-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OK+zv+MlZhSztXlHD3E3n8ONgSr7A5ogMclyk1SsowanBrt+sZKWxnklMK/Z1QZ9 IGPFT2AxJD++lRzogX3BqQ== /in/edgar/work/0000950144-00-013126/0000950144-00-013126.txt : 20001109 0000950144-00-013126.hdr.sgml : 20001109 ACCESSION NUMBER: 0000950144-00-013126 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20000825 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20001108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COX RADIO INC CENTRAL INDEX KEY: 0001018522 STANDARD INDUSTRIAL CLASSIFICATION: [4832 ] IRS NUMBER: 581620022 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 333-08737 FILM NUMBER: 756132 BUSINESS ADDRESS: STREET 1: C/O COX ENTERPRISES INC STREET 2: 1400 LAKE HEARN DR CITY: ATLANTA STATE: GA ZIP: 30319 BUSINESS PHONE: 4048435000 MAIL ADDRESS: STREET 1: C/O COX ENTERPRISES INC STREET 2: 1400 LAKE HEARN DR CITY: ATLANTA STATE: GA ZIP: 30319 8-K/A 1 g65138e8-ka.txt COX RADIO, INC. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): August 25, 2000 Cox Radio, Inc. ------------------------------------------ (Exact name of Registrant as specified in its charter) Delaware -------------------- (State or other jurisdiction of incorporation or organization) 1-12187 58-1620022 -------------------------------- (Commission File Number) (I.R.S. Employer Identification Number) 1400 Lake Hearn Drive Atlanta, Georgia 30319 -------------------------------------------------- (Address of principal executive offices) (Zip Code) (404) 843-5000 ----------------------- (Registrant's telephone number, including area code) 2 Item 2 Acquisition or Disposition of Assets On August 25, 2000, Cox Radio, Inc. (the "Company") acquired from AMFM Inc. ("AMFM") one FM station serving Miami, Florida; one FM station serving Atlanta, Georgia; two FM stations and two AM stations serving Stamford/Norwalk, Connecticut; four FM and two AM stations serving Jacksonville, Florida; and one FM station serving New Haven, Connecticut in exchange for one FM and one AM station serving Los Angeles, California plus approximately $3 million (the "AMFM Acquisition"). The stations acquired include WEDR-FM serving the Miami market; WFOX-FM serving the Atlanta market; WEFX-FM, WNLK-AM, WKHL-FM and WSTC-AM serving the Stamford/Norwalk market; WFYV-FM, WAPE-FM, WBWL-AM, WKQL-FM, WMXQ-FM and WOKV-AM serving the Jacksonville market and WPLR-FM serving the New Haven market. The stations exchanged were KFI-FM and KOST-AM serving the Los Angeles market. There are no material relationships between the Company and AMFM or any of its affiliates, any director or officer of the Company, or any associate of any such director or officer. The Company used general corporate funds to make the AMFM Acquisition. On August 30, 2000, the Company acquired from Clear Channel Communications, Inc. ("Clear Channel") three FM stations serving Houston, Texas and three FM stations and one AM station serving Richmond, Virginia for cash consideration of $380 million (the "Clear Channel Acquisition"). The stations acquired include KKBQ-FM, KKTL-FM and KLDE-FM (Cox Radio acquired the format of KLDE-FM and the FCC license for KTBZ-FM; Clear Channel will retain the FCC license for KLDE-FM) serving the Houston market and WKHK-FM, WMXB-FM, WKLR-FM and WTVR-AM (subsequently named WVBB-AM) serving the Richmond market. There are no material relationships between the Company and Clear Channel or any of its affiliates, any director or officer of the Company, or any associate of any such director or officer. The Company used proceeds from revolving credit facilities to make the Clear Channel Acquisition. Item 7 Financial Statements and Exhibits The Company filed a Current Report on Form 8-K on September 11, 2000 (the "Report"). The Company did not file the financial statements required by subsection (a)(1) of Item 7 and did not file the pro forma financial statements required by subsection (b)(1) of Item 7 (collectively, the "Statements") with the Report. The Company indicated in the Report that it would file an amended Report within 60 days, pursuant to subsections (a)(4) and (b)(2) of Item 7. The Statements are attached as exhibits to this amended Current Report on Form 8-K/A. (a) Financial statements of businesses acquired. 1. Audited combined statement of assets acquired as of December 31, 1999 and the related combined statement of revenues and direct operating expenses of radio stations KKBQ-FM and KLDE-FM (radio stations owned by AMFM Inc.) for the year ended December 31, 1999 and unaudited combined statement of assets acquired as of June 30, 2000 and the related combined statements of revenues and direct operating expenses of radio stations KKBQ-FM and KLDE-FM (radio stations owned by AMFM Inc.) for the six-month periods ended June 30, 2000 and 1999. 2. Audited combined statement of assets acquired as of December 31, 1999 and the related combined statement of revenues and direct operating expenses of radio stations WKHK-FM, WKLR-FM, and WMXB-FM (radio stations owned by AMFM Inc.) for the period from July 13, 1999 to December 31, 1999 and unaudited combined statement of assets acquired as of June 30, 2000 and the related combined statement of revenues and direct operating expenses of radio stations WKHK-FM, WKLR-FM, and WMXB-FM (radio stations owned by AMFM Inc.) for the six-month period ended June 30, 2000. 3. Audited combined statement of revenues and direct operating expenses of radio stations WKHK-FM, WKLR-FM, and WMXB-FM (radio stations owned by Capstar Broadcasting Corporation) for the period from January 1, 1999 to July 12, 1999 and unaudited combined statement of revenues and direct operating expenses of radio stations WKHK-FM, WKLR-FM, and WMXB-FM (radio stations owned by Capstar Broadcasting Corporation) for the six-month period ended June 30, 1999. 1 3 4. Unaudited combined statement of assets acquired as of June 30, 2000 and the related combined statements of revenues and direct operating expenses of radio stations WEDR-FM, WFOX-FM, WAPE-FM, WFYV-FM, WKQL-FM, WMXQ-FM, WOKV-AM, WBWL-AM, WPLR-FM, WKHL-FM, WSTC-AM, WEFX-FM and WNLK-AM (radio stations owned by AMFM Inc.) for the six-month periods ended June 30, 2000 and 1999. (b) Pro forma financial information. 1. Unaudited pro forma combined balance sheet of the Company as of June 30, 2000 after giving effect to the AMFM Acquisition and the Clear Channel Acquisition as if such transactions had been consummated as of June 30, 2000 and unaudited pro forma combined statements of operations for the six-month period ended June 30, 2000 and the year ended December 31, 1999 as if such transactions had been consummated as of January 1, 1999. (c) Exhibits. 23.1 Consent of Deloitte & Touche LLP with respect to the financial statements of radio stations KKBQ-FM and KLDE-FM. 23.2 Consent of Deloitte & Touche LLP with respect to the financial statements of radio stations WKHK-FM, WKLR-FM, and WMXB-FM (owned by AMFM Inc.). 23.3 Consent of Deloitte & Touche LLP with respect to the financial statements of radio stations WKHK-FM, WKLR-FM, and WMXB-FM (owned by Capstar Broadcasting Corporation). 99.1 Audited combined statement of assets acquired as of December 31, 1999 and the related combined statement of revenues and direct operating expenses of radio stations KKBQ-FM and KLDE-FM (radio stations owned by AMFM Inc.) for the year ended December 31, 1999 and unaudited combined statement of assets acquired as of June 30, 2000 and the related combined statements of revenues and direct operating expenses of radio stations KKBQ-FM and KLDE-FM (radio stations owned by AMFM Inc.) for the six-month periods ended June 30, 2000 and 1999. 99.2 Audited combined statement of assets acquired as of December 31, 1999 and the related combined statement of revenues and direct operating expenses of radio stations WKHK-FM, WKLR-FM, and WMXB-FM (radio stations owned by AMFM Inc.) for the period from July 13, 1999 to December 31, 1999 and unaudited combined statement of assets acquired as of June 30, 2000 and the related combined statement of revenues and direct operating expenses of radio stations WKHK-FM, WKLR-FM, and WMXB-FM (radio stations owned by AMFM Inc.) for the six-month period ended June 30, 2000. 99.3 Audited combined statement of revenues and direct operating expenses of radio stations WKHK-FM, WKLR-FM, and WMXB-FM (radio stations owned by Capstar Broadcasting Corporation) for the period from January 1, 1999 to July 12, 1999 and unaudited combined statement of revenues and direct operating expenses of radio stations WKHK-FM, WKLR-FM, and WMXB-FM (radio stations owned by Capstar Broadcasting Corporation) for the six-month period ended June 30, 1999. 99.4 Unaudited combined statement of assets acquired as of June 30, 2000 and the related combined statements of revenues and direct operating expenses of radio stations WEDR-FM, WFOX-FM, WAPE-FM, WFYV-FM, WKQL-FM, WMXQ-FM, WOKV-AM, WBWL-AM, WPLR-FM, WKHL-FM, WSTC-AM, WEFX-FM and WNLK-AM (radio stations owned by AMFM Inc.) for the six-month periods ended June 30, 2000 and 1999. 2 4 99.5 Unaudited pro forma combined balance sheet as of June 30, 2000 and unaudited pro forma combined statements of operations of the Company for the year ended December 31, 1999 and the six-month period ended June 30, 2000. 3 5 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 hereunto duly authorized. Cox Radio, Inc. Dated: November 8, 2000 By: /s/ Neil O. Johnston ------------------------------ Name: Neil O. Johnston Title: Chief Financial Officer 4 6 Exhibit Index Exhibits 23.1 Consent of Deloitte & Touche LLP with respect to the financial statements of radio stations KKBQ-FM and KLDE-FM. 23.2 Consent of Deloitte & Touche LLP with respect to the financial statements of radio stations WKHK-FM, WKLR-FM, and WMXB-FM (owned by AMFM Inc.). 23.3 Consent of Deloitte & Touche LLP with respect to the financial statements of radio stations WKHK-FM, WKLR-FM, and WMXB-FM (owned by Capstar Broadcasting Corporation). 99.1 Audited combined statement of assets acquired as of December 31, 1999 and the related combined statement of revenues and direct operating expenses of radio stations KKBQ-FM and KLDE-FM (radio stations owned by AMFM Inc.) for the year ended December 31, 1999 and unaudited combined statement of assets acquired as of June 30, 2000 and the related combined statements of revenues and direct operating expenses of radio stations KKBQ-FM and KLDE-FM (radio stations owned by AMFM Inc.) for the six-month periods ended June 30, 2000 and 1999. 99.2 Audited combined statement of assets acquired as of December 31, 1999 and the related combined statement of revenues and direct operating expenses of radio stations WKHK-FM, WKLR-FM, and WMXB-FM (radio stations owned by AMFM Inc.) for the period from July 13, 1999 to December 31, 1999 and unaudited combined statement of assets acquired as of June 30, 2000 and the related combined statement of revenues and direct operating expenses of radio stations WKHK-FM, WKLR-FM, and WMXB-FM (radio stations owned by AMFM Inc.) for the six-month period ended June 30, 2000. 99.3 Audited combined statement of revenues and direct operating expenses of radio stations WKHK-FM, WKLR-FM, and WMXB-FM (radio stations owned by Capstar Broadcasting Corporation) for the period from January 1, 1999 to July 12, 1999 and unaudited combined statement of revenues and direct operating expenses of radio stations WKHK-FM, WKLR-FM, and WMXB-FM (radio stations owned by Capstar Broadcasting Corporation) for the six-month period ended June 30, 1999. 99.4 Unaudited combined statement of assets acquired as of June 30, 2000 and the related combined statements of revenues and direct operating expenses of radio stations WEDR-FM, WFOX-FM, WAPE-FM, WFYV-FM, WKQL-FM, WMXQ-FM, WOKV-AM, WBWL-AM, WPLR-FM, WKHL-FM, WSTC-AM, WEFX-FM and WNLK-AM (radio stations owned by AMFM Inc.) for the six-month periods ended June 30, 2000 and 1999. 99.5 Unaudited pro forma combined balance sheet as of June 30, 2000 and unaudited pro forma combined statements of operations of the Company for the year ended December 31, 1999 and the six-month period ended June 30, 2000. EX-23.1 2 g65138ex23-1.txt CONSENT OF DELOITTE & TOUCHE LLP 1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 333-13281 and 333-87193 of Cox Radio, Inc. on Form S-8 and Registration Statement No. 333-35398 of Cox Radio, Inc., Cox Radio Trust I and Cox Radio Trust II on Form S-3 of our report dated September 22, 2000 (relating to the combined statement of assets acquired of KKBQ-FM Pasadena, Texas and KLDE-FM Houston, Texas and the related combined statement of revenues and direct operating expenses) appearing in this Current Report on Form 8-K of Cox Radio, Inc. /s/ Deloitte & Touche LLP Atlanta, Georgia November 8, 2000 EX-23.2 3 g65138ex23-2.txt CONSENT OF DELOITTE & TOUCHE LLP 1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 333-13281 and 333-87193 of Cox Radio, Inc. on Form S-8 and Registration Statement No. 333-35398 of Cox Radio, Inc., Cox Radio Trust I and Cox Radio Trust II on Form S-3 of our report dated September 22, 2000 (relating to the combined statement of assets acquired of WKHK-FM Colonial Heights, Virginia; WKLR-FM Fort Lee, Virginia and WMXB-FM Richmond, Virginia; (radio stations owned by AMFM Inc.) and the related combined statement of revenues and direct operating expenses) appearing in this Current Report on Form 8-K of Cox Radio, Inc. /s/ Deloitte & Touche LLP Atlanta, Georgia November 8, 2000 EX-23.3 4 g65138ex23-3.txt CONSENT OF DELOITTE & TOUCHE LLP 1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 333-13281 and 333-87193 of Cox Radio, Inc. on Form S-8 and Registration Statement No. 333-35398 of Cox Radio, Inc., Cox Radio Trust I and Cox Radio Trust II on Form S-3 of our report dated September 22, 2000 (relating to the combined statement of revenues and direct operating expenses of WKHK-FM Colonial Heights, Virginia; WKLR-FM Fort Lee, Virginia and WMXB-FM Richmond, Virginia; (radio stations owned by Capstar Broadcasting Corporation)) appearing in this Current Report on Form 8-K of Cox Radio, Inc. /s/ Deloitte & Touche LLP Atlanta, Georgia November 8, 2000 EX-99.1 5 g65138ex99-1.txt AUDITED COMBINED STATEMENT OF ASSET 1 INDEPENDENT AUDITORS' REPORT The Board of Directors Cox Radio, Inc. We have audited the accompanying combined statement of assets acquired as of December 31, 1999 and the related combined statement of revenues and direct operating expenses of KKBQ-FM Pasadena, Texas and KLDE-FM Houston, Texas (collectively referred to as the "Radio Stations") for the year then ended. These financial statements are the responsibility of the Radio Stations' management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying combined financial statements reflect the assets acquired and the revenues and direct operating expenses attributable to the Radio Stations as described in Note 1 and are not intended to be a complete presentation of the assets or revenues and expenses of the Radio Stations. In our opinion, the combined financial statements present fairly, in all material respects, the assets acquired of the Radio Stations as of December 31, 1999, and the revenues and direct operating expenses of the Radio Stations as described in Note 1 for the year then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Atlanta, Georgia September 22, 2000 2 KKBQ-FM and KLDE-FM (Radio Stations owned by AMFM Inc.) COMBINED STATEMENTS OF ASSETS ACQUIRED As of December 31, 1999 and June 30, 2000 (unaudited)
(Unaudited) December 31, 1999 June 30, 2000 ----------------- ------------- (Amounts in thousands) Property and equipment, net............................... $ 4,856 $ 4,655 Intangible assets, net.................................... 171,442 167,131 ------------ ------------ Total........................................... $ 176,298 $ 171,786 ============ ============
See notes to combined financial statements. 3 KKBQ-FM and KLDE-FM (Radio Stations owned by AMFM Inc.) COMBINED STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES For the Year Ended December 31, 1999 and the Six-Month Periods Ended June 30, 2000 and 1999 (unaudited)
(Unaudited) (Unaudited) Year Ended Six-Month Period Six-Month Period December 31, Ended Ended 1999 June 30, 2000 June 30, 1999 ------------- ----------------- ---------------- (Amounts in thousands) Revenues: Gross revenues................................... $32,956 $ 16,053 $ 16,027 Less: Agency commissions........................ (4,123) (2,003) (2,027) ------- -------- -------- Total net revenues....................... 28,833 14,050 14,000 Direct operating expenses: Programming, technical and news................. 3,456 1,655 1,708 Selling, promotional, general and administrative............................ 11,872 5,753 6,312 Depreciation and amortization.................... 13,736 6,618 6,869 ------- ------- -------- Total direct operating expenses.......... 29,064 14,026 14,889 ------- Excess (Deficiency) of net revenues over direct operating expenses..................... $ (231) $ 24 $ (889) ======= ======= ========
See notes to the combined financial statements. 4 KKBQ-FM and KLDE-FM (Radio Stations owned by AMFM Inc.) NOTES TO COMBINED FINANCIAL STATEMENTS 1. Organization and Basis of Presentation The accompanying combined financial statements include certain accounts of KKBQ-FM Pasadena, Texas and KLDE-FM, Houston, Texas (collectively referred to as the "Radio Stations"), while under the ownership of AMFM Inc. (formerly Chancellor Media Corporation) (the "Company") as of and during the periods presented. The combined statements of assets acquired and combined statements of revenues and direct operating expenses have been prepared in accordance with accounting principles generally accepted in the United States of America and were derived from the historical accounting records of the Radio Stations. Significant intercompany balances and transactions have been eliminated in combination. The accompanying combined statements of assets acquired include the property and equipment and intangible assets of the Radio Stations acquired by Cox Radio, Inc (see Note 7). These statements do not include cash, accounts receivable, prepaid or other assets, accounts payable, accrued expenses or other liabilities. The combined statements of revenues and direct operating expenses include the revenues and expenses directly attributable to the Radio Stations. These statements do not include corporate overhead costs, interest expense or income taxes. Certain expenses reflect corporate allocations from AMFM Inc. These expenses include expenses for medical, property, workers compensation and other insurance coverages. Expense allocations are based on medical coverage selection, property value, and headcount for the individual stations using corporate insurance rates. Management believes that these allocations were made on a reasonable basis. However, the allocations are not necessarily indicative of the level of expenses that might have been incurred had the Radio Stations contracted directly with third parties. Management has not made a study or any attempt to obtain quotes from third parties to determine what the cost of obtaining such services from third parties would have been. Complete combined financial statements, including historical balance sheets and statements of cash flows, were not prepared as the Company has not segregated indirect corporate operating cost information or related assets and liabilities in its accounting records. The Radio Stations were not accounted for as separate entities. 5 2. Summary of Significant Accounting Policies Revenue Recognition Revenue is derived primarily from the sale of commercial announcements to local and national advertisers. Revenue is recognized as advertising airtime is broadcast and is net of advertising agency commissions. Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method at rates based upon the estimated useful lives. Repairs and maintenance costs are charged to expense when incurred. At the time of retirements, sales or other dispositions of property, the original cost and related accumulated depreciation are written off. Intangible Assets Intangible assets consist of Federal Communications Commission ("FCC") broadcast licenses and goodwill. Intangible assets resulting from acquisitions are valued based upon estimated fair values. The Company amortizes such intangible assets using the straight-line method at rates based upon the estimated useful lives. Impairment of Long Lived Assets Long-lived assets and certain intangibles are required to be reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, with any impairment losses being reported in the period in which any impairment is first identified. Long-lived assets and certain intangibles to be disposed of are required to be reported at the lower of carrying amount or fair value less cost to sell. The Radio Stations continually evaluate the propriety of the carrying amount of property and equipment to determine whether current events or circumstances warrant adjustment of the carrying value. At this time, the Radio Stations believe that no impairment of property and equipment has occurred and that no revisions to the depreciation periods are warranted. The Radio Stations continually evaluate the propriety of the carrying amount of goodwill and other intangible assets and related amortization periods to determine whether current events or circumstances warrant adjustments to the carrying value and/or revised estimates of amortization periods. These evaluations consist of the projection of undiscounted cash flows over the remaining amortization periods of the related intangible assets. The projections are based on historical trend lines of actual results, adjusted for expected changes in operating results. To the extent such projections indicate that undiscounted cash flows is not expected to be adequate to recover the carrying amounts of the related intangible assets, such carrying amounts are written down by charges to expense, based on a discounted cash flow analysis. At this time, the Radio Stations believe that no impairment of goodwill or other intangible assets has occurred and that no revisions to the amortization periods are warranted. 6 Use of Estimates The preparation of combined financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets acquired at the date of the financial statements and the reported amounts of revenues and direct operating expenses during the reporting period. Actual results could differ from those estimates. Unaudited Interim Financial Statements The unaudited financial statements as of June 30, 2000 and for the six-month periods ended June 30, 2000 and 1999 include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the combined statement of assets acquired and combined statements of revenues and direct operating expenses for these periods. Revenues and direct operating expenses for the six-month periods ended June 30, 2000 and 1999 are not necessarily indicative of the results that may be expected for the entire year. 3. Property and Equipment
(Unaudited) Useful Lives December 31, 1999 June 30, 2000 ------------ ----------------- ------------- (Amounts in thousands) Land and land improvements...................... --- $2,221 $2,221 Buildings and building improvements ............ 3-35 Years 760 760 Furniture and fixtures.......................... 5-7 Years 310 310 Office and other equipment...................... 5-7 Years 218 223 Vehicles........................................ 5-7 Years 138 138 Broadcast equipment............................. 3-20 Years 1,895 1,895 Construction in progress........................ --- 2 - ------ ------ Property and equipment, at cost................. 5,544 5,547 Less accumulated depreciation................... (688) (892) ------ ------ Net property and equipment...................... $4,856 $4,655 ====== ======
4. Intangible Assets
(Unaudited) Useful Lives December 31, 1999 June 30, 2000 ------------ ----------------- ------------- (Amounts in thousands) FCC broadcast licenses......................... 15 Years $ 196,709 $ 196,709 Goodwill....................................... 15 Years 1,402 1,402 --------- --------- Intangible assets, at cost..................... 198,111 198,111 Less accumulated amortization.................. (26,669) (30,980) --------- --------- Net intangible assets............... $ 171,442 $ 167,131 ========= =========
7 5. Transactions with Affiliated Companies The Company operates a national radio network, the AMFM Radio Networks, which broadcasts advertising and syndicated programming shows to a national audience. As of June 30, 2000 the AMFM Radio Networks broadcast to approximately 68 million listeners in the United States (including approximately 59 million listeners from the Company's portfolio of stations). The revenues and direct operating expenses of the AMFM Radio Networks allocated to the Radio Stations for the year ended December 31, 1999 and the six-month periods ended June 30, 2000 and 1999 were as follows:
(Unaudited) (Unaudited) Six-Month period Six-Month period Year ended ended ended December 31, 1999 June 30, 2000 June 30, 1999 ----------------- ------------- ------------- (Amounts in thousands) Revenues.......................................... $ 995 $ 547 $ 487 Direct operating expenses......................... (317) (133) (161) ----- ----- ------ Revenues in excess of direct operating expenses... $ 678 $ 414 $ 326 ===== ===== ======
The AMFM Radio Networks allocates revenues and direct operating expenses to the Radio Stations based upon the individual station's percentage of the total AMFM Radio Networks listening audience. Management believes that these allocations were made on a reasonable basis. The Company also operated a marketing group, Chancellor Marketing Group, which is a full-service sales promotion firm developing integrated marketing programs for Fortune 1000 companies. The revenues and direct operating expenses of the Chancellor Marketing Group allocated to the Radio Stations for the year ended December 31, 1999 and the six-month periods ended June 30, 2000 and 1999 were as follows:
(Unaudited) (Unaudited) Six Month period Six Month period Year Ended ended ended December 31, 1999 June 30, 2000 June 30, 1999 ----------------- ------------- ------------- (Amounts in thousands) Revenues....................................................... $1,032 $682 $497 Direct operating expenses...................................... (451) (288) (225) ------ ---- ----- Revenues in excess of direct operating expenses................ $ 581 $394 $272 ====== ==== ====
Revenue and expenses from the Chancellor Marketing Group were allocated based on actual revenues generated from, and expenses incurred in connection with, the special events promoted. Management believes that these allocations were made on a reasonable basis. Certain expenses reflect corporate allocations from the Company. Although such allocations are included in the accompanying statements of revenue and direct operating expenses, the Radio Stations' expense for these allocations was not material for the periods presented. 8 6. Commitments The Radio Stations have long-term operating leases for land, office space, and certain broadcasting facilities and equipment. The leases expire at various dates, generally during the next ten years, and have varying options to renew and cancel. Rental expense for operating leases was approximately (in thousands) $226, $117, and $106 for the year ended December 31, 1999 and the six-month periods ended June 30, 2000 and 1999 (unaudited), respectively. Future minimum lease payments for all non-cancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 1999 are as follows (in thousands): 2000...................................................... $ 754 2001...................................................... 648 2002...................................................... 515 2003...................................................... 439 2004...................................................... 390 Thereafter................................................ 2,598 ------- Total $ 5,344 ======= 7. Sale of Radio Stations Cox Radio entered into an Asset Purchase Agreement on March 3, 2000 with Clear Channel, AMFM Texas Broadcasting, L.P., et.al. to acquire the plant and equipment and FCC broadcast licenses of KKBQ-FM Pasadena, Texas; WKHK-FM Colonial Heights, Virginia; WMXB-FM Richmond, Virginia; WKLR-FM Fort Lee, Virginia; and the studio site assets and intangible assets used to operate KLDE-FM Houston, Texas, and the transmitter site assets and FCC licenses used to operate KTBZ-FM Lake Jackson, Texas and the plant and equipment and FCC broadcast licenses of KKTL-FM Cleveland, Texas and WTVR-AM Richmond, Virginia for cash consideration of $380 million. This transaction closed on August 30, 2000. EX-99.2 6 g65138ex99-2.txt AUDITED COMBINED STATEMENT OF ASSETS 1 INDEPENDENT AUDITORS' REPORT The Board of Directors Cox Radio, Inc. We have audited the accompanying combined statement of assets acquired as of December 31, 1999 and the related combined statement of revenues and direct operating expenses of WKHK-FM Colonial Heights, Virginia; WKLR-FM Fort Lee, Virginia and WMXB-FM Richmond, Virginia (collectively referred to as the "Radio Stations") for the period from July 13, 1999 to December 31, 1999. These financial statements are the responsibility of the Radio Stations' management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying combined financial statements reflect the assets acquired and the revenues and direct operating expenses attributable to the Radio Stations as described in Note 1 and are not intended to be a complete presentation of the assets or revenues and expenses of the Radio Stations. In our opinion, the combined financial statements present fairly, in all material respects, the assets acquired of the Radio Stations as of December 31, 1999, and the revenues and direct operating expenses of the Radio Stations as described in Note 1 for the period from July 13, 1999 to December 31, 1999, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Atlanta, Georgia September 22, 2000 2 WKHK-FM, WKLR-FM, and WMXB-FM (Radio Stations owned by AMFM Inc.) COMBINED STATEMENTS OF ASSETS ACQUIRED As of December 31, 1999 and June 30, 2000 (Unaudited)
(Unaudited) December 31, 1999 June 30, 2000 ----------------- ------------- (Amounts in thousands) Property and equipment, net............................... $ 3,655 $ 3,775 Intangible assets, net.................................... 79,804 77,339 ---------- ----------- Total........................................... $ 83,459 $ 81,114 ========== ===========
See notes to combined financial statements. 3 WKHK-FM, WKLR-FM, and WMXB-FM (Radio Stations owned by AMFM Inc.) COMBINED STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES For the Period from July 13, 1999 to December 31, 1999 and the Six-Month Period Ended June 30, 2000 (Unaudited)
For the Period (Unaudited) from July 13, Six-Month 1999 to December Period Ended 31, 1999 June 30, 2000 ---------------- ------------- (Amounts in thousands) Revenues: Gross revenues................................... $7,312 $7,402 Less: Agency commissions......................... (912) (876) ------ ------ Total net revenues....................... 6,400 6,526 Direct operating expenses: Programming, technical and news.................. 848 914 Selling, promotional, general And administrative............................ 2,622 2,804 Depreciation and amortization.................... 2,739 3,193 ------ ------ Total direct operating expenses.......... 6,209 6,911 ------ ------ Excess (Deficiency) of net revenues over direct operating expenses............................ $ 191 $ (385) ====== ======
See notes to the combined financial statements. 4 WKHK-FM, WKLR-FM, and WMXB-FM (Radio Stations owned by AMFM Inc.) NOTES TO COMBINED FINANCIAL STATEMENTS 1. Organization and Basis of Presentation The accompanying combined financial statements include certain accounts of WKHK-FM Colonial Heights, Virginia; WMXB-FM Richmond, Virginia; and WKLR-FM Fort Lee, Virginia (collectively referred to as the "Radio Stations"), while under the ownership of AMFM Inc. (formerly Chancellor Media Corporation) (the "Company") as of and during the periods presented. The combined statements of assets acquired and combined statements of revenues and direct operating expenses have been prepared in accordance with accounting principles generally accepted in the United States of America and were derived from the historical accounting records of the Radio Stations. Significant intercompany balances and transactions have been eliminated in combination. The accompanying combined statements of assets acquired include the property and equipment and intangible assets of the Radio Stations acquired by Cox Radio, Inc (see Note 7). These statements do not include cash, accounts receivable, prepaid or other assets, accounts payable, accrued expenses or other liabilities. The combined statements of revenues and direct operating expenses include the revenues and expenses directly attributable to the Radio Stations. These statements do not include corporate overhead costs, interest expense or income taxes. Certain expenses reflect corporate allocations from AMFM Inc. These expenses include expenses for medical, property, workers compensation and other insurance coverages. Expense allocations are based on medical coverage selection, property value, and headcount for the individual stations using corporate insurance rates. Management believes that these allocations were made on a reasonable basis. However, the allocations are not necessarily indicative of the level of expenses that might have been incurred had the Radio Stations contracted directly with third parties. Management has not made a study or any attempt to obtain quotes from third parties to determine what the cost of obtaining such services from third parties would have been. Complete combined financial statements, including historical balance sheets and statements of cash flows, were not prepared as the Company has not segregated indirect corporate operating cost information or related assets and liabilities in its accounting records. The Radio Stations were not accounted for as separate entities. On July 13, 1999, the stockholders of Chancellor Media Corporation and Capstar Broadcasting Corporation ("Capstar") voted to approve the merger of the two companies (the "Capstar Merger"). Concurrent with the stockholders' approval of the merger, the stockholders also voted to rename the new company AMFM Inc. The Radio Stations were acquired by the Company as a result of the Capstar Merger. The Capstar Merger was accounted for using the purchase method. The combined statements of assets acquired and 5 combined statements of revenues and direct operating expenses reflect the allocation of purchase price as a result of the Capstar Merger. 2. Summary of Significant Accounting Policies Revenue Recognition Revenue is derived primarily from the sale of commercial announcements to local and national advertisers. Revenue is recognized as advertising airtime is broadcast and is net of advertising agency commissions. Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method at rates based upon the estimated useful lives. Repairs and maintenance costs are charged to expense when incurred. At the time of retirements, sales or other dispositions of property, the original cost and related accumulated depreciation are written off. Intangible Assets Intangible assets consist of Federal Communications Commission ("FCC") broadcast licenses. Intangible assets resulting from acquisitions are valued based upon estimated fair values. The Company amortizes such intangible assets using the straight-line method at rates based upon the estimated useful lives. Impairment of Long Lived Assets Long-lived assets and certain intangibles are required to be reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, with any impairment losses being reported in the period in which any impairment is first identified. Long-lived assets and certain intangibles to be disposed of are required to be reported at the lower of carrying amount or fair value less cost to sell. The Radio Stations continually evaluate the propriety of the carrying amount of property and equipment to determine whether current events or circumstances warrant adjustment of the carrying value. At this time, the Radio Stations believe that no impairment of property and equipment has occurred and that no revisions to the depreciation periods are warranted. The Radio Stations continually evaluate the propriety of the carrying amount of intangible assets and related amortization periods to determine whether current events or circumstances warrant adjustments to the carrying value and/or revised estimates of amortization periods. These evaluations consist of the projection of undiscounted cash flows over the remaining amortization periods of the related intangible assets. The projections are based on historical trend lines of actual results, adjusted for expected changes in operating results. To the extent such projections indicate that undiscounted cash flows is not expected to be adequate to recover the carrying amounts of the related intangible assets, such carrying amounts are written down by charges to expense, based on a discounted cash flow analysis. At this time, the Radio Stations believe that no impairment of intangible assets has occurred and that no revisions to the amortization periods are warranted. 6 Use of Estimates The preparation of combined financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets to be acquired at the date of the financial statements and the reported amounts of revenues and direct operating expenses during the reporting period. Actual results could differ from those estimates. Unaudited Interim Financial Statements The unaudited financial statements as of June 30, 2000 and for the six-month period ended June 30, 2000 include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the combined statement of assets acquired and combined statement of revenues and direct operating expenses for this period. Revenues and direct operating expenses for the six-month period ended June 30, 2000 are not necessarily indicative of the results that may be expected for the entire year. 3. Property and Equipment
Useful (Unaudited) Lives December 31, 1999 June 30, 2000 ----- ----------------- ------------- (Amounts in thousands) Land and land improvements.................. -- $ 57 $ 57 Buildings and building improvements......... 3-35 Years 219 850 Furniture and fixtures...................... 5-7 Years 175 285 Office and other equipment.................. 5-7 Years 247 729 Vehicles.................................... 5-7 Years 120 96 Broadcast equipment......................... 3-20 Years 2,001 2,156 Construction in progress.................... -- 1,005 -- -------- -------- Property and equipment, at cost............. 3,825 4,173 Less accumulated depreciation............... (170) (398) -------- -------- Net property and equipment.................. $ 3,655 $ 3,775 ======== ========
4. Intangible Assets
Useful (Unaudited) Lives December 31, 1999 June 30, 2000 ----- ----------------- ------------- (Amounts in thousands) FCC broadcast licenses...................... 15 Years $ 82,373 $ 82,373 Less accumulated amortization............... (2,569) (5,034) -------- -------- Net intangible assets................. $ 79,804 $ 77,339 ======== ========
7 5. Transactions with Affiliated Companies The Company operates a national radio network, the AMFM Radio Networks, which broadcasts advertising and syndicated programming shows to a national audience. As of June 30, 2000 the AMFM Radio Networks broadcast to approximately 68 million listeners in the United States (including approximately 59 million listeners from the Company's portfolio of stations). The revenues and direct operating expenses of the AMFM Radio Networks allocated to the Radio Stations for the period from July 13, 1999 to December 31, 1999 and the six-month period ended June 30, 2000 were as follows:
(Unaudited) For the Period from Six-Month July 13, 1999 to Period Ended December 31, 1999 June 30, 2000 ----------------- ------------- (Amounts in thousands) Revenues.................................................. $ 217 $ 239 Direct operating expenses................................. (66) (53) ------ ------- Revenues in excess of direct operating expenses... $ 151 $ 186 ====== =======
The AMFM Radio Networks allocates revenues and direct operating expenses to the Radio Stations based upon the individual station's percentage of the total AMFM Radio Networks listening audience. Management believes that these allocations were made on a reasonable basis. Certain expenses reflect corporate allocations from AMFM Inc. Although such allocations are included in the accompanying statements of revenue and direct operating expenses, the Radio Stations' expense for these allocations was not material for the periods presented. 6. Commitments The Radio Stations have long-term operating leases for land, office space, and certain broadcasting facilities and equipment. The leases expire at various dates, generally during the next ten years, and have varying options to renew and cancel. Rental expense for operating leases was approximately (in thousands) $144 and $140 for the period from July 13, 1999 to December 31, 1999 and the six-month period ended June 30, 2000 (unaudited), respectively. Future minimum lease payments for all non-cancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 1999 are as follows (in thousands): 2000..................................................... $ 391 2001..................................................... 394 2002..................................................... 274 2003..................................................... 57 2004..................................................... 56 Thereafter............................................... 168 ------- $ 1,340 ======= Total
8 7. Sale of Radio Stations Cox Radio entered into an Asset Purchase Agreement on March 3, 2000 with Clear Channel, AMFM Texas Broadcasting, L.P., et.al. to acquire the plant and equipment and FCC broadcast licenses of KKBQ-FM Pasadena, Texas; WKHK-FM Colonial Heights, Virginia; WMXB-FM Richmond, Virginia; WKLR-FM Fort Lee, Virginia; and the studio site assets and intangible assets used to operate KLDE-FM Houston, Texas, and the transmitter site assets and FCC licenses used to operate KTBZ-FM Lake Jackson, Texas and the plant and equipment and FCC broadcast licenses of KKTL-FM Cleveland, Texas and WTVR-AM Richmond, Virginia for cash consideration of $380 million. This transaction closed on August 30, 2000. EX-99.3 7 g65138ex99-3.txt AUDITED COMBINED STATEMENT OF REVENUES 1 INDEPENDENT AUDITORS' REPORT The Board of Directors Cox Radio, Inc. We have audited the accompanying combined statement of revenues and direct operating expenses of WKHK-FM Colonial Heights, Virginia; WKLR-FM Fort Lee, Virginia; and WMXB-FM Richmond, Virginia; (collectively referred to as the "Radio Stations") for the period from January 1, 1999 to July 12, 1999. This financial statement is the responsibility of the Radio Stations' management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying combined financial statement reflects the revenues and direct operating expenses attributable to the Radio Stations as described in Note 1 and is not intended to be a complete presentation of the revenues and expenses of the Radio Stations. In our opinion, the combined financial statement presents fairly, in all material respects, the revenues and direct operating expenses of the Radio Stations as described in Note 1 for the period from January 1, 1999 to July 12, 1999, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Atlanta, Georgia September 22, 2000 2 WKHK-FM, WKLR-FM, and WMXB-FM (Radio Stations owned by Capstar Broadcasting Corporation) COMBINED STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES For the Period from January 1, 1999 to July 12, 1999 and the Six-Month Period Ended June 30, 1999 (Unaudited)
(Unaudited) For the Six-Month Period from January 1, Period Ended 1999 to July 12, 1999 June 30, 1999 ---------------------- ------------- Revenues: Gross revenues.................................. $ 7,014 $ 6,519 Less: Agency commissions........................ (847) (781) -------- ------- Total net revenues....................... 6,167 5,738 Direct operating expenses: Programming, technical and news................. 931 918 Selling, promotional, general 2,559 2,581 and administrative....................... Depreciation and amortization.................... 1,307 1,228 -------- ------- Total direct operating expenses.......... 4,797 4,727 -------- ------- Excess of net revenues over direct operating expenses...................................... $ 1,370 $ 1,011 ======== =======
See notes to combined financial statements. 3 WKHK-FM, WKLR-FM, and WMXB-FM (Radio Stations owned by Capstar Broadcasting Corporation) NOTES TO COMBINED FINANCIAL STATEMENTS 1. Organization and Basis of Presentation The accompanying combined financial statements include certain accounts of WKHK-FM Colonial Heights, Virginia; WMXB-FM Richmond, Virginia; and WKLR-FM Fort Lee, Virginia (collectively referred to as the "Radio Stations"), while under the ownership of Capstar Broadcasting Corporation ("Capstar") (subsequently merged on July 13, 1999 with Chancellor Media Corporation and renamed AMFM Inc.) for the periods presented. The combined statements of revenues and direct operating expenses have been prepared in accordance with accounting principles generally accepted in the United States of America and were derived from the historical accounting records of the Radio Stations. Significant intercompany balances and transactions have been eliminated in combination. The combined statements of revenues and direct operating expenses include the revenues and expenses directly attributable to the Radio Stations. These statements do not include corporate general and administrative costs, interest expense or income taxes. Complete combined financial statements, including statements of cash flows, were not prepared as the Company has not segregated indirect corporate operating cost information or related assets and liabilities in its accounting records. Certain expenses reflect corporate allocations from Capstar Broadcasting Corporation. These expenses include expenses for medical, property, workers compensation and other insurance coverages. Expense allocations are based on medical coverage selection, property value, and headcount for the individual stations using corporate insurance rates. Management believes that these allocations were made on a reasonable basis. However, the allocations are not necessarily indicative of the level of expenses that might have been incurred had the Radio Stations contracted directly with third parties. Management has not made a study or any attempt to obtain quotes from third parties to determine what the cost of obtaining such services from third parties would have been. On July 13, 1999, the stockholders of Chancellor Media Corporation and Capstar voted to approve the merger of the two companies (the "Capstar Merger"). Concurrent with the stockholders' approval of the merger, the stockholders also voted to rename the new company AMFM Inc. The Radio Stations were acquired by the Company in the Capstar Merger. 2. Summary of Significant Accounting Policies Revenue Recognition Revenue is derived primarily from the sale of commercial announcements to local and national advertisers. Revenue is recognized as advertising airtime is broadcast and is net of advertising agency commissions. 4 Depreciation and Amortization Depreciation and amortization are computed using the straight-line method at rates based upon the estimated useful lives. Use of Estimates The preparation of combined financial statement in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenues and direct operating expenses during the reporting period. Actual results could differ from those estimates. Unaudited Interim Financial Statement The unaudited financial statement for the six-month period ended June 30, 1999 includes all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the combined statement of assets acquired and combined statement of revenues and direct operating expenses for this period. Revenues and direct operating expenses for the six month period ended June 30, 1999 are not necessarily indicative of the results that may be expected for the entire year. 3. Commitments The Radio Stations have long-term operating leases for land, office space, and certain broadcasting facilities and equipment. The leases expire at various dates, generally during the next ten years, and have varying options to renew and cancel. Rental expense for operating leases was approximately (in thousands) $165 and $155 for period from January 1, 1999 to July 12, 1999 and the six-month period ended June 30, 1999 (unaudited), respectively. 4. Transactions with Affiliated Companies Certain expenses reflect corporate allocations from Capstar Broadcasting Corporation. Although such allocations are included in the accompanying statements of revenue and direct operating expenses, the Radio Stations' expense for these allocations was not material for the periods presented. EX-99.4 8 g65138ex99-4.txt UNAUDITED COMBINED STATEMENT OF ASSETS 1 WEDR-FM, WFOX-FM, WAPE-FM, WFYV-FM, WKQL-FM, WMXQ-FM, WOKV-AM, WBWL-AM, WPLR-FM, WKHL-FM, WSTC-AM, WEFX-FM and WNLK-AM (Radio Stations owned by AMFM Inc.) COMBINED STATEMENT OF ASSETS ACQUIRED As of June 30, 2000 (Unaudited)
(Unaudited) June 30, 2000 ------------- Property and equipment, net............................... $ 15,329 Intangible assets, net.................................... 334,140 ----------- Total........................................... $ 349,469 ===========
See notes to combined financial statements. 2 WEDR-FM, WFOX-FM, WAPE-FM, WFYV-FM, WKQL-FM, WMXQ-FM, WOKV-AM, WBWL-AM, WPLR-FM, WKHL-FM, WSTC-AM, WEFX-FM and WNLK-AM (Radio Stations owned by AMFM Inc.) COMBINED STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES For the Six-Month Periods Ended June 30, 2000 and 1999 (Unaudited)
For the Six-Month Period Six-Month Period Ended June 30, 2000 Ended June 30, 1999 (Unaudited) (Unaudited) ---------------------- -------------------- Revenues: Gross revenues................................... $ 15,039 Less: Agency commissions........................ (1,855) --------- Total net revenues....................... 13,184 Direct operating expenses: Programming, technical and news................. 1,445 Selling, promotional, general And administrative........................... 3,711 Depreciation and amortization.................... $ 13,456 5,084 --------- --------- Total direct operating expenses.......... 13,456 10,240 --------- --------- Excess (Deficiency) of net revenues over direct operating expenses............................ ($13,456) $ 2,944 ========= =========
See notes to the combined financial statements. 3 WEDR-FM, WFOX-FM, WAPE-FM, WFYV-FM, WKQL-FM, WMXQ-FM, WOKV-AM, WBWL-AM, WPLR-FM, WKHL-FM, WSTC-AM, WEFX-FM and WNLK-AM (Radio Stations owned by AMFM Inc.) NOTES TO COMBINED FINANCIAL STATEMENTS 1. Organization and Basis of Presentation The accompanying combined financial statements include certain accounts of WEDR-FM Miami, Florida; WFOX-FM Atlanta, Georgia; WAPE-FM Jacksonville, Florida; WFYV-FM Jacksonville, Florida; WKQL-FM Jacksonville, Florida; WMXQ-FM Jacksonville, Florida; WOKV-AM Jacksonville, Florida; WBWL-AM Jacksonville, Florida; WPLR-FM New Haven, Connecticut; WKHL-FM Stamford-Norwalk, Connecticut; WSTC-AM Stamford-Norwalk, Connecticut; WEFX-FM Stamford-Norwalk, Connecticut; and WNLK-AM Stamford-Norwalk, Connecticut (collectively referred to as the "Radio Stations"), while under the ownership of AMFM Inc. (formerly Chancellor Media Corporation) (the "Company") as of and during the periods presented. The combined statement of assets acquired and combined statements of revenues and direct operating expenses have been prepared in accordance with accounting principles generally accepted in the United Stated of America and were derived from the historical accounting records of the Radio Stations. Significant intercompany balances and transactions have been eliminated in combination. On August 30, 1999, the Company entered into an agreement with Cox Radio, Inc. ("Cox Radio") to exchange the property, intangibles and FCC broadcast licenses of the Radio Stations for the property, intangibles and FCC broadcast licenses of KFI-AM and KOST-FM in Los Angeles, California, plus $3 million in cash. Effective October 1, 1999, the Company and Cox Radio entered into a Time Brokerage Agreement under which Cox Radio provides the programming for the Radio Stations. This transaction was consummated on August 25, 2000. The accompanying combined statement of assets acquired includes the property and equipment and intangible assets of the Radio Stations acquired by Cox Radio, Inc. This statements does not include cash, accounts receivable, prepaid or other assets, accounts payable, accrued expenses or other liabilities. The combined statements of revenues and direct operating expenses included the revenues and expenses directly attributable to the Radio stations. These statements do not include corporate overhead costs, interest expense or income taxes. Since Cox Radio legally owns the operations of the Radio Stations under the Time Brokerage Agreement, beginning October 1, 1999, the net revenues and direct operating expenses, excluding depreciation and amortization, have been excluded from the results of operations of the Radio Stations. Complete combined financial statements, including historical balance sheets and statements of cash flows, were not prepared as the Company has not segregated indirect corporate operating cost information or related assets and liabilities in its accounting records. The Radio Stations were not accounted for as separate entities. 4 2. Summary of Significant Accounting Policies Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method at rates based upon the estimated useful lives. Repairs and maintenance costs are charged to expense when incurred. At the time of retirements, sales or other dispositions of property, the original cost and related accumulated depreciation are written off. Intangible Assets Intangible assets consist of Federal Communications Commission ("FCC") broadcast licenses and goodwill. Intangible assets resulting from acquisitions are valued based upon estimated fair values. The Company amortizes such intangible assets using the straight-line method at rates based upon the estimated useful lives. Impairment of Long Lived Assets Long-lived assets and certain intangibles are required to be reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, with any impairment losses being reported in the period in which any impairment is first identified. Long-lived assets and certain intangibles to be disposed of are required to be reported at the lower of carrying amount or fair value less cost to sell. The Radio Stations continually evaluate the propriety of the carrying amount of property and equipment to determine whether current events or circumstances warrant adjustment of the carrying value. At this time, the Radio Stations believe that no impairment of property and equipment has occurred and that no revisions to the depreciation periods are warranted. The Radio Stations continually evaluate the propriety of the carrying amount of goodwill and other intangible assets and related amortization periods to determine whether current events or circumstances warrant adjustments to the carrying value and/or revised estimates of amortization periods. These evaluations consist of the projection of undiscounted cash flows over the remaining amortization periods of the related intangible assets. The projections are based on historical trend lines of actual results, adjusted for expected changes in operating results. To the extent such projections indicate that undiscounted cash flows is not expected to be adequate to recover the carrying amounts of the related intangible assets, such carrying amounts are written down by charges to expense, based on a discounted cash flow analysis. At this time, the Radio Stations believe that no impairment of goodwill or other intangible assets has occurred and that no revisions to the amortization periods are warranted. 5 Use of Estimates The preparation of combined financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets to be acquired at the date of the financial statements and the reported amounts of revenues and direct operating expenses during the reporting period. Actual results could differ from those estimates. 6 Unaudited Interim Financial Statements The unaudited financial statements as of June 30, 2000 and for the six-month periods ended June 30, 2000 and 1999 include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the combined statement of assets acquired and combined statements of revenues and direct operating expenses for these periods. Revenues and direct operating expenses for the six-month periods ended June 30, 2000 and 1999 are not necessarily indicative of the results that may be expected for the entire year. 3. Property and Equipment
Useful (Unaudited) Lives June 30, 2000 ----- ------------- Land and land improvements.................. -- $ 861 Buildings and building improvements......... 3-35 Years 2,566 Furniture and fixtures...................... 5-7 Years 525 Office equipment............................ 5-7 Years 638 Vehicles.................................... 5-7 Years 448 Broadcast equipment......................... 3-20 Years 13,758 Computer software........................... 3-5 Years 197 Construction in progress.................... -- 112 Property and equipment, at cost............. 19,105 Less accumulated depreciation............... (3,776) -------- Net property and equipment.................. $ 15,329 ========
4. Intangible Assets
Useful (Unaudited) Lives June 30, 2000 ----- ------------- FCC broadcast licenses...................... 15 Years 369,163 Goodwill.................................... 15 Years 10,742 Intangible assets, at cost.................. 379,905 Less accumulated amortization............... (45,765) --------- Net intangible assets............ $ 334,140 =========
7 5. Transactions with Affiliated Companies The Company operates a national radio network, the AMFM Radio Networks, which broadcasts advertising and syndicated programming shows to a national audience. As of June 30, 2000 the AMFM Radio Networks broadcast to approximately 68 million listeners in the United States (including approximately 59 million listeners from the Company's portfolio of stations). The revenues and direct operating expenses of the AMFM Radio Networks allocated to the Radio Stations for the six-month period ended June 30, 1999 were as follows:
(Unaudited) Six-Month Period ended June 30, 1999 (Amounts in thousands) Revenues............................................. $ 605 Direct operating expenses............................ (198) ------- Revenues in excess of direct operating expenses...... $ 407 =======
The revenues and direct operating expenses allocated to the Radio Stations for the six-month period ended June 30, 2000 have not been presented as the revenues and direct operating expenses of the Radio Stations are included in the operations of Cox Radio as a result of the Time Brokerage Agreement discussed in Note 1. The AMFM Radio Networks allocates revenues and direct operating expenses to the Radio Stations based upon the individual station's percentage of the total AMFM Radio Networks listening audience. Management believes that these allocations were made on a reasonable basis. 6. Commitments The Radio Stations have long-term operating leases for land, office space, and certain broadcasting facilities and equipment. The leases expire at various dates, generally during the next ten years, and have varying options to renew and cancel. Rental expense for operating leases was approximately (in thousands) $179 for the six-month periods ended June 30, 1999 (unaudited). The rent expense of the Radio Stations for the six-month period ended June 30, 2000 has not been presented, as revenues and direct operating expenses of the Radio Stations are included in the operations of Cox Radio as a result of the Time Brokerage Agreement discussed in Note 1. EX-99.5 9 g65138ex99-5.txt UNAUDITED PRO FROMA COMBINED BALANCE SHEET 1 COX RADIO, INC. UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION The following unaudited pro forma combined financial information for the year ended December 31, 1999 has been derived from (i) the historical consolidated financial statements of Cox Radio, Inc. included in Cox Radio's Annual Report on Form 10-K/A dated March 20, 2000; (ii) the historical combined statements of revenues and direct operating expenses of WEDR-FM Miami, Florida; WFOX-FM Atlanta, Georgia; WAPE-FM Jacksonville, Florida; WFYV-FM Jacksonville, Florida; WKQL-FM Jacksonville, Florida; WMXQ-FM Jacksonville, Florida; WOKV-AM Jacksonville, Florida; WBWL-AM Jacksonville, Florida; WPLR-FM New Haven, Connecticut; WKHL-FM Stamford-Norwalk, Connecticut; WSTC-AM Stamford-Norwalk, Connecticut; WEFX-FM Stamford-Norwalk, Connecticut; and WNLK-AM Stamford-Norwalk, Connecticut (which we refer to collectively as the "AMFM Radio Stations") included in Item 7 of Cox Radio's Current Report on Form 8-K dated August 30, 1999; (iii) the historical combined statements of revenues and direct operating expenses of KKBQ-FM Houston, Texas and KLDE-FM Houston, Texas (which we refer to collectively as the "Clear Channel Houston Radio Stations") included in Item 7 of this Current Report on Form 8-K; (iv) the historical combined statements of revenues and direct operating expenses of WKHK-FM Richmond, Virginia; WMXB-FM Richmond, Virginia; and WKLR-FM Richmond, Virginia while under the ownership of Capstar Broadcasting Corporation (which we refer to collectively as the "Clear Channel Richmond Capstar Radio Stations") included in Item 7 of this Current Report on Form 8-K and (v) the historical combined statements of revenues and direct operating expenses of WKHK-FM Richmond, Virginia; WMXB-FM Richmond, Virginia; and WKLR-FM Richmond, Virginia while under the ownership of AMFM Inc. (which we refer to collectively as the "Clear Channel Richmond AMFM Radio Stations") included in Item 7 of this Current Report on Form 8-K. The financial information for KKTL-FM Houston, Texas; KTBZ-FM Houston, Texas; and WTVR-AM (subsequently named WVBB-AM) Richmond, Virginia (which we refer to collectively as the "Clear Channel Assets") has not been presented since Cox Radio has determined that such assets do not constitute businesses under Rule 11-01(d) of Regulation S-X. Cox Radio does not believe that there is any continuity of operations before and after the acquisition since we did not acquire the revenue stream, customer base, employees, or management of these stations. The following unaudited pro forma combined financial information as of and for the six months ended June 30, 2000 has been derived from (i) the unaudited historical consolidated financial statements of Cox Radio, Inc. included in Cox Radio's Quarterly Report on Form 10-Q dated August 8, 2000; (ii) the unaudited historical combined statement of assets acquired and the unaudited historical combined statement of direct operating expenses of the AMFM Radio Stations included in Item 7 of this Current Report on Form 8-K; (iii) the unaudited historical combined statement of assets acquired and the unaudited historical combined statement of revenues and direct operating expenses of the Clear Channel Houston Radio Stations included in Item 7 of this Current Report on Form 8-K and (iv) the unaudited historical combined statement of assets acquired and the unaudited historical combined statement of revenues and direct operating expenses of the Clear Channel AMFM Richmond Radio Stations included in Item 7 of this Current Report on Form 8-K. On August 30, 1999, Cox Radio agreed to acquire the plant and equipment, intangible assets, and FCC broadcast licenses of the AMFM Radio Stations in exchange for the plant and equipment, intangible assets, and FCC broadcast licenses of KFI-AM and KOST-FM in Los Angeles, California and approximately $3 million in cash. Effective October 1, 1999, Cox Radio began operating the AMFM Radio Stations pursuant to a Time Brokerage Agreement and AMFM began operating KFI-AM and KOST-AM pursuant to a Time Brokerage Agreement. Since Cox Radio operated the AMFM Radio Stations , beginning October 1,1999, the net revenues and direct operating expenses, excluding, depreciation and amortization, have been excluded from the results of operations of the AMFM Radio Stations and included in the results of operations of Cox Radio. Since AMFM operated KFI-AM and KOST-FM beginning October 1, 1999, the net revenues and direct operating expenses, excluding depreciation and amortization, have been excluded from the results of operations of Cox Radio and included in the results of operations of AMFM Inc. Cox Radio consummated this transaction on August 25, 2000. 2 On March 3, 2000, Cox Radio entered into an agreement to acquire the plant and equipment, intangible assets, and FCC broadcast licenses of the Clear Channel Richmond AMFM Radio Stations, the Clear Channel Houston Radio Stations and the Clear Channel Assets (which we refer to collectively as the "Clear Channel Radio Stations") for consideration of approximately $380 million. Cox Radio consummated this transaction on August 30, 2000. The unaudited pro forma combined statements of operations for the year ended December 31, 1999 and for the six months ended June 30, 2000 have been presented as if the exchange of the plant and equipment, intangible assets and FCC broadcast licenses of KFI-AM Los Angeles, California and KOST-FM Los Angeles, California for the plant and equipment, intangible assets and FCC broadcast licenses of the AMFM Radio Stations and the acquisition of the plant and equipment, intangible assets, and FCC broadcast licenses of the Clear Channel Radio Stations (collectively referred to herein as the "Transactions") had been consummated on January 1, 1999. The unaudited pro forma combined balance sheet as of June 30, 2000 has been presented as if the Transactions had been consummated on that date. The unaudited pro forma combined financial information gives effect to the Transactions under the purchase method of accounting for business combinations and is based upon the assumptions and adjustments described in the accompanying notes to the unaudited pro forma combined financial information presented on the following pages. A final determination of required purchase accounting adjustments, including the allocation of the purchase price to the assets acquired and liabilities assumed based on their respective fair values, has not yet been made. Accordingly, the purchase accounting adjustments made in connection with the development of the unaudited pro forma combined financial information are preliminary and have been made solely for purposes of developing such unaudited pro forma combined financial information. Upon determination of the final fair values of certain assets and liabilities, the actual financial position and results of operations may differ from the unaudited pro forma combined amounts reflected herein because of a variety of factors, including availability of additional information, changes in values not currently identified and changes in operating results between the dates of the unaudited pro forma combined financial information and the date on which such final fair values are determined. However, the Company does not expect that such final determination will have a material impact on its financial position or results of operations. The pro forma adjustments do not reflect any operating efficiencies and cost savings that Cox Radio may achieve with respect to the combined entities. The pro forma adjustments do not include any adjustments to historical revenues for any future price changes nor any adjustments to operating, marketing and general and administrative expenses for any future operating changes. The unaudited pro forma combined results are not necessarily indicative of the financial position or operating results that would have occurred had the Transactions been consummated on June 30, 2000, or at the beginning of the periods ended June 30, 2000 and December 31, 1999, for which such acquisition has been given effect. In addition, the unaudited pro forma combined results are not necessarily indicative of the combined results of future operations. 3 Cox Radio, Inc. Unaudited Proforma Combined Balance Sheet June 30, 2000 (unaudited)
Clear Clear Channel Channel Richmond AMFM Houston AMFM Clear Radio Radio Radio Channel Pro Forma Cox Radio Cox Radio Stations Stations Stations Assets Adjustments Pro Forma --------- ----------- ----------- ----------- ----------- ----------- ----------- (1) (1) (1) (1) (1) (1) (1) Current Assets: Cash and cash equivalents .... $ 13,589 $ -- $ -- $ -- $ -- $ (3,000) (2) $ 10,589 Restricted cash .............. 76,699 -- -- -- -- -- 76,699 Accounts and notes receivable, less allowance for doubtful accounts ..... 83,385 -- -- -- -- -- 83,385 Prepaid expenses and other current assets .............. 5,007 -- -- -- -- -- 5,007 Amounts due from Cox Enterprises Inc. ............ 92,809 -- -- -- -- -- 92,839 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total current assets .... 271,519 -- -- -- -- (3,000) 268,519 Plant and equipment, net ..... 58,086 15,329 4,655 3,775 1,006 (3,893)(2) 81,248 (2,290)(2) Intangible assets, net ....... 804,652 334,140 167,131 77,339 51,308 (334,140)(2) 1,603,924 456,381 (2) (28,309)(2) (295,778)(3) 371,864 (3) (664)(2) Other assets ................. 26,168 -- -- -- -- -- 26,168 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total assets ............. $ 1,160,425 $ 349,469 $ 171,786 $ 81,114 $ 52,314 $ 164,751 $ 1,979,859 =========== =========== =========== =========== =========== =========== =========== CURRENT LIABILITIES: Accounts payable and accrued expenses ........... $ 30,875 $ -- $ -- $ -- $ -- $ -- $ 30,875 Income taxes payable ......... 6,613 -- -- -- -- 800 (2) 7,413 Other current liabilities .... 1,653 -- -- -- -- -- 1,653 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total current liabilities 39,141 -- -- -- -- 800 39,941 Notes payable ................ 200,125 -- -- -- -- 1,000 (3) 582,425 381,300 (3) Deferred income taxes ........ 148,005 -- -- -- -- 175,195 (2) 322,536 (664)(2) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total liabilities ....... 387,271 -- -- -- -- 557,631 944,902 ----------- ----------- ----------- ----------- ----------- ----------- ----------- SHAREHOLDERS' EQUITY: Preferred stock .............. -- -- -- -- -- -- -- Class A common stock ......... 13,402 -- -- -- -- -- 13,402 Class B common stock ......... 19,382 -- -- -- -- -- 19,382 Additional paid-in capital ... 609,151 Retained earnings ............ 132,870 349,469 171,786 81,114 52,314 (349,469)(2) 394,673 470,000 (2) (175,195)(2) (800)(2) (3,893)(2) (28,309)(2) (305,214)(3) Less: Class A common stock in treasury ........... (1,651) -- -- -- -- -- (1,651) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total shareholders' equity ................. 773,154 349,469 171,786 81,114 52,314 (392,880) 1,034,957 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total liabilities and shareholders equity .... $1,160,425 $ 349,469 $ 171,786 $ 81,114 $ 52,314 $ 164,751 $ 1,979,859 =========== =========== =========== =========== =========== =========== ===========
See notes to unaudited pro forma combined balance sheet. 4 COX RADIO, INC. Notes to Unaudited Pro Forma Combined Balance Sheet June 30, 2000 (In Thousands) (1) Represents the historical amounts of (i) Cox Radio, Inc. as reflected in Cox Radio's second quarter Form 10-Q dated August 8, 2000; (ii) the AMFM Radio Stations, the Clear Channel Houston Radio Stations and the Clear Channel Richmond AMFM Stations as reflected in Item 7 of this Current Report on Form 8-K of Cox Radio, Inc. and (iii) the Clear Channel Assets. AMFM RADIO STATIONS (2) On August 30, 1999, Cox Radio agreed to acquire the plant and equipment, intangible assets, and FCC broadcast rights of the AMFM Radio Stations in exchange for the plant and equipment, intangible assets, and FCC broadcast licenses of KFI-AM and KOST-FM in Los Angeles, California and approximately $3 million in cash. Effective October 1, 1999, Cox Radio began operating the AMFM Radio Stations pursuant to a Time Brokerage Agreement. Cox Radio consummated this transaction on August 25, 2000. Accordingly, the following adjustment reflects the exchange of the plant and equipment, intangible assets, and FCC broadcast licenses of KFI-AM and KOST-FM (herein collectively referred to as "KFI-AM and KOST-AM") and the payment of $3 million in cash consideration for the plant and equipment, intangible assets and FCC broadcast licenses of the AMFM Radio Stations and the application of the purchase accounting method in accordance with APB Opinion No. 16, "Business Combinations":
Estimated fair value of the AMFM Radio Stations based on a preliminary appraisal ................... $ 473,000 Preliminary estimate of direct acquisition costs funded through borrowings under Cox Radio's revolving credit facilities......................................................................... 1,000 -------------- Total adjusted purchase price ..................................................................... $ 474,000 Allocation of total adjusted purchase price as follows: Preliminary estimate of the fair value of the AMFM Radio Stations' plant and equipment based on preliminary appraisal ........................................................ 17,619 -------------- Preliminary estimate of excess of purchase price over tangible assets acquired attributed to FCC licenses (Amortizable life of 40 years) .......................................... $ 456,381 ============== Calculation of incremental property, plant, and equipment based on preliminary appraisal: Preliminary estimate of the fair value of the AMFM Radio Stations' plant and equipment based on preliminary appraisal ........................................................ $ 17,619 Historical property, plant, and equipment of AMFM Radio Stations ................................... (15,329) -------------- Incremental property, plant and equipment........................................................... $ 2,290 ============== In addition, the pro forma adjustments reflect the following: Elimination of the historical plant and equipment of KFI-AM and KOST-FM ............................ $ (3,893) Elimination of the historical intangible assets of KFI-AM and KOST-FM .............................. (28,309) Elimination of the historical deferred income tax liabilities of KFI-AM and KOST-FM ................ (664) Elimination of the historical intangible assets of the AMFM Radio Stations ......................... (334,140) Elimination of the historical equity accounts of the AMFM Radio Stations ........................... (349,469) Cash consideration paid to AMFM Inc. upon exchange ................................................. (3,000) Preliminary estimate of current income taxes payable related to the pre-tax gain on exchange of KFI-AM and KOST-FM for the AMFM Radio Stations ....................................... 800 Preliminary estimate of deferred income taxes payable related to the pre-tax gain on exchange of KFI-AM and KOST-FM for the AMFM Radio Stations ....................................... $ 175,195
5 COX RADIO, INC. Notes to Unaudited Pro Forma Combined Balance Sheet June 30, 2000 (In Thousands) The unaudited pro forma combined statement of operations does not include the estimated net after-tax gain upon the exchange of KFI-AM and KOST-FM for the AMFM Radio Stations as follows:
Estimated value of the AMFM Radio Stations, net of cash consideration paid to AMFM Inc. ........................................................................................ $ 470,000 Less: Net book value of the plant and equipment, intangible assets, and FCC broadcast licenses of KFI-AM and KOST-FM ................................................................... (32,202) -------------- Preliminary estimate of pre-tax gain on the exchange ............................................... 437,798 Statutory income tax rate .......................................................................... 40.2% -------------- Preliminary estimated income tax effect of the exchange ............................................ 175,995 -------------- Preliminary estimate of net after-tax gain on the exchange ......................................... $ 261,803 ==============
CLEAR CHANNEL RADIO STATIONS AND ASSETS (3) On March 3, 2000, Cox Radio entered into an agreement to acquire the plant and equipment, intangible assets, and FCC broadcast licenses of the Clear Channel Houston Radio Stations, Clear Channel Richmond AMFM Radio Stations, and Clear Channel Assets for consideration of $380 million. Cox Radio closed this transaction on August 30, 2000. Accordingly, the following adjustment reflects the acquisition of the Clear Channel Radio Stations and the application of the purchase accounting method in accordance with APB Opinion No. 16:
Cash purchase price funded through borrowings under Cox Radio's revolving credit facilities ........ $ 380,000 Preliminary estimate of direct acquisition costs funded through borrowings under Cox Radio's revolving credit facilities....................................................................... 1,300 -------------- Total adjusted purchase price... ................................................................... 381,300 Allocation of total adjusted purchase price as follows: Preliminary estimate of the fair value , which approximates book value, of the plant and equipment of: Clear Channel Houston Radio Stations ............................................................... 4,655 Clear Channel Richmond AMFM Radio Stations ......................................................... 3,775 Clear Channel Assets .............................................................................. 1,006 -------------- Preliminary estimate of excess of purchase price over tangible assets acquired attributed to FCC licenses (Amortizable life of 40 years) .......................................... $ 371,864 ============== In addition, the pro forma adjustments reflect the following: Elimination of the historical intangible assets of the Clear Channel Radio Stations .................. Clear Channel Houston Radio Stations ............................................................... $ (167,131) Clear Channel Richmond AMFM Radio Stations ......................................................... (77,339) Clear Channel Assets .............................................................................. (51,308) -------------- Total historical intangible assets ................................................................. $ (295,778) ============== Elimination of the historical equity accounts of the Clear Channel Radio Stations: Clear Channel Houston Radio Stations ............................................................... (171,786) Clear Channel Richmond AMFM Radio Stations ......................................................... (81,114) Clear Channel Assets .............................................................................. (52,314) ============== Total historical equity accounts ................................................................... $ (305,214) ==============
6 COX RADIO, INC. Unaudited Pro Forma Consolidated Statements of Operations Six Months Ended June 30, 2000 (In Thousands except per share data)
Clear Clear Channel Channel Richmond AMFM Houston AMFM Cox Radio Radio Radio Pro Forma Cox Radio Radio Stations Stations Stations Adjustments Pro Forma --------- --------- --------- --------- ----------- --------- (1) (1) (1) (1) Net revenues .................... $ 171,547 $ -- $ 14,050 $ 6,526 $ -- $ 192,123 Costs and expenses: Operating ................... 37,795 -- 1,655 914 -- 40,364 Selling, general and administrative ............. 69,178 -- 5,753 2,804 -- 77,735 Corporate general and administrative ............. 5,979 -- -- -- -- 5,979 Depreciation and amortization 15,055 13,456 6,618 3,193 (185)(2) 40,601 (178)(3) 1,528 (4) 951 (8) 164 (5) Gain on sales of assets ..... (58) -- -- -- -- (58) Gain on sales of radio stations ................... (45,353) -- -- -- -- (45,353) --------- --------- --------- --------- --------- --------- Operating income (loss) ........ 88,951 (13,456) 24 (385) (2,116) 72,855 Interest expense, net .......... (12,434) -- -- -- (35)(6) (25,929) (13,460)(9) Non-cash mark-to-market unrealized gain ............... 2,172 -- -- -- 2,172 Other expenses - net ........... (344) -- -- -- -- (344) --------- --------- --------- --------- --------- --------- Income (loss) before income taxes ......................... 78,345 (13,456) 24 (385) (15,611) 48,753 Income tax expense (benefit) ... 32,010 -- -- (4,861)(7) 21,211 (5,938)(10) Net income (loss) .............. $ 46,335 $ (13,456) $ 24 $ (385) $ (4,812) $ 27,543 ========= ========= ========= ========= ========= ========= Net income per common share: Basic .......................... $ 0.53 $ 0.32 ========= ========= Diluted ........................ $ 0.53 $ 0.31 ========= ========= Weighted average common shares outstanding: Basic .......................... 87,120 87,120 ========= ========= Diluted ........................ 87,806 87,806 ========= =========
See notes to unaudited pro forma combined statement of operations. 7 Cox Radio, Inc. Notes to Unaudited Pro Forma Combined Statement of Operations Period Ended June 30, 2000 (In Thousands) (1) Represents the historical amounts of (i) Cox Radio, Inc. as reflected in Cox Radio's second quarter Form 10-Q dated August 8, 2000; (ii) the AMFM Radio Stations, the Clear Channel Houston Radio Stations and the Clear Channel Richmond AMFM Stations as reflected in Item 7 of this Current Report on Form 8-K of Cox Radio, Inc. AMFM Radio Stations Effective October 1, 1999, AMFM began operating KFI-AM and KOST-FM pursuant to a Time Borokerage Agreement. Since AMFM legally owned the operatins of KFI-AM and KOST-FM, beginning Octoebr 1, 1999, the net revenues and direct operating expenses, excluding depreciaiton and amortization, have been excluded from the results of operations of Cox Radio. (2) To eliminate actual depreciation expense related to the KFI-AM and KOST-FM plant and equipment for the six months ended June 30, 2000 (3) To eliminate actual amortization expense related to the KFI-AM and KOST-FM intangibles for the six months ended June 30, 2000 (4) To record incremental amortization expense on intangibles assets related to the exchange of KFI-AM and KOST-FM for the AMFM Radio Stations as follows:
Preliminary estimate of excess of purchase price over tangible assets acquired ............... $ 456,381 Historical intangible assets of the AMFM Radio Stations ...................................... (334,140) --------- Incremental intangible assets attributed to FCC licenses ..................................... 122,241 Amortization period .......................................................................... 40 --------- Incremental annual amortization expense ..................................................... 3,056 Divided by 2 ................................................................................. 2 --------- Incremental amortization expense for the six-months ended June 30, 2000 ...................... $ 1,528 =========
(5) To record incremental depreciation expense on property, plant, and equipment related to the exchange of KFI-AM and KOST-FM for the AMFM Radio Stations as follows:
Preliminary estimate of the fair value of the AMFM Radio Stations' plant and equipment based on preliminary appraisal .................................................. $ 17,619 Historical property, plant, and equipment of AMFM Radio Stations .............................. (15,329) --------- Incremental property, plant and equipment .................................................... 2,290 Depreciation period .......................................................................... 7 --------- Incremental annual depreciation expense ..................................................... 327 Divided by 2 ................................................................................. 2 --------- Incremental depreciation expense for the six-months ended June 30, 2000 ...................... $ 164 =========
(6) To record incremental interest expense on borrowings to fund the estimated direct acquisition costs related to the exchange of KFI-AM and KOST-FM for the AMFM Radio Stations using an incremental borrowing rate of 7.06%, based on Cox Radio's borrowing rate under its revolving credit facilities as of June 30, 2000 as follows:
Estimated borrowings ........................................................................... $ 1,000 Incremental borrowing rate ..................................................................... 7.06% --------- Incremental annual interest expense .......................................................... 71 Divided by 2 ................................................................................... 2 --------- Incremental interest expense for the six-months ended June 30, 2000 ............................ $ 35 =========
8 A 1/8% increase or decrease in the incremental borrowing rate would not have a material impact on incremental interest expense. (7) To record the effect on income taxes related to pro forma adjustments 2 through 6 using a statutory income tax rate of 40.2% as follows:
Historical loss before income taxes of AMFM Radio Stations while under ownership of AMFM Inc.: $ (13,456) Net pro forma adjustments to the statement of operations .................................. 1,364 --------- (12,092) Statutory income tax rate ................................................................. 40.2% --------- Preliminary estimate of income tax benefit ................................................ $ (4,861) =========
CLEAR CHANNEL RADIO STATISTICS (8) To record incremental amortization expense related to the intangible assets arising from the acquisition of the Clear Channel Radio Stations, net of the amount of amortization expense previously recorded in the historical financial statements of the Clear Channel Houston Radio Stations, Clear Channel Richmond AMFM Radio Stations, and the Clear Channel Assets as follows:
Excess of purchase price over tangible assets acquired ..................................... $ 371,864 Elimination of historical intangible assets: Clear Channel Houston Radio Stations ....................................................... (167,131) Clear Channel Richmond AMFM Radio Stations ................................................. (77,339) Clear Channel Assets ...................................................................... (51,308) --------- Incremental intangible assets attributed to FCC licenses ................................... 76,086 Amortization period ........................................................................ 40 --------- Incremental annual amortization expense ................................................... 1,902 Divided by 2 ............................................................................... 2 --------- Incremental amortization expense for the six-months ended June 30, 2000 .................... $ 951 =========
(9) To record incremental interest expense on borrowings to fund the estimated purchase price, including the direct acquisition costs, related to the Clear Channel Houston Radio Stations, Clear Channel Richmond Capstar Radio Stations, Clear Channel Richmond AMFM Radio Stations, and the Clear Channel Assets Acquired, exchange using an incremental borrowing rate of 7.06%, based on Cox Radio's borrowing rate under its revolving credit facilities as of June 30, 2000, as follows:
Estimated borrowings for purchase price, including direct acquisition costs ................ $ 381,300 Incremental borrowing rate ................................................................. 7.06% --------- Incremental annual interest expense ........................................................ $ 26,920 Divided by 2 ............................................................................... 2 --------- Incremental interest expense for the six-months ended June 30, 2000 ........................ $ 13,460 =========
A 1/8% increase or decrease in the incremental borrowing rate would not have a material impact on incremental interest expense. (10) To record the effect on income taxes related to pro forma adjustments 8 and 9 using a statutory income tax rate of 40.2%, as follows: 9
Historical income (loss) before income taxes of the Clear Channel Radio Stations: Clear Channel Houston Radio Stations ...................................................... $ 24 Clear Channel Richmond AMFM Radio Stations ................................................ (385) --------- $ (361) Net pro forma adjustments to the statement of operations .................................. (14,411) --------- (14,772) Effective income tax rate ................................................................. 40.2% --------- Preliminary estimate of income tax expense ................................................ $ (5,938) =========
10 Cox Radio, Inc. Unaudited Proforma Combined Statement of Operations Year ended December 31, 1999 (in thousands except per share data)
Clear Channel Clear Channel AMFM Capstar Houston Richmond Capstar Cox Radio Radio Stations Radio Stations Radio Stations Radio Stations --------- -------------- ------------------- -------------- ---------------- (1) (1) (1) (1) (1) Net revenues..........................$ 300,494 $ 29,352 $ 18,226 $ 28,833 $ 6,167 Costs and expense: Operating............................ 68,923 4,270 3,461 3,456 931 Selling, general and administrative... 114,996 9,281 7,854 11,872 2,559 Corporate general and administrative.. 10,038 - Depreciation and amoritzation......... 29,112 17,915 2,666 13,736 1,307 Gain on sales of radio stations........ (40,509) - - -------- -------- -------- ------- -------- Operating income (loss)............... 117,934 (2,114) 4,245 (231) 1,370 Interest expense...................... (22,760) - - Other expense-net..................... (348) - - -------- -------- -------- ------------ -------- Income (loss) before income taxes..... 94,826 (2,114) 4,245 (231) 1,370 Income tax expense (benefit).......... 39,566 - - ------- -------- -------- ------------ -------- Net income (loss)..................... $55,260 $ (2,114) $ 4,245 $ (231) $ 1,370 ======= ========= ======== ============ ======== Net income per common share: Basic............................ $ 0.64 ====== Diluted.......................... $ 0.64 ====== Weighted average common shares outstanding: Basic............................ 86,127 ====== Diluted.......................... 86,637 ======
Clear Channel Richmond AMFM Pro Forma Cox Radio Radio Stations Adjustments Pro Forma -------------- ----------- --------- (1) Net revenues.......................... $ 6,400 $(42,551)(2) $346,921 Costs and expense: Operating............................ 848 (8,014)(2) 73,875 Selling, general and administrative... 2,622 (9,150)(2) 140,034 Corporate general and administrative.. -- 10,038 Depreciation and amoritzation......... 2,739 (400)(3) 72,003 (357)(4) 3,056 (5) 1,902 (9) 327 (6) Gain on sales of radio stations........ (40,509) -------- -------- -------- Operating income (loss)............... 191 (29,915) 91,480 Interest expense...................... (71)(7) (49,751) (26,920)(10) Other expense-net..................... - (348) -------- ------- -------- Income (loss) before income taxes..... 191 (56,906) 41,381 Income tax expense (benefit).......... (10,433)(8) 18,081 (11,052)(11) ------- -------- -------- Net income (loss)..................... $ 191 $ (35,421) $ 23,300 ======= ========= ======== Net income per common share: Basic............................ $ 0.27 ====== Diluted.......................... $ 0.27 ====== Weighted average common shares outstanding: Basic............................ 86,127 ====== Diluted.......................... 86,637 ======
See notes to unaudited proforma combined statement of operations 11 COX RADIO, INC. Notes to Unaudited Pro Forma Combined Statement of Operations Year Ended December 31, 1999 (In Thousands) (1) Represents the historical amounts of (i) Cox Radio, Inc., as reflected in Cox Radio's Annual Report on Form 10-K/A dated March 20, 2000; (ii) the AMFM Radio Stations during the year ended December 31, 1999 while under ownership of AMFM Inc. and during the year ended December 31, 1999 while under ownership of Capstar Broadcasting Corporation, as reflected in Item 7 of the Current Report on Form 8-K of Cox Radio, Inc. dated August 30, 1999, and (iii) the Clear Channel Houston Radio Stations, the Clear Channel Richmond AMFM Radio Stations and the Clear Channel Richmond Capstar Stations as reflected in Item 7 of this Current Report on Form 8-K of Cox Radio, Inc. AMFM RADIO STATIONS (2) To eliminate revenues and direct operating expenses related to KFI-AM and KOST-FM for the year ended December 31, 1999. (3) To eliminate actual depreciation expense related to the KFI-AM and KOST-FM plant and equipment for the year ended December 31, 1999. (4) To eliminate actual amortization expense related to the KFI-AM and KOST-FM intangible assets for the year ended December 31, 1999. (5) To record incremental amortization expense on intangibles assets related to the exchange of KFI-AM and KOST-FM for the AMFM Radio Stations as follows: Preliminary estimate of excess of purchase price over tangible assets acquired .......................................... $ 456,381 Historical intangible assets of the AMFM Radio Stations ...... (334,140) ---------- Incremental intangible assets attributed to FCC licenses ...... 122,241 Amortization period ........................................... 40 ---------- Incremental amortization expense .............................. $ 3,056 ==========
(6) To record incremental depreciation expense on property, plant, and equipment related to the exchange of KFI-AM and KOST-FM for the AMFM Radio Stations as follows: Preliminary estimate of the fair value of the AMFM Radio Stations' plant and equipment based on preliminary appraisal ................................................. $ 17,619 Historical property, plant, and equipment of AMFM Radio Stations .................................................. (15,329) ---------- Incremental property, plant and equipment ..................... 2,290 Depreciation period ........................................... 7 ---------- Incremental depreciation expense .............................. $ 327 ==========
(7) To record incremental interest expense on borrowings to fund the estimated direct acquisition costs related to the exchange of KFI-AM and KOST-FM for the AMFM Radio Stations using an incremental borrowing rate of 7.06%, based on Cox Radio's borrowing rate under its revolving credit facilities as of June 30, 2000, as follows: Estimated borrowings .......................................... $ 1,000 Incremental borrowing rate .................................... 7.06% ---------- Incremental interest expense .................................. $ 71 ==========
A 1/8% increase or decrease in the incremental borrowing rate would not have a material impact on incremental interest expense. 12 (8) To record the effect on income taxes related to pro forma adjustments 2 through 7 using a statutory income tax rate of 40.2% as follows: Historical income (loss) before income taxes of AMFM Radio Stations while under ownership of: AMFM Inc. ..................................................... $ (2,114) Capstar Broadcasting Corporation .............................. 4,245 Net pro forma adjustments to the statement of operations ...... (28,084) --------- (25,953) Statutory income tax rate ..................................... 40.2% --------- Preliminary estimate of income tax benefit .................... $ (10,433) =========
CLEAR CHANNEL RADIO STATIONS (9) To record incremental amortization expense related to the intangible assets arising from the acquisition of the Clear Channel Radio Stations, net of the amount of amortization expense previously recorded in the historical financial statements of the Clear Channel Houston Radio Stations, and the Clear Channel Richmond AMFM Radio Stations as follows: Excess of purchase price over tangible assets acquired ........ $ 371,864 Elimination of historical intangible assets of: Clear Channel Houston Radio Stations ....................... (167,131) Clear Channel Richmond AMFM Radio Stations ................. (77,339) Clear Channel Assets ....................................... (51,308) ---------- Incremental intangible assets attributed to FCC licenses ...... 76,086 Amortization period ........................................... 40 ---------- Incremental amortization expense .............................. $ 1,902 ==========
(10) To record incremental interest expense on borrowings to fund the estimated purchase price, including the direct acquisition costs, related to the Clear Channel Radio Stations using an incremental borrowing rate of 7.06%, based on Cox Radio's borrowing rate under its revolving credit facilities as of June 30, 2000, as follows: Estimated borrowings for purchase price, including direct acquisition costs .......................................... $ 381,300 Incremental borrowing rate .................................... 7.06% ---------- Incremental interest expense .................................. $ 26,920 ==========
A 1/8% increase or decrease in the incremental borrowing rate would result in an increase or decrease of incremental interest expense of approximately $476. (11) To record the effect on income taxes related to pro forma adjustments 9 and 10 using a statutory income tax rate of 40.2%, as follows: Historical income (loss) before income taxes of the Clear Channel Radio Stations Clear Channel Houston Radio Stations ....................... $ (231) Clear Channel Richmond AMFM Radio Stations ................. 191 Clear Channel Richmond Capstar Stations .................... 1,370 Net pro forma adjustments to the statement of operations ...... (28,822) --------- (27,492) Effective income tax rate ..................................... 40.2% --------- Preliminary estimate of income tax benefit .................... $ (11,052) =========
-----END PRIVACY-ENHANCED MESSAGE-----