were priced at 101.375%, with a premium of $11.1 million. After giving effect to the issuance of the additional 2025 senior secured notes, the Company has $1,560.0 million aggregate principal amount of the 2025 senior secured notes outstanding. The additional 2025 senior secured notes are treated as a single series with the initial 2025 senior secured notes and have the same terms as the initial 2025 senior secured notes. See “Debt Instruments—Senior Secured Notes—5.125% due 2025” below.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

Loss on Extinguishment of Debt

For the three months ended March 31, 2015 and 2014, the Company recorded a loss on extinguishment of debt of $73.2 million and $17.2 million, respectively, as a result of refinancing UCI’s debt. The loss includes a premium, fees, the write-off of certain unamortized deferred financing costs and the write-off of certain unamortized discount and premium related to instruments that were repaid.

Debt Instruments

Senior Secured Notes—5.125% due 2025

The 2025 senior secured notes are ten year notes. UCI issued $750.0 million aggregate principal amount of the initial 2025 senior secured notes on February 19, 2015 and $810.0 million aggregate principal amount of the additional 2025 senior secured notes on April 21, 2015, pursuant to an indenture dated as of February 19, 2015. The 2025 senior secured notes mature on February 15, 2025 and pay interest on February 15 and August 15 of each year. Interest on the 2025 senior secured notes accrues at a fixed rate of 5.125% per annum and is payable in cash. At March 31, 2015, the outstanding principal balance of the 2025 senior secured notes was $750.0 million. The 2025 senior secured notes are secured by a first priority lien (subject to permitted liens) on substantially all assets that currently secure UCI’s senior secured revolving credit facility and senior secured term loan facility, which are referred to collectively as the “Senior Secured Credit Facilities.”

On and after February 15, 2020, the 2025 senior secured notes may be redeemed, at the UCI’s option, in whole or in part, at any time and from time to time at the redemption prices set forth below. The 2025 senior secured notes will be redeemable at the applicable redemption price (expressed as percentages of principal amount of the 2025 senior secured notes to be redeemed) plus accrued and unpaid interest thereon to the applicable redemption date if redeemed during the twelve month period beginning on February 15 of each of the following years: 2020 (102.563%), 2021 (101.708%), 2022 (100.854%), 2023 and thereafter (100.0%). In addition, until February 15, 2018, UCI may redeem up to 40% of the outstanding 2025 senior secured notes with the net proceeds it raises in one or more equity offerings at a redemption price equal to 105.125% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to the applicable redemption date. UCI also may redeem any of the 2025 senior secured notes at any time prior to February 15, 2020 at a price equal to 100% of the principal amount plus a make-whole premium and accrued interest. If UCI undergoes a change of control, it may be required to offer to purchase the 2025 senior secured notes from holders at a purchase price equal to 101% of the principal amount plus accrued interest. Subject to certain exceptions and customary reinvestment rights, UCI is required to offer to repay 2025 senior secured notes at par with the proceeds of certain assets sales.

8. Interest Rate Swaps

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. UCI has agreements with each of its interest rate swap counterparties which provide that UCI could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to UCI’s default on the indebtedness.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

For interest rate swap contracts accounted for as cash flow hedges, the effective portion of the change in fair value is recorded in accumulated other comprehensive loss (“AOCL”), net of tax, and is reclassified to earnings as an adjustment to interest expense in the same period or periods that the hedged transactions impact earnings. The ineffective portion of the change in fair value, if any, is recorded directly to current period earnings through interest rate swap (income) expense. For interest rate swap contracts not designated as hedging instruments, the interest rate swaps are marked to market with the change in fair value recorded directly in earnings through interest rate swap (income) expense. While UCI does not enter into interest rate swap contracts for speculative purposes, three out of five of its interest rate swap contracts as of March 31, 2015 are not accounted for as cash flow hedges (“nondesignated instruments”). For two of the nondesignated instruments, the Company ceased applying hedge accounting as a result of debt refinancing. The third nondesignated instrument was entered into to offset the effect of the other nondesignated instruments.

UCI’s current interest rate swap contracts as discussed below effectively convert the interest payable on $2.5 billion of variable rate debt into fixed rate debt, at a weighted-average rate of approximately 2.25% through the expiration of the term loans in the first quarter of 2020. For the three months ended March 31, 2015, the effective interest rate related to UCI’s senior secured term loans was 5.09% including the impact of the interest rate swaps, and 3.97%, excluding the impact of the interest rate swaps.

Some interest rate swap contracts were originally designated in cash flow hedging relationships, but the Company ceased applying cash flow hedge accounting as a result of UCI refinancing the Senior Secured Credit Facilities. Subsequent to the discontinuation of cash flow hedge accounting, those interest rate swap contracts are marked to market, with the change in fair value recorded directly in earnings. The unrealized gain/loss up to the point cash flow hedge accounting was discontinued is being amortized from AOCL into earnings.

Derivatives Designated as Hedging Instruments

As of March 31, 2015, the Company has two effective cash flow hedges, outlined below. These contracts mature in February 2020.

 

     Number of Instruments    Notional  

Interest Rate Derivatives

     

Interest Rate Swap Contracts

   2    $ 2,500,000,000   

Derivatives Not Designated as Hedging Instruments

As of March 31, 2015, the Company has three derivatives not designated as hedges, outlined below. These contracts mature in June 2016.

 

     Number of Instruments    Notional  

Interest Rate Derivatives

     

Interest Rate Swap Contracts

   3    $ 2,500,000,000   

The effective notional amount of the above three instruments is zero. Two swaps have a combined notional amount of $1.25 billion and pay fixed interest and receive floating interest, while the third has a notional amount of $1.25 billion and receives an offsetting amount of floating interest while paying fixed interest.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

Impact of Interest Rate Derivatives on the Consolidated Financial Statements

The table below presents the fair value of the Company’s derivative financial instruments (both designated and non-designated), as well as their classification on the consolidated balance sheets:

 

     Consolidated
Balance Sheet Location
   As of
March 31, 2015
     As of
December 31, 2014
 

Derivatives Designated as Hedging Instruments

        

Interest Rate Swaps—Non-Current Asset

   Other assets    $       $   

Interest Rate Swaps—Non-Current Liability

   Other long-term liabilities      55,700         34,300   

Derivatives Not Designated as Hedging Instruments

        

Interest Rate Swaps—Non-Current Asset

   Other assets      2,800         900   

Interest Rate Swaps—Non-Current Liability

   Other long-term liabilities      16,700         17,600   

The Company does not offset the fair value of interest rate swaps in an asset position against the fair value of interest rate swaps in a liability position on the balance sheet. As of March 31, 2015, UCI has not posted any collateral related to any of the interest rate swap contracts. If UCI had breached any of these default provisions at March 31, 2015, it could have been required to settle its obligations under the agreements at their termination value of $73.4 million.

The table below presents the effect of the Company’s derivative financial instruments designated as cash flow hedges on the consolidated statements of operations and the consolidated statements of comprehensive income (loss) for the three months ended March 31, 2015 and 2014:

 

Derivatives

Designated as Cash

Flow Hedges

  Amount of Gain
or (Loss)

Recognized in
Other
Comprehensive
Income (Loss)

on Derivative
(Effective Portion)
    Location of
Gain or (Loss)
Reclassified

from AOCL
into Income
(Effective
Portion)
    Amount of
Gain or (Loss)
Reclassified

from AOCL
into Income
(Effective

Portion)(a)
    Location of Gain or
(Loss) Recognized in
Income on Derivative
(Ineffective Portion  and
Amount Excluded from
Effectiveness Testing)
    Amount of Gain or
(Loss) Recognized in
Income on Derivative
(Ineffective Portion  and

Amount Excluded from
Effectiveness Testing)
 
      2015             2014           2015     2014       2015     2014  

For the three months ended March 31,

               

Interest Rate Swaps

  $ (29,200   $ (27,900     Interest expense      $ (12,800   $ (11,000    

 

Interest rate swap

income/(expense)

  

  

  $ (100   $ (800 )

 

(b) The amount of gain or (loss) reclassified from AOCL into income includes amounts that have been reclassified related to current effective hedging relationships as well as amortizing AOCL amounts related to discontinued cash flow hedging relationships. For the three months ended March 31, 2015 and 2014, the Company amortized $4.8 million and $4.9 million, respectively, of net unrealized losses on hedging activities from accumulated other comprehensive loss into interest expense.

During the next twelve months, from March 31, 2015, approximately $51.5 million of net unrealized losses will be amortized to interest expense (inclusive of the amounts being amortized related to discontinued cash flow hedging relationships).

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

The table below presents the effect of the Company’s derivative financial instruments not designated as hedging instruments on the consolidated statements of operations for the three months ended March 31, 2015 and 2014:

 

Derivatives Not Designated

as Hedging Instruments

  Location of Gain or (Loss) Recognized in
Income on Derivative
  Amount of Gain or (Loss)
Recognized in Income on
Derivative
 
        2015             2014      

For the three months ended March 31,

     

Interest Rate Swaps

  Interest rate swap income/(expense)   $ 100      $ 100   

9. Earnings (Loss) Per Share

Basic earnings (loss) per share (“EPS”) is calculated by dividing net income (loss) attributable to Univision Holdings, Inc. by the weighted average number of shares of common stock outstanding. The diluted EPS calculation includes the dilutive effect of the Company’s convertible debentures and shares issuable under the Company’s equity-based compensation plans.

The table below presents a reconciliation of net (loss) income attributable to Univision Holdings, Inc. and weighted average shares outstanding used in the calculation of basic and diluted EPS.

 

     Three Months Ended March 31,  

(in thousands)

           2015                     2014          

Net (loss) income attributable to Univision Holdings, Inc. for basic EPS

   $ (142,300   $ 3,800   

After tax impact of convertible debentures

              
  

 

 

   

 

 

 

Net (loss) income attributable to Univision Holdings, Inc. for diluted EPS

$ (142,300 $ 3,800   
  

 

 

   

 

 

 

Weighted average shares outstanding for basic EPS

  10,802      10,791   

Dilutive effect of shares associated with convertible debentures

         

Dilutive effect of equity awards

       121   
  

 

 

   

 

 

 

Weighted average shares outstanding for diluted EPS

  10,802      10,912   
  

 

 

   

 

 

 

Approximately 0.5 million shares for the three months ended March 31, 2015 and 2014 which are issuable under the Company’s equity-based compensation plans are excluded from the calculation of diluted EPS because their inclusion would have been anti-dilutive. The assumed conversion of the Company’s convertible debentures was anti-dilutive during the three months ended March 31, 2015 and 2014, and approximately 4.9 million shares are excluded from the calculation of diluted EPS for each of those periods.

10. Comprehensive (Loss) Income

Comprehensive (loss) income is reported in the Consolidated Statements of Comprehensive (Loss) Income and consists of net loss (income) and other gains (losses) that affect stockholders’ equity but, under GAAP, are excluded from net (loss) income. For the Company, items included in other comprehensive (loss) income are foreign currency translation adjustments, unrealized gain (loss) on hedging activities, the amortization of unrealized loss on hedging activities and unrealized gain on available for sale securities.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

The following table presents the changes in accumulated other comprehensive loss by component. All amounts are net of tax.

 

     Gains and (Losses)
on Hedging
Activities
    Gains on
Available for Sale
Securities
     Currency
Translation
Adjustment
    Total  

Balance as of December 31, 2013

   $ (43,600   $ 12,200       $ (1,900   $ (33,300
  

 

 

   

 

 

    

 

 

   

 

 

 

Other comprehensive (loss) income before reclassifications

  (13,300   9,100      100      (4,100

Amounts reclassified from accumulated other comprehensive loss

  3,000                3,000   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net other comprehensive (loss) income

  (10,300   9,100      100      (1,100
  

 

 

   

 

 

    

 

 

   

 

 

 

Balance as of March 31, 2014

$ (53,900 $ 21,300    $ (1,800 $ (34,400
  

 

 

   

 

 

    

 

 

   

 

 

 

Balance as of December 31, 2014

$ (69,200 $  36,500    $ (2,600 $ (35,300
  

 

 

   

 

 

    

 

 

   

 

 

 

Other comprehensive (loss) income before reclassifications

  (12,900   27,400      (200   14,300   

Amounts reclassified from accumulated other comprehensive loss

  2,900                2,900   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net other comprehensive (loss) income

  (10,000   27,400      (200   17,200   
  

 

 

   

 

 

    

 

 

   

 

 

 

Balance as of March 31, 2015

$ (79,200 $ 63,900    $ (2,800 $ (18,100
  

 

 

   

 

 

    

 

 

   

 

 

 

The following table presents the activity within other comprehensive (loss) income and the tax effect related to such activity.

 

     Pretax     Tax
(provision)
benefit
    Net of tax  

Three Months Ended March 31, 2014

      

Unrealized loss on hedging activities

   $ (21,800   $ 8,500      $ (13,300

Amortization of unrealized loss on hedging activities

     4,900        (1,900     3,000   

Unrealized gain on available for sale securities

     15,200        (6,100     9,100   

Currency translation adjustment

     100               100   
  

 

 

   

 

 

   

 

 

 

Other comprehensive loss

$ (1,600 $ 500    $ (1,100
  

 

 

   

 

 

   

 

 

 

Three Months Ended March 31, 2015

Unrealized loss on hedging activities

$ (21,200 $ 8,300    $ (12,900

Amortization of unrealized loss on hedging activities

  4,800      (1,900   2,900   

Unrealized gain on available for sale securities

  45,100      (17,700   27,400   

Currency translation adjustment

  (200        (200
  

 

 

   

 

 

   

 

 

 

Other comprehensive income

$ 28,500    $ (11,300 $ 17,200   
  

 

 

   

 

 

   

 

 

 

Amounts reclassified from accumulated other comprehensive loss related to hedging activities are recorded to interest expense. See Note 8. Interest Rate Swaps for further information related to amounts reclassified from accumulated other comprehensive loss.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

11. Income Taxes

The Company’s current estimated effective tax rate as of March 31, 2015 was approximately 31%, which differs from the statutory rate primarily due to permanent tax differences, discrete items and state and local taxes. The Company’s estimated effective tax rate as of March 31, 2014 was approximately 39%, which differs from the statutory rate primarily due to permanent tax differences, discrete items and state and local taxes.

The effective tax rate is based on expected income or losses, statutory tax rates and tax planning opportunities applicable to the Company. For interim financial reporting, the Company estimates the annual tax rate based on projected taxable income or loss for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate adjusted for discrete items. As the year progresses, the Company refines the estimates of the year’s taxable income or loss as new information becomes available, including year-to-date financial results. This continual estimation process often results in a change to the expected effective tax rate for the year. When this occurs, the Company adjusts the income tax provision or benefit during the quarter in which the change in estimate occurs so that the year-to-date provision or benefit reflects the expected annual tax rate. Significant judgment is required in determining the effective tax rate and in evaluating the tax positions.

The Company had total gross unrecognized tax benefits of $19.3 million as of March 31, 2015, which would impact the effective tax rate, if recognized. The Company recognizes interest and penalties, if any, related to uncertain income tax positions in income tax expense. As of March 31, 2015, the Company has approximately $4.0 million of accrued interest and penalties related to uncertain tax positions.

The Company is subject to U.S. federal income tax as well as multiple state jurisdictions. The Company has substantially concluded all U.S. federal income tax matters for years through 2013. The Company has concluded substantially all income tax matters for all major jurisdictions through 2009.

12. Performance Awards and Incentive Plans

During the three months ended March 31, 2015 and 2014, the Company recorded share-based compensation expense of $4.3 million and $2.9 million, respectively.

Compensation expense relating to share-based payments is recognized in earnings using a fair-value measurement method. The Company uses the straight-line attribution method of recognizing compensation expense over the vesting period. The estimated fair value of employee awards is expensed on a straight-line basis over the period from grant date through the requisite service period which is generally the vesting period. Restricted stock units classified as liability awards are measured at fair value at the end of each reporting period until vested. During the three months ended March 31, 2015 the Company recorded a cumulative adjustment to income of $0.6 million, related to an increase in the estimated forfeiture rate of equity awards.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

13. Contingencies and Commitments

Contingencies

The Company maintains insurance coverage for various risks, where deemed appropriate by management, at rates and terms that management considers reasonable. The Company has deductibles for various risks, including those associated with windstorm and earthquake damage. The Company self-insures its employee medical benefits and its media errors and omissions exposures. In management’s opinion, the potential exposure in future periods, if uninsured losses were to be incurred, should not be material to the consolidated financial position or results of operations.

The Company is subject to various lawsuits and other claims in the normal course of business. In addition, from time to time, the Company receives communications from government or regulatory agencies concerning investigations or allegations of noncompliance with law or regulations in jurisdictions in which the Company operates.

The Company establishes reserves for specific liabilities in connection with regulatory and legal actions that the Company deems to be probable and estimable. The Company believes the amounts accrued in its financial statements are sufficient to cover all probable liabilities. In other instances, the Company is not able to make a reasonable estimate of any liability because of the uncertainties related to the outcome and/or the amount or range of loss. The Company does not expect that the ultimate resolution of pending regulatory and legal matters in future periods will have a material effect on our financial condition or result of operations.

Commitments

In the normal course of business, UCI enters into multi-year contracts for programming content, sports rights, research and other service arrangements and in connection with joint ventures.

UCI has long-term operating leases expiring on various dates for office, studio, automobile and tower rentals. UCI’s operating leases, which are primarily related to buildings and tower properties, have various renewal terms and escalation clauses. UCI also has long-term capital lease obligations for land and facilities and for its transponders that are used to transmit and receive its network signals.

14. Segments

The Company’s segments have been determined in accordance with the Company’s internal management structure, which is organized based on operating activities that are reviewed by the Company’s chief operating decision maker. The Company evaluates performance based on several factors. In addition to considering primary financial measures including revenue, management evaluates operating performance for planning and forecasting future business operations, as well as measuring the Company’s ability to service debt and meet other cash needs by considering Bank Credit OIBDA (as defined below). Based on its customers and type of content, the Company has operations in two segments, Media Networks and Radio. The Company’s principal segment is Media Networks, which includes Univision Network; UniMás (formerly Telefutura); nine cable networks, including Galavisión and Univision Deportes Network; and the Company’s owned and/or operated television stations. The Media Networks segment also includes digital properties consisting of online and mobile websites and applications including Univision.com and UVideos, a bilingual digital video network. The Radio segment

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

includes the Company’s owned and operated radio stations; Uforia, a comprehensive digital music platform; and any audio-only elements of Univision.com. Additionally, the Company incurs and manages shared corporate expenses related to human resources, finance, legal and executive and certain assets separately from its two segments. The segments have separate financial information which is used by the chief operating decision maker to evaluate performance and allocate resources. The segment results reflect how management evaluates its financial performance and allocates resources and are not necessarily indicative of the results of operations that each segment would have achieved had they operated as stand-alone entities during the periods presented.

Bank Credit OIBDA represents adjusted operating income before depreciation and amortization. Bank Credit OIBDA eliminates the effects of items that are not considered indicative of the Company’s core operating performance. Bank Credit OIBDA is determined in accordance with the definition of earnings before interest, tax, depreciation and amortization (“EBITDA”) in UCI’s senior secured credit facilities and the indentures governing the senior notes, except that Bank Credit OIBDA from redesignated restricted subsidiaries only includes their results since the beginning of the quarter in which they were redesignated as restricted.

Bank Credit OIBDA is not, and should not be used as, an indicator of or alternative to operating income or net (loss) income as reflected in the consolidated financial statements. It is not a measure of financial performance under GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Since the definition of Bank Credit OIBDA may vary among companies and industries, it should not be used as a measure of performance among companies. We are providing on a consolidated basis a reconciliation of the non-GAAP term Bank Credit OIBDA to net (loss) income attributable to Univision Holdings, Inc., which is the most directly comparable GAAP financial measure. Segment information is presented in the table below:

 

     Three Months Ended
March 31,
 
     2015     2014  

Revenue:

    

Media Networks

   $ 560,900      $ 552,200   

Radio

     63,800        68,900   
  

 

 

   

 

 

 

Consolidated

$ 624,700    $ 621,100   
  

 

 

   

 

 

 

Depreciation and amortization:

Media Networks

$ 35,400    $ 34,200   

Radio

  1,900      1,900   

Corporate

  5,300      3,200   
  

 

 

   

 

 

 

Consolidated

$ 42,600    $ 39,300   
  

 

 

   

 

 

 

Operating income (loss):

Media Networks

$ 237,000    $ 217,300   

Radio

  9,900      10,900   

Corporate

  (219,800   (32,900
  

 

 

   

 

 

 

Consolidated

$ 27,100    $ 195,300   
  

 

 

   

 

 

 

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

     Three Months Ended
March 31,
 
     2015     2014  

Bank Credit OIBDA:

    

Media Networks

   $ 276,200      $ 256,200   

Radio

     16,500        15,300   

Corporate

     (18,500     (20,100
  

 

 

   

 

 

 

Consolidated

$ 274,200    $ 251,400   
  

 

 

   

 

 

 

Capital expenditures:

Media Networks

$ 12,500    $ 21,300   

Radio

  1,000      2,300   

Corporate

  8,300      11,800   
  

 

 

   

 

 

 

Consolidated

$ 21,800    $ 35,400   
  

 

 

   

 

 

 

 

     March 31,
2015
     December 31,
2014
 

Total assets:

     

Media Networks

   $ 8,247,700       $ 8,197,700   

Radio

     1,117,500         1,120,300   

Corporate

     1,220,400         1,068,300   
  

 

 

    

 

 

 

Consolidated

$ 10,585,600    $ 10,386,300   
  

 

 

    

 

 

 

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

Presented below is a reconciliation of Bank Credit OIBDA to net income (loss) attributable to Univision Holdings, Inc., which is the most directly comparable GAAP financial measure:

 

     Three Months Ended
March 31,
 
     2015     2014  

Bank Credit OIBDA

   $ 274,200      $ 251,400   

Less expenses excluded from Bank Credit OIBDA, but included in operating income:

    

Depreciation and amortization

     42,600        39,300   

Impairment loss(a)

     300          

Restructuring, severance and related charges

     6,200        3,300   

Share-based compensation

     4,300        2,900   

Business optimization expense(b)

     3,300        1,800   

Termination of management and technical assistance agreements

     180,000          

Management and technical assistance agreement fees

     5,500        5,000   

Unrestricted subsidiaries(c)

     900        700   

Other adjustments to operating income(d)

     4,000        3,100   
  

 

 

   

 

 

 

Operating income

  27,100      195,300   

Other expense (income):

Interest expense

  143,400      147,100   

Interest income

  (2,200   (1,400

Interest rate swap expense

       700   

Amortization of deferred financing costs

  3,900      3,900   

Loss on extinguishment of debt

  73,200      17,200   

Loss on equity method investments

  14,900      20,500   

Other

  300      1,400   
  

 

 

   

 

 

 

(Loss) income before income taxes

  (206,400   5,900   

(Benefit) provision for income taxes

  (64,000   2,300   
  

 

 

   

 

 

 

Net (loss) income

  (142,400   3,600   

Net loss attributable to non-controlling interest

  (100   (200
  

 

 

   

 

 

 

Net (loss) income attributable to Univision Holdings, Inc.

$ (142,300 $ 3,800   
  

 

 

   

 

 

 

 

(a) During the three months ended March 31, 2015, the Company recorded a non-cash impairment loss of $0.3 million in the Media Networks segment, related to the write-down of program rights.
(b) Business optimization expense relates to the Company’s efforts to streamline and enhance its operations and primarily includes legal, consulting and advisory costs and costs associated with the rationalization of facilities.
(c) UCI owns several wholly-owned early stage ventures which have been designated as “unrestricted subsidiaries” for purposes of the credit agreement governing UCI’s Senior Secured Credit Facilities and indentures governing UCI’s senior notes. The amount for unrestricted subsidiaries above represents the residual adjustment to eliminate the results of the unrestricted subsidiaries which are not otherwise eliminated in the other exclusions from Bank Credit OIBDA above. UCI may redesignate these subsidiaries as restricted subsidiaries at any time at its option, subject to compliance with the terms of the credit agreement and indentures. The Bank Credit OIBDA from redesignated restricted subsidiaries as presented herein only includes the results of restricted subsidiaries since the beginning of the quarter in which they were redesignated as restricted.
(d) Other adjustments to operating income comprises adjustments to operating income provided for in the credit agreement governing UCI’s Senior Secured Credit Facilities and indentures in calculating EBITDA.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

The Company is providing the supplemental information below which is the portion of the Company’s revenue equal to the royalty base used to determine the license fee payable by UCI under the PLA, as set forth below:

 

     Three Months Ended
March 31,
 
     2015     2014  

Consolidated revenue

   $ 624,700      $ 621,100   

Less:

    

Radio segment revenue (excluding Radio digital revenue)

     (62,400     (67,000

Other adjustments to arrive at revenue included in royalty base

     (30,100     (29,700
  

 

 

   

 

 

 

Royalty base used to calculate Televisa license fee

$ 532,200    $ 524,400   
  

 

 

   

 

 

 

15. Subsequent Events

Amendment of Program License Agreement and Memorandum of Understanding with Televisa

On July 1, 2015, the Company and Televisa entered into a Memorandum of Understanding (“MOU”) and UCI entered into an amendment to the existing PLA (the “PLA Amendment”).

Under the PLA Amendment, the terms of the existing strategic relationship between Univision and Televisa have been amended as follows:

 

    Term Extension—Upon consummation of Univision’s initial public offering of its common stock, the PLA Amendment extends the term of the PLA from its current expiration date of the later of 2025 or 7.5 years after Televisa voluntarily sells at least two-thirds of the shares (including shares resulting from the conversion of its convertible debentures) that it held immediately following its investment in Univision (the “Televisa Sell-Down”) to the later of 2030 or 7.5 years after a Televisa Sell-Down.

 

    Reduced Royalty Rates; Additional Revenue Subject to Royalties—In exchange for UCI agreeing to make certain additional revenue subject to the royalty, effective January 1, 2015, Televisa receives reduced royalties from UCI based on 11.84 percent, compared to 11.91 percent under the prior terms, of substantially all of UCI’s Spanish-language media networks revenues through December 2017. At that time, royalty payments to Televisa will increase by a comparable amount to 16.13 percent, compared to 16.22 percent. Additionally, Televisa will continue to receive an incremental 2 percent in royalty payments on such media networks revenues above an increased revenue base of $1.66 billion, compared to the prior revenue base of $1.65 billion. The PLA Amendment further states that the royalty rate will again increase by a comparable amount to 16.45 percent starting later in 2018, compared to the prior rate of 16.54 percent, for the remainder of the term. With this second rate increase, Televisa will receive an incremental 2 percent in royalty payments above a reduced revenue base of $1.63 billion.

 

    Advertising Commitment—UCI will have the right, on an annual basis to reduce the minimum amount of advertising it has committed to provide to Televisa by up to 20% for UCI’s use to sell advertising or satisfy ratings guarantees to certain advertisers.

 

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UNIVISION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(Dollars in thousands, Except share and per-share data, unless otherwise indicated)

 

At the same time UCI and Televisa amended the program license agreement entered into with an affiliate of Televisa for the territory of Mexico to conform to certain other amendments contained in the PLA Amendment.

In addition, under the terms of the MOU, Univision and Televisa have agreed to the following:

 

    FCC Matters—Televisa and Univision agreed jointly to file a petition for declaratory ruling with the FCC seeking (a) an increase in the authorized aggregate foreign ownership of Univision’s issued and outstanding shares of common stock from 25% to 49% and (b) to authorize Televisa to hold up to 40% of Univision’s issued and outstanding shares of common stock (in both cases on a voting and an equity basis). Univision and Televisa have agreed to file the petition by the earlier of 30 days after the consummation of Univision’s recently announced proposed initial public offering and January 5, 2016. In addition, Univision agreed that, after its Original Sponsors have sold 75% of their common stock, Univision will file an application for any required FCC approval of a transfer of control of Univision to the public stockholders or as otherwise may be required.

 

    Equity Capitalization Amendment—The equity capitalization of Univision will be adjusted to realign the economic and voting interests of Televisa and Univision’s other stockholders. As a result, Televisa will hold common stock with approximately 22% of the voting rights of Univision’s common stock and may obtain additional voting rights depending on its future equity ownership and the outcome of the FCC petition process described above. The classes of Univision’s shares of common stock to be held by Televisa will also provide Televisa the right to designate a minimum number of directors to Univision’s board of directors.

 

    Conversion of Debentures—Televisa will convert $1.125 billion of the Company’s debentures into warrants that are exercisable for new classes of Univision’s common stock. Univision has agreed to pay Televisa a one-time fee of $135.1 million as consideration for the conversion.

In consideration for the PLA Amendment, the MOU and other agreements entered into at the same time, Univision is making a one-time payment of $4.5 million to Televisa.

 

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REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Members

El Rey Holdings LLC

We have audited the accompanying consolidated financial statements of El Rey Holdings LLC, which comprise the consolidated balance sheets as of December 31, 2014 and 2013, and the related consolidated statements of operations, changes in members’ deficit and cash flows for the year ended December 31, 2014 and the period from May 8, 2013 (inception) through December 31, 2013, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of El Rey Holdings LLC at December 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for the year ended December 31, 2014 and the period from May 8, 2013 (inception) through December 31, 2013, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young

New York, New York

February 27, 2015

 

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EL REY HOLDINGS LLC

CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

 

     As of
December 31,
2014
    As of
December 31,
2013
 
ASSETS     

Current assets:

    

Cash

   $ 9,609      $ 43,272   

Accounts receivable, less allowance for doubtful accounts of $4.0 in 2014 and none in 2013

     18,418        129   

Programming inventory and prepayments

     12,096        12,668   

Restricted cash collateral

     22,500          

Prepaid expenses and other

     1,975        1,415   
  

 

 

   

 

 

 

Total current assets

  64,598      57,484   

Property and equipment, net

  1,282      410   

Programming inventory and prepayments

  2,420      1,193   

Deferred financing costs

  2,850      372   

Other assets

  2,439      100   
  

 

 

   

 

 

 

Total assets

$ 73,589    $ 59,559   
  

 

 

   

 

 

 
LIABILITIES AND MEMBERS’ DEFICIT

Current liabilities:

Accounts payable and accrued liabilities

$ 10,687    $ 2,593   

Deferred revenue

  476        

Accrued interest

  380        

Programming obligations

  972      2,718   

Bank revolving credit facility loans

  29,596        
  

 

 

   

 

 

 

Total current liabilities

  42,111      5,311   

Long-term debt and accrued interest

  120,984      75,767   

Programming obligations

  2,553        

Other long-term liabilities

  757        
  

 

 

   

 

 

 

Total liabilities

  166,405      81,078   
  

 

 

   

 

 

 

Members’ deficit:

Class A Units, 2,626,039 issued and outstanding at December 31, 2014 and December 31, 2013

  2,626      2,626   

Class B Units, 50,000,000 issued and outstanding at December 31, 2014 and December 31, 2013

         

Class P Units, 937,500 issued and outstanding at December 31, 2014 and none issued and outstanding at December 31, 2013

  1,042        

Accumulated deficit

  (96,484   (24,145
  

 

 

   

 

 

 

Total members’ deficit

  (92,816   (21,519
  

 

 

   

 

 

 

Total liabilities and members’ deficit

$ 73,589    $ 59,559   
  

 

 

   

 

 

 

See Notes to Consolidated Financial Statements

 

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EL REY HOLDINGS LLC

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

 

     For the Year
Ended
December 31,
2014
    Period from
May 8, 2013
through
December 31,
2013
 

Net revenue

   $ 45,037      $ 118   

Direct operating expenses

     77,926        4,592   

Selling, general and administrative expenses

     31,388        9,114   

Depreciation expense

     132        25   
  

 

 

   

 

 

 

Operating loss

  (64,409   (13,613

Amortization of deferred financing costs

  834      23   

Interest expense

  7,096      3,393   
  

 

 

   

 

 

 

Loss before income taxes

  (72,339   (17,029

Provision for income taxes

         
  

 

 

   

 

 

 

Net loss

$ (72,339 $ (17,029
  

 

 

   

 

 

 

See Notes to Consolidated Financial Statements

 

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EL REY HOLDINGS LLC

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS’ DEFICIT

(In thousands, except unit data)

 

    Members’ Units     Accumulated
Deficit
    Total
Members’
Deficit
 
    Class A     Class B     Class P      
    Units     Amount     Units     Amount     Units     Amount      

Balance, May 8, 2013

         $             $             $      $      $   

Equity issuance costs

                                              (7,116     (7,116

Issuance of Class A Units

    2,626,039        2,626                                           2,626   

Issuance of Class B Units

                  50,000,000                                      

Net loss

                                              (17,029     (17,029
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2013

  2,626,039    $ 2,626      50,000,000    $         $    $ (24,145 $ (21,519
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2013

  2,626,039    $ 2,626      50,000,000    $         $    $ (24,145 $ (21,519

Issuance of Class P Units

                      937,500      1,042           1,042   

Net loss

                                (72,339   (72,339
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2014

  2,626,039    $ 2,626      50,000,000    $      937,500    $ 1,042    $ (96,484 $ (92,816
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See Notes to Consolidated Financial Statements

 

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EL REY HOLDINGS LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

     For the Year
Ended
December 31,
2014
    Period from
May 8, 2013
through
December 31,
2013
 

Cash flows from operating activities:

    

Net loss

   $ (72,339   $ (17,029

Adjustments to reconcile net loss to net cash used in operating activities:

    

Depreciation expense

     132        25   

Amortization of deferred financing costs

     834        23   

Amortization of programming inventory costs

     9,523          

Share-based compensation

     1,042          

Non-cash PIK interest

     5,896        3,393   

Changes in assets and liabilities:

    

Accounts receivable

     (18,289     (129

Programming inventory and prepayments

     (10,178     (13,861

Prepaid expenses and other

     634        (1,380

Other assets

     (2,339       

Accounts payable and accrued liabilities

     8,069        2,593   

Deferred revenue

     476          

Accrued interest

     380          

Programming inventory obligations

     807        2,718   

Other long-term liabilities

     757        (100
  

 

 

   

 

 

 

Net cash used in operating activities

  (74,595   (23,747
  

 

 

   

 

 

 

Cash flows from investing activities:

Capital expenditures

  (979   (435
  

 

 

   

 

 

 

Net cash used in investing activities

  (979   (435
  

 

 

   

 

 

 

Cash flows from financing activities:

Proceeds from revolving credit facility borrowings

  116,876      72,374   

Proceeds from issuance of convertible debt

  25,000        

Repayments of revolving credit facility borrowings

  (72,959     

Increase in restricted cash collateral

  (22,500     

Debt financing costs paid

  (4,506   (430

Equity issuance costs paid

       (7,116

Capital contribution received

       2,626   
  

 

 

   

 

 

 

Net cash provided by financing activities

  41,911      67,454   
  

 

 

   

 

 

 

Net (decrease) increase in cash

  (33,663   43,272   

Cash, beginning of period

  43,272        
  

 

 

   

 

 

 

Cash, end of period

$ 9,609    $ 43,272   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

Interest paid

$ 820    $   

See Notes to Consolidated Financial Statements

 

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EL REY HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except unit data, unless otherwise indicated)

1. Summary of Significant Accounting Policies

Nature of operations—El Rey Holdings LLC (together with its subsidiaries, the “Company”) was formed as a Delaware limited liability company on May 8, 2013 to serve as a holding company with no independent operations. The Company, directly and/or through its wholly-owned subsidiaries owns and operates the El Rey television network (the “El Rey Network”) and the Tres Pistoleros television studio (“Tres Pistoleros”). Effective May 14, 2013, the Company’s owners, Univision Networks & Studios, Inc. (the “Class A Member” and together with its affiliates, including Univision Communications Inc., “UCI”) and ERN/TP Holdings, LLC (the “Class B Member”) entered into an Amended and Restated Limited Liability Company Agreement of El Rey Holdings LLC (the “LLC Agreement”). The Class B Member is owned by El Rey Chingon, LLC (“El Rey Chingon”) and FactoryMade Ventures, LLC (“FactoryMade”). On March 19, 2014, the Company’s Board of Directors approved an amended and restated LLC Agreement of the Company, which eliminated the Class D ownership interests (none were issued as of March 19, 2014) and authorized the Class R ownership interest. See Note 5. Equity.

The Company’s operations include El Rey Network, which is a 24-hour English-language general entertainment cable network launched in December 2013. Curated by filmmaker Robert Rodriguez, El Rey Network showcases signature dramas, feature films, grindhouse genre, cult classic action, and horror/sci-fi content. It also includes Tres Pistoleros, a television production studio that owns several original scripted and non-scripted shows produced to air on El Rey Network and licensed to other international distributors on a variety of platforms. The Company primarily operates in New York, Los Angeles, Austin, and Miami, and outsources a majority of its non-creative functions such as sales, broadcast operations, finance, and human resources through a Master Services Agreement with UCI.

Principles of consolidation—The consolidated financial statements include the accounts and operations of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated.

The consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will be able to meet their obligations in the next twelve months. Consistent with its business plan, the Company has incurred losses and cumulative negative cash flows from operations since its inception and for the year ended December 31, 2014. The Company anticipates that it will continue to generate negative cash flows for the next several years. During the first quarter of 2015, the Company was able to secure additional capital from the Class A Member to assist in funding the Company’s operations for at least the next twelve months. See Note 9. Subsequent Events.

Reporting period—The Company was formed on May 8, 2013. The Company’s fiscal year ends on December 31. This resulted in fiscal year 2013 being shortened to the period from May 8, 2013 through December 31, 2013. The Company’s fiscal year was and will be twelve months, beginning on January 1 and ending on December 31.

Use of estimates—The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of fixed assets, allowances for doubtful accounts, the valuation and amortization of program inventory and prepayments, the valuation of fixed assets, the valuation of share-based compensation, and reserves for contingencies.

Fair Value Measurements—The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value

 

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EL REY HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except unit data, unless otherwise indicated)

 

based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

 

    Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

 

    Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

 

    Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

Revenue recognition—Net revenue is comprised of advertising revenue, subscriber fees, and content licensing revenue. Advertising revenues are recognized when advertising spots are aired and when guarantees, if any, are met. Subscriber fees received from cable systems and satellite operators are recognized as revenue in the period that services are provided. Content licensing revenues are recognized when the content is delivered, all related obligations have been satisfied, and all other revenue recognition criteria have been met. All revenue is recognized only when collection of the resulting receivable is reasonably assured.

Cash—Cash consists of cash on hand, and cash in various depository and demand deposit accounts. Deposits generally exceed the Federal Deposit Insurance Corporation insurance limit.

Accounts receivable—Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cash used in operating activities in the consolidated statement of cash flows.

The Company periodically assesses the adequacy of valuation allowances for uncollectible accounts receivable by evaluating the collectability of outstanding receivables and general factors such as historical collection experience, length of time individual receivables are past due, and the economic environment.

Restricted cash—The Company classifies cash as restricted when the cash is unavailable for withdrawal or usage. Restrictions include legally restricted deposits held as compensating balances against short-term borrowings arrangements with a lending institution.

Property and Equipment and Related Depreciation—Property and equipment are carried at historical cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. The Company removes the cost and accumulated depreciation of its property and equipment upon the retirement of such assets and the resulting gain or loss, if any, is then recognized. The estimated useful life of leasehold improvements is the shorter of their useful life or the remaining life of the lease. The estimated useful lives of broadcast equipment is 5 to 15 years and the estimated useful lives of furniture, computer and other equipment is 3 to 7 years. Repairs and maintenance costs are expensed as incurred.

Property and equipment are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to its estimated undiscounted

 

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EL REY HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except unit data, unless otherwise indicated)

 

future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Programming inventory and prepayments—Programming inventory and prepayments include costs related to original programming, and acquired library programming and acquired original programming, collectively, “acquired programming”. Original programming costs include capitalizable production costs and development costs and are stated at the lower of cost, less accumulated amortization, or net realizable value. Costs for acquired programming are stated at the lower of cost, less accumulated amortization, or net realizable value. Acquired programming licenses and rights are recorded when (i) the cost of the programming is reasonably determined, (ii) the programming has been accepted in accordance with the terms of the agreement, (iii) the programming is available for its first showing or telecast and (iv) the license period has commenced. Costs incurred in connection with the production of or purchase of rights to programs that are available and scheduled to be broadcast within one year are classified as current assets, while costs of those programs to be broadcast beyond a one-year period are considered non-current. Acquired programming costs are expensed over the license period, which is the period in which an economic benefit is expected to be generated. Marketing, distribution and general and administrative costs related to programming inventory and prepayments are expensed as incurred.

Capitalized original programming, participation and residual costs are expensed over the applicable product life based upon the ratio of the current period’s revenues to estimated remaining total revenues (“ultimate revenues”) for each production. Until the Company has established secondary markets (defined as non-initial licensing deal revenues in a territory or platform), capitalized costs for each television series episode do not exceed an amount equal to the amount of revenue contracted for that episode. The Company expenses as incurred original programming costs in excess of this threshold on an episode-by-episode basis. The costs of acquired program licenses and rights for movies, series and other programs are expensed based on the number of times the program is expected to be aired or on a straight-line basis over the useful life, as appropriate.

The Company expenses exploitation costs as incurred. These costs include marketing, advertising, publicity, promotion and other distribution expenses incurred in connection with the distribution of the original produced content. These costs are recorded in selling, general and administrative expenses in the accompanying statements of operations.

Programming inventory and original programming on the Company’s balance sheet are subject to regular recoverability assessments where ultimate revenue estimates are reviewed and updated, as necessary. If planned usage patterns or estimated relative values by year were to change significantly, amortization of the Company’s programming costs may be accelerated or slowed, or an immediate impairment charge may be recognized.

Deferred financing costs—Deferred financing costs consist of payments made by the Company in connection with its convertible notes and revolving credit facility. These costs include legal fees, up-front fees, arrangement fees and other related expenses. Deferred financing costs are amortized over the life of the related debt using the effective interest method.

Legal costs—Legal costs are expensed as incurred unless required by U.S. GAAP to be capitalized.

Advertising and promotional expenses—The Company expenses advertising and promotional costs in the period in which they are incurred. The Company recorded advertising and promotional expense of $8,241 and $634 for the year ended December 31, 2014 and for the period from May 8, 2013 (Inception) through December 31, 2013, respectively, in direct operating expenses and selling, general and administrative expenses in the accompanying consolidated statements of operations.

 

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EL REY HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except unit data, unless otherwise indicated)

 

Share-based compensation—Compensation expense relating to share-based payments is recognized based on the fair value of the award. The Company uses the accelerated attribution method of recognizing compensation expense over the vesting period.

Income taxes—The Company is treated as a partnership for federal and state tax purposes. Therefore, such taxes are the liability of the partners. However, the Company is subject to certain local income taxes including a New York City unincorporated business tax (“UBT”).

Concentration of credit risk—Financial instruments that potentially subject the Company to concentrations of credit risk primarily includes cash. Concentration of credit risk with respect to cash is limited as the Company maintains primary banking relationships with only large nationally recognized financial institutions. The Company also experiences concentration in revenue from particular products and customers due to the volume of business transacted with particular customers. For the year ended December 31, 2014, four customers each represented more than $4,503 or 10% of net revenue of the Company. Because El Rey Network currently has several subscriber fee contracts and is just beginning to generate advertising sales, revenues for the year ended December 31, 2014 are not representative of revenues that are expected to be achieved in future years. The Company expects to spread trade credit risk by entering into agreements with additional cable systems and satellite operators, by selling advertising to a diversified group of customers in a number of different industries, and by licensing the Company’s content to different licensees in territories around the world. The Company extends credit based on an evaluation of the customers’ financial condition. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses.

Reclassifications—Certain reclassifications have been made to the prior year financial statements to conform to the current period presentation.

New accounting pronouncements—In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2014-09, which amended Accounting Standards Codification (“ASC”) 606 Revenue from Contracts with Customers. The amendments provide guidance to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards. For public entities, the amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. For non-public entities, the amendments are effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Non-public entities are permitted to adopt as early as public entities. The Company is currently evaluating the impact ASU 2014-09 will have on its consolidated financial statements and disclosures.

Subsequent events—The Company evaluates subsequent events and the evidence they provide about conditions existing at the date of the balance sheet as well as conditions that arose after the balance sheet date but before the financial statements are issued. The effects of conditions that existed at the balance sheet date are recognized in the financial statements. Events and conditions arising after the balance sheet date but before the financial statements are issued are evaluated to determine if disclosure is required to keep the financial statements from being misleading. To the extent such events and conditions exist, disclosures are made regarding the nature of events and the estimated financial effects for those events and conditions. For purposes of preparing the accompanying consolidated financial statements and the following notes to these financial statements, the Company evaluated subsequent events through February 27, 2015, the date the financial statements were issued. See Note. 9. Subsequent Events.

 

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EL REY HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except unit data, unless otherwise indicated)

 

2. Property and Equipment

Property and equipment consists of the following:

 

     December 31,
2014
    December 31,
2013
 

Broadcast equipment

   $ 287      $ 286   

Furniture, computer and other equipment

     293        149   

Leasehold improvements

     859          
  

 

 

   

 

 

 
  1,439      435   

Accumulated depreciation

  (157   (25
  

 

 

   

 

 

 
$ 1,282    $ 410   
  

 

 

   

 

 

 

Depreciation expense on property and equipment was $132 and $25 for the year ended December 31, 2014 and for the period from May 8, 2013 (Inception) through December 31, 2013, respectively.

3. Programming Inventory, Prepayments and Accrued Participation Liability

Programming inventory and prepayments consist of the following:

 

     December 31,
2014
    December 31,
2013
 

Original produced programming in preproduction

   $ 2,583      $ 9,523   

Original produced programming in production

     247          

Original produced programming completed(a)

     1,205          

Acquired original programming

     5,966          

Acquired library programming(b)

     4,515        4,338   
  

 

 

   

 

 

 

Total programming inventory and prepayments

  14,516      13,861   

Less current portion

  (12,096   (12,668
  

 

 

   

 

 

 

Long-term programming inventory and prepayments

$ 2,420    $ 1,193   
  

 

 

   

 

 

 

 

(a) The Company expects to amortize 100% of the original produced completed programming asset during the next twelve—month period ending December 31, 2015.
(b) The Company expects to amortize the unamortized balance of acquired library programming asset within five years from December 31, 2014.

During the year ended December 31, 2014 and the period from May 8, 2013 (Inception) through December 31, 2013, the Company recognized $6,247 and $121, respectively, of amortization expense on acquired original and library programming inventory. During the year ended December 31, 2014 and for the period from May 8, 2013 (Inception) through December 31, 2013, the Company recognized $58,628 and $2,339, respectively, of programming expense on original produced programming inventory. These amounts are recorded in direct operating expenses in the accompanying statements of operations.

The Company recorded an accrued participation liability of $1,210 at December 31, 2014, which is expected to be paid within the next fiscal year ending December 31, 2015. This liability is recorded in accounts payable and accrued expenses in the accompanying balance sheet. No participation liability was recorded during the period from May 8, 2013 (Inception) through December 31, 2013.

 

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EL REY HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except unit data, unless otherwise indicated)

 

4. Debt

UCI Convertible Notes

The Company’s long-term debt consists mainly of the convertible notes with UCI subject to restrictions on transfer. The balances related to the convertible debt as of December 31, 2014 and 2013 are $102,787 and $72,374, respectively. The Company issued a $72,374 convertible note in May 2013 (the “Initial convertible note”) and an additional $25,000 convertible note in November 2014 (the “Additional convertible note”), (collectively, “the notes”) to the Class A Member. Each of these notes is a twelve year note which bears interest at 7.5% per annum. Interest is added to principal annually as it accrues. Only the original principal amounts of the notes are convertible into equity. At any time after two years following the launch of the El Rey Network which occurred on December 17, 2013 (the “Launch Date”), a portion of the initial principal of the two notes may be converted into equity, and the entire principal may be converted following four years after the Launch Date; provided that the maximum voting interest for UCI’s combined equity interest cannot exceed 49% for the first six years after the Launch Date. The convertible notes are secured by a pledge of stock or units in wholly-owned subsidiaries of the Company. See Note 9. Subsequent events.

While the convertible debt is outstanding, distributions (other than tax distributions) will require approval of the Board of the Company and consent of UCI as holder of the notes.

In connection with the issuance of the Initial convertible note, the Company paid fees of $430 in 2013, which are included on the balance sheet as current and non-current deferred financing costs. These fees will be amortized over the term of the debt. For the year ended December 31, 2014 and the period from May 8, 2013 (Inception) through December 31, 2013, the Company recognized $36 and $23, respectively, related to the amortization of these costs.

Bank Senior Secured Revolving Credit Facility

On April 7, 2014, the Company obtained a four-year senior secured revolving credit facility in the amount of $100,000, which may be increased to $150,000 in accordance with its terms, which will be used, among other things, to fund the production, distribution or other exploitation of made-for-television scripted programming. It is primarily secured by territory, market, and platform licensing revenue contracts, production tax incentives, and 90% of the proceeds from the Additional convertible note, which is disclosed as restricted cash collateral on the consolidated balance sheet as of December 31, 2014. The facility bears an interest rate of LIBOR plus 2.75% basis points, or the alternate base rate plus 1.75%. The facility matures on April 6, 2018.

At December 31, 2014, there was $43,917 outstanding on the revolving credit facility. The outstanding loan balance has a three month maturity period but the Company has the intent and the ability to refinance a portion of the debt for a longer period of time. Therefore, the Company has classified $29,596 as a current liability and $14,321 as long-term on the consolidated balance sheet as of December 31, 2014. At December 31, 2014, the Company has $56,083 available for borrowing on the revolving credit facility, subject to borrowing base collateral availability.

In connection with obtaining the secured revolving credit facility, the Company paid fees of $4,422, which are included on the consolidated balance sheet as prepaid expenses and other and non-current deferred financing costs. These fees will be amortized over the four-year term of the facility. For the year ended December 31, 2014, the Company recognized $798 of amortization expense related to these costs.

 

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EL REY HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except unit data, unless otherwise indicated)

 

5. Equity

On May 14, 2013, in addition to the $72,374 contributed by the Class A Member in exchange for the Initial convertible note, the Class A Member contributed $2,626 in exchange for 2,626,039 Class A Units. As stated in the LLC Agreement, the Class A Units are entitled to a liquidation preference of $2,626 upon liquidation of the Company, following payment of all debt, including any convertible note. The convertible notes are convertible into Class A-1 Units which are identical in all respects to the Class A Units, except the Class A-1 Units are entitled to a liquidation preference equal to their conversion price (currently $1.00 of principal amount of the convertible notes) plus $.087.

Also on May 14, 2013, the Class B Member contributed their interests in El Rey Network LLC and Tres Pistoleros LLC (both Delaware limited liability companies), and TTP Texas Tres Pistoleros, LLC (a Texas limited liability company) (collectively the “Initial Subsidiaries”) to the Company in exchange for 50,000,000 Class B Units. The Class B Units are entitled to a liquidation preference of $50,000 less prior distributions of free cash flow as approved by the Board and tax distributions upon liquidation of the Company, following payment of all debt and any Class A or Class A-1 Unit liquidation preferences. The assets of the Initial Subsidiaries at the time of the contribution included, among other things, certain rights to trademarks and domain names contributed to the Initial Subsidiaries by Robert Rodriguez and FactoryMade (together, the “Founders”), certain rights relating to Lucha Libre AAA programming contained in an agreement between FactoryMade and the holder of the rights to such programming, and an existing affiliate distribution agreement with Comcast Cable Communications. These non-cash asset contributions were recorded at carryover basis, which was zero.

Class A and Class B Units have voting rights in the Company.

For a period following December 1, 2020 the Class A Member has a right to call, and the Class B Member has the right to put, in each case at fair market value, a portion of the Class B Member’s equity interest in the Company. For a period following December 1, 2023 the Class A Member has a similar right to call, and the Class B Member has a similar right to put, all of the Class B Member’s equity interest in the Company.

The Company can also issue Class P Units pursuant to its LLC Agreement. Class P Units do not have any voting rights and any issuance of Class P Units require approval of the Board of the Company. On March 19, 2014, the Company granted 6,250,000 Class P Units to the Company’s Vice Chairman representing service-based profits interests of the Company. The Class P Units are subject to a time-based vesting schedule of four years contingent upon the Vice Chairman’s continuous employment with the Company. The Company determined that the Class P Units fair value per unit was $0.34 on the grant date. As of December 31, 2014, 937,500 Class P units were vested and 5,312,500 units remain unvested.

The Company can also issue Class R Units pursuant to its LLC Agreement. Class R Units do not have any voting rights and any issuance of Class R Units requires approval of the Board of the Company. On March 19, 2014, the Company granted 1,562,500 Class R Units to non-employee executive producers of Matador, representing performance-based profits interests of the Company. The Company determined that the Class R Units fair value per unit was $0.23 on the grant date. The vesting of the Class R Units is based on performance conditions related to achieving defined production budgets and the production of seasons 3, 4 and 5. During the year ended December 31, 2014, the Company did not record any share-based compensation because the performance conditions were not met, in accordance with ASC 505-50 Equity-Based Payments to Non-Employees. During the fourth quarter of 2014, the Company determined that the Class R equity awards were forfeited as a result of the Company cancelling Matador.

 

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EL REY HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except unit data, unless otherwise indicated)

 

The fair value of equity units awarded to employees and non-employees was measured at the grant date by first determining the Business Enterprise Value (“BEV”) of the Company using a Discounted Cash Flow (“DCF”) method under the income approach. The DCF method follows three steps. The first step is the estimation of annual cash flows over a discrete projection period. The second step is to estimate the terminal value of the business or the value of the business that remains beyond the discrete projection period. The third step is to discount the discrete period cash flows and the terminal value to present value, as of the valuation date, at a rate of return that considers the relative risk of achieving the cash flows and the time value of money. The Company then utilized the Black-Scholes option pricing model to determine the fair value of the units. The key inputs for the Black-Scholes model include the total equity value as of the valuation date, the exercise price (breakpoint), the expected annual equity volatility, the expected time to a liquidation event, and the annual risk-free rate of return. To allocate the BEV, the Company considered two liquidity event scenarios, one in 2020 and another in 2023, which are based on the put/call terms of the LLC Agreement. The results of the two scenarios were averaged to arrive to the fair value of the units. The valuation is classified as a Level 3 measurement.

The following key assumptions were used in the Black-Scholes valuation model to value the fair value per unit for both the Class P and Class R Units:

 

Average Volatility

35%

Risk Free Interest Rates

2.24% to 2.75%

Time to liquidity event (years)

6.7 to 9.7

During the year ended December 31, 2014, the Company recorded share-based compensation expense of $1,042 related to the Class P Units grants. The Company did not record any share-based compensation expense for the period from May 8, 2013 (Inception) through December 31, 2013. Total unrecognized compensation cost related to unvested Class P Units awards as of December 31, 2014 is $1,083, which is expected to be recognized over a period of 2.5 years.

6. Related Party Transactions

Robert Rodriguez, El Rey Chingon & FactoryMade

On May 14, 2013, the Founders entered into services agreements (the “Founders Services Agreements”) with the Company. These Founders Services Agreements, in addition to providing for certain services to be rendered by the Founders to the Company, granted the Company certain television exclusivity rights for Robert Rodriguez and FactoryMade programming during the term of such agreements.

Under FactoryMade’s services agreement, FactoryMade will provide non-writing executive producer and certain other services to the Company in exchange for an annual payment of $2,000, payable in monthly installments. The Company also reimburses FactoryMade for facilities and other amenities expenses. During the year ended December 31, 2014, the Company recorded $2,119 for the services fees and reimbursements of costs to FactoryMade. During the period from May 8, 2013 (Inception) through December 31, 2013, the Company recorded $1,739 for the services fees and reimbursements of costs to FactoryMade. As of December 31, 2014 and December 31, 2013, the Company had a payable of $170 and $42, respectively, related to these services fees and costs. As of December 31, 2014 the Company did not record any assets related to this service agreement. As of December 31, 2013, the Company recorded an asset of $97, related to certain prepayments under this services agreement.

FactoryMade also has a minority interest in Lucha Libre FMV LLC, which owns Lucha Underground, an original non-scripted program that premiered on El Rey Network in October 2014. El Rey has a one-year,

 

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EL REY HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except unit data, unless otherwise indicated)

 

renewable licensing agreement in place to premiere the program in the English language domestically. FactoryMade has significant decision making ability on the production of the program. As of December 31, 2014, the Company recorded a prepaid programming asset of $5,773, related to the licensing of this program and a programming asset of $192, related to an episode delivered but not aired as of December 31, 2014. The Company also recorded programming expense of $1,539 related to the episodes delivered and aired on El Rey Network as of December 31, 2014.

FactoryMade also has an economic interest in Skip Film Boutique FMV LLC (“Skip Film”), which the Company has engaged to produce “The Director’s Chair”, an original non-scripted program that premiered on El Rey Network in May 2014. The Company records these costs as an original programming asset and amortizes the costs as the episodes are aired. During the year ended December 31, 2014, the Company recorded expense of $354, related to the amortization of the content aired during 2014. As of December 31, 2014, the Company recorded a prepaid programming asset of $247, related to the production of the content and has a recorded programming liability of $119 related to these costs. In addition, the Company engaged Skip Film to produce promos, movie hostings, electronic press kits and other services related to the promotion of El Rey Network content. During the year ended December 31, 2014, the Company recorded an expense of $645 related to these services.

Under Robert Rodriguez’s services agreement, Mr. Rodriguez is entitled to compensation for any series he creates and develops, customary fixed per episode fees for non-writing executive producer fees for certain other Company programming, and reimbursement for direct costs and expenses in connection with his services. The Company also entered into a separate services agreement with Mr. Rodriguez to compensate him for writing and directing services, and related royalties for From Dusk Till Dawn: The Series and Matador. During the year ended December 31, 2014, the Company recorded $2,160 of expense for these services. During the period from May 8, 2013 (Inception) through December 31, 2013 the Company recorded $169 of expense for these services. As of December 31, 2014, the Company had a payable of $494, related to these services.

On April 1, 2014, the Company entered into an agreement with Mr. Rodriguez, pursuant to which the Company agreed to pay Mr. Rodriguez a monthly salary of $83 for his duties as chairman for the period commencing on April 1, 2014 and ending on December 31, 2016. The Company’s obligations under this agreement are independent of its financial obligations to Mr. Rodriguez under Mr. Rodriguez’s services agreement described above and will terminate upon Mr. Rodriguez’s death or permanent disability or upon certain “cause events” as defined in the agreement. During the year ended December 31, 2014, the Company paid Mr. Rodriguez $750 pursuant to this agreement.

Upon formation, the Company paid $1,111 to El Rey Chingon and $1,957 to FactoryMade as reimbursement to the Founders for loans that they had made to El Rey Network LLC prior to the transaction with UCI. These loans bore interest at the rate of 0.05% per annum. The repayments of these loans are reflected in total members’ deficit as of December 31, 2013.

UCI

Under a Master Services Agreement with the Company dated May 14, 2013, UCI provides certain distribution, advertising sales and back office/technical services to the Company for fees generally based on incremental costs incurred by UCI in providing these services. The costs include compensation costs for certain dedicated UCI employees performing such services, allocation of certain UCI facilities costs and a use fee during the useful life of certain UCI assets used by the Company in connection with the provision of the services. The Company also pays UCI an annual $3,000 management fee which is paid in monthly installments. Upon certain

 

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EL REY HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except unit data, unless otherwise indicated)

 

terminations of the services agreement, the Company is obligated to reimburse UCI for reasonable one-time costs directly resulting from the termination. The back office/technical services include facilities, engineering and operations support, program scheduling, rights management, promotion support, human resources, finance, accounting, payroll, procurement, and risk management services.

Under other agreements with the Company, UCI has also agreed to provide certain English language soccer programming in exchange for a license fee equal to the Company’s net advertising and sponsorship revenues, and promotional support to the El Rey Network.

Grupo Televisa S.A.B. and its affiliates (collectively “Televisa”) holds equity and debt interests in certain UCI entities and provides a significant amount of programming to other UCI entities. As a result of this relationship, and in connection with the provision of promotional support, the Company has agreed to provide Televisa certain advertising spots on the El Rey Network. Additionally, the Company agreed to provide UCI and Televisa access to certain unsold advertising inventory on the El Rey Network.

During the year ended December 31, 2014, the Company recognized $12,039, for the management and services fees and reimbursement of costs to UCI. During the period from May 8, 2013 (Inception) through December 31, 2013, the Company recognized $4,743 for the management and services fees and reimbursement of costs to UCI. As of December 31, 2014, and December 31, 2013, the Company had a payable to UCI of $1,872, and $1,579, respectively, related to these management and services fees and costs.

Other transactions

The Founders also have controlling ownership interests or ownership interests with significant influence with companies that do business with the Company, primarily for rental of production studios, and as it pertains to the Founders Services Agreements, reimbursement of travel expenses and compensation for health benefits. These services totaled $697 during the year ended December 31, 2014; the Company recorded an asset of $83 related to these costs with the remaining amounts being expensed during fiscal 2014. During the period from May 8, 2013 (Inception) through December 31, 2013, the Company recorded an expense of $461 for these services.

The Company has a lease with FactoryMade for its production office in Los Angeles which expires in 2017. The Company pays an annual rent of $400 with a 3% escalation rate at each January. During the year ended December 31, 2014, the Company recognized $326 in rent expense related to the space rental and recorded a security deposit of $53 in noncurrent other assets as of December 31. 2014. In July 2014, the Company entered into a space rental arrangement with Troublemaker Studios, L.P. of which Robert Rodriguez is one of the founders. The arrangement calls for a monthly fee per employee. During the year ended December 31, 2014 the Company incurred rent expense of $48 related to this arrangement.

7. Contingencies and Commitments

Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when the Company believes it is probable that a liability has been incurred and the amount of the contingency can be reasonably estimated. The Company has recorded no loss contingencies as of December 31, 2014 and December 31, 2013.

 

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EL REY HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except unit data, unless otherwise indicated)

 

Commitments

In the normal course of business, the Company enters into multi-year contracts for programming content and other service arrangements. The Company also has contractual commitments for creative talent and employment agreements, which may include obligations to actors, producers, television personalities and executives.

On March 14, 2014, the Company terminated a senior executive and entered into the 12-month separation agreement for salary and benefits contemplated by the executive’s original employment agreement.

The following table is a summary of the Company’s major contractual payment obligations as of December 31, 2014 and does not include obligations under its convertible notes with UCI and the Founders Services Agreements:

 

     Payments Due By Period  
     2015      2016      2017      2018      2019      Thereafter      Total  
     (In thousands)  

Programming

   $ 3,465       $ 2,624       $ 605       $ 996       $ 732       $       $ 8,422   

Severance

     123                                                 123   

Operating leases

     412         424         437                                 1,273   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
$ 4,000    $ 3,048    $ 1,042    $ 996    $ 732    $    $ 9,818   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As of December 31, 2014, the Company’s balance sheet reflected contractual commitments related to programming inventory obligations of $972 due in 2015, $550 due in 2016, $605 due in 2017, $666 due in 2018 and $732 due in 2019. The Company also has off balance sheet programming inventory obligations of $2,493 due in 2015, $2,074 due in 2016, none due in 2017, and $330 due in 2018, because the license period had not started.

8. Income Taxes

The Company is treated as a partnership for federal and state tax purposes. Therefore, no provision has been recorded for federal or state income taxes as such taxes are the liability of the partners. The Company is however, subject to certain local income taxes including a New York City UBT.

The effective tax rate for the Company is different from the federal statutory rate primarily due to the fact that the majority of the income is not taxed at the partnership level; the effect of local taxes; permanent differences; and the valuation allowance on the Company’s domestic deferred tax assets.

The table below summarizes the Company’s deferred tax assets and liabilities:

 

     December 31,
2014
    December 31,
2013
 

Deferred tax assets

   $ 528      $ 109   

Valuation allowance

     (503     (109

Deferred tax liabilities

     (25       
  

 

 

   

 

 

 

Net deferred tax asset

$    $   
  

 

 

   

 

 

 

 

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EL REY HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except unit data, unless otherwise indicated)

 

At December 31, 2014 and December 31, 2013, the Company’s deferred tax assets primarily relate to UBT net operating losses (“NOL”). Realization of these deferred tax assets is dependent upon future earnings. Accordingly, a full valuation allowance was recorded against the assets for the UBT NOLs due to historical and projected losses at the Company. The UBT NOL carryforwards begin to expire in 2034.

The Company has not recorded any reserves for uncertain tax positions.

9. Subsequent events

On January 16, 2015, the Company entered into an agreement in principal with Miramax Film NY, LLC and Miramax Distribution Services LLC (collectively, “Miramax”) with respect to, among other things, increasing Miramax’s economic interest in From Dusk Till Dawn: The Series (the “Series”) for Season 2 and Season 3. Pursuant to the agreement the Company will arrange production loans under the revolving credit facility for Season 2, and production approvals for Season 2 will be expanded to include mutual approval over all aspects of production. In addition, Miramax will assume responsibility for participations and residuals on a worldwide basis, and following full repayment of Season 2 production loans under the revolving credit facility, the Company will obtain a release from the liens held by the lenders under this facility over Season 2 rights. The Company will assign all of its rights, title and interest in Season 2 to Miramax, and Miramax will be the sole owner, producer and financier of Season 3 of the Series and subsequent seasons. Lastly, El Rey Network will have certain exhibition rights for Season 2 and Season 3 and certain subsequent seasons on substantially the same terms and conditions as Season 1.

On February 19, 2015, the Company’s Board of Directors approved the purchase by the Class A Member of, and the issuance by the Company to the Class A Member of, a new $30,000 convertible note. The note will be convertible into a new class of units and will have similar terms as the existing convertible notes held by the Class A Member with certain differences, including the conversion price and certain amendments to the liquidation/sale waterfall provisions.

 

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Through and including                     , 2015 (the 25th day after the date of this prospectus), all dealers effecting transactions in the Class A Common Stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

                 Shares

 

LOGO

Univision Holdings, Inc.

Class A Common Stock

PRELIMINARY PROSPECTUS

Morgan Stanley

Goldman, Sachs & Co.

Deutsche Bank Securities

                    , 2015

 

 


Table of Contents

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The expenses, other than underwriting commissions, expected to be incurred by us, or the Registrant, in connection with the issuance and distribution of the securities being registered under this Registration Statement are estimated to be as follows:

 

SEC Registration Fee

$  11,620   

Financial Industry Regulatory Authority, Inc. Filing Fee

  15,500   

NYSE or Nasdaq Listing Fee

  *   

Printing and Engraving

  *   

Legal Fees and Expenses

  *   

Accounting Fees and Expenses

  *   

Transfer Agent and Registrar Fees

  *   

Miscellaneous

  *   
  

 

 

 

Total

$ *   
  

 

 

 

 

* To be completed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Registrant is governed by the Delaware General Corporation Law, or DGCL. Section 145 of the DGCL provides that a corporation may indemnify any person, including an officer or director, who was or is, or is threatened to be made, a party to any threatened, pending or completed legal action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person was or is an officer, director, employee or agent of such corporation or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such officer, director, employee or agent acted in good faith and in a manner such person reasonably believed to be in, or not opposed to, the corporation’s best interest and, for criminal proceedings, had no reasonable cause to believe that such person’s conduct was unlawful. A Delaware corporation may indemnify any person, including an officer or director, who was or is, or is threatened to be made, a party to any threatened, pending or contemplated action or suit by or in the right of such corporation, under the same conditions, except that such indemnification is limited to expenses (including attorneys’ fees) actually and reasonably incurred by such person, and except that no indemnification is permitted without judicial approval if such person is adjudged to be liable to such corporation. Where an officer or director of a corporation is successful, on the merits or otherwise, in the defense of any action, suit or proceeding referred to above, or any claim, issue or matter therein, the corporation must indemnify that person against the expenses (including attorneys’ fees) which such officer or director actually and reasonably incurred in connection therewith.

The Registrant’s amended and restated bylaws will authorize the indemnification of its officers and directors, consistent with Section 145 of the Delaware General Corporation Law, as amended. The Registrant intends to enter into indemnification agreements with each of its directors and executive officers. These agreements, among other things, will require the Registrant to indemnify each director and executive officer to the fullest extent permitted by Delaware law, including indemnification of expenses such as attorneys’ fees, judgments, fines and settlement amounts incurred by the director or executive officer in any action or proceeding, including any action or proceeding by or in right of the Registrant, arising out of the person’s services as a director or executive officer.

 

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Reference is made to Section 102(b)(7) of the DGCL, which enables a corporation in its original certificate of incorporation or an amendment thereto to eliminate or limit the personal liability of a director for violations of the director’s fiduciary duty, except (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL, which provides for liability of directors for unlawful payments of dividends of unlawful stock purchase or redemptions or (iv) for any transaction from which a director derived an improper personal benefit.

The Registrant expects to maintain standard policies of insurance that provide coverage (i) to its directors and officers against loss rising from claims made by reason of breach of duty or other wrongful act and (ii) to the Registrant with respect to indemnification payments that it may make to such directors and officers.

The proposed form of Underwriting Agreement to be filed as Exhibit 1.1 to this Registration Statement provides for indemnification to the Registrant’s directors and officers by the underwriters against certain liabilities.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

The following sets forth information regarding all unregistered securities sold by the Registrant since January 1, 2012:

Since January 1, 2015, the Registrant has granted to certain of the Registrant’s employees (i) 30,708 stock options and (ii) 14,840 restricted stock units. These securities were issued under the Registrant’s equity incentive plan without registration in reliance on the exemptions afforded by Section 4(a)(2) of the Securities Act and Rule 701 promulgated thereunder.

During the fiscal year ended December 31, 2014, the Registrant granted to certain of the Registrant’s employees 23,512 stock options. These securities were issued under the Registrant’s equity incentive plan without registration in reliance on the exemptions afforded by Section 4(a)(2) of the Securities Act and Rule 701 promulgated thereunder.

On January 30, 2014, a group of institutional investors acquired 241,870 shares of the Registrant’s Class A common stock for an aggregate purchase price of $125.0 million. The shares of Class A common stock in this transaction were issued in reliance on Section 4(2) of the Securities Act of 1933, as amended, as the sale of the security did not involve a public offering. Appropriate legends were affixed to the share certificate issued in each transaction.

During the fiscal year ended December 31, 2013, the Registrant granted to certain of the Registrant’s employees (i) 80,530 stock options and (ii) 92,850 restricted stock units. These securities were issued under the Registrant’s equity incentive plan without registration in reliance on the exemptions afforded by Section 4(a)(2) of the Securities Act and Rule 701 promulgated thereunder.

During the fiscal year ended December 31, 2012, the Registrant granted to certain of the Registrant’s employees 150,463 stock options. These securities were issued under the Registrant’s equity incentive plan without registration in reliance on the exemptions afforded by Section 4(a)(2) of the Securities Act and Rule 701 promulgated thereunder.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

See the Exhibit Index immediately following the signature pages included in this registration statement.

(b) Financial Statement Schedules.

See the Index to Financial Statements included on page F-1 for a list of the financial statements included in this registration statement.

 

 

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All schedules not identified above have been omitted because they are not required, are not applicable or the information is included in the selected consolidated financial data or notes contained in this registration statement.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions referenced in Item 14 of this registration statement, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

 

  (1)   For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

 

  (2)   For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on July 2, 2015.

 

By:

 

/s/ Randel A. Falco

Name:

  Randel A. Falco

Title:

  Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and appoints each of Peter H. Lori, Francisco J. Lopez-Balboa and Jonathan Schwartz, or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in his name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-1 (including all pre-effective and post-effective amendments and registration statements filed pursuant to Rule 462(b) under the Securities Act of 1933), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming that any such attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on July 2, 2015.

 

Signature

  

Title

/s/    Randel A. Falco        

Randel A. Falco

  

President and Chief Executive Officer, Director

(Principal Executive Officer)

/s/    Francisco J. Lopez-Balboa        

Francisco J. Lopez-Balboa

  

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

/s/    Peter H. Lori        

Peter H. Lori

  

Executive Vice President, Deputy Chief Financial Officer and Chief Accounting Officer

(Principal Accounting Officer)

/s/    Haim Saban        

Haim Saban

   Chairman

/s/    Zaid F. Alsikafi        

Zaid F. Alsikafi

   Director

/s/    Alfonso de Angoitia        

Alfonso de Angoitia

   Director

/s/    José Antonio Bastón Patiño        

José Antonio Bastón Patiño

   Director

/s/    Adam Chesnoff        

Adam Chesnoff

   Director

 

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Signature

  

Title

/s/    Henry G. Cisneros        

Henry G. Cisneros

   Director

/s/    Michael P. Cole        

Michael P. Cole

   Director

/s/    Kelvin L. Davis        

Kelvin L. Davis

   Director

/s/    David Goel        

David Goel

   Director

/s/    Michael N. Gray        

Michael N. Gray

   Director

/s/    Enrique F. Senior Hernández        

Enrique F. Senior Hernández

   Director

/s/    Emilio Azcárraga Jean        

Emilio Azcárraga Jean

   Director

/s/    Jonathan M. Nelson        

Jonathan M. Nelson

   Director

/s/    James N. Perry, Jr.        

James N. Perry, Jr.

   Director

/s/    David Trujillo        

David Trujillo

   Director

/s/    Tony Vinciquerra        

Tony Vinciquerra

   Director

 

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EXHIBIT INDEX

 

Exhibit
Number

 

Description of Exhibits

1.1*   Form of Underwriting Agreement.
3.1*   Form of Amended and Restated Certificate of Incorporation of Univision Holdings, Inc.
3.2*   Form of Amended and Restated Bylaws of Univision Holdings, Inc.
4.1   First-Lien Guarantee and Collateral Agreement, dated as of March 29, 2007, as amended as of February 28, 2013, among Broadcast Media Partners Holdings, Inc., Univision Communications Inc., the subsidiaries of Univision Communications Inc. from time to time party thereto and Deutsche Bank AG New York Branch, as first-lien collateral agent.
4.2   Senior Notes Indenture, dated as of November 23, 2010, among Univision Communications Inc., the guarantors party thereto and Wilmington Trust FSB, as trustee, governing the 8 1/2% Senior Notes due 2021 issued thereunder.
4.2(a)   Supplemental Indenture, dated as of March 16, 2011, among TuTV LLC and Wilmington Trust FSB, as trustee.
4.2(b)   Second Supplemental Indenture, dated as of September 15, 2011, among Univision Local Media Inc. and Wilmington Trust, National Association, as successor by merger to Wilmington Trust FSB, as trustee.
4.2(c)   Third Supplemental Indenture, dated as of November 2, 2011, among Ufertas, LLC, Univision Enterprises, LLC (f/k/a UniLabs) LLC, Univision 24/7, LLC, Univision Deportes, LLC, Univision Financial Marketing, Inc., Univision of Puerto Rico Real Estate Company, Univision tlnovelas, LLC, and Wilmington Trust, National Association, as successor by merger to Wilmington Trust FSB, as trustee.
4.2(d)   Fourth Supplemental Indenture, dated as of March 29, 2013, among New Univision Deportes, LLC, New Univision Enterprises, LLC, Univision 24/7, LLC, Univision tlnovelas, LLC and Wilmington Trust, National Association, as trustee.
4.2(e)   Fifth Supplemental Indenture, dated as of November 13, 2013, between Univision Deportes, LLC and Wilmington Trust, National Association, as trustee.
4.3   Senior Secured Notes Indenture, dated as of August 29, 2012, among Univision Communications Inc., the guarantors party thereto and Wilmington Trust, National Association, as trustee, governing the 6 3/4% Senior Secured Notes due 2022 issued thereunder.
4.3(a)   First Supplemental Indenture, dated as of February 6, 2013, among Univision Communications Inc., the guarantors party thereto and Wilmington Trust, National Association, as trustee.
4.3(b)   Second Supplemental Indenture, dated as of March 29, 2013, among New Univision Deportes, LLC, New Univision Enterprises, LLC, Univision 24/7, LLC, Univision tlnovelas, LLC and Wilmington Trust, National Association, as trustee.
4.3(c)   Third Supplemental Indenture, dated as of November 13, 2013, between Univision Deportes, LLC and Wilmington Trust, National Association, as trustee.
4.4   Senior Secured Notes Indenture, dated as of May 21, 2013, among Univision Communications Inc., the guarantors party thereto and Wilmington Trust, National Association, as trustee, governing the 5 1/8% Senior Secured Notes due 2023 issued thereunder.
4.4(a)   First Supplemental Indenture, dated as of November 13, 2013, between Univision Deportes, LLC and Wilmington Trust, National Association, as trustee.

 

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Exhibit
Number

 

Description of Exhibits

4.5   Senior Secured Notes Indenture, dated as of February 19, 2015, among Univision Communications Inc., the guarantors party thereto and Wilmington Trust, National Association, as trustee, governing the 5 1/8% Senior Secured Notes due 2025 issued thereunder.
4.6   First-lien Intercreditor Agreement, dated as of July 9, 2009, among Univision Communications Inc., Univision of Puerto Rico Inc., the other Grantors party thereto, Deutsche Bank AG New York Branch, as Collateral Agent and Authorized Representative for the Credit Agreement Secured Parties, Wilmington Trust FSB, as the Initial Additional Authorized Representative and each additional Authorized Representative from time to time party thereto.
4.6(a)   Representative Supplement No. 1, dated as of October 26, 2010, among Univision Communications Inc., Univision of Puerto Rico Inc., the other Grantors party thereto, Deutsche Bank AG New York Branch, as Collateral Agent and Authorized Representative for the Credit Agreement Secured Parties, Wilmington Trust FSB, as the Initial Additional Authorized Representative, and each additional Authorized Representative from time to time party thereto.
4.6(b)   Representative Supplement No. 2, dated as of May 9, 2011, among Univision Communications Inc., Univision of Puerto Rico Inc., the other Grantors party thereto, Deutsche Bank AG New York Branch, as Collateral Agent and Authorized Representative for the Credit Agreement Secured Parties, Wilmington Trust FSB, as the Initial Additional Authorized Representative, and each additional Authorized Representative from time to time party thereto.
4.6(c)   Representative Supplement No. 3, dated as of February 7, 2012, among Univision Communications Inc., Univision of Puerto Rico Inc., the other Grantors party thereto, Deutsche Bank AG New York Branch, as Collateral Agent and Authorized Representative for the Credit Agreement Secured Parties, Wilmington Trust FSB, as the Initial Additional Authorized Representative, and each additional Authorized Representative from time to time party thereto.
4.6(d)   Representative Supplement No. 4, dated as of August 29, 2012, among Univision Communications Inc., Univision of Puerto Rico Inc., the other Grantors party thereto, Deutsche Bank AG New York Branch, as Collateral Agent and Authorized Representative for the Credit Agreement Secured Parties, Wilmington Trust FSB, as the Initial Additional Authorized Representative, and each additional Authorized Representative from time to time party thereto.
4.6(e)   Representative Supplement No. 5, dated as of September 19, 2012, among Univision Communications Inc., Univision of Puerto Rico Inc., the other Grantors party thereto, Deutsche Bank AG New York Branch, as Collateral Agent and Authorized Representative for the Credit Agreement Secured Parties, Wilmington Trust FSB, as the Initial Additional Authorized Representative, and each additional Authorized Representative from time to time party thereto.
4.6(f)   Representative Supplement No. 6, dated as of February 28, 2013, among Univision Communications Inc., Univision of Puerto Rico Inc., the other Grantors party thereto, Deutsche Bank AG New York Branch, as Collateral Agent and Authorized Representative for the Credit Agreement Secured Parties, Wilmington Trust FSB, as the Initial Additional Authorized Representative, and each additional Authorized Representative from time to time party thereto.
4.6(g)   Representative Supplement No. 7, dated as of May 21, 2013, among Univision Communications Inc., Univision of Puerto Rico Inc., the other Grantors party thereto, Deutsche Bank AG New York Branch, as Collateral Agent and Authorized Representative for the Credit Agreement Secured Parties, Wilmington Trust FSB, as the Initial Additional Authorized Representative, and each additional Authorized Representative from time to time party thereto.

 

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Exhibit
Number

 

Description of Exhibits

4.6(h)   Representative Supplement No. 8, dated as of May 29, 2013, among Univision Communications Inc., Univision of Puerto Rico Inc., the other Grantors party thereto, Deutsche Bank AG New York Branch, as Collateral Agent and Authorized Representative for the Credit Agreement Secured Parties, Wilmington Trust, National Association, as the Initial Additional Authorized Representative, and each additional Authorized Representative from time to time party thereto,
4.6(i)   Representative Supplement No. 9, dated as of January 23, 2014, among Univision Communications Inc., Univision of Puerto Rico Inc., the other Grantors party thereto, Deutsche Bank AG New York Branch, as Collateral Agent and Authorized Representative for the Credit Agreement Secured Parties, Wilmington Trust National Association, as the Initial Additional Authorized Representative, and each additional Authorized Representative from time to time party thereto.
4.6(j)   Representative Supplement No. 10, dated as of February 19, 2015, among Univision Communications Inc., Univision of Puerto Rico Inc., the other Grantors party thereto, Deutsche Bank AG New York Branch, as Collateral Agent and Authorized Representative for the Credit Agreement Secured Parties, Wilmington Trust National Association, as the Initial Additional Authorized Representative, and each additional Authorized Representative from time to time party thereto.
4.6(k)   Representative Supplement No. 11, dated as of February 19, 2015, among Univision Communications Inc., Univision of Puerto Rico Inc., the other Grantors party thereto, Deutsche Bank AG New York Branch, as Collateral Agent and Authorized Representative for the Credit Agreement Secured Parties, Wilmington Trust National Association, as the Initial Additional Authorized Representative, and each additional Authorized Representative from time to time party thereto.
4.7   Collateral Agreement, dated as of July 9, 2009, among Univision Communications Inc., the Subsidiaries of Univision Communications Inc. from time to time party thereto and Deutsche Bank AG New York Branch, as Collateral Agent.
4.7(a)   Supplement No. 1 to the Collateral Agreement, dated as of February 19, 2010, among Univision Communications Inc., the Subsidiaries of Univision Communications Inc. from time to time party thereto and Deutsche Bank AG New York Branch, as Collateral Agent.
4.7(b)   Supplement No. 2 to the Collateral Agreement, dated as of March 16, 2011, among Univision Communications Inc., the Subsidiaries of Univision Communications Inc. from time to time party thereto and Deutsche Bank AG New York Branch, as Collateral Agent.
4.7(c)   Supplement No. 3 to the Collateral Agreement, dated as of September 15, 2011, among Univision Communications Inc., the Subsidiaries of Univision Communications Inc. from time to time party thereto and Deutsche Bank AG New York Branch, as Collateral Agent.
4.7(d)   Supplement No. 4 to the Collateral Agreement, dated as of November 2, 2011, among Univision Communications Inc., the Subsidiaries of Univision Communications Inc. from time to time party thereto and Deutsche Bank AG New York Branch, as Collateral Agent.
4.7(e)   Supplement No. 5 to the Collateral Agreement, dated as of March 29, 2013, among Univision Communications Inc., the Subsidiaries of Univision Communications Inc. from time to time party thereto and Deutsche Bank AG New York Branch, as Collateral Agent.
4.7(f)   Supplement No. 6 to the Collateral Agreement, dated as of November 13, 2013, among Univision Communications Inc., Univision of Puerto Rico Inc., the other Grantors party thereto, Deutsche Bank AG New York Branch, as Collateral Agent and Authorized Representative for the Credit Agreement Secured Parties, Wilmington Trust National Association, as the Initial Additional Authorized Representative, and each additional Authorized Representative.

 

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Exhibit
Number

  

Description of Exhibits

  4.8    First-lien Trademark Security Agreement, dated as of July 9, 2009, among the grantors named therein and Deutsche Bank AG New York Branch, as Collateral Agent.
  4.9    First-lien Copyright Security Agreement, dated as of July 9, 2009, among the grantors named therein and Deutsche Bank AG New York Branch, as Collateral Agent.
  4.10    Amended and Restated Receivables Sale Agreement, dated as of June 28, 2013, by and among the originators party thereto and the buyers party thereto.
  4.11    Amended and Restated Receivables Transfer and Servicing Agreement, dated as of June 28, 2013, by and among the transferors party thereto, Univision Receivables Co., LLC, as Buyer, and Univision Communications Inc., as Servicer.
  4.12    Second Amended and Restated Receivables Purchase Agreement, dated as of June 28, 2013, by and among Univision Receivables Co., LLC, as Seller, the financial institutions signatory thereto from time to time, as Purchasers, General Electric Capital Corporation, as Administrative Agent, General Electric Capital Corporation, as Purchaser Agent, and the CIT Finance LLC, as Syndication Agent
  4.13    Convertible Debentures due 2025, each dated as of December 20, 2010 to Multimedia Telecom, S.A. de C.V. and to BMPI Services II, LLC., respectively.
  4.14*    Form of Class A Common Stock Certificate
  5.1*    Opinion of Weil, Gotshal & Manges LLP.
10.1    Credit Agreement, dated as of March 29, 2007, as amended as of June 19, 2009, as amended and restated as of October 26, 2010, as amended as of August 21, 2012, as amended as of February 28, 2013, as amended as of May 29, 2013 and as further amended as of January 23, 2014, among Univision Communications Inc. and Univision of Puerto Rico, Inc., as borrowers, the lenders from time to time party thereto, and Deutsche Bank AG New York Branch, as administrative agent and collateral agent.
10.2    2010 Equity Incentive Plan
10.3    Amended and Restated 2007 Equity Incentive Plan
10.4*    Memorandum of Understanding, dated July 1, 2015, by and among Univision Holdings, Inc., Broadcast Media Partners Holdings, Inc., Univision Communications Inc., Grupo Televisa, S.A.B. and Certain Stockholders and Managers of Univision Holdings, Inc.
10.5*    Second Amended and Restated 2011 Program License Agreement, by and between Televisa, S.A. de C.V. and Univision Communications Inc.
10.6*    Amended and Restated 2011 Mexico License Agreement, by and between Univision Communications Inc. and Videoserpel, Ltd.
10.7*    Amendment to Amended and Restated 2011 Mexico License Agreement, by and between Univision Communications Inc. and Videoserpel, Ltd.
10.8*    2011 International Sales Agency Agreement, dated as of December 20, 2010, by and between Univision Communications Inc. and Televisa, S.A. de C.V.
10.9*    Form of Amended and Restated Principal Investor Agreement, by and among Univision Holdings, Inc. (f/k/a Broadcasting Media Partners, Inc.), Broadcasting Media Partners Holdings, Inc., Univision Communications Inc., Grupo Televisa, S.A.B. and the Principal Investors as defined therein.
10.10*    Form of Amended and Restated Stockholders Agreement, by and among Univision Holdings, Inc. (f/k/a Broadcasting Media Partners, Inc.), Broadcast Media Partners Holdings, Inc., Univision Communications Inc. and Certain Stockholders of Univision Holdings, Inc.

 

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Exhibit
Number

 

Description of Exhibits

10.11*   Form of Amended and Restated Participation, Registration Rights and Coordination Agreement by and among Univision Holdings, Inc. (f/k/a Broadcasting Media Partners, Inc.), Broadcasting Media Partners Holdings, Inc., Univision Communications Inc., Grupo Televisa, S.A.B. and Certain Stockholders of Univision Holdings, Inc.
10.12*   Amended and Restated Management Agreement, dated as of December 20, 2010, by and among Univision Communications Inc., Univision Holdings, Inc. (f/k/a Broadcasting Media Partners, Inc.), Broadcasting Media Partners Holdings, Inc., Madison Dearborn Partners IV, L.P., Madison Dearborn Partners V-B, L.P., Providence Equity Partners V Inc., Providence Equity Partners L.L.C., KSF Corp., THL Managers VI, LLC and TPG Capital, L.P.
10.12(a)*   Management Termination Agreement, dated as of April, 12, 2015, by and among Univision Communications Inc., Univision Holdings, Inc. (f/k/a Broadcasting Media Partners, Inc.), Broadcasting Media Partners Holdings, Inc., Madison Dearborn Partners IV, L.P., Madison Dearborn Partners V-B, L.P., Providence Equity Partners V Inc., Providence Equity Partners L.L.C., KSF Corp., THL Managers VI, LLC and TPG Capital, L.P.
10.13*   Technical Assistance Agreement, dated as of December 20, 2010, by and among Univision Communications Inc., Univision Holdings, Inc. (f/k/a Broadcasting Media Partners, Inc.), Broadcasting Media Partners Holdings, Inc. and Televisa, S.A. de C.V.
10.13(a)*   Technical Assistance Termination Agreement, dated as of April 12, 2015, by and among Univision Communications Inc., Univision Holdings, Inc. (f/k/a Broadcasting Media Partners, Inc.), Broadcasting Media Partners Holdings, Inc. and Televisa, S.A. de C.V.
10.14*   Investment Agreement, dated as of December 20, 2010, by and among Univision Holdings, Inc. (f/k/a Broadcasting Media Partners, Inc.), BMPI Services II, LLC, Univision Communications Inc., Grupo Televisa, S.A.B. and Pay-TV Venture, Inc.
10.14(a)*   Amendment to Investment Agreement, dated as of February 28, 2011, by and among Univision Holdings, Inc. (f/k/a Broadcasting Media Partners, Inc.), BMPI Services II, LLC, Univision Communications Inc., Grupo Televisa, S.A.B. and Pay-TV Venture, Inc.
10.14(b)*   Form of Amendment No. 2 to Investment Agreement, by and among Univision Holdings, Inc. (f/k/a Broadcasting Media Partners, Inc.), BMPI Services II, LLC, Univision Communications Inc., Grupo Televisa, S.A.B. and Pay-TV Venture, Inc.
10.15*   Amended and Restated Services Agreement, dated as of December 20, 2010, by and between Univision Holdings, Inc. (f/k/a Broadcasting Media Partners, Inc.), SCG Investments IIB LLC, BMPI Services LLC and BMPI Services II, LLC.
10.16*   Employment and Non-Competition Agreement, dated as of January 14, 2011, by and between Univision Communications Inc. and Randel A. Falco.
10.16(a)*   First Amendment to Employment Agreement, dated as of June 29, 2011, by and between Univision Communications Inc. and Randel A. Falco.
10.16(b)*   Second Amendment to Employment Agreement, dated as of October 16, 2014, by and between Univision Communications Inc. and Randel A. Falco.
10.17*   Amended and Restated Employment and Non-Competition Agreement, dated as of June 30, 2015, by and between Univision Communications Inc. and Francisco J. Lopez-Balboa.
10.18*   Employment Agreement, dated as of March 5, 2014, by and between Univision Communications Inc. and Roberto Llamas.

 

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Exhibit
Number

  

Description of Exhibits

10.19*    Employment Agreement, dated as of March 10, 2014, by and between Univision Communications Inc. and Peter Lori.
10.20*    Employment Agreement, dated as of November 13, 2012, by and between Univision Management Co., Univision Holdings, Inc. (f/k/a Broadcasting Media Partners, Inc.) and Jonathan Schwartz.
21.1*    Subsidiaries of the Registrant
23.1    Consent of Ernst & Young LLP
23.2    Consent of Ernst & Young LLP
23.3*    Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1).
24.1    Power of Attorney (included on signature page to this Registration Statement)

 

* To be filed by amendment.

 

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