-----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, LO2NF9T99H3Pbr6su9tS2SnOJFYDYxbI/PH0Um5MsNw4CeTRtqrg/t89HKnuIjQP MJlRhtWwKvPS6byF5V2GLQ== 0000893220-01-500183.txt : 20010514 0000893220-01-500183.hdr.sgml : 20010514 ACCESSION NUMBER: 0000893220-01-500183 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERCOM COMMUNICATIONS CORP CENTRAL INDEX KEY: 0001067837 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 231701044 STATE OF INCORPORATION: PA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14461 FILM NUMBER: 1629974 BUSINESS ADDRESS: STREET 1: 401 CITY AVENUE STREET 2: SUITE 409 CITY: BALA CYNWYD STATE: PA ZIP: 19004 BUSINESS PHONE: 6106605610 MAIL ADDRESS: STREET 1: 401 CITY AVENUE STREET 2: SUITE 409 CITY: BALA CYNWYD STATE: PA ZIP: 19004 10-Q 1 w48942e10-q.txt FORM 10-Q ENTERCOM COMMUNICATIONS CORP. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________to ___________ COMMISSION FILE NUMBER: 001-14461 Entercom Communications Corp. (Exact name of registrant as specified in its charter) PENNSYLVANIA 23-1701044 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation of organization) 401 CITY AVENUE, SUITE 409 BALA CYNWYD, PENNSYLVANIA 19004 (Address of principal executive offices and Zip Code) (610) 660-5610 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class A Common Stock, $.01 par value - 34,537,941 Shares Outstanding as of May 7, 2001 Class B Common Stock, $.01 par value - 10,531,805 Shares Outstanding as of May 7, 2001 Class C Common Stock, $.01 par value - 195,669 Shares Outstanding as of May 7, 2001 2 ENTERCOM COMMUNICATIONS CORP. INDEX
PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements................................................................................ 3 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................................ 11 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.......................................... 15 PART II - OTHER INFORMATION ITEM 1. Legal Proceedings................................................................................... 16 ITEM 2. Changes in Securities and Use of Proceeds........................................................... 16 ITEM 3. Defaults Upon Senior Securities..................................................................... 16 ITEM 4. Submission of Matters to a Vote of Security Holders................................................. 16 ITEM 5. Other Information................................................................................... 16 ITEM 6. Exhibits and Reports on Form 8-K.................................................................... 16 SIGNATURES .................................................................................................... 18
2 3 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ENTERCOM COMMUNICATIONS CORP. CONDENSED CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 AND MARCH 31, 2001 (AMOUNTS IN THOUSANDS) (UNAUDITED) ASSETS
DECEMBER 31, MARCH 31, 2000 2001 ----------- ----------- CURRENT ASSETS Cash and cash equivalents $ 13,257 $ 13,087 Accounts receivable, net of allowance for doubtful accounts 70,937 53,592 Prepaid expenses and deposits 3,852 6,236 Prepaid and refundable federal and state income taxes 705 5,370 Deferred tax assets 1,499 4,089 Station deposits and acquisition costs 688 762 ----------- ----------- Total current assets 90,938 83,136 ----------- ----------- INVESTMENTS 12,116 16,948 ----------- ----------- PROPERTY AND EQUIPMENT - AT COST Land, land easements and land improvements 10,082 10,176 Buildings 10,404 10,446 Equipment 77,409 78,267 Furniture and fixtures 12,125 12,167 Leasehold improvements 8,967 8,986 ----------- ----------- 118,987 120,042 Accumulated depreciation and amortization (26,532) (29,204) ----------- ----------- 92,455 90,838 Capital improvements in progress 1,498 4,301 ----------- ----------- Net property and equipment 93,953 95,139 ----------- ----------- RADIO BROADCASTING LICENSES AND OTHER INTANGIBLES -NET 1,265,816 1,257,512 ----------- ----------- DEFERRED CHARGES AND OTHER ASSETS -NET 11,105 10,960 ----------- ----------- TOTAL $ 1,473,928 $ 1,463,695 =========== ===========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3 4 ENTERCOM COMMUNICATIONS CORP. CONDENSED CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 AND MARCH 31, 2001 (AMOUNTS IN THOUSANDS) (UNAUDITED) LIABILITIES AND SHAREHOLDERS' EQUITY
DECEMBER 31, MARCH 31, 2000 2001 ------------ ------------ CURRENT LIABILITIES Accounts payable $ 18,967 $ 15,754 Accrued liabilities: Salaries 6,042 4,373 Interest 1,744 3,735 Other 1,017 1,203 Derivative instruments -- 5,318 Long-term debt due within one year 11 13 ----------- ----------- Total current liabilities 27,781 30,396 ----------- ----------- SENIOR DEBT 461,249 445,322 DEFERRED TAX LIABILITIES 124,197 129,378 ----------- ----------- Total liabilities 613,227 605,096 ----------- ----------- COMPANY-OBLIGATED MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED SECURITIES OF SUBSIDIARY HOLDING SOLELY CONVERTIBLE DEBENTURES OF THE COMPANY 125,000 125,000 ----------- ----------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Preferred stock -- -- Class A common stock 342 345 Class B common stock 105 105 Class C common stock 5 2 Additional paid-in capital 747,442 748,235 Accumulated deficit (11,850) (14,165) Unearned compensation (329) (297) Accumulated other comprehensive loss (14) (626) ----------- ----------- Total shareholders' equity 735,701 733,599 ----------- ----------- TOTAL $ 1,473,928 $ 1,463,695 =========== ===========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4 5 ENTERCOM COMMUNICATIONS CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2000 AND 2001 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, --------- 2000 2001 ---- ---- NET REVENUES $70,877 $69,455 ------------ ------------ OPERATING EXPENSES: Station operating expenses 46,193 46,360 Depreciation and amortization 10,477 11,496 Corporate general and administrative expenses 3,167 3,330 Net expense from time brokerage agreement fees 4 -- Net loss on sale of assets 7 23 ------------ ------------ Total operating expenses 59,848 61,209 ------------ ------------ OPERATING INCOME 11,029 8,246 ------------ ------------ OTHER EXPENSE (INCOME): Interest expense 9,390 7,911 Financing cost of Company-obligated mandatorily redeemable convertible preferred securities of subsidiary holding solely convertible debentures of the Company 1,953 1,953 Interest income (106) (95) Equity loss from unconsolidated affiliate -- 850 Net loss on derivative instruments -- 478 ------------ ------------ Total other expense 11,237 11,097 ------------ ------------ LOSS BEFORE INCOME TAX BENEFIT & ACCOUNTING CHANGE (208) (2,851) INCOME TAX BENEFIT (122) (1,102) ------------ ------------ LOSS BEFORE ACCOUNTING CHANGE (86) (1,749) Cumulative effect of accounting change, net of taxes of $377 -- (566) ------------ ------------ NET LOSS ($86) ($2,315) ============ ============ NET LOSS PER SHARE - BASIC AND DILUTED: Loss before accounting change ($0.00) ($0.04) Cumulative effect of accounting change, net of taxes -- ($0.01) ------------ ------------ NET LOSS PER SHARE - BASIC AND DILUTED ($0.00) ($0.05) ============ ============ WEIGHTED AVERAGE SHARES: Basic and Diluted 45,188,010 45,250,110
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5 6 ENTERCOM COMMUNICATIONS CORP. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS THREE MONTHS ENDED MARCH 31, 2000 AND 2001 (AMOUNTS IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, --------- 2000 2001 ---- ---- NET LOSS ($86) ($2,315) OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX BENEFIT OR PROVISION Unrealized income (loss) on investments - net of tax benefit of $0.9 million in 2000 and tax provision of $1.2 million in 2001 (1,386) 1,727 Unrealized loss on hedged derivatives from cumulative effect of accounting change- net of tax benefit of $0.5 million in 2001 -- (685) Unrealized loss on hedged derivatives - net of tax benefit of $1.1 million in 2001 -- (1,653) ------- ------- COMPREHENSIVE LOSS ($1,472) ($2,926) ======= =======
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6 7 ENTERCOM COMMUNICATIONS CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2000 AND 2001 (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, ------------------ 2000 2001 ---- ---- OPERATING ACTIVITIES: Net loss ($86) ($2,315) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 10,477 11,496 Deferred taxes 4,365 3,385 Provision for bad debts 967 1,130 Non-cash stock-based compensation expense 204 164 Loss on disposition of assets 7 23 Equity loss from unconsolidated affiliate -- 850 Net loss on derivative instruments -- 478 Cumulative effect of accounting change -- 943 Changes in assets and liabilities which provided (used) cash: Accounts receivable (4,868) 16,215 Prepaid expenses (489) (2,384) Prepaid and refundable income taxes -- (5,051) Accounts payable, accrued liabilities and income taxes payable (7,479) (2,706) -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 3,098 22,228 -------- -------- INVESTING ACTIVITIES: Additions to property and equipment (2,596) (4,028) Proceeds from sale of property, equipment and other assets 21 106 Purchases of radio station assets (8,000) -- Deferred charges and other assets (220) (333) Purchase of investments (157) (2,804) Station acquisition costs (324) (74) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (11,276) (7,133) -------- -------- FINANCING ACTIVITIES: Proceeds from issuance of long-term debt 12,000 3,078 Payments of long-term debt (5,002) (19,004) Proceeds from issuance of common stock related to incentive plans 364 145 Proceeds from exercise of stock options -- 516 -------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 7,362 (15,265) -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (816) (170) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 11,262 13,257 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $10,446 $13,087 -------- -------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -- Cash paid during the period for: Interest $9,030 $7,826 ======== ======== Interest on TIDES $1,953 $1,953 ======== ======== Income taxes $400 $25 ======== ========
SUPPLEMENTAL DISCLOSURES ON NON-CASH INVESTING AND FINANCING ACTIVITIES - In connection with the issuance of Restricted Stock during the three months ended March 31, 2000, the Company issued 5,000 shares of Class A Common Stock and increased its additional paid-in-capital by $266. SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 7 8 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2000 AND 2001 1. BASIS OF PRESENTATION The accompanying unaudited financial statements for Entercom Communications Corp. (the "Company") have been prepared in accordance with (1) generally accepted accounting principles for interim financial information and (2) the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of only normal recurring accruals, considered necessary for a fair presentation have been included. This Form 10-Q should be read in conjunction with the financial statements and notes thereto included in the Company's audited financial statements as of December 31, 2000, and filed with the Securities and Exchange Commission (the "SEC") on March 21, 2001, as part of the Company's Form 10-K. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full fiscal year. Certain prior year amounts have been reclassified to conform to the current year's presentation, which had no effect on net loss or shareholders' equity. Effective January 1, 2001, Entercom adopted the Financial Accounting Standards Board's Statement of Accounting Standards ("SFAS") No. 133 entitled "Accounting for Derivative and Hedging Activities," that was amended by SFAS No. 137 and SFAS No. 138. SFAS No. 133 established accounting and reporting standards for (1) derivative instruments, including certain derivative instruments embedded in other contracts, which are collectively referred to as derivatives and (2) hedging activities. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and the hedged item are recognized in the statement of operations. If the derivative is designated as a cash flow hedge, changes in the fair value of the derivative are recorded in other comprehensive income (loss) and are recognized in the statement of operations when the hedged item affects net income (loss). SFAS No. 133 defines new requirements for designation and documentation of hedging relationships as well as on going effectiveness assessments in order to use hedge accounting under this standard. A derivative that does not qualify as a hedge is marked to fair value through the statement of operations. For those derivatives with a notional amount of $30.0 million that did not qualify for hedge accounting treatment, for the three months ended March 31, 2001, the Company recorded to the statement of operations a $0.4 million loss under the cumulative effect of accounting change as an accumulated transition adjustment and a $0.8 million loss under loss on derivative instruments as the adjustment for this period. For those derivatives designated as cash flow hedges with a notional amount of $233.0 million, the Company recorded: (1) the ineffective amount of the hedges to the statement of operations as a $0.6 million loss under the cumulative effect of accounting change as an accumulated transition adjustment and as a $0.3 million gain under loss on derivative instruments as the adjustment for this period and (2) the effective amount of the hedges to other comprehensive loss, as a $1.1 million loss as an accumulated transition adjustment and as a $2.8 million loss as the adjustment for this period. The Company has calculated the transition and current period adjustments in accordance with tentative accounting guidance issued by the Derivatives Implementation Group, and therefore, the guidance could be subject to change. The net income (loss) per share is calculated in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share" which requires presentation of basic net income (loss) per share and diluted net income (loss) per share. Basic net income (loss) per share excludes dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share is computed in the same manner as basic net income (loss) after assuming issuance of common stock for all potentially dilutive equivalent shares, which includes (1) stock options (using the treasury stock method) and (2) the Term Income Deferrable Equity Securities ("TIDES") after eliminating from net income the interest expense, net of taxes, on the TIDES. Anti-dilutive instruments are not considered in this calculation. For the three-month periods ended March 31, 2001 and 2000, the effect of the TIDES and stock options in the calculation of net loss per share was anti-dilutive. 2. UNAUDITED PRO FORMA INFORMATION FOR ACQUISITIONS AND DISPOSITIONS The following unaudited pro forma summary presents the consolidated results of operations as if the transactions which occurred during the period of January 1, 2000 through March 31, 2001, had all occurred as of January 1, 2000, after giving effect to certain adjustments, including depreciation and amortization of assets and interest expense on any debt incurred to fund acquisitions, net of dispositions, which would have been incurred had such acquisitions, divestitures and other events occurred as of January 1, 2000. For a discussion of these acquisitions, dispositions and other events, please refer to the Company's Form 10-K filed with the Securities and Exchange Commission on March 21, 2001. The effect of the accounting change was not included as an adjustment for purposes of this presentation. These unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of (1) what would have occurred had the acquisitions and other transactions been made as of that date or (2) results which may occur in the future. 8 9
THREE MONTHS ENDED MARCH 31, ------------------ (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE) 2000 2001 ---- ---- PRO FORMA ACTUAL --------- ------ Net Revenues $72,362 $69,455 ======= ======= Income before net loss on sale of assets and accounting change ($1,084) ($1,735) Cumulative effect of accounting change, net of taxes -- (566) ------- ------- Net loss ($1,088) ($2,315) ======= ======= Net loss per share - basic and diluted ($0.02) ($0.05) ======= =======
3. DEBT The Company has a bank credit agreement (the "Bank Facility") with a syndicate of banks which provides for senior secured credit of $650.0 million consisting of: (1) a $325.0 million reducing revolving credit facility ("Revolver") and (2) a $325.0 million multi-draw term loan ("Term Loan"). The Revolver and Term Loan, which mature on September 30, 2007, each reduce on a quarterly basis beginning September 30, 2002, in quarterly amounts that vary from $12.2 million to $16.3 million for each loan. As of March 31, 2001, the Company had $445.0 million of borrowings outstanding under the Bank Facility ($120.0 million under the Revolver and $325.0 million under the Term Loan), in addition to an outstanding Letter of Credit in the amount of $5.8 million. The Company enters into interest rate transactions with different banks to diversify its risk associated with interest rate fluctuations against the variable rate debt under the Bank Facility and to comply with certain covenants under the Bank Facility. Under these transactions, the Company agrees with other parties to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts calculated by reference to an agreed notional principal amount against the variable debt. The total notional amount of these transactions was $263.0 million as of March 31, 2001. These agreements, with initial terms that vary from 2 years to 7 years, effectively fix the interest at rates that vary from 5.8% to 8.5% on current borrowings equal to the total notional amount. 4. COMMITMENTS AND CONTINGENCIES Pending Acquisition The Company entered into a preliminary agreement on February 6, 1996, to acquire the assets of radio station KWOD-FM, Sacramento, California, from Royce International Broadcasting Corporation ("Royce"), subject to approval by the FCC, for a purchase price of $25.0 million. Notwithstanding efforts by the Company to pursue this transaction, Royce has been non-responsive. On July 28, 1999, the Company commenced a legal action seeking to enforce this agreement, and subsequently Royce filed a cross-complaint against the Company asking for treble damages, an injunction, attorney's fees and costs and filed a separate action against the Company's President. This separate action against the Company's President was dismissed without leave to amend in February 2000. The Company is pursuing legal action against Royce and seeking dismissal of the cross-complaint. The Company estimates that the impact of an unfavorable outcome will not materially impact the financial position, results of operations or cash flows of the Company. However, the Company cannot determine if and when the transaction might occur. Contingencies In October 1999, The Radio Music License Committee, of which the Company is a participant, filed a motion in the New York courts against Broadcast Music, Inc. commencing a rate-making proceeding, on behalf of the radio industry, seeking a determination of fair and reasonable industry-wide license fees. The Company is currently operating under interim license agreements for the period commencing January 1, 1997 at the rates and terms reflected in prior agreements. The Company's management estimates that the impact of an unfavorable outcome of the motion will not materially impact the financial position, results of operations or cash flows of the Company. In December 2000, the U.S. Copyright Office, under the Digital Millennium Copyright Act, issued a final rule that AM and FM radio broadcast signals transmitted simultaneously over a digital communications network, are subject to the sound recording copyright owner's exclusive right of performance. This would result in the imposition of license fees for Internet streaming and other digital media. As a result of this decision, the Company must now participate in an arbitration proceeding at the U.S. Copyright Office to determine the amount of the fees that are due from the use of sound recordings in Internet streaming. The Company, along with other broadcasters and the National Association of Broadcasters, previously commenced a legal action in New York challenging the imposition of these license fees. In addition, the Company has 9 10 commenced a legal action, together with other radio broadcasters, seeking declaratory relief as to the impact of the final rule of the Copyright Office. The Company intends to pursue this action. However, the Company cannot determine the likelihood of success. The Company's management estimates that the impact of an unfavorable determination will not materially impact the financial position, results of operations or cash flows of the Company. The Company is subject to various outstanding claims which arose in the ordinary course of business and to other legal proceedings. In the opinion of management, any liability of the Company which may arise out of or with respect to these matters will not materially affect the financial position, results of operations or cash flows of the Company. 5. CONVERTIBLE PREFERRED SECURITIES On October 6, 1999, the Company sold 2,500,000 Convertible Preferred Securities, Term Income Deferrable Equity Securities ("TIDES"), including underwriters' over-allotments at an offering price of $50.00 per security. The net proceeds to the Company after deducting underwriting discounts and other offering expenses, was $120.5 million. Subject to certain deferral provisions, the trust pays quarterly calendar distributions. The first distribution was paid on December 31, 1999. The TIDES represent undivided preferred beneficial ownership interest in the assets of the trust. The trust used the proceeds to purchase from the Company an equal amount of 6.25% Convertible Subordinated Debentures due 2014. The Company owns all of the common securities issued by the trust. The trust exists for the sole purpose of issuing the common securities and the TIDES. The trust is a wholly-owned subsidiary of the Company, with the sole assets of the trust consisting of the $125.0 million aggregate principal amount of the Company's 6.25% Convertible Subordinated Debentures due September 30, 2014. The Company has entered into several contractual arrangements for the purpose of fully, irrevocably and unconditionally guaranteeing the trust's obligations under the TIDES. The holders of the TIDES have a preference with respect to each distribution and amount payable upon liquidation, redemption or otherwise over the holders of the common securities of the trust. Each TIDES is convertible into shares of the Company's Class A Common Stock at the rate of 1.1364 shares of Class A Common Stock for each TIDES. 6. SHAREHOLDERS' EQUITY During the three months ended March 31, 2000 and 2001, the Company issued non-qualified options to purchase 467,750 shares and 788,500 shares, respectively, of its Class A Common Stock at prices ranging from $31.88 to $59.44 and $40.00 to $43.53, respectively, per share. All of the options become exercisable over a four-year period. In connection with the grant of options with exercise prices below fair market value at the time of grant, the grant of options issued to non-employees and the grant of performance-based options, the Company recognized non-cash stock-based compensation expense in the amount of $173,000 and $132,000 for the three months ended March 31, 2000 and 2001, respectively. During the three months ended March 31, 2000, the Company issued Restricted Stock awards, consisting of rights to 5,000 shares of Class A Common Stock. Such shares vest ratably on each of the next four anniversary dates of the grant. In connection with awards in 1999 and with this award, the Company recognized non-cash stock-based compensation expense in the amounts of $31,000 and $32,000 for the three months ended March 31, 2000 and 2001, respectively. On February 5, 2001, J.P. Morgan Partners, formerly known as Chase Capital, converted 300,000 shares of Class C Common Stock to 300,000 shares of Class A Common Stock. 7. SUBSEQUENT EVENTS On May 4, 2001, the shareholders of the Company approved an amendment to the Company's 1998 Equity Compensation Plan to increase the number of shares issuable under such plan by 2.5 million shares. 10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This report contains, in addition to historical information, statements by us with regard to our expectations as to financial results and other aspects of our business that involve risks and uncertainties and may constitute forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements reflect our current views and are based on certain assumptions. Actual results could differ materially from those currently anticipated as a result of a number of factors, including, but not limited to, the following: (1) the highly competitive nature of, and new technologies in, the radio broadcasting industry; (2) our dependence upon our Seattle radio stations; (3) the risks associated with our acquisition strategy generally; (4) the control of us by Joseph M. Field and members of his immediate family; (5) our vulnerability to changes in federal legislation or regulatory policies; and (6) those matters discussed below. GENERAL Founded in 1968, we are the fifth largest radio broadcasting company in the United States based upon revenues derived from the latest edition of BIA Consulting, Inc. We have assembled a nationwide portfolio of 95 stations in 18 markets, including 11 of the country's top 50 markets. Our station groups rank among the top three in revenue market share in 15 of the 16 measured markets in which we operate, based on Duncan's Radio Market Guide (2000 ed.) A radio broadcasting company derives its revenues primarily from the sale of broadcasting time to local and national advertisers. The advertising rates that a radio station is able to charge and the number of advertisements that can be broadcast without jeopardizing listener levels largely determine those revenues. Advertising rates are primarily based on three factors: (1) a station's audience share in the demographic groups targeted by advertisers, as measured principally by quarterly reports issued by the Arbitron Ratings Company; (2) the number of radio stations in the market competing for the same demographic groups; and (3) the supply of and demand for radio advertising time. Several factors may adversely affect a radio broadcasting company's performance in any given period. In the radio broadcasting industry, seasonal revenue fluctuations are common and are due primarily to variations in advertising expenditures by local and national advertisers. Typically, revenues are lowest in the first calendar quarter of the year. We generally incur advertising and promotional expenses to increase "listenership" and Arbitron ratings. However, since Arbitron reports ratings quarterly, any increased ratings and therefore increased advertising revenues tend to lag behind the incurrence of advertising and promotional spending. We include revenues recognized under a time brokerage agreement or a similar sales agreement for stations operated by us prior to acquiring the stations in net revenues, while we reflect operating expenses associated with these stations in station operating expenses. Consequently, there is no difference in the method of revenue and operating expense recognition between a station operated by us under a time brokerage agreement or similar sales agreement and a station owned and operated by us. In the following analysis, we discuss broadcast cash flow, broadcast cash flow margin and after tax cash flow. Broadcast cash flow consists of operating income before depreciation and amortization, net expense (income) from time brokerage agreement fees, corporate general and administrative expenses and gain or loss on sale of assets. Broadcast cash flow margin represents broadcast cash flow as a percentage of net revenues. After tax cash flow consists of loss before accounting change, plus the following: depreciation and amortization, non-cash compensation expense (which is otherwise included in corporate general and administrative expenses), deferred tax provision and the elimination of any gain or loss, net of current tax, on sale of assets, investments and derivative instruments. Although broadcast cash flow, broadcast cash flow margin and after tax cash flow are not measures of performance or liquidity calculated in accordance with generally accepted accounting principles, we believe that these measures are useful to an investor in evaluating our performance because they are widely used in the broadcast industry to measure a radio company's operating performance. However, you should not consider broadcast cash flow, broadcast cash flow margin and after tax cash flow in isolation or as substitutes for net income, operating income, cash flows from operating activities or any other measure for determining our operating performance or liquidity that is calculated in accordance with generally accepted accounting principles. In addition, because broadcast cash flow, broadcast cash flow margin and after tax cash flow are not calculated in accordance with generally accepted accounting principles, they are not necessarily comparable to similarly titled measures employed by other companies. We calculate "same station" growth by comparing the performance of stations operated by us throughout a relevant period to the comparable performance in the prior year's corresponding period, adjusted for significant changes to sports contracts and excluding the effect of barter revenues and expenses. "Same station broadcast cash flow margin" is the broadcast cash flow margin of the stations included in our same station calculations. RESULTS OF OPERATIONS The following presents the results of our operations for the three months ended March 31, 2001 and March 31, 2000, and should be read in conjunction with our condensed consolidated financial statements and the related notes included 11 12 elsewhere in this Form 10-Q. Our results of operations represent the operations of the radio stations owned or operated pursuant to time brokerage agreements or joint sales agreements during the relevant periods. THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2000
THREE MONTHS ENDED ------------------ MARCH 31, 2000 MARCH 31, 2001 (AMOUNTS IN THOUSANDS) NET REVENUES $70,877 $69,455 Decrease of $1,422 or 2.0% ------------------------------------------------------------------------
Net revenues decreased 2.0% to $69.5 million for the three months ended March 31, 2001 from $70.9 million for the three months ended March 31, 2000. On a same station basis, net revenues decreased 4.0% to $68.7 million from $71.5 million. Same station net revenues declined due to a general weakness in the advertising sector coupled with comparisons to the prior year's period in which we experienced an exceptionally strong growth rate of approximately 19%. The overall decline in net revenues was affected by acquisitions and divestitures. Since January 1, 2000, we acquired stations with net revenues of $4.2 million for the three months ended March 31, 2001 as compared to $0.4 million for the three months ended March 31, 2000 and we divested stations that had net revenues of $1.5 million for the three months ended March 31, 2000, (including $0.2 million in revenues from a sports contract for which we discontinued selling advertising).
THREE MONTHS ENDED ------------------ MARCH 31, 2000 MARCH 31, 2001 (AMOUNTS IN THOUSANDS) STATION OPERATING EXPENSES $46,193 $46,360 Increase of $167 or 0.4% Percentage of Net Revenues ------------------------------------------------------------------------- 65.2% 66.7%
Station operating expenses increased 0.4% to $46.4 million for the three months ended March 31, 2001 from $46.2 million for the three months ended March 31, 2000. On a same station basis, station operating expenses decreased 3.2% to $45.6 million from $47.1 million. Same station operating expenses declined due to: (1) a decrease in sales expense as a result of a decrease in same station net revenues for the reasons described above and (2) cost reduction efforts. The overall increase in station operating expenses was affected by acquisitions and divestitures. Since January 1, 2000, we acquired stations with operating expenses of $3.7 million for the three months ended March 31, 2001 as compared to $0.4 million for the three months ended March 31, 2000 and divested stations that had operating expenses of $0.5 million for the three months ended March 31, 2000 (net of $0.5 million in expense reductions from a sports contract for which we discontinued selling advertising).
THREE MONTHS ENDED ------------------ MARCH 31, 2000 MARCH 31, 2001 (AMOUNTS IN THOUSANDS) DEPRECIATION AND AMORTIZATION $10,477 $11,496 Increase of $1,019 or 9.7% ------------------------------------------------------------------- Percentage of Net Revenues 14.8% 16.6%
Depreciation and amortization increased 9.7% to $11.5 million for the three months ended March 31, 2001 from $10.5 million for the three months ended March 31, 2000. The increase was mainly attributable to our acquisitions, net of divestitures, since January 1, 2000.
THREE MONTHS ENDED ------------------ MARCH 31, 2000 MARCH 31, 2001 (AMOUNTS IN THOUSANDS) CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES $3,167 $3,330 Increase of $ 163 or 5.1% -------------------------------------------------------------------- Percentage of Net Revenues 4.5% 4.8%
Corporate general and administrative expenses increased 5.1% to $3.3 million for the three months ended March 31, 2001 from $3.2 million for the three months ended March 31, 2000. The increase was mainly attributable to increased costs related to the growth in the number of stations. Also included is non-cash stock-based compensation expense of $0.2 million for each of the three months ended March 31, 2001 and 2000.
THREE MONTHS ENDED ------------------ MARCH 31, 2000 MARCH 31, 2001
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(AMOUNTS IN THOUSANDS) INTEREST EXPENSE (INCLUDING FINANCING COST OF TIDES) $11,343 $9,864 Decrease of $1,479 or 13.0% ------------------------------------------------------------------ Percentage of Net Revenues 16.0% 14.2%
Interest expense, including the financing cost of our 6.25% Convertible Preferred Securities Term Income Deferrable Equity Securities (TIDES), decreased 13.0% to $9.9 million for the three months ended March 31, 2001 from $11.3 million for the three months ended March 31, 2000. The decrease in interest expense was mainly attributable to an overall decrease in outstanding indebtedness coupled with a decline in interest rates.
THREE MONTHS ENDED ------------------ MARCH 31, 2000 MARCH 31, 2001 (AMOUNTS IN THOUSANDS) LOSS BEFORE INCOME TAX BENEFIT AND ($208) ($2,851) ACCOUNTING CHANGE Increase of $2,643 ------------------------------------------------------------------- Percentage of Net Revenues (0.3%) (4.1%)
Loss before income tax benefit and accounting change increased to $2.9 million for the three months ended March 31, 2001 from $0.2 million for the three months ended March 31, 2000. The increase in the loss before income tax benefit and accounting change is mainly attributable to: (1) the decrease in net revenues of $1.4 million; (2) the increase in depreciation and amortization of $1.0 million; (3) the implementation this period of a new accounting standard for derivative instruments, resulting in a loss of $0.5 million; and (4) the equity loss from unconsolidated affiliate of $0.9 million, offset by a reduction in interest expense of $1.5 million.
THREE MONTHS ENDED ------------------ MARCH 31, 2000 MARCH 31, 2001 (AMOUNTS IN THOUSANDS) NET LOSS ($86) ($2,315) Increase of $2,229 ------------------------------------------------------------------- Percentage of Net Revenues (0.1%) (3.3%)
Net loss increased to $2.3 million for the three months ended March 31, 2001 from $0.1 million for the three months ended March 31, 2000. The increase in net loss is mainly attributable to: (1) all of the factors described above and (2) the cumulative effect of the accounting change, net of taxes, of $0.6 million, offset by the increase in the income tax benefit of $1.0 million. OTHER DATA
THREE MONTHS ENDED ------------------ MARCH 31, 2000 MARCH 31, 2001 (AMOUNTS IN THOUSANDS) BROADCAST CASH FLOW $24,684 $23,095 Decrease of $ 1,589 or 6.4% -------------------------------------------------------------------
Broadcast cash flow decreased 6.4% to $23.1 million for the three months ended March 31, 2001 from $24.7 million for the three months ended March 31, 2000. On a same station basis, broadcast cash flow decreased 5.7% to $23.1 million from $24.5 million for the same reasons that same station net revenues declined, which are described above. The overall decline in broadcast cash flow was affected by acquisitions and divestitures. Since January 1, 2000, we acquired stations with broadcast cash flow of $0.5 million for the three months ended March 31, 2001 and we divested stations that had broadcast cash flow of $0.9 million for the three months ended March 31, 2000 (including $0.7 million in broadcast cash flow from a sports contract for which we discontinued selling advertising).
THREE MONTHS ENDED ------------------ MARCH 31, 2000 MARCH 31, 2001 (AMOUNTS IN THOUSANDS) BROADCAST CASH FLOW MARGIN Decrease of 34.8% 33.3% -------------------------------------------------------------------
The broadcast cash flow margin decreased to 33.3% for the three months ended March 31, 2001 from 34.8% for the three months ended March 31, 2000. On a same station basis, our broadcast cash flow margin decreased to 33.6% from 13 14 34.2%. The decrease is primarily attributable to the same reasons that same station net revenues and same station broadcast cash flow declined, which are described above.
THREE MONTHS ENDED ------------------ MARCH 31, 2000 MARCH 31, 2001 (AMOUNTS IN THOUSANDS) AFTER TAX CASH FLOW $14,968 $15,082 Increase of $114 or 0.8% --------------------------------------------------------------------------------
After tax cash flow increased 0.8% to $15.1 million for the three months ended March 31, 2001 from $15.0 million for the three months ended March 31, 2000. Despite the decrease in broadcast cash flow for the reasons described above, after tax cash flow was positively affected by: (1) the decrease in interest expense, net of tax, due to the overall decrease in outstanding indebtedness and the decline in interest rates and (2) the tax benefits from the purchase of radio station assets since January 1, 2000. The amount of the deferred income tax expense was $3.8 million for the three months ended March 31, 2001 and $4.4 million for the three months ended March 31, 2000. LIQUIDITY AND CAPITAL RESOURCES We use a significant portion of our capital resources to consummate acquisitions. These acquisitions are funded from one or a combination of the following sources: (1) our bank facility (described below); (2) the sale of securities; (3) the swapping of our radio stations in transactions which qualify as "like-kind" exchanges under Section 1031 of the Internal Revenue Code and (4) internally-generated cash flow. Net cash flows provided by operating activities were $22.2 million and $3.1 million for the three months ended March 31, 2001 and 2000, respectively. Changes in our net cash flows provided by operating activities are primarily a result of changes in advertising revenues and station operating expenses, which are affected by the acquisition and disposition of radio stations during those periods. For the three months ended March 31, 2001, cash flows provided by operating activities were positively affected primarily by a decrease of $16.2 million in outstanding accounts receivable due to the seasonality of the business as first quarter net revenues are typically lower than the prior year's fourth quarter net revenues and to improved collection efforts. For the three months ended March 31, 2000, cash flows were negatively impacted by an increase of $4.9 million in accounts receivable and by a decrease of $7.5 million in accounts payable, accrued liabilities and income taxes payable as a result of the increase in cash requirements necessary to operate the 41 radio stations purchased from Sinclair Broadcast Group, Inc. on December 16, 1999. Net cash flows used in investing activities were $7.1 million and $11.3 million for the three months ended March 31, 2001 and 2000, respectively. Net cash flows used in financing activities were $15.3 million for the three months ended March 31, 2001 and net cash flows provided by financing activities were $7.4 million for the three months ended March 31, 2000. The cash flows for the three months ended March 31, 2001 reflect additions to property and equipment, investments consummated and the net decrease in borrowings. The cash flows for the three months ended March 31, 2000 reflect acquisitions consummated and the related borrowings. During the three months ended March 31, 2001, we reduced our outstanding debt by $16.0 million. We also increased the amount of investments by $2.8 million. As of March 31, 2001, we had $445.0 million of borrowings outstanding under our bank facility in addition to an outstanding letter of credit in the amount of $5.8 million. We expect to use the credit available under the revolving credit facility to fund future acquisitions. In addition to debt service and quarterly distributions under the TIDES, our principal liquidity requirements are for working capital and general corporate purposes, including capital expenditures, and, if appropriate opportunities arise, acquisitions of additional radio stations. Capital expenditures for the three months ended March 31, 2001, were $4.0 million, which included the balance of a $2.0 million commitment as of December 31, 2000, to fund construction of a studio relocation project. We estimate that an additional amount of capital expenditures for the balance of the fiscal year 2001 will be between $5.0 and $7.0 million. We believe that cash from operating activities, together with available revolving borrowings under our bank facility, should be sufficient to permit us to meet our financial obligations and fund our operations. However, we may require additional financing for future acquisitions, if any, and we cannot assure you that we will be able to obtain such financing on terms considered favorable by us. We entered into our bank facility as of December 16, 1999, with a syndicate of banks for $650.0 million in senior credit consisting of: (1) $325.0 million in a reducing revolving credit facility and (2) $325.0 million in a multi-draw term loan that was fully drawn as of March 31, 2001. Our bank facility was established to: (1) refinance existing indebtedness; (2) provide working capital; and (3) fund corporate acquisitions. At our election, interest on any outstanding principal accrues at a rate based on either LIBOR plus a spread which ranges from 0.75% to 2.375% or on the prime rate plus a spread of up to 1.125%, depending on our leverage ratio. Under the bank facility, the reducing revolving credit facility and the multi-draw term loan mature on September 30, 2007 and reduce on a quarterly basis beginning September 30, 2002 in quarterly amounts that vary from $12.2 million to $16.3 million for each loan. Our bank facility requires us to comply with certain financial covenants and leverage ratios that are defined terms within the agreement. We believe we are in compliance 14 15 with the covenants and leverage ratios. Our bank facility also provides that at any time prior to December 31, 2001, we may solicit additional incremental loans of up to $350.0 million, and we will be governed under the same terms as the term loan. RECENT PRONOUNCEMENTS Effective January 1, 2001, we adopted the Financial Accounting Standards Board's Statement of Accounting Standards ("SFAS") No. 133 entitled "Accounting for Derivative and Hedging Activities" and amended by SFAS No. 137 and SFAS No. 138. SFAS No. 133 established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, which are collectively referred to as derivatives, and for hedging activities. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value. If the derivative is designated in a fair value hedge, the changes in the fair value of the derivative and the hedged item are recognized in the statement of operations. If the derivative is designated as a cash flow hedge, changes in the fair value of the derivative are recorded in other comprehensive income (loss) and are recognized in the statement of operations when the hedged item affects net income (loss). SFAS No. 133 defines new requirements for designation and documentation of hedging relationships as well as on going effectiveness assessments in order to use hedge accounting under this standard. A derivative that does not qualify as a hedge is marked to fair value through the statement of operations. For those derivatives with a notional amount of $30.0 million that did not qualify for hedge accounting treatment, for the three months ended March 31, 2001, we recorded to the statement of operations a $0.4 million loss under the cumulative effect of accounting change as an accumulated transition adjustment and a $0.8 million loss under loss on derivative instruments as the adjustment for this period. For those derivatives designated as cash flow hedges with a notional amount of $233.0 million, we recorded: (1) the ineffective amount of the hedges to the statement of operations as a $0.6 million loss under the cumulative effect of accounting change as an accumulated transition adjustment and as a $0.3 million gain under loss on derivative instruments as the adjustment for this period and (2) the effective amount of the hedges to other comprehensive loss, as a $1.1 million loss as an accumulated transition adjustment and as a $2.8 million loss as the adjustment for this period. We calculated the transition and current period adjustments in accordance with tentative accounting guidance issued by the Derivatives Implementation Group, and therefore, the guidance could be subject to change. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our bank facility requires us to protect ourselves from interest rate fluctuations through the use of derivative rate hedging instruments. As a result, we have entered into various interest rate transactions with various banks, which we define as "Rate Hedging Transactions", designed to mitigate our exposure to significantly higher floating interest rates. A rate cap agreement establishes an upper limit or "cap" for the base LIBOR rate and a rate floor agreement establishes a lower limit or "floor" for the base LIBOR rate. Several of the agreements cover a rate cap and a rate floor and have been entered into simultaneously with the same bank. Swap agreements require that we pay a fixed rate of interest on the notional amount to a bank and the bank pay to us a variable rate equal to three-month LIBOR. As of March 31, 2001, we have Rate Hedging Transactions in place for a total notional amount of $263.0 million. All of the Rate Hedging Transactions are tied to the three-month LIBOR interest rate, which may fluctuate significantly on a daily basis. The valuation of each of the Rate Hedging Transactions is affected by the change in the three-month LIBOR rate and the remaining term of the agreement. Any increase in the three-month LIBOR rate results in a more favorable valuation, while any decrease in the three-month LIBOR rate results in a less favorable valuation for each of the Rate Hedging Transactions. As of March 31, 2001, we recognized losses in the statement of operations and the statement of other comprehensive loss as these losses were negatively affected by a decrease in the three-month LIBOR rate at March 31, 2001, as compared to December 31, 2000, offset by a reduction in the average remaining period under each of the outstanding Rate Hedging Transactions. See also additional disclosures regarding "Liquidity and Capital Resources" made under Item 2, above. 15 16 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We are from time to time involved in litigation incidental to the conduct of our business, but we are not a party to any lawsuit or proceeding which, in our opinion, is likely to have a material adverse effect on us. We entered into a preliminary agreement on February 6, 1996, to acquire the assets of radio station KWOD-FM, Sacramento, California, from Royce International Broadcasting Corporation ("Royce"), subject to approval by the FCC, for a purchase price of $25.0 million. Notwithstanding efforts by us to pursue this transaction, Royce has been non-responsive. On July 28, 1999, we commenced a legal action seeking to enforce this agreement, and subsequently Royce filed a cross-complaint against us asking for treble damages, an injunction, attorney's fees and costs and filed a separate action against our President. This separate action against our President was dismissed without leave to amend in February 2000. We are pursuing legal action against Royce and seeking dismissal of the cross-complaint. We estimate that the impact of an unfavorable outcome will not materially impact our financial position, results of operations or cash flows. However, we cannot determine if and when the transaction might occur. In October 1999, The Radio Music License Committee, of which we are a participant, filed a motion in the New York courts against Broadcast Music, Inc. commencing a rate-making proceeding, on behalf of the radio industry, seeking a determination of fair and reasonable industry-wide license fees. We are currently operating under interim license agreements for the period commencing January 1, 1997 at the rates and terms reflected in prior agreements. We estimate that the impact of an unfavorable outcome of the motion will not materially impact our financial position, results of operations or cash flows. In December 2000, the U.S. Copyright Office, under the Digital Millennium Copyright Act, issued a final rule that AM and FM radio broadcast signals transmitted simultaneously over a digital communications network, are subject to the sound recording copyright owner's exclusive right of performance. This would result in the imposition of license fees for Internet streaming and other digital media. As a result of this decision, we must now participate in an arbitration proceeding at the U.S. Copyright Office to determine the amount of the fees that are due from the use of sound recordings in Internet streaming. We, along with other broadcasters and the National Association of Broadcasters, previously commenced a legal action in New York challenging the imposition of these license fees. In addition, we have commenced a legal action, together with other radio broadcasters, seeking declaratory relief as to the impact of the final rule of the Copyright Office. We intend to pursue this action. However, we cannot determine the likelihood of success. We estimate that the impact of an unfavorable determination will not materially impact our financial position, results of operations or cash flows. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None to report. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None to report. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None to report. ITEM 5. OTHER INFORMATION None to report. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
Exhibit Number Description - ------ ----------- 3.01 Amended and Restated Articles of Incorporation of the Registrant (1) 3.02 Form of Amended and Restated Bylaws of the Registrant (1) 10.01 Employment Agreement, dated June 25, 1993, between the Registrant and Joseph M. Field, as amended (1)
16 17
10.02 Employment Agreement, dated December 17, 1998, between the Registrant and David J. Field, as amended (1) 10.03 Employment Agreement, dated December 17, 1998, between the Registrant and John C. Donlevie, as amended (1) 10.04 Employment Agreement, dated November 13, 1998, between the Registrant and Stephen F. Fisher (1) 10.05 Asset Purchase Agreement, dated as of May 11, 2000, among the Registrant, Entercom Kansas City, LLC, Entercom Kansas City License, LLC, and Susquehanna Radio Corp. (See table of contents for list of omitted schedules and exhibits, which the Registrant hereby agrees to furnish supplementally to the Securities and Exchange Commission upon request) (2) 10.06 Credit Agreement, dated as of December 16, 1999, among Entercom Radio, LLC, as the Borrower, the Registrant, as a Guarantor, Banc of America Securities LLC, as Sole Lead Arranger and Book Manager, Key Corporate Capital, Inc., as Administrative Agent, and Co-Documentation Agent, Bank of America, N.A., as Syndication Agent, and Co-Documentation Agent and the Financial Institutions listed therein (4) 10.07 Amended and Restated Asset Purchase Agreement, dated as of August 20, 1999, among the Registrant, Sinclair Communications, Inc., WCGV, Inc., Sinclair Radio of Milwaukee Licensee, LLC, Sinclair Radio of New Orleans Licensee, LLC, Sinclair Radio of Memphis, Inc., Sinclair Radio of Memphis Licensee, Inc., Sinclair Properties, LLC, Sinclair Radio of Norfolk/Greensboro Licensee, L.P., Sinclair Radio of Buffalo, Inc., Sinclair Radio of Buffalo Licensee, LLC, WLFL, Inc., Sinclair Radio of Greenville Licensee, Inc., Sinclair Radio of Wilkes-Barre, Inc. and Sinclair Radio of Wilkes-Barre Licensee, LLC. (See table of contents for list of omitted schedules and exhibits, which the Registrant hereby agrees to furnish supplementally to the Securities and Exchange Commission upon request (3) 10.08 Asset Purchase Agreement, dated as of August 20, 1999, among the Registrant, Sinclair Communications, Inc., Sinclair Media III, Inc. and Sinclair Radio of Kansas City Licensee, LLC. (See table of contents for list of omitted schedules and exhibits, which the Registrant hereby agrees to furnish supplementally to the Securities and Exchange Commission upon request (3)
(1) Incorporated by reference to the Registrant's Registration Statement on Form S-1 (File No. 333-61381) (2) Incorporated by reference to the Registrant's Quarterly Report on Form 10Q. (File No. 001-14461) (3) Incorporated by reference to the Registrant's Registration Statement on Form S-1. (File No. 333-86397) (4) Incorporated by reference to the Registrant's Current Report on Form 8-K. (File No. 001-14461). (b) Reports filed on Form 8-K On January 17, 2001, we filed a report on Form 8-K to disclose unaudited financial information for the year ended December 31, 1999 and for the nine-months ended September 30, 2000. On March 28, 2001, we filed a report on Form 8-K to report the dismissal of Deloitte & Touche LLP as our independent accountant and the engagement of Arthur Andersen LLP as our new independent accountant as of March 23, 2001. The decision to change accountants was recommended by the audit committee to the board of directors and was approved by the board of directors. Deloitte & Touche LLP's opinions on our financial statements for the fiscal years ended December 31, 2000 and 1999 did not contain an adverse opinion or a disclaimer of opinion, nor were such opinions qualified or modified as to uncertainty, audit scope or accounting principles. 17 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ENTERCOM COMMUNICATIONS CORP. (Registrant) Date: May 11, 2001 /s/ Joseph M. Field -------------------- Name: Joseph M. Field Title: Chief Executive Officer Date: May 11, 2001 /s/ David J. Field ------------------- Name: David J. Field Title: President and Chief Operating Officer Date: May 11, 2001 /s/ Stephen F. Fisher --------------------- Name: Stephen F. Fisher Title: Executive Vice President and Chief Financial Officer 18 -----END PRIVACY-ENHANCED MESSAGE-----