-----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, NS0pyCEeFb7f4z2waW42SB+wYvAQvTIUISFEWAZ483yttNrkrxWFTtpERGCVqDAj uMEWYxAk+eHIRHW9dpgLbQ== 0000950144-99-012937.txt : 19991115 0000950144-99-012937.hdr.sgml : 19991115 ACCESSION NUMBER: 0000950144-99-012937 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 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: SEC FILE NUMBER: 001-12187 FILM NUMBER: 99750106 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 SEPTEMBER 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________ COMMISSION FILE NUMBER 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 required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] --------------- Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. There were 9,308,534 shares of Class A Common Stock outstanding as of October 31, 1999. There were 19,577,672 shares of Class B Common Stock outstanding as of October 31, 1999. 2 COX RADIO, INC. FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.................... 19 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .......................... 20 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............................................. 20 SIGNATURES................................................................................ 22
2 3 PART 1 - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS COX RADIO, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, 1999 1998 ------------- ------------ (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) ASSETS Current Assets: Cash and cash equivalents ........................................ $ 7,815 $ 6,479 Accounts receivable, less allowance for doubtful accounts of $2,919 and $2,862, respectively ............................ 67,454 58,190 Prepaid expenses and other current assets ........................ 3,984 3,430 --------- -------- Total current assets .......................................... 79,253 68,099 Plant and equipment, net ........................................... 55,581 51,886 Intangible assets, net ............................................. 815,229 590,686 Amounts due from Cox Enterprises, Inc. ............................. -- 30,292 Station investment notes receivable ................................ 850 7,250 Other assets ....................................................... 11,197 4,899 --------- -------- Total assets .................................................. $ 962,110 $753,112 ========= ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued expenses ............................ $ 20,454 $ 19,245 Accrued salaries and wages ....................................... 5,803 4,570 Accrued interest ................................................. 4,754 1,633 Income taxes payable ............................................. 8,323 2,686 Other current liabilities ........................................ 1,228 1,018 --------- -------- Total current liabilities ..................................... 40,562 29,152 Notes payable ...................................................... 420,092 300,235 Deferred income taxes .............................................. 127,751 110,693 Amounts due to Cox Enterprises, Inc. ............................... 7,604 -- --------- -------- Total liabilities ............................................. 596,009 440,080 --------- -------- Commitments and contingencies (Note 3) Shareholders' Equity: Preferred stock, $1.00 par value: 5,000,000 shares authorized, None outstanding .............................................. -- -- Class A common stock, $1.00 par value; 70,000,000 shares Authorized; 9,257,439 and 8,971,955 shares outstanding at September 30, 1999 and December 31, 1998, respectively ........ 9,257 8,972 Class B common stock, $1.00 par value; 45,000,000 shares Authorized; 19,577,672 shares outstanding at September 30, 1999 and December 31, 1998 ......................................... 19,578 19,578 Additional paid-in capital ....................................... 261,084 253,207 Retained earnings ................................................ 77,833 31,275 Class A common stock held in treasury (39,952 shares at cost) .... (1,651) -- --------- -------- Total shareholders' equity .................................... 366,101 313,032 --------- -------- Total liabilities and shareholders' equity .................... $ 962,110 $753,112 ========= ========
See notes to consolidated financial statements. 3 4 COX RADIO, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- ----------------------------- 1999 1998 1999 1998 -------- -------- --------- --------- (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) NET REVENUES: Local ............................................ $ 57,244 $ 50,233 $ 160,635 $ 139,837 National ......................................... 19,814 17,541 52,064 47,441 Other ............................................ 2,696 1,381 6,013 3,098 -------- -------- --------- --------- Total revenues ................................. 79,754 69,155 218,712 190,376 COSTS AND EXPENSES: Operating ........................................ 18,422 17,367 51,043 46,906 Selling, general and administrative .............. 28,058 25,068 84,005 75,952 Corporate general and administrative ............. 2,673 1,992 7,268 5,924 Depreciation and amortization .................... 7,544 6,144 20,758 17,098 -------- -------- --------- --------- OPERATING INCOME .................................... 23,057 18,584 55,638 44,496 OTHER INCOME (EXPENSE): Interest income ..................................... -- 164 466 375 Interest expense .................................... (5,831) (4,726) (16,288) (12,604) Gain on sale of radio stations ...................... 719 -- 40,521 -- Other - net ......................................... (135) (153) (266) (303) -------- -------- --------- --------- INCOME BEFORE INCOME TAXES .......................... 17,810 13,869 80,071 31,964 Income taxes ........................................ 7,750 6,849 33,513 15,824 -------- -------- --------- --------- NET INCOME .......................................... $ 10,060 $ 7,020 $ 46,558 $ 16,140 ======== ======== ========= ========= Basic net income per common share ................... $ .35 $ .25 $ 1.63 $ .57 ======== ======== ========= ========= Diluted net income per common share ................. $ .35 $ .24 $ 1.62 $ .56 ======== ======== ========= ========= Weighted average basic common shares outstanding ......................................... 28,758 28,462 28,649 28,446 ======== ======== ========= ========= Weighted average diluted common shares outstanding ......................................... 28,920 28,890 28,787 28,882 ======== ======== ========= =========
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 RETAINED TREASURY SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL ------ ------ ------ ------- ---------- -------- -------- --------- (AMOUNTS IN THOUSANDS) BALANCE AT DECEMBER 31, 1998 ................... 8,972 $8,972 19,578 $19,578 $253,207 $31,275 -- $ 313,032 Net income .................................... -- -- -- -- -- 46,558 -- 46,558 Issuance of Class A common stock related to incentive plans (including tax benefit on stock options exercised) ......... 285 285 -- -- 7,877 -- -- 8,162 Repurchase of Class A common stock ............ -- -- -- -- -- -- $(1,651) (1,651) ----- ------ ------ ------- -------- ------- ------- --------- BALANCE AT SEPTEMBER 30, 1999 .................. 9,257 $9,257 19,578 $19,578 $261,084 $77,833 $(1,651) $ 366,101 ===== ====== ====== ======= ======== ======= ======= =========
See notes to consolidated financial statements. 5 6 COX RADIO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, ---------------------- 1999 1998 --------- --------- (AMOUNTS IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income ................................................................. $ 46,558 $ 16,140 Items not requiring cash: Depreciation ............................................................. 5,173 4,224 Amortization ............................................................. 15,585 12,874 Deferred income taxes .................................................... 17,741 3,378 Gain on sale of radio stations ........................................... (40,521) -- Increase in accounts receivable ............................................ (9,264) (5,995) Increase in accounts payable and accrued expenses .......................... 1,381 2,606 Increase in accrued salaries and wages ..................................... 1,233 -- Increase in accrued interest ............................................... 3,121 3,055 Increase in taxes payable .................................................. 8,079 1,376 Other, net ................................................................. (1,287) (983) --------- --------- Net cash provided by operating activities ........................... 47,799 36,675 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ....................................................... (4,901) (4,817) Acquisitions, net of cash acquired ......................................... (208,776) (69,182) Decrease in station investment notes receivable ............................ 6,400 -- Increase in other long-term assets ......................................... (6,652) (9,639) Proceeds from the sale of businesses ....................................... 5,868 -- Increase in amounts due to (from) CEI ...................................... 37,361 (18,044) Other, net ................................................................. -- 29 --------- --------- Net cash used in investing activities ............................... (170,700) (101,653) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings of debt ..................................................... 119,857 64,670 Proceeds from stock options exercised ...................................... 5,720 1,216 Repurchase of Class A common stock ......................................... (1,651) -- Increase in book overdrafts ................................................ 311 327 --------- --------- Net cash provided by financing activities .......................... 124,237 66,213 --------- --------- Net increase in cash and cash equivalents .................................. 1,336 1,235 Cash and cash equivalents at beginning of period ........................... 6,479 6,218 --------- --------- Cash and cash equivalents at end of period ................................. $ 7,815 $ 7,453 ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest ............................................................. $ 13,167 $ 9,549 Income taxes ......................................................... $ 7,697 $ 10,945 SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES: Value of businesses exchanged ........................................ $ 55,000 $ --
See notes to consolidated financial statements. 6 7 COX RADIO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1999 1. BASIS OF PRESENTATION AND OTHER INFORMATION Cox Radio, Inc. 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, Inc. indirectly owns approximately 68% of the Common Stock 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, 1998 and notes thereto contained in Cox Radio's Annual Report on Form 10-K filed with the Securities and Exchange Commission (Commission File No. 1-12187). The results of operations for the three and nine months ended September 30, 1999 are not necessarily indicative of the results to be expected for the year ending December 31, 1999 or any other interim period. 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 swaps, as well as the use of local marketing agreements, or LMA's, and joint sales agreements, or JSA's. All of the consummated and pending transactions have been or will be accounted for as purchase transactions. Specific transactions entered into or consummated by Cox Radio during the nine months ended September 30, 1999 are discussed below. In January 1999, Cox Radio acquired the assets of radio station WSUN-FM (formerly WLVU-FM) serving the Tampa-St. Petersburg, Florida market in exchange for the assets of WSUN-AM in Tampa-St. Petersburg, Florida and approximately $17 million. Prior to the acquisition, Cox Radio had been operating WSUN-FM pursuant to an LMA since September 1998. In January 1999, Cox Radio entered into an agreement to acquire KRTQ-FM (formerly KTFX-FM) in Tulsa, Oklahoma for $3.5 million. Cox Radio also entered into a Station Investment Note Receivable with the seller for $0.9 million which is collateralized by substantially all the assets of the station. Cox Radio has been operating this station pursuant to an LMA since January 1999. Pending certain regulatory approvals, Cox Radio expects to consummate this acquisition in December 1999. On December 21, 1998 and March 1, 1999, Cox Radio purchased shares of common stock of USA Digital Radio, Inc., a developer of digital radio broadcasting technology, for a total purchase price of $2.5 million. In May 1999, Cox Radio acquired radio stations WVEZ-FM and WSFR-FM and the option to purchase WMHX-FM serving the Louisville, Kentucky market and radio stations WFJO-FM, WHPT-FM and WDUV-FM (formerly WTBT-FM) serving the Tampa-St. Petersburg, Florida market in exchange for the Company's radio stations WYYY-FM, WBBS-FM, WWHT-FM, WHEN-AM and WSYR-AM serving the Syracuse, New York market, plus additional cash consideration of approximately $94 million, resulting in a pre-tax gain of approximately $39.2 million. 7 8 2. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES (CONTINUED) In June 1999, Cox Radio exercised its option to purchase WMHX-FM in Louisville for a purchase price of approximately $2.0 million. Cox Radio consummated the acquisition of WMHX-FM in September 1999. Cox Radio had been operating the station under a JSA or LMA since May 1999. In connection with obtaining regulatory approvals for these transactions, Cox Radio agreed to divest ownership of WRVI-FM and WLSY-FM serving the Louisville, Kentucky market. Such stations were transferred to a trust for the benefit of Cox Radio pending sale to a third party. In May 1999, Cox Radio and the trust entered into an agreement for the sale of WRVI-FM and WLSY-FM for consideration of $5.0 million resulting in a pre-tax gain of approximately $1.6 million. This disposition was consummated in September 1999. In June 1999, Cox Radio disposed of the assets of WPTW-AM in Dayton, Ohio for consideration of $0.1 million. In August 1999, Cox Radio consummated its acquisition of WRLR-FM (formerly WEDA-FM) in Homewood, Alabama serving the Birmingham, Alabama market for a purchase price of approximately $5.5 million and the assumption of debt of approximately $0.2 million. Prior to the acquisition, Cox Radio had been operating this station under an LMA since November 1998. In August 1999, Cox Radio acquired WPYO-FM (formerly WTLN-FM) serving the Orlando, Florida market for consideration of $14.5 million. Cox Radio had been operating the station pursuant to an LMA since January 1999. In a related transaction, Cox Radio disposed of the assets of WTLN-AM, also serving the Orlando, Florida market, for $0.5 million. In August 1999, Cox Radio entered into an agreement to acquire KRTR-FM, KXME-FM, KGMZ-FM and KGMZ-AM in Honolulu, Hawaii for consideration of approximately $16.4 million. Pending certain regulatory approvals, Cox Radio anticipates consummating this transaction during the fourth quarter of 1999. In August 1999, Cox Radio agreed to acquire from AMFM, Inc. WEDR-FM in Miami, Florida; WFOX-FM in Atlanta, Georgia; WFYV-FM, WAPE-FM, WBWL-AM, WKQL-FM, WMXQ-FM and WOKV-AM in Jacksonville, Florida; WEFX-FM, WNLK-AM, WKHL-FM and WSTC-AM in Stamford/Norwalk, Connecticut; and WPLR-FM and local sales rights at WYBC-FM in New Haven, Connecticut in exchange for KFI-AM and KOST-FM in Los Angeles, California plus approximately $3.0 million. In October 1999, Cox Radio began operating these stations pursuant to an LMA. Pending certain regulatory approvals, including obtaining a temporary waiver of the FCC's newspaper-radio cross-ownership rule for the acquisition of WFOX-FM in Atlanta, Cox Radio anticipates consummating this transaction in the first quarter of 2000. In September 1999, Cox Radio disposed of the assets of WGBB-AM serving the Nassau-Suffolk (Long Island), New York market for consideration of $1.7 million. In September 1999, Cox Radio acquired WBTS-FM (formerly WNGC-FM) in Athens, Georgia for consideration of approximately $78 million. In October 1999, Cox Radio entered into an agreement to dispose of the assets of KACE-FM and KRTO-FM in Los Angeles for approximately $75 million. Pending certain regulatory approvals, Cox Radio anticipates consummating this disposition in the fourth quarter of 1999. 8 9 2. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES (CONTINUED) 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, 1998 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.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------------------------- 1999 1998 1999 1998 -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net revenues .................................... $ 82,479 $ 71,260 $226,390 $198,356 Net income ...................................... $ 4,837 $ 2,720 $ 10,750 $ 3,312 ======== ======== ======== ======== Basic pro forma net income per common share ..... $ .17 $ .10 $ .38 $ .12 ======== ======== ======== ======== Diluted pro forma net income per common share ... $ .17 $ .09 $ .37 $ .11 ======== ======== ======== ======== Basic pro forma shares outstanding .............. 28,758 28,462 28,649 28,446 ======== ======== ======== ======== Diluted pro forma shares outstanding ............ 28,920 28,890 28,787 28,882 ======== ======== ======== ========
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 loan proceeds were used to finance the payment of the consideration payable for the acquisition of NewCity Communications, Inc. in April 1997, repay certain secured debt of NewCity Communications and finance certain other acquisitions. The remaining credit availability may be used to finance additional acquisitions and other corporate purposes. The bank credit facility has restrictions on the payment of dividends, certain mergers, consolidations or dispositions of assets and establishes limitations on, among other things, additional indebtedness and transactions with affiliates. At September 30, 1999, Cox Radio had approximately $220 million of outstanding indebtedness under the bank credit facility and had approximately $80 million available under the bank credit facility. The interest rate applied to amounts due under the bank credit facility was 5.78% at September 30, 1999. The borrowings under the bank credit facility bear interest at current market rates and, thus, approximate fair value. 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 notes consist of $100 million principal amount of 6.25% notes due in full in 2003 and $100 million principal amount of 6.375% notes due in full in 2005. Pursuant to the Registration Rights Agreement dated as of May 26, 1998 among Cox Radio, its wholly owned subsidiaries WSB, Inc. and WHIO, Inc. (each a former guarantor of the notes), NationsBanc Montgomery Securities LLC, Chase Securities, Inc., and J.P. Morgan Securities, Inc., on December 14, 1998, Cox Radio consummated an exchange offer pursuant to which Cox Radio exchanged $200 million principal amount of the notes originally sold on May 26, 1998, for an aggregate of $200 million principal amount of notes (the terms and form of which are the same in all material respects as the original notes, except as to restrictions on transfer) which have been registered under the Securities Act of 1933. As a result of the mergers of WSB, Inc. and WHIO, Inc. into Cox Radio, WSB, Inc. and WHIO, Inc. are no longer guarantors of the notes. As a result of the transfer of certain Federal Communications Commission licenses, permits and authorizations held by Cox Radio to CXR Holdings, Inc., a wholly-owned subsidiary of Cox Radio, CXR Holdings became a guarantor of the notes on February 1, 1999. At September 30, 1999, the estimated fair value of these notes is approximately $194.7 million based on quoted market prices. 9 10 3. COMMITMENTS AND CONTINGENCIES (CONTINUED) In September 1997, Cox Radio entered into interest rate swap agreements with certain lenders providing bank financing under the bank credit facility. Pursuant to the interest rate swap agreements, Cox Radio has exchanged its floating rate interest obligations on an aggregate of $100 million in principal amount at an average fixed rate of 6.23% per annum having an average maturity of 6.25 years. The fixing of interest rates for this period reduces Cox Radio's exposure to the uncertainty of floating interest rates. The differential paid or received on the interest rate swap agreements is recognized as an adjustment to interest expense. The counterparties to these interest rate swap agreements are a diverse group of major financial institutions. Cox Radio is exposed to credit loss in the event of nonperformance by these counterparties. However, Cox Radio does not anticipate nonperformance by these counterparties, and no material loss would be expected from their nonperformance. The fair value of the interest rate swap agreements was not recognized in the consolidated financial statements since they are accounted for as hedges. The estimated fair value of the interest rate swap agreements, based on current market rates, approximated a net receivable of $438,000 at September 30, 1999 and a net payable of $4.6 million at December 31, 1998. 4. GUARANTOR FINANCIAL INFORMATION CXR Holdings, a wholly-owned subsidiary of Cox Radio, is the guarantor of Cox Radio's $200 million notes pursuant to a full and unconditional guarantee. 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, 1999 and for the three- and nine-month periods ended September 30, 1999. Comparative condensed financial information as of December 31, 1998 and for the three- and nine-month periods ended September 30, 1998, is presented on a pro forma basis as though CXR Holdings had been formed on January 1, 1998. CXR Holdings 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 the notes on February 1, 1999. Pro forma adjustments consist solely of the recognition of royalty income associated with royalty fees that would have been charged to Cox Radio had CXR Holdings been formed and the corresponding assets transferred on January 1, 1998. All other comparative financial information consists of actual historical balances of Cox Radio as of December 31, 1998 and for the three- and nine-month periods ended September 30, 1998, respectively.
AS OF SEPTEMBER 30, DECEMBER 31, 1999 1998 (ACTUAL) (PRO FORMA) ------------- ------------ (AMOUNTS IN THOUSANDS) ASSETS: Accounts receivable .......................... $ 20,066 $ 25,656 Intangible assets, net ....................... 393,375 176,404 Other assets ................................. 64 -- -------- -------- Total assets ................................. $413,505 $202,060 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY: Due to Cox Enterprises or Cox Radio .......... $ 90,624 Shareholder's equity ......................... 322,881 202,060 -------- -------- Total liabilities and shareholder's equity ... $413,505 $202,060 ======== ========
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1999 1998 1999 1998 (ACTUAL) (PRO FORMA) (ACTUAL) (PRO FORMA) -------- ----------- -------- ----------- (AMOUNTS IN THOUSANDS) Royalty income .................. $ 6,559 $ 6,574 $ 20,081 $ 18,983 Depreciation and amortization ... (1,135) (1,020) (3,387) (2,636) ------- ------- -------- -------- Operating Income ................ $ 5,424 $ 5,554 $ 16,694 $ 16,347 ======= ======= ======== ========
10 11 5. EARNINGS PER COMMON SHARE AND CAPITAL STRUCTURE
THREE MONTHS ENDED NINE MONTHS ENDED SEPT. 30, SEPT. 30, -------------------- -------------------- 1999 1998 1999 1998 -------- -------- -------- -------- (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) NET INCOME .................................................. $10,060 $ 7,020 $ 46,558 $ 16,140 ======== ======== ======== ======== BASIC NET INCOME PER COMMON SHARE Weighted-average common shares outstanding .................. 28,758 28,462 28,649 28,446 ======== ======== ======== ======== Basic net income per common share ........................... $ .35 $ .25 $ 1.63 $ .57 ======== ======== ======== ======== DILUTED NET INCOME PER COMMON SHARE Weighted-average common shares outstanding - basic .......... 28,758 28,462 28,649 28,446 Shares issuable on exercise of dilutive options .......... 584 668 584 668 Shares assumed to be purchased with proceeds from options (432) (395) (450) (388) Shares issuable pursuant to employee stock purchase plan . 78 186 78 186 Shares assumed to be purchased with proceeds from employee stock purchase plan .......................... (68) (31) (74) (30) -------- -------- -------- -------- Shares applicable to diluted net income per common share .... 28,920 28,890 28,787 28,882 ======== ======== ======== ======== Diluted net income per common share ......................... $ .35 $ .24 1.62 $ .56 ======== ======== ======== ========
In January 1999, Cox Radio purchased 39,952 shares of previously restricted Class A common stock for cash consideration of approximately $1.7 million. 11 12 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, 1999 and 1998. This report contains forward-looking statements that are subject to risks and uncertainties. Forward-looking statements include, but may not be limited to, the information regarding future cash requirements of Cox Radio, statements regarding Year 2000 issues (including problems that may arise on the part of third parties), and statements regarding the intent, belief or current expectations of Cox Radio and its management. For such statements, Cox Radio claims the protection of the safe harbor for forward-looking statements contained in Section 21E of the Securities Exchange Act of 1934, as amended. Cox Radio's results could differ materially from those discussed in each forward-looking statement due to various factors which are outside Cox Radio's control, including competition for audience share and advertising revenue from other radio stations, electronic and print media and new media technologies and governmental regulation of the radio broadcasting industry. For a more detailed discussion of these factors and others, see the Risk Factors section of Cox Radio's Annual Report on Form 10-K (Commission File No. 1-12187). GENERAL Cox Radio is a leading national radio broadcast company whose business, which constitutes one reportable segment, is devoted to acquiring, developing and operating radio stations located throughout the United States. Cox Enterprises indirectly owns approximately 68% of the Common Stock of Cox Radio through its wholly-owned subsidiary, Cox Broadcasting, Inc. 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 operating income plus depreciation and amortization and corporate general and administrative expenses. EBITDA is defined as operating income plus depreciation and amortization. After-Tax Cash Flow is defined as net income (loss) before extraordinary items plus depreciation, amortization and deferred tax expense (benefit). Although Broadcast Cash Flow, EBITDA and After-Tax Cash Flow are not recognized under generally accepted accounting principles, or 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, 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 as determined in accordance with GAAP, an alternative to cash flows from operating activities (as a measure of liquidity) or an indicator of Cox Radio's performance under GAAP. 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 gross revenues have been generated from local and national advertising, respectively. Cox Radio's most significant station operating expenses are employees' salaries and benefits, commissions, programming expenses and advertising and promotional expenditures. Cox Radio's revenues vary throughout the year. As is typical in the radio broadcasting industry, Cox Radio's revenues and broadcast cash flows are typically lowest in the first quarter and higher in the second and fourth quarters. Cox Radio's operating results in any period may be affected by the incurrence of advertising and promotional expenses that do not necessarily produce commensurate revenues until the impact of the advertising and promotion is realized in future periods. 12 13 ACQUISITIONS AND DISPOSITIONS During the past several years, Cox Radio has actively managed its portfolio of radio stations through selected acquisitions, dispositions and swaps, as well as the use of LMA's and JSA's. All of the consummated and pending transactions have been or will be accounted for as purchase transactions. Specific transactions entered into or consummated by Cox Radio during the nine months ended September 30, 1999, are discussed below. In January 1999, Cox Radio acquired the assets of radio station WSUN-FM (formerly WLVU-FM) serving the Tampa-St. Petersburg, Florida market in exchange for the assets of WSUN-AM in Tampa-St. Petersburg, Florida and approximately $17 million. Prior to the acquisition, Cox Radio had been operating WSUN-FM pursuant to an LMA since September 1998. In January 1999, Cox Radio entered into an agreement to acquire KRTQ-FM (formerly KTFX-FM) in Tulsa, Oklahoma for $3.5 million. Cox Radio also entered into a Station Investment Note Receivable with the seller for $0.9 million which is collateralized by substantially all the assets of the station. Cox Radio has been operating this station pursuant to an LMA since January 1999. Pending certain regulatory approvals, Cox Radio expects to consummate this acquisition in December 1999. On December 21, 1998 and March 1, 1999, Cox Radio purchased shares of common stock of USA Digital Radio, Inc., a developer of digital radio broadcasting technology, for a total purchase price of $2.5 million. In May 1999, Cox Radio acquired radio stations WVEZ-FM and WSFR-FM and the option to purchase WMHX-FM serving the Louisville, Kentucky market and radio stations WFJO-FM, WHPT-FM and WDUV-FM (formerly WTBT-FM) serving the Tampa-St. Petersburg, Florida market in exchange for the Company's radio stations WYYY-FM, WBBS-FM, WWHT-FM, WHEN-AM and WSYR-AM serving the Syracuse, New York market, plus additional cash consideration of approximately $94 million, resulting in a pre-tax gain of approximately $39.2 million. In June 1999, Cox Radio exercised its option to purchase WMHX-FM in Louisville for a purchase price of approximately $2.0 million. Cox Radio consummated the acquisition of WMHX-FM in September 1999. Cox Radio had been operating the station under a JSA or LMA since May 1999. In connection with obtaining regulatory approvals for these transactions, Cox Radio agreed to divest ownership of WRVI-FM and WLSY-FM serving the Louisville, Kentucky market. Such stations were transferred to a trust for the benefit of Cox Radio pending sale to a third party. In May 1999, Cox Radio and the trust entered into an agreement for the sale of WRVI-FM and WLSY-FM for consideration of $5.0 million resulting in a pre-tax gain of approximately $1.6 million. This disposition was consummated in September 1999. In June 1999, Cox Radio disposed of the assets of WPTW-AM in Dayton, Ohio for consideration of $0.1 million. In August 1999, Cox Radio consummated its acquisition of WRLR-FM (formerly WEDA-FM) in Homewood, Alabama serving the Birmingham, Alabama market for a purchase price of approximately $5.5 million and the assumption of debt of approximately $0.2 million. Prior to the acquisition, Cox Radio had been operating this station under an LMA since November 1998. In August 1999, Cox Radio acquired WPYO-FM (formerly WTLN-FM) serving the Orlando, Florida market for consideration of $14.5 million. Cox Radio had been operating the station pursuant to an LMA since January 1999. In a related transaction, Cox Radio disposed of the assets of WTLN-AM, also serving the Orlando, Florida market, for $0.5 million. In August 1999, Cox Radio entered into an agreement to acquire KRTR-FM, KXME-FM, KGMZ-FM and KGMZ-AM in Honolulu, Hawaii for consideration of approximately $16.4 million. Pending certain regulatory approvals, Cox Radio anticipates consummating this transaction during the fourth quarter of 1999. 13 14 In August 1999, Cox Radio agreed to acquire from AMFM, Inc. WEDR-FM in Miami, Florida; WFOX-FM in Atlanta, Georgia; WFYV-FM, WAPE-FM, WBWL-AM, WKQL-FM, WMXQ-FM and WOKV-AM in Jacksonville, Florida; WEFX-FM, WNLK-AM, WKHL-FM and WSTC-AM in Stamford/Norwalk, Connecticut; and WPLR-FM and local sales rights at WYBC-FM in New Haven, Connecticut in exchange for KFI-AM and KOST-FM in Los Angeles, California plus approximately $3.0 million. In October 1999, Cox Radio began operating these stations pursuant to an LMA. Pending certain regulatory approvals, including obtaining a temporary waiver of the FCC's newspaper-radio cross-ownership rule for the acquisition of WFOX-FM in Atlanta, Cox Radio anticipates consummating this transaction in the first quarter of 2000. In September 1999, Cox Radio disposed of the assets of WGBB-AM serving the Nassau-Suffolk (Long Island), New York market for consideration of $1.7 million. In September 1999, Cox Radio acquired WBTS-FM (formerly WNGC-FM) in Athens, Georgia for consideration of approximately $78 million. In October 1999, Cox Radio entered into an agreement to dispose of the assets of KACE-FM and KRTO-FM in Los Angeles for approximately $75 million. Pending certain regulatory approvals, Cox Radio anticipates consummating this disposition in the fourth quarter of 1999. RESULTS OF OPERATIONS Three months ended September 30, 1999 compared to three months ended September 30, 1998: Net Revenues. Net revenues for the third quarter of 1999 increased $10.6 million to $79.8 million, a 15.3% increase over the third quarter of 1998. This increase was primarily a result of the acquisitions in Tampa, Florida and Louisville, Kentucky and offset somewhat by the May 1999 disposition of stations in Syracuse, New York. In addition, the stations in Atlanta and Orlando had significant increases in net revenues which were realized as a result of continued strong ratings performance. Station Operating Expenses. Station operating expenses increased $4.0 million to $46.5 million, an increase of 9.5% over the third quarter of 1998. The increase was primarily attributable to the acquisition of stations in Tampa, Florida and Louisville, Kentucky and offset somewhat by the disposition of stations in Syracuse, New York. The increase was also due to higher programming and sales related costs which are driven by ratings and revenues, respectively. Broadcast Cash Flow. Broadcast cash flow increased $6.6 million to $33.3 million, a 24.5% increase over the third quarter of 1998 for the reasons discussed above. Corporate General and Administrative Expenses. Corporate general and administrative expenses increased $0.7 million in the third quarter of 1999 to $2.7 million primarily due to higher overhead costs incurred as a result of the increase in number of stations owned and/or operated in 1999. Operating Income. Operating income for the third quarter of 1999 increased $4.5 million to $23.1 million, an increase of 24.1% over the third quarter of 1998 for the reasons discussed above. Interest Expense. Interest expense during the third quarter of 1999 totaled $5.8 million as compared to third quarter 1998 of $4.6 million as a result of borrowings incurred to consummate Cox Radio's acquisitions during late 1998 and the first nine months of 1999. Net Income. Net income increased $3.0 million to $10.1 million for the third quarter of 1999, primarily for the reasons discussed above and as a result of the $0.9 million after-tax gain on the sale of WRVI-FM and WLSY-FM in Louisville, Kentucky. 14 15 Nine months ended September 30, 1999 compared to nine months ended September 30, 1998: Net Revenues. Net revenues for the first nine months of 1999 increased $28.3 million to $218.7 million, a 14.9% increase over the first nine months of 1998. This increase was primarily a result of the 1998 acquisition of radio stations in Long Island, New York and current year acquisitions in Tampa, Florida and Louisville, Kentucky and offset somewhat by the May 1999 disposition of stations in Syracuse, New York. In addition, the stations in Atlanta, Birmingham, and Orlando had substantial increases in net revenues which were realized as a result of continued strong ratings performance. Station Operating Expenses. Station operating expenses increased $12.2 million to $135.0 million, an increase of 9.9% over the first nine months of 1998. The increase was primarily attributable to the acquisition of stations in Long Island, New York; Tampa, Florida; and Louisville, Kentucky and offset somewhat by the disposition of stations in Syracuse, New York. The increase was also due to higher programming and sales related costs which are driven by ratings and revenues, respectively. Broadcast Cash Flow. Broadcast cash flow increased $16.1 million to $83.7 million, a 23.9% increase over the first nine months of 1998 for the reasons discussed above. Corporate General and Administrative Expenses. Corporate general and administrative expenses increased $1.3 million in the first nine months of 1999 to $7.3 million primarily due to higher overhead costs incurred as a result of the increase in number of stations owned and/or operated in 1999. Operating Income. Operating income for the first nine months of 1999 increased $11.1 million to $55.6 million, an increase of 25.0% over the first nine months of 1998 for the reasons discussed above. Interest Expense. Interest expense during the first nine months of 1999 totaled $15.8 million as compared to first nine months of 1998 of $12.2 million as a result of borrowings incurred to consummate Cox Radio's acquisitions during 1998 and the first half of 1999. Net Income. Net income increased $30.4 million to $46.6 million for the first nine months of 1999, primarily as a result of the $23.5 million after-tax gain on the sale of Cox Radio's stations in Syracuse, New York, the $0.9 million after-tax gain on the sale of WRVI-FM and WSLY-FM in Louisville, Kentucky and for the reasons discussed above. LIQUIDITY AND CAPITAL RESOURCES Cox Radio's primary source of liquidity is cash provided by operations. Historically, cash requirements have been funded by Cox Radio's operating activities and through borrowings under Cox Radio's bank credit facility described below. For the nine months ended September 30, 1999 as compared to the nine months ended September 30, 1998, cash from operations increased $11.1 million to $47.8 million, primarily attributable to improved operations and the net change in working capital accounts. In addition, cash requirements historically have been funded on a temporary basis through intercompany advances from Cox Enterprises 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. Borrowings, if any, under the Cox Enterprises credit facility would accrue interest at Cox Enterprises' commercial paper rate plus .40%. Cox Enterprises continues to perform day-to-day cash management services for Cox Radio. On March 7, 1997, Cox Radio entered into a $300 million, five-year, senior, unsecured revolving bank credit facility. The interest rate is based on the London Interbank Offered Rate plus a spread determined by certain leverage ratios. This facility also includes a commitment fee on the unused portion of the total amount available of .1% to .25% based on certain leverage ratios. At September 30, 1999, Cox Radio had approximately $220 million of outstanding indebtedness under the bank credit facility and had approximately $80 million available under the bank credit facility. The interest rate applied to amounts due under the bank credit facility was 5.78% at September 30, 1999. The borrowings under the bank credit facility bear interest at current market rates and, thus, approximate fair value. 15 16 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 notes consist of $100 million principal amount of 6.25% notes due in full in 2003 and $100 million principal amount of 6.375% notes due in full in 2005. Pursuant to the Registration Rights Agreement dated as of May 26, 1998 among Cox Radio, its wholly owned subsidiaries WSB, Inc. and WHIO, Inc. (each a former guarantor of the notes), NationsBanc Montgomery Securities LLC, Chase Securities, Inc., and J.P. Morgan Securities, Inc., on December 14, 1998, Cox Radio consummated an exchange offer pursuant to which Cox Radio exchanged $200 million principal amount of the notes originally sold on May 26, 1998, for an aggregate of $200 million principal amount of notes (the terms and form of which are the same in all material respects as the original notes, except as to restrictions on transfer) which have been registered under the Securities Act of 1933. As a result of the mergers of WSB, Inc. and WHIO, Inc. into Cox Radio, WSB, Inc. and WHIO, Inc. are no longer guarantors of the notes. As a result of the transfer of certain Federal Communications Commission licenses, permits and authorizations held by Cox Radio to CXR Holdings, Inc., a wholly-owned subsidiary of Cox Radio, CXR Holdings became a guarantor of the notes on February 1, 1999. At September 30, 1999, the estimated fair value of these notes is approximately $194.7 million based on quoted market prices. In September 1997, Cox Radio entered into interest rate swap agreements with certain lenders providing bank financing under the bank credit facility. Pursuant to the interest rate swap agreements, Cox Radio has exchanged its floating rate interest obligations on an aggregate of $100 million in principal 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, and no material loss would be expected from their nonperformance. The fair value of the interest rate swap agreements was not recognized in the consolidated financial statements since they are accounted for as hedges. The estimated fair value of the interest rate swap agreements, based on current market rates, approximated a net receivable of $438,000 at September 30, 1999 and a net payable of $4.6 million at December 31, 1998. Future cash requirements are expected to include capital expenditures, principal and interest payments on indebtedness and funds for acquisitions. Cox Radio expects its operations to generate sufficient cash to meet its capital expenditures and debt service requirements. Additional cash requirements, including funds for pending or other acquisitions, will be funded from various sources, including the proceeds from bank financing and, if or when appropriate, other issuances of Company securities. 16 17 OTHER MATTERS IMPACT OF THE YEAR 2000 ISSUE AND YEAR 2000 READINESS DISCLOSURE Cox Radio recognizes the importance of the Year 2000 issue and is proactively managing an appropriate transition into the year 2000. The Year 2000 issue is the result of computer programs and embedded computer microprocessors being unable to distinguish between the year 1900 and the year 2000, or misinterpreting the date field. Any of Cox Radio's systems that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000, which could result in miscalculations or system failures. A system or application is deemed Year 2000 compliant when it continues to produce understandable, accurate and predictable results which conform to the original functional specifications, regardless of the millennium change. STATE OF READINESS Cox Radio has implemented a project team utilizing both internal and external resources, including those of majority shareholder, Cox Broadcasting, to develop its Year 2000 initiative, which may, as necessary, involve upgrading or replacing affected computer systems, software and equipment with embedded chips, and preparing contingency and disaster recovery plans. Cox Radio has substantially completed an inventory of current systems and operations to identify any information technology and non-information technology systems (including equipment with embedded chips) that do not properly recognize dates after December 31, 1999. The project team has implemented a plan to assess, remediate, test, and, sufficiently in advance of the Year 2000, ascertain that the systems of Cox Radio that are critical to its operations will properly recognize such dates. The plan includes on-site audits at each of the stations that Cox Radio owns or operates except the stations pending acquisition in Honolulu, Hawaii. Cox Radio is assessing the Year 2000 compliance of the Hawaii stations and developing an appropriate plan for addressing any significant issues identified. As of November 12, 1999, the project team has substantially completed this on-site audit process. Based on the results of the inventory, Cox Radio began in the second quarter of 1998 to remediate noncompliant systems. Cox Radio anticipates that remediation will be substantially complete by the end of November 1999. Cox Radio uses Cox Enterprises' financial and human resources information systems, which are being tested by Cox Enterprises. Cox Radio has substantially completed a formal communication program with its significant vendors to determine the extent to which it is vulnerable to those third parties who fail to remediate their own Year 2000 non-compliance. Cox Radio is to a large degree dependent on vendor remediation and testing of vendor systems. Cox Radio's two most significant vendors are Marketron, which provides Cox Radio's traffic and billing system for the majority of its stations, and ADP which provides payroll services. Cox Radio uses Marketron Act II Version 28.02 running on DOS 6.22, which Marketron has indicated is Year 2000 compliant; and ADP PC/Payroll for Windows Version 2.5 running on Windows 95 for substantially all of its stations, which ADP has indicated is Year 2000 compliant. Cox Radio successfully completed testing of Marketron Act II Version 28.02 during the second quarter of 1999 and concluded that Version 28.02 appears to be Year 2000 compliant. Cox Enterprises has successfully completed testing of ADP PC/Payroll for Windows Version 2.5 and concluded that Version 2.5 appears to be Year 2000 compliant. 17 18 COSTS As of September 30, 1999, costs of approximately $925,000 have been incurred related to Cox Radio's Year 2000 initiative. Cox Radio has and will incur capital expenditures and internal staff costs as well as additional outside consulting and other expenditures related to this initiative. Cox Radio expects these costs will not exceed approximately $1.5 million, based on currently available information. Total incremental expenses (including depreciation and amortization) of bringing current systems into compliance, writing off existing non-compliant systems, and capital replacements have not had a material impact on Cox Radio's financial condition to date and are not, at present, based on known facts, expected to have a material impact on Cox Radio's financial condition. All costs of the Year 2000 initiative will be funded by Cox Radio's cash flow from operations. RISKS AND MOST REASONABLY LIKELY WORST CASE SCENARIO If systems critical to Cox Radio's operations are not Year 2000 compliant, the most reasonably likely worst case scenario would include service interruptions resulting from failure in electrical power and satellite feeds providing news, weather and syndicated shows for broadcast and failure of equipment with embedded chips including master clocks, studio equipment, transmission equipment and telephone, security and environmental control systems. Based on the information currently available, Cox Radio is not aware of any likely Year 2000 non-compliance by Cox Radio or its vendors or customers that will materially affect its business operations; however, Cox Radio does not control the systems of other companies, and cannot assure that such systems will be converted on a timely basis and, if not converted, would not have an adverse effect on Cox Radio's business operations. Furthermore, no assurance can be given at this time that any or all of Cox Radio's systems are or will be Year 2000 compliant, or that the ultimate costs required to address the Year 2000 issue or the impact of any failure to achieve substantial Year 2000 compliance by Cox Radio, its vendors or customers will not have a material adverse effect on Cox Radio's financial condition. Like most other businesses, Cox Radio is dependent on general service outside vendors including providers of electrical power, telephony, water, fuel for vehicles and other necessary commodities. Cox Radio also relies upon the interstate banking system and related electronic communications for such functions as transmitting financial data from field locations to the home office and sweeping cash into lockboxes. Cox Radio is currently not aware of any material non-compliance by these providers that will materially affect its business operations; however, Cox Radio does not control these systems and cannot assure that they will be converted in a timely fashion and, if not converted, would not have an adverse effect on its business operations. CONTINGENCY PLANS The Year 2000 project team is working with each station to expand and modify existing business continuity plans to encompass potential Year 2000 exposures, including increased risk of loss of electrical power, and satellite failures resulting in need for alternate delivery system for programming, potential multiple systems failures and other relevant issues. Contingency plans will be in place for substantially all of Cox Radio's stations as of November 30, 1999. Cox Radio has made arrangements to ensure that appropriate personnel, including key engineering and information technology resources, are available to respond to any situations that may be encountered. A coordinated group will have the resources required to identify, track, prioritize, remediate, and report on any events encountered. If the modifications and conversions required to make Cox Radio Year 2000 ready are not made or are not completed on a timely basis, the resulting problems could have a material impact on the operations of Cox Radio. 18 19 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK In September 1997, Cox Radio entered into interest rate swap agreements with certain lenders providing bank financing under the bank credit facility. Pursuant to the interest rate swap agreements, Cox Radio has exchanged its floating rate interest obligations on an aggregate of $100 million in principal 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, and no material loss would be expected from their nonperformance. The fair value of the interest rate swap agreements was not recognized in the consolidated financial statements since they are accounted for as hedges. The estimated fair value of the interest rate swap agreements, based on current market rates, approximated a net receivable of $438,000 at September 30, 1999 and a net payable of $4.6 million at December 31, 1998. 19 20 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None 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 ------- ----------- (1)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. (2) (1)2.2 -- Guaranty by Cox Broadcasting, Inc., dated as of July 1, 1996, in favor of NewCity Communications, Inc. (1)3.1 -- Amended and Restated Certificate of Incorporation of Cox Radio, Inc. (1)3.2 -- Amended and Restated Bylaws of Cox Radio, Inc. (3)4.1 -- Indenture dated as of May 26, 1998 between Cox Radio, Inc., The Bank of New York, WSB, Inc., and WHIO, Inc. (4)4.2 -- First Supplemental Indenture dated as of February 1, 1999 by and between Cox Radio, Inc., CXR Holdings, Inc., and the Bank of New York (5)4.3 -- Registration Rights Agreement dated May 26, 1998 among Cox Radio, Inc., WSB, Inc., WHIO, Inc., and NationsBanc Montgomery Securities, LLC, Chase Securities, Inc., and J.P. Morgan Securities, Inc. (6)4.4 -- Specimen of Class A Common Stock Certificate. (7)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 (2) (1)10.2 -- New CEI Credit Facility. (1)10.3 -- Cox Radio, Inc. Long-Term Incentive Plan. (1)10.4 -- Cox Radio, Inc. Employee Stock Purchase Plan. (1)10.5 -- Cox Radio, Inc. Restricted Stock Plan for Non-Employee Directors (1)10.6 -- Tax Allocation and Indemnification Agreement, dated as of September 30, 1996, by and between Cox Enterprises, Inc. and Cox Radio, Inc. 27.1 -- Financial Data Schedule (for SEC use only)
- ---------- (1) Incorporated by reference to the corresponding exhibit of Cox Radio's Registration Statement on Form S-1 (Commission File No. 333-08737). (2) Schedules and Exhibits intentionally omitted. (3) Incorporated by reference to Exhibit 4.1 of Cox Radio's Registration Statement on Form S-4 (Commission File No. 333-61179). (4) Incorporated by reference to Exhibit 4.2 of Cox Radio's Quarterly Report on Form 10-Q for the period ending March 31, 1999 (Commission File No. 1-12187). (5) Incorporated by reference to Exhibit 4.2 of Cox Radio's Registration Statement on Form S-4 (Commission File No. 333-61179). (6) Incorporated by reference to Exhibit 4.3 of Cox Radio's Registration Statement on Form S-1 (Commission File No. 333-08737). (7) Incorporated by reference to Cox Radio's Annual Report on Form 10-K for the period ending December 31, 1996 (Commission File No. 1-12187). 20 21 (b) Reports on Form 8-K On August 27, 1999, Cox Radio filed a current report on form 8-K announcing that on August 18, 1999, the Board of Directors of Cox Radio (i) increased the number of directors from seven to eight and (ii) elected Marc W. Morgan to fill the vacancy in accordance with Cox Radio's bylaws. On September 17, 1999 Cox Radio filed a current report on form 8-K announcing that , Cox Radio agreed to acquire from AMFM, Inc. WEDR-FM in Miami, Florida; WFOX-FM in Atlanta, Georgia; WFYV-FM, WAPE-FM, WBWL-AM, WKQL-FM, WMXQ-FM and WOKV-AM in Jacksonville, Florida; WEFX-FM, WNLK-AM, WKHL-FM and WSTC-AM in Stamford/Norwalk, Connecticut; and WPLR-FM and local sales rights at WYBC-FM in New Haven, Connecticut in exchange for KFI-AM and KOST-FM in Los Angeles, California plus approximately $3.0 million 21 22 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. November 12, 1999 /s/ Maritza C. Pichon ---------------------------------------- Maritza C. Pichon Chief Financial Officer (Principal Financial Officer and duly authorized officer) 22 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF COX RADIO, INC. FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U. S. DOLLARS 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 1 7,815 0 70,373 (2,919) 0 79,253 93,615 (38,034) 962,110 40,562 420,092 0 0 28,835 337,266 962,110 0 218,712 0 135,048 28,026 0 16,288 80,071 33,513 46,558 0 0 0 46,558 1.63 1.62
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