<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________
COMMISSION FILE NUMBER 1-12187
COX RADIO, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 58-1620022
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1400 LAKE HEARN DRIVE, ATLANTA, GEORGIA 30319
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (404) 843-5000
---------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
---------------
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date.
There were 8,806,595 shares of Class A Common Stock outstanding as
of September 30, 1997.
There were 19,577,672 shares of Class B Common Stock outstanding as of
September 30, 1997.
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COX RADIO, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
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PAGE
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS................................................... 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.............................................. 11
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................... 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K....................................... 15
SIGNATURES...................................................................... 17
</TABLE>
2
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PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COX RADIO, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(Thousands of Dollars)
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................................................... $ 9,273 $ 1,544
Restricted cash .............................................................. -- 9,051
Accounts receivable, less allowance for doubtful accounts
of $1,778 and $834 ......................................................... 44,913 31,511
Prepaid expenses and other current assets .................................... 5,465 1,575
Income taxes receivable ...................................................... 589
--------- ---------
Total current assets ...................................................... 60,240 43,681
Plant and equipment, net ....................................................... 44,374 27,070
Intangible assets, net ......................................................... 519,402 138,119
Amounts due from Cox Enterprises, Inc. ......................................... -- 49,667
Station investment note receivable ............................................. 12,000 --
Other assets ................................................................... 10,192 3,182
--------- ---------
Total assets .............................................................. $ 646,208 $ 261,719
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses ........................................ $ 18,553 $ 10,296
Unit appreciation plan ("UAP") liability ..................................... -- 646
Income taxes payable ......................................................... -- 3,216
Deferred barter/trade ........................................................ 2,656 --
Other current liabilities .................................................... 141 668
--------- ---------
Total current liabilities ................................................. 21,350 14,826
Amounts due to Cox Enterprises, Inc. ........................................... 14,882 --
Notes payable .................................................................. 225,000 --
Deferred income taxes .......................................................... 103,009 11,095
Other noncurrent liabilities ................................................... 743 --
--------- ---------
Total liabilities ......................................................... 364,984 25,921
--------- ---------
Commitments and contingencies (Note 3)
SHAREHOLDERS' EQUITY:
Class A common stock, $1.00 par value; 70,000,000 shares
authorized; 8,806,595 and 8,736,972 shares outstanding at September 30,
1997 and December 31, 1996, respectively .................................... 8,807 8,737
Class B common stock, $1.00 par value; 45,000,000 shares
authorized; 19,577,672 shares outstanding at September 30, 1997 and
December 31, 1996 ........................................................... 19,578 19,578
Additional paid-in capital ................................................... 250,193 248,972
Retained earnings (accumulated deficit) ...................................... 2,646 (41,489)
--------- ---------
Total shareholders' equity ................................................ 281,224 235,798
--------- ---------
Total liabilities and shareholders' equity ................................ $ 646,208 $ 261,719
========= =========
</TABLE>
See notes to consolidated financial statements.
3
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COX RADIO, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
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THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- ----------------------
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(Thousands of dollars, except per share data)
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NET REVENUES:
Local ..................................... $ 40,326 $ 24,294 $ 101,168 $ 74,708
National .................................. 13,988 7,984 35,289 23,463
Other ..................................... 874 739 2,235 1,154
--------- --------- --------- ---------
Total revenues .......................... 55,188 33,017 138,692 99,325
COSTS AND EXPENSES:
Operating ................................. 14,918 11,482 36,760 32,046
Selling, general and administrative ....... 19,657 10,944 53,458 37,677
Corporate general and administrative ...... 1,709 1,986 5,159 4,327
Depreciation and amortization ............. 4,834 2,027 12,019 6,006
--------- --------- --------- ---------
OPERATING INCOME ............................. 14,070 6,578 31,296 19,269
OTHER INCOME (EXPENSE):
Interest income .............................. 106 -- 1,578 --
Interest expense ............................. (3,501) (2,553) (7,072) (5,409)
Gain on sale of radio station ................ -- -- 49,072 --
Other - net .................................. (425) (51) (538) (326)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES ................... 10,250 3,974 74,336 13,534
Income taxes ................................. 4,255 1,604 30,201 5,951
--------- --------- --------- ---------
NET INCOME ................................... $ 5,995 $ 2,370 $ 44,135 $ 7,583
========= ========= ========= =========
Net income per common share .................. $ .21 $ .12 $ 1.56 $ .39
========= ========= ========= =========
Weighted average common shares
outstanding .................................. 28,339 19,578 28,327 19,578
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
4
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COX RADIO, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
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CLASS A CLASS B RETAINED
COMMON STOCK COMMON STOCK ADDITIONAL EARNINGS
-------------------- -------------------- PAID-IN (ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT) TOTAL
-------- -------- -------- -------- -------- -------- --------
(AMOUNTS IN THOUSANDS)
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BALANCE AT DECEMBER 31, 1996 .............. 8,737 $ 8,737 19,578 $ 19,578 $248,972 $(41,489) $235,798
Net income .............................. -- -- -- -- -- 44,135 44,135
Issuance of restricted stock .............. 13 13 -- -- 224 -- 237
Issuance of stock related to incentive .... 57 57 997 1,054
-------- -------- -------- -------- -------- -------- --------
BALANCE AT SEPTEMBER 30, 1997 ............. 8,807 $ 8,807 19,578 $ 19,578 $250,193 $ 2,646 $281,224
======== ======== ======== ======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
5
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COX RADIO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1997 1996
--------- ---------
(Thousands of Dollars)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................... $ 44,135 $ 7,583
Items not requiring cash:
Depreciation ........................................................... 3,204 1,931
Amortization ........................................................... 8,815 4,075
Deferred income taxes .................................................. 25,394 1,134
Gain on sale of radio station .......................................... (49,072) --
Decrease (increase) in accounts receivable ............................... (654) 1,443
Increase (decrease) in accounts payable and accrued expenses ............. 1,365 (226)
Decrease in taxes payable ................................................ (3,805) (278)
Increase (decrease) of UAP liability ..................................... (646) 1,589
Other, net ............................................................... 379 565
--------- ---------
Net cash provided by operating activities ......................... 29,115 17,816
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ..................................................... (7,835) (1,381)
Acquisitions, net of cash acquired ....................................... (315,121) (15,811)
Increase in other long-term assets ....................................... (19,822) (3,205)
Net proceeds from sale of radio station .................................. 19,590 --
Other, net ............................................................... 237 --
--------- ---------
Net cash used in investing activities ............................. (322,951) (20,397)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in amounts due to CEI ............................................. 64,549 18,774
Borrowings of debt ....................................................... 224,994 --
Net proceeds from issuance of stock related to incentive plan ............ 1,054 --
Dividends paid ........................................................... -- (12,656)
Increase (decrease) in book overdrafts ................................... 1,917 (2,415)
--------- ---------
Net cash provided by financing activities ......................... 292,514 3,703
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS ................................ (1,322) 1,122
CASH AND CASH EQUIVALENTS (INCLUDING RESTRICTED CASH) AT BEGINNING OF
PERIOD ................................................................. 10,595 1,691
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .............................. $ 9,273 $ 2,813
========= =========
</TABLE>
See notes to consolidated financial statements.
6
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COX RADIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997
1. BASIS OF PRESENTATION AND OTHER INFORMATION
Cox Radio, Inc. ("Cox Radio" or the "Company"), a majority-owned
subsidiary of Cox Enterprises, Inc. ("CEI"), is a leading national radio
broadcasting company whose business is devoted exclusively to operating,
acquiring and developing radio stations located throughout the United States.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnote disclosures required by generally accepted accounting principles for
complete financial statements. In the opinion of management, the financial
statements reflect all adjustments considered necessary for a fair statement of
the results of operations and financial position for the interim periods
presented. All such adjustments are of a normal, recurring nature. These
unaudited interim financial statements should be read in conjunction with the
audited consolidated financial statements for the year ended December 31, 1996
and notes thereto contained in Cox Radio's Annual Report on Form 10-K filed with
the Securities and Exchange Commission (Commission File No. 1-12187).
The results of operations for the nine months ended September 30, 1997
are not necessarily indicative of the results to be expected for the year ending
December 31, 1997 or any interim period.
2. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES
In March 1997, the Company exchanged WCKG-FM and WYSY-FM in Chicago for
WHOO-AM, WHTQ-FM and WMMO-FM in Orlando (the "Orlando Acquisition"). The Orlando
Acquisition resulted in a pre-tax gain of approximately $49 million. In addition
to receiving the three Orlando stations, Cox Radio also received cash proceeds
of approximately $20 million. Prior to the NewCity Acquisition (as defined
below), the Orlando stations were operated by NewCity Communications, Inc.
("NewCity") since July 1996 under a local marketing agreement ("LMA").
In March 1997, the Company acquired WFNS-AM in Tampa for an aggregate
consideration of $1.5 million (the "Tampa Acquisition"). The Company had been
operating this station pursuant to an LMA or a joint sales agreement ("JSA")
since June 1995.
In April 1997, Cox Radio completed its acquisition of the license and
certain assets of KRTO-FM in Los Angeles for $19 million in cash (the "Los
Angeles Acquisition").
On April 1, 1997, the Company, through the merger of its wholly owned
subsidiary New Cox Radio II, Inc. with and into NewCity Communications, Inc.
("NewCity"), with NewCity as the surviving corporation, acquired all of the
issued and outstanding capital stock of NewCity (the "NewCity Acquisition"). Cox
Radio purchased the stock of NewCity for an aggregate consideration of
approximately $253 million, including approximately $87 million in assumption of
NewCity indebtedness and approximately $3 million in working capital
adjustments. To consummate the NewCity Acquisition, the Company utilized
approximately $56 million of amounts due from CEI and borrowed approximately
$110 million pursuant to the Company's $300 million, five-year, senior,
unsecured revolving credit facility with certain banks, including Texas Commerce
Bank National Association, as Administrative Agent. On April 2, 1997, NewCity
was merged with and into the Company, with the Company as the surviving
corporation.
7
<PAGE> 8
The NewCity Acquisition was recorded effective April 1, 1997, using the purchase
method of accounting, whereby the allocable share of the NewCity purchase price
was allocated to the assets acquired and liabilities assumed based on their fair
values at the date of acquisition as follows (in thousands):
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Net working capital................................................ $ 8,342
Plant and equipment................................................ 9,310
Goodwill/FCC broadcast licenses.................................... 311,684
Deferred taxes..................................................... (65,735)
--------
Total cost of acquisition including assumed liabilities............ $263,601
========
</TABLE>
The above amounts reflect certain purchase accounting adjustments which
have been made through September 30, 1997. These amounts are subject to certain
other purchase accounting adjustments which will be made in subsequent periods.
In May 1997, the Company agreed to acquire WBHJ-FM and WBHK-FM in
Birmingham, Alabama (the "Birmingham Acquisition I") for an aggregate
consideration of $17 million, consisting of $5 million paid for an option to
purchase and $12 million issued to the seller as a Station Investment Note
Receivable. See further discussion at Note 4. On August 1, 1997, the Company
began operating WBHJ-FM and WBHK-FM under an LMA. The Company expects to
consummate this acquisition during the second half of 1998.
In May 1997, the Company agreed to acquire WENN-FM and WAGG-AM, also in
Birmingham, Alabama, for consideration of $15 million (the "Birmingham
Acquisition II"). In July, 1997, the Company assigned its right to purchase
WENN-FM for consideration of $14.5 million to a third party (the "Birmingham
Disposition"). The Company consummated both the Birmingham Acquisition II and
the Birmingham Disposition during November 1997.
In September 1997, the Company announced that it had entered into an
agreement in principle with a third party to construct, program and own a new
Class A FM radio station in Homewood, Alabama to serve the Birmingham market
(the "Birmingham Acquisition III"). The transaction is pending FCC approval of
the application for the new construction permit and settlement of the
comparative hearing between three applicants for the construction permit. As
part of the agreement, the third party would construct the station, the Company
would enter into an LMA for the new station and the Company would acquire an
option to purchase the station for an aggregate consideration of $5.5.
The Birmingham Acquisition I, the Birmingham Acquisition II, the
Birmingham Acquisition III and the Birmingham Disposition are collectively
referred to herein as the "Birmingham Transactions".
In September 1997, the Company acquired KISS-FM, KSMG-FM and KLUP-AM in
San Antonio, Texas for an aggregate consideration of $30.4 million plus certain
non-compete agreements (the "San Antonio Acquisition").
In October 1997, the Company disposed of the assets of American Comedy
Network (the "American Comedy Network Disposition") for aggregate proceeds of
approximately $1.1 million including certain non-compete agreements. This
transaction resulted in a pretax gain of approximately $.1 million.
8
<PAGE> 9
The following unaudited pro forma summary of operations presents the
consolidated results of operations as if the Cox Radio Consolidation (as
discussed in the Company's Annual Report on Form 10-K for the period ended
December 31, 1996), the Company's Initial Public Offering, the Orlando
Acquisition, the NewCity Acquisition, the Birmingham Transactions and the San
Antonio Acquisition had occurred at the beginning of the periods presented and
does not purport to be indicative of what would have occurred had these
transactions been made as of those dates or of results which may occur in the
future. No pro forma adjustments have been made for the Tampa Acquisition, the
Los Angeles Acquisition, the Birmingham Acquisition III and the American Comedy
Network Disposition due to immateriality.
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THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
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Net revenues........................................ $56,747 $49,488 $161,471 $143,204
Corporate general and administrative expenses....... 1,709 2,373 5,635 5,110
Depreciation and amortization....................... 4,834 4,577 15,314 9,349
Operating income.................................... 14,507 9,442 33,021 28,521
Net income.......................................... 6,027 3,290 12,586 10,686
---------------------------------------------
Earnings per common share........................... $ .21 $ .12 $ .44 $ .38
---------------------------------------------
Pro forma shares outstanding........................ 28,328 28,328 28,328 28,328
=============================================
</TABLE>
3. COMMITMENTS AND CONTINGENCIES
On March 7, 1997, Cox Radio entered into a $300 million, five-year,
senior, unsecured revolving credit facility (the "Credit Agreement") with
certain guarantors and banks, including Texas Commerce Bank National
Association, as Administrative Agent, Nationsbank of Texas, N.A., as
Syndications Agent, and Citibank, N.A., as Documentation Agent. The loan
proceeds were used to finance the payment of the consideration payable in the
Merger, repay certain secured debt of NewCity and and finance certain
acquisitions. The remaining loan proceeds may be used to finance (A) the
repayment or repurchase of certain unsecured debt of NewCity, (B) additional
acquisitions and (C) other corporate purposes. The Credit Agreement restricts
the payment of dividends, prohibits certain mergers, consolidations or
dispositions of assets and establishes limitations on, among other things,
additional indebtedness and transactions with affiliates.
Cox Radio borrowed approximately $110 million under the Credit
Agreement to consummate the NewCity Acquisition.
At the closing of the NewCity Acquisition and the merger of NewCity
with and into the Company, as described in Note 2, NewCity was the obligor of
$75 million principal amount of 11-3/8% Senior Subordinated Notes due 2003 (the
"Notes").
9
<PAGE> 10
On May 2, 1997, following a tender offer and consent solicitation, the
Company paid an aggregate amount of $82.1 million to holders of the Notes in
exchange for approximately $74.6 million principal amount of the Notes and
consents to the elimination of substantially all the restrictive covenants
applicable to the Notes. The Company obtained the funds necessary to make such
payments from borrowings under the Credit Agreement.
The Company has entered into interest rate swap agreements with certain
lenders providing bank financing. Pursuant to the interest rate swap agreements,
the Company has exchanged its floating rate interest obligations on an aggregate
of $100 million in principal at an average fixed rate of 6.23% per annum for an
average maturity of 6.25 years. The fixing of interest rates for this period
reduces in part the Company's exposure to the uncertainty of floating interest
rates. The differential paid or received on the interest rate swap agreements
are recognized as an adjustment to interest expense.
At September 30, 1997, the Company had approximately $240 million of
outstanding indebtedness including approximately $14.9 million due to CEI, and
had approximately $75 million available under the Credit Agreement.
4. STATION INVESTMENT NOTE RECEIVABLE
In connection with the Birmingham Acquisition I, the Company has loaned
$12 million to an entity which owns radio stations that the Company has agreed
to purchase. This Station Investment Note Receivable has an interest rate of
8.5% and is collateralized by substantially all of the assets of Birmingham
radio stations WBHJ-FM and WBHK-FM.
5. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 1997, SFAS No. 128, "Earnings per Share," was issued. This
statement establishes standards for computing and presenting earnings per share
(EPS). It replaces the presentation of primary EPS with a presentation of basic
EPS. It also requires dual presentation of basic and diluted EPS on the face of
the income statement for all entities with complex capital structures. Basic EPS
excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Diluted EPS is computed similarly to fully diluted EPS pursuant to APB
Opinion No. 15, "Earnings per Share," which is superseded by this Statement.
This Statement requires restatement of all prior-period EPS data presented. Upon
adoption of this Statement in December 1997, the EPS amounts presented will not
be materially different than those previously presented in accordance with
Opinion 15.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF COX RADIO
The following discussion should be read in conjunction with the
accompanying historical Consolidated Statements of Income for the three and nine
month periods ended September 30, 1997 and 1996.
This report contains forward-looking statements that are subject to
risks and uncertainties. Forward-looking statements include the information
regarding future cash requirements of the Company. For such statements, the
Company claims the protection of the safe harbor for forward-looking statements
contained in Section 21E of the Securities Exchange Act of 1934, as amended. The
Company's results could differ materially from those discussed in each
forward-looking statement due to various factors which are outside the Company's
control, including competition for audience share and advertising revenue from
other radio stations, electronic and print media and new media technologies and
governmental regulation of the radio broadcasting industry. For a more detailed
discussion of these factors and others, see the Risk Factors section of the
Company's prospectus filed as part of its Registration Statement on Form S-1
(File No. 333-08737).
GENERAL
The performance of a radio station group, such as the Company, is
customarily measured by its ability to generate Broadcast Cash Flow and EBITDA.
Broadcast Cash Flow is defined as net revenues less station operating expenses.
EBITDA is defined as operating income plus depreciation and amortization.
Although Broadcast Cash Flow and EBITDA are not recognized under generally
accepted accounting principles ("GAAP"), they are accepted by the broadcasting
industry as generally recognized measures of performance and are used by
analysts who report publicly on the condition and performance of broadcasting
companies. For the foregoing reasons, the Company believes that these measures
will be useful to investors. However, investors should not consider Broadcast
Cash Flow or EBITDA to be an alternative to operating income as determined in
accordance with GAAP, an alternative to cash flows from operating activities (as
a measure of liquidity) or an indicator of the Company's performance under GAAP.
The primary source of the Company's revenues is the sale of local,
national and network advertising. Most of the Company's revenue is generated
from local advertising which is sold by each station's sales staff.
Historically, approximately 76% and 24% of the Company's gross revenues were
generated from local and national advertising, respectively. The Company's most
significant station operating expenses are employees' salaries and benefits,
commissions, programming expenses and advertising and promotional expenditures.
The Company's revenues vary throughout the year. As is typical in the
radio broadcasting industry, the Company's first calendar quarter generally
produces the lowest revenues for the year, and the fourth calendar quarter
generally produces the highest revenues for the year. The Company's operating
results in any period may be affected by the incurrence of advertising and
promotional expenses that do not necessarily produce commensurate revenues until
the impact of the advertising and promotion is realized in future periods.
ACQUISITIONS AND DISPOSITIONS
During the past several years, the Company has actively managed its
portfolio of radio stations through selected acquisitions, dispositions and
swaps, as well as the use of local marketing agreements ("LMA's") and joint
sales agreements ("JSA's"). Specific transactions entered into by the Company
during the nine months ended September 30, 1997 are discussed below.
11
<PAGE> 12
In March 1997, the Company exchanged WCKG-FM and WYSY-FM in Chicago for
WHOO-AM, WHTQ-FM and WMMO-FM in Orlando (the "Orlando Acquisition"). The Orlando
Acquisition resulted in a pre-tax gain of approximately $49 million. In addition
to receiving the three Orlando stations, Cox Radio also received cash proceeds
of approximately $20 million. Prior to the NewCity Acquisition (as defined
below), the Orlando stations were operated by NewCity Communications, Inc.
("NewCity") since July 1996 under an LMA.
In March 1997, the Company acquired WFNS-AM in Tampa for an aggregate
consideration of $1.5 million (the "Tampa Acquisition"). The Company had been
operating this station pursuant to an LMA or a JSA since June 1995.
In April 1997, Cox Radio completed its acquisition of the license and
certain assets of KRTO-FM in Los Angeles for $19 million in cash (the "Los
Angeles Acquisition").
On April 1, 1997, the Company, through the merger of its wholly owned
subsidiary New Cox Radio II, Inc. with and into NewCity Communications, Inc.
(NewCity), with NewCity as the surviving corporation, acquired all of the issued
and outstanding capital stock of NewCity (the "NewCity Acquisition"). Cox Radio
purchased the stock of NewCity for an aggregate consideration of approximately
$253 million, including approximately $87 million in assumption of NewCity
indebtedness and approximately $3 million in working capital adjustments. To
consummate the NewCity Acquisition, the Company utilized approximately $56
million of amounts due from CEI and borrowed approximately $110 million pursuant
to the Company's $300 million, five-year, senior, unsecured revolving credit
facility with certain banks, including Texas Commerce Bank National Association,
as Administrative Agent. On April 2, 1997, NewCity was merged with and into the
Company, with the Company as the surviving corporation.
In May 1997, the Company agreed to acquire WBHJ-FM and WBHK-FM in
Birmingham, Alabama (the "Birmingham Acquisition I") for an aggregate
consideration of $17 million, consisting of $5 million paid as an option to
purchase and $12 million issued to the seller as a Station Investment Note
Receivable. See further discussions at Note 4. On August 1, 1997, the Company
began operating WBHJ-FM and WBHK-FM under an LMA. The Company expects to
consummate this acquisition during the second half of 1998.
In May 1997, the Company agreed to acquire WENN-FM and WAGG-AM, also in
Birmingham, Alabama, for consideration of $15 million (the "Birmingham
Acquisition II"). In July, 1997, the Company assigned its right to purchase
WENN-FM for consideration of $14.5 million to a third party (the "Birmingham
Disposition"). The Company consummated both the Birmingham Acquisition II and
the Birmingham Disposition during November 1997.
In September 1997, the Company announced that it had entered into an
agreement in principle with a third party to construct, program and own a new
Class A FM radio station in Homewood, Alabama to serve the Birmingham market
(the "Birmingham Acquisition III"). The transaction is pending FCC approval of
the application for the new construction permit and settlement of the
comparative hearing between three applicants for the construction permit. As
part of the agreement, the third party would construct the station, the Company
would enter into an LMA for the new station and the Company would acquire an
option to purchase the station for an aggregate consideration of $5.5.
In September 1997, the Company acquired KISS-FM, KSMG-FM and KLUP-AM in
San Antonio, Texas for an aggregate consideration of $30.4 million plus certain
non-compete agreements.
In October 1997, the Company disposed of the assets of American Comedy
Network for aggregate proceeds of approximately $1.1 million including certain
non-compete agreements. This transaction resulted in a pretax gain of
approximately $.1 million.
12
<PAGE> 13
RESULTS OF OPERATIONS
Three months ended September 30, 1997 compared to three months ended September
30, 1996
Net Revenues. Net revenues for the third quarter of 1997 increased
$22.2 million to $55.2 million, a 67.2% increase over the third quarter of 1996.
This increase was primarily attributable to the NewCity Acquisition.
Additionally, substantial increases in net revenues at the stations in Atlanta,
Los Angeles, Miami and Tampa offset approximately $2.0 million of lost revenue
due to the sale of WIOD-AM in Miami during December of 1996.
Station Operating Expenses. Station operating expenses increased $12.1
million to $34.6 million, an increase of 54.2% over the third quarter of 1996.
The increase was primarily attributable to the NewCity Acquisition but was
offset somewhat by the disposal of WIOD-AM in Miami during December of 1996.
Broadcast Cash Flow. Broadcast cash flow increased $10.0 million to
$20.6 million, a 94.6% increase over the third quarter of 1996 for the reasons
discussed above.
Corporate general and administrative expenses. Corporate general and
administrative expenses decreased $.3 million to $1.7 million primarily due to a
non-recurring corporate charge during the third quarter of 1996 as well as costs
associated with the Company's initial public offering during the third quarter
of 1996.
Operating Income. Operating income for the third quarter of 1997
increased $7.5 million to $14.1 million, an increase of 113.9% over the third
quarter of 1996 for the reasons discussed above.
Interest expense. Interest expense during the third quarter of 1997
totaled $3.3 million as compared to $2.6 million during the third quarter of
1996 as a result of borrowings incurred to complete the NewCity Acquisition, the
Birmingham Acquisition I and the San Antonio Acquisition.
Net Income. Net income increased $3.6 million to $6.0 million, a 153.0%
increase over the third quarter of 1996 for the reasons discussed above.
Nine months ended September 30, 1997 compared to nine months ended September 30,
1996
Net Revenues. Net revenues for the nine months ended September 30, 1997
increased $39.4 million to $138.7 million, a 39.6% increase over the comparable
period of 1996. This increase was primarily attributable to the NewCity
Acquisition as discussed above and substantial percentage increases in net
revenues at the stations in Atlanta, Los Angeles and Tampa offset somewhat by
the disposal of the operations of WCKG-FM/WYSY-FM in Chicago through an LMA
commencing July 1996 and the sale of WIOD-AM in Miami in December 1996.
Station Operating Expenses. Station operating expenses for the nine
months ended September 30, 1997 increased $20.5 million to $90.2 million, an
increase of 29.4% over the comparable period of 1996. The increase was primarily
attributable to the NewCity Acquisition but offset somewhat by the disposal of
the operations of the Chicago stations through an LMA commencing July 1996 and
the sale of WIOD-AM in Miami during December of 1996. Additionally, substantial
reductions in station operating expenses were realized at the Tampa station
group as a result of efforts to control costs.
Broadcast Cash Flow. Broadcast cash flow for the nine months ended
September 30, 1997 increased $18.9 million to $48.5 million, a 63.8% increase
over the comparable period of 1996 for the reasons discussed above.
Corporate general and administrative expenses. Corporate general and
administrative expenses for the nine months ended September 30, 1997 increased
$.8 million to $5.2 million primarily due to
13
<PAGE> 14
additional costs incurred as a result of the NewCity Acquisition and as a result
of the Company being publicly-held during the first nine months of 1997 but
somewhat offset by a non-recurring corporate charge during 1996.
Operating Income. Operating income for the nine months ended September
30, 1997 increased $12.0 million to $31.3 million, an increase of 62.4% over the
comparable period of 1996 for the reasons discussed above.
Interest income/expense. Interest expense during the nine months ended
September 30, 1997 totaled $5.5 million as compared to $5.4 million during the
comparable period of 1996, primarily as a result of borrowings incurred to
complete the NewCity Acquisition, the Birmingham Acquisition I and the San
Antonio Acquisition offset somewhat by interest income earned during the first
quarter of 1997.
Net Income. Net income increased $36.6 million over the prior period to
$44.1 million for the reasons discussed above and as a result of an after-tax
gain of approximately $29.3 million on the sale of WCKG-FM and WYSY-FM in
Chicago during March 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity is cash provided by
operations. For the nine months ended September 30, 1997, cash from operations
increased $7.5 million to $25.3 million, a 42.2% increase primarily attributable
to an increase in net income and deferred taxes and a decrease in accounts
payable, accrued expenses and income taxes payable. Historically, cash
requirements have been funded by Cox Radio's operating activities and through
borrowings under the Credit Agreement (as defined below). In addition, cash
requirements have been funded on a temporary basis through intercompany advances
from CEI under a revolving credit facility with CEI (the "New CEI Credit
Facility"). Borrowings by the Company under the New CEI Credit Facility are
typically repaid by the Company within 30 days. Borrowings under the New CEI
Credit Facility accrue interest at CEI's commercial paper rate plus .75%. CEI
continues to perform day-to-day cash management services for Cox Radio.
On March 7, 1997, Cox Radio entered into a $300 million, five-year,
senior, unsecured revolving credit facility (the "Credit Agreement") with
certain guarantors and banks, including Texas Commerce Bank National
Association, as Administrative Agent, Nationsbank of Texas, N.A., as
Syndications Agent, and Citibank, N.A., as Documentation Agent. The loan
proceeds were used to finance the payment of the consideration payable in the
Merger, repay certain secured debt of NewCity and and finance certain
acquisitions. The remaining loan proceeds may be used to finance (A) the
repayment or repurchase of certain unsecured debt of NewCity, (B) additional
acquisitions and (C) other corporate purposes. The Credit Agreement restricts
the payment of dividends, prohibits certain mergers, consolidations or
dispositions of assets and establishes limitations on, among other things,
additional indebtedness and transactions with affiliates.
Cox Radio borrowed approximately $110 million under the Credit
Agreement to consummate the NewCity Acquisition. Upon consummation of the Cox
Radio Merger, Cox Radio assumed certain indebtedness of NewCity. NewCity was the
obligor of $75 million principal amount of 11-3/8% Senior Subordinated Notes due
2003 (the "Notes"). The Notes were general unsecured obligations of Cox Radio
and are subordinated to all existing and future senior indebtedness of Cox
Radio. On May 2, 1997, following a tender offer and consent solicitation, the
Company paid an aggregate amount of $82.1 million to holders of the Notes in
exchange for approximately $76.4 million principal amount of the Notes and
consents to the elimination of substantially all of the restrictive covenants
applicable to the Notes. The Company obtained the funds necessary to make such
payments from borrowings under the Credit Agreement.
The Company has entered into interest rate swap agreements with certain
lenders providing bank financing. Pursuant to the interest rate swap agreements,
the Company has exchanged its floating rate interest obligations on an aggregate
of $100 million in principal at an average fixed rate of 6.23% per
14
<PAGE> 15
annum for an average maturity of 6.25 years. The fixing of interest rates for
this period reduces in part the Company's exposure to the uncertainty of
floating interest rates. The differential paid or received on the interest rate
swap agreements are recognized as an adjustment to interest expense.
At September 30, 1997, the Company had approximately $240 million of
outstanding indebtedness including approximately $14.9 due to CEI, and had
approximately $75 million available under the Credit Agreement.
Future cash requirements are expected to include capital expenditures,
principal and interest payments on indebtedness and funds for acquisitions. The
Company expects its operations to generate sufficient cash to meet its capital
expenditures and debt service requirements. Additional cash requirements,
including funds for pending or other acquisitions, will be funded by various
sources, including the proceeds from bank financing and, if or when appropriate,
other issuances of Company securities.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Listed below are the exhibits which are filed as part of this
Report (according to the number assigned to them in Item 601 of
Regulation S-K):
EXHIBIT DESCRIPTION
NUMBER
2.1 Agreement and Plan of Merger, dated as of July 1, 1996, by and
among Cox Radio, Inc., New Cox Radio II, Inc., NewCity
Communications, Inc. and certain stockholders of NewCity
Communications, Inc. (Incorporated by reference to the
corresponding exhibit of Cox Radio's Registration Statement on
Form S-1 (Commission File No. 333-08737))*
2.2 Guaranty by Cox Broadcasting, Inc., dated as of July 1, 1996,
in favor of NewCity Communications, Inc. (Incorporated by
reference to the corresponding exhibit of Cox Radio's
Registration Statement on Form S-1 (Commission File No.
333-08737))
3.1 Amended and Restated Certificate of Incorporation of Cox
Radio, Inc. (Incorporated by reference to the corresponding
exhibit of Cox Radio's Registration Statement on Form S-1
(Commission File No. 333-08737))
3.2 Amended and Restated Bylaws of Cox Radio, Inc. (Incorporated
by reference to the corresponding exhibit of Cox Radio's
Registration Statement on Form S-1 (Commission File No.
333-08737))
4.1 Indenture between NewCity Communications, Inc. and Shawmut
Bank Connecticut, National Association, as Trustee, dated as
of November 2, 1993, related to the 11 3/8% Notes due 2003 of
NewCity Communications, Inc. (Incorporated by reference to the
corresponding exhibit of Cox Radio's Registration Statement on
Form S-1 (Commission File No. 333-08737))*
4.2 First Supplemental Indenture between NewCity Communications,
Inc. and Shawmut Bank Connecticut, National Association, as
Trustee, dated as of September 16, 1994, relating to the 11
3/8% Notes due 2003 of NewCity Communications, Inc.
(Incorporated by reference to the corresponding exhibit of
15
<PAGE> 16
Cox Radio's Registration Statement on Form S-1 (Commission
File No. 333-08737))
4.3 Specimen of Class A Common Stock Certificate. (Incorporated by
reference to the corresponding exhibit of Cox Radio's
Registration Statement on Form S-1 (Commission File No.
333-08737))
10.1 Credit Agreement, dated as of March 7, 1997, by and among Cox
Radio, Inc., Texas Commerce Bank National Association,
Nationsbank of Texas, N.A. and Citibank, N.A., individually
and as agents, and the other banks signatory thereto.
(Incorporated by reference to the corresponding exhibit of Cox
Radio's Annual Report on Form 10-K (Commission File No.
1-12187))*
10.2 New CEI Credit Facility. (Incorporated by reference to the
corresponding exhibit of Cox Radio's Registration Statement on
Form S-1 (Commission File No. 333-08737))
10.3 Cox Radio, Inc. Long-Term Incentive Plan. (Incorporated by
reference to the corresponding exhibit of Cox Radio's
Registration Statement on Form S-1 (Commission File No.
333-08737))
10.4 Cox Radio, Inc. Employee Stock Purchase Plan. (Incorporated by
reference to the corresponding exhibit of Cox Radio's
Registration Statement on Form S-1 (Commission File No.
333-08737))
10.5 Cox Radio, Inc. Restricted Stock Plan for Non-Employee
Directors (Incorporated by reference to the corresponding
exhibit of Cox Radio's Registration Statement on Form S-1
(Commission File No. 333-08737))
10.6 Tax Allocation and Indemnification Agreement dated as of
October 2, 1996, by and between Cox Enterprises, Inc. and Cox
Radio, Inc. (Incorporated by reference to the corresponding
exhibit of Cox Radio's Annual Report on Form 10-K (Commission
File No. 1-12187))
21 Subsidiaries of the Registrant
27.1 Financial Data Schedule (for SEC use only)
* Schedules and Exhibits intentionally omitted.
(b) Reports on Form 8-K filed during the quarter ended September 30,
1997:
None
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COX RADIO, INC.
November 13, 1997 /s/ Maritza C. Phicon
--------------------------------------------
Maritza C. Pichon
Chief Financial Officer
(Principal Financial Officer and
duly authorized officer)
17
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF COX RADIO, INC.
WHIO, Inc.
WSB, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 9,273
<SECURITIES> 0
<RECEIVABLES> 46,691
<ALLOWANCES> (1,778)
<INVENTORY> 0
<CURRENT-ASSETS> 60,240
<PP&E> 82,787
<DEPRECIATION> (38,413)
<TOTAL-ASSETS> 646,208
<CURRENT-LIABILITIES> 21,350
<BONDS> 0
0
0
<COMMON> 28,385
<OTHER-SE> 252,839
<TOTAL-LIABILITY-AND-EQUITY> 646,208
<SALES> 0
<TOTAL-REVENUES> 138,692
<CGS> 0
<TOTAL-COSTS> 90,218
<OTHER-EXPENSES> 17,178
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (7,072)
<INCOME-PRETAX> 74,336
<INCOME-TAX> 30,201
<INCOME-CONTINUING> 44,135
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,135
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 0
</TABLE>
