<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 March 31, 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: 001-14461
---------
Entercom Communications Corp.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1701044
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
401 CITY AVENUE, SUITE 409
BALA CYNWYD, PENNSYLVANIA 19004
(Address of principal executive offices and Zip Code)
(610) 660-5610
(Registrant's telephone number, including area code)
Former Fiscal Year: September 30
--------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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.
Class A Common Stock, $.01 par value -
24,940,806 Shares Outstanding as of May 13, 1999
Class B Common Stock, $.01 par value -
10,531,805 Shares Outstanding as of May 13, 1999
Class C Common Stock, $.01 par value -
1,695,669 Shares Outstanding as of May 13, 1999
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ENTERCOM COMMUNICATIONS CORP.
INDEX
PAGE
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements.................................................................................3
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................................................10
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk..........................................15
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings...................................................................................16
ITEM 2. Changes in Securities and Use of Proceeds...........................................................16
ITEM 3. Defaults Upon Senior Securities.....................................................................16
ITEM 4. Submission of Matters to a Vote of Security Holders.................................................16
ITEM 5. Other Information...................................................................................17
ITEM 6. Exhibits and Reports on Form 8-K....................................................................17
SIGNATURES ....................................................................................................18
</TABLE>
2
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND MARCH 31, 1999
(dollars in thousands)
(unaudited)
ASSETS
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DECEMBER 31, MARCH 31,
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1998 1999
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CURRENT ASSETS
Cash and cash equivalents $ 6,469 $ 7,290
Accounts receivable, net of allowance for doubtful accounts 38,511 32,657
Prepaid expenses and deposits 6,259 6,300
Proceeds held in escrow from sale of Tampa stations 75,000
Deferred tax assets 2,143
Station acquisition deposits 327 263
--------- ---------
Total current assets 126,566 48,653
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PROPERTY AND EQUIPMENT - AT COST
Land and land easements and land improvements 6,927 7,137
Building 4,596 4,735
Equipment 35,804 38,741
Furniture and fixtures 7,662 8,262
Leasehold improvements 3,899 3,991
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58,888 62,866
Accumulated depreciation (10,874) (12,192)
--------- ---------
48,014 50,674
Capital improvements in progress 629 1,248
--------- ---------
Net property and equipment 48,643 51,922
RADIO BROADCASTING LICENSES AND OTHER INTANGIBLES -NET 500,545 553,352
DEFERRED CHARGES AND OTHER ASSETS - NET 5,280 4,295
--------- ---------
TOTAL $ 681,034 $ 658,222
========= =========
</TABLE>
See notes to condensed consolidated financial statements
3
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ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND MARCH 31, 1999
(dollars in thousands)
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
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DECEMBER 31, MARCH 31,
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1998 1999
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CURRENT LIABILITIES
Accounts payable $ 18,224 $ 17,417
Accrued liabilities:
Salaries 4,322 4,289
Interest 1,492 423
Other 1,094 281
Income taxes payable 487
Dividends payable 12,932
Short-term debt 3,138
Long-term debt due within one year 10 10
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Total current liabilities 25,142 38,977
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SENIOR DEBT 330,271 147,768
--------- ---------
CONVERTIBLE SUBORDINATED NOTE
Note payable 25,000
Accrued interest 4,858
Cumulative adjustment to reflect indexing of Convertible Subordinated Note 67,414
--------- ---------
Total Convertible Subordinated Note 97,272
DEFERRED TAX LIABILITY 82,102
MINORITY INTEREST IN EQUITY OF PARTNERSHIP 2,882
--------- ---------
Total liabilities 455,567 268,847
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred Stock
Class A common stock 110 246
Class B common stock 105 105
Class C common stock 20
Additional paid-in capital 467,897
Retained earnings (deficit) 225,252 (78,653)
Unearned compensation (240)
--------- ---------
Total shareholders' equity 225,467 389,375
--------- ---------
TOTAL $ 681,034 $ 658,222
========= =========
</TABLE>
See notes to condensed consolidated financial statements
4
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ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1999
(dollars in thousands, except share and per share data)
(unaudited)
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THREE MONTHS ENDED
------------------
MARCH 31
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1998 1999
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NET REVENUES $ 24,978 $ 39,599
OPERATING EXPENSES:
Station operating expenses 18,360 28,909
Depreciation and amortization 2,966 4,861
Corporate general and administrative expenses 1,100 1,801
Net time brokerage agreement expenses 632 652
------------ ------------
OPERATING INCOME 1,920 3,376
------------ ------------
OTHER EXPENSE (INCOME) ITEMS:
Interest expense 2,939 3,586
Adjustment to reflect indexing of the Convertible Subordinated Note 9,947
Interest income (44) (544)
Other non-operating expenses 25
Gains on sale of assets (293)
------------ ------------
Total other expense (income) 12,574 3,042
------------ ------------
INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (10,654) 334
INCOME TAXES (BENEFIT)
Income taxes - C Corporation 791
Income taxes - S Corporation (14) 125
Deferred income taxes for conversion from an S to a C Corporation 79,845
------------ ------------
Total income taxes (benefit) (14) 80,761
------------ ------------
LOSS BEFORE EXTRAORDINARY ITEM (10,640) (80,427)
EXTRAORDINARY ITEM (NET OF TAX BENEFIT) 2,397
------------ ------------
NET LOSS ($ 13,037) ($ 80,427)
============ ============
NET LOSS PER SHARE
Basic:
Loss before extraordinary item ($ 2.48)
Extraordinary item, net of taxes
------------
NET LOSS PER SHARE ($ 2.48)
============
Diluted:
Loss before extraordinary item ($ 2.48)
Extraordinary item, net of taxes
============
NET LOSS PER SHARE ($ 2.48)
============
PRO FORMA DATA
PRO FORMA NET INCOME DATA:
Income (loss) before income taxes and extraordinary item ($ 10,654) $ 334
Pro forma income taxes (benefit) (269) 127
------------ ------------
Pro forma income (loss) before extraordinary item (10,385) 207
Extraordinary item, net of pro forma taxes 1,489
------------ ------------
PRO FORMA NET INCOME (LOSS) ($ 11,874) $ 207
============ ============
PRO FORMA EARNINGS (LOSS) PER SHARE:
Basic:
Pro forma earnings (loss) before extraordinary item ($ 0.48) $ 0.01
Extraordinary item, net of pro forma taxes 0.07
------------ ------------
Pro forma earnings (loss) per share ($ 0.55) $ 0.01
============ ============
Diluted:
Pro forma earnings (loss) before extraordinary item ($ 0.48) $ 0.01
Extraordinary item, net of pro forma taxes $ 0.07
------------ ------------
Pro forma earnings (loss) per share ($ 0.55) $ 0.01
============ ============
WEIGHTED AVERAGE SHARES:
Basic 21,534,000 32,477,995
Diluted 21,534,000 32,802,870
</TABLE>
See notes to condensed consolidated financial statements
5
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ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1999
(dollars in thousands)
(unaudited)
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<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31
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1998 1999
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OPERATING ACTIVITIES:
Net loss ($ 13,037) ($ 80,427)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation 865 1,319
Amortization of radio broadcasting licenses, other intangibles and deferred charges 2,101 3,542
Extraordinary items 2,401
Deferred taxes 79,959
Gain on dispositions and exchanges of assets (293)
Non-cash stock-based compensation expense 62
Interest on Convertible Subordinated Note 462
Adjustment to reflect indexing of the Convertible Subordinated Note 9,947
Changes in assets and liabilities which provided (used) cash:
Accounts receivable 3,651 5,853
Prepaid expenses (612) (43)
Accounts payable, accrued liabilities and income taxes payable 1,537 (2,287)
Minority interest 19
--------- ---------
Net cash provided by operating activities 7,041 7,978
--------- ---------
INVESTING ACTIVITIES:
Additions to property and equipment (2,419) (2,281)
Proceeds from sale of assets 6
Payment for exchanges of radio stations (306)
Purchases of radio station assets (58,187)
Deferred charges and other assets (1,348) (80)
Station acquisition deposits (678) 75,066
--------- ---------
Net cash (used) provided by investing activities (4,745) 14,518
--------- ---------
FINANCING ACTIVITIES:
Net proceeds from initial public offering 236,007
Proceeds from issuance of long-term debt 131,293 64,000
Payments of long-term debt (130,000) (246,501)
Dividends paid to S Corporation shareholders (1,437) (75,181)
--------- ---------
Net cash used by financing activities (144) (21,675)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,152 821
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,497 6,469
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,649 $ 7,290
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION --
Cash paid during the period for:
Interest $ 2,002 $ 4,583
========= =========
Income taxes $ 148 $ 586
========= =========
</TABLE>
SUPPLEMENTAL DISCLOSURES ON NON-CASH INVESTING AND FINANCING ACTIVITIES -
In connection with the radio station exchange transactions completed by the
Company during the three months ended March 31, 1998, the non-cash portion of
assets recorded was $22,500.
In connection with the Company's Initial Public Offering completed during the
three months ended March 31, 1999, the convertible subordinated Note, net of
deferred finance charges, of $96,400 was converted into equity.
In connection with the purchase of the 1% minority interest in ECI License
Company, L.P., the Company issued a short-term note payable in the amount of
$3,100.
In connection with the issue of certain awards of Restricted Stock for 11,112
shares of Class A Common, the Company increased its additional paid-in
capital by $250.
See notes to condensed consolidated financial statements
6
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ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1998 AND 1999
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements for Entercom
Communications Corp. (the "Company") have been prepared in accordance with (i)
generally accepted accounting principles for interim financial information and
(ii) the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments, including normal recurring
accruals, considered necessary for a fair presentation have been included.
This Form 10-Q should be read in conjunction with the financial
statements and notes thereto included in the Company's audited financial
statements as of September 30, 1998, as presented in the Company's registration
statement on Form S-1, filed with the Securities and Exchange Commission (the
"SEC") and dated January 28, 1999 and the transition report on Form 10-Q for the
transition period ending December 31, 1998, filed with the SEC on March 12,
1999.
On March 12, 1999, the Company filed a Form 8-K, indicating, among
other things, its change for financial reporting purposes, from a fiscal year
ending September 30 to a calendar year ending December 31, effective January 1,
1999.
Operating results for the three-month period ended March 31, 1999 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1999. Certain prior year amounts have been reclassified to
conform with the current year's presentation, which had no effect on net income
or shareholders' equity.
Effective January 28, 1999 (the "Revocation Date"), in
connection with the initial public offering (the "IPO") of 13,627,500 shares of
Class A Common Stock of the Company at a price of $22.50 per share, the Company
revoked its S Corporation status with the Internal Revenue Service and therefore
the last day the Company was taxed as an S Corporation was January 27, 1999. As
a result, all of the Company's net income after January 27, 1999 will be taxed
to the Company rather than taxed to the Company's shareholders. The Company's
effective tax rate for state and federal income taxes for the period subsequent
to January 27, 1999 is at a combined rate of 38%, applied to taxable income
before income taxes, which is adjusted for permanent differences between tax and
book income.
On January 29, 1999, the Company's Class A Common Stock began trading
on the New York Stock Exchange. On February 3, 1999, the Company completed the
IPO, pursuant to which 13,627,500 shares of Class A Common Stock were sold to
the public at a price of $22.50 per share. Of the 13,627,500 shares sold, the
Company sold 11,300,000 and Chase Capital Partners ("Chase Capital"), the sole
selling shareholder, sold 2,327,500 shares. The net proceeds to the Company,
after deducting underwriting discounts and other offering expenses was
approximately $236.0 million.
As a result of the revocation of its S Corporation status and its
conversion to a C Corporation, the Company recorded a deferred income tax
expense of approximately $79.8 million to reflect the cumulative effect of
temporary differences between the tax and financial reporting bases of the
Company's assets and liabilities attributable to the period prior to its
conversion to a C Corporation.
The unaudited pro forma net income (loss) data reflect adjustments
for income taxes (benefit) as if the Company had been subject to federal and
state income taxes based upon a pro forma effective tax rate of 38% applied to
income before income taxes and extraordinary item, excluding the effect of an
adjustment to reflect indexing of the Convertible Subordinated Note (as such
adjustment is not tax deductible) of $9.9 million for the period ending March
31, 1998.
The net loss per share and pro forma earnings (loss) per share are
calculated in accordance with Statement of Financial Accounting Standards No.
128 and, are based on the weighted average number of shares of Common Stock
outstanding and dilutive common equivalent shares which include stock options
and restricted stock (using the treasury stock method). For the period ended
March 31,1998, the effect of the conversion of the Convertible Subordinated Note
for the calculation of the pro forma loss per share was antidilutive.
2. ACQUISITIONS AND OTHER SIGNIFICANT EVENTS
Completed Acquisitions, Divestitures and Investments
For the Three Month Transition Period Ended December 31, 1998
On December 11, 1998, the Company acquired the assets of WRKO-AM and
WEEI-AM, serving the Boston radio market, from CBS Radio, Inc. ("CBS") for $82.0
million (the "First Boston Transaction"). The Company incurred transaction costs
of approximately $0.3 million related to this acquisition. Broadcasting licenses
and other intangibles in the amount of $77.8 million were recorded in connection
with this transaction. The Company had operated these stations under a Time
Brokerage Agreement ("TBA") since September 1998.
7
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
On December 14, 1998, the Company acquired the assets of KSLM-AM,
serving the Salem, Oregon radio market, from Willamette Broadcasting Co. for
approximately $0.6 million. Broadcasting licenses and other intangibles in the
amount of approximately $0.5 million were recorded in connection with this
transaction.
On December 21, 1998, the Company purchased 200,000 shares of the
common stock of USA Digital Radio, Inc., at a per share price of $5.00, for an
aggregate investment of $1.0 million. USA Digital Radio, Inc. is a developer of
in-band AM and FM digital audio broadcasting technology.
On December 22, 1998, the Company sold the assets of WLLD-FM and
WYUU-FM, serving the Tampa, Florida radio market to CBS for $75.0 million (the
"Tampa Transaction"), resulting in a gain of approximately $69.6 million.
For the Three Months Ended March 31, 1999
On January 22, 1999, in a related party transaction, a wholly owned
subsidiary of the Company purchased a 1% limited partnership interest in ECI
License Company, L.P. for $3.4 million. ECI License Company, L.P. is a limited
partnership in which the Company is the general partner, owning a 99% general
partnership interest. ECI License Company, L.P. owns certain of the Company's
FCC licenses. The acquisition effectively gives the Company a 100% interest in
its FCC licenses.
On February 22, 1999, the Company purchased the assets of radio
stations WAAF-FM and WEGQ-FM in Boston and WWTM-AM in Worchester from CBS for
$58.0 million in cash (the "Second Boston Transaction"). The Company incurred
transaction costs of approximately $0.2 million related to this transaction.
Broadcasting licenses and other intangibles in the amount of $55.7 million were
recorded in connection with this transaction. The Company had operated these
stations under a TBA since September 1998 and for the three months ended March
31, 1999, the Company incurred TBA fees in the amount of $0.7million.
Significant Events
Prior to the revocation of its S Corporation status, the
Company declared a dividend (the "S Distribution"), conditioned upon
consummation of the IPO, payable to its former S Corporation Shareholders in the
amount of $88.1 million, which the Company estimated would be the undistributed
balance of the income of the Company which has been taxed or is taxable to its S
Corporation Shareholders as of the Revocation Date. For the period ended March
31, 1999, the Company distributed $75.2 million to its S Corporation
Shareholders as a partial payment of the S Distribution. The Company paid the
remaining $12.9 million on April 15, 1999 and the liability is included in the
balance sheet at March 31, 1999 as a dividend payable.
Prior to the IPO, Chase Capital, which held a Convertible
Subordinated Promissory Note of the Company (the "Convertible Subordinated
Note") in the principal amount of $25.0 million, converted the Convertible
Subordinated Note into 2,327,500 shares of Class A Common Stock and 1,995,669
shares of Class C Common Stock (the "Chase Conversion"). At the time of the
Chase Conversion, the market value of the shares into which the Convertible
Subordinated Note was convertible, was approximately $97.3 million (the
principal amount of the Convertible Subordinated Note plus accrued interest
amounted to approximately $29.9 million, and the cumulative adjustment to
reflect indexing of the Convertible Subordinated Note was approximately $67.4
million). The Convertible Subordinated Note has been retired and there is no
further obligation due.
Pending Acquisitions
On December 9, 1998, the Company entered into an agreement to acquire
WREN-AM, a radio station serving Kansas City, Kansas, from Mortenson
Broadcasting Company of Canton, LLC and Mortenson Broadcasting Company for the
sum of $2.8 million in cash. It is anticipated that this transaction will close
in the second calendar quarter of 1999.
Unaudited Pro Forma Information for Acquisitions and Divestitures
The following unaudited pro forma summary presents the consolidated
results of operations as if the acquisition and divestiture transactions which
occurred during the period of January 1,1998 through March 31, 1999 had all
occurred as of January 1, 1998, after giving effect to certain adjustments,
including depreciation and amortization of assets and interest expense on any
debt incurred to fund the acquisitions which would have been incurred had such
acquisitions and other transactions occurred as of January 1, 1998. These
unaudited pro forma results have been prepared for comparative purposes only and
do not purport to be indicative of (i) what would have occurred had the
acquisitions and other transactions been made as of that date or (ii) results
which may occur in the future.
8
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
<TABLE>
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(UNAUDITED)
-----------
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1999
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<S> <C> <C>
Net Revenues $33,662 $39,599
Loss before extraordinary items and gains on sale of assets (14,139) (81,107)
Loss before extraordinary items (net of tax benefits) (13,846) (81,107)
Net loss (16,243) (81,107)
</TABLE>
3. DEBT
The Company has a senior secured Credit Facility (the "Credit
Facility") with a syndicate of banks which allows the Company to borrow up to
$350.0 million on a reducing, revolving basis. Availability under the Credit
Facility reduces quarterly beginning June 30, 2000, in amounts which vary from
$4.4 million to $17.5 million. As of March 31, 1999, the Company had
approximately $147.5 million of borrowings outstanding under the Credit
Facility.
4. COMMITMENTS AND CONTINGENCIES
Acquisitions
The Company entered into a preliminary agreement on February 6, 1996,
to acquire the assets of radio station KWOD-FM, Sacramento, California, from
Royce International Broadcasting Corporation, subject to approval by the FCC,
for a purchase price of $25.0 million. Notwithstanding efforts by the Company to
pursue this transaction, the seller has been nonresponsive. Accordingly, the
Company cannot determine if and when the transaction might occur.
Contingencies
The Company is subject to various outstanding claims which arose in
the ordinary course of business and to other legal proceedings. In the opinion
of management, any liability of the Company which may arise out of or with
respect to these matters will not materially affect the financial position,
results of operations or cash flows of the Company.
5. SHAREHOLDERS' EQUITY
During the three months ended March 31, 1999, the Company issued
options to purchase 798,111 shares of its Class A Common Stock at prices ranging
from $18.00 to $31.88 per share. All of the options become exercisable over a
four year period. In connection with the grant of options with exercise prices
below fair market value at the time of grant, the Company recognized
compensation expense in the amount of $52,000 for the three months ended March
31, 1999.
During the three months ended March 31, 1999, the Company issued
certain Restricted Stock awards, consisting of rights to 11,112 shares of Class
A Common Stock, to two directors. Such shares vest ratably on each of the next
four anniversary dates of the grant. In connection with these awards, the
Company recognized compensation expense in the amount of $10,400 for the three
months ended March 31, 1999.
6. SUBSEQUENT EVENTS
On April 15, 1999, the Company distributed $12.9 million to its
former S Corporation shareholders, which represented the remaining balance of
the S Distribution (see Significant Events under Note 2).
On April 22, 1999, the Company sold a building located in Seattle,
Washington, to Fulcrum Technologies, L.L.C. for a cash purchase price of $1.3
million, resulting in a gain of approximately $0.5 million.
On May 11, 1999, Chase Capital converted 300,000 shares of Class C
Common Stock to 300,000 shares of Class A Common Stock.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report contains, in addition to historical information, statements
by the Company with regard to its expectations as to financial results and other
aspects of its business that involve risks and uncertainties and may constitute
forward looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Such statements reflect management's current views and are based on
certain assumptions. Actual results could differ materially from those currently
anticipated as a result of a number of factors, including, but not limited to,
the following: (i) the highly competitive nature of, and new technologies in,
the radio broadcasting industry; (ii) the Company's dependence upon its Seattle
radio stations; (iii) the risks associated with the Company's acquisition
strategy; (iv) the control of the Company by Joseph M. Field and David J. Field;
(v) the Company's vulnerability to changes in federal legislation or FCC
regulatory policy; and (vi) those matters discussed under "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
GENERAL
The Company, founded in 1968, will own and operate 42 stations, 25 FM
and 17 AM, in eight markets, including five of the country's top 30 radio
advertising markets, upon completion of the acquisition of WREN-AM. The Company
has built the largest radio station clusters, based on gross revenues, in
Seattle and Kansas City, and has the second or third largest cluster in each of
its other markets.
The following discussion and analysis of financial condition and
results of the Company should be read in conjunction with the unaudited interim
consolidated financial statements and related notes thereto of the Company
included elsewhere in this report. Historically, the Company has operated with
an October 1st to September 30th fiscal year. However, on March 12, 1999, the
Company filed a Form 8-K reflecting, among other things, its change for
financial reporting purposes to a calendar year of January 1 to December 31,
effective January 1, 1999. The Company plans to change to a calendar year for
tax reporting purposes, effective on January 1, 2000. All references herein,
with the exception of specific references to fiscal year periods, are based on
the Company's calendar year ending on December 31.
A radio broadcasting company's revenues are derived primarily from the
sale of broadcasting time to local and national advertisers. These revenues are
largely determined by the advertising rates that a radio station is able to
charge and the number of advertisements that can be broadcast without
jeopardizing listener levels. Advertising rates are primarily based on three
factors: (i) a station's audience share in the demographic groups targeted by
advertisers, as measured principally by quarterly reports issued by the Arbitron
Ratings Company ("Arbitron"); (ii) the number of radio stations in the market
competing for the same demographic groups; and (iii) the supply of and demand
for radio advertising time.
Several factors may adversely affect a radio broadcasting company's
performance in any given period. In the radio broadcasting industry, seasonal
revenue fluctuations are common and are due primarily to variations in
advertising expenditures by local and national advertisers. Typically, revenues
are lowest in the first calendar quarter of the year. The Company generally
incurs advertising and promotional expenses to increase "listenership" and
Arbitron ratings. However, since Arbitron reports ratings quarterly, any
increased ratings, and any corresponding increased advertising revenues, tend to
lag behind the incurrence of advertising and promotional spending.
Radio broadcasting companies often derive revenues from TBAs and Joint
Sales Agreements ("JSAs"). In a TBA, a radio station operator will enter into an
agreement to provide a substantial amount of the broadcast programming for a
radio station that is owned by a separate licensee. In a JSA, a licensed radio
station operator agrees to sell commercial advertising for a radio station that
is owned by a separate licensee. Typically, the Company uses TBAs and JSAs to
operate radio stations that it has agreed to acquire prior to the time that the
acquisition is completed. Revenues realized under TBAs or JSAs for stations
operated by the Company prior to acquiring the stations are included in net
revenues, and operating expenses associated with these stations are reflected in
station operating expenses. Consequently, there is no difference in the method
of revenue and operating expense recognition between a station operated by the
Company under a TBA or JSA and a station owned and operated by the Company.
In the following analysis, management discusses broadcast cash flow and
after-tax cash flow. Neither broadcast cash flow nor after-tax cash flow
purports to represent net income, operating income or net cash provided by
operating activities, as those terms are defined under generally accepted
accounting principles, and they should not be considered in isolation or as a
substitute for such measurements. Broadcast cash flow consists of operating
income before depreciation, amortization, net expense (income) from TBA fees and
corporate expenses. After-tax cash flow consists of pro forma net income before
extraordinary items minus net gain on sale of assets (net of tax), plus the
following: depreciation, amortization, non-cash stock-based compensation
expense, the amount of the adjustment to reflect indexing of the Convertible
Subordinated Note and the amount of the deferred tax provision (or minus the
deferred tax benefit). In part due to the non-capital-intensive nature of the
radio broadcasting industry and the high level of non-cash depreciation and
amortization expense, broadcast cash flow and after-tax cash flow are frequently
used as bases for evaluating radio broadcasting businesses, although the
Company's measures of broadcast cash flow and after-tax cash flow may not be
comparable to similarly titled measures of other companies.
10
<PAGE> 11
The Company calculates "same station" growth by comparing the
performance of stations operated by the Company (including operation under a TBA
or JSA) throughout a relevant quarter to the performance of those same stations
(whether or not operated by the Company) in the prior year's corresponding
quarter, excluding the effect of barter revenues and expenses and divested
stations. "Same station broadcast cash flow margin" is the broadcast cash flow
margin of the stations included in the Company's same station calculations. For
purposes of the following discussion, (i) pro forma net income represents
historical income before income taxes and extraordinary items, adjusted as if
the Company were treated as a C Corporation during all relevant periods at an
effective tax rate of 38%, applied to income before income taxes, including
permanent differences between tax and book income, and extraordinary items,
excluding the effect of the adjustment to reflect indexing of the Convertible
Subordinated Note (as such adjustment is not tax-deductible) of $9.9 million for
the three months ended March 31, 1998, and (ii) broadcast cash flow margin
represents broadcast cash flow as a percentage of net revenues.
RESULTS OF OPERATIONS
The following presents the results of operations of the Company for the
three months ended March 31, 1999 and March 31, 1998, and should be read in
conjunction with the condensed consolidated financial statements of the Company
and the related notes included elsewhere in this Form 10-Q.
THREE MONTHS ENDED MARCH 31, 1999 v. MARCH 31, 1998
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31,1998 MARCH 31,1999
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
NET REVENUES $24,978 $39,599
Increase of $14,621 or 58.5%
------------------------------------------------------------
</TABLE>
Of the increase in net revenues, $13.3 million is attributable to
stations acquired or that were in the process of being acquired since January 1,
1998, offset by $1.0 million for stations divested or that were in the process
of being divested during the same period. On a same station basis, net revenues
increased 16.5% from $33.6 million to $39.1 million.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31,1998 MARCH 31,1999
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
STATION OPERATING EXPENSES $18,360 $28,909
Increase of $10,549 or 57.5%
------------------------------------------------------------
Percentage of Net Revenues 73.5% 73.0%
</TABLE>
Of the increase in station operating expenses, $9.6 million is
attributable to stations acquired or that were in the process of being acquired
since January 1, 1998, offset by $0.7 million for stations divested or that were
in the process of being divested during the same period. On a same station
basis, station operating expenses increased 8.8 % to $28.4 million from $26.1
million.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31,1998 MARCH 31,1999
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
CORPORATE, GENERAL AND ADMINISTRATIVE EXPENSES $1,100 $1,801
Increase of $701 or 63.7%
------------------------------------------------------------
Percentage of Net Revenues 4.4% 4.5%
</TABLE>
The increase in corporate expenses was mainly attributable to higher
administrative expenses associated with supporting the Company's growth and
increasing staff in anticipation of operation as a public company. Also included
in the current period is $0.1 million in non-cash stock-based compensation
expense.
11
<PAGE> 12
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31,1998 MARCH 31,1999
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
DEPRECIATION AND AMORTIZATION $2,966 $4,861
Increase of $1,895 or 63.9%
------------------------------------------------------------
Percentage of Net Revenues 11.9% 12.3%
</TABLE>
The increase in depreciation and amortization was mainly attributable to the
Company's acquisitions net of divestitures since January 1, 1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31,1998 MARCH 31,1999
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
INTEREST EXPENSE $2,939 $3,586
Increase of $647 or 22.0%
------------------------------------------------------------
Percentage of Net Revenues 11.8% 9.1%
</TABLE>
The increase in interest expense was mainly attributable to indebtedness
incurred in connection with the Company's acquisitions.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31,1998 MARCH 31,1999
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
INCOME (LOSS) BEFORE INCOME TAXES & EXTRAORDINARY ITEM ($10,654) $334
Increase of $10,988
------------------------------------------------------------
Percentage of Net Revenues (42.7%) 0.8%
</TABLE>
Of the increase, $9.9 million is attributable to a decrease in the expense for
the adjustment to reflect indexing of the Convertible Subordinated Note.
<TABLE>
<CAPTION>
OTHER DATA THREE MONTHS ENDED
------------------
MARCH 31,1998 MARCH 31,1999
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
PRO FORMA NET INCOME ($11,874) $207
Increase of $12,081
------------------------------------------------------------
</TABLE>
Of the increase, $9.9 million is attributable to a decrease in the
expense for the adjustment to reflect indexing of the Convertible Subordinated
Note.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31,1998 MARCH 31,1999
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
BROADCAST CASH FLOW $6,618 $10,690
Increase of $4,072 or 61.5%
------------------------------------------------------------
</TABLE>
Of the increase in broadcast cash flow, $3.6 million is attributable
to stations acquired or that were in the process of being acquired since January
1, 1998, offset by $0.4 million for stations divested or that were in the
process of being divested during the same period. On a same station basis,
broadcast cash flow increased 43.3 % to $10.7 million from $7.5 million.
12
<PAGE> 13
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31,1998 MARCH 31,1999
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
BROADCAST CASH FLOW MARGIN 26.5% 27.0%
------------------------------------------------------------
</TABLE>
The increase in broadcast cash flow margin is attributable to improved
revenues and expense management associated with newly acquired stations. On a
same station basis, the Company's broadcast cash flow margin increased to 27.4 %
from 22.3 %.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31,1998 MARCH 31,1999
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
PRO FORMA AFTER-TAX CASH FLOW $2,741 $6,400
Increase of $3,659 or 133.5%
------------------------------------------------------------
</TABLE>
The increase in pro forma after-tax cash flow is attributable to
improved operations of existing stations and the net effect of newly acquired
properties, taking into consideration pro forma income taxes as though the
Company had reported as a C corporation during the periods presented. The amount
of the deferred pro forma income tax expense, excluding the amount of the
current pro forma income tax expense, was $1.3 million and $0.4 million for the
three months ended March 31, 1999 and 1998, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company uses a significant portion of its capital resources to consummate
acquisitions. These acquisitions are funded from one or a combination of the
following sources: (i) the Credit Facility (described below), (ii) the swapping
of Company-owned radio stations in transactions which qualify as "like-kind"
exchanges under Section 1031 of the Internal Revenue Code and (iii)
internally-generated cash flow.
Net cash flows provided by operating activities were $8.0 million and $7.0
million for the three months ended March 31, 1999 and 1998, respectively.
Changes in the Company's net cash flows provided by operating activities are
primarily a result of changes in advertising revenues and station operating
expenses, which are affected by the acquisition and disposition of stations
during those periods.
Net cash flows provided by investing activities were $14.5 million for the
three months ended March 31, 1999 and net cash flows used by investing
activities were $4.7 million for the three months ended March 31, 1998. Net cash
flows used by financing activities were $21.7 million and $0.1 million for the
three months ended March 31, 1999 and 1998, respectively. The cash flows for the
three months ended March 31, 1999 reflect (i) acquisitions consummated in the
relevant periods and the related borrowings, (ii) proceeds from the IPO and the
related payment of long-term debt and (iii) the partial payment of the S
Distribution. The cash flows for the three months ended March 31,1998 reflect
refinancing as a result of the Company's new Credit Facility.
On February 3, 1999, upon the consummation of the IPO, the Company received
net proceeds of $236.0 million, after deduction of discounts, commissions, fees
and expenses. The proceeds were used to reduce outstanding indebtedness under
the Credit Facility. Additionally, subsequent to March 31, 1999, the Company has
paid (i) the balance of the S Distribution of $12.9 million on April 15, 1999 to
its former S Corporation shareholders ($75.2 million was distributed for the
period ended March 31, 1999 as partial payment of the S Distribution) and (ii)
$3.1 million on April 22, 1999, to retire a note payable in connection with the
purchase of the 1% minority interest in ECI License Company, L.P. Additionally,
the Company has committed to pay $2.7 million to fund the remaining balance of
the purchase price for the acquisition of WREN-AM.
In addition to debt service, the Company's principal liquidity requirements
are for working capital and general corporate purposes, including capital
expenditures, and, if appropriate opportunities arise, acquisitions of
additional radio stations. For calendar 1999, management anticipates maintenance
capital expenditures to be between $1.0 million and $1.5 million and total
capital expenditures to be between $6.5 million and $7.5 million. The majority
of non-maintenance capital expenditures relates to studio consolidation which
should result in future operating efficiencies. Management believes that cash
from operating activities, together with available revolving credit borrowings
under the Credit Facility, should be sufficient to permit the Company to meet
its financial obligations and fund its operations. However, the Company may
require additional financing for future acquisitions, if any, and there can be
no assurance that it would be able to obtain such financing on terms considered
to be favorable by management.
13
<PAGE> 14
The Company entered into the Credit Facility, dated as of February 13, 1998,
as amended October 8, 1998, with a syndicate of banks, for a $350.0 million
revolving credit facility, subject to compliance with certain financial ratios.
The Credit Facility was established to: (i) refinance existing indebtedness of
the Company, (ii) provide working capital and (iii) fund corporate acquisitions.
At the Company's election, interest on any outstanding principal accrues at a
rate based on either LIBOR plus a spread which ranges from 0.5% to 2.125% or on
KeyBank N.A.'s base rate plus a spread of up to 0.875%, depending on the
Company's leverage ratio. Although the Company may borrow, repay and re-borrow
under the Credit Facility, the aggregate maximum amount that the Company can
have outstanding at any one time is reduced on a quarterly basis beginning on
June 30, 2000. The final maturity date for the Credit Facility is February 13,
2006. The Credit Facility requires the Company to comply with certain financial
covenants and leverage ratios, with which management believes the Company is in
compliance.
As of March 31, 1999, the Company had approximately $147.5 million of
borrowings outstanding under the Credit Facility in addition to an outstanding
letter of credit in the amount of $4.9 million. Approximately $135.0 million of
such indebtedness was incurred in connection with the First Boston Transaction
and the Second Boston Transaction and the remainder was incurred to fund other
acquisitions and for general corporate purposes.
RECENT PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133 entitled "Accounting for
Derivative Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
"derivatives"), and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The accounting for changes
in the fair value of a derivative depends on the intended use of the derivative
and the resulting designation. This statement is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999, and should not be
applied retroactively to financial statements of prior periods. Management has
not completed a full evaluation of the applicability of SFAS No. 133.
IMPACT OF YEAR 2000 ISSUES
The Company relies, directly and indirectly, on information technology
systems to operate its radio stations, provide its radio stations with
up-to-date news and perform a variety of administrative services including
accounting, financial reporting, advertiser spot scheduling, payroll and
invoicing. Most of these information technology systems, such as Marketron,
Columbine, Ultipro, Solomon and Novell, are standard commercial software
products used both throughout the radio broadcasting industry and in other
industries. The Company also uses non-information technology systems, such as
microchips for dating and other automated functions. Information and
non-information technology systems that do not properly recognize and process
date sensitive information when the year changes to "2000" or "00" could
generate erroneous data or cause such systems to fail ("Year 2000 Issues"). All
of the Company's technology systems could potentially be affected by Year 2000
Issues.
In order to minimize the risk of Year 2000 related losses, the Company is
conducting a comprehensive assessment of its Year 2000 Issues. This assessment
consists of (i) an analysis of all of the information and non-information
technology systems that the Company uses, including the circulation of Year 2000
compliance questionnaires to the chief engineers of each of the Company's
stations, requiring them to evaluate their respective station's preparedness for
Year 2000 Issues and (ii) an inquiry as to the Year 2000 status of third parties
material to the Company's operations, including the transmission of letters to
all key service providers requesting written confirmation of their Year 2000
readiness.
Due to (i) the preventive measures being taken in response to the
Company's assessment, (ii) the relatively small degree to which the radio
broadcasting industry, as compared to other industries, depends on older large
computer systems or interfaces with third party computer systems, (iii) the fact
that most of the Company's automated administrative services can, if needed, be
performed manually and (iv) the fact that most of the Company's radio stations
are equipped with emergency power systems, management believes that, while
difficult to fully assess, Year 2000 Issues should not have a material adverse
effect on the Company's broadcast operations.
The Company believes that it is difficult to fully assess the risks of the
Year 2000 Issues due to the numerous uncertainties surrounding the issue.
Management believes that the Company's primary risks are external to the Company
and relate to the Year 2000 readiness of its third party suppliers. The
inability of such third party suppliers to adequately address the Year 2000
Issues on a timely basis could result in a material financial risk, including
loss of revenue, substantial unanticipated costs and service interruptions. The
Company plans to continue its efforts to survey all work with such third party
suppliers to address all significant Year 2000 Issues in a timely manner.
The Company expects to have completed its Year 2000 remediation efforts by
the end of the second quarter of 1999. Additionally, the Company will develop a
contingency plan for addressing Year 2000 Issues caused by systems external to
the Company by the end of the third quarter of fiscal 1999. Since most of the
Year 2000 compliance achieved by the Company to date has been done through the
normal information systems upgrading process, separate costs have not been
allocated to the Year 2000 Issues.
14
<PAGE> 15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Credit Facility requires the Company to protect itself from interest rate
fluctuations through the use of derivative rate hedging instruments. As a
result, the Company has entered into various convertible rate cap and interest
rate swap transactions with various banks (the "Rate Hedging Transactions")
designed to mitigate the Company's exposure to significantly higher floating
interest rates. A rate cap agreement establishes an upper limit or "cap" for the
base LIBOR rate. Swap agreements require that the Company pay a fixed rate of
interest on the notional amount to a bank and the bank pay to the Company a
variable rate equal to three-month LIBOR. Certain of the swap agreements grant
the bank the option to terminate the transaction prior to its respective
expiration date in certain limited circumstances. Currently, the Company has
Rate Hedging Transactions in place for a total notional amount of $129.0
million.
All of the Rate Hedging Transactions are tied to the three-month LIBOR
interest rate, which may fluctuate daily, and which may fluctuate significantly.
Any increase in the three-month LIBOR rate results in a decrease in the amount
of unrecognized loss by the Company, while any decrease in the three-month LIBOR
rate results in an increase in the amount of unrecognized loss by the Company.
An increase in the three-month LIBOR rate results in a more favorable valuation
of each of the Rate Hedging Transactions. Correspondingly, a decrease in the
three-month LIBOR rate results in a less favorable valuation of each of the Rate
Hedging Transactions. The three-month LIBOR rate at March 31, 1999 was higher
than the rate at December 31, 1998. This increase resulted in lower unrecognized
losses by the Company from the Rate Hedging Transactions.
See also additional disclosures regarding "Liquidity and Capital Resources"
made under Item 2, above.
15
<PAGE> 16
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None to report.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On January 29, 1999, the Company commenced the IPO of its Class A common
stock, $.01 par value. The registration statement relating to this offering
(File No. 333-61381) was declared effective on January 28, 1999. Credit Suisse
First Boston Corporation, BT Alex. Brown, Goldman, Sachs & Co., and Morgan
Stanley Dean Witter were the managing underwriters of the IPO. On February 3,
1999, the Company consummated the IPO. The number of shares registered, the
aggregate price of the offering amount registered, the amount sold and the
aggregate offering price of the amount sold by the Company and Chase Capital, as
a selling shareholder of the Company in the IPO, were as follows:
<TABLE>
<CAPTION>
Shares of Class A Aggregate
----------------- ---------
Common Price of Shares Amount of Shares Aggregate
------ --------------- ---------------- ---------
Registered Registered Sold Price of Shares Sold
---------- ---------- ---- --------------------
<S> <C> <C> <C> <C>
The Company 11,300,000 $254,250,000 11,300,000 $254,250,000
The Selling Shareholder 2,327,500 $ 52,368,750 2,327,500 $ 52,368,750
</TABLE>
The Company incurred the following expenses with respect to the IPO during the
period from May 1998 through February 3, 1999. These expenses include the
payment of $46,772.45 to the law firm of Stradley Ronon Stevens & Young, LLP, a
firm with which S. Gordon Elkins, a director of the Company, is affiliated.
Except for the payment of this expense, none of the following expenses were
direct or indirect payments to directors, officers, general partners of the
Company or their affiliates or to persons owning 10% or more of any class of
equity securities of the Company or to affiliates of the Company:
<TABLE>
<CAPTION>
Underwriting Discounts Underwriters' Total Company
---------------------- ------------- -------------
and Commissions Finders' Fees Expenses Other Expenses Expenses
--------------- ------------- -------- -------------- --------
<S> <C> <C> <C> <C>
$15,255,000 $0 $0 $2,988,000 $18,242,000
</TABLE>
The net proceeds from the IPO to the Company after deducting the foregoing
discounts, commissions, fees and expenses were approximately $236.0 million. All
of these proceeds have been used by the Company since the IPO to repay existing
revolving indebtedness outstanding under the Credit Facility.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None to report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None to report.
16
<PAGE> 17
ITEM 5. OTHER INFORMATION
The Company has filed a Form 8-K on March 12,1999, reflecting its change for
financial reporting purposes, from a fiscal year of October 1 to September 30,
to a calendar year of January 1 to December 31, effective January 1, 1999; and
disclosing the consummation of the Second Boston Transaction.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
3.01 Amended and Restated Articles of Incorporation of the Registrant**
3.02 Amended and Restated Bylaws of the Registrant**
10.01 Registration Rights Agreement, dated as of May 21, 1996, between the Registrant and Chase
Equity Associates, L.P.**
10.02 Employment Agreement, dated June 25, 1993, between the Registrant and Joseph M. Field, as
amended**
10.03 Employment Agreement, dated December 17, 1998, between the Registrant and David J.
Field, as amended**
10.04 Employment Agreement, dated December 17, 1998, between the Registrant and John C.
Donlevie, as amended**
10.05 Employment Agreement, dated November 13, 1998, between the Registrant and Stephen F.
Fisher**
10.06 Entercom 1998 Equity Compensation Plan**
10.09 Loan Agreement, dated as of February 13, 1998, among the Registrant, Key Corporate Capital
Inc., as administrative agent, Bank of America, National Trust and Savings Association, as
syndication agent, and certain banks listed therein, as amended by the First Amendment to Loan
Agreement dated October 8, 1998**
11.01 Calculation of Earnings Per Share*
27.01 Financial Data Schedule*
</TABLE>
- ----------
* Filed herewith.
** Incorporated by reference to the Company's Registration Statement on Form
S-1 (File No. 333-61381).
(b) Other than the Form 8-K described in Item 5 above, the Compamy did not file
any other reports on Form 8-K during the three months ended March 31,1999.
17
<PAGE> 18
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.
ENTERCOM COMMUNICATIONS CORP.
(Registrant)
Date: May 13, 1999 _________________________________________
Name: Joseph M. Field
Title: Chief Executive Officer
Date: May 13, 1999 _________________________________________
Name: David J. Field
Title: President and Chief Operating
Officer
Date: May 13, 1999 _________________________________________
Name: Stephen F. Fisher
Title: Senior Vice President and
Chief Financial Officer
18
<PAGE> 1
EXHIBIT 11.01
EARNINGS (LOSS) PER COMMON SHARE
The following table sets forth the computations of earnings (loss) per common
share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------
3/31/98 3/31/99
----------------------------------------
<S> <C> <C>
Net Loss ($13,037) ($80,427)
=========== ===============
Basic loss per share:
Weighted average shares outstanding N/A 32,477,995
===============
Basic loss per share N/A ($2.48)
===============
Pro forma net income (loss) before extraordinary item ($10,385) $207
Extraodinary item 1,489
----------- ---------------
Net income (loss) ($11,874) $207
=========== ===============
Pro forma basic earnings (loss) per share:
Weighted average shares outstanding 21,534,000 32,477,995
=========== ===============
Basic earnings (loss) per share before extraodinary item ($0.48) $0.01
Extraodinary item 0.07
----------- ---------------
Basic earnings (loss) per share ($0.55) $0.01
=========== ===============
Pro forma diluted earnings (loss) per share:
Weighted average shares outstanding 21,534,000 32,477,995
Effect of dilutive options 324,875
----------- ---------------
Shares applicable to diluted earnings (loss) per share 21,534,000 32,802,870
=========== ===============
Diluted earnings (loss) per share before extraodinary item ($0.48) $0.01
Extraodinary item $0.07
----------- ---------------
Diluted earnings (loss) per share ($0.55) $0.01
=========== ===============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 7,290
<SECURITIES> 0
<RECEIVABLES> 32,657
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 48,653
<PP&E> 62,866
<DEPRECIATION> 12,192
<TOTAL-ASSETS> 658,222
<CURRENT-LIABILITIES> 38,977
<BONDS> 147,768
0
0
<COMMON> 371
<OTHER-SE> (78,653)
<TOTAL-LIABILITY-AND-EQUITY> 658,222
<SALES> 0
<TOTAL-REVENUES> 39,599
<CGS> 34,422
<TOTAL-COSTS> 34,422
<OTHER-EXPENSES> 1,801
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,586
<INCOME-PRETAX> 334
<INCOME-TAX> 80,761
<INCOME-CONTINUING> (80,427)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (80,427)
<EPS-PRIMARY> (2.48)
<EPS-DILUTED> (2.48)
</TABLE>
