<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, 1999
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 1-12187
(COX RADIO, INC. LOGO)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
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)
</TABLE>
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 9,308,534 shares of Class A Common Stock outstanding as
of October 31, 1999.
There were 19,577,672 shares of Class B Common Stock outstanding as
of October 31, 1999.
<PAGE> 2
COX RADIO, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.......................................................... 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..................................................... 12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.................... 19
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .......................... 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............................................. 20
SIGNATURES................................................................................ 22
</TABLE>
2
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COX RADIO, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(AMOUNTS IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ........................................ $ 7,815 $ 6,479
Accounts receivable, less allowance for doubtful accounts
of $2,919 and $2,862, respectively ............................ 67,454 58,190
Prepaid expenses and other current assets ........................ 3,984 3,430
--------- --------
Total current assets .......................................... 79,253 68,099
Plant and equipment, net ........................................... 55,581 51,886
Intangible assets, net ............................................. 815,229 590,686
Amounts due from Cox Enterprises, Inc. ............................. -- 30,292
Station investment notes receivable ................................ 850 7,250
Other assets ....................................................... 11,197 4,899
--------- --------
Total assets .................................................. $ 962,110 $753,112
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses ............................ $ 20,454 $ 19,245
Accrued salaries and wages ....................................... 5,803 4,570
Accrued interest ................................................. 4,754 1,633
Income taxes payable ............................................. 8,323 2,686
Other current liabilities ........................................ 1,228 1,018
--------- --------
Total current liabilities ..................................... 40,562 29,152
Notes payable ...................................................... 420,092 300,235
Deferred income taxes .............................................. 127,751 110,693
Amounts due to Cox Enterprises, Inc. ............................... 7,604 --
--------- --------
Total liabilities ............................................. 596,009 440,080
--------- --------
Commitments and contingencies (Note 3)
Shareholders' Equity:
Preferred stock, $1.00 par value: 5,000,000 shares authorized,
None outstanding .............................................. -- --
Class A common stock, $1.00 par value; 70,000,000 shares
Authorized; 9,257,439 and 8,971,955 shares outstanding at
September 30, 1999 and December 31, 1998, respectively ........ 9,257 8,972
Class B common stock, $1.00 par value; 45,000,000 shares
Authorized; 19,577,672 shares outstanding at September 30, 1999
and December 31, 1998 ......................................... 19,578 19,578
Additional paid-in capital ....................................... 261,084 253,207
Retained earnings ................................................ 77,833 31,275
Class A common stock held in treasury (39,952 shares at cost) .... (1,651) --
--------- --------
Total shareholders' equity .................................... 366,101 313,032
--------- --------
Total liabilities and shareholders' equity .................... $ 962,110 $753,112
========= ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
COX RADIO, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- -----------------------------
1999 1998 1999 1998
-------- -------- --------- ---------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
NET REVENUES:
Local ............................................ $ 57,244 $ 50,233 $ 160,635 $ 139,837
National ......................................... 19,814 17,541 52,064 47,441
Other ............................................ 2,696 1,381 6,013 3,098
-------- -------- --------- ---------
Total revenues ................................. 79,754 69,155 218,712 190,376
COSTS AND EXPENSES:
Operating ........................................ 18,422 17,367 51,043 46,906
Selling, general and administrative .............. 28,058 25,068 84,005 75,952
Corporate general and administrative ............. 2,673 1,992 7,268 5,924
Depreciation and amortization .................... 7,544 6,144 20,758 17,098
-------- -------- --------- ---------
OPERATING INCOME .................................... 23,057 18,584 55,638 44,496
OTHER INCOME (EXPENSE):
Interest income ..................................... -- 164 466 375
Interest expense .................................... (5,831) (4,726) (16,288) (12,604)
Gain on sale of radio stations ...................... 719 -- 40,521 --
Other - net ......................................... (135) (153) (266) (303)
-------- -------- --------- ---------
INCOME BEFORE INCOME TAXES .......................... 17,810 13,869 80,071 31,964
Income taxes ........................................ 7,750 6,849 33,513 15,824
-------- -------- --------- ---------
NET INCOME .......................................... $ 10,060 $ 7,020 $ 46,558 $ 16,140
======== ======== ========= =========
Basic net income per common share ................... $ .35 $ .25 $ 1.63 $ .57
======== ======== ========= =========
Diluted net income per common share ................. $ .35 $ .24 $ 1.62 $ .56
======== ======== ========= =========
Weighted average basic common shares
outstanding ......................................... 28,758 28,462 28,649 28,446
======== ======== ========= =========
Weighted average diluted common shares
outstanding ......................................... 28,920 28,890 28,787 28,882
======== ======== ========= =========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
COX RADIO, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK ADDITIONAL
--------------- ---------------- PAID-IN RETAINED TREASURY
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL
------ ------ ------ ------- ---------- -------- -------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1998 ................... 8,972 $8,972 19,578 $19,578 $253,207 $31,275 -- $ 313,032
Net income .................................... -- -- -- -- -- 46,558 -- 46,558
Issuance of Class A common stock
related to incentive plans (including tax
benefit on stock options exercised) ......... 285 285 -- -- 7,877 -- -- 8,162
Repurchase of Class A common stock ............ -- -- -- -- -- -- $(1,651) (1,651)
----- ------ ------ ------- -------- ------- ------- ---------
BALANCE AT SEPTEMBER 30, 1999 .................. 9,257 $9,257 19,578 $19,578 $261,084 $77,833 $(1,651) $ 366,101
===== ====== ====== ======= ======== ======= ======= =========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
COX RADIO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1999 1998
--------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................................. $ 46,558 $ 16,140
Items not requiring cash:
Depreciation ............................................................. 5,173 4,224
Amortization ............................................................. 15,585 12,874
Deferred income taxes .................................................... 17,741 3,378
Gain on sale of radio stations ........................................... (40,521) --
Increase in accounts receivable ............................................ (9,264) (5,995)
Increase in accounts payable and accrued expenses .......................... 1,381 2,606
Increase in accrued salaries and wages ..................................... 1,233 --
Increase in accrued interest ............................................... 3,121 3,055
Increase in taxes payable .................................................. 8,079 1,376
Other, net ................................................................. (1,287) (983)
--------- ---------
Net cash provided by operating activities ........................... 47,799 36,675
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ....................................................... (4,901) (4,817)
Acquisitions, net of cash acquired ......................................... (208,776) (69,182)
Decrease in station investment notes receivable ............................ 6,400 --
Increase in other long-term assets ......................................... (6,652) (9,639)
Proceeds from the sale of businesses ....................................... 5,868 --
Increase in amounts due to (from) CEI ...................................... 37,361 (18,044)
Other, net ................................................................. -- 29
--------- ---------
Net cash used in investing activities ............................... (170,700) (101,653)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings of debt ..................................................... 119,857 64,670
Proceeds from stock options exercised ...................................... 5,720 1,216
Repurchase of Class A common stock ......................................... (1,651) --
Increase in book overdrafts ................................................ 311 327
--------- ---------
Net cash provided by financing activities .......................... 124,237 66,213
--------- ---------
Net increase in cash and cash equivalents .................................. 1,336 1,235
Cash and cash equivalents at beginning of period ........................... 6,479 6,218
--------- ---------
Cash and cash equivalents at end of period ................................. $ 7,815 $ 7,453
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest ............................................................. $ 13,167 $ 9,549
Income taxes ......................................................... $ 7,697 $ 10,945
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:
Value of businesses exchanged ........................................ $ 55,000 $ --
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 7
COX RADIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1999
1. BASIS OF PRESENTATION AND OTHER INFORMATION
Cox Radio, Inc. is a leading national radio broadcast company whose
business, which constitutes one reportable segment, is devoted to acquiring,
developing and operating radio stations located throughout the United States.
Cox Enterprises, Inc. indirectly owns approximately 68% of the Common Stock of
Cox Radio.
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 consolidated interim financial statements should be read in
conjunction with the audited consolidated financial statements for the year
ended December 31, 1998 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 three and nine months ended
September 30, 1999 are not necessarily indicative of the results to be expected
for the year ending December 31, 1999 or any other interim period.
2. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES
During the past several years, Cox Radio has actively managed its
portfolio of radio stations through selected acquisitions, dispositions and
swaps, as well as the use of local marketing agreements, or LMA's, and joint
sales agreements, or JSA's. All of the consummated and pending transactions
have been or will be accounted for as purchase transactions. Specific
transactions entered into or consummated by Cox Radio during the nine months
ended September 30, 1999 are discussed below.
In January 1999, Cox Radio acquired the assets of radio station
WSUN-FM (formerly WLVU-FM) serving the Tampa-St. Petersburg, Florida market in
exchange for the assets of WSUN-AM in Tampa-St. Petersburg, Florida and
approximately $17 million. Prior to the acquisition, Cox Radio had been
operating WSUN-FM pursuant to an LMA since September 1998.
In January 1999, Cox Radio entered into an agreement to acquire
KRTQ-FM (formerly KTFX-FM) in Tulsa, Oklahoma for $3.5 million. Cox Radio also
entered into a Station Investment Note Receivable with the seller for $0.9
million which is collateralized by substantially all the assets of the station.
Cox Radio has been operating this station pursuant to an LMA since January
1999. Pending certain regulatory approvals, Cox Radio expects to consummate
this acquisition in December 1999.
On December 21, 1998 and March 1, 1999, Cox Radio purchased shares of
common stock of USA Digital Radio, Inc., a developer of digital radio
broadcasting technology, for a total purchase price of $2.5 million.
In May 1999, Cox Radio acquired radio stations WVEZ-FM and WSFR-FM and
the option to purchase WMHX-FM serving the Louisville, Kentucky market and
radio stations WFJO-FM, WHPT-FM and WDUV-FM (formerly WTBT-FM) serving the
Tampa-St. Petersburg, Florida market in exchange for the Company's radio
stations WYYY-FM, WBBS-FM, WWHT-FM, WHEN-AM and WSYR-AM serving the Syracuse,
New York market, plus additional cash consideration of approximately $94
million, resulting in a pre-tax gain of approximately $39.2 million.
7
<PAGE> 8
2. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES (CONTINUED)
In June 1999, Cox Radio exercised its option to purchase WMHX-FM in
Louisville for a purchase price of approximately $2.0 million. Cox Radio
consummated the acquisition of WMHX-FM in September 1999. Cox Radio had been
operating the station under a JSA or LMA since May 1999. In connection with
obtaining regulatory approvals for these transactions, Cox Radio agreed to
divest ownership of WRVI-FM and WLSY-FM serving the Louisville, Kentucky
market. Such stations were transferred to a trust for the benefit of Cox Radio
pending sale to a third party. In May 1999, Cox Radio and the trust entered
into an agreement for the sale of WRVI-FM and WLSY-FM for consideration of $5.0
million resulting in a pre-tax gain of approximately $1.6 million. This
disposition was consummated in September 1999.
In June 1999, Cox Radio disposed of the assets of WPTW-AM in Dayton,
Ohio for consideration of $0.1 million.
In August 1999, Cox Radio consummated its acquisition of WRLR-FM
(formerly WEDA-FM) in Homewood, Alabama serving the Birmingham, Alabama market
for a purchase price of approximately $5.5 million and the assumption of debt
of approximately $0.2 million. Prior to the acquisition, Cox Radio had been
operating this station under an LMA since November 1998.
In August 1999, Cox Radio acquired WPYO-FM (formerly WTLN-FM) serving
the Orlando, Florida market for consideration of $14.5 million. Cox Radio had
been operating the station pursuant to an LMA since January 1999. In a related
transaction, Cox Radio disposed of the assets of WTLN-AM, also serving the
Orlando, Florida market, for $0.5 million.
In August 1999, Cox Radio entered into an agreement to acquire
KRTR-FM, KXME-FM, KGMZ-FM and KGMZ-AM in Honolulu, Hawaii for consideration of
approximately $16.4 million. Pending certain regulatory approvals, Cox Radio
anticipates consummating this transaction during the fourth quarter of 1999.
In August 1999, Cox Radio agreed to acquire from AMFM, Inc. WEDR-FM in
Miami, Florida; WFOX-FM in Atlanta, Georgia; WFYV-FM, WAPE-FM, WBWL-AM,
WKQL-FM, WMXQ-FM and WOKV-AM in Jacksonville, Florida; WEFX-FM, WNLK-AM,
WKHL-FM and WSTC-AM in Stamford/Norwalk, Connecticut; and WPLR-FM and local
sales rights at WYBC-FM in New Haven, Connecticut in exchange for KFI-AM and
KOST-FM in Los Angeles, California plus approximately $3.0 million. In October
1999, Cox Radio began operating these stations pursuant to an LMA. Pending
certain regulatory approvals, including obtaining a temporary waiver of the
FCC's newspaper-radio cross-ownership rule for the acquisition of WFOX-FM in
Atlanta, Cox Radio anticipates consummating this transaction in the first
quarter of 2000.
In September 1999, Cox Radio disposed of the assets of WGBB-AM serving
the Nassau-Suffolk (Long Island), New York market for consideration of $1.7
million.
In September 1999, Cox Radio acquired WBTS-FM (formerly WNGC-FM) in
Athens, Georgia for consideration of approximately $78 million.
In October 1999, Cox Radio entered into an agreement to dispose of the
assets of KACE-FM and KRTO-FM in Los Angeles for approximately $75 million.
Pending certain regulatory approvals, Cox Radio anticipates consummating this
disposition in the fourth quarter of 1999.
8
<PAGE> 9
2. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES (CONTINUED)
The following unaudited pro forma summary of operations presents the
consolidated results of operations as if all consummated and pending
transactions had occurred on January 1, 1998 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.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-----------------------------------------
1999 1998 1999 1998
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net revenues .................................... $ 82,479 $ 71,260 $226,390 $198,356
Net income ...................................... $ 4,837 $ 2,720 $ 10,750 $ 3,312
======== ======== ======== ========
Basic pro forma net income per common share ..... $ .17 $ .10 $ .38 $ .12
======== ======== ======== ========
Diluted pro forma net income per common share ... $ .17 $ .09 $ .37 $ .11
======== ======== ======== ========
Basic pro forma shares outstanding .............. 28,758 28,462 28,649 28,446
======== ======== ======== ========
Diluted pro forma shares outstanding ............ 28,920 28,890 28,787 28,882
======== ======== ======== ========
</TABLE>
3. COMMITMENTS AND CONTINGENCIES
On March 7, 1997, Cox Radio entered into a $300 million, five-year,
senior, unsecured revolving credit facility 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 for the acquisition of NewCity Communications, Inc. in
April 1997, repay certain secured debt of NewCity Communications and finance
certain other acquisitions. The remaining credit availability may be used to
finance additional acquisitions and other corporate purposes. The bank credit
facility has restrictions on the payment of dividends, certain mergers,
consolidations or dispositions of assets and establishes limitations on, among
other things, additional indebtedness and transactions with affiliates.
At September 30, 1999, Cox Radio had approximately $220 million of
outstanding indebtedness under the bank credit facility and had approximately
$80 million available under the bank credit facility. The interest rate applied
to amounts due under the bank credit facility was 5.78% at September 30, 1999.
The borrowings under the bank credit facility bear interest at current market
rates and, thus, approximate fair value.
On May 26, 1998, Cox Radio issued and sold an aggregate of $200
million principal amount of notes in an offering exempt from registration under
Rule 144A of the Securities Act of 1933, as amended. The notes consist of $100
million principal amount of 6.25% notes due in full in 2003 and $100 million
principal amount of 6.375% notes due in full in 2005. Pursuant to the
Registration Rights Agreement dated as of May 26, 1998 among Cox Radio, its
wholly owned subsidiaries WSB, Inc. and WHIO, Inc. (each a former guarantor of
the notes), NationsBanc Montgomery Securities LLC, Chase Securities, Inc., and
J.P. Morgan Securities, Inc., on December 14, 1998, Cox Radio consummated an
exchange offer pursuant to which Cox Radio exchanged $200 million principal
amount of the notes originally sold on May 26, 1998, for an aggregate of $200
million principal amount of notes (the terms and form of which are the same in
all material respects as the original notes, except as to restrictions on
transfer) which have been registered under the Securities Act of 1933. As a
result of the mergers of WSB, Inc. and WHIO, Inc. into Cox Radio, WSB, Inc. and
WHIO, Inc. are no longer guarantors of the notes. As a result of the transfer
of certain Federal Communications Commission licenses, permits and
authorizations held by Cox Radio to CXR Holdings, Inc., a wholly-owned
subsidiary of Cox Radio, CXR Holdings became a guarantor of the notes on
February 1, 1999. At September 30, 1999, the estimated fair value of these
notes is approximately $194.7 million based on quoted market prices.
9
<PAGE> 10
3. COMMITMENTS AND CONTINGENCIES (CONTINUED)
In September 1997, Cox Radio entered into interest rate swap
agreements with certain lenders providing bank financing under the bank credit
facility. Pursuant to the interest rate swap agreements, Cox Radio has
exchanged its floating rate interest obligations on an aggregate of $100
million in principal amount at an average fixed rate of 6.23% per annum having
an average maturity of 6.25 years. The fixing of interest rates for this period
reduces Cox Radio's exposure to the uncertainty of floating interest rates. The
differential paid or received on the interest rate swap agreements is
recognized as an adjustment to interest expense. The counterparties to these
interest rate swap agreements are a diverse group of major financial
institutions. Cox Radio is exposed to credit loss in the event of
nonperformance by these counterparties. However, Cox Radio does not anticipate
nonperformance by these counterparties, and no material loss would be expected
from their nonperformance. The fair value of the interest rate swap agreements
was not recognized in the consolidated financial statements since they are
accounted for as hedges. The estimated fair value of the interest rate swap
agreements, based on current market rates, approximated a net receivable of
$438,000 at September 30, 1999 and a net payable of $4.6 million at December
31, 1998.
4. GUARANTOR FINANCIAL INFORMATION
CXR Holdings, a wholly-owned subsidiary of Cox Radio, is the guarantor
of Cox Radio's $200 million notes pursuant to a full and unconditional
guarantee. Separate financial statements and other disclosures concerning CXR
Holdings are not presented because CXR Holdings is comprised primarily of
non-operating assets, including Federal Communications Commission licenses,
permits and authorizations and cash royalties, and such separate financial
statements and other disclosures would not be meaningful to investors. The
following table sets forth condensed financial information of CXR Holdings as
of September 30, 1999 and for the three- and nine-month periods ended September
30, 1999. Comparative condensed financial information as of December 31, 1998
and for the three- and nine-month periods ended September 30, 1998, is
presented on a pro forma basis as though CXR Holdings had been formed on
January 1, 1998. CXR Holdings was formed on September 11, 1998, and Cox Radio
transferred certain of its Federal Communications Commission licenses, permits
and authorizations to CXR Holdings as of January 1, 1999. CXR Holdings became
the guarantor of the notes on February 1, 1999. Pro forma adjustments consist
solely of the recognition of royalty income associated with royalty fees that
would have been charged to Cox Radio had CXR Holdings been formed and the
corresponding assets transferred on January 1, 1998. All other comparative
financial information consists of actual historical balances of Cox Radio as of
December 31, 1998 and for the three- and nine-month periods ended September 30,
1998, respectively.
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, DECEMBER 31,
1999 1998
(ACTUAL) (PRO FORMA)
------------- ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
ASSETS:
Accounts receivable .......................... $ 20,066 $ 25,656
Intangible assets, net ....................... 393,375 176,404
Other assets ................................. 64 --
-------- --------
Total assets ................................. $413,505 $202,060
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Due to Cox Enterprises or Cox Radio .......... $ 90,624
Shareholder's equity ......................... 322,881 202,060
-------- --------
Total liabilities and shareholder's equity ... $413,505 $202,060
======== ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
(ACTUAL) (PRO FORMA) (ACTUAL) (PRO FORMA)
-------- ----------- -------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Royalty income .................. $ 6,559 $ 6,574 $ 20,081 $ 18,983
Depreciation and amortization ... (1,135) (1,020) (3,387) (2,636)
------- ------- -------- --------
Operating Income ................ $ 5,424 $ 5,554 $ 16,694 $ 16,347
======= ======= ======== ========
</TABLE>
10
<PAGE> 11
5. EARNINGS PER COMMON SHARE AND CAPITAL STRUCTURE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPT. 30, SEPT. 30,
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
NET INCOME .................................................. $10,060 $ 7,020 $ 46,558 $ 16,140
======== ======== ======== ========
BASIC NET INCOME PER COMMON SHARE
Weighted-average common shares outstanding .................. 28,758 28,462 28,649 28,446
======== ======== ======== ========
Basic net income per common share ........................... $ .35 $ .25 $ 1.63 $ .57
======== ======== ======== ========
DILUTED NET INCOME PER COMMON SHARE
Weighted-average common shares outstanding - basic .......... 28,758 28,462 28,649 28,446
Shares issuable on exercise of dilutive options .......... 584 668 584 668
Shares assumed to be purchased with proceeds from options (432) (395) (450) (388)
Shares issuable pursuant to employee stock purchase plan . 78 186 78 186
Shares assumed to be purchased with proceeds from
employee stock purchase plan .......................... (68) (31) (74) (30)
-------- -------- -------- --------
Shares applicable to diluted net income per common share .... 28,920 28,890 28,787 28,882
======== ======== ======== ========
Diluted net income per common share ......................... $ .35 $ .24 1.62 $ .56
======== ======== ======== ========
</TABLE>
In January 1999, Cox Radio purchased 39,952 shares of previously
restricted Class A common stock for cash consideration of approximately $1.7
million.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
accompanying unaudited historical Consolidated Statements of Income for the
three and nine month periods ended September 30, 1999 and 1998.
This report contains forward-looking statements that are subject to
risks and uncertainties. Forward-looking statements include, but may not be
limited to, the information regarding future cash requirements of Cox Radio,
statements regarding Year 2000 issues (including problems that may arise on the
part of third parties), and statements regarding the intent, belief or current
expectations of Cox Radio and its management. For such statements, Cox Radio
claims the protection of the safe harbor for forward-looking statements
contained in Section 21E of the Securities Exchange Act of 1934, as amended.
Cox Radio's results could differ materially from those discussed in each
forward-looking statement due to various factors which are outside Cox Radio'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 Cox
Radio's Annual Report on Form 10-K (Commission File No. 1-12187).
GENERAL
Cox Radio is a leading national radio broadcast company whose
business, which constitutes one reportable segment, is devoted to acquiring,
developing and operating radio stations located throughout the United States.
Cox Enterprises indirectly owns approximately 68% of the Common Stock of Cox
Radio through its wholly-owned subsidiary, Cox Broadcasting, Inc.
The performance of a radio station group, such as Cox Radio, is
customarily measured by its ability to generate Broadcast Cash Flow, EBITDA and
After-Tax Cash Flow. Broadcast Cash Flow is defined as operating income plus
depreciation and amortization and corporate general and administrative
expenses. EBITDA is defined as operating income plus depreciation and
amortization. After-Tax Cash Flow is defined as net income (loss) before
extraordinary items plus depreciation, amortization and deferred tax expense
(benefit). Although Broadcast Cash Flow, EBITDA and After-Tax Cash Flow are not
recognized under generally accepted accounting principles, or 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, Cox Radio
believes that these measures will be useful to investors. However, Broadcast
Cash Flow, EBITDA or After-Tax Cash Flow should not be considered 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 Cox Radio's performance under GAAP.
The primary source of Cox Radio's revenues is the sale of local and
national advertising. Historically, approximately 73% and 25% of Cox Radio's
gross revenues have been generated from local and national advertising,
respectively. Cox Radio's most significant station operating expenses are
employees' salaries and benefits, commissions, programming expenses and
advertising and promotional expenditures.
Cox Radio's revenues vary throughout the year. As is typical in the
radio broadcasting industry, Cox Radio's revenues and broadcast cash flows are
typically lowest in the first quarter and higher in the second and fourth
quarters. Cox Radio'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.
12
<PAGE> 13
ACQUISITIONS AND DISPOSITIONS
During the past several years, Cox Radio has actively managed its
portfolio of radio stations through selected acquisitions, dispositions and
swaps, as well as the use of LMA's and JSA's. All of the consummated and
pending transactions have been or will be accounted for as purchase
transactions. Specific transactions entered into or consummated by Cox Radio
during the nine months ended September 30, 1999, are discussed below.
In January 1999, Cox Radio acquired the assets of radio station
WSUN-FM (formerly WLVU-FM) serving the Tampa-St. Petersburg, Florida market in
exchange for the assets of WSUN-AM in Tampa-St. Petersburg, Florida and
approximately $17 million. Prior to the acquisition, Cox Radio had been
operating WSUN-FM pursuant to an LMA since September 1998.
In January 1999, Cox Radio entered into an agreement to acquire
KRTQ-FM (formerly KTFX-FM) in Tulsa, Oklahoma for $3.5 million. Cox Radio also
entered into a Station Investment Note Receivable with the seller for $0.9
million which is collateralized by substantially all the assets of the station.
Cox Radio has been operating this station pursuant to an LMA since January
1999. Pending certain regulatory approvals, Cox Radio expects to consummate
this acquisition in December 1999.
On December 21, 1998 and March 1, 1999, Cox Radio purchased shares of
common stock of USA Digital Radio, Inc., a developer of digital radio
broadcasting technology, for a total purchase price of $2.5 million.
In May 1999, Cox Radio acquired radio stations WVEZ-FM and WSFR-FM and
the option to purchase WMHX-FM serving the Louisville, Kentucky market and
radio stations WFJO-FM, WHPT-FM and WDUV-FM (formerly WTBT-FM) serving the
Tampa-St. Petersburg, Florida market in exchange for the Company's radio
stations WYYY-FM, WBBS-FM, WWHT-FM, WHEN-AM and WSYR-AM serving the Syracuse,
New York market, plus additional cash consideration of approximately $94
million, resulting in a pre-tax gain of approximately $39.2 million.
In June 1999, Cox Radio exercised its option to purchase WMHX-FM in
Louisville for a purchase price of approximately $2.0 million. Cox Radio
consummated the acquisition of WMHX-FM in September 1999. Cox Radio had been
operating the station under a JSA or LMA since May 1999. In connection with
obtaining regulatory approvals for these transactions, Cox Radio agreed to
divest ownership of WRVI-FM and WLSY-FM serving the Louisville, Kentucky
market. Such stations were transferred to a trust for the benefit of Cox Radio
pending sale to a third party. In May 1999, Cox Radio and the trust entered
into an agreement for the sale of WRVI-FM and WLSY-FM for consideration of $5.0
million resulting in a pre-tax gain of approximately $1.6 million. This
disposition was consummated in September 1999.
In June 1999, Cox Radio disposed of the assets of WPTW-AM in Dayton,
Ohio for consideration of $0.1 million.
In August 1999, Cox Radio consummated its acquisition of WRLR-FM
(formerly WEDA-FM) in Homewood, Alabama serving the Birmingham, Alabama market
for a purchase price of approximately $5.5 million and the assumption of debt
of approximately $0.2 million. Prior to the acquisition, Cox Radio had been
operating this station under an LMA since November 1998.
In August 1999, Cox Radio acquired WPYO-FM (formerly WTLN-FM) serving
the Orlando, Florida market for consideration of $14.5 million. Cox Radio had
been operating the station pursuant to an LMA since January 1999. In a related
transaction, Cox Radio disposed of the assets of WTLN-AM, also serving the
Orlando, Florida market, for $0.5 million.
In August 1999, Cox Radio entered into an agreement to acquire
KRTR-FM, KXME-FM, KGMZ-FM and KGMZ-AM in Honolulu, Hawaii for consideration of
approximately $16.4 million. Pending certain regulatory approvals, Cox Radio
anticipates consummating this transaction during the fourth quarter of 1999.
13
<PAGE> 14
In August 1999, Cox Radio agreed to acquire from AMFM, Inc. WEDR-FM in
Miami, Florida; WFOX-FM in Atlanta, Georgia; WFYV-FM, WAPE-FM, WBWL-AM,
WKQL-FM, WMXQ-FM and WOKV-AM in Jacksonville, Florida; WEFX-FM, WNLK-AM,
WKHL-FM and WSTC-AM in Stamford/Norwalk, Connecticut; and WPLR-FM and local
sales rights at WYBC-FM in New Haven, Connecticut in exchange for KFI-AM and
KOST-FM in Los Angeles, California plus approximately $3.0 million. In October
1999, Cox Radio began operating these stations pursuant to an LMA. Pending
certain regulatory approvals, including obtaining a temporary waiver of the
FCC's newspaper-radio cross-ownership rule for the acquisition of WFOX-FM in
Atlanta, Cox Radio anticipates consummating this transaction in the first
quarter of 2000.
In September 1999, Cox Radio disposed of the assets of WGBB-AM serving
the Nassau-Suffolk (Long Island), New York market for consideration of $1.7
million.
In September 1999, Cox Radio acquired WBTS-FM (formerly WNGC-FM) in
Athens, Georgia for consideration of approximately $78 million.
In October 1999, Cox Radio entered into an agreement to dispose of the
assets of KACE-FM and KRTO-FM in Los Angeles for approximately $75 million.
Pending certain regulatory approvals, Cox Radio anticipates consummating this
disposition in the fourth quarter of 1999.
RESULTS OF OPERATIONS
Three months ended September 30, 1999 compared to three months ended September
30, 1998:
Net Revenues. Net revenues for the third quarter of 1999 increased
$10.6 million to $79.8 million, a 15.3% increase over the third quarter of
1998. This increase was primarily a result of the acquisitions in Tampa,
Florida and Louisville, Kentucky and offset somewhat by the May 1999
disposition of stations in Syracuse, New York. In addition, the stations in
Atlanta and Orlando had significant increases in net revenues which were
realized as a result of continued strong ratings performance.
Station Operating Expenses. Station operating expenses increased $4.0
million to $46.5 million, an increase of 9.5% over the third quarter of 1998.
The increase was primarily attributable to the acquisition of stations in
Tampa, Florida and Louisville, Kentucky and offset somewhat by the disposition
of stations in Syracuse, New York. The increase was also due to higher
programming and sales related costs which are driven by ratings and revenues,
respectively.
Broadcast Cash Flow. Broadcast cash flow increased $6.6 million to
$33.3 million, a 24.5% increase over the third quarter of 1998 for the reasons
discussed above.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $0.7 million in the third quarter of 1999 to
$2.7 million primarily due to higher overhead costs incurred as a result of the
increase in number of stations owned and/or operated in 1999.
Operating Income. Operating income for the third quarter of 1999
increased $4.5 million to $23.1 million, an increase of 24.1% over the third
quarter of 1998 for the reasons discussed above.
Interest Expense. Interest expense during the third quarter of 1999
totaled $5.8 million as compared to third quarter 1998 of $4.6 million as a
result of borrowings incurred to consummate Cox Radio's acquisitions during
late 1998 and the first nine months of 1999.
Net Income. Net income increased $3.0 million to $10.1 million for the
third quarter of 1999, primarily for the reasons discussed above and as a
result of the $0.9 million after-tax gain on the sale of WRVI-FM and WLSY-FM in
Louisville, Kentucky.
14
<PAGE> 15
Nine months ended September 30, 1999 compared to nine months ended September
30, 1998:
Net Revenues. Net revenues for the first nine months of 1999 increased
$28.3 million to $218.7 million, a 14.9% increase over the first nine months of
1998. This increase was primarily a result of the 1998 acquisition of radio
stations in Long Island, New York and current year acquisitions in Tampa,
Florida and Louisville, Kentucky and offset somewhat by the May 1999
disposition of stations in Syracuse, New York. In addition, the stations in
Atlanta, Birmingham, and Orlando had substantial increases in net revenues
which were realized as a result of continued strong ratings performance.
Station Operating Expenses. Station operating expenses increased $12.2
million to $135.0 million, an increase of 9.9% over the first nine months of
1998. The increase was primarily attributable to the acquisition of stations in
Long Island, New York; Tampa, Florida; and Louisville, Kentucky and offset
somewhat by the disposition of stations in Syracuse, New York. The increase was
also due to higher programming and sales related costs which are driven by
ratings and revenues, respectively.
Broadcast Cash Flow. Broadcast cash flow increased $16.1 million to
$83.7 million, a 23.9% increase over the first nine months of 1998 for the
reasons discussed above.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $1.3 million in the first nine months of 1999
to $7.3 million primarily due to higher overhead costs incurred as a result of
the increase in number of stations owned and/or operated in 1999.
Operating Income. Operating income for the first nine months of 1999
increased $11.1 million to $55.6 million, an increase of 25.0% over the first
nine months of 1998 for the reasons discussed above.
Interest Expense. Interest expense during the first nine months of
1999 totaled $15.8 million as compared to first nine months of 1998 of $12.2
million as a result of borrowings incurred to consummate Cox Radio's
acquisitions during 1998 and the first half of 1999.
Net Income. Net income increased $30.4 million to $46.6 million for
the first nine months of 1999, primarily as a result of the $23.5 million
after-tax gain on the sale of Cox Radio's stations in Syracuse, New York, the
$0.9 million after-tax gain on the sale of WRVI-FM and WSLY-FM in Louisville,
Kentucky and for the reasons discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Cox Radio's primary source of liquidity is cash provided by
operations. Historically, cash requirements have been funded by Cox Radio's
operating activities and through borrowings under Cox Radio's bank credit
facility described below. For the nine months ended September 30, 1999 as
compared to the nine months ended September 30, 1998, cash from operations
increased $11.1 million to $47.8 million, primarily attributable to improved
operations and the net change in working capital accounts. In addition, cash
requirements historically have been funded on a temporary basis through
intercompany advances from Cox Enterprises under a revolving credit facility
with Cox Enterprises. Borrowings, if any, by Cox Radio under the Cox
Enterprises credit facility would typically be repaid by Cox Radio within 30
days. Borrowings, if any, under the Cox Enterprises credit facility would
accrue interest at Cox Enterprises' commercial paper rate plus .40%. Cox
Enterprises 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 bank credit facility. The interest rate is based on
the London Interbank Offered Rate plus a spread determined by certain leverage
ratios. This facility also includes a commitment fee on the unused portion of
the total amount available of .1% to .25% based on certain leverage ratios. At
September 30, 1999, Cox Radio had approximately $220 million of outstanding
indebtedness under the bank credit facility and had approximately $80 million
available under the bank credit facility. The interest rate applied to amounts
due under the bank credit facility was 5.78% at September 30, 1999. The
borrowings under the bank credit facility bear interest at current market rates
and, thus, approximate fair value.
15
<PAGE> 16
On May 26, 1998, Cox Radio issued and sold an aggregate of $200
million principal amount of notes in an offering exempt from registration under
Rule 144A of the Securities Act of 1933, as amended. The notes consist of $100
million principal amount of 6.25% notes due in full in 2003 and $100 million
principal amount of 6.375% notes due in full in 2005. Pursuant to the
Registration Rights Agreement dated as of May 26, 1998 among Cox Radio, its
wholly owned subsidiaries WSB, Inc. and WHIO, Inc. (each a former guarantor of
the notes), NationsBanc Montgomery Securities LLC, Chase Securities, Inc., and
J.P. Morgan Securities, Inc., on December 14, 1998, Cox Radio consummated an
exchange offer pursuant to which Cox Radio exchanged $200 million principal
amount of the notes originally sold on May 26, 1998, for an aggregate of $200
million principal amount of notes (the terms and form of which are the same in
all material respects as the original notes, except as to restrictions on
transfer) which have been registered under the Securities Act of 1933. As a
result of the mergers of WSB, Inc. and WHIO, Inc. into Cox Radio, WSB, Inc. and
WHIO, Inc. are no longer guarantors of the notes. As a result of the transfer
of certain Federal Communications Commission licenses, permits and
authorizations held by Cox Radio to CXR Holdings, Inc., a wholly-owned
subsidiary of Cox Radio, CXR Holdings became a guarantor of the notes on
February 1, 1999. At September 30, 1999, the estimated fair value of these
notes is approximately $194.7 million based on quoted market prices.
In September 1997, Cox Radio entered into interest rate swap
agreements with certain lenders providing bank financing under the bank credit
facility. Pursuant to the interest rate swap agreements, Cox Radio 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 having an
average maturity of 6.25 years. The fixing of interest rates for this period
reduces Cox Radio's exposure to the uncertainty of floating interest rates. The
differential paid or received on the interest rate swap agreements is
recognized as an adjustment to interest expense. The counterparties to these
interest rate swap agreements are a diverse group of major financial
institutions. Cox Radio is exposed to credit loss in the event of
nonperformance by these counterparties. However, Cox Radio does not anticipate
nonperformance by these counterparties, and no material loss would be expected
from their nonperformance. The fair value of the interest rate swap agreements
was not recognized in the consolidated financial statements since they are
accounted for as hedges. The estimated fair value of the interest rate swap
agreements, based on current market rates, approximated a net receivable of
$438,000 at September 30, 1999 and a net payable of $4.6 million at December
31, 1998.
Future cash requirements are expected to include capital expenditures,
principal and interest payments on indebtedness and funds for acquisitions. Cox
Radio 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 from various
sources, including the proceeds from bank financing and, if or when
appropriate, other issuances of Company securities.
16
<PAGE> 17
OTHER MATTERS
IMPACT OF THE YEAR 2000 ISSUE AND YEAR 2000 READINESS DISCLOSURE
Cox Radio recognizes the importance of the Year 2000 issue and is
proactively managing an appropriate transition into the year 2000. The Year
2000 issue is the result of computer programs and embedded computer
microprocessors being unable to distinguish between the year 1900 and the year
2000, or misinterpreting the date field. Any of Cox Radio's systems that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000, which could result in miscalculations or system failures. A
system or application is deemed Year 2000 compliant when it continues to
produce understandable, accurate and predictable results which conform to the
original functional specifications, regardless of the millennium change.
STATE OF READINESS
Cox Radio has implemented a project team utilizing both internal and
external resources, including those of majority shareholder, Cox Broadcasting,
to develop its Year 2000 initiative, which may, as necessary, involve upgrading
or replacing affected computer systems, software and equipment with embedded
chips, and preparing contingency and disaster recovery plans.
Cox Radio has substantially completed an inventory of current systems
and operations to identify any information technology and non-information
technology systems (including equipment with embedded chips) that do not
properly recognize dates after December 31, 1999. The project team has
implemented a plan to assess, remediate, test, and, sufficiently in advance of
the Year 2000, ascertain that the systems of Cox Radio that are critical to its
operations will properly recognize such dates. The plan includes on-site audits
at each of the stations that Cox Radio owns or operates except the stations
pending acquisition in Honolulu, Hawaii. Cox Radio is assessing the Year 2000
compliance of the Hawaii stations and developing an appropriate plan for
addressing any significant issues identified. As of November 12, 1999, the
project team has substantially completed this on-site audit process.
Based on the results of the inventory, Cox Radio began in the second
quarter of 1998 to remediate noncompliant systems. Cox Radio anticipates that
remediation will be substantially complete by the end of November 1999. Cox
Radio uses Cox Enterprises' financial and human resources information systems,
which are being tested by Cox Enterprises.
Cox Radio has substantially completed a formal communication program
with its significant vendors to determine the extent to which it is vulnerable
to those third parties who fail to remediate their own Year 2000
non-compliance. Cox Radio is to a large degree dependent on vendor remediation
and testing of vendor systems. Cox Radio's two most significant vendors are
Marketron, which provides Cox Radio's traffic and billing system for the
majority of its stations, and ADP which provides payroll services. Cox Radio
uses Marketron Act II Version 28.02 running on DOS 6.22, which Marketron has
indicated is Year 2000 compliant; and ADP PC/Payroll for Windows Version 2.5
running on Windows 95 for substantially all of its stations, which ADP has
indicated is Year 2000 compliant. Cox Radio successfully completed testing of
Marketron Act II Version 28.02 during the second quarter of 1999 and concluded
that Version 28.02 appears to be Year 2000 compliant. Cox Enterprises has
successfully completed testing of ADP PC/Payroll for Windows Version 2.5 and
concluded that Version 2.5 appears to be Year 2000 compliant.
17
<PAGE> 18
COSTS
As of September 30, 1999, costs of approximately $925,000 have been
incurred related to Cox Radio's Year 2000 initiative. Cox Radio has and will
incur capital expenditures and internal staff costs as well as additional
outside consulting and other expenditures related to this initiative. Cox Radio
expects these costs will not exceed approximately $1.5 million, based on
currently available information. Total incremental expenses (including
depreciation and amortization) of bringing current systems into compliance,
writing off existing non-compliant systems, and capital replacements have not
had a material impact on Cox Radio's financial condition to date and are not, at
present, based on known facts, expected to have a material impact on Cox Radio's
financial condition. All costs of the Year 2000 initiative will be funded by Cox
Radio's cash flow from operations.
RISKS AND MOST REASONABLY LIKELY WORST CASE SCENARIO
If systems critical to Cox Radio's operations are not Year 2000
compliant, the most reasonably likely worst case scenario would include service
interruptions resulting from failure in electrical power and satellite feeds
providing news, weather and syndicated shows for broadcast and failure of
equipment with embedded chips including master clocks, studio equipment,
transmission equipment and telephone, security and environmental control
systems.
Based on the information currently available, Cox Radio is not aware
of any likely Year 2000 non-compliance by Cox Radio or its vendors or customers
that will materially affect its business operations; however, Cox Radio does
not control the systems of other companies, and cannot assure that such systems
will be converted on a timely basis and, if not converted, would not have an
adverse effect on Cox Radio's business operations. Furthermore, no assurance
can be given at this time that any or all of Cox Radio's systems are or will be
Year 2000 compliant, or that the ultimate costs required to address the Year
2000 issue or the impact of any failure to achieve substantial Year 2000
compliance by Cox Radio, its vendors or customers will not have a material
adverse effect on Cox Radio's financial condition.
Like most other businesses, Cox Radio is dependent on general service
outside vendors including providers of electrical power, telephony, water, fuel
for vehicles and other necessary commodities. Cox Radio also relies upon the
interstate banking system and related electronic communications for such
functions as transmitting financial data from field locations to the home
office and sweeping cash into lockboxes. Cox Radio is currently not aware of
any material non-compliance by these providers that will materially affect its
business operations; however, Cox Radio does not control these systems and
cannot assure that they will be converted in a timely fashion and, if not
converted, would not have an adverse effect on its business operations.
CONTINGENCY PLANS
The Year 2000 project team is working with each station to expand and
modify existing business continuity plans to encompass potential Year 2000
exposures, including increased risk of loss of electrical power, and satellite
failures resulting in need for alternate delivery system for programming,
potential multiple systems failures and other relevant issues. Contingency
plans will be in place for substantially all of Cox Radio's stations as of
November 30, 1999.
Cox Radio has made arrangements to ensure that appropriate personnel,
including key engineering and information technology resources, are available
to respond to any situations that may be encountered. A coordinated group will
have the resources required to identify, track, prioritize, remediate, and
report on any events encountered.
If the modifications and conversions required to make Cox Radio Year
2000 ready are not made or are not completed on a timely basis, the resulting
problems could have a material impact on the operations of Cox Radio.
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<PAGE> 19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
In September 1997, Cox Radio entered into interest rate swap
agreements with certain lenders providing bank financing under the bank credit
facility. Pursuant to the interest rate swap agreements, Cox Radio 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 having an
average maturity of 6.25 years. The fixing of interest rates for this period
reduces Cox Radio's exposure to the uncertainty of floating interest rates. The
differential paid or received on the interest rate swap agreements is
recognized as an adjustment to interest expense. The counterparties to these
interest rate swap agreements are a diverse group of major financial
institutions. Cox Radio is exposed to credit loss in the event of
nonperformance by these counterparties. However, Cox Radio does not anticipate
nonperformance by these counterparties, and no material loss would be expected
from their nonperformance. The fair value of the interest rate swap agreements
was not recognized in the consolidated financial statements since they are
accounted for as hedges. The estimated fair value of the interest rate swap
agreements, based on current market rates, approximated a net receivable of
$438,000 at September 30, 1999 and a net payable of $4.6 million at December
31, 1998.
19
<PAGE> 20
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):
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
(1)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. (2)
(1)2.2 -- Guaranty by Cox Broadcasting, Inc.,
dated as of July 1, 1996, in favor of
NewCity Communications, Inc.
(1)3.1 -- Amended and Restated Certificate of
Incorporation of Cox Radio, Inc.
(1)3.2 -- Amended and Restated Bylaws of Cox
Radio, Inc.
(3)4.1 -- Indenture dated as of May 26, 1998
between Cox Radio, Inc., The Bank of New
York, WSB, Inc., and WHIO, Inc.
(4)4.2 -- First Supplemental Indenture dated
as of February 1, 1999 by and between Cox
Radio, Inc., CXR Holdings, Inc., and the
Bank of New York
(5)4.3 -- Registration Rights Agreement dated
May 26, 1998 among Cox Radio, Inc., WSB,
Inc., WHIO, Inc., and NationsBanc
Montgomery Securities, LLC, Chase
Securities, Inc., and J.P. Morgan
Securities, Inc.
(6)4.4 -- Specimen of Class A Common Stock
Certificate.
(7)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 (2)
(1)10.2 -- New CEI Credit Facility.
(1)10.3 -- Cox Radio, Inc. Long-Term Incentive
Plan.
(1)10.4 -- Cox Radio, Inc. Employee Stock Purchase
Plan.
(1)10.5 -- Cox Radio, Inc. Restricted Stock Plan
for Non-Employee Directors
(1)10.6 -- Tax Allocation and Indemnification
Agreement, dated as of September 30, 1996,
by and between Cox Enterprises, Inc. and
Cox Radio, Inc.
27.1 -- Financial Data Schedule (for SEC use only)
</TABLE>
- ----------
(1) Incorporated by reference to the corresponding exhibit of Cox Radio's
Registration Statement on Form S-1 (Commission File No. 333-08737).
(2) Schedules and Exhibits intentionally omitted.
(3) Incorporated by reference to Exhibit 4.1 of Cox Radio's Registration
Statement on Form S-4 (Commission File No. 333-61179).
(4) Incorporated by reference to Exhibit 4.2 of Cox Radio's Quarterly
Report on Form 10-Q for the period ending March 31, 1999 (Commission
File No. 1-12187).
(5) Incorporated by reference to Exhibit 4.2 of Cox Radio's Registration
Statement on Form S-4 (Commission File No. 333-61179).
(6) Incorporated by reference to Exhibit 4.3 of Cox Radio's Registration
Statement on Form S-1 (Commission File No. 333-08737).
(7) Incorporated by reference to Cox Radio's Annual Report on Form 10-K
for the period ending December 31, 1996 (Commission File No. 1-12187).
20
<PAGE> 21
(b) Reports on Form 8-K
On August 27, 1999, Cox Radio filed a current report
on form 8-K announcing that on August 18, 1999, the Board of
Directors of Cox Radio (i) increased the number of directors
from seven to eight and (ii) elected Marc W. Morgan to fill
the vacancy in accordance with Cox Radio's bylaws.
On September 17, 1999 Cox Radio filed a current
report on form 8-K announcing that , Cox Radio agreed to
acquire from AMFM, Inc. WEDR-FM in Miami, Florida; WFOX-FM in
Atlanta, Georgia; WFYV-FM, WAPE-FM, WBWL-AM, WKQL-FM, WMXQ-FM
and WOKV-AM in Jacksonville, Florida; WEFX-FM, WNLK-AM,
WKHL-FM and WSTC-AM in Stamford/Norwalk, Connecticut; and
WPLR-FM and local sales rights at WYBC-FM in New Haven,
Connecticut in exchange for KFI-AM and KOST-FM in Los
Angeles, California plus approximately $3.0 million
21
<PAGE> 22
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 12, 1999 /s/ Maritza C. Pichon
----------------------------------------
Maritza C. Pichon
Chief Financial Officer
(Principal Financial Officer and
duly authorized officer)
22
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF COX RADIO, INC. FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U. S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
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0
0
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<EPS-BASIC> 1.63
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</TABLE>
