Cox Radio 10Q 2003 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2003

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-12187

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.)

6205 Peachtree Dunwoody Road

Atlanta, Georgia 30328

(Address of principal executive offices and zip code)

(678) 645-0000

(Registrant’s telephone number, including area code)

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 by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). 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, par value of $0.33 - 41,678,042 shares outstanding as of October 31, 2003.

Class B common stock, par value of $0.33 - 58,733,016 shares outstanding as of October 31, 2003.

COX RADIO, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2003

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	16

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23

Item 4.	Controls and Procedures	23

	Part II – Other Information

Item 1.	Legal Proceedings	24

Item 6.	Exhibits and Reports on Form 8-K	25

Signatures		26

Preliminary Note

This Quarterly Report on Form 10-Q is for the three-month and nine-month periods ended September 30, 2003. This Quarterly Report modifies and supersedes documents filed prior to this Quarterly Report. The SEC allows us to “incorporate by reference” information that we file with them, which means that we can disclose important information to you by referring you directly to those documents. Information incorporated by reference is considered to be part of this Quarterly Report. In addition, information that we file with the SEC in the future will automatically update and supersede information contained in this Quarterly Report. In this Quarterly Report, “Cox Radio,” “we,” “us” and “our” refer to Cox Radio, Inc. and its subsidiaries.

Part I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

COX RADIO, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30, 2003			December 31, 2002
	(Amounts in thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	7,206		$	4,681
Accounts and notes receivable, less allowance for doubtful accounts of $4,631 and $4,791, respectively		86,497			86,876
Prepaid expenses and other current assets		9,203			7,567
Amounts due from Cox Enterprises.		—			3,059

Total current assets		102,906			102,183
Property and equipment, net		79,308			79,304
FCC licenses and other intangible assets, net		2,028,827			2,023,525
Goodwill		46,318			46,514
Other assets		18,604			20,186

Total assets	$	2,275,963		$	2,271,712

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	26,790		$	27,821
Accrued salaries and wages		4,797			6,449
Accrued interest		4,690			7,966
Income taxes payable		16,431			12,109
Amounts due to Cox Enterprises.		2,239			—
Other current liabilities		3,618			2,083

Total current liabilities		58,565			56,428
Notes payable		554,710			614,602
Deferred income taxes		497,977			482,286
Other long term liabilities		5,237			6,907

Total liabilities		1,116,489			1,160,223

Commitments and contingencies (Note 5)

Shareholders’ equity:
Preferred stock, $0.33 par value: 15,000,000 shares authorized, none outstanding		—			—
Class A common stock, $0.33 par value; 210,000,000 shares authorized; 41,670,468 and 41,571,789 shares issued and 41,542,197 and 41,450,595 shares outstanding at September 30, 2003 and December 31, 2002, respectively		13,752			13,719
Class B common stock, $0.33 par value; 135,000,000 shares authorized; 58,733,016 shares issued and outstanding at September 30, 2003 and December 31, 2002		19,382			19,382
Additional paid-in capital		625,564			624,049
Accumulated other comprehensive loss, net of tax		(2,372	)		(3,082	)
Retained earnings		504,994			459,104

		1,161,320			1,113,172
Less: Class A common stock held in treasury (128,271 and 121,194 shares at cost, at September 30, 2003 and December 31, 2002, respectively)		(1,846	)		(1,683	)

Total shareholders’ equity		1,159,474			1,111,489

Total liabilities and shareholders’ equity	$	2,275,963		$	2,271,712

See notes to unaudited consolidated financial statements.

COX RADIO, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2002			2003			2002
Net revenues:
Local	$	78,707		$	82,377		$	228,666		$	229,672
National		26,224			23,792			71,492			65,910
Other		7,348			6,369			18,936			16,896

Total revenues		112,279			112,538			319,094			312,478

Operating expenses:
Cost of services (exclusive of depreciation shown separately below)		26,258			26,079			72,912			71,037
Selling, general and administrative		39,957			41,108			121,463			119,853
Corporate general and administrative		4,131			3,711			12,766			12,177
Depreciation		2,945			3,074			8,866			9,104
Amortization		29			30			88			89
Loss on sales of assets		24			21			52			396
Gain on sales of radio stations		—			(411	)		—			(309	)

Operating income		38,935			38,926			102,947			100,131

Other income (expense):
Interest income		7			23			9			32
Interest expense		(8,491	)		(10,012	)		(26,544	)		(30,250	)
Other - net		(123	)		(122	)		(362	)		(359	)

Income before income taxes and cumulative effect of accounting change		30,328			28,815			76,050			69,554

Current income tax expense		5,297			3,354			14,784			10,407
Deferred income tax expense		6,586			7,647			15,376			16,535

Total income tax expense		11,883			11,001			30,160			26,942

Income before cumulative effect of accounting change		18,445			17,814			45,890			42,612
Cumulative effect of accounting change, net of tax		—			—			—			(13,934	)

Net income	$	18,445		$	17,814		$	45,890		$	28,678


Basic net income per share
Income before cumulative effect of accounting change	$	0.18		$	0.18		$	0.46		$	0.43
Cumulative effect of accounting change		—			—			—			(0.14	)

Net income per common share	$	0.18		$	0.18		$	0.46		$	0.29


Diluted net income per share
Income before cumulative effect of accounting change	$	0.18		$	0.18		$	0.46		$	0.42
Cumulative effect of accounting change		—			—			—			(0.14	)

Net income per common share	$	0.18		$	0.18		$	0.46		$	0.28

Weighted average basic common shares outstanding		100,240			100,299			100,219			100,191

Weighted average diluted common shares outstanding		100,545			100,677			100,564			100,672

See notes to unaudited consolidated financial statements.

COX RADIO, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(Unaudited)

	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Retained Earnings		Treasury Stock				Total
	Class A Common Stock			Class B Common Stock										Treasury Stock
	Shares	Amount		Shares	Amount									Shares	Amount
	(Amounts in thousands)
Balance at December 31, 2002	41,572	$	13,719	58,733	$	19,382	$	624,049	$	(3,082	)	$	459,104	121	$	(1,683	)	$	1,111,489

Comprehensive income:
Net income	—		—	—		—		—		—			45,890	—		—			45,890
Unrealized gain on interest rate swaps	—		—	—		—		—		622			—	—		—			622
Reclassification to earnings of transition adjustments	—		—	—		—		—		88			—	—		—			88

Comprehensive income																			46,600

Repurchase of Class A common stock	—		—	—		—		—		—			—	7		(163	)		(163	)
Issuance of Class A common stock related to incentive plans including tax benefit of $494	98		33	—		—		1,515		—			—	—		—			1,548

Balance at September 30, 2003	41,670	$	13,752	58,733	$	19,382	$	625,564	$	(2,372	)	$	504,994	128	$	(1,846	)	$	1,159,474

See notes to unaudited consolidated financial statements.

COX RADIO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2003			2002
	(Amounts in thousands)
Cash flows from operating activities:
Net income	$	45,890		$	28,678
Items not requiring cash:
Depreciation		8,866			9,104
Amortization		88			89
Deferred income taxes		15,376			16,535
Tax benefit from exercise of stock options		494			2,011
Loss on sales of assets		52			396
Gain on sales of radio stations		—			(309	)
Cumulative effect of accounting change, net of tax		—			13,934
Changes in assets and liabilities (net of effects of acquisitions and dispositions):
Decrease (increase) in accounts receivable		379			(5,600	)
(Decrease) increase in accounts payable and accrued expenses		(986	)		5,144
(Decrease) increase in accrued salaries and wages		(1,652	)		548
Decrease in accrued interest		(3,276	)		(1,049	)
Increase in income taxes payable		4,322			6,222
Other, net		(482	)		39

Net cash provided by operating activities		69,071			75,742

Cash flows from investing activities:
Capital expenditures		(8,122	)		(8,862	)
Acquisitions and related expenses, net of cash acquired		(216	)		(377	)
Decrease in other long-term assets		584			4,480
Proceeds from sales of assets		14			51
Investment in signal upgrades		(4,864	)		(13,658	)
Proceeds from sales of radio stations		—			3,465

Net cash used in investing activities		(12,604	)		(14,901	)

Cash flows from financing activities:
Net borrowings (payments) of revolving credit facilities		40,000			(65,000	)
Repayment of 6.25% notes		(100,000	)		—
Proceeds from stock options exercised		1,054			3,367
Increase (decrease) in book overdrafts		103			(938	)
Repurchase of Class A common stock		(163	)		(28	)
Payment of debt issuance costs		(234	)		(181	)
Increase in amounts due from/to Cox Enterprises, Inc.		5,298			4,331

Net cash used in financing activities		(53,942	)		(58,449	)

Net increase in cash and cash equivalents		2,525			2,392
Cash and cash equivalents at beginning of period		4,681			7,961

Cash and cash equivalents at end of period	$	7,206		$	10,353

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	29,820		$	31,299
Income taxes		9,941			2,175

See notes to unaudited consolidated financial statements.

COX RADIO, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation and Other Information

Cox Radio is a leading national radio broadcasting company whose business, which constitutes one reportable segment for accounting purposes, is devoted to acquiring, developing and operating radio stations located throughout the United States. Cox Enterprises, Inc. indirectly owns approximately 62% of the common stock of Cox Radio and has approximately 94% of the voting power of Cox Radio.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America 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 accounting principles generally accepted in the United States of America 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, 2002 and notes thereto contained in Cox Radio’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission.

The results of operations for the three-month and nine-month periods ended September 30, 2003 are not necessarily indicative of the results to be expected for the year ending December 31, 2003 or any other period.

Certain prior year amounts have been reclassified for comparative purposes.

2. Summary of Significant Accounting Policies

Cash Equivalents

Cox Radio considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The carrying value of these investments approximates fair value.

Revenue Recognition

Cox Radio recognizes revenues when the following conditions are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the price is fixed and determinable; and collectibility is reasonably assured. These criteria are generally met for advertising revenue at the time an advertisement is broadcast. Advertising revenue is recorded net of advertising agency commissions. Cox Radio records an allowance for doubtful accounts based on historical information, analysis of credit memo data and any other relevant factors.

Corporate General and Administrative Expenses

Corporate general and administrative expenses consist of corporate overhead costs not specifically allocable to any of Cox Radio’s individual stations.

Advertising Expenses

Advertising expenses are expensed as incurred. Advertising expenses for the three-month and nine-month periods ended September 30, 2003 were $0.7 million and $5.6 million, respectively. Advertising expenses for the three-month and nine-month periods ended September 30, 2002 were $1.4 million and $5.0 million, respectively.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation. Depreciation is computed principally using the straight-line method at rates based upon estimated useful lives of 5 to 40 years for buildings and building improvements, 5 to 25 years for broadcast equipment, 7 to 10 years for furniture and fixtures and 2 to 5 years for computers, software and other equipment.

Expenditures for maintenance and repairs are charged to operating expense as incurred. At the time of retirements, sales or other dispositions of property, the original cost and related accumulated depreciation are written off.

Web Site Development Costs

Web site development activities include planning, design and development of graphics and content for new web sites and operation of existing sites. Cox Radio accounts for costs associated with such activities in accordance with the Emerging Issues Task Force (EITF) Issue No. 00-2, “Accounting for Web Site Development Costs.” Under this guidance, costs incurred that involve providing additional functions and features to the web site are capitalized. Costs associated with the planning phase, as well as the maintaining of the web site, are expensed as incurred. In addition, costs associated with content development and training are also expensed as incurred. Capitalized costs are generally amortized over two years.

Intangible Assets

Intangible assets consist primarily of Federal Communications Commission (FCC) broadcast licenses, but also include goodwill and certain other intangible assets acquired in purchase business combinations. Upon the adoption of Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” on January 1, 2002, Cox Radio ceased amortization of goodwill and FCC licenses, which are indefinite-lived intangible assets. Other intangible assets are amortized on a straight-line basis over the contractual lives of the assets.

Cox Radio evaluates its FCC licenses for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. FCC licenses are evaluated for impairment at the market level. If the carrying amount of FCC licenses is greater than their estimated fair value in a given market, the carrying amount of FCC licenses in that market is reduced to its estimated fair value. Cox Radio evaluates goodwill in each of its reporting units (markets) for impairment annually, or more frequently if certain circumstances are present. If the carrying amount of goodwill in a reporting unit is greater than the implied value of goodwill for that reporting unit determined from the estimated fair value of the reporting unit, the carrying amount of goodwill in that reporting unit is reduced to its estimated fair value.

Cox Radio utilizes independent appraisals in testing FCC licenses and goodwill for impairment. These appraisals principally use the discounted cash flow methodology. This income approach consists of a quantitative model, which incorporates variables such as market advertising revenues, market revenue share projections, anticipated operating profit margins and various discount rates. The variables used in the analysis reflect historical station and advertising market growth trends, as well as anticipated performance and market conditions. Multiples of operating cash flow are also considered. Cox Radio evaluates amortizing intangible assets for recoverability when circumstances indicate an impairment may have occurred, using an undiscounted cash flow methodology. If the future undiscounted cash flows for the intangible asset are less than net book value, net book value is reduced to the estimated fair value.

Other Assets

Other assets consist primarily of external costs incurred to facilitate signal upgrades, which enhance the value of Cox Radio’s FCC licenses. Upon completion of each signal upgrade, Cox Radio reclassifies the applicable amount to FCC licenses. During the first quarter of 2003, Cox Radio completed a signal upgrade at WBHK-FM in Birmingham, Alabama, and reclassified $5.4 million from other assets to FCC licenses. No signal upgrades were completed in the three-month period ended September 30, 2003.

Impairment of Long-Lived Assets

Cox Radio accounts for long-lived assets in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Long-lived assets and certain intangibles are required to be reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, with any impairment losses being reported in the period in which the recognition criteria are first applied based on the fair value of the asset. Cox Radio assesses the recoverability based on a review of estimated undiscounted cash flows. Long-lived assets and certain intangibles to be disposed of are required to be reported at the lower of carrying amount or fair value less cost to sell.

Income Taxes

Deferred income taxes are provided based on the liability method of accounting pursuant to SFAS No. 109, “Accounting for Income Taxes.” The liability method measures the expected tax impact of future taxable income or deductions resulting from differences in the tax and financial reporting bases of assets and liabilities reflected in the consolidated balance sheets and the expected tax impact of carryforwards for tax purposes. Cox Radio evaluates its effective tax rates regularly and adjusts rates when appropriate based on currently available information relative to statutory rates, apportionment factors and the applicable taxable income in the jurisdictions in which Cox Radio operates, among other factors.

Pension, Postretirement and Postemployment Benefits

Cox Enterprises generally provides defined pension benefits to eligible employees based on years of service and compensation during those years. Cox Enterprises also provides certain health care and life insurance benefits to eligible employees and retirees. For certain employees and retirees of Cox Radio eligible for such coverages, these benefits are provided through the Cox Enterprises plans. Expenses related to these plans are allocated to Cox Radio through the intercompany account. The amount of the allocations is generally based on actuarial determinations of the effect of Cox Radio employees’ participation in the Cox Enterprises plans.

Incentive Compensation Plans

Cox Radio accounts for stock compensation in accordance with the requirements of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. SFAS No. 123, “Accounting for Stock-Based Compensation” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” requires disclosure of the pro forma effects on net income and earnings per share as if Cox Radio had adopted the fair value recognition provisions of SFAS No. 123, as amended. Had compensation cost for the Long-Term Incentive Plan and the Employee Stock Purchase Plans (ESPP) been determined based on the fair value at the grant or enrollment dates in accordance with the fair value provisions of SFAS No. 123, as amended, Cox Radio’s net income and net income per share for the three-month and nine-month periods ended September 30, 2003 and 2002 would have been changed to the pro forma amounts indicated below:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2002			2003			2002
	(Amounts in thousands, except per share data)
Net income, as reported	$	18,445		$	17,814		$	45,890		$	28,678
Deduct: total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(2,538	)		(2,248	)		(6,997	)		(6,776	)

Pro forma net income	$	15,907		$	15,566		$	38,893		$	21,902

Earnings per share:
Basic – as reported	$	0.18		$	0.18		$	0.46		$	0.29

Basic – pro forma	$	0.16		$	0.16		$	0.39		$	0.22

Diluted – as reported	$	0.18		$	0.18		$	0.46		$	0.28

Diluted – pro forma	$	0.16		$	0.15		$	0.39		$	0.22

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Concentration of Risk

A significant portion of Cox Radio’s business historically has been conducted in the Atlanta market. Net revenues earned from radio stations located in Atlanta represented 28% and 26% of total revenues for the three-month and nine-month periods, respectively, ended September 30, 2003 and 28% and 27% of total revenues for the three-month and nine-month periods, respectively, ended September 30, 2002.

Recent Accounting Pronouncements

In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” SFAS No. 150 clarifies the definition of a liability as currently defined in FASB Concepts Statement No. 6, “Elements of Financial Statements,” as well as other planned revisions. This statement requires a financial instrument that embodies an obligation of an issuer to be classified as a liability. In addition, the statement establishes standards for the initial and subsequent measurement of these financial instruments and disclosure requirements. SFAS No. 150 became effective for Cox Radio on July 1, 2003. The adoption of this standard did not have a material impact on Cox Radio’s consolidated financial statements.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends SFAS No. 133 for decisions made as part of the FASB’s Derivatives Implementation Group process, other FASB projects dealing with financial instruments, and in connection with implementation issues raised in relation to the application of the definition of a derivative. This statement is generally effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of this standard did not have a material impact on Cox Radio’s consolidated financial statements.

In January 2003, the FASB issued Interpretation No. (FIN) 46, “Consolidation of Variable Interest Entities.” This interpretation clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” in determining whether a reporting entity should consolidate certain legal entities, including partnerships, limited liability companies, or trusts, among others, collectively defined as variable interest entities. This interpretation applies to variable interest entities created or obtained after January 31, 2003, and to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. FIN 46, as amended, was effective on February 1, 2003 for new transactions and is effective for reporting periods ending on or after December 15, 2003 for transactions entered into prior to February 1, 2003. Cox Radio has not entered into any new transactions subject to FIN 46 since February 1, 2003. Management believes adoption of this statement as it relates to transactions entered into prior to February 1, 2003 will not have a material impact on Cox Radio’s consolidated financial statements.

3. Earnings Per Common Share and Capital Structure

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2002			2003			2002
	(Amounts in thousands, except per share data)
Income before cumulative effect of accounting change	$	18,445		$	17,814		$	45,890		$	42,612
Cumulative effect of accounting change		—			—			—			(13,934	)

Net income	$	18,445		$	17,814		$	45,890		$	28,678

Earnings per share – basic
Weighted average common shares outstanding		100,240			100,299			100,219			100,191

Income before cumulative effect of accounting change per common share – basic	$	0.18		$	0.18		$	0.46		$	0.43
Cumulative effect of accounting change per common share – basic		—			—			—			(0.14	)

Net income per common share – basic	$	0.18		$	0.18		$	0. 46		$	0.29

Earnings per share – diluted
Weighted average common shares outstanding		100,240			100,299			100,219			100,191
Shares issuable on exercise of dilutive options		3,421			1,873			3,437			3,488
Shares assumed to be purchased with proceeds of options		(3,148	)		(1,557	)		(3,128	)		(3,082	)
Shares issuable pursuant to Employee Stock Purchase Plan		202			271			202			271
Shares assumed to be purchased with proceeds from Employee Stock Purchase Plan		(170	)		(209	)		(166	)		(196	)

Shares applicable to earnings per share – diluted		100,545			100,677			100,564			100,672

Income before cumulative effect of accounting change per common share – diluted	$	0.18		$	0.18		$	0.46		$	0.42
Cumulative effect of accounting change per common share – diluted		—			—			—			(0.14	)

Net income per common share—diluted	$	0.18		$	0.18		$	0.46		$	0.28

The options and ESPP purchase rights excluded from the computation of net income per common share - diluted for the three-month and nine-month periods ended September 30, 2003 and 2002 are summarized below. The exercise price of these options and the subscription price of these purchase rights were greater than the average market price of the Class A common stock during the three-month and nine-month periods ended September 30, 2003 and 2002.

	Three Months Ended September 30,		Nine Months Ended September 30,
	2003	2002	2003	2002

	(Amounts in thousands)
Options and ESPP purchase rights outstanding	2,248	2,378	2,231	763

4. Acquisitions and Dispositions of Businesses

Historically, Cox Radio has actively managed its portfolio of radio stations through selected acquisitions, dispositions and exchanges, as well as through the use of local marketing agreements, or LMAs, and joint sales agreements, or JSAs. Under an LMA or a JSA, the company operating a station provides programming or sales and marketing or a combination of such services on behalf of the owner of a station. The broadcast revenues and operating expenses of stations operated by Cox Radio under LMAs and JSAs have been included in Cox Radio’s operations since the respective effective dates of such agreements.

During the three-month and nine-month periods ended September 30, 2003 and through October 31, 2003, as well as during the three-month and nine-month periods ended September 30, 2002, Cox Radio did not enter into or consummate any acquisitions or dispositions.

5. Long-Term Debt, Commitments and Contingencies

Cox Radio’s outstanding debt for the periods presented consists of the following:

	September 30, 2003		December 31, 2002
	(Amounts in thousands)
6.25% notes payable, paid in May 2003 (1)	$	—	$	99,998
6.375% notes payable, due in May 2005 (2)		99,932		99,902
6.625% notes payable, due in February 2006 (3)		249,778		249,702
Revolving credit facility		205,000		165,000

Total	$	554,710	$	614,602

(1)	At December 31, 2002, the estimated aggregate fair value of the 6.25% notes was approximately $101.4 million based on quoted market prices. In May 2003, Cox Radio repaid the $100.0 million principal amount of the 6.25% notes at maturity using funds from the five-year revolving credit facility.

(2)	At September 30, 2003 and December 31, 2002, the estimated aggregate fair value of the 6.375% notes was approximately $106.8 million and $106.5 million, respectively, based on quoted market prices.

(3)	At September 30, 2003 and December 31, 2002, the estimated fair value of these notes was approximately $273.8 million and $269.3 million, respectively, based on quoted market prices.

On June 30, 2000, Cox Radio entered into a $350 million, five-year senior unsecured revolving credit facility. On June 27, 2003, Cox Radio renewed its existing $150 million 364-day senior unsecured revolving credit facility. The interest rate for both the 364-day facility and the five-year facility is, at Cox Radio’s option: the greater of the prime rate or the federal funds borrowing rate plus 0.5%; the London Interbank Offered Rate plus a spread based on the credit ratings of Cox Radio’s senior long-term debt; or the bid rate for the purchase of certificates of deposit of equal principal amount and maturity plus a spread based on the credit ratings of Cox Radio’s senior long-term debt. Under the 364-day facility, Cox Radio may also choose an interest rate based on the federal funds rate plus a spread based on the credit ratings of Cox Radio’s senior long-term debt and certain financial covenants. The 364-day facility also provides for a letter of credit facility. The facilities include commitment fees on the unused portion of the total amount available of 0.09% to 0.25% based on the credit ratings of Cox Radio’s senior long-term debt. Each facility contains, among other provisions, specified leverage and interest coverage requirements, the terms of which are defined within each credit facility. At September 30, 2003, Cox Radio was in compliance with these covenants. Cox Radio’s credit facilities contain events of default based on (i) the failure to pay when due other debt, the outstanding amount of which exceeds $25 million, after the expiration of applicable grace periods and (ii) the acceleration of other debt, the outstanding amount of which exceeds $25 million. Cox Radio is not in default under its credit facilities. At September 30, 2003, Cox Radio had $205 million of outstanding indebtedness under the five-year facility with $145 million available, and no amounts outstanding under the 364-day facility with $150 million available. The interest rate applied to amounts due under the bank credit facilities was 1.745% at September 30, 2003. At December 31, 2002, Cox Radio had approximately $165 million of outstanding indebtedness under the five-year facility with $185 million available, and no amounts outstanding under the 364-day facility with $150 million available. The interest rate applied to amounts due under the bank credit facilities was 2.1% at December 31, 2002. Since the interest rate is variable, the recorded balance of the credit facilities approximates fair value. See Note 6 for a discussion of Cox Radio’s interest rate swap agreements.

Cox Radio has an effective universal shelf registration statement under which Cox Radio may from time to time offer and issue debentures, notes, bonds and other evidence of indebtedness and forward contracts in respect of any such indebtedness, shares of preferred stock, shares of Class A common stock, warrants, stock purchase contracts, stock purchase units and stock purchase rights, and two financing trusts sponsored by Cox Radio may offer and issue preferred securities of the trusts for an original maximum aggregate offering amount of $750 million. Unless otherwise described in future prospectus supplements, Cox Radio intends to use the net proceeds from the sale of securities registered under this universal shelf registration statement for general corporate purposes, which may include additions to working capital, the repayment or redemption of existing indebtedness and the financing of capital expenditures and acquisitions. At September 30, 2003 and December 31, 2002, $244.8 million was available under the universal shelf registration statement.

Cox Radio also has various commitments under the following types of contracts: capitalized and operating leases; long-term debt; long-term contracts and certain other operating contracts with aggregate minimum annual commitments as of September 30, 2003 as follows:

	Payments Due by Period
	Total		October 1, to December 31, 2003		2004		2005		2006		2007		After 2007
	(Amounts in thousands)
Leases (1)	$	40,033	$	1,435	$	5,490	$	5,340	$	5,004	$	4,122	$	18,642
Long-term debt (2)		555,000		—		—		305,000		250,000		—		—
Long-term contracts (3)		41,774		4,958		23,030		7,315		4,975		1,468		28
Other operating contracts		890		40		218		158		158		158		158

Total	$	637,697	$	6,433	$	28,738	$	317,813	$	260,137	$	5,748	$	18,828

(1)	Cox Radio has long-term capitalized and non-cancelable operating lease commitments for studio and office facilities, studio and general office equipment and transmitter and antenna sites.

(2)

Cox Radio’s failure to comply with its financial covenants, scheduled interest payments, scheduled principal repayments, or any other terms of its revolving five-year credit facility could result in the acceleration of the maturity of its outstanding indebtedness. At September 30, 2003, Cox Radio had $205 million of outstanding indebtedness under the revolving five-year credit facility.

(3)	Long-term contracts include, but are not limited to, sports programming and on-air personalities.

At September 30, 2003, Cox Radio was the guarantor of certain senior debt of Honolulu Broadcasting, Inc. totaling $6.6 million. Honolulu Broadcasting owns KGMZ-FM, serving Honolulu, Hawaii. This debt consists of a one-year renewable term loan secured by the assets of KGMZ-FM, the proceeds of which were used by Honolulu Broadcasting to finance the purchase of this station. Cox Radio provides sales and marketing services under a JSA to this station pursuant to which Cox Radio sells advertising on the station, which it records as revenues, provides marketing services for the station, and pays a JSA fee to Honolulu Broadcasting in an amount sufficient to service this debt. In addition, Cox Radio believes that the fair value of KGMZ-FM exceeds the liabilities of Honolulu Broadcasting, including the outstanding renewable term loan. As a result, Cox Radio considers the risk of loss related to this guarantee to be remote at this time. In February 2001, Cox Radio also entered into a JSA agreement with Honolulu Broadcasting to provide sales and marketing services for WARV-FM, serving Richmond, Virginia, and simultaneously guaranteed Honolulu Broadcasting’s financing for the acquisition of this station. During February 2003, Honolulu Broadcasting sold WARV-FM, terminating the related JSA, and repaid the related indebtedness of $1.0 million. This reduced the collective amount of Cox Radio’s guarantee from $7.6 million to $6.6 million.

In October 1999, the Radio Music License Committee, of which Cox Radio is a participant, filed a motion in the New York courts against Broadcast Music, Inc. to commence a rate-making proceeding on behalf of the radio industry and to seek a determination of fair and reasonable industry-wide license fees for the broadcast of music. In September 2002, the rate court proceeding between the Radio Music License Committee and Broadcast Music, Inc. was adjourned, and the parties engaged in settlement discussions. On September 17, 2003, the court signed an order approving a settlement agreement among the parties, which grants music licenses to members of the Radio Music License Committee, including Cox Radio, through 2006. Among other things, the settlement approves the license fees for Cox Radio at the interim license agreement rates through 2002 and establishes industry rates for 2003 through 2006 according to an agreed allocation method to be applied each year. As a result of this settlement, Cox Radio reversed approximately $1.0 million in music license fee accruals during the third quarter of 2003. This litigation is now concluded.

On October 11, 2000, Cox Radio and its controlling shareholder, Cox Broadcasting, Inc., were sued in Georgia federal court by broadcast station broker Force Communications, for alleged breach of contract and other theories involving a failure to pay the broker a commission allegedly due on two transactions. The suit sought contract damages in excess of $5 million plus interest, costs, expenses and attorneys’ fees. Following completion of discovery, the parties filed cross-motions for summary judgment and on July 1, 2002, the court granted defendants’ motion for summary judgment and denied Force Communications’ cross-motion for partial summary judgment. On July 5, 2002, the court entered judgment in favor of Cox Radio and Cox Broadcasting on all counts. On July 31, 2002, Force Communications filed a notice of appeal to the United States Court of Appeals for the 11th Circuit from the order entering summary judgment in favor of Cox Radio and Cox Broadcasting and from the entry of judgment. Force Communications, Cox Radio and Cox Broadcasting agreed on January 23, 2003 to resolve this matter through binding arbitration. Pursuant to that agreement, on June 25, 2003, the arbitrator issued an award of $1.2 million to Force Communications. As a result of this settlement, $0.4 million was recorded as a reduction of corporate general and administrative expenses during the second quarter of 2003 based on amounts previously accrued for this matter. Following payment of that award, on July 23, 2003, the 11th Circuit dismissed the appeal with prejudice pursuant to the parties’ joint motion.

On June 13, 2001, Cox Radio was named as defendant in a putative class action suit filed in an amended complaint in the state court in Fulton County, Georgia, alleging violations of the Federal Telephone Consumer Protection Act (TCPA). The complaint seeks statutory damages in the amount of $1,500, plus attorneys’ fees, on behalf of each person “throughout the State of Georgia” who received an unsolicited pre-recorded telephone message delivering an “unsolicited advertisement” from a Cox Radio radio station. Cox Radio filed an answer to the complaint denying liability and asserting numerous defenses. Thereafter, proceedings in this case were stayed pending rulings by the Georgia Court of Appeals in a similar action pending against a third-party radio broadcast company. This stay was lifted on August 13, 2003 following rulings by the Court of Appeals in the third-party case directing the trial court to consider certain constitutional defenses raised by the defendant. On July 3, 2003, the FCC issued a Report and Order holding, among other things, that pre-recorded telephone messages by broadcasters made for the purpose of inviting consumers to listen to a free broadcast are not “unsolicited advertisements” prohibited by the TCPA. On July 28, 2003, Cox Radio requested that the plaintiffs voluntarily dismiss their claims in light of the FCC’s Report and Order. Plaintiffs subsequently refused this request, and on October 24, 2003, Cox Radio filed a motion for judgment on the pleadings seeking the dismissal of plaintiffs’ claims on grounds that the calls in question were permissible under the TCPA and the FCC’s implementing rules and, alternatively, that the application of the TCPA to the facts of this case would violate Cox Radio’s constitutional rights to free speech, equal protection and due process. Cox Radio intends to defend this action vigorously if the plaintiffs do not agree voluntarily to dismiss their claims. At the present time, Cox Radio cannot reasonably estimate the possible loss or range of loss with respect to this lawsuit. The outcome of this matter cannot be predicted at this time.

Cox Radio is a party to various other legal proceedings that are ordinary and incidental to its business. Management does not expect that any of these legal proceedings currently pending will have a material adverse impact on Cox Radio’s consolidated financial position, consolidated results of operations or cash flows.

6. Derivative Instruments and Hedging Activities

Cox Radio is exposed to fluctuations in interest rates. Cox Radio actively monitors these fluctuations and uses derivative instruments from time to time to manage such risk. In accordance with its risk management strategy, Cox Radio uses derivative instruments only for the purpose of managing risk associated with an asset, liability, committed transaction or probable forecasted transaction that is identified by management. Cox Radio’s use of derivative instruments may result in short-term gains or losses and may increase volatility in its earnings.

Cox Radio had two interest rate swap agreements outstanding as of September 30, 2003, each of which is used to manage its exposure to the variability of future cash flows related to certain of its floating rate interest obligations that may result due to changes in interest rates. The counterparties to these interest rate swap agreements are 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.

Under SFAS No. 133, as amended, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 137, “Accounting for Derivative Instruments and Hedging Activities—Deferral of the Effective Date of SFAS No. 133,” SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities,” and SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” the accounting for changes in the fair values of derivative instruments at each new measurement date is dependent upon their intended use. The effective portion of changes in the fair values of derivative instruments designated as hedges of forecasted transactions, referred to as cash flow hedges, are deferred and recorded as a component of accumulated other comprehensive income until the hedged forecasted transactions occur and are recognized in earnings. The ineffective portion of changes in the fair values of derivative instruments designated as cash flow hedges are immediately reclassified to earnings. The differential paid or received on the interest rate swap agreements is recognized as an adjustment to interest expense. Cox Radio’s two interest rate swap agreements qualify as cash flow hedges.

During the three-month and nine-month periods ended September 30, 2003 and 2002, there was no ineffective portion related to the changes in fair values of the interest rate swap agreements and there were no amounts excluded from the measure of effectiveness. For the nine-month period ended September 30, 2003, approximately $154,000, before related income tax effects of approximately $66,000, was reclassified into earnings as interest expense. The balance of $2.4 million recorded in accumulated other comprehensive

loss at September 30, 2003 is expected to be reclassified into future earnings, contemporaneously with and offsetting changes in interest expense on certain of Cox Radio’s floating rate interest obligations. The estimated amount to be reclassified into future earnings as interest expense over the twelve months ending September 30, 2004 is approximately $1.5 million, before related income tax effects of approximately $0.4 million. The actual amount that will be reclassified to future earnings over the next twelve months may vary from this amount as a result of changes in market conditions related to interest rates.

At September 30, 2003, $50 million notional principal amount of interest rate swap agreements were outstanding at an average annual fixed rate of 6.3% and an average remaining maturity of 2.5 years. The estimated fair value of these swap agreements, based on current market rates, approximated a net payable of $4.7 million and $5.8 million at September 30, 2003 and December 31, 2002, respectively. The fair value of the swap agreements at September 30, 2003 is included in other current liabilities and other long-term liabilities according to the respective maturity dates of the swaps.

7. Goodwill and Other Intangible Assets

On January 1, 2002, Cox Radio adopted SFAS No. 142, which requires that goodwill and certain intangible assets, including FCC licenses, no longer be amortized but instead be tested for impairment at least annually. Cox Radio’s annual impairment testing date is January 1st.

In accordance with SFAS No. 142, Cox Radio discontinued the amortization of its FCC licenses and goodwill effective January 1, 2002. During the quarter ended March 31, 2002, Cox Radio recognized an after-tax impairment charge of $13.9 million for FCC licenses in certain markets based on independent appraisals as a result of adopting the provisions of SFAS No. 142. During the quarter ended March 31, 2003, Cox Radio performed its annual tests for impairment, and based on independent appraisals, no impairment of either FCC licenses or goodwill was indicated.

The following table reflects the components of intangible assets for the periods indicated:

	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
	(Amounts in thousands)
September 30, 2003
FCC licenses and other intangible assets, net	$	2,029,299	$	472	$	2,028,827
Goodwill		46,318		—		46,318

December 31, 2002
FCC licenses and other intangible assets, net		2,023,908		383		2,023,525
Goodwill		46,514		—		46,514

During the third quarter of 2003, Cox Radio reduced goodwill by $0.2 million for a previously unrecognized tax benefit related to a prior acquisition.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This report contains “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, among others, statements that relate to Cox Radio’s future plans, earnings, objectives, expectations, performance, and similar projections, as well as any facts or assumptions underlying these statements or projections. Actual results may differ materially from the results expressed or implied in these forward-looking statements, due to various risks, uncertainties or other factors. These factors include competition within the radio broadcasting industry, advertising demand in our markets, the possibility that advertisers may cancel or postpone schedules in response to political events, competition for audience share, our success in executing and integrating acquisitions, and our ability to generate sufficient cash flow to meet our debt service obligations and finance operations. For a more detailed discussion of these and other risk factors, see the Risk Factors section of Cox Radio’s Annual Report on Form 10-K for the year ended December 31, 2002. Cox Radio assumes no responsibility to update any forward-looking statements as a result of new information, future events or otherwise.

General

Cox Radio is a leading national radio broadcast company whose business is acquiring, developing and operating radio stations located throughout the United States. Cox Enterprises indirectly owns approximately 62% of the common stock of Cox Radio and has approximately 94% of the voting power of Cox Radio.

The primary source of Cox Radio’s revenues is the sale of local and national advertising to be broadcast on its radio stations. Historically, approximately 73% and 22% of Cox Radio’s net revenues have been generated from local and national advertising, respectively. Cox Radio’s most significant station operating expenses are employees’ salaries and benefits, commissions, programming expenses and advertising and promotional expenditures.

Cox Radio’s revenues vary throughout the year. As is typical in the radio broadcasting industry, Cox Radio’s revenues and operating income are generally lowest in the first quarter. 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.

Acquisitions and Dispositions

Historically, Cox Radio has actively managed its portfolio of radio stations through selected acquisitions, dispositions and exchanges, as well as through the use of local marketing agreements, or LMAs, and joint sales agreements, or JSAs. Under an LMA or a JSA, the company operating a station provides programming or sales and marketing or a combination of such services on behalf of the owner of a station. The broadcast revenues and operating expenses of stations operated by us under LMAs and JSAs have been included in Cox Radio’s operations since the respective effective dates of such agreements.

During the three-month and nine-month periods ended September 30, 2003 and through October 31, 2003, as well as during the three-month and nine-month periods ended September 30, 2003, Cox Radio did not enter into or consummate any acquisitions or dispositions.

Results of Operations

Cox Radio’s results of operations represent the operations of the radio stations owned or operated by Cox Radio, or for which it provides sales and marketing services, during the applicable periods. The following discussion should be read in conjunction with the accompanying consolidated financial statements and the related notes included in this report.

Three months ended September 30, 2003 compared to three months ended September 30, 2002

	September 30, 2003		September 30, 2002		$ Change			% Change
	(Amounts in thousands)
Net revenues:
Local	$	78,707	$	82,377	$	(3,670	)	(4.5	)%
National		26,224		23,792		2,432		10.2	%
Other		7,348		6,369		979		15.4	%

Total net revenues	$	112,279	$	112,538	$	(259	)	(0.2	)%

Net revenues are gross revenues less agency commissions. Local revenues are comprised of advertising sales made within a station’s local market or region either directly with the advertiser or through the advertiser’s agency. National revenues represent sales made to advertisers/agencies who are purchasing advertising for multiple markets; these sales are typically facilitated by our national representation firm, which serves as our sales agent in these transactions. Other revenues are comprised of Internet revenues, syndicated radio program revenues, network revenues and revenues from community events and sponsorships.

Net revenues for the third quarter of 2003 decreased $0.3 million to $112.3 million, a 0.2% decrease compared to the third quarter of 2002. National revenues improved in the third quarter of 2003, increasing 10.2% over the third quarter of 2002, and local revenues decreased 4.5% over the third quarter of 2002.

Net revenues for the third quarter of 2003 were flat with the third quarter of 2002. While our stations in the Southern Connecticut, Long Island and Tulsa markets were down, our Houston, Tampa, Richmond, Dayton and Greenville-Spartanburg markets delivered strong growth during the third quarter of 2003. Our revenues in Atlanta, our largest market, were down 1% compared to the market, which was down 2%, as reported in the Miller Kaplan Market Revenue Reports. Excluding the recently reformatted WFOX-FM, net revenues in Atlanta were up 3% for the quarter.

	September 30, 2003		September 30, 2002		$ Change		% Change
	(Amounts in thousands)
Cost of services (exclusive of depreciation shown separately below)	$	26,258	$	26,079	$	179	0.7	%

Cost of services is comprised of expenses incurred by our technical, news and programming departments. Cost of services for the third quarter of 2003 increased $0.2 million to $26.3 million compared to the third quarter of 2002. While program rights in Atlanta and talent fees increased for the third quarter of 2003 as compared to the third quarter of 2002, these charges were offset by the reversal of music license fee accruals of approximately $1.0 million during the third quarter of 2003 as a result of the resolution of the license fee rate making proceedings between the radio industry and Broadcast Music, Inc. See Note 5 to the unaudited consolidated financial statements for additional information on this matter.

	September 30, 2003		September 30, 2002		$ Change			% Change
	(Amounts in thousands)
Selling, general and administrative expenses	$	39,957	$	41,108	$	(1,151	)	(2.8	)%

Selling, general and administrative expenses are comprised of our sales, promotion and general and administrative departments. Selling, general and administrative expenses decreased approximately $1.2 million in the third quarter of 2003 compared to the third quarter of 2002 due to a reduction in promotional spending and bad debt expense.

	September 30, 2003		September 30, 2002			$ Change			% Change
	(Amounts in thousands)
Corporate general and administrative expenses	$	4,131	$	3,711		$	420		11.3	%
Depreciation		2,945		3,074			(129	)	(4.2	)%
Amortization		29		30			(1	)	(3.3	)%
Loss on sales of assets		24		21			3		14.3	%
Gain on sales of radio stations		—		(411	)		411		(100.0	)%

The increase in corporate general and administrative expenses can be attributed to costs associated with employee relocation, sales training and higher pension expense due to lower than expected investment returns and a lower discount rate used to measure pension expense, offset by adjustments to incentive compensation during the third quarter of 2003. There were no significant changes in depreciation or amortization and no material sales of assets. There were no sales of radio stations during the third quarter of 2003.

	September 30, 2003		September 30, 2002		$ Change		% Change
	(Amounts in thousands)
Operating income	$	38,935	$	38,926	$	9	—

Operating income for the third quarter of 2003 was $38.9 million, flat with the third quarter of 2002.

	September 30, 2003		September 30, 2002		$ Change			% Change
	(Amounts in thousands)
Interest expense	$	8,491	$	10,012	$	(1,521	)	(15.2	)%

Interest expense during the third quarter of 2003 totaled $8.5 million, as compared to $10.0 million for the third quarter of 2002. This was as a result of lower overall outstanding debt, as well as a lower average borrowing rate due to the repayment at maturity of the $100.0 million principal amount of our 6.25% notes with proceeds from our five-year revolving credit facility, with an average rate of 1.8% for the third quarter of 2003, as well as a decrease in the average interest rate on our outstanding floating rate debt.

	September 30, 2003		September 30, 2002		$ Change			% Change
	(Amounts in thousands)
Income taxes:
Current	$	5,297	$	3,354	$	1,943		57.9	%
Deferred		6,586		7,647		(1,061	)	(13.9	)%

Total income taxes	$	11,883	$	11,001	$	882		8.0	%

Income taxes increased approximately $0.9 million to $11.9 million in the third quarter of 2003 compared to $11.0 million in the third quarter of 2002, primarily as a result of increased earnings in 2003. The effective tax rates for the third quarter of 2003 and 2002 were 39.2% and 38.2%, respectively.

	September 30, 2003		September 30, 2002		$ Change		% Change
	(Amounts in thousands)
Net income	$	18,445	$	17,814	$	631	3.5	%

Net income for the third quarter of 2003 was $18.4 million compared to $17.8 million for the third quarter of 2002. This increase was primarily a result of the decrease in interest expense during the third quarter of 2003 as compared to the third quarter of 2002 and for the reasons discussed above.

Nine months ended September 30, 2003 compared to nine months ended September 30, 2002

	September 30, 2003		September 30, 2002		$ Change			% Change
	(Amounts in thousands)
Net revenues:
Local	$	228,666	$	229,672	$	(1,006	)	(0.4	)%
National		71,492		65,910		5,582		8.5	%
Other		18,936		16,896		2,040		12.1	%

Total net revenues	$	319,094	$	312,478	$	6,616		2.1	%

Net revenues for the nine months ended September 30, 2003 increased $6.6 million to $319.1 million, a 2.1% increase compared to the nine months ended September 30, 2002. Local revenues decreased 0.4% and national revenues increased 8.5% over the first nine months of 2002. Overall growth in revenues was primarily a result of the focus on our core strategy, which includes managing our inventories, maintaining our competitive rates and the successful execution of our consultative selling strategy.

During the nine months ended September 30, 2003, 12 of our 18 markets delivered revenue growth that either matched or outpaced their respective markets as reported in the Miller Kaplan Market Revenue Reports. The market leaders were Orlando, Tampa, Richmond, Louisville and Greenville-Spartanburg. These increases in revenues were partially offset by decreases in Atlanta, Southern Connecticut, Birmingham and Tulsa. During the first nine months of 2003, revenues at WFOX-FM in Atlanta, our recently reformatted station, decreased $3.3 million compared to the first nine months of 2002. Excluding WFOX-FM, net revenues in Atlanta were up 3% for the first nine months of 2003.

	September 30, 2003		September 30, 2002		$ Change		% Change
	(Amounts in thousands)
Cost of services (exclusive of depreciation shown separately below)	$	72,912	$	71,037	$	1,875	2.6	%

Cost of services for the nine months ended September 30, 2003 increased $1.9 million to $72.9 million, an increase of 2.6% compared to the nine months ended September 30, 2002. The most significant increases were in Atlanta, which consisted primarily of higher sports programming costs and costs associated with the reformatting of WFOX-FM. In addition, syndicated programming expenses increased as a result of new programming. These increases were offset by the reversal of music license fee accruals of approximately $1.0 million as a result of the resolution of the license fee rate making proceedings between the radio industry and Broadcast Music, Inc. See Note 5 to the unaudited consolidated financial statements for additional information on this matter.

	September 30, 2003		September 30, 2002		$ Change		% Change
	(Amounts in thousands)
Selling, general and administrative expenses	$	121,463	$	119,853	$	1,610	1.3	%

Selling, general and administrative expenses increased $1.6 million in the nine months of 2003 compared to the nine months of 2002. Promotional expenses increased during the first half of 2003 mainly due to increased promotional spending to maintain our competitive advantage. However, promotion spending was scaled back during the third quarter of 2003 due to decreased local revenues for the quarter. Selling expenses increased largely as a result of increased compensation costs, including higher sales commissions directly related to increased revenues during the first half of 2003, offset by a decrease in sales costs due to a change in the sales compensation structure in Atlanta and Southern Connecticut and a reduction in bad debt expenses.

	September 30, 2003		September 30, 2002			$ Change			% Change
	(Amounts in thousands)
Corporate general and administrative expenses	$	12,766	$	12,177		$	589		4.8	%
Depreciation		8,866		9,104			(238	)	(2.6	)%
Amortization		88		89			(1	)	(1.1	)%
Loss on sales of assets		52		396			(344	)	(86.9	)%
Gain on sales of radio stations		—		(309	)		309		(100.0	)%

The increase in corporate general and administrative expenses can be attributed to increased professional fees related to the documentation of our internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act, costs associated with employee relocation, sales training, and higher pension expense due to lower than expected investment returns and a lower discount rate used to measure pension expense. These increases were offset by adjustments to incentive compensation accruals during the third quarter of 2003, savings related to creating an in-house research department during 2002, and the $0.4 million reversal of an accrual as a result of the settlement of the Force Communications litigation in the second quarter of 2003. There were no significant changes in depreciation or amortization and no material sales of assets. There were no sales of radio stations during the first nine months of 2003.

	September 30, 2003		September 30, 2002		$ Change		% Change
	(Amounts in thousands)
Operating income	$	102,947	$	100,131	$	2,816	2.8	%

Operating income for the nine months ended September 30, 2003 increased $2.8 million to $102.9 million. This was primarily as a result of an increase in net revenues in excess of operating expenses as discussed above.

	September 30, 2003		September 30, 2002		$ Change			% Change
	(Amounts in thousands)
Interest expense	$	26,544	$	30,250	$	(3,706	)	(12.3	)%

Interest expense during the nine months ended September 30, 2003 totaled $26.5 million, as compared to $30.3 million for the nine months ended September 30, 2002. This was as a result of lower overall outstanding debt, as well as a lower average borrowing rate due to the repayment at maturity of the $100.0 million principal amount of our 6.25% notes with the proceeds from our five-year revolving credit facility, with an average rate of 1.9% for the first nine months of 2003, as well as a decrease in the average interest rate on our outstanding floating rate debt.

	September 30, 2003		September 30, 2002		$ Change			% Change
	(Amounts in thousands)
Income taxes:
Current	$	14,784	$	10,407	$	4,377		42.1	%
Deferred		15,376		16,535		(1,159	)	(7.0	)%

Total income taxes	$	30,160	$	26,942	$	3,218		11.9	%

Income taxes increased to $30.2 million in the nine months ended September 30, 2003 compared to $26.9 million in the nine months ended September 30, 2002, primarily as a result of increased earnings in 2003. The effective tax rates for the nine months of 2003 and 2002 were 39.7% and 38.7%, respectively.

	September 30, 2003		September 30, 2002		$ Change		% Change
	(Amounts in thousands)
Net income	$	45,890	$	28,678	$	17,212	60.0	%

Net income for the nine months ended September 30, 2003 was $45.9 million compared to $28.7 million for the nine months ended September 30, 2002. This increase was primarily as a result of a $13.9 million after-tax loss related to the cumulative effect of an accounting change as a result of adopting SFAS No. 142 in the first quarter of 2002, coupled with the increase in operating income and decrease in interest expense for the first nine months of 2003, as discussed above.

Liquidity and Capital Resources

Sources and Uses of Liquidity

Cox Radio’s primary sources of liquidity are cash provided by operations and through borrowings under its bank credit facilities. Net cash from operations results primarily from net income adjusted for non-cash items, including depreciation and amortization, deferred income taxes, gains or losses on sales of radio stations and changes in working capital accounts. Primary uses of liquidity include debt service, acquisitions, capital expenditures and investment in signal upgrades.

Cox Radio has an effective universal shelf registration statement under which it may from time to time offer and issue debentures, notes, bonds and other evidence of indebtedness and forward contracts in respect of any such indebtedness, shares of preferred stock, shares of Class A common stock, warrants, stock purchase contracts, stock purchase units and stock purchase rights, and two financing trusts sponsored by Cox Radio may offer and issue preferred securities of the trusts. At September 30, 2003 and December 31, 2002, $244.8 million was available under the universal shelf registration statement.

In addition, daily cash management needs have been funded through intercompany advances from Cox Enterprises. Our borrowings from Cox Enterprises are due on demand, but typically repaid within 30 days, and accrue interest at Cox Enterprises’ current commercial paper borrowing rate plus 40 basis points. Cox Enterprises continues to perform day-to-day cash management services for us. Cox Radio owed Cox Enterprises approximately $2.2 million at September 30, 2003, and Cox Enterprises owed Cox Radio approximately $3.1 million at December 31, 2002.

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 acquisitions, will be funded from various sources, including the proceeds from bank financing, intercompany advances from Cox Enterprises and, if or when appropriate, other issuances of securities.

Debt Service

On June 30, 2000, Cox Radio entered into a $350 million, five-year senior unsecured revolving credit facility. On June 27, 2003, Cox Radio renewed its existing $150 million 364-day senior unsecured revolving credit facility. The interest rate for both the 364-day facility and the five-year facility is, at Cox Radio’s option: the greater of the prime rate or the federal funds borrowing rate plus 0.5%; the London Interbank Offered Rate plus a spread based on the credit ratings of Cox Radio’s senior long-term debt; or the bid rate for the purchase of certificates of deposit of equal principal amount and maturity plus a spread based on the credit ratings of Cox Radio’s senior long-term debt. Under the 364-day facility, Cox Radio may also choose an interest rate based on the federal funds rate plus a spread based on the credit ratings of Cox Radio’s senior long-term debt and certain financial covenants. The 364-day facility also provides for a letter of credit facility. The facilities include commitment fees on the unused portion of the total amount available of 0.09% to 0.25% based on the credit ratings of Cox Radio’s senior long-term debt. Each facility contains, among other provisions, specified leverage and interest coverage requirements, the terms of which are defined within each credit facility. At September 30, 2003, Cox Radio was in compliance with these covenants. Cox Radio’s credit facilities contain events of default based on (i) the failure to pay when due other debt, the outstanding amount of which exceeds $25 million, after the expiration of applicable grace periods and (ii) the acceleration of other debt, the outstanding amount of which exceeds $25 million. Cox Radio is not in default under its credit facilities. At September 30, 2003, Cox Radio had $205 million of outstanding indebtedness under the five-year facility with $145 million available, and no amounts outstanding under the 364-day facility with $150 million available. The interest rate applied to amounts due under the bank credit facilities was 1.745% at September 30, 2003. At December 31, 2002, Cox Radio had approximately $165 million of outstanding indebtedness under the five-year facility with $185 million available, and no amounts outstanding under the 364-day facility with $150 million available. The interest rate applied to amounts due under the bank credit facilities was 2.1% at December 31, 2002. Since the interest rate is variable, the recorded balance of the credit facilities approximates fair value. See Note 6 to the consolidated financial statements for a discussion of Cox Radio’s interest rate swap agreements.

In May 2003, the $100 million principal amount of the 6.25% notes was repaid at maturity using funds from the five-year revolving credit facility. Cox Radio currently has $350 million in outstanding debt securities, as described below (dollar amounts in thousands):

Principal Amount	Interest Rate	Maturity
$100,000 (1)	6.375%	May 2005
$250,000 (2)	6.625%	February 2006

(1)	At September 30, 2003 and December 31, 2002, the estimated aggregate fair value of the 6.375% notes was approximately $106.8 million and $106.5 million, respectively, based on quoted market prices.

(2)	At September 30, 2003 and December 31, 2002, the estimated fair value of these notes was approximately $273.8 million and $269.3 million, respectively, based on quoted market prices.

Off-Balance Sheet Arrangements

Cox Radio’s off-balance sheet arrangements consist primarily of lease commitments and contracts for sports programming and on-air personalities (which are disclosed in Note 5 to Cox Radio’s consolidated financial statements included in this report) and the guarantee discussed below. Cox Radio does not have any majority-owned subsidiaries that are not included in its consolidated financial statements, nor does Cox Radio have any interests in or relationships with any variable interest entities.

Broadcasting, including the outstanding renewable term loan. As a result, Cox Radio considers the risk of loss related to this guarantee to be remote at this time. In February 2001, Cox Radio also entered into a JSA agreement with Honolulu Broadcasting to provide sales and marketing services for WARV-FM, serving Richmond, Virginia, and simultaneously guaranteed Honolulu Broadcasting’s financing for the acquisition of this station. During February 2003, Honolulu Broadcasting sold WARV-FM, terminating the related JSA, and repaid the related indebtedness of $1.0 million. This reduced the collective amount of Cox Radio’s guarantee from $7.6 million to $6.6 million.

Summary Disclosures about Contractual Obligations

	Payments Due by Period
	Total		October 1, to December 31, 2003		2004		2005		2006		2007		After 2007
	(Amounts in thousands)
Leases (1)	$	40,033	$	1,435	$	5,490	$	5,340	$	5,004	$	4,122	$	18,642
Long-term debt (2)		555,000		—		—		305,000		250,000		—		—
Long-term contracts (3)		41,774		4,958		23,030		7,315		4,975		1,468		28
Other operating contracts		890		40		218		158		158		158		158

Total	$	637,697	$	6,433	$	28,738	$	317,813	$	260,137	$	5,748	$	18,828

(1)	Cox Radio has long-term capitalized and non-cancelable operating lease commitments for studio and office facilities, studio and general office equipment and transmitter and antenna sites.

(2)

(3)	Long-term contracts include, but are not limited to, sports programming and on-air personalities.

Impact of Inflation

The impact of inflation on our operations has not been significant to date. However, there can be no assurance that a high rate of inflation in the future would not have an adverse impact on our operating results.

ITEM 3. Quantitative and Qualitative Disclosure About Market Risk

Cox Radio is exposed to a number of financial market risks in the ordinary course of business. Cox Radio’s primary financial market risk exposure pertains to changes in interest rates.

Cox Radio has examined exposures to these risks and concluded that none of the exposures in these areas are material to cash flows or earnings. Cox Radio has engaged in several strategies to manage these market risks. Cox Radio’s indebtedness under its various financing arrangements creates interest rate risk. In connection with each debt issuance and as a result of continual monitoring of interest rates, Cox Radio has entered into interest rate swap agreements for purposes of managing borrowing costs.

Pursuant to the interest rate swap agreements, Cox Radio has exchanged its floating rate interest obligations on an aggregate of $50 million in notional principal amount of debt for fixed interest rates. These agreements have an average annual fixed rate of 6.3% and an average remaining maturity of two and one half years. Concurrently with the adoption of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” in January 2001, Cox Radio formally designated these agreements as cash flow hedges as discussed in Note 6 to the consolidated financial statements included herein. Cox Radio is exposed to a credit loss in the event of nonperformance by the counterparties to the interest rate swap agreements. However, Cox Radio does not anticipate nonperformance by such counterparties, and no material loss would be expected in the event of the counterparties’ nonperformance. The estimated fair value of the swap agreements, based on current market rates, approximated a net payable of $4.8 million and $5.8 million at September 30, 2003 and December 31, 2002, respectively. The fair value of the swap agreements at September 30, 2003 is included in other current liabilities and other long-term liabilities according to the respective maturity dates of the swaps.

The determination of the estimated fair value of Cox Radio’s fixed-rate debt is subject to the effects of interest rate risk. The estimated fair value of the fixed-rate debt instruments at September 30, 2003 was $380.6 million, compared to a carrying amount of $349.7 million. The estimated fair value of Cox Radio’s fixed-rate debt instruments at December 31, 2002 was $477.1 million, compared to a carrying amount of $449.6 million. The effect of a hypothetical one percentage point decrease in interest rates would be to increase the estimated fair value of the fixed-rate debt instruments from $380.6 million to $388.5 million at September 30, 2003, and from $477.1 million to $487.6 million at December 31, 2002.

The estimated fair values of debt instruments are based on discounted cash flow analyses using Cox Radio’s borrowing rates for similar types of borrowing arrangements and dealer quotations. The revolving credit facilities and Cox Enterprises’ borrowings bear interest based on current market rates and, thus, approximate fair value. Cox Radio is exposed to interest rate volatility with respect to the foregoing variable rate debt instruments.

With respect to financial instruments, Cox Radio has estimated the fair values of such instruments using available market information and valuation methodologies that it believes to be appropriate. Considerable judgment, however, is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that Cox Radio would realize or pay in a current market exchange.

ITEM 4. Controls and Procedures

The Chief Executive Officer and the Chief Financial Officer of Cox Radio (its principal executive officer and principal financial officer, respectively) have concluded, based on their evaluation as of September 30, 2003, the end of the fiscal quarter to which this report relates, that Cox Radio’s disclosure controls and procedures: are effective to ensure that information required to be disclosed by Cox Radio in the reports filed or submitted by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and include controls and procedures designed to ensure that information required to be disclosed by Cox Radio in such reports is accumulated and communicated to Cox Radio’s management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in Cox Radio’s internal control over financial reporting during the period covered by this report that materially affected, or were reasonably likely to materially affect, Cox Radio’s internal control over financial reporting.

Cox Radio’s disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching Cox Radio’s desired disclosure objectives and are effective in reaching that level of reasonable assurance.

PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings

On October 11, 2000, Cox Radio and its controlling shareholder, Cox Broadcasting, Inc., were sued in Georgia federal court by broadcast station broker Force Communications, for alleged breach of contract and other theories involving a failure to pay the broker a commission allegedly due on two transactions. The suit sought contract damages in excess of $5 million plus interest, costs, expenses and attorneys’ fees. Following completion of discovery, the parties filed cross-motions for summary judgment and on July 1, 2002, the court granted defendants’ motion for summary judgment and denied Force Communications’ cross-motion for partial summary judgment. On July 5, 2002, the court entered judgment in favor of Cox Radio and Cox Broadcasting, Inc. on all counts. On July 31, 2002, Force Communications filed a notice of appeal to the United States Court of Appeals for the 11th Circuit from the order entering summary judgment in favor of Cox Radio and Cox Broadcasting, Inc. and from the entry of judgment. Force Communications, Cox Radio and Cox Broadcasting, Inc. agreed on January 23, 2003 to resolve this matter through binding arbitration. Pursuant to that agreement, on June 25, 2003, the arbitrator issued an award of $1.2 million to Force Communications. Following payment of that award, on July 23, 2003, the 11th Circuit dismissed the appeal with prejudice pursuant to the parties’ joint motion.

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)3.1	—	Amended and Restated Certificate of Incorporation of Cox Radio, Inc.

(2)3.2	—	Certificate of Amendment to Certificate of Incorporation of Cox Radio, Inc.

(3)3.3	—	Amended and Restated Bylaws of Cox Radio, Inc.

(4)4.1	—	Indenture dated as of May 26, 1998 by and among Cox Radio, Inc. The Bank of New York, WSB, Inc. and WHIO, Inc.

(5)4.2	—	First Supplemental Indenture dated as of February 1, 1999 by and among The Bank of New York, Cox Radio, Inc. and CXR Holdings, Inc.

(6)4.3	—	Form of Specimen Class A common stock certificate.

31.1	—	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

31.2	—	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

32.1	—	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934.

(1)	Incorporated by reference to the corresponding exhibit of Cox Radio’s Registration Statement on Form S-1 (Commission File No. 333-08737).

(2)	Incorporated by reference to Exhibit 3.2 of Cox Radio’s Form 8-A12B/A filed on February 15, 2002.

(3)	Incorporated by reference to Exhibit 3.2 of Cox Radio’s Registration Statement on Form S-1 (Commission File No. 333-08737).

(4)	Incorporated by reference to Exhibit 4.4 of Cox Radio’s Report on Form 10-Q for the period ended June 30, 1998.

(5)	Incorporated by reference to Exhibit 4.2 of Cox Radio’s Report on Form 10-Q for the period ended March 31, 1999.

(6)	Incorporated by reference to Exhibit 4.1 of Cox Radio’s Report on Form 8-A12B/A dated February 15, 2002.

(b)	Reports on Form 8-K

Form 8-K dated November 5, 2003 (furnished November 5, 2003) announcing Cox Radio’s financial results for the quarter ended September 30, 2003 under Item 12.

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, 2003				/s/ Neil O. Johnston
				Neil O. Johnston
				Vice President and Chief Financial
				Officer (Principal Financial Officer,
				Principal Accounting Officer and
				duly authorized officer)

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Cox Radio (CXR) Inactive 10-Q2003 Q3 Quarterly report

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