-----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, ToXl1kL1vNN4ZTGUieoyyOaHGV9vg4FT+G8/0gHQe95SbSiTL854wbQugc2ynWAe bIqURnNlkyV+birIneO9rw== 0000950144-01-001900.txt : 20010207 0000950144-01-001900.hdr.sgml : 20010207 ACCESSION NUMBER: 0000950144-01-001900 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20010206 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COX RADIO INC CENTRAL INDEX KEY: 0001018522 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 581620022 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 333-08737 FILM NUMBER: 1525519 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 10-Q/A 1 g66736a1e10-qa.txt COX RADIO, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A (Amendment No. 1) (MARK ONE) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________ COMMISSION FILE NUMBER 1-12187 COX RADIO, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 58-1620022 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 1400 LAKE HEARN DRIVE, ATLANTA, GEORGIA 30319 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including area code: (404) 843-5000 --------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] 2 EXPLANATORY NOTE This amendment on Form 10-Q/A is being filed to give effect to the restatement of Cox Radio's financial statements, included in Item 1., as discussed in Note 8 thereto. COX RADIO, INC. FORM 10-Q/A (Amendment No. 1) FOR THE QUARTER ENDED SEPTEMBER 30, 2000 TABLE OF CONTENTS PAGE ---- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS............................................. 3 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................................ 12 ITEM 6. EXHIBITS......................................................... 19 SIGNATURES................................................................ 20 2 3 PART 1 - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS COX RADIO, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, 2000 1999 (As restated, see Note 8) ----------------- ------------------- (AMOUNTS IN THOUSANDS) ASSETS Current Assets: Cash and cash equivalents............................................ $ 20,596 $ 14,704 Restricted cash...................................................... 1,444 -- Accounts receivable, less allowance for doubtful accounts of $3,305 and $2,966, respectively .............................. 90,148 74,775 Prepaid expenses and other current assets ........................... 6,539 4,387 Amounts due from Cox Enterprises, Inc. .............................. 20,216 -- ----------------- ------------------- Total current assets ............................................. 138,943 93,866 Plant and equipment, net .............................................. 65,050 56,582 Intangible assets, net ................................................ 2,127,262 829,307 Station investment note receivable .................................... -- 850 Other assets .......................................................... 8,894 6,016 ----------------- ------------------- Total assets ..................................................... $ 2,340,149 $ 986,621 ================= =================== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued expenses ............................... $ 25,682 $ 28,115 Accrued salaries and wages .......................................... 6,838 4,464 Accrued interest .................................................... 8,258 2,476 Income taxes payable ................................................ 6,092 5,462 Other current liabilities ........................................... 979 1,572 Current portion of notes payable .................................... 230,000 -- Amounts due to Cox Enterprises, Inc. ............................... -- 17,138 ----------------- ------------------- Total current liabilities ........................................ 277,849 59,227 Notes payable ......................................................... 549,937 420,105 Deferred income taxes ................................................. 483,995 128,623 ----------------- ------------------- Total liabilities ................................................ 1,311,781 607,955 ----------------- ------------------- Commitments and contingencies (Note 3) Shareholders' Equity: Preferred stock, $1.00 par value: 15,000,000 shares authorized, None outstanding.................................................. -- -- Class A common stock, $0.33 par value; 210,000,000 shares authorized; 40,658,397 and 28,015,983 shares outstanding at September 30, 2000 and December 31, 1999, respectively ........... 13,418 9,245 Class B common stock, $0.33 par value; 135,000,000 shares authorized; 58,733,016 shares outstanding at September 30, 2000 and December 31, 1999, respectively .............................. 19,382 19,382 Additional paid-in capital .......................................... 609,469 265,155 Retained earnings ................................................... 387,750 86,535 ----------------- ------------------- 1,030,019 380,317 Less: Class A common stock held in treasury (119,856 shares at cost) (1,651) (1,651) ----------------- ------------------- Total shareholders' equity ....................................... 1,028,368 378,666 ----------------- ------------------- Total liabilities and shareholders' equity ....................... $ 2,340,149 $ 986,621 ================= ===================
See notes to unaudited consolidated financial statements. 3 4 COX RADIO, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------------------- ----------------------------------- 2000 1999 2000 1999 (As restated, (As restated, see Note 8) see Note 8) --------------- -------------- --------------- --------------- (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) NET REVENUES: Local .................................. $ 69,468 $ 57,244 $ 193,005 $ 160,635 National ............................... 21,209 19,814 61,348 52,064 Other .................................. 4,392 2,696 12,263 6,013 --------------- -------------- --------------- --------------- Total revenues ...................... 95,069 79,754 266,616 218,712 COSTS AND EXPENSES: Operating .............................. 21,684 18,422 59,479 51,043 Selling, general and administrative .... 32,865 28,058 102,043 84,005 Corporate general and administrative ... 3,611 2,673 9,590 7,268 Depreciation and amortization .......... 11,206 7,544 26,261 20,758 Loss on sales of assets ................ 63 -- 5 -- Gain on sales of radio stations ........ (429,935) (719) (475,288) (40,521) --------------- -------------- --------------- --------------- OPERATING INCOME ......................... 455,575 23,776 544,526 96,159 OTHER INCOME (EXPENSE): Interest income ........................ 2,775 -- 4,482 466 Interest expense ....................... (9,268) (5,831) (23,409) (16,288) Non-cash mark-to-market unrealized (loss)/gain ......................... (698) -- 1,474 -- Other - net ............................ (122) (135) (466) (266) --------------- -------------- --------------- --------------- INCOME BEFORE INCOME TAXES................ 448,262 17,810 526,607 80,071 Income taxes ........................... 193,382 7,750 225,392 33,513 --------------- -------------- --------------- --------------- NET INCOME ............................... $ 254,880 $ 10,060 $ 301,215 $ 46,558 =============== ============== =============== =============== Basic net income per common share......... $ 2.57 $ 0.12 $ 3.30 $ 0.54 =============== ============== =============== =============== Diluted net income per common share....... $ 2.55 $ 0.12 $ 3.28 $ 0.54 =============== ============== =============== =============== Weighted average basic common shares outstanding............................. 99,362 86,274 91,230 85,946 =============== ============== =============== =============== Weighted average diluted common shares outstanding............................. 99,966 86,761 91,892 86,362 =============== ============== =============== ===============
See notes to unaudited consolidated financial statements. 4 5 COX RADIO, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
CLASS A CLASS B TREASURY STOCK COMMON STOCK COMMON STOCK ADDITIONAL ------------------ ----------------- ----------------- PAID-IN RETAINED SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL ------ ------ ------ ------ ---------- -------- ------ ------ ----- (IN THOUSANDS) BALANCE AT DECEMBER 31, 1999........ 28,016 $ 9,245 58,733 $ 19,382 $ 265,155 $ 86,535 120 $ (1,651) $ 378,666 Net income as restated See Note 8............. -- -- -- -- -- 301,215 -- -- 301,215 Issuance of Class A common stock pursuant to equity offering............... 12,392 4,089 -- -- 340,116 -- -- -- 344,205 Issuance of Class A common stock related to incentive plans........ 250 84 -- -- 4,198 -- -- -- 4,282 ------- -------- -------- -------- --------- --------- -------- -------- ---------- BALANCE AT SEPTEMBER 30, 2000 (As restated, see Note 8).... 40,658 $ 13,418 58,733 $ 19,382 $ 609,469 $ 387,750 120 $ (1,651) $1,028,368 ======= ======== ======== ======== ========= ========= ======== ======== ==========
See notes to unaudited consolidated financial statements. 5 6 COX RADIO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, --------------------------- 2000 1999 (As restated, see Note 8) ------------ ------------ (AMOUNTS IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income ............................................................. $ 301,215 $ 46,558 Items not requiring cash: Depreciation ......................................................... 5,198 5,173 Amortization ......................................................... 21,063 15,585 Deferred income taxes ................................................ 207,372 17,741 Tax benefit from exercise of stock options ........................... 1,382 2,442 Non-cash mark-to-market unrealized (gain)............................. (1,474) -- Loss on sales of assets............................................... 5 -- (Gain) on sales of radio stations .................................... (475,288) (40,521) Changes in assets and liabilities (net of effects of acquisitions and dispositions): Increase in accounts receivable ...................................... (15,541) (9,264) (Decrease) increase in accounts payable and accrued expenses ......... (49) 1,381 Increase in accrued salaries and wages ............................... 2,374 1,233 Increase in accrued interest ......................................... 5,782 3,121 Increase in taxes payable ............................................ 630 5,637 Other, net ........................................................... (2,613) (1,287) ------------- ----------- Net cash provided by operating activities ....................... 50,056 47,799 ------------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ................................................... (7,346) (4,901) Acquisitions, net of cash acquired ..................................... (811,330) (208,776) Decrease in station investment note receivable ......................... 850 6,400 Decrease (increase) in other long-term assets .......................... 1,256 (6,652) Proceeds from sales of assets .......................................... 423 -- Proceeds from sales of radio stations .................................. 107,618 5,868 Increase in cash restricted for investment.............................. (1,444) -- (Decrease) increase in amounts due to/from Cox Enterprises, Inc. ....... (37,354) 37,361 ------------- ----------- Net cash used in investing activities ........................... (747,327) (170,700) ------------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings of revolving credit facility ............................ 359,832 119,857 Proceeds from stock options exercised .................................. 2,899 5,720 Net proceeds from stock offering ....................................... 344,205 -- Repurchase of Class A common stock ..................................... -- (1,651) (Decrease) increase in book overdrafts ................................. (2,635) 311 Payment of credit facility financing costs ............................. (1,138) -- ------------- ----------- Net cash provided by financing activities ....................... 703,163 124,237 ------------- ----------- Net increase in cash and cash equivalents .............................. 5,892 1,336 Cash and cash equivalents at beginning of period ....................... 14,704 6,479 ------------- ----------- Cash and cash equivalents at end of period ............................. $ 20,596 $ 7,815 ============= =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest ......................................................... $ 17,627 $ 13,167 Income taxes ..................................................... $ 16,097 $ 7,697 SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES: Value of businesses exchanged ................................... $ 470,000 $55,000
See notes to unaudited consolidated financial statements. 6 7 COX RADIO, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION AND OTHER INFORMATION Cox Radio is a leading national radio broadcasting company whose business, which constitutes one reportable segment, is devoted to acquiring, developing and operating radio stations located throughout the United States. Cox Enterprises, Inc. indirectly owns approximately 63% of the common stock of Cox Radio and has approximately 94% of the voting power of Cox Radio. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnote disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, the financial statements reflect all adjustments considered necessary for a fair statement of the results of operations and financial position for the interim periods presented. All such adjustments are of a normal, recurring nature. These unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 1999 and notes thereto contained in Cox Radio's Annual Report on Form 10-K, as amended, filed with the Securities and Exchange Commission. The results of operations for the three and nine months ended September 30, 2000 are not necessarily indicative of the results to be expected for the year ending December 31, 2000 or any other interim period. Certain prior year amounts have been reclassified for comparative purposes. 2. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES During the past several years, Cox Radio has actively managed its portfolio of radio stations through selected acquisitions, dispositions and exchanges, as well as through the use of local marketing agreements, or LMAs, and joint sales agreements, or JSAs. Under an LMA, the company operating a station provides programming, sales and marketing services. Under a JSA, the company operating a station provides sales and marketing services. The broadcast revenues and operating expenses of stations operated by Cox Radio under LMAs and JSAs have been included in Cox Radio's operations since the respective dates of such agreements. All consummated and pending acquisitions discussed below have been or will be accounted for using the purchase method. As such, the results of operations of acquired stations have been or will be included in the results of operations from the date of acquisition. Specific transactions entered into or consummated by Cox Radio during the nine months ended September 30, 2000 and through November 7, 2000 are discussed below. In January 2000, Cox Radio acquired the assets of KRTQ-FM (formerly KTFX-FM) in Tulsa, Oklahoma for consideration of $3.5 million. Cox Radio had been operating this station pursuant to an LMA since January 1999. Also in January 2000, Cox Radio disposed of the assets of KACE-FM and KRTO-FM, serving Los Angeles, California, for consideration of approximately $75 million. On April 2, 2000, the LMA for WCNN-AM, serving Atlanta, Georgia, terminated. Also in April 2000, Cox Radio disposed of the assets of KGMZ-FM, serving Honolulu, Hawaii, for approximately $6.6 million. Cox Radio continues to manage this station's local, regional and national 7 8 advertising sales efforts under a JSA. In addition, Cox Radio is a guarantor of the buyer's financing for this transaction. On May 1, 2000, Cox Radio acquired the assets of KINE-FM, KCCN-FM and KCCN-AM, serving Honolulu, Hawaii, for consideration of approximately $17.8 million. On July 13, 2000, Cox Radio acquired the outstanding capital stock of Marlin Broadcasting, Inc., which owned radio stations WTMI-FM serving Miami, Florida, WCCC-FM and WCCC-AM serving Hartford, Connecticut, and WBOQ-FM serving Gloucester, Massachusetts, for approximately $125 million. As part of this transaction, Cox Radio sold those assets of Marlin comprising WCCC-FM, WCCC-AM and WBOQ-FM to certain of the former principals of Marlin for approximately $25 million. Cox Radio did not recognize any gain or loss on the sale of these assets. On August 25, 2000, Cox Radio acquired WEDR-FM in Miami, Florida; WFOX-FM in Atlanta, Georgia; WFYV-FM, WAPE-FM, WBWL-AM, WKQL-FM, WMXQ-FM and WOKV-AM in Jacksonville, Florida; WEFX-FM, WNLK-AM, WKHL-FM and WSTC-AM in Stamford/Norwalk, Connecticut; and WPLR-FM and national and local sales and marketing rights at WYBC-FM in New Haven, Connecticut in exchange for KFI-AM and KOST-FM in Los Angeles, California, plus approximately $3 million (the "AMFM Transaction"). The transaction was accounted for as a purchase business combination with a fair value of $473 million based on an independent appraisal. Cox Radio recorded a $244.6 million after-tax gain on the transaction in the third quarter of 2000. Cox Radio has operated the acquired stations (other than WYBC-FM) pursuant to an LMA and WYBC-FM pursuant to a JSA since October 1999. Cox Radio obtained a temporary waiver of the FCC's newspaper-radio cross-ownership rule for the acquisition of WFOX-FM in Atlanta. On August 30, 2000, Cox Radio acquired the assets of radio stations KKBQ-FM, KLDE-FM and KKTL-FM, serving Houston, Texas, and WKHK-FM, WMXB-FM, WKLR-FM and WVBB-AM (formerly WTVR-AM), serving Richmond, Virginia, for consideration of approximately $380 million. Also on August 30, 2000, Cox Radio acquired the capital stock of Midwestern Broadcasting Company, Inc., which owned WALR-FM, serving Atlanta, Georgia, for $280 million. In a related transaction with Salem Communications Corporation on September 1, 2000, Cox Radio exchanged the license and transmitting facilities of WALR-FM, as well as the license and transmitting facilities of radio stations KLUP-AM, serving San Antonio, Texas, and WSUN-AM, serving Tampa, Florida, for the license and transmitting facilities of radio station KHPT-FM (formerly KKHT-FM), serving Houston, Texas. Cox Radio retained the intellectual property of WALR-FM and is broadcasting WALR-FM's programming on its WJZF-FM signal in Atlanta. Cox Radio has changed WJZF-FM's call letters to WALR-FM. The following unaudited pro forma summary of operations presents the consolidated results of operations as if all consummated and pending transactions had occurred on January 1, 1999 and does not purport to be indicative of what would have occurred had these transactions been made as of that date, or indicative of results which may occur in the future.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) Net revenues.................................... $104,486 $ 97,002 $305,356 $267,758 Net income...................................... 11,256 7,465 31,839 21,570 =============================================== Basic pro forma net income per common share..... $ 0.11 $ 0.09 $ 0.35 $ 0.25 =============================================== Diluted pro forma net income per common......... $ 0.11 $ 0.09 $ 0.35 $ 0.25 =============================================== Basic pro forma shares outstanding.............. 99,362 86,274 91,230 85,946 =============================================== Diluted pro forma shares outstanding............ 99,966 86,761 91,892 86,362 ===============================================
8 9 3. COMMITMENTS AND CONTINGENCIES On March 7, 1997, Cox Radio entered into a $300 million, five-year, senior, unsecured revolving credit facility with certain guarantors and banks, including Texas Commerce Bank National Association as Administrative Agent, Nationsbank of Texas, N.A. as Syndications Agent, and Citibank, N.A. as Documentation Agent. The interest rate was based on the London Interbank Offered Rate plus a spread determined by the ratio of Cox Radio's debt to EBITDA. This facility included a commitment fee on the unused portion of the total amount available of .1% to .25% based on the ratio of Cox Radio's debt to EBITDA. At December 31, 1999, Cox Radio had approximately $220 million of outstanding indebtedness and approximately $80 million available under the bank credit facility. Borrowings under the bank credit facility approximated fair value based upon current borrowing rates available to Cox Radio. The interest rate applied to amounts due under the bank credit facility was 6.9% at December 31, 1999. This bank credit facility contained, among other provisions, defined requirements as to ratio of debt to EBITDA and ratio of EBITDA to interest expense. At December 31, 1999, Cox Radio was in compliance with these covenants. On June 27, 2000, all amounts previously outstanding under this facility were repaid with a portion of the net proceeds from the offering of Class A common stock discussed in Note 5 below. On June 30, 2000, Cox Radio replaced its $300 million, five-year, senior, unsecured revolving credit facility, with a $350 million, five-year, senior, unsecured revolving credit facility and a $350 million, 364-day, senior, unsecured revolving credit facility, each with certain banks, including The Chase Manhattan Bank as the Administrative Agent, Bank of America, N.A. as the Syndications Agent, and Citibank, N.A. as the Documentation Agent. The interest rate for each facility is based on the Federal funds borrowing rate plus 1/2%; the London Interbank Offered Rate plus a spread based on the credit ratings of Cox Radio's senior, long-term debt; or the bid rate for the purchase of certificates of deposit of equal principal amount and maturity plus a spread based on the credit ratings of Cox Radio's senior, long-term debt. Each facility includes a commitment fee on the unused portion of the total amount available of .1% to .25% based on the credit ratings of Cox Radio's senior, long-term debt. Each facility also contains, among other provisions, defined requirements as to the ratio of debt to EBITDA and the ratio of EBITDA to interest expense. At September 30, 2000, Cox Radio was in compliance with the covenants. At September 30, 2000, Cox Radio had approximately $350 million of outstanding indebtedness under the five-year facility with no additional amounts available, and $230 million of outstanding indebtedness under the 364-day facility with $120 million available. The interest rate applied to amounts due under the bank credit facilities was 7.13% at September 30, 2000. On May 26, 1998, Cox Radio issued and sold an aggregate of $200 million principal amount of notes in an offering exempt from registration under Rule 144A of the Securities Act of 1933, as amended, (the "Securities Act"), which were later exchanged for notes registered under the Securities Act. The notes consisted of $100 million principal amount of 6.25% notes due in 2003 and $100 million principal amount of 6.375% notes due in 2005. Pursuant to the Registration Rights Agreement dated as of May 26, 1998 among Cox Radio, its then-wholly owned subsidiaries WSB, Inc. and WHIO, Inc. (each a former guarantor of the notes), NationsBanc Montgomery Securities LLC, Chase Securities, Inc., and J.P. Morgan Securities, Inc., on December 14, 1998, an exchange offer was consummated pursuant to which Cox Radio exchanged $200 million principal amount of the notes originally sold on May 26, 1998, for an aggregate of $200 million principal amount of notes (the terms and form of which are the same in all material respects as the original notes, except as to restrictions on transfer) which have been registered under the Securities Act. As a result of the mergers of WSB, Inc. and WHIO, Inc. into Cox Radio, WSB, Inc. and WHIO, Inc. are no longer guarantors of the notes. As a result of the transfer of certain Federal Communications Commission licenses, permits and authorizations held by Cox Radio to CXR Holdings, Inc., a wholly-owned subsidiary of Cox Radio, CXR Holdings became a guarantor of the notes on February 1, 1999. At 9 10 September 30, 2000 and December 31, 1999, the estimated fair value of these notes was approximately $194.1 million and $191.0 million, respectively, based on quoted market prices. In September 1997, Cox Radio entered into interest rate swap agreements with certain lenders providing bank financing under its bank credit facility. Pursuant to the interest rate swap agreements, Cox Radio exchanged its floating rate interest obligations on an aggregate of $100 million in principal amount at an average fixed rate of 6.23% per annum having an average maturity of 6.25 years. The fixing of interest rates for this period reduces Cox Radio's exposure to the uncertainty of floating interest rates. The differential paid or received on the interest rate swap agreements is recognized as an adjustment to interest expense. The counterparties to these interest rate swap agreements are a diverse group of major financial institutions. Cox Radio is exposed to credit loss in the event of nonperformance by these counterparties. However, Cox Radio does not anticipate nonperformance by these counterparties nor would we expect any such loss to be material. The estimated fair value of the interest rate swap agreements, based on current market rates, approximated a net receivable of $1.9 million at December 31, 1999. Prior to June 27, 2000, Cox Radio accounted for the interest rate swap agreements as hedges. In connection with the offering of Class A common stock as discussed in Note 5 below, Cox Radio used a portion of the net proceeds from the offering to repay all amounts then outstanding under its bank credit facility. As the interest rate swap agreements were no longer matched with existing debt, Cox Radio recorded a non-cash mark-to-market unrealized gain as of June 30, 2000 of $2.2 million, which represents the fair value of the interest rate swap agreements at that date. On August 4, 2000, Cox Radio redesignated these interest rate swap agreements as hedges of floating rate borrowings under the new revolving credit facilities dated June 30, 2000 discussed above. Concurrent with the redesignation of these swaps, Cox Radio recorded a non-cash, mark-to-market unrealized loss of $0.7 million, which represents the difference in the fair value of the interest rate swap agreements from June 30, 2000 to August 4, 2000. The estimated fair value of the interest rate swap agreements, based on current market rates, approximated a net receivable of $0.9 million at September 30, 2000. On May 2, 2000, Cox Radio's universal shelf registration statement filed with the Securities and Exchange Commission on Form S-3 was declared effective. Under the universal shelf registration statement, Cox Radio and two financing trusts sponsored by Cox Radio may from time to time offer and issue debentures, notes, bonds and other evidences of indebtedness, forward contracts in respect of any such indebtedness, shares of preferred stock, shares of Class A common stock, warrants, stock purchase contracts and stock purchase units of Cox Radio and preferred securities of the Cox Radio trusts for a maximum aggregate offering amount of $750 million. Unless otherwise described in future prospectus supplements, Cox Radio intends to use the net proceeds from the sale of securities registered under this universal shelf registration statement for general corporate purposes, which may include additions to working capital, the repayment or redemption of existing indebtedness and the financing of capital expenditures and acquisitions. See Note 5 below for a discussion of an offering of Class A common stock during the second quarter of 2000 under the universal shelf registration statement of Cox Radio. On March 6, 2000, Cox Radio was named as a defendant in a putative class action suit filed in the state court of Gwinnett County, Georgia, alleging violations of the federal Telephone Consumer Protection Act and related Georgia telemarketing laws. The complaint sought statutory damages in the amount of $1,500, plus actual and punitive damages and attorneys' fees, on behalf of each person "throughout the State of Georgia" who received an unsolicited pre-recorded telephone message delivering an "advertisement" from a Cox Radio radio station. On May 1, 2000, the lawsuit was dismissed without prejudice. Counsel for the plaintiff has indicated his intention to file a similar action against Cox Radio at a later date. 4. GUARANTOR FINANCIAL INFORMATION CXR Holdings, Inc., a wholly-owned subsidiary of Cox Radio, was formed on September 11, 1998, and Cox Radio transferred certain of its Federal Communications Commission licenses, permits and authorizations to CXR Holdings as of January 1, 1999. CXR Holdings became the guarantor of Cox Radio's $200 million in registered notes described in Note 3 above pursuant to a full and unconditional 10 11 guarantee on February 1, 1999. Separate financial statements and other disclosures concerning CXR Holdings are not presented because CXR Holdings is comprised primarily of non-operating assets, including Federal Communications Commission licenses, permits and authorizations and cash royalties, and such separate financial statements and other disclosures would not be meaningful to investors. The following table sets forth condensed financial information of CXR Holdings as of September 30, 2000 and December 31, 1999 and for the three and nine month periods ended September 30, 2000 and 1999.
AS OF SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------------------------------- (AMOUNTS IN THOUSANDS) ASSETS: Accounts receivable - Cox Radio........................... $ 62,481 $ 15,066 Intangible assets, net.................................... 670,259 391,832 Other assets.............................................. 29 767 ------------------------------------- Total assets........................................... $ 732,769 $ 407,665 ===================================== ------------------------------------- Shareholders' equity...................................... $ 732,769 $ 407,665 =====================================
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2000 1999 2000 1999 ------------------------------------------------------ (AMOUNTS IN THOUSANDS) Royalty income - Cox Radio................................ $ 13,805 $ 6,559 $ 38,611 $ 20,081 Intercompany interest, net................................ 1,259 -- 2,282 -- Depreciation and amortization............................. (3,241) (1,135) (8,299) (3,387) ------------------------------------------------------ Operating income.......................................... $ 11,823 $ 5,424 $ 32,594 $ 16,694 ======================================================
5. EARNINGS PER COMMON SHARE AND CAPITAL STRUCTURE
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------- -------------------- 2000 1999 2000 1999 ---- ---- ---- ---- (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) NET INCOME............................................ $ 254,880 $ 10,060 $ 301,215 $ 46,558 ========= ======== ========= ======== BASIC EPS Weighted-average common shares outstanding ........... 99,362 86,274 91,230 85,946 ========= ======== ========= ======== Basic net income per common share..................... $ 2.57 $ 0.12 $ 3.30 $ 0.54 ========= ======== ========= ======== DILUTED EPS Weighted-average common shares outstanding - basic.... 99,362 86,274 91,230 85,946 Shares issuable on exercise of dilutive options.... 1,445 1,751 1,445 1,751 Shares assumed to be purchased with proceeds from options.......................................... (986) (1,295) (939) (1,347) Shares issuable pursuant to employee stock purchase plan.................................... 229 234 229 234 Shares assumed to be purchased with proceeds from employee stock purchase plan.................... (84) (203) (73) (222) --------- -------- --------- -------- Shares applicable to diluted EPS...................... 99,966 86,761 91,892 86,362 ========= ======== ========= ======== Diluted net income per common share................... $ 2.55 $ 0.12 $ 3.28 $ 0.54 ========= ======== ========= ========
In January 1999, Cox Radio reacquired 119,856 shares of previously restricted Class A common stock from employees for cash consideration of approximately $1.7 million which was used to pay employee withholding taxes. On February 7, 2000, Cox Radio announced that its Board of Directors approved a three-for-one stock split. The stock split resulted in a decrease in par value of each share, including shares of preferred stock (authorized with no shares presently outstanding), from $1.00 to $0.33 per share. At the Annual Meeting of Stockholders, the stockholders voted to amend Cox Radio's Articles of Incorporation to increase 11 12 authorized (a) Class A common stock from 70,000,000 to 210,000,000 shares; (b) Class B common stock from 45,000,000 to 135,000,000 shares; and (c) preferred stock from 5,000,000 to 15,000,000 shares. The stock split was distributed on May 19, 2000 to stockholders of record on May 12, 2000. All financial information contained elsewhere in these financial statements has been adjusted to reflect the impact of this stock split. On June 27, 2000, Cox Radio consummated a public offering of 8,800,000 shares of its Class A common stock pursuant to its universal shelf registration statement and completed a concurrent private placement of 3,591,954 shares of Class A common stock directly to Cox Enterprises at the public offering price per share, less underwriting discounts and commissions. Cox Radio received net proceeds of approximately $344.2 million from this offering to partially finance acquisitions, repay outstanding indebtedness and for general corporate purposes. 6. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133). This statement requires that all derivatives be recognized in the statement of financial position as either assets or liabilities and measured at fair value. In addition, all hedging relationships must be designated, reassessed and documented pursuant to the provisions of SFAS 133. SFAS 133, as amended by SFAS 137 and 138, is effective for fiscal years beginning after June 15, 2000. Accordingly, Cox Radio will be required to adopt SFAS 133 on January 1, 2001. In November 1999, Cox Radio developed an SFAS 133 implementation plan and appointed a team to implement SFAS 133 on a company-wide basis. The implementation plan includes, among other things, the education of both financial and non-financial personnel, the conducting of an inventory of all free-standing and embedded derivatives, the development of a SFAS 133 compliant risk management process, the development of controls and processes to identify and account for derivatives on an on going basis, and the documentation and assessment of the Company's hedging strategies. Cox Radio believes that the adoption of SFAS 133 will not have a material impact on the financial statements. 7. SUBSEQUENT EVENT On November 8, 2000, Cox Radio entered into an agreement to acquire the assets of radio stations WDYL-FM serving Richmond, Virginia, and WJMZ-FM and WPEK-FM serving Greenville, South Carolina for a purchase price of $52.5 million in cash. Pending customary regulatory approvals, Cox Radio anticipates closing this transaction during the first quarter of 2001. 8. RESTATEMENT OF FINANCIAL STATEMENTS Subsequent to the filing of Cox Radio's Form 10-Q for the quarter ended September 30, 2000, Cox Radio's management determined that the gain of $438.0 million recorded in the third quarter of 2000 on the AMFM Transaction discussed in Note 2 should be revised to $430.0 million to properly reflect $8.0 million in assets which had been excluded from the initial calculation of the gain. As a result, the following financial statement line items and basic and diluted income per share have been restated from the amounts previously reported to comprehend the revised gain on the AMFM transaction.
As of September 30, 2000 ---------------------- (amounts in thousands) As Previously As Reported Restated Plant and Equipment, net $ 73,092 $ 65,050 Total Assets $2,348,191 $2,340,149 Retained Earnings $ 395,792 $ 387,750 Total Shareholders' Equity $1,036,410 $1,028,368 Total Liabilities and Shareholders' Equity $2,348,191 $2,340,149
Three Months Ended Nine Months Ended September 30, 2000 September 30, 2000 ------------------ ------------------ (amounts in thousands) As Previously As As Previously As Reported Restated Reported Restated Gain on sales of radio stations $437,977 $429,935 $483,330 $475,288 Operating income $463,617 $455,575 $552,568 $544,526 Income before income taxes $456,304 $448,262 $534,649 $526,607 Net income $262,922 $254,880 $309,257 $301,215 Basic net income per share $ 2.65 $ 2.57 $ 3.39 $ 3.30 Diluted net income per share $ 2.63 $ 2.55 $ 3.37 $ 3.28
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the accompanying unaudited historical Consolidated Statements of Income for the three and nine-month periods ended September 30, 2000 and 1999. See Note 8 of the notes to Cox Radio's unaudited financial statements for a discussion of the effects of the restatement of Cox Radio's financial statements as of and for the three- and nine-month periods ended September 30, 2000. This report contains "forward-looking" statements, including but not limited to statements relating to future cash requirements, which are statements that relate to Cox Radio's future plans, earnings, objectives, expectations, performance, and similar projections, as well as any facts or assumptions underlying these statements or projections. Actual results may differ materially from the results expressed or implied in these forward-looking statements, due to various risks, uncertainties or other factors. These factors include competition within the radio broadcasting industry, advertising demand in our markets, competition for audience share, our success in executing and integrating acquisitions, our ability to execute our Internet strategy effectively, and our ability to generate sufficient cash flow to meet our debt service obligations and finance operations. For a more detailed discussion of these and other risk factors, see the Risk Factors section of Cox Radio's Annual Report on Form 10-K, as amended, for the year ended 12 13 December 31, 1999. Cox Radio assumes no responsibility to update any forward-looking statements as a result of new information, future events or otherwise. GENERAL Cox Radio is a leading national radio broadcast company whose business, which constitutes one reportable segment, is devoted to acquiring, developing and operating radio stations located throughout the United States. Cox Enterprises indirectly owns approximately 63% of the common stock of Cox Radio through its wholly-owned subsidiary, Cox Broadcasting, Inc., and has approximately 94% of the voting power of Cox Radio. The performance of a radio station group such as Cox Radio is customarily measured by its ability to generate Broadcast Cash Flow, EBITDA and After-tax Cash Flow. Broadcast Cash Flow is defined as net revenues less station operating expenses. EBITDA is defined as operating income excluding the gain on sales of assets and radio stations plus depreciation and amortization. After-tax Cash Flow is defined as income (loss) before extraordinary items excluding gain on sales of assets and radio stations plus depreciation and amortization. Although Broadcast Cash Flow, EBITDA and After-tax Cash Flow are not recognized under generally accepted accounting principles, they are accepted by the broadcasting industry as generally recognized measures of performance and are used by analysts who report publicly on the condition and performance of broadcasting companies. For the foregoing reasons, Cox Radio believes that these measures will be useful to investors. However, Broadcast Cash Flow, EBITDA or After-tax Cash Flow should not be considered to be an alternative to operating income or cash flows from operating activities as a measure of liquidity, each as determined in accordance with accounting principles generally accepted in the United States of America, or an indicator of Cox Radio's performance under generally accepted accounting principles. The primary source of Cox Radio's revenues is the sale of local and national advertising. Historically, approximately 73% and 25% of Cox Radio's net revenues have been generated from local and national advertising, respectively. Cox Radio's most significant station operating expenses are employees' salaries and benefits, commissions, programming expenses and advertising and promotional expenditures. Cox Radio's revenues vary throughout the year. As is typical in the radio broadcasting industry, Cox Radio's revenues and broadcast cash flows are typically lowest in the first quarter and higher in the second and fourth quarters. Cox Radio's operating results in any period may be affected by the incurrence of advertising and promotional expenses that do not necessarily produce commensurate revenues until the impact of advertising and promotion is realized in future periods. ACQUISITIONS AND DISPOSITIONS During the past several years, Cox Radio has actively managed its portfolio of radio stations through selected acquisitions, dispositions and exchanges, as well as through the use of local marketing agreements, or LMAs, and joint sales agreements, or JSAs. Under an LMA, the company operating a station provides programming, sales and marketing services. Under a JSA, the company operating a station provides sales and marketing services. The broadcast revenues and operating expenses of stations operated by Cox Radio under LMAs and JSAs have been included in Cox Radio's operations since the respective dates of such agreements. All consummated and pending acquisitions discussed below have been or will be accounted for using the purchase method. As such, the results of operations of acquired stations have been or will be included in the results of operations from the date of acquisition. Specific transactions entered into or consummated by Cox Radio during the nine months ended September 30, 2000 and through November 7, 2000 are discussed below. 13 14 In January 2000, Cox Radio acquired the assets of KRTQ-FM (formerly KTFX-FM) in Tulsa, Oklahoma for consideration of $3.5 million. Cox Radio had been operating this station pursuant to an LMA since January 1999. Also in January 2000, Cox Radio disposed of the assets of KACE-FM and KRTO-FM, serving Los Angeles, California, for consideration of approximately $75 million. On April 2, 2000, the LMA for WCNN-AM, serving Atlanta, Georgia, terminated. Also in April 2000, Cox Radio disposed of the assets of KGMZ-FM, serving Honolulu, Hawaii, for approximately $6.6 million. Cox Radio continues to manage this station's local, regional and national advertising sales efforts under a JSA. In addition, Cox Radio is a guarantor of the buyer's financing for this transaction. On May 1, 2000, Cox Radio acquired the assets of KINE-FM, KCCN-FM and KCCN-AM, serving Honolulu, Hawaii, for consideration of approximately $17.8 million. On July 13, 2000, Cox Radio acquired the outstanding capital stock of Marlin Broadcasting, Inc., which owned radio stations WTMI-FM serving Miami, Florida, WCCC-FM and WCCC-AM serving Hartford, Connecticut, and WBOQ-FM serving Gloucester, Massachusetts, for approximately $125 million. As part of this transaction, Cox Radio sold those assets of Marlin comprising WCCC-FM, WCCC-AM and WBOQ-FM to certain of the former principals of Marlin for approximately $25 million. Cox Radio did not recognize any gain or loss on the sale of these assets. On August 25, 2000, Cox Radio acquired WEDR-FM in Miami, Florida; WFOX-FM in Atlanta, Georgia; WFYV-FM, WAPE-FM, WBWL-AM, WKQL-FM, WMXQ-FM and WOKV-AM in Jacksonville, Florida; WEFX-FM, WNLK-AM, WKHL-FM and WSTC-AM in Stamford/Norwalk, Connecticut; and WPLR-FM and national and local sales and marketing rights at WYBC-FM in New Haven, Connecticut in exchange for KFI-AM and KOST-FM in Los Angeles, California, plus approximately $3 million. The transaction was accounted for as a purchase business combination with a fair value of $473 million based on an independent appraisal. Cox Radio recorded a $244.6 million after-tax gain on the transaction in the third quarter of 2000. Cox Radio has operated the acquired stations (other than WYBC-FM) pursuant to an LMA and WYBC-FM pursuant to a JSA since October 1999. Cox Radio obtained a temporary waiver of the FCC's newspaper-radio cross-ownership rule for the acquisition of WFOX-FM in Atlanta. On August 30, 2000, Cox Radio acquired the assets of radio stations KKBQ-FM, KLDE-FM and KKTL-FM, serving Houston, Texas, and WKHK-FM, WMXB-FM, WKLR-FM and WVBB-AM (formerly WTVR-AM), serving Richmond, Virginia, for consideration of approximately $380 million. Also on August 30, 2000, Cox Radio acquired the capital stock of Midwestern Broadcasting Company, Inc., which owned WALR-FM, serving Atlanta, Georgia, for $280 million. In a related transaction with Salem Communications Corporation on September 1, 2000, Cox Radio exchanged the license and transmitting facilities of WALR-FM, as well as the license and transmitting facilities of radio stations KLUP-AM, serving San Antonio, Texas, and WSUN-AM, serving Tampa, Florida, for the license and transmitting facilities of radio station KHPT-FM (formerly KKHT-FM), serving Houston, Texas. Cox Radio retained the intellectual property of WALR-FM and is broadcasting WALR-FM's programming on its WJZF-FM signal in Atlanta. Cox Radio has changed WJZF-FM's call letters to WALR-FM. RESULTS OF OPERATIONS Three months ended September 30, 2000 compared to three months ended September 30, 1999 Net revenues for the third quarter of 2000 increased $15.3 million to $95.1 million, a 19.2% increase over the third quarter of 1999. This increase was primarily a result of the acquisition of radio stations in Honolulu, 14 15 Hawaii; Houston, Texas; Richmond, Virginia; Jacksonville, Florida; New Haven, Connecticut; Stamford-Norwalk, Connecticut; Atlanta, Georgia; and Miami, Florida; and was offset somewhat by the disposition of stations in Los Angeles, California. In addition, significant increases in net revenues at Cox Radio's previously owned radio stations in Atlanta, Georgia; Long Island, New York; Tampa, Florida; and San Antonio, Texas, were realized as a result of continued strong ratings performance. Station operating expenses increased $8.1 million to $54.5 million, an increase of 17.4% over the third quarter of 1999. This increase was primarily a result of the acquisition of radio stations in Honolulu, Hawaii; Houston, Texas; Richmond, Virginia; Jacksonville, Florida; New Haven, Connecticut; Stamford-Norwalk, Connecticut; Atlanta, Georgia; and Miami, Florida, as well as higher programming and sales related costs which are driven by ratings and revenues, respectively. These increases were offset somewhat by the disposition of stations in Los Angeles, California. Broadcast cash flow increased $7.2 million to $40.5 million, a 21.8% increase over the third quarter of 1999, for the reasons discussed above. Corporate general and administrative expenses increased $0.9 million to $3.6 million, primarily due to higher overhead costs incurred as a result of the increase in number of stations owned and/or operated in 2000. Operating income increased $431.8 million to $455.6 million for the third quarter of 2000, for the reasons discussed above and as a result of a $429.9 million pre-tax gain recorded in the third quarter of 2000 on the exchange of KFI-AM and KOST-FM in Los Angeles, California. Interest expense during the third quarter of 2000 increased $3.4 million to $9.3 million as a result of borrowings incurred to complete Cox Radio's acquisitions during 1999 and the first nine months of 2000. Net income increased $244.8 million to $254.9 million for the third quarter of 2000, primarily for the reasons discussed above. In addition, a $244.6 million after-tax gain was recorded in the third quarter of 2000 on the exchange of KFI-AM and KOST-FM in Los Angeles, California, offset by a $0.4 million non-cash after-tax "mark-to-market" unrealized loss related to Cox Radio's interest rate swap agreements. Nine months ended September 30, 2000 compared to nine months ended September 30, 1999 Net revenues for the first nine months of 2000 increased $47.9 million to $266.6 million, a 21.9% increase over the first nine months of 1999. This increase was primarily a result of the acquisition of radio stations in Tampa, Florida; Louisville, Kentucky; Honolulu, Hawaii; Houston, Texas; Richmond, Virginia; Jacksonville, Florida; New Haven, Connecticut; Stamford-Norwalk, Connecticut; Atlanta, Georgia; and Miami, Florida; and offset somewhat by the disposition of radio stations in Syracuse, New York and Los Angeles, California. In addition, significant increases in net revenues at Cox Radio's previously owned radio stations in Atlanta, Georgia; Birmingham, Alabama; Long Island, New York; Orlando, Florida; Southern Connecticut; Tulsa, Oklahoma; and San Antonio, Texas, were realized as a result of continued strong ratings performance. Station operating expenses increased $26.5 million to $161.5 million, an increase of 19.6% over the first nine months of 1999. This increase was primarily as a result of the acquisition of radio stations in Tampa, Florida; Louisville, Kentucky; Honolulu, Hawaii; Houston, Texas; Richmond, Virginia; Jacksonville, Florida; New Haven and Stamford-Norwalk, Connecticut; Atlanta, Georgia; and Miami, Florida, as well as higher programming and sales related costs which are driven by ratings and revenues, respectively. These increases were offset somewhat by the disposition of stations in Syracuse, New York and Los Angeles, California. Broadcast cash flow increased $21.4 million to $105.1 million, a 25.6% increase over the first nine months of 1999, for the reasons discussed above. Corporate general and administrative expenses increased $2.3 million to $9.6 million, primarily due to higher overhead costs incurred as a result of the increase in number of stations owned and/or operated in 2000. 15 16 Operating income increased $448.4 million to $544.5 million for the first nine months of 2000, primarily as a result of a $429.9 million pre-tax gain recorded on the exchange of KFI-AM and KOST-FM in Los Angeles, California and for the reasons discussed above. In addition, a $46.6 million pre-tax gain was recorded in the first nine months of 2000 on the sale of KACE-FM and KRTO-FM in Los Angeles, California. These gains were significantly greater than the $39.8 million pre-tax gain recorded in the first nine months of 1999 on the sale of Cox Radio's stations in Syracuse, New York. Interest expense during the first nine months of 2000 increased $7.1 million to $23.4 million as a result of borrowings incurred to complete Cox Radio's acquisitions during 1999 and the first nine months of 2000. Net income increased $254.7 million to $301.2 million for the first nine months of 2000, primarily for the reasons discussed above and due to a $0.9 million after-tax non-cash "mark-to-market" unrealized gain related to Cox Radio's interest rate swap agreements in the first nine months of 2000. In addition, a $27.9 million after-tax gain was recorded on the sale of KACE-FM and KRTO-FM in Los Angeles, California and a $244.6 million after-tax gain was recorded on the exchange of KFI-AM and KOST-FM in Los Angeles, California in the first nine months of 2000. These gains were significantly greater than the $23.8 million after-tax gain recorded in the first nine months of 1999 on the sale of Cox Radio's stations in Syracuse, New York. LIQUIDITY AND CAPITAL RESOURCES Cox Radio's primary source of liquidity is cash provided by operations. Historically, cash requirements have been funded through Cox Radio's operating activities and borrowings under Cox Radio's bank credit facility. For the nine months ended September 30, 2000 as compared to the nine months ended September 30, 1999, cash flow from operations increased $2.3 million to $50.1 million, primarily attributable to the net change in working capital accounts. In addition, cash requirements historically have been funded on a temporary basis through intercompany advances under a revolving credit facility with Cox Enterprises. Borrowings, if any, by Cox Radio under the Cox Enterprises credit facility would typically be repaid by Cox Radio within 30 days and would accrue interest at Cox Enterprises' commercial paper rate plus .4%. Cox Enterprises continues to perform day-to-day cash management services for Cox Radio. On March 7, 1997, Cox Radio entered into a $300 million, five-year, senior, unsecured revolving credit facility with certain guarantors and banks, including Texas Commerce Bank National Association as Administrative Agent, Nationsbank of Texas, N.A. as Syndications Agent, and Citibank, N.A. as Documentation Agent. The interest rate was based on the London Interbank Offered Rate plus a spread determined by the ratio of Cox Radio's debt to EBITDA. This facility included a commitment fee on the unused portion of the total amount available of .1% to .25% based on the ratio of Cox Radio's debt to EBITDA. At December 31, 1999, Cox Radio had approximately $220 million of outstanding indebtedness and approximately $80 million available under the bank credit facility. Borrowings under the bank credit facility approximated fair value based upon current borrowing rates available to Cox Radio. The interest rate applied to amounts due under the bank credit facility was 6.9% at December 31, 1999. This bank credit facility contained, among other provisions, defined requirements as to ratio of debt to EBITDA and ratio of EBITDA to interest expense. At December 31, 1999, Cox Radio was in compliance with these covenants. On June 27, 2000, all amounts previously outstanding under this facility were repaid with a portion of the net proceeds from the offering of Class A common stock discussed in Note 5 to the financial statements. On June 30, 2000, Cox Radio replaced its $300 million, five-year, senior, unsecured revolving credit facility, with a $350 million, five-year, senior, unsecured revolving credit facility and a $350 million, 364-day, senior, unsecured revolving credit facility, each with certain banks, including The Chase Manhattan Bank as the Administrative Agent, Bank of America, N.A. as the Syndications Agent, and Citibank, N.A. as the Documentation Agent. The interest rate for each facility is based on the Federal funds borrowing rate plus 1/2%; the London Interbank Offered Rate plus a spread based on the credit ratings of Cox Radio's senior, long-term debt; or the bid rate for the purchase of certificates of deposit of equal principal amount and maturity plus a spread based on the credit ratings of Cox Radio's senior, long-term debt. Each facility 16 17 includes a commitment fee on the unused portion of the total amount available of .1% to .25% based on the credit ratings of Cox Radio's senior, long-term debt. Each facility also contains, among other provisions, defined requirements as to the ratio of debt to EBITDA and the ratio of EBITDA to interest expense. At September 30, 2000, Cox Radio was in compliance with the covenants. At September 30, 2000, Cox Radio had approximately $350 million of outstanding indebtedness under the five-year facility with no additional amounts available, and $230 million of outstanding indebtedness under the 364-day facility with $120 million available. The interest rate applied to amounts due under the bank credit facilities was 7.13% at September 30, 2000. On May 26, 1998, Cox Radio issued and sold an aggregate of $200 million principal amount of notes in an offering exempt from registration under Rule 144A of the Securities Act of 1933, as amended, (the "Securities Act"), which were later exchanged for notes registered under the Securities Act. The notes consisted of $100 million principal amount of 6.25% notes due in 2003 and $100 million principal amount of 6.375% notes due in 2005. Pursuant to the Registration Rights Agreement dated as of May 26, 1998 among Cox Radio, its then-wholly owned subsidiaries WSB, Inc. and WHIO, Inc. (each a former guarantor of the notes), NationsBanc Montgomery Securities LLC, Chase Securities, Inc., and J.P. Morgan Securities, Inc., on December 14, 1998, an exchange offer was consummated pursuant to which Cox Radio exchanged $200 million principal amount of the notes originally sold on May 26, 1998, for an aggregate of $200 million principal amount of notes (the terms and form of which are the same in all material respects as the original notes, except as to restrictions on transfer) which have been registered under the Securities Act. As a result of the mergers of WSB, Inc. and WHIO, Inc. into Cox Radio, WSB, Inc. and WHIO, Inc. are no longer guarantors of the notes. As a result of the transfer of certain Federal Communications Commission licenses, permits and authorizations held by Cox Radio to CXR Holdings, Inc., a wholly-owned subsidiary of Cox Radio, CXR Holdings became a guarantor of the notes on February 1, 1999. At September 30, 2000 and December 31, 1999, the estimated fair value of these notes was approximately $194.1 million and $191.0 million, respectively, based on quoted market prices. In September 1997, Cox Radio entered into interest rate swap agreements with certain lenders providing bank financing under its bank credit facility. Pursuant to the interest rate swap agreements, Cox Radio exchanged its floating rate interest obligations on an aggregate of $100 million in principal amount at an average fixed rate of 6.23% per annum having an average maturity of 6.25 years. The fixing of interest rates for this period reduces Cox Radio's exposure to the uncertainty of floating interest rates. The differential paid or received on the interest rate swap agreements is recognized as an adjustment to interest expense. The counterparties to these interest rate swap agreements are a diverse group of major financial institutions. Cox Radio is exposed to credit loss in the event of nonperformance by these counterparties. However, Cox Radio does not anticipate nonperformance by these counterparties nor would we expect any such loss to be material. The estimated fair value of the interest rate swap agreements, based on current market rates, approximated a net receivable of $1.9 million at December 31, 1999. Prior to June 27, 2000, Cox Radio accounted for the interest rate swap agreements as hedges. In connection with the offering of Class A common stock as discussed in Note 5 to the financial statements included in Item 1. hereof, Cox Radio used a portion of the net proceeds from the offering to repay all amounts then outstanding under its bank credit facility. As the interest rate swap agreements were no longer matched with existing debt, Cox Radio recorded a non-cash mark-to-market unrealized gain as of June 30, 2000 of $2.2 million, which represents the fair value of the interest rate swap agreements at that date. On August 4, 2000, Cox Radio redesignated these interest rate swap agreements as hedges of floating rate borrowings under the new revolving credit facilities dated June 30, 2000 discussed above. Concurrent with the redesignation of these swaps, Cox Radio recorded a non-cash, mark-to-market unrealized loss of $0.7 million, which represents the difference in the fair value of the interest rate swap agreements from June 30, 2000 to August 4, 2000. The estimated fair value of the interest rate swap agreements, based on current market rates, approximated a net receivable of $0.9 million at September 30, 2000. Future cash requirements are expected to include capital expenditures, principal and interest payments on indebtedness and funds for acquisitions. Cox Radio expects its operations to generate sufficient cash to meet its capital expenditures and debt service requirements. Additional cash requirements, including funds 17 18 for pending or other acquisitions, will be funded from various sources, including the proceeds from bank financing and, if or when appropriate, other issuances of Company securities. On May 2, 2000, Cox Radio's universal shelf registration statement filed with the Securities and Exchange Commission on Form S-3 was declared effective. Under the universal shelf registration statement, Cox Radio and two financing trusts sponsored by Cox Radio may from time to time offer and issue debentures, notes, bonds and other evidences of indebtedness, forward contracts in respect of any such indebtedness, shares of preferred stock, shares of Class A common stock, warrants, stock purchase contracts and stock purchase units of Cox Radio and preferred securities of the Cox Radio trusts for a maximum aggregate offering amount of $750 million. Unless otherwise described in future prospectus supplements, Cox Radio intends to use the net proceeds from the sale of securities registered under this universal shelf registration statement for general corporate purposes, which may include additions to working capital, the repayment or redemption of existing indebtedness and the financing of capital expenditures and acquisitions. On June 27, 2000, Cox Radio consummated a public offering of 8,800,000 shares of its Class A common stock pursuant to its universal shelf registration statement and completed a concurrent private placement of 3,591,954 shares of Class A common stock directly to Cox Enterprises at the public offering price per share, less underwriting discounts and commissions. Cox Radio received net proceeds of approximately $344.2 million from this offering to partially finance acquisitions, repay outstanding indebtedness and for general corporate purposes. 18 19 ITEM 6. Exhibits Listed below are the exhibits which are filed as part of this Report (according to the number of them in Item 601 of Regulation S-K):
Exhibit Number Description - ------ ----------- 27.1 Financial Data Schedule (for SEC use only)
19 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amended report to be signed on its behalf by the undersigned thereunto duly authorized. COX RADIO, INC. February 6, 2001 /s/ Neil O. Johnston ----------------------------------- Neil O. Johnston Chief Financial Officer (Principal Financial Officer and duly authorized officer) 20 EX-27.1 2 g66736a1ex27-1.txt RESTATED FINANCIAL DATA SCHEDULE
5 1 U.S. DOLLARS 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 1 22,040 0 93,453 3,305 0 138,943 102,572 37,522 2,340,149 277,849 0 0 0 32,800 995,568 2,340,149 0 266,616 0 161,522 35,851 0 23,409 526,607 225,392 301,215 0 0 0 301,215 3.30 3.28
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