S-1/A 1 d916872ds1a.htm AMENDMENT NO. 4 TO FORM S-1 Amendment No. 4 to Form S-1
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As filed with the Securities and Exchange Commission on December 23, 2015

Registration No. 333-205439

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 4

to

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.

Executive Vice President,

General Counsel & Head of

Government Relations, and

Secretary

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  ¨

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 DECEMBER 23, 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”) 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                     , 2016.

 

 

 

Morgan Stanley   Goldman, Sachs & Co.   Deutsche Bank Securities
Allen & Company LLC   Barclays   BofA Merrill Lynch
Citigroup   Credit Suisse   Guggenheim Securities
J.P. Morgan     Wells Fargo Securities
  Natixis  

Cabrera Capital Markets, LLC

 

Guzman & Company

 

Lebenthal Capital Markets

Loop Capital Markets

 

    Ramirez & Co., Inc.

 

The Williams Capital Group, L.P.

 

 

                    , 2016


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UNIVISION IS THE LEADING MEDIA COMPANY SERVING HISPANIC AMERICA

 

LOGO


Table of Contents

TABLE OF CONTENTS

 

     Page  

Summary

     1   

Risk Factors

     20   

Forward-Looking Statements

     45   

Use of Proceeds

     47   

Dividend Policy

     48   

Capitalization

     49   

Dilution

     51   

Selected Historical Financial Data

     52   

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

     54   

Business

     91   

Management

     119   

Executive and Director Compensation

     128   
 

 

 

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, Pew Research Center (“Pew”), the Center for American Progress and industry analysts and

 

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(ii) our management’s knowledge of our business, markets and 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) and to their ratings rankings among viewers aged 18 to 49;

 

    references to the “last television season” refer to the period from September 22, 2014 to September 20, 2015;

 

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

 

    references to our exclusive 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 and population growth projections are sourced from U.S. Census population projections as of December 2014;

 

    voter information is 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, Pew, the Center for American Progress 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 2015. 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 events, 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 major demographic as of 2013, 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 major demographic in the U.S. as of 2013 with 60% of the U.S. Hispanic population projected to be 34 or younger in 2015; 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 broadcast television network among U.S. Hispanics, available in approximately 93% of U.S. Hispanic television households. UniMás is among the leading Spanish-language broadcast television networks. In addition, we operate nine cable networks, including the two most-watched U.S. Spanish-language cable networks, Univision Deportes and Galavisión. We own and operate 59 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 an array of websites and apps, which generate, on average, 571 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 or #2 among Spanish-language stations 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 54 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 this 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 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.”

 



 

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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 (“Adjusted 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; Adjusted OIBDA of $0.9 billion, $1.1 billion, and $1.2 billion; Adjusted 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 nine months ended September 30, 2015, we generated revenue of $2,122.5 million, Adjusted OIBDA of $976.6 million, Adjusted Free Cash Flow of $344.7 million and a net loss of $16.6 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 approximately 57 million U.S. Hispanics representing 18% 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 approximately half of the growth of the total population from 2010 to 2014. By 2030, it is estimated that there will be over 77 million U.S. Hispanics, representing nearly 22% of the total U.S. population. The estimated buying power of U.S. Hispanics is projected to increase from $1.3 trillion in 2014 to $1.7 trillion by 2019. In addition, U.S. Hispanics are expected to account for 40% of employment growth in the U.S. from 2015 to 2020

 

    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 2014, the percentage of Spanish-speaking U.S. Hispanic 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

 



 

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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 U.S. Hispanic demographic is growing in size and political importance, 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. With approximately 800,000 U.S. Hispanics turning 18 each year, it is estimated that by 2016, approximately 28 million U.S. Hispanics will be eligible to vote. We believe these trends will 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. We believe the difference between disposable income and advertising spend is the result of a lower number of advertisers targeting U.S. Hispanics as compared to those that target the overall U.S. population and lower prices for Spanish-language advertising as compared to English-language advertising. 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, approximately 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, 81.5% of U.S. Hispanic households were pay-TV subscribers. It is estimated that between 2014 and 2018 the number of U.S Hispanic pay-TV subscribers will grow approximately 12% as compared to a 2% decline in non-Hispanic pay-TV subscribers over the same period. 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 approximately 72% 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 either share content or click on shared content on 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 2015 and our score ranked us among the top-tier global brands. In addition, in terms of viewership, we have a 57% share among U.S. Hispanics based on the combined television ratings for us and the four largest English-language networks. Additionally, Univision had 12 of the top 20 primetime programs across U.S. Hispanic viewing audiences during the last 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 as of September 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 broadcast television network among U.S. Hispanics, consistently ranked first among U.S. Hispanic viewers. Additionally, our average primetime television viewer is 41 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 59 owned and operated local stations. Our television stations are ranked first in total day and primetime viewing among Spanish-language stations in 15 of 17 DMAs and 14 of 17 DMAs, respectively, in which we own and operate stations and for which such data is available. 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 29 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 550% 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

 



 

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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, excluding sports and special events, 92% of our audience consuming our content live as compared to an average of 54% of the audience of the top four English-language broadcast networks. Additionally, 95% 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 believe U.S. Hispanics are underserved by advertisers, leading to brand, volume and pricing gaps as compared to the top four English-language broadcast networks. We believe this is part of the reason we have demonstrated resiliency during recent economic cycles and ratings fluctuations, as we have been able to narrow those gaps and, as a result, our advertising revenues have increased during the three year period ended December 31, 2014, while the average advertising revenues of the top four English-language broadcast networks have declined over the same period. Because the proportionate share of advertising spend targeting U.S. Hispanics continues to be low as compared to the disposable income of U.S. Hispanics, we believe these gaps will continue to narrow in the future. This is expected to have a positive impact on our advertising revenues. In addition to our advertising revenue, we anticipate that our “must-see” content 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 carryforwards 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.

 



 

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    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 September 2015. Since 2011, our management team has increased revenue and Adjusted 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.

 



 

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    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 platforms offer a compelling way to reach Hispanic America in an effective and trusted manner. Among U.S. Hispanics, brands have stronger likability when advertised on Univision than on English-language broadcasts. Also, we deliver a 71% exclusive audience that does not tune into any other of the top 10 broadcast or cable network as compared to an average 16% exclusive audience among the top four English-language broadcast networks. Excluding sports and special events, we have a 92% live viewing audience as compared to a 54% 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, representing an increase of 29% since 2009. 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 and we may make additional digital acquisitions or investments targeting U.S. Hispanics and multicultural millennials in the future. We are investing significantly in mobile products and applications, the fastest growing platform for consuming content, particularly among our target audience, resulting in more than doubling our mobile unique visitors across all of our digital properties from March 2014 to September 2015. Our digital distribution also includes subscription streaming services. In November 2015, we launched Univision Now, a direct-to-consumer internet subscription service that allows our audience to view our content at anytime from anywhere. In February 2015, we 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 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 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

 



 

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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.

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. In addition, Televisa owns warrants exercisable for              shares of common stock. 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. 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, TPG Global, LLC and its affiliates, 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 converted into 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. On July 15, 2015, Televisa converted its debentures into the Televisa Warrants. 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

 



 

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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 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. TPG Global, LLC and its affiliates (“TPG”), is a leading global private investment firm founded in 1992 with over $74 billion of assets under management as of June 30, 2015 and offices in San Francisco, Fort Worth, Austin, Beijing, Dallas, Hong Kong, Houston, Istanbul, 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 $20 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 20. 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 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 2016 Equity Incentive Plan, which will be in effect prior to consummation of this offering;

 

    excludes              shares of Class T-1 common stock issuable upon the exercise of the Televisa Warrants;

 

    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 September 30, 2015 and for the nine months ended September 30, 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 September 30, 2015 gives effect to the increase in authorized shares which will occur prior to the consummation of this offering and the Equity Recapitalization. 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.

 

    Nine Months Ended
September 30,
    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

  $ 2,122,500      $ 2,183,700      $ 2,911,400      $ 2,627,400      $ 2,442,000   

Direct operating expenses

    652,500        773,100        1,013,100        872,200        797,900   

Selling, general and administrative expenses

    532,600        542,700        718,800        712,600        750,400   

Impairment loss

    86,200        12,300        340,500        439,400        90,400   

Restructuring, severance and related charges

    22,500        13,400        41,200        29,400        44,200   

Depreciation and amortization

    128,000        120,000        163,800        145,900        130,300   

Termination of management and technical assistance agreements

    180,000                               
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    520,700        722,200        634,000        427,900        628,800   

Other expense (income):

         

Interest expense

    414,900        440,500        587,200        618,200        573,200   

Interest income

    (7,300     (4,300     (6,000     (3,500     (200

Interest rate swap expense (income)

    200        (100     (500     (3,800       

Amortization of deferred financing costs

    11,700        11,600        15,500        14,100        8,300   

Loss on extinguishment of debt and inducement

    266,900        17,200        17,200        10,000        2,600   

Loss on equity method investments

    39,900        82,200        85,200        36,200        900   

Other

    1,200        500        600        3,100        (500
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

    (206,800     174,600        (65,200     (246,400     44,500   

(Benefit) provision for income taxes

    (190,200     35,400        (66,100     (462,400     58,900   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

    (16,600     139,200        900        216,000        (14,400

Net loss attributable to non-controlling interest

    (700     (700     (1,000     (200       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

  $ (15,900   $ 139,900      $ 1,900      $ 216,200      $ (14,400
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 



 

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    Nine Months Ended
September 30,
    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 attributable to Univision Holdings, Inc.:

   

Basic

  $ (1.46   $ 12.97      $ 0.18      $ 20.49      $ (1.36

Diluted

  $ (1.46   $ 9.34      $ 0.17      $ 14.60      $ (1.36

Weighted average shares outstanding:

   

Basic

    10,907        10,790        10,791        10,549        10,552   

Diluted

    10,907        15,772        10,910        15,442        10,552   

Other Operating Data

   

Adjusted OIBDA(1)

  $ 976,600      $ 897,500      $ 1,223,800      $ 1,078,900      $ 945,900   

Bank Credit Adjusted OIBDA(1)

  $ 1,000,200      $ 917,600      $ 1,253,800      $ 1,120,400      $ 1,003,200   

Adjusted Free Cash Flow(1)

  $ 344,700      $ 266,700      $ 335,600      $ (92,400   $ 69,700   

 

     As of
September 30,
2015
    Pro Forma      Pro Forma
As
Adjusted
 
(unaudited)    Actual       

Balance Sheet Data

       

Current assets

   $ 1,104,500      $                    $                

Total assets

     10,334,700        

Current liabilities

     604,300        

Long-term debt, including capital leases

     9,276,800        

Stockholders’ deficit

     (614,600     

 

     Nine Months Ended
September 30,
    Year Ended December 31,  
     2015     2014     2014     2013     2012  
     (unaudited)              

Cash Flow Data

        

Cash interest paid

   $ 407,300      $ 399,900      $ 589,100      $ 618,500      $ 554,400   

Capital expenditures

     (74,900     (83,000     (133,400     (179,200     (99,500

Net cash (used in) provided by operating activities

     (16,000     333,700        274,900        79,300        169,100   

Net cash used in investing activities

     (122,200     (87,300     (154,800     (335,200     (102,500

Net cash provided by (used in) financing activities

     184,200        (93,200     (107,200     263,700        (89,200

 

(1)

Adjusted OIBDA represents operating income before depreciation, amortization and certain additional adjustments to operating income. In calculating Adjusted 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 Adjusted OIBDA represents Adjusted 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. Adjusted Free Cash Flow represents Adjusted OIBDA less specified cash and non-cash items deducted in calculating Adjusted 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.” Adjusted OIBDA, Bank Credit Adjusted OIBDA and Adjusted Free Cash Flow eliminate the effects of certain items that we do not consider indicative of our core operating performance. Adjusted OIBDA, Bank Credit

 



 

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  Adjusted OIBDA and Adjusted Free Cash Flow are supplemental measures of our operating performance that are not required by, or presented in accordance with, GAAP. Adjusted OIBDA, Bank Credit Adjusted OIBDA and Adjusted 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 Adjusted OIBDA, Bank Credit Adjusted OIBDA and Adjusted Free Cash Flow may not be comparable to those or other similar metrics reported by other companies.

We believe that Adjusted OIBDA, Bank Credit Adjusted OIBDA and Adjusted Free Cash Flow provide management and investors with additional information to measure our operating performance, valuation and our potential for growth. Management uses Adjusted OIBDA, Bank Credit Adjusted OIBDA and Adjusted Free Cash Flow or comparable metrics to evaluate our operating performance, for planning and forecasting future business operations and as tools to assist our investors in determining valuation and our potential for growth. Management also uses Bank Credit Adjusted OIBDA to assess our ability to satisfy certain financial covenants contained in our senior secured credit facilities and the indentures governing our senior notes. We believe that Adjusted OIBDA, Bank Credit Adjusted OIBDA and Adjusted 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 Adjusted OIBDA, Bank Credit Adjusted OIBDA and Adjusted 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, Adjusted OIBDA, Bank Credit Adjusted OIBDA and Adjusted 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 Adjusted OIBDA, Bank Credit Adjusted OIBDA and Adjusted Free Cash Flow only supplementally. In addition, we reconcile Adjusted OIBDA, Bank Credit Adjusted OIBDA and Adjusted 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 Adjusted OIBDA, Bank Credit Adjusted OIBDA or Adjusted Free Cash Flow. By providing Adjusted OIBDA, Bank Credit Adjusted OIBDA and Adjusted 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 Adjusted OIBDA to net (loss) income attributable to Univision Holdings, Inc., which is the most directly comparable GAAP financial measure:

 

    Nine Months Ended
September 30,
    Year Ended December 31,  
    2015     2014     2014     2013     2012  
(in thousands)   (unaudited)                    

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

  $ (15,900   $ 139,900      $ 1,900      $ 216,200      $ (14,400

Net loss attributable to non-controlling interest

    (700     (700     (1,000     (200       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

    (16,600     139,200        900        216,000        (14,400

(Benefit) provision for income taxes

    (190,200     35,400        (66,100     (462,400     58,900   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

    (206,800     174,600        (65,200     (246,400     44,500   

Other expense (income):

         

Interest expense

    414,900        440,500        587,200        618,200        573,200   

Interest income

    (7,300     (4,300     (6,000     (3,500     (200

Interest rate swap expense (income)(A)

    200        (100     (500     (3,800       

Amortization of deferred financing costs

    11,700        11,600        15,500        14,100        8,300   

Loss on extinguishment of debt and inducement(B)

    266,900        17,200        17,200        10,000        2,600   

Loss on equity method investments(C)

    39,900        82,200        85,200        36,200        900   

Other

    1,200        500        600        3,100        (500
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    520,700        722,200        634,000        427,900        628,800   

Depreciation and amortization

    128,000        120,000        163,800        145,900        130,300   

Impairment loss(D)

    86,200        12,300        340,500        439,400        90,400   

Restructuring, severance and related charges(E)

    22,500        13,400        41,200        29,400        44,200   

Share-based compensation(F)

    12,200        8,400        14,900        7,800        25,700   

Asset write-offs, net

    3,200               500        3,700        1,000   

Termination of management and technical assistance agreements

    180,000                               

Management and technical assistance agreement fees(G)

    20,000        18,400        25,100        22,400        20,000   

Other adjustments to operating income(H)

    3,800        2,800        3,800        2,400        5,500   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted OIBDA (unaudited)

  $ 976,600      $ 897,500      $ 1,223,800      $ 1,078,900      $ 945,900   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

    Nine Months Ended
September 30,
    Year Ended December 31,  
    2015     2014     2014     2013     2012  
(in thousands)                              

Adjusted OIBDA

  $ 976,600      $ 897,500      $ 1,223,800      $ 1,078,900      $ 945,900   

Business optimization expense(I)

    8,500        4,600        8,900        12,300        19,900   

Unrestricted subsidiaries loss(J)

    4,600        3,200        4,700        12,600        23,400   

Contractual adjustments permitted under senior secured credit facilities(K)

    10,500        12,300        16,400        16,600        14,000   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Bank Credit Adjusted OIBDA

  $ 1,000,200      $ 917,600      $ 1,253,800      $ 1,120,400      $ 1,003,200   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 



 

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

 

    Nine Months Ended
September 30,
    Year Ended December 31,  
    2015     2014     2014     2013     2012  
(in thousands)                        

Adjusted OIBDA

  $ 976,600      $ 897,500      $ 1,223,800      $ 1,078,900      $ 945,900   

Management and technical assistance agreement fees

    (20,000     (18,400     (25,100     (22,400     (20,000

Asset write-offs, net

    (3,200            (500     (3,700     (1,000

Restructuring, severance and related charges

    (22,500     (13,400     (41,200     (29,400     (44,200

Other(L)

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

Non-cash deferred advertising revenue(M)

    (44,900     (45,100     (60,000     (60,100     (60,300

Cash interest expense(N)

    (410,400     (436,300     (581,100     (616,200     (575,600

Cash interest income

           100        100               100   

Capital expenditures

    (74,900     (83,000     (133,400     (179,200     (99,500

Cash taxes received/(paid)(O)

    (1,100     (3,800     (4,700     (8,500     (3,800

Changes in assets and liabilities:

         

Accounts receivable, net

    (55,400     (68,600     (4,100     (87,000     (40,800

Program rights and prepayments

    9,900        9,500        (9,100     (171,700     (85,800

Accounts payable and accrued liabilities

    (4,000     (19,500     3,100        32,200        24,000   

Other

    (3,900     49,200        (30,100     (25,000     32,400   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Free Cash Flow

  $ 344,700      $ 266,700      $ 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 9 to our unaudited consolidated financial statements for the nine months ended September 30, 2015 contained elsewhere in this prospectus.
(B) Loss on extinguishment of debt and inducement 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 8 to our unaudited consolidated financial statements for the nine months ended September 30, 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 6 to our unaudited consolidated financial statements for the nine months ended September 30, 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 Notes 4 and 15 to our unaudited consolidated financial statements for the nine months ended September 30, 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 nine months ended September 30, 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 13 to our unaudited consolidated financial statements for the nine months ended September 30, 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 affiliates of 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 7 to our unaudited consolidated financial statements for the nine months ended September 30, 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 Adjusted 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 Adjusted 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 beginning in 2016, 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. recently acquired DirecTV, and Charter Communications, Inc. (“Charter”) and Time Warner Cable, Inc. have entered into an agreement to merge their respective companies. In addition, Charter has entered into an agreement to acquire Bright House Networks LLC. The AT&T Inc.–DirecTV merger resulted in the combination of two of the ten largest cable and satellite MVPDs. The Time Warner Cable - Charter - Bright House merger, if approved by the FCC and the Department of Justice 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

 

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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.

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 nine months ended September 30, 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 6 to our unaudited consolidated financial statements for the nine months ended September 30, 2015 contained elsewhere in this prospectus. In addition, we will need to make additional investments in one or more of these 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 acquire or invest in complementary businesses, particularly digital businesses, as part of a growth strategy targeting U.S. Hispanics and multicultural millennials, which may expose us to certain risks.

From time to time, we may acquire or invest in complementary businesses, particularly digital businesses, as part of a growth strategy targeting U.S. Hispanics and multicultural millennials. This strategy will depend on our ability to find, consummate transactions with and successfully integrate suitable acquisition or investment targets and we may not be successful in doing so. In addition, this strategy may divert management attention, result in increased costs or require us to incur additional debt or raise additional equity capital, which could have a material adverse effect on our business, financial condition and results of operations. Our results of operations may also be impacted by gains and losses from such acquisitions or investments or from any related impairment or restructuring charges.

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

 

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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, elect to allow a third party broadcaster to share our spectrum 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.

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

 

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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 $8.1 billion at September 30, 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.

The amount of any quantified impairment must be expensed immediately as a charge to operations. During the nine months ended September 30, 2015, we recorded non-cash impairment losses of $86.2 million, which consisted primarily of $47.7 million related to the write-down of broadcast radio licenses, $8.9 million related to the write-down of property held for sale, $25.4 million related to the write-down of program rights, $4.0 million related to the write-down of a trade name, and $0.2 million related to the write-down of tangible assets. 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 an “ownership change” 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.

 

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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 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.

 

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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 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. Given the ownership of Televisa and certain other holders at the time of this offering, non-U.S. citizen investors buying our Class A common stock in this offering or in the open market after this offering will likely be subject to these provisions. 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

 

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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 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

 

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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 (“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. On September 2, 2015, the FCC issued a Notice of Proposed Rulemaking (“NPRM”) seeking comment on whether the FCC should make changes to its rules requiring that commercial broadcast television stations and MVPDs negotiate in “good faith” for the retransmission by MVPDs of local television signals. Under the Communications Act, MVPDs may not retransmit a commercial broadcast television station’s signal without the station’s consent (unless the station has elected “must-carry” status). Stations and MVPDs are required to negotiate for retransmission consent in “good faith.” The FCC’s rules implementing the good faith requirement identify certain practices that presumptively violate the obligation to negotiate in good faith. The FCC also may consider whether other practices violate the good faith requirement under the “totality of the circumstances.” The NPRM was issued in response to Congress’s directive in STELAR that the FCC commence a review of the “totality of the circumstances” test. The NPRM seeks comment generally on the state of the retransmission consent market and the effectiveness of the FCC’s existing rules. Although the NPRM does not propose any changes to the existing rules, it asks whether several practices should be considered consistent with, or a violation of, the good faith requirement. Among a number of other matters, the NPRM seeks comment on whether networks negotiating retransmission consent on behalf of their third party affiliates, or holding approval rights over their affiliates’ retransmission consent agreements, should be deemed to violate the good faith negotiation requirement. In a statement released on August 12, 2015, the Chairman of the FCC indicated that the FCC will consider the elimination of the “network non-duplication” and “syndicated exclusivity” rules, which afford television stations certain rights to enforce the territorial exclusivity provisions in their network affiliation and syndicated programming agreements. We cannot predict the outcome of pending or future rulemakings on these matters.

 

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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 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 on August 11, 2015, it announced that the auction will begin on March 29, 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.

 

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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 September 30, 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;

 

    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.

 

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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;

 

    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

 

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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 September 30, 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 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

 

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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 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, subject to applicable laws and regulations and certain contractual limitations. On July 15, 2015, Televisa converted its debentures into the Televisa Warrants. 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

 

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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.

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.”

 

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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 Class T-1 common stock are issuable upon conversion of the Televisa Warrants. In addition, while immediately prior to this offering Televisa holds 10% of our common stock, which is the maximum percentage of our outstanding common stock Televisa may own (the “Maximum Equity Percentage”) pursuant to the Stockholders Agreement (as defined and discussed in “Certain Relationships and Related Party Transactions—Stockholder Arrangements—Stockholders Agreement”), upon the issuance of Class A common stock pursuant to this offering, Televisa’s direct ownership percentage will fall below the Maximum Equity Percentage and Televisa will be able to convert Televisa Warrants into as many as              additional shares of our Class T-1 common stock without exceeding the Maximum Equity Percentage. 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 any two of Morgan Stanley & Co. LLC, Goldman Sachs & Co. and Deutsche Bank Securities Inc., 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.

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.”

 

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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 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.

 

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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, 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 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.

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.

 

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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 that 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, financing 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;

 

    our success in acquiring and integrating complementary businesses;

 

    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 amended and restated certificate of incorporation, our debt instruments and other agreements;

 

    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 September 30, 2015:

 

    on an actual basis;

 

    on a pro forma basis to give effect to the increase in authorized shares which will occur prior to the consummation of this offering and 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 September 30, 2015  
     Actual      Pro
Forma
     Pro
Forma As
Adjusted(1)
 
(in millions, except share data) (unaudited)                     

Cash and cash equivalents

   $ 102.8       $         $                
  

 

 

    

 

 

    

 

 

 

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

        

Senior secured credit facilities:

        

Senior secured revolving credit facility(2)

   $       $         $     

Senior secured term loan facilities

     4,534.7         
  

 

 

    

 

 

    

 

 

 

Senior secured credit facilities

     4,534.7         

8.5% Senior notes due 2021

     815.0         

6.75% Senior secured notes due 2022

     1,107.9         

5.125% Senior secured notes due 2023

     1,200.0         

5.125% Senior secured notes due 2025

     1,560.0         

Accounts receivable sale facility

     120.0         

Existing capital leases

     80.9         
  

 

 

    

 

 

    

 

 

 

Total debt

     9,418.5         
  

 

 

    

 

 

    

 

 

 

 

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     As of September 30, 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 6,515,517 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 1,110,382 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

     5,466.1        

Accumulated deficit

     (6,068.3     

Accumulated other comprehensive loss

     (13.5     
  

 

 

   

 

 

    

 

 

 

Total Univision Holdings, Inc. stockholders’ deficit

     (615.7     
  

 

 

   

 

 

    

 

 

 

Non-controlling interest

     1.1        
  

 

 

   

 

 

    

 

 

 

Total stockholders’ deficit

     (614.6     
  

 

 

   

 

 

    

 

 

 

Total capitalization

   $ 8,803.9      $                    $              
  

 

 

   

 

 

    

 

 

 

 

(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.

 

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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 September 30, 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 September 30, 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 September 30, 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 September 30, 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 September 30, 2015 and for the nine months ended September 30, 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.

 

    Nine Months
Ended September 30,
    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

  $ 2,122,500      $ 2,183,700      $ 2,911,400      $ 2,627,400      $ 2,442,000      $ 2,273,500      $ 2,245,200   

Direct operating expenses

    652,500        773,100        1,013,100        872,200        797,900        802,000        791,400   

Selling, general and administrative expenses

    532,600        542,700        718,800        712,600        750,400        621,900        606,900   

Impairment loss

    86,200        12,300        340,500        439,400        90,400        14,200        15,800   

Restructuring, severance and related charges

    22,500        13,400        41,200        29,400        44,200        37,100        13,100   

Televisa settlement and related charges

                                       1,300        452,000   

Depreciation and amortization

    128,000        120,000        163,800        145,900        130,300        124,900        117,800   

Termination of management and technical assistance agreements

    180,000                                             
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    520,700        722,200        634,000        427,900        628,800        672,100        248,200   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other expense (income):

             

Interest expense

    414,900        440,500        587,200        618,200        573,200        531,300        585,500   

Interest income

    (7,300     (4,300     (6,000     (3,500     (200     (2,500     (10,500

Interest rate swap expense (income)

    200        (100     (500     (3,800                   (20,600

Amortization of deferred financing costs

    11,700        11,600        15,500        14,100        8,300        6,300        33,900   

Gain on investments

                                              (6,700

Loss on extinguishment of debt and inducement

    266,900        17,200        17,200        10,000        2,600        178,500        195,100   

Loss on equity method investments

    39,900        82,200        85,200        36,200        900                 

Other

    1,200        500        600        3,100        (500     (4,300     (2,600
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

    (206,800     174,600        (65,200     (246,400     44,500        (37,200     (525,900

(Benefit) provision for income taxes

    (190,200     35,400        (66,100     (462,400     58,900        35,200        30,100   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income from continuing operations

    (16,600     139,200        900        216,000        (14,400     (72,400     (556,000

Loss from discontinued operation, net of income taxes

                                              (400
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

    (16,600     139,200      $ 900      $ 216,000      $ (14,400   $ (72,400   $ (556,400

Net loss attributable to non-controlling interest

    (700     (700     (1,000     (200                     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

  $ (15,900   $ 139,900      $ 1,900      $ 216,200      $ (14,400   $ (72,400   $ (556,400
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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    Nine Months
Ended September 30,
    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

    (20,200     (23,400     (37,400     43,800        (15,000     (45,100     (47,000

Amortization of unrealized loss on hedging activities

    8,800        8,900        11,800        19,600                      33,000   

Unrealized gain on available for sale securities

    34,300        40,100        24,300        12,200                        

Currency translation adjustment

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

    21,800        25,400        (2,000     75,800        (15,100     (46,600     (14,100
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

    5,200        164,600      $ (1,100   $ 291,800      $ (29,500   $ (119,000   $ (570,500

Comprehensive loss attributable to the non-controlling interest

    (700     (700     (1,000     (200                     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

  $ 5,900      $ 165,300      $ (100   $ 292,000      $ (29,500   $ (119,000   $ (570,500
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

             

Basic

  $ (1.46   $ 12.97      $ 0.18      $ 20.49      $ (1.36   $ (6.87   $ (55.40

Diluted

  $ (1.46   $ 9.34      $ 0.17      $ 14.60      $ (1.36   $ (6.87   $ (55.40

Basic weighted average shares outstanding

    10,907        10,790        10,791        10,549        10,552        10,546        10,044   

Diluted weighted average shares outstanding

    10,907        15,772        10,910        15,442        10,552        10,546        10,044   

 

     Nine Months
Ended September 30,
    Year Ended December 31,  
(in thousands)    2015     2014     2013     2012     2011     2010  
     (unaudited)                                

Balance Sheet Data (at period end):

            

Current assets

   $ 1,104,500      $ 976,700      $ 972,200      $ 695,500      $ 655,700      $ 1,893,700   

Total assets

     10,334,700        10,386,300        10,584,700        10,346,700        10,311,400        11,569,500   

Current liabilities

     604,300        579,900        651,600        687,700        679,000        1,846,500   

Total liabilities

     10,949,300        12,174,000        12,504,500        12,567,600        12,528,100        13,687,100   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Long-term debt, including capital leases

     9,276,800        10,320,500        10,491,100        10,083,000        10,065,800        9,992,900   

Total Univision Holdings Inc.’s stockholders’ deficit

     (615,700     (1,788,000     (1,921,100     (2,220,900     (2,216,700     (2,117,600

Stockholders’ deficit:

     (614,600     (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 2015. 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 events, 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 broadcast television network among U.S. Hispanics, available in approximately 93% of U.S. Hispanic television households. UniMás is among the leading Spanish-language broadcast television networks. In addition, we operate nine cable networks, including the two most-watched U.S. Spanish-language cable networks, Univision Deportes

 

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and Galavisión. We own and operate 59 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 an array of websites and apps, which generate, on average, 571 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 or #2 among Spanish-language stations 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 54 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 Adjusted OIBDA for each of our segments for the periods presented.

 

(in thousands)    Nine Months Ended
September 30,
    Year Ended December 31,  
     2015     2014     2014     2013     2012  
     (unaudited)                    

Revenue

          

Media Networks

   $ 1,912,100      $ 1,956,200      $ 2,601,800      $ 2,292,400      $ 2,103,500   

Radio

     210,400        227,500        309,600        335,000        338,500   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated

   $ 2,122,500      $ 2,183,700      $ 2,911,400      $ 2,627,400      $ 2,442,000   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted OIBDA

          

Media Networks

   $ 982,700      $ 905,600      $ 1,225,500      $ 1,063,000      $ 944,400   

Radio

     65,000        62,600        90,300        107,900        97,000   

Corporate

     (71,100     (70,700     (92,000     (92,000     (95,500
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated

   $ 976,600      $ 897,500      $ 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, Adjusted OIBDA, Bank Credit Adjusted OIBDA, Adjusted 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.

 

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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.

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. In addition, advertising revenues may grow as brand, volume and pricing gaps between advertising targeting U.S. Hispanics and advertising targeting the overall U.S. population narrow. Advertising revenue is subject to seasonality, market-based variations, general economic conditions, political cycles and advocacy campaigns. In addition, major soccer tournaments, including the World Cup and the Gold Cup, generate incremental revenue in the periods in which the programming airs from advertisers who purchase both major soccer and other advertising, and result in such advertisers shifting the timing for their purchase of other advertising from periods within the year in which the major soccer programming does not air.

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. These retransmission consent arrangements are renewed periodically and we have a significant number of related contract negotiations scheduled for the next few years, commencing in 2016. As we negotiate new contracts, we anticipate that our retransmission fees will increase and make up a larger percentage of our revenues. We also receive subscription revenue related to fees for our digital content provided on an authenticated basis.

 

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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. From time to time, we enter into transactions involving our spectrum, and in the third quarter of 2015, we entered into an agreement with a major mobile telecommunications company consenting to the concurrent use of adjacent spectrum in one of our existing markets in exchange for minimum aggregate payments of $26.0 million.

Adjusted OIBDA

Adjusted OIBDA represents operating income before depreciation, amortization and certain additional adjustments to operating income. In calculating Adjusted 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 Adjusted OIBDA or comparable metrics to evaluate our operating performance, for planning and forecasting future business operations and as a tool to assist our investors in determining valuation and our potential for growth. We believe that Adjusted 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 Adjusted OIBDA and a reconciliation of Adjusted OIBDA to net (loss) income attributable to Univision Holdings, Inc., see “Summary—Summary Historical Financial and Other Data.”

Bank Credit Adjusted OIBDA

Bank Credit Adjusted OIBDA represents Adjusted 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 Notes 9 and 18 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 Adjusted OIBDA is calculated and how the calculation differs from the definition of “EBITDA” in our senior secured credit facilities. Management uses Bank Credit Adjusted OIBDA to evaluate our operating performance, for planning and forecasting future business operations, as a tool to assist our investors in determining valuation and our potential for growth and to assess our ability to satisfy certain financial covenants contained in our senior secured credit facilities and the indentures governing our senior notes. For important information about Bank Credit Adjusted OIBDA and a reconciliation of Bank Credit Adjusted OIBDA to net (loss) income attributable to Univision Holdings, Inc., see “Summary—Summary Historical Financial and Other Data.”

Adjusted Free Cash Flow

Adjusted Free Cash Flow represents Adjusted OIBDA less specified cash and non-cash items deducted in calculating Adjusted OIBDA and less capital expenditures plus the net change in working capital. Management uses Adjusted Free Cash Flow to evaluate our operating performance, for planning and forecasting future business operations and as a tool to assist our investors in determining valuation and our potential for growth. We believe that Adjusted 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 Adjusted Free Cash

 

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Flow and a reconciliation of Adjusted 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 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 Note 7 to our unaudited consolidated financial statements for the nine months ended September 30, 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.

Upon consummation of this offering, we will no longer be incurring any management fees. Under the management agreement among us, our indirect, wholly-owned subsidiary Univision Communications Inc. (“UCI”) and affiliates of the Investors (the “Sponsor Management Agreement”), we incurred a management fee of $12.6 million for the nine months ended September 30, 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 $0.9 million for the nine months ended September 30, 2015 and $1.0 million, $0.8 million and $1.0 million for the years ended December 31, 2014, 2013 and 2012, respectively. Under the technical assistance agreement with Televisa, we incurred fees of $7.4 million for the nine months ended September 30, 2015 and $8.8 million, $7.8 million and $7.0 million for the years ended December 31, 2014, 2013 and 2012, respectively. We do not anticipate incurring additional selling, general and administrative expenses, including increased employee-related costs, associated with replacing the services provided under such agreements other than to the extent such costs are included in additional public company expenses referenced below.

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. In addition, if we need to replace services provided under the Sponsor Management Agreement or technical assistance agreement in future periods, we may incur additional expenses in such periods. See “Risk Factors—We will incur increased costs and obligations as a result of being a public company” and “Certain Relationships and Related Person Transactions—Stockholder Arrangements—Sponsor Management Agreement.”

 

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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 Notes 4 and 15 to our unaudited consolidated financial statements for the nine months ended September 30, 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 nine months ended September 30, 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 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. See Note 9 to our audited consolidated financial statements for the year ended December 31, 2014 and Note 8 to our unaudited consolidated financial statements for the nine months ended September 30, 2015 included elsewhere in this prospectus. In addition, in connection with the conversion of our convertible debentures held by Televisa for warrants, and the one-time payment made to induce the conversion on July 15, 2015, we recorded a $135.1 million expense in the third quarter of 2015.

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 the Chairman of our board of directors. In compensation for the consulting services, equity units in various limited liability companies that hold a portion of our common stock on behalf of the Investors and Televisa were granted to that

 

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entity, entitling the entity to payments upon defined liquidation events based on the appreciation in the Investors’ and Televisa’s 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 13 to our unaudited consolidated financial statements for the nine months ended September 30, 2015 included elsewhere in this prospectus for information related to our share-based compensation. Following the consummation of this offering, we expect to issue equity incentive awards at a higher rate than we have historically, which would result in an increase of non-cash share-based compensation expense. See “Executive and Director Compensation—Elements of Compensation—Long-Term Equity Incentive Awards.”

Benefit (Provision) for Income Tax

Our annual effective tax rate differs from the statutory rate due to a number of factors, including permanent tax differences, changes in our valuation allowance based in part on the realization of capital loss carryforwards and net operating loss carryforwards. As of December 31, 2014, we had approximately $1.6 billion in net operating loss carryforwards. We anticipate our effective tax rate to be (92%) in 2015. Beginning in 2016 we anticipate our effective tax rate to be in the range of 36-38%. See Note 1 to our audited consolidated financial statements for the year ended December 31, 2014.

Results of Operations

Overview

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

 

    Nine Months Ended
September 30,
    Year Ended December 31,  
    2015     2014     2014     2013     2012  
(in thousands)   (unaudited)                    

Revenue

  $ 2,122,500      $ 2,183,700      $ 2,911,400      $ 2,627,400      $ 2,442,000   

Direct operating expenses:

         

Programming excluding variable program license fee

    380,000        418,400        540,500        438,200        388,400   

Variable program license fee

    208,500        285,000        380,400        338,100        311,100   

Other

    64,000        69,700        92,200        95,900        98,400   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    652,500        773,100        1,013,100        872,200        797,900   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Selling, general and administrative expenses

    532,600        542,700        718,800        712,600        750,400   

Impairment loss

    86,200        12,300        340,500        439,400        90,400   

Restructuring, severance and related charges

    22,500        13,400        41,200        29,400        44,200   

Depreciation and amortization

    128,000        120,000        163,800        145,900        130,300   

Termination of management and technical assistance agreements

    180,000                               
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    520,700        722,200        634,000        427,900        628,800   

Other expense (income):

         

Interest expense

    414,900        440,500        587,200        618,200        573,200   

Interest income

    (7,300     (4,300     (6,000     (3,500     (200

Interest rate swap expense (income)

    200        (100     (500     (3,800       

Amortization of deferred financing costs

    11,700        11,600        15,500        14,100        8,300   

Loss on extinguishment of debt and inducement

    266,900        17,200        17,200        10,000        2,600   

Loss on equity method investments

    39,900        82,200        85,200        36,200        900   

Other

    1,200        500        600        3,100        (500
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

    (206,800     174,600        (65,200     (246,400     44,500   

(Benefit) provision for income taxes

    (190,200     35,400        (66,100     (462,400     58,900   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

    (16,600     139,200        900        216,000        (14,400

Net loss attributable to non-controlling interest

    (700     (700     (1,000     (200       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

  $ (15,900   $ 139,900      $ 1,900      $ 216,200      $ (14,400
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Nine Months Ended September 30, 2015 Compared to Nine Months Ended September 30, 2014

In comparing our results of operations for the nine months ended September 30, 2015 (“2015”) with the nine months ended September 30, 2014 (“2014”), 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 2015 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 net advertising revenue of $174.3 million, and consolidated estimated World Cup operating expenses of $152.3 million. In 2014, the estimated incremental impact of the 2014 World Cup tournament was an increase of $21.9 million in operating income, Adjusted OIBDA and Bank Credit Adjusted OIBDA.

 

    In 2015, we had revenues that did not exist in 2014 associated with the airing of the 2015 Gold Cup soccer tournament. For the nine months ended September 30, 2015, we had consolidated estimated incremental Gold Cup advertising revenue of $22.1 million and consolidated estimated Gold Cup operating expenses of $26.2 million. For the nine months ended September 30, 2015, the estimated incremental impact of the 2015 Gold Cup tournament was a loss of $7.4 million in operating income, Adjusted OIBDA and Bank Credit Adjusted OIBDA.

 

    In 2015, we had content licensing revenue that did not exist in 2014 consisting of $30.3 million recognized in connection with the final satisfaction of a licensing agreement.

 

    In 2015, we had other revenue that did not exist in 2014 associated with an agreement with a major mobile telecommunications company consenting to the concurrent use of adjacent spectrum in one of our existing markets of $26.0 million.

 

    In 2015, we had expenses that did not exist in 2014 associated with the termination effective March 31, 2015 of the Sponsor Management Agreement and the technical assistance agreement with Televisa. Pursuant to such termination agreements, we paid 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, we recorded $86.2 million in non-cash impairment loss, which is comprised of $54.1 million in the Radio segment, related to the write-downs of broadcast licenses, trade name, and property held for sale, and $32.1 million in the Media Networks segment related to the write-downs of property held for sale, program rights and tangible assets. In 2014, we recorded $12.3 million in non-cash impairment loss in the Media Networks segment related to the write-downs of property held for sale and program rights.

 

    In 2015 and 2014, we recorded $22.5 million and $13.4 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 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 and inducement of $266.9 million and $17.2 million, respectively. The loss in 2015 includes the one-time payment of $135.1 million to Televisa to induce the conversion of its $1.125 billion of our debentures. The loss in 2015 and 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.

Revenue. Revenue was $2,122.5 million in 2015 compared to $2,183.7 million in 2014, a decrease of $61.2 million or 2.8%, which reflected a decrease of 2.3% in the Media Networks segment and a decrease of 7.5% in the Radio segment.

 

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Advertising revenue was $1,402.2 million in 2015 compared to $1,599.3 million in 2014, a decrease of $197.1 million or 12.3%. Advertising revenue in 2015 included (i) political/advocacy advertising revenue of $28.1 million and (ii) estimated incremental Gold Cup advertising revenue of $22.1 million. Advertising revenue in 2014 included (i) political/advocacy advertising revenue of $50.8 million and (ii) estimated incremental World Cup advertising revenue of $174.3 million. Non-advertising revenue (which was primarily comprised of subscriber fee revenue, content licensing revenue and other revenue) was $720.3 million in 2015 compared to $584.4 million in 2014, an increase of $135.9 million or 23.3% primarily due to an increase in subscriber fees of $56.9 million primarily due to contractual rate increases and additional distribution of the Univision Deportes network, content licensing revenue of $44.8 million, primarily due to $30.3 million recognized in connection with the final satisfaction of a licensing agreement and an increase in other revenue of $34.2 million primarily due to revenue associated with the concurrent use of adjacent spectrum in one of our existing markets of $26.0 million. Subscriber fee revenue was $530.6 million in 2015 compared to $473.7 million in 2014.

Media Networks segment revenues were $1,912.1 million in 2015 compared to $1,956.2 million in 2014, a decrease of $44.1 million or 2.3%. Advertising revenue was $1,202.7 million in 2015 as compared to $1,386.0 million in 2014, a decrease of $183.3 million or 13.2%. Advertising revenue in 2015 included (i) political/advocacy advertising revenue of $21.3 million and (ii) estimated incremental Gold Cup advertising revenue of $22.1 million. Advertising revenue in 2014 included (i) political/advocacy advertising revenue of $40.2 million and (ii) estimated incremental World Cup advertising revenue of $181.8 million. Advertising revenue for our television platforms was $1,155.5 million in 2015 compared to $1,322.3 million in 2014, a decrease of $166.8 million or 12.6%. Advertising revenue in 2015 for our television platforms included (i) political/advocacy advertising revenue of $20.1 million and (ii) estimated incremental Gold Cup advertising revenue of $20.2 million. Advertising revenue in 2014 for our television platforms included (i) political/advocacy advertising revenue of $38.1 million and (ii) estimated incremental World Cup advertising revenue of $163.4 million. Advertising revenue for the Media Networks digital platform was $47.2 million in 2015 compared to $63.7 million in 2014, a decrease of $16.5 million. Advertising revenue in 2015 for the Media Networks digital platform included (i) political/advocacy revenue of $1.2 million and (ii) estimated incremental Gold Cup advertising revenue $1.8 million. Advertising revenue in 2014 for the Media Networks digital platform included (i) political/advocacy revenue of $2.1 million and (ii) estimated incremental World Cup advertising revenue of $18.4 million. Non-advertising revenue (which was primarily comprised of subscriber fee revenue, content licensing revenue and other revenue) in the Media Networks segment was $709.4 million in 2015 compared to $570.2 million in 2014, an increase of $139.2 million or 24.4% primarily due to an increase in subscriber fee revenue of $56.9 million, content licensing revenue of $44.8 million, primarily due to $30.3 million recognized in connection with the final satisfaction of a licensing agreement and an increase in other revenue of $37.5 million primarily due to revenue associated with the concurrent use of adjacent spectrum in one of our existing markets of $26.0 million.

Radio segment revenues were $210.4 million in 2015 compared to $227.5 million in 2014, a decrease of $17.1 million or 7.5%. Advertising revenue was $199.5 million in 2015 as compared to $213.3 million in 2014, a decrease of $13.8 million or 6.5%, primarily due to advertising market declines. Advertising revenue in 2015 and 2014 included political/advocacy advertising revenue of $6.8 million and $10.6 million, respectively. Advertising revenue in 2014 included the impact of estimated incremental World Cup advertising revenue of $7.5 million shifting from Univision’s radio business to Univision’s television business. Non-advertising revenue in the Radio segment (which was primarily comprised of other revenue) was $10.9 million in 2015 compared to $14.2 million in 2014, a decrease of $3.3 million or 23.2%.

Direct operating expenses – programming excluding variable program license fees. Programming expenses excluding variable program license fees decreased to $380.0 million in 2015 from $418.4 million in 2014, a decrease of $38.4 million or 9.2%. As a percentage of revenue, our programming expenses excluding variable program license fees decreased to 17.9% in 2015 from 19.2% in 2014. Media Networks segment programming expenses excluding variable program license fees were $341.3 million in 2015 compared to $378.4 million in 2014, a decrease of $37.1 million or 9.8%, primarily due to a decrease of $116.6 million related to 2014 World

 

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Cup programming costs that did not reoccur in 2015 and other programming cost decreases of $0.7 million, partially offset by an increase in entertainment programming costs of $34.4 million, $26.2 million related to 2015 Gold Cup programming costs that did not occur in 2014 and an increase in sports programming costs of $19.6 million. Radio segment programming expenses were $38.7 million in 2015 and $40.0 million in 2014, a decrease of $1.3 million or 3.2%, 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 $208.5 million in 2015 from $285.0 million in 2014, a decrease of $76.5 million or 26.8% primarily as a result of the amendment to the Venevision PLA and lower revenue. On a consolidated basis, as a percentage of revenue, variable program license fees decreased to 9.8% in 2015 from 13.1% in 2014.

Direct operating expenses – other. Other direct operating expenses decreased to $64.0 million in 2015 from $69.7 million in 2014, a decrease of $5.7 million or 8.2%. As a percentage of revenue, our other direct operating expenses decreased to 3.0% in 2015 from 3.2% in 2014. Media Networks segment other direct operating expenses were $52.9 million in 2015 compared to $57.2 million in 2014, a decrease of $4.3 million or 7.5%, primarily due to lower technical related costs. Radio segment other direct operating expenses were $11.1 million in 2015 and $12.5 million in 2014, a decrease of $1.4 million primarily due to lower technical related costs.

Selling, general and administrative expenses. Selling, general and administrative expenses decreased to $532.6 million in 2015 from $542.7 million in 2014, a decrease of $10.1 million or 1.9%. Media Networks segment selling, general and administrative expenses were $333.0 million in 2015 compared to $334.9 million in 2014, a decrease of $1.9 million or 0.6%. Radio segment had selling, general and administrative expenses of $94.9 million in 2015 compared to $112.9 million in 2014, a decrease of $18.0 million or 15.9% primarily due to employee related sales costs. Corporate selling, general and administrative expenses were $104.7 million in 2015 compared to $94.9 million in 2014, an increase of $9.8 million or 10.3%. On a consolidated basis, as a percentage of revenue, our selling, general and administrative expenses was 25.1% in 2015 and 24.9% in 2014.

Impairment loss. In 2015, we recorded non-cash impairment losses of $86.2 million which includes $54.1 million in the Radio segment and $32.1 million in the Media Networks segment. In the Radio segment, we recorded $47.7 million related to the write-down of broadcast licenses, $4.0 million related to the write-down of a trade name and $2.4 million related to the write-down of property held for sale. The write-downs of broadcast licenses and a trade name in the Radio segment are based on a review of market conditions and management’s assessment of long-term growth rates. In the Media Networks segment, we recorded $25.4 million related to the write-down of program rights, $6.5 million related to the write-down of property held for sale and $0.2 million related to the write-down of tangible assets. The loss in 2014 of $12.3 million relates to the Media Networks segment and is comprised of $7.0 million related to the write-down of property held for sale and $5.3 million related to the write-down of program rights.

Restructuring, severance and related charges. In 2015, we incurred restructuring, severance and related charges in the amount of $22.5 million. This amount includes a $19.5 million charge related to broader-based cost-saving restructuring initiatives and $3.0 million related to severance charges for individual employees. The severance charge of $3.0 million is related to miscellaneous severance agreements primarily with corporate employees. The restructuring charge of $19.5 million consists of a $8.9 million charge in the Media Networks segment, a $7.1 million charge in the Radio segment and $3.5 million of corporate expenses, related to employee termination benefits, costs related to consolidating offices and other contract terminations. The $22.5 million charge recognized during the period includes $15.8 million resulting from restructuring activities that were initiated in 2012 and $3.7 million resulting from the restructuring activities to improve performance, collaboration and operational efficiencies across its local media platforms initiated in the third quarter of 2014. In 2014, we incurred restructuring, severance and related charges in the amount of $13.4 million. This amount includes a $13.8 million charge related to broader-based cost-saving restructuring initiatives, partially offset by a $0.4 million benefit related to the adjustment of severance charges for individual employees. The severance

 

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benefit of $0.4 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 $13.8 million consists of a $7.2 million charge in the Media Networks segment, a $6.4 million charge in the Radio segment and $0.2 million of corporate expenses, related to employee termination benefits, costs related to consolidating offices, and other contract terminations. See Note 3 to our unaudited consolidated financial statements for the nine months ended September 30, 2015 included elsewhere in this prospectus.

Depreciation and amortization. Depreciation and amortization increased to $128.0 million in 2015 from $120.0 million in 2014, an increase of $8.0 million or 6.7%. Our depreciation expense increased to $86.3 million in 2015 from $76.3 million in 2014, an increase of $10.0 million, primarily related to depreciation on newly acquired assets. We had amortization of intangible assets of $41.7 million in 2015 and $43.7 million in 2014. The decrease is primarily the result of advertising relationships associated with our digital platforms becoming fully amortized during the first quarter of 2015. Depreciation and amortization expense for the Media Networks segment increased by $2.4 million to $104.6 million in 2015 from $102.2 million in 2014. Depreciation and amortization expense for the Radio segment increased by $0.8 million to $6.6 million in 2015 from $5.8 million in 2014. Corporate depreciation expense increased by $4.8 million to $16.8 million in 2015 from $12.0 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 $520.7 million in 2015 and $722.2 million in 2014, a decrease of $201.5 million. The Media Networks segment had operating income of $830.6 million in 2015 and $779.2 million in 2014, a decrease of $51.4 million. The Radio segment had operating loss of $2.2 million in 2015 and operating income of $50.0 million in 2014, a decrease in operating income of $52.2 million. Corporate operating loss was $307.7 million and $107.0 million in 2015 and 2014, respectively, an increase in loss of $200.7 million. Contributing to the decrease in Radio segment operating income was the $54.1 million impairment expense, discussed above. Contributing to the increase in corporate operating loss was the $180.0 million expense associated with the termination of the management and technical assistance agreements, discussed above. The impact of revenue recognition related to certain content licensing agreements contributed $43.7 million in 2015, primarily due to the $26.1 million impact of the revenue recognized in connection with the final satisfaction of a licensing agreement and $5.1 million in 2014. Political/advocacy advertising contributed $22.9 million in 2015 and $43.1 million in 2014. We had other revenue of $25.3 million in 2015, associated with the concurrent use of adjacent spectrum in one of our existing markets. The estimated incremental impact of the Gold Cup tournament was a loss of $7.4 million in 2015 and the estimated incremental impact of the World Cup tournament contributed $21.9 million in 2014.

Interest expense. Interest expense decreased to $414.9 million in 2015 from $440.5 million in 2014, a decrease of $25.6 million. The decrease is primarily due to lower interest expense on the senior notes and variable rate debt as a result of refinancing transactions in 2014 and 2015 as well as lower interest expense on our debentures as a result of their conversion in 2015. See Notes 8 and 9 to our unaudited consolidated financial statements for the nine months ended September 30, 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 $7.3 million and $4.3 million, respectively, an increase of $3.0 million, primarily related to investments in convertible debt with El Rey.

Interest rate swap expense (income). In 2015, 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 $0.2 million, related to interest expense, partially offset by net fair value adjustments. 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 income of approximately $0.1 million, related to net fair value adjustments, partially offset by interest expense. See Note 9 to our unaudited consolidated financial statements for the nine months ended September 30, 2015 included elsewhere in this prospectus.

 

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Amortization of deferred financing costs. Amortization of deferred financing costs was $11.7 million in 2015 and $11.6 million in 2014. See Note 8 to our unaudited consolidated financial statements for the nine months ended September 30, 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 and inducement. In 2015, we recorded a loss of $266.9 million as a result of our refinancing transactions and the one-time payment to Televisa to induce the conversion of the debentures. In 2014, we recorded a loss on the extinguishment of debt in the amount of $17.2 million as a result of our refinancing transactions. See Note 8 to our unaudited consolidated financial statements for the nine months ended September 30, 2015 included elsewhere in this prospectus.

Loss on equity method investments. In 2015, we recorded a loss on equity method investments of $39.9 million, primarily related to losses at the two early stage businesses, El Rey and Fusion, of $21.8 million and $17.8 million, respectively. In 2014, we recorded a loss on equity method investments of $82.2 million, primarily related to a loss of $70.3 million for El Rey and a loss of $11.9 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 6 to our unaudited consolidated financial statements for the nine months ended September 30, 2015 included elsewhere in this prospectus.

(Benefit) provision for income taxes. In 2015, we reported an income tax benefit of $190.2 million based on the pre-tax loss for the nine months ended September 30, 2015 multiplied by the estimated annual effective tax rate adjusted for discrete items. In 2014, we reported an income tax provision of $35.4 million based on the pre-tax income for the nine months ended September 30, 2014 multiplied by the estimated annual effective tax rate adjusted for discrete items. Our current estimated effective tax rate as of September 30, 2015 was approximately (92%), which differs from the statutory rate primarily due to permanent tax differences and discrete items, partially offset by the impact of state and local taxes. Our estimated effective tax rate as of September 30, 2014 was approximately 20%, which differs from the statutory rate primarily due to permanent tax differences and discrete items, including a reduction in the liability for unrecognized tax benefits, partially offset by the impact of state and local taxes.

Net (loss) income. As a result of the above factors, we reported a net loss of $16.6 million in 2015 and net income of $139.2 million in 2014.

Net loss attributable to non-controlling interest. Net loss attributable to non-controlling interest was $0.7 million in 2015 and 2014.

Net (loss) income attributable to Univision Holdings, Inc. We reported a net loss attributable to Univision Holdings, Inc. of $15.9 million in 2015 and net income attributable to Univision Holdings, Inc. of $139.9 million in 2014.

Adjusted OIBDA and Bank Credit Adjusted OIBDA. Adjusted OIBDA increased to $976.6 million in 2015 from $897.5 million in 2014, an increase of $79.1 million or 8.8% and Bank Credit Adjusted OIBDA increased to $1,000.2 million in 2015 from 917.6 million in 2014, an increase of $82.6 million or 9.0%. See Note 15 to our unaudited consolidated financial statements for the nine months ended September 30, 2015 included elsewhere in this prospectus. The increase results from the factors discussed in the “Overview” above and other factors, as noted above. On a consolidated basis, as a percentage of revenue, our Adjusted OIBDA increased to 46.0% in 2015 from 41.1% in 2014 and Bank Credit Adjusted OIBDA increased to 47.1% in 2015 from 42.0% in 2014. The impact of revenue recognition related to certain content licensing agreements contributed $43.7 million in 2015, primarily due to the $26.1 million impact of the revenue recognized in connection with the final satisfaction of a licensing agreement and $5.1 million in 2014. Political/advocacy advertising contributed $22.9 million in 2015 and $43.1 million in 2014. We had other revenue of $25.3 million in 2015, associated with the

 

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concurrent use of adjacent spectrum in one of our existing markets. The estimated incremental impact of the Gold Cup tournament was a loss of $7.4 million in 2015 and the estimated incremental impact of the World Cup tournament contributed $21.9 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 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, Adjusted OIBDA and Bank Credit Adjusted 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.

 

    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.

 

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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 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.

 

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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 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

 

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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 $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.

 

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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 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 carryforwards 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.

 

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Adjusted OIBDA and Bank Credit Adjusted OIBDA. As a result of the factors discussed above, Adjusted 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 Adjusted 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 Adjusted OIBDA increased to 42.0% in 2014 from 41.1% in 2013 and Bank Credit Adjusted 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 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-

 

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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 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.

 

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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.

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

 

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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 $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.

 

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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 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.

Adjusted OIBDA and Bank Credit Adjusted OIBDA. As a result of the factors discussed above, Adjusted 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 Adjusted 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 Adjusted OIBDA increased to 41.1% in 2013 from 38.7% in 2012 and Bank Credit Adjusted 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.

Quarterly Results

The following table sets forth our historical unaudited quarterly consolidated statement of operations data for the first three quarters of 2015 and each of the fiscal quarters of 2014 and 2013. This unaudited quarterly

 

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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)

  Third
Quarter
2015
    Second
Quarter
2015
    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

  $ 801,500 (a)    $ 696,300 (a)    $ 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

    250,000        204,900        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

    186,000        175,700        170,900        176,100        184,700        187,200        170,800        186,600        179,900        179,100        167,000   

Impairment loss

    19,500        66,400        300        328,200 (d)      12,300                      352,600 (g)      84,300 (g)             2,500   

Restructuring, severance and related charges

    7,500        8,800        6,200        27,800        8,000        2,100        3,300        13,500        3,700        10,000        2,200   

Depreciation and amortization

    42,400        43,000        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)

    296,100        197,500        27,100        (88,200     235,200        291,700        195,300        (132,100     159,700        236,100        164,200   

Other expense (income):

                     

Interest expense

    133,700        137,800        143,400        146,700        146,700        146,700        147,100        153,100        153,600        157,900        153,600   

Interest income

    (2,600     (2,500     (2,200     (1,700     (1,400     (1,500     (1,400     (1,300     (2,100            (100

Interest rate swap expense (income)

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

Amortization of deferred financing costs

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

Loss on extinguishment of debt and inducement

    135,100        58,600        73,200                             17,200               400        6,000        3,600   

Loss on equity method investments

    17,400        7,600        14,900        3,000        29,100        32,600        20,500        14,300        9,400        11,700        800   

Other

    700        200        300        100        (1,000     100        1,400        (2,000     3,600        1,300        200   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    7,800        (8,200     (206,400     (239,800     58,000        110,700        5,900        (299,700     (10,100     60,300        3,100   

(Benefit) provision for income taxes

    (153,800     27,600        (64,000     (101,500     17,800        15,300        2,300        (490,500 )(h)      8,300        23,200        (3,400
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

    161,600        (35,800     (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

    (200     (400     (100     (300     (200     (300     (200     (200                     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

  $ 161,800      $ (35,400   $ (142,300   $ (138,000   $ 40,400      $ 95,700      $ 3,800      $ 191,000      $ (18,400   $ 37,100      $ 6,500   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) 2015 revenue was impacted by several factors. Content licensing revenue contributed $50.8 million of revenue, political/advocacy advertising revenue contributed $28.1 million of advertising revenue in 2015 and the Gold Cup soccer tournament contributed $48.6 million (an estimated $22.1 million on an incremental basis) and we had an increase in other revenue of $34.2 million primarily due to revenue associated with the concurrent use of adjacent spectrum in one of our existing markets of $26.0 million. On a quarterly basis, content licensing revenue contributed $7.4 million of revenue in the first quarter, $7.7 million in the second quarter, $35.6 million of revenue in the third quarter, primarily due to $30.3 million recognized in connection with the final satisfaction of a licensing agreement, and political/advocacy advertising revenue contributed $14.1 million of advertising revenue in the first quarter, $6.6 million in the second quarter and $7.4 million in the third quarter. The Gold Cup soccer tournament contributed $0.1 million of revenue in the second quarter and $48.5 million in the third quarter.
(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

 

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  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.
(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 goodwill impairment referenced in note (g) 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 nine months ended September 30, 2015 and 2014 and for the years ended December 31, 2014, 2013 and 2012 were as follows:

Cash flows used in operating activities for the nine months ended September 30, 2015 were $16.0 million compared to cash flows from operating activities for the nine months ended September 30, 2014 of $333.7 million. After excluding the impact of the non-cash items, cash flows from operating activities decreased by approximately $24.0 million, primarily as a result of lower accrued interest in 2015 due to the Company’s refinancing activities offset by other changes in working capital including the net impact of the World Cup in 2014 on accounts receivable and prepaid expenses.

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

 

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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 nine months ended September 30, 2015 and 2014 and for the years ended December 31, 2014, 2013 and 2012 were as follows:

Cash flows used in investing activities were $122.2 million for the nine months ended September 30, 2015 compared to cash flows used in investing activities of $87.3 million for the nine months ended September 30, 2014. 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 $8.1 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 financing activities for the nine months ended September 30, 2015 and 2014 and the years ended December 31, 2014, 2013 and 2012 were as follows:

Cash flows from financing activities were $184.2 million for the nine months ended September 30, 2015 compared to cash flows used in financing activities of $93.2 million for the nine months ended September 30, 2014. The cash flows provided by financing activities reflect net borrowings related to our debt of $83.2 million in 2015. Cash flows used in financing activities for the nine months ended September 30, 2014 include 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.

 

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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.

On July 15, 2015, Televisa converted $1.125 billion of debentures into the Televisa Warrants and we made a one-time payment of $135.1 million to Televisa to induce the conversion. We utilized available cash, including the restricted cash of $92.7 million which had collateralized the letter of credit, in partial payment of the inducement. The remaining cash came from operations. The conversion of the debentures into the Televisa Warrants will result in annual cash interest savings of approximately $16.9 million.

Capital Expenditures

Capital expenditures for the nine months ended September 30, 2015 totaled $74.9 million, not reflecting the impact of approximately $3.3 million of accruals as of September 30, 2015. These expenditures include $41.1 million related to normal capital purchases or improvements and $33.8 million related to facilities upgrades, including those related to the consolidation of operations. Our capital expenditures exclude 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 $95.4 million, plus approximately $15.1 million of capital purchases that were accrued as of December 31, 2014. These anticipated expenditures include $54.6 million related to normal capital purchases or improvements and $55.9 million related to facilities upgrades, including those related to the consolidation of operations. We anticipate our capital expenditures to decline in future periods as we complete our facilities upgrades and consolidation.

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 September 30, 2015, we had total committed capacity, defined as maximum available borrowings under various existing debt arrangements plus cash and cash equivalents, of $10,270.4 million. Of this committed capacity, $923.1 million was unused and $9,337.6 million was outstanding as debt. As of September 30, 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

   $ 102,800       $       $       $ 102,800   

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

     550,000         9,700                 540,300   

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

     4,534,700                 4,534,700           

Senior notes due 2021—8.5%(b)

     815,000                 815,000           

Senior secured notes due 2022—6.75%(b)

     1,107,900                 1,107,900           

Senior secured notes due 2023—5.125%(b)

     1,200,000                 1,200,000           

Senior secured notes due 2025—5.125%(b)

     1,560,000                 1,560,000           

Accounts receivable facility maturing in 2018—LIBOR + 2.25%

     400,000                 120,000         280,000   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 10,270,400       $ 9,700       $ 9,337,600       $ 923,100   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) Amounts do not give pro forma effect to an amendment to the credit agreement governing our senior secured credit facilities, which was entered into on September 3, 2015 and increases our borrowing capacity under the revolving credit facility to $850.0 million, contingent upon this offering being consummated prior to April 30, 2016, the application of certain specified use of proceeds of this offering and other customary conditions.
(b) Amounts represent the principal balance and do not include any discounts and premiums.

To the extent permitted and to the extent of free cash flow, we intend to repay indebtedness and reduce our ratio of Adjusted OIBDA to total debt.

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 8 to our unaudited consolidated financial statements for the nine months ended September 30, 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

 

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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, 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 Adjusted OIBDA. UCI is in compliance with these covenants under the agreements governing its senior secured credit facilities and the existing senior notes as of September 30, 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 Adjusted 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.

 

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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.

On September 3, 2015, we entered into an amendment of the credit agreement governing our senior secured credit facilities to increase the borrowing capacity of our revolving credit facility to $850.0 million and extend the maturity to the five-year anniversary of the date that the borrowing capacity is increased (subject to an earlier maturity date if more than $1.5 billion of the current term loans have not been refinanced to have a longer maturity date). The amendment, as modified on December 11, 2015, is contingent upon this offering being consummated prior to April 30, 2016, the application of certain specified use of proceeds of this offering and other customary conditions. See “Description of Certain Indebtedness—Senior Secured Credit Facilities.”

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 September 30, 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 September 30, 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   

Interest on variable rate debt(c)

    186,500        198,900        227,800        237,300        240,400        40,100        1,131,000   

Operating leases

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

Capital leases(d)

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

Accounts receivable facility(e)

                         100,000                      100,000   

Programming(f)

    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   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 879,600      $ 829,900      $ 831,200      $ 888,300      $ 1,858,600      $ 9,831,500      $ 15,119,100   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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 December 31, 2014, and (v) the exchange of Televisa’s convertible debentures for the Televisa Warrants.
(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 December 31, 2014, 2015, and (v) the exchange of Televisa’s convertible debentures for the Televisa Warrants.
(c) Amounts represent anticipated cash interest payments related to our variable rate debt, which includes the bank senior secured term loans and the accounts receivable facility. Interest on these debt instruments is calculated as one-month LIBOR plus an applicable margin. To estimate the future interest payments, we adjusted the debt principal balances based on contractual reductions in debt and utilized the one-month forward LIBOR curve as of December 31, 2014.

 

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(d) 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.
(e) 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.
(f) 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 September 30, 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 September 30, 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 September 30, 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

 

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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 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 nine months ended September 30, 2015 and 2014, we recognized revenue of $44.9 million and $45.2 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 7 to our unaudited consolidated financial statements for the nine months ended September 30, 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 each reporting unit 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 each reporting unit 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 the reporting unit is compared to its carrying value, including goodwill (the “Step 1 Test”). In the Step 1 Test, we estimate the fair value of our reporting units 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 each reporting unit 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 reporting unit 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 reporting unit. The implied fair value of goodwill is determined in a manner similar to how goodwill is calculated in a

 

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business combination, where the fair value of each reporting unit is allocated to all of the assets and liabilities of the reporting unit 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 reporting unit, the excess amount is recorded as an impairment charge. An impairment charge cannot exceed the carrying value of goodwill assigned to a reporting unit, but may indicate that certain long-lived and intangible assets associated with the reporting unit may require additional impairment testing.

If a qualitative assessment is performed for goodwill, we consider relevant events and circumstances that could affect a reporting unit’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 reporting unit, and determine if it is more likely than not that the fair value of each reporting unit 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.

 

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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 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 us, 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 7 to our unaudited consolidated financial statements for the nine months ended September 30, 2015. 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 the entire deferred tax asset will not be realized. The future realization of deferred tax assets depends on the existence of sufficient taxable income of the appropriate character in either the carry back or carry forward period under the tax law for the deferred tax asset. Our net operating loss carryforwards for federal income tax purposes will begin to expire in 2027-2034. Our various state net operating loss carryforwards expire from 2015 through 2034. In a situation where the net operating losses are more likely than not to expire prior to being utilized we have established the appropriate valuation allowance. If estimates of future taxable income during the net operating loss carryforward period are reduced, the realization of the deferred tax assets may be impacted. 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.

In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (ASC 835) and in August 2015, the FASB issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. These ASUs provide guidance on the presentation of debt issuance costs as a direct deduction from the carrying amount of the debt liability. The presentation and subsequent measurement of debt issuance costs associated with lines of credit, may be presented as an asset and amortized ratably over the term of the line of credit arrangement, regardless of whether there are outstanding borrowings on the arrangement. The recognition and measurement guidance for debt issuance costs are not affected by these ASUs. For public entities, the amendments are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. The adoption of these ASUs will not have a significant impact on the Company’s consolidated financial statements or 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 2015. 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 events, 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 major demographic as of 2013, 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 major demographic in the U.S. as of 2013 with 60% of the U.S. Hispanic population projected to be 34 or younger in 2015; 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 broadcast television network among U.S. Hispanics, available in approximately 93% of U.S. Hispanic television households. UniMás is among the leading Spanish-language broadcast television networks. In addition, we operate nine cable networks, including the two most-watched U.S. Spanish-language cable networks, Univision Deportes and Galavisión. We own and operate 59 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

 

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stations among the major U.S. broadcast networks. In addition, we provide programming to 74 broadcast network station affiliates. Our digital properties include an array of websites and apps, which generate, on average, 571 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 or #2 among Spanish-language stations 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 54 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 Adjusted 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; Adjusted OIBDA of $0.9 billion, $1.1 billion, and $1.2 billion; Adjusted 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 nine months ended September 30, 2015, we generated revenue of $2,122.5 million, Adjusted OIBDA of $976.6 million, Adjusted Free Cash Flow of $344.7 million and a net loss of $16.6 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 approximately 57 million U.S. Hispanics representing 18% 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

 

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for approximately half of the growth of the total population from 2010 to 2014. By 2030, it is estimated that there will be over 77 million U.S. Hispanics, representing nearly 22% of the total U.S. population. The estimated buying power of U.S. Hispanics is projected to increase from $1.3 trillion in 2014 to $1.7 trillion by 2019. In addition, U.S. Hispanics are expected to account for 40% of employment growth in the U.S. from 2015 to 2020.

 

    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 2014, the percentage of Spanish-speaking U.S. Hispanic 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 U.S. Hispanic demographic is growing in size and political importance, 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. With approximately 800,000 U.S. Hispanics turning 18 each year, it is estimated that by 2016, approximately 28 million U.S. Hispanics will be eligible to vote. We believe these trends will 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. We believe the difference between disposable income and advertising spend is the result of a lower number of advertisers targeting U.S. Hispanics as compared to those that target the overall U.S. population and lower prices for Spanish-language advertising as compared to English-language advertising. 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, approximately 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, 81.5% of U.S. Hispanic households were pay-TV subscribers. It is estimated that between 2014 and 2018 the number of U.S Hispanic pay-TV subscribers will grow approximately 12% as compared to a 2% decline in non-Hispanic pay-TV subscribers over the same period. 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

 

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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 approximately 72% 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 either share content or click on shared content on 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 2015 and our score ranked us among the top-tier global brands. In addition, in terms of viewership, we have a 57% share among U.S. Hispanics based on the combined television ratings for us and the four largest English-language networks. Additionally, Univision had 12 of the top 20 primetime programs across U.S. Hispanic viewing audiences during the last 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 as of September 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 broadcast television network among U.S. Hispanics, consistently ranked first among U.S. Hispanic viewers. Additionally, our average primetime television viewer is 41 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-

 

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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 59 owned and operated local stations. Our television stations are ranked first in total day and primetime viewing among Spanish-language stations in 15 of 17 DMAs and 14 of 17 DMAs, respectively, in which we own and operate stations and for which such data is available. 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 29 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 550% 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, excluding sports and special events, 92% of our audience consuming our content live as compared to an average of 54% of the audience of the top four English-language broadcast networks. Additionally, 95% 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 believe U.S. Hispanics are underserved by advertisers, leading

 

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to brand, volume and pricing gaps as compared to the top four English-language broadcast networks. We believe this is part of the reason we have demonstrated resiliency during recent economic cycles and ratings fluctuations, as we have been able to narrow those gaps and, as a result, our advertising revenues have increased during the three year period ended December 31, 2014, while the average advertising revenues of the top four English-language broadcast networks have declined over the same period. Because the proportionate share of advertising spend targeting U.S. Hispanics continues to be low as compared to the disposable income of U.S. Hispanics, we believe these gaps will continue to narrow in the future. This is expected to have a positive impact on our advertising revenues. In addition to our advertising revenue, we anticipate that our “must-see” content 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 carryforwards 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 September 2015. Since 2011, our management team has increased revenue and Adjusted 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.

 

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    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 this demographic. We believe our platforms offer a compelling way to reach Hispanic America in an effective and trusted manner. Among U.S. Hispanics, brands have stronger likability when advertised on Univision than on English-language broadcasts. Also, we deliver a 71% exclusive audience that does not tune into any other of the top 10 broadcast or cable network as compared to an average 16% exclusive audience among the top four English-language broadcast networks. Excluding sports and special events, we have a 92% live viewing audience as compared to a 54% 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 representing an increase of 29% since 2009. 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 and we may make additional digital acquisitions or investments targeting U.S. Hispanics and multicultural millennials in the future. We are investing significantly in mobile products and applications, the fastest growing platform for consuming content, particularly among our target audience, resulting in more than doubling our mobile unique visitors across all of our digital properties from March 2014 to September 2015. Our digital distribution also includes subscription streaming services. In November 2015, we launched Univision Now, a direct-to-consumer internet subscription service that allows our audience to view our content at anytime from anywhere. In February 2015, we 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.

 

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    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 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.

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 general entertainment 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 59 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 broadcast television network among U.S. Hispanics, available in approximately 93% 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. As of September 2015, Univision Network was distributed to approximately 94 million households. 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 87% of all U.S. Hispanic television households as of September 2015. 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 last television 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. As of September 2015, UniMás was distributed to approximately 70 million households.

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 September 2015, it was available in approximately 68 million U.S. pay-TV households and more than 10 million, or approximately 70% of U.S. Hispanic households. As of September 2015, Galavisión was available in approximately 35% more U.S. Hispanic homes than its nearest competitor.

Univision Deportes is the most-watched U.S. Spanish-language cable television network. Univision