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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 JUNE 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. LOGO]
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 58-1620022
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
1400 LAKE HEARN DRIVE, ATLANTA, GEORGIA 30319
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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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 irequired 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 8,749,640 shares of Class A Common Stock outstanding as of
July 31, 1997.
There were 19,577,672 shares of Class B Common Stock outstanding as of
July 31, 1997.
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COX RADIO, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
TABLE OF CONTENTS
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PAGE
----
PART I - FINANCIAL INFORMATION
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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
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COX RADIO, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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JUNE 30, DECEMBER 31,
1997 1996
--------- ----------
(Thousands of Dollars)
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................. $ 11,550 $ 1,544
Restricted cash ........................................... -- 9,051
Accounts receivable, less allowance for doubtful accounts
of $1,671 and $834 ...................................... 44,647 31,511
Prepaid expenses and other current assets ................. 5,867 1,575
Income taxes receivable ................................... 2,239
--------- ---------
Total current assets ................................... 64,303 43,681
Plant and equipment, net .................................... 40,473 27,070
Intangible assets, net ...................................... 495,963 138,119
Amounts due from Cox Enterprises, Inc. ...................... -- 49,667
Station Investment Note Receivable .......................... 12,000 --
Other assets ................................................ 8,107 3,182
--------- ---------
Total assets ........................................... $ 620,846 $ 261,719
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses ..................... $ 16,562 $ 10,296
Unit appreciation plan ("UAP") liability .................. -- 646
Income taxes payable ...................................... -- 3,216
Deferred Barter/Trade ..................................... 3,039 --
Other current liabilities ................................. 148 668
--------- ---------
Total current liabilities .............................. 19,749 14,826
Amounts due to Cox Enterprises, Inc. ........................ 7,248 --
Notes Payable ............................................... 215,000 --
Deferred income taxes ....................................... 104,674 11,095
--------- ---------
Total liabilities ...................................... 346,671 25,921
--------- ---------
Commitments and contingencies (Note 3)
SHAREHOLDERS' EQUITY:
Class A common stock, $1.00 par value; 70,000,000 shares
authorized and 8,749,640 shares outstanding ............ 8,750 8,737
Class B common stock, $1.00 par value; 45,000,000 shares
authorized and 19,577,672 shares outstanding ........... 19,578 19,578
Additional paid-in capital ................................ 249,196 248,972
Deficit in retained earnings .............................. (3,349) (41,489)
--------- ---------
Total shareholders' equity ............................. 274,175 235,798
--------- ---------
Total liabilities and shareholders' equity ............. $ 620,846 $ 261,719
========= =========
</TABLE>
See notes to consolidated financial statements.
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COX RADIO, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
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THREE MONTHS ENDED SIX MONTHS ENDED
--------------------- ---------------------
JUNE 30, JUNE 30,
--------------------- ---------------------
1997 1996 1997 1996
-------- -------- -------- --------
(Thousands of Dollars)
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NET REVENUES:
Local ....................... $ 39,550 $ 27,852 $ 60,842 $ 50,414
National .................... 14,187 8,638 21,301 15,479
Other ....................... 612 250 1,361 415
-------- -------- -------- --------
Total revenues ............ 54,349 36,740 83,504 66,308
COSTS AND EXPENSES:
Operating ................... 13,650 11,053 21,842 20,493
Selling, general and
administrative .............. 22,394 14,461 33,801 26,804
Corporate general and
administrative .............. 2,028 1,238 3,450 2,341
Depreciation and
amortization ................ 5,133 1,997 7,185 3,979
-------- -------- -------- --------
OPERATING INCOME ............... 11,144 7,991 17,226 12,691
OTHER INCOME (EXPENSE):
Interest income ................ 525 -- 1,472 --
Interest expense ............... (3,567) (1,389) (3,571) (2,856)
Gain on sale of radio station .. -- -- 49,223 --
Other - net .................... (196) (179) (264) (275)
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES ..... 7,906 6,423 64,086 9,560
Income taxes ................... 3,969 3,022 25,946 4,347
-------- -------- -------- --------
NET INCOME ..................... $ 3,937 $ 3,401 $ 38,140 $ 5,213
======== ======== ======== ========
Net income per common share .... $ .14 $ .17 $ 1.35 $ .27
======== ======== ======== ========
Weighted average common
shares outstanding ............. 28,327 19,578 28,321 19,578
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
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COX RADIO, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
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CLASS A CLASS B
COMMON STOCK COMMON STOCK ADDITIONAL
-------- -------- -------- -------- 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 ...................... -- -- -- -- -- 38,140 38,140
Issuance of restricted stock ...... 13 13 -- -- 224 -- 237
-------- -------- -------- -------- -------- -------- --------
BALANCE AT JUNE 30, 1997 .......... 8,750 $ 8,750 19,578 $ 19,578 $249,196 $ (3,349) $274,175
======== ======== ======== ======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
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COX RADIO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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SIX MONTHS ENDED
JUNE 30,
----------------------
1997 1996
--------- --------
(Thousands of Dollars)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................. $ 38,140 $ 5,213
Items not requiring cash:
Depreciation ......................................................... 2,205 1,287
Amortization ......................................................... 4,980 2,692
Deferred income taxes ................................................ 22,852 984
Gain on sale of radio station ........................................ (49,223) --
Decrease in accounts receivable ........................................ (26) (618)
Increase in accounts payable and accrued expenses ...................... 50 332
Decrease in taxes payable .............................................. (5,455) (112)
Increase (decrease) of UAP liability ................................... (646) 459
Other, net ............................................................. (466) (1,167)
--------- --------
Net cash provided by operating activities ....................... 12,411 9,070
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................... (4,171) (1,153)
Acquisitions, net of cash acquired ..................................... (283,517) (13,188)
Increase in other long-term assets ..................................... (17,546) (842)
Net proceeds from sale of radio station ................................ 19,741 --
Other, net ............................................................. 237 (6)
--------- --------
Net cash used in investing activities ........................... (285,256) (15,189)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in amounts due to CEI ......................................... 56,915 12,832
Borrowings of debt ..................................................... 214,994 --
Dividends paid ......................................................... -- (4,464)
Increase (decrease) in book overdrafts ................................. 1,891 (2,274)
--------- --------
Net cash provided by financing activities ....................... 273,800 6,094
--------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................... 955 (25)
CASH AND CASH EQUIVALENTS (INCLUDING RESTRICTED CASH) AT BEGINNING OF
PERIOD ............................................................... 10,595 1,691
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................ $ 11,550 $ 1,666
========= ========
</TABLE>
See notes to consolidated financial statements.
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COX RADIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 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. i("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 filed with the
Securities and Exchange Commission on Form 10-K (Commission File No. 1-12187).
The results of operations for the six months ended June 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. See Exhibit 21 for the list of subsidiaries hereof.
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 pushed down to the assets
7
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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 ............................................... 9,427
Plant and equipment ............................................... 9,310
Goodwill/FCC broadcast licenses ................................... 307,094
Deferred taxes .................................................... (70,530)
=========
Total cost of acquisition including assumed liabilities ........... 255,301
=========
</TABLE>
The above amounts are subject to purchase accounting adjustments which will be
made in subsequent periods.
In May 1997, the Company agreed to acquire WBHJ-FM and WBHK-FM in
Bimingham, 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 discussion at Note 4. On August 1, 1997, the Company
began operating WBHJ-FM and WBHK-FM under a local marketing agreement ("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 current owner has consented to this assignment. The Company
expects to consummate these transactions during the third quarter of 1997
pending regulatory approvals.
The Birmingham Acquisition I, the Birmingham Acquisition II and the
Birmingham Disposition are collectively referred to herein as the "Birmingham
Transactions".
In June 1997, the Company agreed to acquire KISS-FM, KSMG-FM and
KLUP-AM in San Antonio, Texas for an aggregate consideration of $30 million
plus certain non-compete agreements (the "San Antonio Acquisition"). The
Company expects to close on this transaction during the fourth quarter of 1997
pending government and regulatory approvals.
The following unaudited pro forma summary of operations presents the
consolidated results of operations as if the Cox Radio Consolidation (as
discussed on 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 and
the Los Angeles Acquisition due to immateriality.
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THREE MONTHS ENDED SIX MONTHS
------------------- ----------
JUNE 30, ENDED JUNE 30,
-------- --------------
1997 1996 1997 1996
------- ------- -------- -------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
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Net revenues ................................... $58,078 $52,062 $105,092 $94,560
Corporate general and administrative expenses .. 2,028 1,543 3,926 2,737
Depreciation and amortization .................. 5,514 4,691 10,480 9,349
Operating income ............................... 11,930 9,343 18,133 14,661
Net income ..................................... 3,987 2,614 6,795 2,917
------- ------- -------- -------
Earnings per common share ...................... $ .14 $ .09 $ .24 $ .10
------- ------- -------- -------
Pro forma shares outstanding ................... 28,327 28,327 28,327 28,327
======= ======= ======== =======
</TABLE>
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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 may be used to (i) finance the payment of the consideration payable in
the Merger, (ii) repay certain secured debt of NewCity and (iii) 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.
In connection with the NewCity Acquisition and the merger of NewCity
with and into the Company, as described in Note 2, the Company succeeded to
NewCity's obligations as the issuer of $75 million principal amount of 11-3/8%
Senior Subordinated Notes due 2003 (the "Notes"). On April 3, 1997, the Company
commenced a tender offer for all of the outstanding Notes (the "Tender Offer").
In conjunction with the Tender Offer, the Company also solicited
consents (the "Consent Solicitation") to amend the Indenture under which the
Notes were issued (the "Indenture"), including the elimination of substantially
all of the restrictive covenants contained in the Indenture (collectively, the
"Amendments"). The Tender Offer and Consent Solicitation expired on April 30,
1997 (the "Expiration Date"). As of the Expiration Date, holders of
approximately $74.6 million principal amount of Notes tendered their Notes and
gave their consents
The Tender Offer price and consent payment for each $1,000 principal
amount of Notes subject to the Tender Offer and Consent Solicitation was
$1,100.00, plus accrued and unpaid interest until May 2, 1997 (the "Payment
Date"). Holders of Notes who consented to the Amendments at or prior to
Midnight, New York City time, on April 17,1997 received the total consideration
referred to in the previous sentence on the Payment Date; holders of Notes who
did not consent to the Amendments at or prior to such time received $1,097.61
for each $1,000 principal amount of Notes validly tendered.
The aggregate amount paid by the Company to holders of Notes in
connection with the Tender Offer and Consent Solicitation was $82.1 million,
which was paid on May 2, 1997 (the "Payment Date"). The Company obtained the
funds necessary to make such payments from
borrowings under the Credit Agreement.
At June 30, 1997, the Company had approximately $222 million of
outstanding indebtedness including amounts due to CEI, and had approximately
$85 million available under the Credit Agreement.
4. STATION INVESTMENT NOTE RECEIVABLE
In connection with the Birmingham Acquisition I discussed in Note 2,
the Company has loaned $12 million to an entity which owns radio stations 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 WBHJ-FM and WBHK-FM.
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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.
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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 six
month periods ended June 30, 1997 and 1996.
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 past three months are discussed below.
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 JSA since June 1995.
11
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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. See Exhibit 21 for the list of subsidiaries hereof.
In May 1997, the Company agreed to acquire WBHJ-FM and WBHK-FM in
Bimingham, 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 current owner has consented to this assignment. The Company
expects to consummate these transactions during the third quarter of 1997
pending regulatory approvals.
In June 1997, the Company agreed to acquire KISS-FM, KSMG-FM and
KLUP-AM in San Antonio, Texas for an aggregate consideration of $30 million
plus certain non-compete agreements. The Company expects to close on this
transaction during the fourth quarter of 1997 pending government and regulatory
approvals.
RESULTS OF OPERATIONS
Three months ended June 30, 1997 compared to three months ended June 30, 1996
Net Revenues. Net revenues for the second quarter of 1997 increased
$17.6 million to $54.3 million, a 47.9% increase over the second quarter of
1996. This increase was primarily attributable to the NewCity Acquisition which
contributed approximately $17.7 million of net revenues during the second
quarter of 1997. Substantial increases in net revenues at the stations in
Atlanta, Los Angeles and Tampa offset approximately $4.9 million of lost
revenue due to the sale of WCKG-FM and WYSY-FM in Chicago and WIOD-AM in Miami
during July and December of 1996, respectively.
Station Operating Expenses. Station operating expenses increased $10.5
million to $36.0 million, an increase of 41.2% from the second quarter of 1996.
The increase was primarily attributable to the NewCity Acquisition which
contributed approximately $12.6 million but was offset somewhat by the disposal
of the operations of the Chicago stations and WIOD-AM in Miami during July and
December of 1996, respectively.
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Broadcast Cash Flow. Broadcast cash flow increased $7.1 million to
$18.3 million, a 63.4% increase over the second quarter of 1996 for the reasons
discussed above.
Corporate general and administrative expenses. Corporate general and
administrative expenses increased $.8 million to $2.0 million primarily due to
additional costs incurred as a result of the NewCity Acquisition and as a
result of the Company being publicly-held during the second quarter of 1997.
Operating Income. Operating income for the second quarter of 1997
increased $3.2 million to $11.1 million, an increase of 39.5% over the second
quarter of 1996 for the reasons discussed above.
Interest income/expense. Interest expense during the second quarter of
1997 totaled $3.6 million as compared to $1.4 million during the second quarter
of the prior year as a result of borrowings incurred to complete the NewCity
Acquisition and the Birmingham Acquisition I.
Net Income. Net income increased $.5 million to $3.9 million, a 15.7% increase
over the first quarter of 1996 for the reasons discussed above.
Six months ended June 30, 1997 compared to six months ended June 30, 1996
Net Revenues. Net revenues for the six months ended June 30, 1997
increased $17.2 million to $83.5 million, a 25.9% 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, Tampa and Dayton offset
somewhat by the disposal of the operations of WCKG-FM/WYSY-FM in Chicago and
WIOD-AM in Miami in July and December 1996, respectively.
Station Operating Expenses. Station operating expenses for the six
months ended June 30, 1997 increased $8.3 million to $55.6 million, an increase
of 17.6% over the comparable period of 1996. The increase was attributable to
NewCity Acquisition offset somewhat by the disposal of the operations of the
Chicago stations and WIOD-AM in Miami during July and December of 1996,
respectively. 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 six months ended June
30, 1997 increased $8.9 million to $27.9 million, a 46.6% increase over the
comparable period of 1996 for the reasons discussed above.
Corporate general and administrative expenses. Corporate general and
administrative expenses for the six months ended June 30, 1997 increased $1.1
million to $3.5 million primarily due to additional costs incurred as a result
of the NewCity Acquisition and as a result of the Company being publicly-held
during the six months of 1997.
Operating Income. Operating income for the six months ended June 30,
1997 increased $4.5 million to $17.2 million, an increase of 35.7% over the
comparable period of 1996 for the reasons discussed above.
Interest income/expense. Interest expense during the six months ended
June 30, 1997 totaled $3.6 million as compared to $2.9 million during the
comparable period of 1996, primarily as a result borrowings incurred to
complete the NewCity Acquisition and the Birmingham Acquisition I.
Net Income. Net income increased $32.9 million over the prior period
to $38.1 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.
13
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity is cash provided by
operations. For the six months ended June 30, 1997, cash from operations
increased $3.3 million to $12.4 million, a 36.8% increase primarily
attributable to an increase in net income. Historically, cash requirements have
been funded by Cox Radio's operating activities and, as needed, through
intercompany advances from CEI under a revolving credit facility with CEI (the
"New CEI Credit Facility"). 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 may be used to (i) finance the payment of the consideration payable in
the Merger, (ii) repay certain secured debt of NewCity and (iii) 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, including
NewCity's obligations in respect of the Notes and pursuant to the Indenture.
The Notes were general unsecured obligations of Cox Radio and are subordinated
to all existing and future senior indebtedness of Cox Radio.
On April 3, 1997, the Company commenced a tender offer for all of the
outstanding Notes (the "Tender Offer"). In conjunction with the Tender Offer,
the Company also solicited consents (the "Consent Solicitation") to amend the
Indenture under which the Notes were issued (the "Indenture"), including the
elimination of substantially all of the restrictive covenants contained in the
Indenture (collectively, the "Amendments"). The Tender Offer and Consent
Solicitation expired on April 30, 1997 (the "Expiration Date"). As of the
Expiration Date, holders of approximately $74.6 million principal amount of
Notes tendered their Notes and gave their consents
The Tender Offer price and consent payment for each $1,000 principal
amount of Notes subject to the Tender Offer and Consent Solicitation was
$1,100.00, plus accrued and unpaid interest until May 2, 1997 (the "Payment
Date"). Holders of Notes who consented to the Amendments at or prior to
Midnight, New York City time, on April 17,1997 received the total consideration
referred to in the previous sentence on the Payment Date; holders of Notes who
did not consent to the Amendments at or prior to such time received $1,097.61
for each $1,000 principal amount of Notes validly tendered.
The aggregate amount paid by the Company to holders of Notes in
connection with the Tender Offer and Consent Solicitation was $82.1 million,
which was paid on May 2, 1997 (the "Payment Date"). The Company obtained the
funds necessary to make such payments from borrowings under the Credit
Agreement
At June 30, 1997, the Company had approximately $222 million of
outstanding indebtedness including amounts due to CEI, and had approximately
$85 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.
14
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on May 9, 1997.
Two matters were voted upon at the meeting: (a) the election of a Board of
Directors of six members to serve until the 1998 Annual Meeting or until their
successors are duly elected and qualified; and (b) ratification of the
appointment by the Board of Directors of Deloitte & Touche, LLP, independent
certified public accountants, as the Company's independent auditors for the
fiscal year ending December 31, 1997.
The following directors were elected and they received the votes
indicated:
<TABLE>
<CAPTION>
Nominee Votes in Favor Votes Withheld
------- -------------- --------------
<S> <C> <C>
David E. Easterly 203,185,660 139,200
Ernest D. Fears, Jr. 203,187,760 137,100
Paul M. Hughes 203,187,760 137,100
James C. Kennedy 203,185,660 139,200
Robert F. Neil 203,185,660 139,200
Nicholas D. Trigony 203,185,560 139,300
</TABLE>
Consistent with the Company's disclosure in its proxy statement,
immediately following the 1997 Annual Meeting of Stockholders, the Company's
Board of Directors amended the Company's bylaws to expand the number of
directors to seven and elected Richard A. Ferguson, former President and Chief
Executive Officer of NewCity Communications, Inc., to fill the vacancy.
Ratification of Deloitte & Touche, LLP, as independent auditors for
the fiscal year ending December 31, 1997, was approved with 203,298,735 votes
in favor, 700 votes opposed to, and 25,425 abstentions.
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):
<TABLE>
<CAPTION>
EXHIBIT
-------
NUMBER DESCRIPTION
------ -----------
<S> <C>
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
</TABLE>
15
<PAGE> 16
<TABLE>
<S> <C>
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 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)
</TABLE>
* Schedules and Exhibits intentionally omitted.
(b) Reports on Form 8-K filed during the quarter ended
June 30, 1997:
The Company filed a report on Form 8-K on April 14,
1997 related to the Company's tender offer for NewCity's public
indebtedness on April 1, 1997.
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.
August 11, 1997 /s/ Maritza C. Pichon
--------------------------------
Maritza C. Pichon
Chief Financial Officer
(Principal Financial Officer and
duly authorized officer)
17
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF COX RADIO, INC.
Cox Kentucky, Inc.
Cox Louisville, L.L.C.
WHIO, Inc.
WSB, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 11,550
<SECURITIES> 0
<RECEIVABLES> 46,318
<ALLOWANCES> (1,671)
<INVENTORY> 0
<CURRENT-ASSETS> 64,303
<PP&E> 77,988
<DEPRECIATION> (37,515)
<TOTAL-ASSETS> 620,846
<CURRENT-LIABILITIES> 19,749
<BONDS> 215,000
0
0
<COMMON> 28,328
<OTHER-SE> 245,847
<TOTAL-LIABILITY-AND-EQUITY> 620,846
<SALES> 0
<TOTAL-REVENUES> 83,504
<CGS> 0
<TOTAL-COSTS> 55,643
<OTHER-EXPENSES> 10,635
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,571
<INCOME-PRETAX> 64,086
<INCOME-TAX> 25,946
<INCOME-CONTINUING> 38,140
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,140
<EPS-PRIMARY> 1.35
<EPS-DILUTED> 0
</TABLE>
