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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

or

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                       to                        

Commission file number:   001-35886

HEMISPHERE MEDIA GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware

80-0885255

(State or other jurisdiction of incorporation or
organization)

(I.R.S. Employer
Identification No.)

Hemisphere Media Group, Inc.

4000 Ponce de Leon Boulevard

Suite 650

Coral Gables, FL

33146

(Address of principal executive offices)

(Zip Code)

(305) 421-6364

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

    

Trading Symbol(s)

    

Name of Each Exchange on Which Registered

Class A common stock, par value $0.0001 per share

HMTV

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No 

Class of Stock

    

Shares Outstanding as of August 7, 2020

Class A common stock, par value $0.0001 per share

20,241,173 shares

Class B common stock, par value $0.0001 per share

19,720,381 shares

Table of Contents

HEMISPHERE MEDIA GROUP, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

June 30, 2020

(Unaudited)

 

PAGE
NUMBER

PART I - FINANCIAL INFORMATION

7

 

Item 1. Financial Statements

7

 

Notes to Condensed Consolidated Financial Statements

13

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

34

 

Item 4. Controls and Procedures

35

 

PART II - OTHER INFORMATION

35

 

Item 1. Legal Proceedings

35

 

Item 1A. Risk Factors

36

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

37

 

Item 3. Defaults Upon Senior Securities

37

 

Item 4. Mine Safety Disclosures

37

 

Item 5. Other Information

37

 

Item 6. Exhibits

37

 

SIGNATURES

38

2

Table of Contents

PART I

Unless otherwise indicated or the context requires otherwise, in this disclosure, references to the “Company,” “Hemisphere,” “registrant,” “we,” “us” or “our” refers to Hemisphere Media Group, Inc., a Delaware corporation and, where applicable, its consolidated subsidiaries; “Business” refers collectively to our consolidated operations; “Cable Networks” refers to our Networks (as defined below) with the exception of WAPA and WAPA Deportes; “Canal 1” refers to a joint venture among us and Radio Television Interamericana S.A., Compania de Medios de Informacion S.A.S. and NTC Nacional de Television y Comunicaciones S.A. to operate a broadcast television network in Colombia; “Centroamerica TV” refers to HMTV Centroamerica TV, LLC, a Delaware limited liability company; “Cinelatino” refers to Cine Latino, Inc., a Delaware corporation; “ComScore” refers to comScore, Inc.; “Distributors” refers collectively to satellite systems, telephone companies (“telcos”), and cable multiple system operators (“MSO”s), and the MSO’s affiliated regional or individual cable systems; “MarVista” refers to Mar Vista Entertainment, LLC, a Delaware limited liability company; “MVS” refers to Grupo MVS, S.A. de C.V., a Mexican Sociedad Anonima de Capital Variable (variable capital corporation) and its affiliates, as applicable; “Networks” refers collectively to WAPA, WAPA Deportes, WAPA America, Cinelatino, Pasiones, Centroamerica TV and Television Dominicana; “Nielsen” refers to Nielsen Media Research; “Pantaya” refers to Pantaya, LLC, a Delaware limited liability company, a joint venture among us and a subsidiary of Lions Gate Entertainment, Inc.; “Pasiones” refers collectively to HMTV Pasiones US, LLC, a Delaware limited liability company, and HMTV Pasiones LatAm, LLC, a Delaware limited liability company; “REMEZCLA” refers to Remezcla, LLC, a New York limited liability company; “Second Amended Term Loan Facility” refers to our Term Loan Facility amended on February 14, 2017 as set forth on Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017; “Snap Media” refers to Snap Global, LLC, a Delaware limited liability company and its wholly owned subsidiaries; “Television Dominicana” refers to HMTV TV Dominicana, LLC, a Delaware limited liability company; “Term Loan Facility” refers to our term loan facility amended on July 31, 2014 as set forth on Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017; “WAPA” refers to Televicentro of Puerto Rico, LLC, a Delaware limited liability company; “WAPA America” refers to WAPA America, Inc., a Delaware corporation; “WAPA Deportes” refers to a sports television network in Puerto Rico operated by WAPA; “WAPA.TV” refers to a news and entertainment website in Puerto Rico operated by WAPA; “United States” or “U.S.” refers to the United States of America, including its territories, commonwealths and possessions.

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FORWARD-LOOKING STATEMENTS

CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.

Statements in this Quarterly Report on Form 10-Q (this “Quarterly Report”), including the exhibits attached hereto, future filings by us with the Securities and Exchange Commission, our press releases and oral statements made by, or with the approval of, our authorized personnel, that relate to our future performance or future events, may contain certain statements about Hemisphere Media Group, Inc. (the “Company”) and its consolidated subsidiaries that do not directly or exclusively relate to historical facts. These statements are, or may be deemed to be, “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.

These forward-looking statements are necessarily estimates reflecting the best judgment and current expectations, plans, assumptions and beliefs about future events (in each case subject to change) of our senior management and management of our subsidiaries (including target businesses) and involve a number of risks, uncertainties and other factors, some of which may be beyond our control that could cause actual results to differ materially from those expressed or implied in such forward-looking statements. Without limitation, any statements preceded or followed by or that include the words “targets,” “plans,” “believes,” “expects,” “intends,” “will,” “likely,” “may,” “anticipates,” “estimates,” “projects,” “should,” “would,” “expect,” “positioned,” “strategy,” “future,” “potential,” “forecast,” or words, phrases or terms of similar substance or the negative thereof, are forward-looking statements. These include, but are not limited to, the Company’s future financial and operating results (including growth and earnings), plans, objectives, expectations and intentions and other statements that are not historical facts.

We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all forward-looking statements.

Forward-looking statements are not guarantees of performance. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance, or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements. In addition to the risk factors described in “Item 1A—Risk Factors” in this Quarterly Report on Form 10-Q, those factors include:

the deterioration of general economic conditions, political instability, social unrest, and public health crises, such as the occurrence of a global pandemic like the novel coronavirus (“COVID-19”), either nationally or in the local markets in which we operate, including, without limitation, in the Commonwealth of Puerto Rico;

the effects of Hurricanes Irma and Maria and recent earthquakes in Puerto Rico on our business, including, without limitation, affiliate revenue that we receive and the advertising market in Puerto Rico as well as our customers, employees, third-party vendors and suppliers and the short and long-term migration shifts in Puerto Rico;

our ability to timely and fully recover proceeds under our insurance policies in Puerto Rico following Hurricanes Maria and Irma, including one of our policies with an insurance carrier which was placed under an order of rehabilitation;

the reaction by advertisers, programming providers, strategic partners, the Federal Communications Commission (the “FCC”) or other government regulators to businesses that we acquire;

the potential for viewership of our Networks’ programming to decline or unexpected reductions in the number of subscribers to our Networks;

the risk that we may fail to secure sufficient or additional advertising and/or subscription revenue;

the inability of advertisers or affiliates to remit payment to us in a timely manner or at all;

the risk that we may become responsible for certain liabilities of the businesses that we acquire or joint ventures we enter into;

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future financial performance, including our ability to obtain additional financing in the future on favorable terms;

the failure of our Business to produce projected revenues or cash flows;

reduced access to capital markets or significant increases in borrowing costs;

our ability to successfully manage relationships with customers and Distributors and other important third parties;

continued consolidation of Distributors in the marketplace;

a failure to secure affiliate agreements or renewal of such agreements on less favorable terms;

disagreements with our Distributors over contract interpretation;

our success in acquiring, investing in and integrating complementary businesses;

the outcome of any pending or threatened litigation;

the loss of key personnel and/or talent or expenditure of a greater amount of resources attracting, retaining and motivating key personnel than in the past;

strikes or other union job actions that affect our operations, including, without limitation, failure to renew our collective bargaining agreements on mutually favorable terms;

changes in technology, including changes in the distribution and viewing of television programming, expanded deployment of personal video recorders, video on demand, internet protocol television, mobile personal devices and personal tablets and their impact on subscription and television advertising revenue;

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

uncertainties inherent in the development of new business lines and business strategies;

changes in pricing and availability of products and services;

uncertainties regarding the financial results of equity method investees and changes in the nature of key strategic relationships with partners and Distributors;

changes in domestic and foreign laws or regulations under which we operate;

changes in laws or treaties relating to taxation, or the interpretation thereof, in the U.S. or in the countries in which we operate;

the ability of suppliers and vendors to deliver products and services;

fluctuations in foreign currency exchange rates and political unrest and regulatory changes in the international markets in which we operate;

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;

changes in, or failure or inability to comply with, government regulations including, without limitation, regulations of the FCC, and adverse outcomes from regulatory proceedings; and

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competitor responses to our products and services.

The list of factors above is illustrative, but by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. All subsequent written and oral forward-looking statements concerning the matters addressed in this Quarterly Report and attributable to us or any person acting on our behalf are qualified by these cautionary statements.

The forward-looking statements are based on current expectations about future events and are not guarantees of future performance, and are subject to certain risks, uncertainties and assumptions. Although we believe that the expectations reflected in the forward-looking statements are reasonable, these expectations may not be achieved. We may change our intentions, beliefs or expectations at any time and without notice, based upon any change in our assumptions or otherwise. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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PART I - FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

HEMISPHERE MEDIA GROUP, INC.

Condensed Consolidated Balance Sheets

(amounts in thousands, except share and par value amounts)

    

June 30, 

    

December 31, 

    

2020

    

2019

(Unaudited)

Assets

Current Assets

Cash

$

104,983

$

92,151

Accounts receivable, net of allowance for doubtful accounts of $1,454 and $507, respectively

 

31,677

 

29,269

Due from related parties

 

1,091

 

1,626

Programming rights

 

8,710

 

11,691

Prepaids and other current assets

9,924

11,003

Total current assets

 

156,385

 

145,740

Programming rights, net of current portion

 

14,859

 

14,804

Property and equipment, net

 

32,326

 

34,319

Operating lease right-of-use assets

1,567

1,833

Broadcast license

 

41,356

 

41,356

Goodwill

 

167,322

 

167,322

Other intangibles, net

 

29,058

 

32,587

Deferred income taxes

1,725

1,208

Equity method investments

 

31,917

 

49,639

Other assets

4,487

3,979

Total Assets

$

481,002

$

492,787

Liabilities and Stockholders’ Equity

Current Liabilities

Accounts payable

5,046

1,925

Due to related parties

 

1,101

 

669

Accrued agency commissions

 

3,027

 

4,662

Accrued compensation and benefits

 

4,569

 

5,021

Accrued marketing

6,379

5,327

Other accrued expenses

 

5,738

 

6,596

Programming rights payable

 

8,481

 

6,369

Investee losses in excess of investment

1,484

Current portion of long-term debt

 

2,134

 

2,134

Total current liabilities

 

36,475

 

34,187

Programming rights payable, net of current portion

 

1,234

 

820

Long-term debt, net of current portion

 

201,631

 

202,406

Deferred income taxes

 

19,331

 

19,331

Other long-term liabilities

5,021

2,917

Defined benefit pension obligation

 

2,469

 

2,457

Total Liabilities

 

266,161

 

262,118

Stockholders’ Equity

Preferred stock, $0.0001 par value; 50,000,000 shares authorized; 0 shares issued at June 30, 2020 and December 31, 2019

 

 

Class A common stock, $.0001 par value; 100,000,000 shares authorized; 25,439,375 and 25,202,314 shares issued at June 30, 2020 and December 31, 2019, respectively

 

3

 

3

Class B common stock, $.0001 par value; 33,000,000 shares authorized; 19,720,381 shares issued at June 30, 2020 and December 31, 2019

 

2

 

2

Additional paid-in capital

 

277,154

 

274,518

Class A treasury stock, at cost 5,670,853 and 5,609,966 at June 30, 2020 and December 31, 2019, respectively

 

(61,031)

 

(60,521)

Retained (deficit) earnings

 

(35)

 

16,075

Accumulated other comprehensive loss

 

(2,598)

 

(792)

Total Hemisphere Media Group Stockholders’ Equity

213,495

229,285

Equity attributable to non-controlling interest

1,346

1,384

Total Stockholders’ Equity

 

214,841

 

230,669

Total Liabilities and Stockholders’ Equity

$

481,002

$

492,787

See accompanying Notes to Condensed Consolidated Financial Statements.

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HEMISPHERE MEDIA GROUP, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

(amounts in thousands, except per share amounts)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2020

    

2019

    

2020

    

2019

Net revenues

$

34,735

$

39,147

$

67,144

$

74,257

Operating expenses:

Cost of revenues

 

12,560

 

11,317

 

23,527

 

21,531

Selling, general and administrative

 

10,208

 

10,813

 

21,441

 

21,714

Depreciation and amortization

 

2,794

 

2,556

 

5,925

 

6,623

Other expenses

 

27

 

422

 

3,048

 

653

Loss (gain) from FCC spectrum repack and other

 

182

 

(45)

 

173

 

(1,507)

Total operating expenses

 

25,771

 

25,063

 

54,114

 

49,014

Operating income

 

8,964

 

14,084

 

13,030

 

25,243

Other expense:

Interest expense, net

 

(2,496)

 

(3,005)

 

(5,282)

 

(5,965)

Loss on equity method investments

(10,189)

(9,784)

(17,208)

(17,160)

Impairment of equity method investment

(5,479)

Total other expense

(12,685)

(12,789)

(27,969)

(23,125)

(Loss) income before income taxes

 

(3,721)

 

1,295

(14,939)

 

2,118

Income tax expense

 

(2,884)

 

(3,643)

 

(1,209)

 

(6,199)

Net loss

(6,605)

(2,348)

(16,148)

(4,081)

Net (income) loss attributable to non-controlling interest

(77)

(10)

38

37

Net loss attributable to Hemisphere Media Group, Inc.

$

(6,682)

$

(2,358)

$

(16,110)

$

(4,044)

Loss per share attributable to Hemisphere Media Group, Inc.:

Basic

$

(0.17)

$

(0.06)

$

(0.41)

$

(0.10)

Diluted

$

(0.17)

$

(0.06)

$

(0.41)

$

(0.10)

Weighted average shares outstanding:

Basic

 

39,444

 

39,164

 

39,378

39,098

Diluted

 

39,444

 

39,164

 

39,378

39,098

See accompanying Notes to Condensed Consolidated Financial Statements.

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HEMISPHERE MEDIA GROUP, INC.

Condensed Consolidated Statement of Comprehensive Loss

(Unaudited)

(amounts in thousands)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2020

    

2019

    

2020

    

2019

Net loss

$

(6,605)

$

(2,348)

$

(16,148)

$

(4,081)

Other comprehensive income (loss):

Change in fair value of interest rate swap, net of income taxes

81

(1,177)

(1,806)

(1,855)

Comprehensive loss

(6,524)

(3,525)

(17,954)

(5,936)

Comprehensive (income) loss attributable to non-controlling interest

(77)

(10)

38

37

Comprehensive loss attributable to Hemisphere Media Group, Inc.

$

(6,601)

$

(3,535)

$

(17,916)

$

(5,899)

See accompanying Notes to Condensed Consolidated Financial Statements.

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HEMISPHERE MEDIA GROUP, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three and Six Months Ended June 30, 2020

(Unaudited)

(amounts in thousands)

Class A

Class B

Additional

Class A

Retained

Accumulated

Non-

 

Common Stock

Common Stock

Paid In

Treasury

Earnings

Comprehensive

controlling

 

    

Shares

    

Par Value

    

Shares

    

Par Value

    

Capital

    

Stock

    

(Deficit)

    

Loss

    

Interest

    

Total

Balance at March 31, 2020

 

25,202

$

3

 

19,720

$

2

$

275,798

$

(60,521)

$

6,647

$

(2,679)

$

1,269

$

220,519

Net (loss) income

 

 

 

 

 

 

 

(6,682)

 

 

77

 

(6,605)

Stock-based compensation

 

 

 

 

 

1,356

 

 

 

 

 

1,356

Vesting of restricted stock

 

237

 

 

 

 

 

(510)

 

 

 

 

(510)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

81

 

 

81

Balance at June 30, 2020

 

25,439

$

3

 

19,720

$

2

$

277,154

$

(61,031)

$

(35)

$

(2,598)

$

1,346

$

214,841

    

Class A 

    

Class B

    

Additional

    

Class A

    

Retained

    

Accumulated

    

Non-

    

Common Stock

 Common Stock

Paid In

Treasury

Earnings

Comprehensive

controlling

    

Shares

    

Par Value

    

Shares

        

Par Value

    

Capital

    

Stock

    

(Deficit)

    

Loss

    

Interest

    

Total

Balance at December 31, 2019

 

25,202

$

3

 

19,720

$

2

$

274,518

$

(60,521)

$

16,075

$

(792)

$

1,384

$

230,669

Net loss

 

(16,110)

(38)

(16,148)

Stock-based compensation

2,636

2,636

Vesting of restricted stock

237

(510)

(510)

Other comprehensive loss, net of tax

(1,806)

(1,806)

Balance at June 30, 2020

 

25,439

$

3

 

19,720

$

2

$

277,154

$

(61,031)

$

(35)

$

(2,598)

$

1,346

$

214,841

See accompanying Notes to Condensed Consolidated Financial Statements.

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HEMISPHERE MEDIA GROUP, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three and Six Months Ended June 30, 2019

(Unaudited)

(amounts in thousands)

Class A 

    

Class B

    

Additional

    

Class A

    

    

Accumulated

    

Non-

    

Common Stock

 Common Stock

Paid In

Treasury

Retained

Comprehensive

controlling

    

Shares

        

Par Value

    

Shares

        

Par Value

    

Capital

    

Stock

    

Earnings

    

Income(Loss)

    

Interest

    

Total

Balance at March 31, 2019

 

24,850

$

2

 

19,720

$

2

$

270,674

$

(59,013)

$

17,756

$

530

$

1,441

$

231,392

Net (loss) income

 

(2,358)

10

(2,348)

Stock-based compensation

443

443

Vesting of restricted stock

184

1

(532)

(531)

Repurchases of Class A common Stock

(135)

(135)

Issuance of treasury shares for option exercise

107

107

Other comprehensive loss, net of tax

(1,177)

(1,177)

Balance at June 30, 2019

 

25,034

$

3

 

19,720

$

2

$

271,117

$

(59,573)

$

15,398

$

(647)

$

1,451

$

227,751

    

Class A 

    

Class B

    

Additional

    

Class A

    

    

Accumulated

    

Non-

    

Common Stock

 Common Stock

Paid In

Treasury

Retained

Comprehensive

controlling

    

Shares

        

Par Value

    

Shares

        

Par Value

    

Capital

    

Stock

    

Earnings

    

Income(Loss)

    

Interest

    

Total

Balance at December 31, 2018

 

24,850

$

2

 

19,720

$

2

$

270,345

$

(59,088)

$

19,495

$

1,155

$

1,488

$

233,399

Net loss

 

(4,044)

(37)

(4,081)

Issuance of treasury shares for acquisition of Snap Media

(588)

588

Stock-based compensation

1,360

1,360

Vesting of restricted stock

 

184

1

 

 

 

 

(532)

 

 

 

(531)

Repurchases of Class A common Stock

(648)

(648)

Issuance of treasury shares for option exercise

107

107

Adoption of accounting standards

(53)

53

Other comprehensive loss, net of tax

(1,855)

(1,855)

Balance at June 30, 2019

 

25,034

$

3

 

19,720

$

2

$

271,117

$

(59,573)

$

15,398

$

(647)

$

1,451

$

227,751

See accompanying Notes to Condensed Consolidated Financial Statements.

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HEMISPHERE MEDIA GROUP, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(amounts in thousands)

Six Months Ended June 30, 

    

2020

    

2019

Reconciliation of Net Loss to Net Cash Provided by Operating Activities:

Net loss

$

(16,148)

$

(4,081)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

 

5,925

 

6,623

Program amortization

 

8,784

 

6,953

Amortization of deferred financing costs and original issue discount

 

292

 

290

Stock-based compensation

 

2,636

 

1,360

Provision for bad debts

 

929

 

219

Loss on disposition of assets

 

211

 

39

Loss on equity method investments

17,208

17,160

Impairment of equity method investment

5,479

Gain from FCC repack

(38)

(1,546)

Amortization of operating lease right-of-use assets

252

228

Changes in assets and liabilities:

Decrease (increase) in:

Accounts receivable

 

(3,337)

 

(288)

Due from related parties, net

967

(233)

Programming rights

 

(5,858)

 

(6,046)

Prepaids and other assets

 

585

 

(3,841)

(Decrease) increase in:

Accounts payable

 

3,121

 

(168)

Other accrued expenses

 

(1,893)

 

(5,594)

Programming rights payable

 

2,526

 

1,280

Income taxes payable

(2,265)

Other liabilities

(207)

1,741

Net cash provided by operating activities

 

21,434

 

11,831

Cash Flows From Investing Activities:

Funding of equity method investments

(6,449)

(21,931)

Capital expenditures

 

(613)

 

(4,303)

FCC repack proceeds

38

1,546

Net cash used in investing activities

 

(7,024)

 

(24,688)

Cash Flows From Financing Activities:

Repayments of long-term debt

 

(1,068)

 

(1,067)

Purchases of common stock

(510)

(1,180)

Proceeds from exercise of options

107

Net cash used in financing activities

 

(1,578)

 

(2,140)

Net increase (decrease) in cash

 

12,832

 

(14,997)

Cash:

Beginning

 

92,151

 

94,478

Ending

$

104,983

$

79,481

Supplemental Disclosures of Cash Flow Information:

Cash payments for:

Interest

$

5,213

$

6,979

Income taxes

$

5

$

6,343

Non-cash investing activity:

Acquisition financed in part by treasury shares

$

$

588

See accompanying Notes to Condensed Consolidated Financial Statements.

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Notes to Condensed Consolidated Financial Statements

Note 1. Nature of Business

Nature of business: The accompanying Condensed Consolidated Financial Statements include the accounts of Hemisphere Media Group, Inc. (“Hemisphere” or the “Company”), the parent holding company of Cine Latino, Inc. (“Cinelatino”), WAPA Holdings, LLC (formerly known as InterMedia Español Holdings, LLC) (“WAPA Holdings”), HMTV Cable, Inc., the parent company of the entities for the acquired networks consisting of Pasiones, TV Dominicana, and Centroamerica TV (see below), and HMTV Distribution, LLC, the parent of Snap Global, LLC, a Delaware limited liability company and its wholly owned subsidiaries (“Snap Media”), in which we own a 75% interest. Hemisphere was formed on January 16, 2013 for purposes of effecting its initial public offering, which was consummated on April 4, 2013. In these notes, the terms “Company,” “we,” “us” or “our” mean Hemisphere and all subsidiaries included in our Condensed Consolidated Financial Statements.

Reclassification: Certain prior year amounts on the presented Condensed Consolidated Statement of Cash Flows have been reclassified to conform to current year presentation.

Basis of presentation:   The accompanying Condensed Consolidated Financial Statements for Hemisphere and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. In our opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. Our financial condition as of, and operating results, for the three and six months ended June 30, 2020 are not necessarily indicative of the financial condition or results that may be expected for any future interim period or for the year ending December 31, 2020, especially when considering the risks and uncertainties associated with the coronavirus (“COVID-19”) and the impact it may have on our business, results of operations and financial condition. These Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Use of estimates: In preparing these financial statements, management had to make estimates and assumptions that affected the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the balance sheet dates, and the reported revenues and expenses for each of the three and six months ended June 30, 2020 and 2019. Such estimates are based on historical experience and other assumptions that are considered appropriate in the circumstances, but could change in the future as more information becomes known about the impact of COVID-19, and actual results could differ from those estimates.

Net loss per common share:  Basic loss per share is computed by dividing loss attributable to Hemisphere Media Group, Inc. common stockholders by the number of weighted-average outstanding shares of common stock. Diluted loss per share reflects the effect of the assumed exercise of stock options and vesting of restricted shares only in the periods in which such effect would have been dilutive.

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The following table sets forth the computation of the common shares outstanding used in determining basic and diluted loss per share attributable to Hemisphere Media Group, Inc. (amounts in thousands, except per share amounts):

Three Months Ended June 30, 

Six Months Ended June 30, 

        

2020

        

2019

        

2020

        

2019

Numerator for loss per common share calculation: