-----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, QTD4kZ4dPRJgCBXh6Xh5puaGzgcN3wQRmqKP90cwiUJPoWJCWC+kirp44zsRTmbn ovzHM5w0Z2GOCirtj4ykIg== 0000950144-97-008761.txt : 19970812 0000950144-97-008761.hdr.sgml : 19970812 ACCESSION NUMBER: 0000950144-97-008761 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970811 SROS: NONE 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 SEC ACT: 1934 Act SEC FILE NUMBER: 001-12187 FILM NUMBER: 97656015 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 1 COX RADIO, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________ COMMISSION FILE NUMBER 1-12187 [COX RADIO INC. LOGO] (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 58-1620022 (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) 1400 LAKE HEARN DRIVE, ATLANTA, GEORGIA 30319 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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 irequired to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] --------------- Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. There were 8,749,640 shares of Class A Common Stock outstanding as of July 31, 1997. There were 19,577,672 shares of Class B Common Stock outstanding as of July 31, 1997. 1 2 COX RADIO, INC. FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997 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................................................ 11 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................... 15 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................... 15 SIGNATURES................................................................................. 17
2 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS COX RADIO, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 30, DECEMBER 31, 1997 1996 --------- ---------- (Thousands of Dollars) ASSETS CURRENT ASSETS: Cash and cash equivalents ................................. $ 11,550 $ 1,544 Restricted cash ........................................... -- 9,051 Accounts receivable, less allowance for doubtful accounts of $1,671 and $834 ...................................... 44,647 31,511 Prepaid expenses and other current assets ................. 5,867 1,575 Income taxes receivable ................................... 2,239 --------- --------- Total current assets ................................... 64,303 43,681 Plant and equipment, net .................................... 40,473 27,070 Intangible assets, net ...................................... 495,963 138,119 Amounts due from Cox Enterprises, Inc. ...................... -- 49,667 Station Investment Note Receivable .......................... 12,000 -- Other assets ................................................ 8,107 3,182 --------- --------- Total assets ........................................... $ 620,846 $ 261,719 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses ..................... $ 16,562 $ 10,296 Unit appreciation plan ("UAP") liability .................. -- 646 Income taxes payable ...................................... -- 3,216 Deferred Barter/Trade ..................................... 3,039 -- Other current liabilities ................................. 148 668 --------- --------- Total current liabilities .............................. 19,749 14,826 Amounts due to Cox Enterprises, Inc. ........................ 7,248 -- Notes Payable ............................................... 215,000 -- Deferred income taxes ....................................... 104,674 11,095 --------- --------- Total liabilities ...................................... 346,671 25,921 --------- --------- Commitments and contingencies (Note 3) SHAREHOLDERS' EQUITY: Class A common stock, $1.00 par value; 70,000,000 shares authorized and 8,749,640 shares outstanding ............ 8,750 8,737 Class B common stock, $1.00 par value; 45,000,000 shares authorized and 19,577,672 shares outstanding ........... 19,578 19,578 Additional paid-in capital ................................ 249,196 248,972 Deficit in retained earnings .............................. (3,349) (41,489) --------- --------- Total shareholders' equity ............................. 274,175 235,798 --------- --------- Total liabilities and shareholders' equity ............. $ 620,846 $ 261,719 ========= =========
See notes to consolidated financial statements. 3 4 COX RADIO, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED --------------------- --------------------- JUNE 30, JUNE 30, --------------------- --------------------- 1997 1996 1997 1996 -------- -------- -------- -------- (Thousands of Dollars) NET REVENUES: Local ....................... $ 39,550 $ 27,852 $ 60,842 $ 50,414 National .................... 14,187 8,638 21,301 15,479 Other ....................... 612 250 1,361 415 -------- -------- -------- -------- Total revenues ............ 54,349 36,740 83,504 66,308 COSTS AND EXPENSES: Operating ................... 13,650 11,053 21,842 20,493 Selling, general and administrative .............. 22,394 14,461 33,801 26,804 Corporate general and administrative .............. 2,028 1,238 3,450 2,341 Depreciation and amortization ................ 5,133 1,997 7,185 3,979 -------- -------- -------- -------- OPERATING INCOME ............... 11,144 7,991 17,226 12,691 OTHER INCOME (EXPENSE): Interest income ................ 525 -- 1,472 -- Interest expense ............... (3,567) (1,389) (3,571) (2,856) Gain on sale of radio station .. -- -- 49,223 -- Other - net .................... (196) (179) (264) (275) -------- -------- -------- -------- INCOME BEFORE INCOME TAXES ..... 7,906 6,423 64,086 9,560 Income taxes ................... 3,969 3,022 25,946 4,347 -------- -------- -------- -------- NET INCOME ..................... $ 3,937 $ 3,401 $ 38,140 $ 5,213 ======== ======== ======== ======== Net income per common share .... $ .14 $ .17 $ 1.35 $ .27 ======== ======== ======== ======== Weighted average common shares outstanding ............. 28,327 19,578 28,321 19,578 ======== ======== ======== ========
See notes to consolidated financial statements. 4 5 COX RADIO, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
CLASS A CLASS B COMMON STOCK COMMON STOCK ADDITIONAL -------- -------- -------- -------- PAID-IN ACCUMULATED SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL -------- -------- -------- -------- -------- -------- -------- (AMOUNTS IN THOUSANDS) BALANCE AT DECEMBER 31, 1996 ...... 8,737 $ 8,737 19,578 $ 19,578 $248,972 $(41,489) $235,798 Net income ...................... -- -- -- -- -- 38,140 38,140 Issuance of restricted stock ...... 13 13 -- -- 224 -- 237 -------- -------- -------- -------- -------- -------- -------- BALANCE AT JUNE 30, 1997 .......... 8,750 $ 8,750 19,578 $ 19,578 $249,196 $ (3,349) $274,175 ======== ======== ======== ======== ======== ======== ========
See notes to consolidated financial statements. 5 6 COX RADIO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, ---------------------- 1997 1996 --------- -------- (Thousands of Dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net income ............................................................. $ 38,140 $ 5,213 Items not requiring cash: Depreciation ......................................................... 2,205 1,287 Amortization ......................................................... 4,980 2,692 Deferred income taxes ................................................ 22,852 984 Gain on sale of radio station ........................................ (49,223) -- Decrease in accounts receivable ........................................ (26) (618) Increase in accounts payable and accrued expenses ...................... 50 332 Decrease in taxes payable .............................................. (5,455) (112) Increase (decrease) of UAP liability ................................... (646) 459 Other, net ............................................................. (466) (1,167) --------- -------- Net cash provided by operating activities ....................... 12,411 9,070 --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ................................................... (4,171) (1,153) Acquisitions, net of cash acquired ..................................... (283,517) (13,188) Increase in other long-term assets ..................................... (17,546) (842) Net proceeds from sale of radio station ................................ 19,741 -- Other, net ............................................................. 237 (6) --------- -------- Net cash used in investing activities ........................... (285,256) (15,189) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in amounts due to CEI ......................................... 56,915 12,832 Borrowings of debt ..................................................... 214,994 -- Dividends paid ......................................................... -- (4,464) Increase (decrease) in book overdrafts ................................. 1,891 (2,274) --------- -------- Net cash provided by financing activities ....................... 273,800 6,094 --------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................... 955 (25) CASH AND CASH EQUIVALENTS (INCLUDING RESTRICTED CASH) AT BEGINNING OF PERIOD ............................................................... 10,595 1,691 --------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................ $ 11,550 $ 1,666 ========= ========
See notes to consolidated financial statements. 6 7 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 1997 1. BASIS OF PRESENTATION AND OTHER INFORMATION Cox Radio, Inc. ("Cox Radio" or the "Company"), a majority-owned subsidiary of Cox Enterprises, Inc. i("CEI"), is a leading national radio broadcasting company whose business is devoted exclusively to operating, acquiring and developing radio stations located throughout the United States. 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 interim financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 1996 and notes thereto contained in Cox Radio's Annual Report filed with the Securities and Exchange Commission on Form 10-K (Commission File No. 1-12187). The results of operations for the six months ended June 30, 1997 are not necessarily indicative of the results to be expected for the year ending December 31, 1997 or any interim period. 2. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES In March 1997, the Company exchanged WCKG-FM and WYSY-FM in Chicago for WHOO-AM, WHTQ-FM and WMMO-FM in Orlando (the "Orlando Acquisition"). The Orlando Acquisition resulted in a pre-tax gain of approximately $49 million. In addition to receiving the three Orlando stations, Cox Radio also received cash proceeds of approximately $20 million. Prior to the NewCity Acquisition (as defined below), the Orlando stations were operated by NewCity Communications, Inc. ("NewCity") since July 1996 under a local marketing agreement ("LMA"). In March 1997, the Company acquired WFNS-AM in Tampa for an aggregate consideration of $1.5 million (the "Tampa Acquisition"). The Company had been operating this station pursuant to an LMA or a joint sales agreement ("JSA") since June 1995. In April 1997, Cox Radio completed its acquisition of the license and certain assets of KRTO-FM in Los Angeles for $19 million in cash (the "Los Angeles Acquisition"). On April 1, 1997, the Company, through the merger of its wholly owned subsidiary New Cox Radio II, Inc. with and into NewCity Communications, Inc. ("NewCity"), with NewCity as the surviving corporation, acquired all of the issued and outstanding capital stock of NewCity (the "NewCity Acquisition"). Cox Radio purchased the stock of NewCity for an aggregate consideration of approximately $253 million, including approximately $87 million in assumption of NewCity indebtedness and approximately $3 million in working capital adjustments. To consummate the NewCity Acquisition, the Company utilized approximately $56 million of amounts due from CEI and borrowed approximately $110 million pursuant to the Company's $300 million, five-year, senior, unsecured revolving credit facility with certain banks, including Texas Commerce Bank National Association, as Administrative Agent. On April 2, 1997, NewCity was merged with and into the Company, with the Company as the surviving corporation. See Exhibit 21 for the list of subsidiaries hereof. The NewCity Acquisition was recorded effective April 1, 1997, using the purchase method of accounting, whereby the allocable share of the NewCity purchase price was pushed down to the assets 7 8 acquired and liabilities assumed based on their fair values at the date of acquisition as follows (in thousands): Net working capital ............................................... 9,427 Plant and equipment ............................................... 9,310 Goodwill/FCC broadcast licenses ................................... 307,094 Deferred taxes .................................................... (70,530) ========= Total cost of acquisition including assumed liabilities ........... 255,301 =========
The above amounts are subject to purchase accounting adjustments which will be made in subsequent periods. In May 1997, the Company agreed to acquire WBHJ-FM and WBHK-FM in Bimingham, Alabama (the "Birmingham Acquisition I") for an aggregate consideration of $17 million, consisting of $5 million paid as an option to purchase and $12 million issued to the seller as a Station Investment Note Receivable. See further discussion at Note 4. On August 1, 1997, the Company began operating WBHJ-FM and WBHK-FM under a local marketing agreement ("LMA"). The Company expects to consummate this acquisition during the second half of 1998. In May 1997, the Company agreed to acquire WENN-FM and WAGG-AM, also in Birmingham, Alabama for consideration of $15 million (the "Birmingham Acquisition II"). In July, 1997, the Company assigned its right to purchase WENN-FM for consideration of $14.5 million to a third party (the "Birmingham Disposition"). The current owner has consented to this assignment. The Company expects to consummate these transactions during the third quarter of 1997 pending regulatory approvals. The Birmingham Acquisition I, the Birmingham Acquisition II and the Birmingham Disposition are collectively referred to herein as the "Birmingham Transactions". In June 1997, the Company agreed to acquire KISS-FM, KSMG-FM and KLUP-AM in San Antonio, Texas for an aggregate consideration of $30 million plus certain non-compete agreements (the "San Antonio Acquisition"). The Company expects to close on this transaction during the fourth quarter of 1997 pending government and regulatory approvals. The following unaudited pro forma summary of operations presents the consolidated results of operations as if the Cox Radio Consolidation (as discussed on the Company's Annual Report on Form 10-K for the period ended December 31, 1996), the Company's Initial Public Offering; the Orlando Acquisition, the NewCity Acquisition, the Birmingham Transactions and the San Antonio Acquisition had occurred at the beginning of the periods presented and does not purport to be indicative of what would have occurred had these transactions been made as of those dates or of results which may occur in the future. No pro forma adjustments have been made for the Tampa Acquisition and the Los Angeles Acquisition due to immateriality.
THREE MONTHS ENDED SIX MONTHS ------------------- ---------- JUNE 30, ENDED JUNE 30, -------- -------------- 1997 1996 1997 1996 ------- ------- -------- ------- (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) Net revenues ................................... $58,078 $52,062 $105,092 $94,560 Corporate general and administrative expenses .. 2,028 1,543 3,926 2,737 Depreciation and amortization .................. 5,514 4,691 10,480 9,349 Operating income ............................... 11,930 9,343 18,133 14,661 Net income ..................................... 3,987 2,614 6,795 2,917 ------- ------- -------- ------- Earnings per common share ...................... $ .14 $ .09 $ .24 $ .10 ------- ------- -------- ------- Pro forma shares outstanding ................... 28,327 28,327 28,327 28,327 ======= ======= ======== =======
8 9 3. COMMITMENTS AND CONTINGENCIES On March 7, 1997, Cox Radio entered into a $300 million, five-year, senior, unsecured revolving credit facility (the "Credit Agreement") with certain guarantors and banks, including Texas Commerce Bank National Association, as Administrative Agent, Nationsbank of Texas, N.A., as Syndications Agent, and Citibank, N.A., as Documentation Agent. The loan proceeds may be used to (i) finance the payment of the consideration payable in the Merger, (ii) repay certain secured debt of NewCity and (iii) finance (A) the repayment or repurchase of certain unsecured debt of NewCity, (B) additional acquisitions and (C) other corporate purposes. The Credit Agreement restricts the payment of dividends, prohibits certain mergers, consolidations or dispositions of assets and establishes limitations on, among other things, additional indebtedness and transactions with affiliates. Cox Radio borrowed approximately $110 million under the Credit Agreement to consummate the NewCity Acquisition. In connection with the NewCity Acquisition and the merger of NewCity with and into the Company, as described in Note 2, the Company succeeded to NewCity's obligations as the issuer of $75 million principal amount of 11-3/8% Senior Subordinated Notes due 2003 (the "Notes"). On April 3, 1997, the Company commenced a tender offer for all of the outstanding Notes (the "Tender Offer"). In conjunction with the Tender Offer, the Company also solicited consents (the "Consent Solicitation") to amend the Indenture under which the Notes were issued (the "Indenture"), including the elimination of substantially all of the restrictive covenants contained in the Indenture (collectively, the "Amendments"). The Tender Offer and Consent Solicitation expired on April 30, 1997 (the "Expiration Date"). As of the Expiration Date, holders of approximately $74.6 million principal amount of Notes tendered their Notes and gave their consents The Tender Offer price and consent payment for each $1,000 principal amount of Notes subject to the Tender Offer and Consent Solicitation was $1,100.00, plus accrued and unpaid interest until May 2, 1997 (the "Payment Date"). Holders of Notes who consented to the Amendments at or prior to Midnight, New York City time, on April 17,1997 received the total consideration referred to in the previous sentence on the Payment Date; holders of Notes who did not consent to the Amendments at or prior to such time received $1,097.61 for each $1,000 principal amount of Notes validly tendered. The aggregate amount paid by the Company to holders of Notes in connection with the Tender Offer and Consent Solicitation was $82.1 million, which was paid on May 2, 1997 (the "Payment Date"). The Company obtained the funds necessary to make such payments from borrowings under the Credit Agreement. At June 30, 1997, the Company had approximately $222 million of outstanding indebtedness including amounts due to CEI, and had approximately $85 million available under the Credit Agreement. 4. STATION INVESTMENT NOTE RECEIVABLE In connection with the Birmingham Acquisition I discussed in Note 2, the Company has loaned $12 million to an entity which owns radio stations the Company has agreed to purchase. This Station Investment Note Receivable has an interest rate of 8.5% and is collateralized by substantially all of the assets of WBHJ-FM and WBHK-FM. 9 10 5. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In February 1997, SFAS No. 128, "Earnings per Share," was issued. This statement establishes standards for computing and presenting earnings per share (EPS). It replaces the presentation of primary EPS with a presentation of basic EPS. It also requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is computed similarly to fully diluted EPS pursuant to APB Opinion No. 15, "Earnings per Share," which is superseded by this Statement. This statement requires restatement of all prior-period EPS data presented. Upon adoption of this Statement in December 1997, the EPS amounts presented will not be materially different than those previously presented in accordance with Opinion 15. 10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF COX RADIO The following discussion should be read in conjunction with the accompanying historical Consolidated Statements of Income for the three and six month periods ended June 30, 1997 and 1996. GENERAL The performance of a radio station group, such as the Company, is customarily measured by its ability to generate Broadcast Cash Flow and EBITDA. Broadcast Cash Flow is defined as net revenues less station operating expenses. EBITDA is defined as operating income plus depreciation and amortization. Although Broadcast Cash Flow and EBITDA are not recognized under generally accepted accounting principles ("GAAP"), they are accepted by the broadcasting industry as generally recognized measures of performance and are used by analysts who report publicly on the condition and performance of broadcasting companies. For the foregoing reasons, the Company believes that these measures will be useful to investors. However, investors should not consider Broadcast Cash Flow or EBITDA to be an alternative to operating income as determined in accordance with GAAP, an alternative to cash flows from operating activities (as a measure of liquidity) or an indicator of the Company's performance under GAAP. The primary source of the Company's revenues is the sale of local, national and network advertising. Most of the Company's revenue is generated from local advertising which is sold by each station's sales staff. Historically, approximately 76% and 24% of the Company's gross revenues were generated from local and national advertising, respectively. The Company's most significant station operating expenses are employees' salaries and benefits, commissions, programming expenses and advertising and promotional expenditures. The Company's revenues vary throughout the year. As is typical in the radio broadcasting industry, the Company's first calendar quarter generally produces the lowest revenues for the year, and the fourth calendar quarter generally produces the highest revenues for the year. The Company's operating results in any period may be affected by the incurrence of advertising and promotional expenses that do not necessarily produce commensurate revenues until the impact of the advertising and promotion is realized in future periods. ACQUISITIONS AND DISPOSITIONS During the past several years, the Company has actively managed its portfolio of radio stations through selected acquisitions, dispositions and swaps, as well as the use of local marketing agreements ("LMA's") and joint sales agreements ("JSA's"). Specific transactions entered into by the Company during the past three months are discussed below. In March 1997, the Company exchanged WCKG-FM and WYSY-FM in Chicago for WHOO-AM, WHTQ-FM and WMMO-FM in Orlando (the "Orlando Acquisition"). The Orlando Acquisition resulted in a pre-tax gain of approximately $49 million. In addition to receiving the three Orlando stations, Cox Radio also received cash proceeds of approximately $20 million. Prior to the NewCity Acquisition (as defined below), the Orlando stations were operated by NewCity Communications, Inc. ("NewCity") since July 1996 under a local marketing agreement ("LMA"). In March 1997, the Company acquired WFNS-AM in Tampa for an aggregate consideration of $1.5 million (the "Tampa Acquisition"). The Company had been operating this station pursuant to an LMA or a JSA since June 1995. 11 12 In April 1997, Cox Radio completed its acquisition of the license and certain assets of KRTO-FM in Los Angeles for $19 million in cash (the "Los Angeles Acquisition"). On April 1, 1997, the Company, through the merger of its wholly owned subsidiary New Cox Radio II, Inc. with and into NewCity Communications, Inc. (NewCity), with NewCity as the surviving corporation, acquired all of the issued and outstanding capital stock of NewCity (the "NewCity Acquisition"). Cox Radio purchased the stock of NewCity for an aggregate consideration of approximately $253 million, including approximately $87 million in assumption of NewCity indebtedness and approximately $3 million in working capital adjustments. To consummate the NewCity Acquisition, the Company utilized approximately $56 million of amounts due from CEI and borrowed approximately $110 million pursuant to the Company's $300 million, five-year, senior, unsecured revolving credit facility with certain banks, including Texas Commerce Bank National Association, as Administrative Agent. On April 2, 1997, NewCity was merged with and into the Company, with the Company as the surviving corporation. See Exhibit 21 for the list of subsidiaries hereof. In May 1997, the Company agreed to acquire WBHJ-FM and WBHK-FM in Bimingham, Alabama (the "Birmingham Acquisition I") for an aggregate consideration of $17 million, consisting of $5 million paid as an option to purchase and $12 million issued to the seller as a Station Investment Note Receivable. See further discussions at Note 4. On August 1, 1997, the Company began operating WBHJ-FM and WBHK-FM under an LMA. The Company expects to consummate this acquisition during the second half of 1998. In May 1997, the Company agreed to acquire WENN-FM and WAGG-AM, also in Birmingham, Alabama for consideration of $15 million (the "Birmingham Acquisition II"). In July, 1997, the Company assigned its right to purchase WENN-FM for consideration of $14.5 million to a third party (the "Birmingham Disposition"). The current owner has consented to this assignment. The Company expects to consummate these transactions during the third quarter of 1997 pending regulatory approvals. In June 1997, the Company agreed to acquire KISS-FM, KSMG-FM and KLUP-AM in San Antonio, Texas for an aggregate consideration of $30 million plus certain non-compete agreements. The Company expects to close on this transaction during the fourth quarter of 1997 pending government and regulatory approvals. RESULTS OF OPERATIONS Three months ended June 30, 1997 compared to three months ended June 30, 1996 Net Revenues. Net revenues for the second quarter of 1997 increased $17.6 million to $54.3 million, a 47.9% increase over the second quarter of 1996. This increase was primarily attributable to the NewCity Acquisition which contributed approximately $17.7 million of net revenues during the second quarter of 1997. Substantial increases in net revenues at the stations in Atlanta, Los Angeles and Tampa offset approximately $4.9 million of lost revenue due to the sale of WCKG-FM and WYSY-FM in Chicago and WIOD-AM in Miami during July and December of 1996, respectively. Station Operating Expenses. Station operating expenses increased $10.5 million to $36.0 million, an increase of 41.2% from the second quarter of 1996. The increase was primarily attributable to the NewCity Acquisition which contributed approximately $12.6 million but was offset somewhat by the disposal of the operations of the Chicago stations and WIOD-AM in Miami during July and December of 1996, respectively. 12 13 Broadcast Cash Flow. Broadcast cash flow increased $7.1 million to $18.3 million, a 63.4% increase over the second quarter of 1996 for the reasons discussed above. Corporate general and administrative expenses. Corporate general and administrative expenses increased $.8 million to $2.0 million primarily due to additional costs incurred as a result of the NewCity Acquisition and as a result of the Company being publicly-held during the second quarter of 1997. Operating Income. Operating income for the second quarter of 1997 increased $3.2 million to $11.1 million, an increase of 39.5% over the second quarter of 1996 for the reasons discussed above. Interest income/expense. Interest expense during the second quarter of 1997 totaled $3.6 million as compared to $1.4 million during the second quarter of the prior year as a result of borrowings incurred to complete the NewCity Acquisition and the Birmingham Acquisition I. Net Income. Net income increased $.5 million to $3.9 million, a 15.7% increase over the first quarter of 1996 for the reasons discussed above. Six months ended June 30, 1997 compared to six months ended June 30, 1996 Net Revenues. Net revenues for the six months ended June 30, 1997 increased $17.2 million to $83.5 million, a 25.9% increase over the comparable period of 1996. This increase was primarily attributable to the NewCity Acquisition as discussed above and substantial percentage increases in net revenues at the stations in Atlanta, Los Angeles, Tampa and Dayton offset somewhat by the disposal of the operations of WCKG-FM/WYSY-FM in Chicago and WIOD-AM in Miami in July and December 1996, respectively. Station Operating Expenses. Station operating expenses for the six months ended June 30, 1997 increased $8.3 million to $55.6 million, an increase of 17.6% over the comparable period of 1996. The increase was attributable to NewCity Acquisition offset somewhat by the disposal of the operations of the Chicago stations and WIOD-AM in Miami during July and December of 1996, respectively. Additionally, substantial reductions in station operating expenses were realized at the Tampa station group as a result of efforts to control costs. Broadcast Cash Flow. Broadcast cash flow for the six months ended June 30, 1997 increased $8.9 million to $27.9 million, a 46.6% increase over the comparable period of 1996 for the reasons discussed above. Corporate general and administrative expenses. Corporate general and administrative expenses for the six months ended June 30, 1997 increased $1.1 million to $3.5 million primarily due to additional costs incurred as a result of the NewCity Acquisition and as a result of the Company being publicly-held during the six months of 1997. Operating Income. Operating income for the six months ended June 30, 1997 increased $4.5 million to $17.2 million, an increase of 35.7% over the comparable period of 1996 for the reasons discussed above. Interest income/expense. Interest expense during the six months ended June 30, 1997 totaled $3.6 million as compared to $2.9 million during the comparable period of 1996, primarily as a result borrowings incurred to complete the NewCity Acquisition and the Birmingham Acquisition I. Net Income. Net income increased $32.9 million over the prior period to $38.1 million for the reasons discussed above and as a result of an after-tax gain of approximately $29.3 million on the sale of WCKG-FM and WYSY-FM in Chicago during March 1997. 13 14 LIQUIDITY AND CAPITAL RESOURCES The Company's primary source of liquidity is cash provided by operations. For the six months ended June 30, 1997, cash from operations increased $3.3 million to $12.4 million, a 36.8% increase primarily attributable to an increase in net income. Historically, cash requirements have been funded by Cox Radio's operating activities and, as needed, through intercompany advances from CEI under a revolving credit facility with CEI (the "New CEI Credit Facility"). Borrowings under the New CEI Credit Facility accrue interest at CEI's commercial paper rate plus .75%. CEI 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 (the "Credit Agreement") with certain guarantors and banks, including Texas Commerce Bank National Association, as Administrative Agent, Nationsbank of Texas, N.A., as Syndications Agent, and Citibank, N.A., as Documentation Agent. The loan proceeds may be used to (i) finance the payment of the consideration payable in the Merger, (ii) repay certain secured debt of NewCity and (iii) finance (A) the repayment or repurchase of certain unsecured debt of NewCity, (B) additional acquisitions and (C) other corporate purposes. The Credit Agreement restricts the payment of dividends, prohibits certain mergers, consolidations or dispositions of assets and establishes limitations on, among other things, additional indebtedness and transactions with affiliates. Cox Radio borrowed approximately $110 million under the Credit Agreement to consummate the NewCity Acquisition. Upon consummation of the Cox Radio Merger, Cox Radio assumed certain indebtedness of NewCity, including NewCity's obligations in respect of the Notes and pursuant to the Indenture. The Notes were general unsecured obligations of Cox Radio and are subordinated to all existing and future senior indebtedness of Cox Radio. On April 3, 1997, the Company commenced a tender offer for all of the outstanding Notes (the "Tender Offer"). In conjunction with the Tender Offer, the Company also solicited consents (the "Consent Solicitation") to amend the Indenture under which the Notes were issued (the "Indenture"), including the elimination of substantially all of the restrictive covenants contained in the Indenture (collectively, the "Amendments"). The Tender Offer and Consent Solicitation expired on April 30, 1997 (the "Expiration Date"). As of the Expiration Date, holders of approximately $74.6 million principal amount of Notes tendered their Notes and gave their consents The Tender Offer price and consent payment for each $1,000 principal amount of Notes subject to the Tender Offer and Consent Solicitation was $1,100.00, plus accrued and unpaid interest until May 2, 1997 (the "Payment Date"). Holders of Notes who consented to the Amendments at or prior to Midnight, New York City time, on April 17,1997 received the total consideration referred to in the previous sentence on the Payment Date; holders of Notes who did not consent to the Amendments at or prior to such time received $1,097.61 for each $1,000 principal amount of Notes validly tendered. The aggregate amount paid by the Company to holders of Notes in connection with the Tender Offer and Consent Solicitation was $82.1 million, which was paid on May 2, 1997 (the "Payment Date"). The Company obtained the funds necessary to make such payments from borrowings under the Credit Agreement At June 30, 1997, the Company had approximately $222 million of outstanding indebtedness including amounts due to CEI, and had approximately $85 million available under the Credit Agreement. Future cash requirements are expected to include capital expenditures, principal and interest payments on indebtedness and funds for acquisitions. The Company expects its operations to generate sufficient cash to meet its capital expenditures and debt service requirements. Additional cash requirements, including funds for pending or other acquisitions, will be funded by various sources, including the proceeds from bank financing and, if or when appropriate, other issuances of Company securities. 14 15 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its Annual Meeting of Stockholders on May 9, 1997. Two matters were voted upon at the meeting: (a) the election of a Board of Directors of six members to serve until the 1998 Annual Meeting or until their successors are duly elected and qualified; and (b) ratification of the appointment by the Board of Directors of Deloitte & Touche, LLP, independent certified public accountants, as the Company's independent auditors for the fiscal year ending December 31, 1997. The following directors were elected and they received the votes indicated:
Nominee Votes in Favor Votes Withheld ------- -------------- -------------- David E. Easterly 203,185,660 139,200 Ernest D. Fears, Jr. 203,187,760 137,100 Paul M. Hughes 203,187,760 137,100 James C. Kennedy 203,185,660 139,200 Robert F. Neil 203,185,660 139,200 Nicholas D. Trigony 203,185,560 139,300
Consistent with the Company's disclosure in its proxy statement, immediately following the 1997 Annual Meeting of Stockholders, the Company's Board of Directors amended the Company's bylaws to expand the number of directors to seven and elected Richard A. Ferguson, former President and Chief Executive Officer of NewCity Communications, Inc., to fill the vacancy. Ratification of Deloitte & Touche, LLP, as independent auditors for the fiscal year ending December 31, 1997, was approved with 203,298,735 votes in favor, 700 votes opposed to, and 25,425 abstentions. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Listed below are the exhibits which are filed as part of this Report (according to the number assigned to them in Item 601 of Regulation S-K):
EXHIBIT ------- NUMBER DESCRIPTION ------ ----------- 2.1 Agreement and Plan of Merger, dated as of July 1, 1996, by and among Cox Radio, Inc., New Cox Radio II, Inc., NewCity Communications, Inc. and certain stockholders of NewCity Communications, Inc. (Incorporated by reference to the corresponding exhibit of Cox Radio's Registration Statement on Form S-1 (Commission File No. 333-08737))* 2.2 Guaranty by Cox Broadcasting, Inc., dated as of July 1, 1996, in favor of NewCity Communications, Inc. (Incorporated by reference to the corresponding exhibit of Cox Radio's Registration Statement on Form S-1 (Commission File No. 333-08737)) 3.1 Amended and Restated Certificate of Incorporation of Cox Radio, Inc. (Incorporated by reference to the corresponding exhibit of Cox Radio's Registration Statement on Form S-1 (Commission File No. 333-08737)) 3.2 Amended and Restated Bylaws of Cox Radio, Inc. (Incorporated by reference
15 16 to the corresponding exhibit of Cox Radio's Registration Statement on Form S-1 (Commission File No. 333-08737)) 4.1 Indenture between NewCity Communications, Inc. and Shawmut Bank Connecticut, National Association, as Trustee, dated as of November 2, 1993, related to the 11 3/8% Notes due 2003 of NewCity Communications, Inc. (Incorporated by reference to the corresponding exhibit of Cox Radio's Registration Statement on Form S-1 (Commission File No. 333-08737))* 4.2 First Supplemental Indenture between NewCity Communications, Inc. and Shawmut Bank Connecticut, National Association, as Trustee, dated as of September 16, 1994, relating to the 11 3/8% Notes due 2003 of NewCity Communications, Inc. (Incorporated by reference to the corresponding exhibit of Cox Radio's Registration Statement on Form S-1 (Commission File No. 333-08737)) 4.3 Specimen of Class A Common Stock Certificate. (Incorporated by reference to the corresponding exhibit of Cox Radio's Registration Statement on Form S-1 (Commission File No. 333-08737)) 10.1 Credit Agreement, dated as of March 7, 1997, by and among Cox Radio, Inc., Texas Commerce Bank National Association, Nationsbank of Texas, N.A. and Citibank, N.A., individually and as agents, and the other banks signatory thereto. (Incorporated by reference to the corresponding exhibit of Cox Radio's Annual Report on Form 10-K (Commission File No. 1-12187))* 10.2 New CEI Credit Facility. (Incorporated by reference to the corresponding exhibit of Cox Radio's Registration Statement on Form S-1 (Commission File No. 333-08737)) 10.3 Cox Radio, Inc. Long-Term Incentive Plan. (Incorporated by reference to the corresponding exhibit of Cox Radio's Registration Statement on Form S-1 (Commission File No. 333-08737)) 10.4 Cox Radio, Inc. Employee Stock Purchase Plan. (Incorporated by reference to the corresponding exhibit of Cox Radio's Registration Statement on Form S-1 (Commission File No. 333-08737)) 10.5 Cox Radio, Inc. Restricted Stock Plan for Non-Employee Directors (Incorporated by reference to the corresponding exhibit of Cox Radio's Registration Statement on Form S-1 (Commission File No. 333-08737)) 10.6 Tax Allocation and Indemnification Agreement dated as of October 2, 1996, by and between Cox Enterprises, Inc. and Cox Radio, Inc. (Incorporated by reference to the corresponding exhibit of Cox Radio's Annual Report on Form 10-K (Commission File No. 1-12187)) 21 Subsidiaries of the Registrant 27.1 Financial Data Schedule (for SEC use only)
* Schedules and Exhibits intentionally omitted. (b) Reports on Form 8-K filed during the quarter ended June 30, 1997: The Company filed a report on Form 8-K on April 14, 1997 related to the Company's tender offer for NewCity's public indebtedness on April 1, 1997. 16 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COX RADIO, INC. August 11, 1997 /s/ Maritza C. Pichon -------------------------------- Maritza C. Pichon Chief Financial Officer (Principal Financial Officer and duly authorized officer) 17 EX-21 2 SUBSIDIARIES OF REGISRTANT 1 EXHIBIT 21 SUBSIDIARIES OF COX RADIO, INC. Cox Kentucky, Inc. Cox Louisville, L.L.C. WHIO, Inc. WSB, Inc. EX-27.1 3 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 1 11,550 0 46,318 (1,671) 0 64,303 77,988 (37,515) 620,846 19,749 215,000 0 0 28,328 245,847 620,846 0 83,504 0 55,643 10,635 0 3,571 64,086 25,946 38,140 0 0 0 38,140 1.35 0
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