<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 JUNE 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
---------- ----------
COMMISSION FILE NUMBER 1-12187
COX RADIO, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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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 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 40,472,543 shares of Class A common stock outstanding as of
August 4, 2000.
There were 58,733,016 shares of Class B common stock outstanding as of
August 4, 2000.
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COX RADIO, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
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....................................................... 12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...................... 18
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS............................................................... 20
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS....................................... 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ............................ 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................ 21
SIGNATURES........................................................................................ 23
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2
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PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COX RADIO, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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JUNE 30, DECEMBER 31,
2000 1999
----------- ------------
(AMOUNTS IN THOUSANDS)
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ASSETS
Current Assets:
Cash and cash equivalents .......................................... $ 13,589 $ 14,704
Restricted cash .................................................... 76,699 --
Accounts receivable, less allowance for doubtful accounts
of $3,406 and $2,966, respectively .............................. 83,385 74,775
Prepaid expenses and other current assets .......................... 5,007 4,387
Amounts due from Cox Enterprises, Inc. ............................. 92,839 --
----------- ---------
Total current assets ............................................ 271,519 93,866
Plant and equipment, net ............................................. 58,086 56,582
Intangible assets, net ............................................... 804,652 829,307
Station investment note receivable ................................... -- 850
Other assets ......................................................... 26,168 6,016
----------- ---------
Total assets .................................................... $ 1,160,425 $ 986,621
=========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses .............................. $ 23,176 $ 28,115
Accrued salaries and wages ......................................... 6,076 4,464
Accrued interest ................................................... 1,623 2,476
Income taxes payable ............................................... 6,613 5,462
Other current liabilities .......................................... 1,653 1,572
Amounts due to Cox Enterprises, Inc. ............................... -- 17,138
----------- ---------
Total current liabilities ....................................... 39,141 59,227
Notes payable ........................................................ 200,125 420,105
Deferred income taxes ................................................ 148,005 128,623
----------- ---------
Total liabilities ............................................... 387,271 607,955
----------- ---------
Commitments and contingencies (Note 3)
Shareholders' Equity:
Preferred stock, $1.00 par value: 15,000,000 shares authorized,
None outstanding ................................................ -- --
Class A common stock, $0.33 par value; 210,000,000 shares
authorized; 40,612,257 and 28,015,983 shares outstanding at
June 30, 2000 and December 31, 1999, respectively ............... 13,402 9,245
Class B common stock, $0.33 par value; 135,000,000 shares
authorized; 58,733,016 shares outstanding at June 30, 2000
and December 31, 1999, respectively ............................. 19,382 19,382
Additional paid-in capital ......................................... 609,151 265,155
Retained earnings .................................................. 132,870 86,535
----------- ---------
774,805 380,317
Less: Class A common stock held in treasury (119,856 shares at cost) (1,651) (1,651)
----------- ---------
Total shareholders' equity ...................................... 773,154 378,666
----------- ---------
Total liabilities and shareholders' equity ...................... $ 1,160,425 $ 986,621
=========== =========
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See notes to unaudited consolidated financial statements.
3
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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,
------------------------- ---------------------------
2000 1999 2000 1999
-------- -------- --------- ---------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
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NET REVENUES:
Local ................................. $ 69,166 $ 58,181 $ 123,537 $ 103,391
National .............................. 22,172 18,506 40,139 32,250
Other ................................. 4,331 1,898 7,871 3,317
-------- -------- --------- ---------
Total revenues ...................... 95,669 78,585 171,547 138,958
COSTS AND EXPENSES:
Operating ............................. 20,375 17,755 37,795 32,621
Selling, general and administrative ... 37,397 30,144 69,178 55,947
Corporate general and administrative .. 3,136 2,409 5,979 4,595
Depreciation and amortization ......... 7,788 6,856 15,055 13,214
Loss (gain) on sales of assets ........ 4 -- (58) --
Gain on sales of radio stations ....... (5) (39,802) (45,353) (39,802)
-------- -------- --------- ---------
OPERATING INCOME ......................... 26,974 61,223 88,951 72,383
OTHER INCOME (EXPENSE):
Interest income .......................... 1,058 -- 1,707 466
Interest expense ......................... (7,201) (5,611) (14,141) (10,457)
Non-cash mark-to-market unrealized gain .. 2,172 -- 2,172 --
Other - net .............................. (104) (62) (344) (131)
-------- -------- --------- ---------
INCOME BEFORE INCOME TAXES ............... 22,899 55,550 78,345 62,261
Income taxes ............................. 9,432 22,876 32,010 25,763
--------- ---------
========= =========
NET INCOME ............................... $ 13,467 $ 32,674 $ 46,335 $ 36,498
======== ======== ========= =========
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Basic net income per common share ........ $ 0.15 $ 0.38 $ 0.53 $ 0.43
======== ======== ========= =========
Diluted net income per common share ...... $ 0.15 $ 0.38 $ 0.53 $ 0.42
======== ======== ========= =========
Weighted average basic common shares
outstanding .............................. 87,465 85,830 87,120 85,780
======== ======== ========= =========
Weighted average diluted common shares
outstanding .............................. 88,148 86,896 87,806 86,787
======== ======== ========= =========
</TABLE>
See notes to unaudited consolidated financial statements.
4
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COX RADIO, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
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CLASS A CLASS B
COMMON STOCK COMMON STOCK ADDITIONAL TREASURY STOCK
---------------- ----------------- PAID-IN RETAINED ---------------
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL
------ ------ ------ ------ ------- -------- ------ -------- -----
(AMOUNTS IN THOUSANDS)
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BALANCE AT
DECEMBER 31, 1999 .................. 28,016 $ 9,245 58,733 $19,382 $265,155 $ 86,535 120 $(1,651) $378,666
Net income .......................... -- -- -- -- -- 46,335 -- -- 46,335
Issuance of Class A
common stock
pursuant to equity
offering ........................... 12,392 4,089 -- -- 340,438 -- -- -- 344,527
Issuance of Class A
common stock related to
incentive plans .................... 204 68 -- -- 3,558 -- -- -- 3,626
------ ------- ------ ------- -------- -------- --- ------- --------
BALANCE AT
JUNE 30, 2000 ...................... 40,612 $13,402 58,733 $19,382 $609,151 $132,870 120 $(1,651) $773,154
====== ======= ====== ======= ======== ======== === ======= ========
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See notes to unaudited consolidated financial statements.
5
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COX RADIO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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SIX MONTHS ENDED
JUNE 30,
-----------------------------
2000 1999
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(AMOUNTS IN THOUSANDS)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................................... $ 46,335 $ 36,498
Items not requiring cash:
Depreciation ...................................................... 3,173 3,259
Amortization ...................................................... 11,882 9,955
Deferred income taxes ............................................. 19,382 17,106
Non-cash mark-to-market unrealized gain ........................... (2,172) --
Gain on sales of assets ........................................... (58) --
Gain on sales of radio stations ................................... (45,353) (39,802)
Changes in assets and liabilities (net of effects of acquisitions and
dispositions):
Increase in accounts receivable ................................... (9,390) (6,066)
(Decrease) increase in accounts payable and accrued expenses ...... (821) 1,753
Increase in accrued salaries and wages ............................ 1,612 656
Decrease in accrued interest ...................................... (853) (61)
Increase in taxes payable ......................................... 2,303 7,424
Other, net ........................................................ (539) (2,301)
--------- ---------
Net cash provided by operating activities .................... 25,501 28,421
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................ (3,921) (3,201)
Acquisitions, net of cash acquired .................................. (22,253) (112,587)
Decrease in station investment note receivable ...................... 850 6,400
Increase in other long-term assets .................................. (18,186) (5,135)
Proceeds from sales of assets ....................................... 423 --
Proceeds from sales of radio stations ............................... 81,600 --
Increase in cash restricted for investment .......................... (76,699) --
(Decrease) increase in amounts due to/from Cox Enterprises .......... (109,977) 35,311
Other, net .......................................................... -- 75
--------- ---------
Net cash used in investing activities ........................ (148,163) (79,137)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) borrowings of revolving credit facility .............. (219,980) 50,031
Proceeds from stock options exercised ............................... 2,474 1,552
Net proceeds from stock offering .................................... 344,527 --
Repurchase of Class A common stock .................................. -- (1,651)
(Decrease) increase in book overdrafts .............................. (4,369) 766
Payment of credit facility financing costs .......................... (1,105) --
--------- ---------
Net cash provided by financing activities .................... 121,547 50,698
--------- ---------
Net decrease in cash and cash equivalents ........................... (1,115) (18)
Cash and cash equivalents at beginning of period .................... 14,704 6,479
--------- ---------
Cash and cash equivalents at end of period .......................... $ 13,589 $ 6,461
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ...................................................... $ 14,994 $ 10,518
Income taxes .................................................. $ 10,414 $ 1,236
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:
Value of businesses exchanged ................................. $ -- $ 55,000
See notes to unaudited consolidated financial statements.
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6
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COX RADIO, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND OTHER INFORMATION
Cox Radio is a leading national radio broadcasting 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 63% of the common stock of
Cox Radio and has approximately 95% of the voting power 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, 1999 and notes thereto contained in Cox Radio's Annual Report
on Form 10-K, as amended, filed with the Securities and Exchange Commission
(Commission File No. 1-12187).
The results of operations for the three and six months ended June 30,
2000 are not necessarily indicative of the results to be expected for the year
ending December 31, 2000 or any other interim period.
Certain prior year amounts have been reclassified for comparative
purposes.
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
exchanges, as well as through the use of local marketing agreements, or LMAs,
and joint sales agreements, or JSAs. Under an LMA, the company operating a
station provides programming, sales and marketing services. Under a JSA, the
company operating a station provides sales and marketing services. The broadcast
revenues and operating expenses of stations operated by Cox Radio under LMAs and
JSAs have been included in Cox Radio's operations since the respective dates of
such agreements.
All consummated and pending acquisitions discussed below have been or
will be accounted for using the purchase method. As such, the results of
operations of acquired stations have been or will be included in the results of
operations from the date of acquisition. Specific transactions entered into or
consummated by Cox Radio during the six months ended June 30, 2000 and through
August 8, 2000 are discussed below. In addition, the pending AMFM Inc.
transaction has been included below due to its significance.
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 million. In October 1999, Cox Radio
began operating the stations to be acquired (other than WYBC-FM) pursuant to an
LMA and WYBC-FM pursuant to a JSA. 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 second half of 2000.
In January 2000, Cox Radio acquired the assets of KRTQ-FM (formerly
KTFX-FM) in Tulsa, Oklahoma for consideration of $3.5 million. Cox Radio had
been operating this station pursuant to an LMA since January 1999.
7
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Also in January 2000, Cox Radio disposed of the assets of KACE-FM and
KRTO-FM, serving the Los Angeles, California market, for consideration of
approximately $75 million.
On March 3, 2000, Cox Radio entered into an agreement to acquire the
assets of radio stations KKBQ-FM, KLDE-FM and KKTL-FM, serving the Houston,
Texas market, and WKHK-FM, WMXB-FM, WKLR-FM and WTVR-AM, serving the Richmond,
Virginia market, for consideration of approximately $380 million. Pending
receipt of all necessary legal and regulatory approvals, Cox Radio anticipates
closing this transaction during the second half of 2000.
For tax purposes, Cox Radio intends to account for the disposition of
KACE-FM and KRTO-FM, serving the Los Angeles, California market, and the
acquisition of WKHK-FM, WMXB-FM, WKLR-FM and WTVR-AM, serving the Richmond,
Virginia market, as tax deferred like-kind exchanges. Tax rules allow Cox Radio
to defer a substantial portion of the tax gains on these transactions upon the
reinvestment of the net proceeds in qualifying future acquisitions. Restricted
cash of $76.7 million is being held in escrow pending reinvestment and has been
reported in the June 30, 2000 Consolidated Balance Sheet as restricted cash.
On April 2, 2000, the LMA for WCNN-AM, serving the Atlanta, Georgia
market, terminated.
Also in April 2000, Cox Radio disposed of the assets of KGMZ-FM,
serving the Honolulu, Hawaii market, for approximately $6.6 million. Cox Radio
continues to manage this station's local, regional and national advertising
sales efforts under a JSA. In addition, Cox Radio is a guarantor of the buyer's
financing for this transaction.
On May 1, 2000, Cox Radio acquired the assets of KINE-FM, KCCN-FM and
KCCN-AM, serving the Honolulu, Hawaii market, for consideration of approximately
$17.8 million.
On June 2, 2000, Cox Radio exercised its right of first refusal and
agreed to acquire the capital stock of Midwestern Broadcasting Company, Inc.
which owns WALR-FM, serving the Atlanta, Georgia market, for $280 million. In a
related transaction, Cox Radio entered into an asset exchange agreement with
Salem Communications Corporation to exchange the license and transmitting
facilities of WALR-FM, as well as the license and transmitting facilities of
radio stations KLUP-AM, serving San Antonio, Texas, and WSUN-AM, serving Tampa,
Florida, for the license and transmitting facilities of radio station KKHT-FM,
serving Houston, Texas. Cox Radio would retain the intellectual property of
WALR-FM and intends to broadcast WALR-FM's programming on its WJZF-FM signal in
Atlanta. Pending receipt of all regulatory approvals, Cox Radio anticipates
consummation of these transactions in the second half of 2000.
On July 13, 2000, Cox Radio acquired the outstanding capital stock of
Marlin Broadcasting, Inc., which owns radio stations WTMI-FM serving Miami,
WCCC-FM and WCCC-AM serving Hartford, Connecticut and WBOQ-FM serving
Gloucester, Massachusetts, for approximately $125 million. As part of this
transaction, Cox Radio sold certain assets of Marlin comprising WCCC-FM, WCCC-AM
and WBOQ-FM to certain principals of Marlin for approximately $25 million. The
proceeds of the sale of WCCC-FM, WCCC-AM, and WBOQ-FM are being held in escrow
pending reinvestment in qualifying future acquisitions as part of a tax deferred
like-kind exchange.
8
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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, 1999 and does not purport to be
indicative of what would have occurred had these transactions been made as of
that date or of results which may occur in the future.
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------------------------------------
2000 1999 2000 1999
-------- -------- -------- --------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
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Net revenues .......................................... $111,324 $ 95,733 $200,870 $170,757
Net income ............................................ 13,865 9,973 20,577 14,243
==============================================================
Basic pro forma net income per common share ........... $ 0.16 $ 0.12 $ 0.24 $ 0.17
==============================================================
Diluted pro forma net income per common share ......... $ 0.16 $ 0.11 $ 0.23 0.16
==============================================================
Basic pro forma shares outstanding .................... 87,465 85,830 87,120 85,780
==============================================================
Diluted pro forma shares outstanding .................. 88,148 86,896 87,806 86,787
==============================================================
</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 interest rate was based on the London Interbank Offered
Rate plus a spread determined by the ratio of Cox Radio's debt to EBITDA. This
facility included a commitment fee on the unused portion of the total amount
available of .1% to .25% based on the ratio of Cox Radio's debt to EBITDA. At
December 31, 1999, Cox Radio had approximately $220 million of outstanding
indebtedness and approximately $80 million available under the bank credit
facility. Borrowings under the bank credit facility approximated fair value
based upon current borrowing rates available to Cox Radio. The interest rate
applied to amounts due under the bank credit facility was 6.9% at December 31,
1999. This bank credit facility contained, among other provisions, defined
requirements as to ratio of debt to EBITDA and ratio of EBITDA to interest
expense. At December 31, 1999, Cox Radio was in compliance with these covenants.
On June 27, 2000, all amounts previously outstanding under this facility were
repaid with a portion of the net proceeds from the offering of Class A common
stock discussed in Note 5 of the financial statements included in Item 1.
hereof.
On June 30, 2000, Cox Radio replaced its $300 million, five-year,
senior, unsecured revolving credit facility, with a $350 million, five-year,
senior, unsecured revolving credit facility and a $350 million, 364-day, senior,
unsecured revolving credit facility, both with certain banks, including The
Chase Manhattan Bank, as the Administrative Agent, Bank of America, N.A., as the
Syndications Agent, and Citibank, N.A., as Documentation Agent. The interest
rate for both facilities is based on the Federal funds borrowing rate plus 1/2
of 1%; the London Interbank Offered Rate plus a spread based on the credit
ratings of Cox Radio's senior, long-term debt; or the bid rate for the purchase
of certificates of deposit of equal principal amount and maturity plus a spread
based on the credit ratings of Cox Radio's senior, long-term debt. Both
facilities include a commitment fee on the unused portion of the total amount
available of .1% to .25% based on the credit ratings of Cox Radio's senior,
long-term debt. Both facilities contain, among other provisions, defined
requirements as to the ratio of debt to EBITDA and the ratio of EBITDA to
interest expense. At June 30, 2000, there were no amounts outstanding under
these new bank credit facilities.
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
9
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1933, as amended, which have been exchanged for notes which have been registered
under the Securities Act of 1933. The replacement 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 then-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 June 30, 2000
and December 31, 1999, the estimated fair value of these notes was approximately
$191.6 million and $191.0 million, respectively, based on quoted market prices.
In September 1997, Cox Radio entered into interest rate swap agreements
with certain lenders providing bank financing under its 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 nor would we expect
any such loss to be material. The estimated fair value of the interest rate swap
agreements, based on current market rates, approximated a net receivable of $1.9
million at December 31, 1999. Prior to June 27, 2000, Cox Radio accounted for
the interest rate swap agreements as hedges. In connection with the offering of
Class A common stock as discussed in Note 5 of the financial statements included
in Item 1. hereof, Cox Radio used a portion of the net proceeds from the
offering to repay all amounts then outstanding under the bank credit facility.
As the interest rate swap agreements were no longer matched with existing debt,
Cox Radio recorded a non-cash, mark-to-market unrealized gain of $2.2 million,
which represented the fair value of the interest rate swap agreements at the
date the underlying debt was paid off. Cox Radio is contemplating re-designating
these interest rate swap agreements as hedges of related floating rate
borrowings under its revolving credit facilities.
On May 2, 2000, Cox Radio's universal shelf registration statement
filed with the Securities and Exchange Commission on Form S-3 was declared
effective. Under the universal shelf registration statement, Cox Radio and two
financing trusts sponsored by Cox Radio may from time to time offer and issue
debentures, notes, bonds and other evidences of indebtedness and forward
contracts in respect of any such indebtedness, shares of preferred stock, shares
of Class A common stock, warrants, stock purchase contracts and stock purchase
units of Cox Radio and preferred securities of the Cox Radio trusts for a
maximum aggregate offering amount of $750 million. Unless otherwise described in
future prospectus supplements, Cox Radio intends to use the net proceeds from
the sale of securities registered under this universal shelf registration
statement for general corporate purposes, which may include additions to working
capital, the repayment or redemption of existing indebtedness and the financing
of capital expenditures and acquisitions. See Note 5 of the financial statements
included in Item 1. hereof for a discussion of an offering of Class A common
stock completed during the second quarter of 2000.
On March 6, 2000, Cox Radio was named as a defendant in a putative
class action suit filed in the state court of Gwinnett County, Georgia, alleging
violations of the federal Telephone Consumer Protection Act and related Georgia
telemarketing laws. The complaint sought statutory damages in the amount of
$1,500, plus actual and punitive damages and attorneys' fees, on behalf of each
person "throughout the State of Georgia" who received an unsolicited
pre-recorded telephone message delivering an "advertisement" from a Cox Radio
radio station. On May 1, 2000, the lawsuit was dismissed without prejudice.
Counsel for the plaintiff has recently indicated his intention to file a similar
action against Cox Radio at a later date.
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4. GUARANTOR FINANCIAL INFORMATION
CXR Holdings, Inc., a wholly-owned subsidiary of Cox Radio, 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 Cox Radio's $200
million public notes pursuant to a full and unconditional guarantee on February
1, 1999. 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
June 30, 2000 and December 31, 1999 and for the three and six month periods
ended June 30, 2000 and 1999.
<TABLE>
<CAPTION>
AS OF
JUNE 30, DECEMBER 31,
2000 1999
------------------------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
ASSETS:
Accounts receivable - Cox Radio ............. $ 47,409 $ 15,066
Intangible assets, net ...................... 413,500 391,832
Other assets ................................ 37 767
------------------------------
Total assets ............................. $ 460,946 $ 407,665
==============================
------------------------------
Shareholders' equity ........................ $ 460,946 $ 407,665
==============================
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
--------------------------------------------------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Royalty income - Cox Radio ............................ $ 14,932 $ 6,652 $ 24,806 $ 13,522
Intercompany interest, net ............................ 735 -- 1,023 --
Depreciation and amortization ......................... (2,525) (1,092) (5,058) (2,252)
--------------------------------------------------------
Operating Income ...................................... $ 13,142 $ 5,560 $ 20,771 $ 11,270
========================================================
</TABLE>
5. EARNINGS PER COMMON SHARE AND CAPITAL STRUCTURE
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
2000 1999 2000 1999
----------- ------------ ----------- -----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
NET INCOME ...................................................... $ 13,467 $ 32,674 $ 46,335 $ 36,498
========== ========== ========== ==========
BASIC EPS
Weighted-average common shares outstanding ...................... 87,465 85,830 87,120 85,780
========== ========== ========== ==========
Basic net income per common share ............................... $ 0.15 $ 0.38 $ 0.53 $ 0.43
========== ========== ========== ==========
DILUTED EPS
Weighted-average common shares outstanding - basic .............. 87,465 85,830 87,120 85,780
Shares issuable on exercise of dilutive options .............. 1,490 2,078 1,490 2,078
Shares assumed to be purchased with proceeds from options .... (950) (1,562) (948) (1,621)
Shares issuable pursuant to employee stock purchase plan ..... 229 558 229 558
Shares assumed to be purchased with proceeds from
employee stock purchase plan .............................. (86) (8) (85) (8)
---------- ---------- ---------- ----------
Shares applicable to diluted EPS ................................ 88,148 86,896 87,806 86,787
========== ========== ========== ==========
Diluted net income per common share ............................. $ 0.15 $ 0.38 $ 0.53 $ 0.42
========== ========== ========== ==========
</TABLE>
In January 1999, Cox Radio reacquired 119,856 shares of previously
restricted Class A common stock from employees for cash consideration of
approximately $1.7 million which was used to pay employee withholding taxes.
11
<PAGE> 12
On February 7, 2000, Cox Radio announced that its Board of Directors
approved a three-for-one stock split. The stock split resulted in a decrease in
par value of each share, including shares of preferred stock (authorized with no
shares presently outstanding), from $1.00 to $0.33 per share. At the Annual
Meeting of Stockholders, the stockholders voted to amend Cox Radio's Articles of
Incorporation to increase authorized (a) Class A common stock from 70,000,000 to
210,000,000 shares; (b) Class B common stock from 45,000,000 to 135,000,000
shares; and (c) preferred stock from 5,000,000 to 15,000,000 shares. The stock
split was paid on May 19, 2000 to stockholders of record on May 12, 2000. All
financial information contained elsewhere in these financial statements has been
adjusted to reflect the impact of this stock split.
On June 27, 2000, Cox Radio consummated a public offering of 8,800,000
shares of its Class A common stock pursuant to its shelf registration statement
and completed a concurrent private placement of 3,591,954 shares of Class A
common stock directly to Cox Enterprises at the public offering price per share,
less underwriting discounts and commissions. Cox Radio received net proceeds of
approximately $344.5 million from this offering and will use such proceeds to
partially finance pending acquisitions, repay outstanding indebtedness and for
general corporate purposes.
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 six month periods ended June 30, 2000 and 1999.
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 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, as amended, for
the year ended December 31, 1999 (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 63% of the common stock of Cox Radio
through its wholly-owned subsidiary, Cox Broadcasting, Inc., and has
approximately 95% of the voting power of Cox Radio.
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 net revenues less station
operating expenses. EBITDA is defined as operating income excluding the gain on
sales of assets and radio stations plus depreciation and amortization. After-tax
Cash Flow is defined as income (loss) before extraordinary items excluding gain
on sales of assets and radio stations plus depreciation and amortization.
Although Broadcast Cash Flow, EBITDA and After-tax Cash Flow are not recognized
under generally accepted accounting principles, 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 or cash flows from operating activities (as a measure of liquidity), each
as determined in accordance with generally accepted accounting principles, or an
indicator of Cox Radio's performance under generally accepted accounting
principles.
12
<PAGE> 13
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 net
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.
ACQUISITIONS AND DISPOSITIONS
During the past several years, Cox Radio has actively managed its
portfolio of radio stations through selected acquisitions, dispositions and
exchanges, as well as through the use of local marketing agreements, or LMAs,
and joint sales agreements, or JSAs. Under an LMA, the company operating a
station provides programming, sales and marketing services. Under a JSA, the
company operating a station provides sales and marketing services. The broadcast
revenues and operating expenses of stations operated by Cox Radio under LMAs and
JSAs have been included in Cox Radio's operations since the respective dates of
such agreements.
All consummated and pending acquisitions discussed below have been or
will be accounted for using the purchase method. As such, the results of
operations of acquired stations have been or will be included in the results of
operations from the date of acquisition. Specific transactions entered into or
consummated by Cox Radio during the six months ended June 30, 2000 and through
August 8, 2000 are discussed below. In addition, the pending AMFM Inc.
transaction has been included below due to its significance.
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 million. In October 1999, Cox Radio
began operating the stations to be acquired (other than WYBC-FM) pursuant to an
LMA and WYBC-FM pursuant to a JSA. 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 second half of 2000.
In January 2000, Cox Radio acquired the assets of KRTQ-FM (formerly
KTFX-FM) in Tulsa, Oklahoma for consideration of $3.5 million. Cox Radio had
been operating this station pursuant to an LMA since January 1999.
Also in January 2000, Cox Radio disposed of the assets of KACE-FM and
KRTO-FM, serving the Los Angeles, California market, for consideration of
approximately $75 million.
On March 3, 2000, Cox Radio entered into an agreement to acquire the
assets of radio stations KKBQ-FM, KLDE-FM and KKTL-FM, serving the Houston,
Texas market, and WKHK-FM, WMXB-FM, WKLR-FM and WTVR-AM, serving the Richmond,
Virginia market, for consideration of approximately $380 million. Pending
receipt of all necessary legal and regulatory approvals, Cox Radio anticipates
closing this transaction during the second half of 2000.
For tax purposes, Cox Radio intends to account for the disposition of
KACE-FM and KRTO-FM, serving the Los Angeles, California market, and the
acquisition of WKHK-FM, WMXB-FM, WKLR-FM and WTVR-AM, serving the Richmond,
Virginia market, as tax deferred like-kind exchanges. Tax rules allow Cox Radio
to defer a substantial portion of the tax gains on these transactions upon the
reinvestment of the net proceeds in qualifying future acquisitions. Restricted
cash of $76.7 million is being held in escrow pending reinvestment and has been
reported in the June 30, 2000 Consolidated Balance Sheet as restricted cash.
13
<PAGE> 14
On April 2, 2000, the LMA for WCNN-AM, serving the Atlanta, Georgia
market, terminated.
Also in April 2000, Cox Radio disposed of the assets of KGMZ-FM,
serving the Honolulu, Hawaii market, for approximately $6.6 million. Cox Radio
continues to manage this station's local, regional and national advertising
sales efforts under a JSA. In addition, Cox Radio is a guarantor of the buyer's
financing for this transaction.
On May 1, 2000, Cox Radio acquired the assets of KINE-FM, KCCN-FM and
KCCN-AM, serving the Honolulu, Hawaii market, for consideration of approximately
$17.8 million.
On June 2, 2000, Cox Radio exercised its right of first refusal and
agreed to acquire the capital stock of Midwestern Broadcasting Company, Inc.
which owns WALR-FM, serving the Atlanta, Georgia market, for $280 million. In a
related transaction, Cox Radio entered into an asset exchange agreement with
Salem Communications Corporation to exchange the license and transmitting
facilities of WALR-FM, as well as the license and transmitting facilities of
radio stations KLUP-AM, serving San Antonio, Texas, and WSUN-AM, serving Tampa,
Florida, for the license and transmitting facilities of radio station KKHT-FM,
serving Houston, Texas. Cox Radio would retain the intellectual property of
WALR-FM and intends to broadcast WALR-FM's programming on its WJZF-FM signal in
Atlanta. Pending receipt of all regulatory approvals, Cox Radio anticipates
consummation of these transactions in the second half of 2000.
On July 13, 2000, Cox Radio acquired the outstanding capital stock of
Marlin Broadcasting, Inc., which owns radio stations WTMI-FM serving Miami,
WCCC-FM and WCCC-AM serving Hartford, Connecticut and WBOQ-FM serving
Gloucester, Massachusetts, for approximately $125 million. As part of this
transaction, Cox Radio sold certain assets of Marlin comprising WCCC-FM, WCCC-AM
and WBOQ-FM to certain principals of Marlin for approximately $25 million. The
proceeds of the sale of WCCC-FM, WCCC-AM, and WBOQ-FM are being held in escrow
pending reinvestment in qualifying future acquisitions as part of a tax deferred
like-kind exchange.
RESULTS OF OPERATIONS
Three months ended June 30, 2000 compared to three months ended June 30, 1999
Net revenues for the second quarter of 2000 increased $17.1 million to
$95.7 million, a 21.7% increase over the second quarter of 1999. This increase
was primarily a result of the acquisition of radio stations in Tampa, Florida;
Louisville, Kentucky; and Honolulu, Hawaii; the acquisition of the operations of
radio stations in Jacksonville, Florida; New Haven, Connecticut;
Stamford-Norwalk, Connecticut; Atlanta, Georgia; and Miami, Florida; and offset
somewhat by the disposition of stations in Syracuse, New York and operations of
KFI-AM and KOST-FM in Los Angeles, California. In addition, significant
increases in net revenues at Cox Radio's previously owned radio stations in
Atlanta, Georgia; Birmingham, Alabama; Long Island, New York; and San Antonio,
Texas, were realized as a result of continued strong ratings performance.
Station operating expenses increased $9.9 million to $57.8 million, an
increase of 20.6% over the second quarter of 1999. This increase was primarily
as a result of the acquisition of radio stations in Tampa, Florida; Louisville,
Kentucky; and Honolulu, Hawaii; the acquisition of the operations of radio
stations in Jacksonville, Florida; New Haven, Connecticut; Stamford-Norwalk,
Connecticut; Atlanta, Georgia; and Miami, Florida, as well as higher programming
and sales related costs which are driven by ratings and revenues, respectively.
These increases were offset somewhat by the disposition of stations in Syracuse,
New York and operations of KFI-AM and KOST-FM in Los Angeles, California.
Broadcast cash flow increased $7.2 million to $37.9 million, a 23.5%
increase over the second quarter of 1999, for the reasons discussed above.
Corporate general and administrative expenses increased $0.7 million to
$3.1 million, primarily due to higher overhead costs incurred as a result of the
increase in number of stations owned and/or operated in 2000.
14
<PAGE> 15
Operating income decreased $34.2 million to $27.0 million for the
second quarter of 2000, for the reasons discussed above and as a result of a
$39.8 million pre-tax gain recorded in the second quarter of 1999 on the sale of
Cox Radio's stations in Syracuse, New York.
Interest expense during the second quarter of 2000 increased $1.6
million to $7.2 million as a result of borrowings incurred to complete Cox
Radio's acquisitions during 1999 and the first half of 2000.
Net income decreased $19.2 million to $13.5 million for the second
quarter of 2000 as a result of a $23.8 million after-tax gain recorded in the
second quarter of 1999 on the sale of Cox Radio's stations in Syracuse, New
York, offset by a $1.3 million after-tax non-cash "mark-to-market" unrealized
gain related to Cox Radio's interest rate swap agreements in the second quarter
of 2000 and also for the reasons discussed above.
Six months ended June 30, 2000 compared to six months ended June 30, 1999
Net revenues for the first half of 2000 increased $32.6 million to
$171.5 million, a 23.5% increase over the first half of 1999. This increase was
primarily a result of the acquisition of radio stations in Tampa, Florida;
Louisville, Kentucky; and Honolulu, Hawaii; the acquisition of the operations of
radio stations in Jacksonville, Florida; New Haven, Connecticut;
Stamford-Norwalk, Connecticut; Atlanta, Georgia; and Miami, Florida; and offset
somewhat by the disposition of radio stations in Syracuse, New York and the
operations of KFI-AM and KOST-FM in Los Angeles, California. In addition,
significant increases in net revenues at Cox Radio's previously owned radio
stations in Atlanta, Georgia; Birmingham, Alabama; Long Island, New York; and
San Antonio, Texas, were realized as a result of continued strong ratings
performance.
Station operating expenses increased $18.4 million to $107.0 million,
an increase of 20.8% over the first half of 1999. This increase was primarily as
a result of the acquisition of radio stations in Tampa, Florida; Louisville,
Kentucky; and Honolulu, Hawaii; the acquisition of the operations of radio
stations in Jacksonville, Florida; New Haven, Connecticut; Stamford-Norwalk,
Connecticut; Atlanta, Georgia; and Miami, Florida, as well as higher programming
and sales related costs which are driven by ratings and revenues, respectively.
These increases were offset somewhat by the disposition of stations in Syracuse,
New York and the operations of KFI-AM and KOST-FM in Los Angeles, California.
Broadcast cash flow increased $14.2 million to $64.6 million, a 28.1%
increase over the first half of 1999, for the reasons discussed above.
Corporate general and administrative expenses increased $1.4 million to
$6.0 million, primarily due to higher overhead costs incurred as a result of the
increase in number of stations owned and/or operated in 2000.
Operating income increased $16.6 million to $89.0 million for the first
half of 2000, primarily for the reasons discussed above. In addition, the $46.6
million pre-tax gain recorded in the first half of 2000 on the sale of KACE-FM
and KRTO-FM in Los Angeles, California is greater than the $39.8 million pre-tax
gain recorded in the first half of 1999 on the sale of Cox Radio's stations in
Syracuse, New York.
Interest expense during the first half of 2000 increased $3.7 million
to $14.1 million as a result of borrowings incurred to complete Cox Radio's
acquisitions during 1999 and the first half of 2000.
Net income increased $9.8 million to $46.3 million for the first half
of 2000, primarily for the reasons discussed above and due to a $1.3 million
after-tax non-cash "mark-to-market" unrealized gain related to Cox Radio's
interest rate swap agreements in the second quarter of 2000. In addition, the
$27.9 million after-tax gain recorded in the first half of 2000 on the sale of
KACE-FM and KRTO-FM in Los Angeles, California is greater than the $23.8 million
after-tax gain recorded in the first half of 1999 on the sale of Cox Radio's
stations in Syracuse, New York.
15
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES
Cox Radio's primary source of liquidity is cash provided by operations.
Historically, cash requirements have been funded through Cox Radio's operating
activities and borrowings under Cox Radio's bank credit facility. For the six
months ended June 30, 2000 as compared to the six months ended June 30, 1999,
cash from operations decreased $2.9 million to $25.5 million, primarily
attributable to the gain on sales of radio stations and the net change in
working capital accounts. In addition, cash requirements historically have been
funded on a temporary basis through intercompany advances 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 and 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 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 interest rate was based on the London Interbank Offered
Rate plus a spread determined by the ratio of Cox Radio's debt to EBITDA. This
facility included a commitment fee on the unused portion of the total amount
available of .1% to .25% based on the ratio of Cox Radio's debt to EBITDA. At
December 31, 1999, Cox Radio had approximately $220 million of outstanding
indebtedness and approximately $80 million available under the bank credit
facility. Borrowings under the bank credit facility approximated fair value
based upon current borrowing rates available to Cox Radio. The interest rate
applied to amounts due under the bank credit facility was 6.9% at December 31,
1999. This bank credit facility contained, among other provisions, defined
requirements as to ratio of debt to EBITDA and ratio of EBITDA to interest
expense. At December 31, 1999, Cox Radio was in compliance with these covenants.
On June 27, 2000, all amounts previously outstanding under this facility were
repaid with a portion of the net proceeds from the offering of Class A common
stock discussed in Note 5 of the financial statements included in Item 1.
hereof.
On June 30, 2000, Cox Radio replaced its $300 million, five-year,
senior, unsecured revolving credit facility, with a $350 million, five-year,
senior, unsecured revolving credit facility and a $350 million, 364-day, senior,
unsecured revolving credit facility, both with certain banks, including The
Chase Manhattan Bank, as the Administrative Agent, Bank of America, N.A., as the
Syndications Agent, and Citibank, N.A., as Documentation Agent. The interest
rate for both facilities is based on the Federal funds borrowing rate plus 1/2
of 1%; the London Interbank Offered Rate plus a spread based on the credit
ratings of Cox Radio's senior, long-term debt; or the bid rate for the purchase
of certificates of deposit of equal principal amount and maturity plus a spread
based on the credit ratings of Cox Radio's senior, long-term debt. Both
facilities include a commitment fee on the unused portion of the total amount
available of .1% to .25% based on the credit ratings of Cox Radio's senior,
long-term debt. Both facilities contain, among other provisions, defined
requirements as to the ratio of debt to EBITDA and the ratio of EBITDA to
interest expense. At June 30, 2000, there were no amounts outstanding under
these new bank credit facilities.
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, which have been exchanged for
notes which have been registered under the Securities Act of 1933. The
replacement 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 then-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
16
<PAGE> 17
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 June 30, 2000 and
December 31, 1999, the estimated fair value of these notes was approximately
$191.6 million and $191.0 million, respectively, based on quoted market prices.
In September 1997, Cox Radio entered into interest rate swap agreements
with certain lenders providing bank financing under its 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 nor would we expect
any such loss to be material. The estimated fair value of the interest rate swap
agreements, based on current market rates, approximated a net receivable of $1.9
million at December 31, 1999. Prior to June 27, 2000, Cox Radio accounted for
the interest rate swap agreements as hedges. In connection with the offering of
Class A common stock as discussed in Note 5 of the financial statements included
in Item 1. hereof, Cox Radio used a portion of the net proceeds from the
offering to repay all amounts then outstanding under the bank credit facility.
As the interest rate swap agreements were no longer matched with existing debt,
Cox Radio recorded a non-cash, mark-to-market unrealized gain of $2.2 million,
which represented the fair value of the interest rate swap agreements at the
date the underlying debt was paid off. Cox Radio is contemplating re-designating
these interest rate swap agreements as hedges of related floating rate
borrowings under its revolving credit facilities.
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.
On May 2, 2000, Cox Radio's universal shelf registration statement
filed with the Securities and Exchange Commission on Form S-3 was declared
effective. Under the universal shelf registration statement, Cox Radio and two
financing trusts sponsored by Cox Radio may from time to time offer and issue
debentures, notes, bonds and other evidences of indebtedness and forward
contracts in respect of any such indebtedness, shares of preferred stock, shares
of Class A common stock, warrants, stock purchase contracts and stock purchase
units of Cox Radio and preferred securities of the Cox Radio trusts for a
maximum aggregate offering amount of $750 million. Unless otherwise described in
future prospectus supplements, Cox Radio intends to use the net proceeds from
the sale of securities registered under this universal shelf registration
statement for general corporate purposes, which may include additions to working
capital, the repayment or redemption of existing indebtedness and the financing
of capital expenditures and acquisitions. See Note 5 of the financial statements
included in Item 1. hereof for a discussion of an offering of Class A common
stock completed during the second quarter of 2000.
On June 27, 2000, Cox Radio consummated a public offering of 8,800,000
shares of its Class A common stock pursuant to its shelf registration statement
and completed a concurrent private placement of 3,591,954 shares of Class A
common stock directly to Cox Enterprises at the public offering price per share,
less underwriting discounts and commissions. Cox Radio received net proceeds of
approximately $344.5 million from this offering and will use such proceeds to
partially finance pending acquisitions, repay outstanding indebtedness and for
general corporate purposes.
17
<PAGE> 18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest rate risk is the risk that the Company will incur economic
losses due to adverse changes in interest rates. The Company manages
interest-rate risk through the use of fixed- and floating-rate debt, and through
the use of derivatives.
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 interest rate was based on the London Interbank Offered
Rate plus a spread determined by the ratio of Cox Radio's debt to EBITDA. This
facility included a commitment fee on the unused portion of the total amount
available of .1% to .25% based on the ratio of Cox Radio's debt to EBITDA. At
December 31, 1999, Cox Radio had approximately $220 million of outstanding
indebtedness and approximately $80 million available under the bank credit
facility. Borrowings under the bank credit facility approximated fair value
based upon current borrowing rates available to Cox Radio. The interest rate
applied to amounts due under the bank credit facility was 6.9% at December 31,
1999. This bank credit facility contained, among other provisions, defined
requirements as to ratio of debt to EBITDA and ratio of EBITDA to interest
expense. At December 31, 1999, Cox Radio was in compliance with these covenants.
On June 27, 2000, all amounts previously outstanding under this facility were
repaid with a portion of the net proceeds from the offering of Class A common
stock discussed in Note 5 of the financial statements included in Item 1.
hereof.
On June 30, 2000, Cox Radio replaced its $300 million, five-year,
senior, unsecured revolving credit facility, with a $350 million, five-year,
senior, unsecured revolving credit facility and a $350 million, 364-day, senior,
unsecured revolving credit facility, both with certain banks, including The
Chase Manhattan Bank, as the Administrative Agent, Bank of America, N.A., as the
Syndications Agent, and Citibank, N.A., as Documentation Agent. The interest
rate for both facilities is based on the Federal funds borrowing rate plus 1/2
of 1%; the London Interbank Offered Rate plus a spread based on the credit
ratings of Cox Radio's senior, long-term debt; or the bid rate for the purchase
of certificates of deposit of equal principal amount and maturity plus a spread
based on the credit ratings of Cox Radio's senior, long-term debt. Both
facilities include a commitment fee on the unused portion of the total amount
available of .1% to .25% based on the credit ratings of Cox Radio's senior,
long-term debt. Both facilities contain, among other provisions, defined
requirements as to the ratio of debt to EBITDA and the ratio of EBITDA to
interest expense. At June 30, 2000, there were no amounts outstanding under
these new bank credit facilities.
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, which have been exchanged for
notes which have been registered under the Securities Act of 1933. The
replacement 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 then-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 June 30, 2000 and December 31, 1999, the estimated fair
value of these notes was approximately $191.6 million and $191.0 million,
respectively, based on quoted market prices.
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In September 1997, Cox Radio entered into interest rate swap agreements
with certain lenders providing bank financing under its 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 nor would we expect
any such loss to be material. The estimated fair value of the interest rate swap
agreements, based on current market rates, approximated a net receivable of $1.9
million at December 31, 1999. Prior to June 27, 2000, Cox Radio accounted for
the interest rate swap agreements as hedges. In connection with the offering of
Class A common stock as discussed in Note 5 of the financial statements included
in Item 1. hereof, Cox Radio used a portion of the net proceeds from the
offering to repay all amounts then outstanding under the bank credit facility.
As the interest rate swap agreements were no longer matched with existing debt,
Cox Radio recorded a non-cash, mark-to-market unrealized gain of $2.2 million,
which represented the fair value of the interest rate swap agreements at the
date the underlying debt was paid off. Cox Radio is contemplating re-designating
these interest rate swap agreements as hedges of related floating rate
borrowings under its revolving credit facilities.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 6, 2000, Cox Radio was named as a defendant in a putative
class action suit filed in the state court of Gwinnett County, Georgia, alleging
violations of the federal Telephone Consumer Protection Act and related Georgia
telemarketing laws. The complaint sought statutory damages in the amount of
$1,500, plus actual and punitive damages and attorneys' fees, on behalf of each
person "throughout the State of Georgia" who received an unsolicited
pre-recorded telephone message delivering an "advertisement" from a Cox Radio
radio station. On May 1, 2000, the lawsuit was dismissed without prejudice.
Counsel for the plaintiff has recently indicated his intention to file a similar
action against Cox Radio at a later date.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On June 27, 2000, Cox Radio completed a private placement of 3,591,954
shares of Class A common stock to Cox Enterprises, Inc. at a price of $27.84 per
share, pursuant to Section 4(2) of the Securities Act of 1933. Cox Radio is
using the proceeds to partially finance pending acquisitions, repay outstanding
indebtedness and for general corporate purposes.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Cox Radio held its Annual Meeting of Stockholders on May 11, 2000. Four
matters were voted upon at the meeting: (a) the election of a Board of Directors
of eight members to serve until the 2001 Annual Meeting or until their
successors are duly elected and qualified; (b) ratification of the appointment
by the Board of Directors of Deloitte & Touche LLP, independent certified public
accountants, as Cox Radio's independent auditors for the fiscal year ending
December 31, 2000; (c) approval of an amendment to the Certificate of
Incorporation to increase the number of authorized shares of Class A common
stock, Class B common stock and preferred stock; and (d) approval of an
amendment to the Certificate of Incorporation to effect a three-for-one split of
the Cox Radio's outstanding stock.
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 203,530,592 114,788
Ernest D. Fears, Jr. 203,554,974 90,406
Richard A. Ferguson 203,530,492 114,888
Paul M. Hughes 203,554,688 90,692
James C. Kennedy 203,530,592 114,788
Marc W. Morgan 203,530,492 114,888
Robert F. Neil 203,530,492 114,888
Nicholas D. Trigony 203,529,588 115,792
</TABLE>
Ratification of Deloitte & Touche LLP, as independent auditors for the
fiscal year ending December 31, 2000, was approved with 203,609,351 votes in
favor, 35,176 votes opposed to, and 853 abstentions.
The amendment to the Certificate of Incorporation to increase the
number of authorized shares of Class A common stock, Class B common stock and
preferred stock was approved with 200,545,496 votes in favor, 2,309,620 votes
opposed to, and 361 abstentions.
The amendment to the Certificate of Incorporation to effect a
three-for-one split of Cox Radio's outstanding stock was approved by each class
of shareholders as follows:
<TABLE>
<CAPTION>
Class Votes in Favor Votes Opposed Abstentions
----- -------------- ------------- -----------
<S> <C> <C> <C>
Class A Common 7,812,132 56,083 445
Class B Common 195,776,720 0 0
----------- --------- -------
All classes combined 203,588,852 56,083 445
</TABLE>
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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)3.1 -- Amended and Restated Certificate of Incorporation of Cox Radio, Inc.
(1)3.2 -- Amended and Restated Bylaws of Cox Radio, Inc.
(2)4.1 -- Indenture dated as of May 26, 1998 between Cox Radio, Inc., The Bank of New
York, WSB, Inc., and WHIO, Inc.
(3)4.2 -- Supplemental Indenture dated as of February 1, 1999 by and among trustee, Cox
Radio, Inc. and CXR Holdings, Inc.
(4)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.
(5)4.4 -- Specimen of Class A Common Stock Certificate.
(6)10.1 -- Asset Exchange Agreement dated August 30, 1999 by and among Cox Radio, Inc. and
AMFM Inc.
(7) 10.2 -- Letter dated as of August 30, 1999 by and among Cox Radio, Inc. and AMFM Inc.
(8) 10.3 -- Merger Agreement dated March 14, 2000 by and among Marlin Broadcasting, Inc., Cox
Radio, Inc., Cox Miami Merger Sub, Inc. and Marlin Broadcasting, LLC
(9) 10.4 -- Asset Purchase Agreement dated March 3, 2000 by and among Clear Channel
Broadcasting, Inc., Clear Channel Broadcasting Licenses, Inc., Citicasters Co.,
Capstar Radio Operating Company, Capstar TX Limited Partnership, AMFM Texas
Broadcasting, L.P., AMFM Texas Licenses Limited Partnership, Cox Radio, Inc., and
CXR Holdings, Inc.
10.5 -- Asset Exchange Agreement dated as of May 31, 2000 by and among Cox Radio, Inc.,
Salem Communications Corporation and South Texas Broadcasting, Inc.
10.6 Letter dated May 31, 2000 by and among Cox Radio, Inc., CXR Holdings, Inc., Salem
Communications Corporation and South Texas Broadcasting, Inc.
10.7 Letter dated June 7, 2000 by and among Cox Radio, Inc., CXR Holdings, Inc., Salem
Communications Corporation and South Texas Broadcasting, Inc.
10.8 -- Stock Purchase Agreement dated as of June 7, 2000 by and among Midwestern
Broadcasting, Inc., the stockholders of Midwestern Broadcasting Company, Inc.
parties thereto and Cox Radio, Inc.
10.9 -- 364-Day Credit Agreement dated as of June 30, 2000 among Cox Radio, Inc., the
Banks party thereto, The Chase Manhattan Bank, as Administrative Agent, Bank of
America, N.A., as Syndications Agent, and Citibank, N.A., as Documentation Agent.
10.10 -- Five-Year Credit Agreement dated as of June 30, 2000 among Cox Radio, Inc., the
Banks referred to therein, The Chase Manhattan Bank, as Administrative Agent, Bank
of America, N.A., as Syndications Agent, and Citibank, N.A., as Documentation
Agent.
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) Incorporated by reference to Exhibit 4.1 of Cox Radio's Registration
Statement on Form S-4 (Commission File No. 333-61179).
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<PAGE> 22
(3) Incorporated by reference to the corresponding exhibit of Cox Radio's
Report on Form 10-Q for the period ending March 31, 1999 (Commission
File No. 1-12187)
(4) Incorporated by reference to Exhibit 4.2 of Cox Radio's Registration
Statement on Form S-4 (Commission File No. 333-61179).
(5) Incorporated by reference to Exhibit 4.3 of Cox Radio's Registration
Statement on Form S-1 (Commission File No. 333-08737).
(6) Incorporated by reference to Exhibit 99.1 of Cox Radio's Report on Form
8-K dated September 17, 1999 (Commission File No. 1-12187).
(7) Incorporated by reference to Exhibit 99.2 of Cox Radio's Report on Form
8-K dated September 17, 1999 (Commission File No. 1-12187).
(8) Incorporated by reference to Exhibit 2.2 of Cox Radio's Report on Form
8-K dated April 19, 2000 (Commission File No. 1-12187).
(9) Incorporated by reference to Exhibit 2.3 of Cox Radio's Report on Form
8-K dated April 19, 2000 (Commission File No. 1-12187).
(b) Reports on Form 8-K
On April 19, 2000, Cox Radio filed a Current Report on Form
8-K to provide certain audited financial information for recently
announced transactions and to provide an unaudited pro forma combined
balance sheet as of December 31, 1999 as if the transactions had been
consummated as of December 31, 1999 and an unaudited pro forma combined
statement of operations for the year ended December 31, 1999 as if such
transactions had been consummated on January 1, 1999.
On June 27, 2000, Cox Radio filed a Current Report on
Form 8-K to report the consummation of the public offering of 8,800,000
shares of its Class A common stock and the concurrent private placement
of 3,591,954 shares of Class A common stock to Cox Enterprises, Inc.
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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 8, 2000 /s/ Maritza C. Pichon
-----------------------------------
Maritza C. Pichon
Chief Financial Officer
(Principal Financial Officer and
duly authorized officer)
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