UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 2005
or
o | 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 0-15392
REGENT COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware | 31-1492857 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
2000 Fifth Third Center
511 Walnut Street
Cincinnati, Ohio 45202
511 Walnut Street
Cincinnati, Ohio 45202
(Address of Principal Executive Offices)
(Zip Code)
(Zip Code)
(513) 651-1190
(Registrant’s Telephone Number, including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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. Yesþ Noo
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yesþ Noo
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, $.01 par value — 41,844,370 shares outstanding as of November 3, 2005
REGENT COMMUNICATIONS, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2005
INDEX
Page | ||||||||
Number | ||||||||
PART I FINANCIAL INFORMATION | ||||||||
Item 1. Financial Statements | ||||||||
Condensed Consolidated Statements of Operations for the three months and nine months ended September 30, 2005 (unaudited) and September 30, 2004 (unaudited) | 3 | |||||||
Condensed Consolidated Balance Sheets as of September 30, 2005 (unaudited) and December 31, 2004 | 4 | |||||||
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2005 (unaudited) and September 30, 2004 (unaudited) | 5 | |||||||
Notes to Condensed Consolidated Financial Statements (unaudited) | 6 | |||||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 | |||||||
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 38 | |||||||
Item 4. Controls and Procedures | 38 | |||||||
PART II OTHER INFORMATION | ||||||||
Item 1. Legal Proceedings | 38 | |||||||
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 39 | |||||||
Item 6. Exhibits | 39 |
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
REGENT COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share amounts)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Broadcast revenues, net of agency commissions | $ | 22,931 | $ | 22,454 | $ | 64,280 | $ | 62,075 | ||||||||
Station operating expenses | 14,576 | 14,033 | 43,042 | 41,384 | ||||||||||||
Depreciation and amortization | 1,345 | 1,219 | 4,102 | 3,351 | ||||||||||||
Corporate general and administrative expenses | 2,792 | 1,842 | 6,514 | 5,632 | ||||||||||||
Loss on sale of long-lived assets | 28 | 12 | 44 | 36 | ||||||||||||
Operating income | 4,190 | 5,348 | 10,578 | 11,672 | ||||||||||||
Interest expense | (1,271 | ) | (1,023 | ) | (3,473 | ) | (2,498 | ) | ||||||||
Other income (expense), net | 9 | (39 | ) | 18 | (129 | ) | ||||||||||
Income from continuing operations before income taxes | 2,928 | 4,286 | 7,123 | 9,045 | ||||||||||||
Income tax expense | (1,525 | ) | (1,790 | ) | (3,094 | ) | (3,645 | ) | ||||||||
Income from continuing operations | 1,403 | 2,496 | 4,029 | 5,400 | ||||||||||||
Discontinued operations: | ||||||||||||||||
Loss from operations of discontinued operations, net of income tax | (27 | ) | (16 | ) | (245 | ) | ||||||||||
Gain on sale of discontinued operations, net of income tax | — | 5,591 | — | 5,559 | ||||||||||||
Income (loss) on discontinued operations | — | 5,564 | (16 | ) | 5,314 | |||||||||||
Net income | $ | 1,403 | $ | 8,060 | $ | 4,013 | $ | 10,714 | ||||||||
Basic and diluted income per common share: | ||||||||||||||||
Income from continuing operations | $ | 0.03 | $ | 0.06 | $ | 0.09 | $ | 0.12 | ||||||||
Income (loss) from discontinued operations | 0.00 | 0.12 | 0.00 | 0.11 | ||||||||||||
Net income | $ | 0.03 | $ | 0.18 | $ | 0.09 | $ | 0.23 | ||||||||
Weighted average number of common shares: | ||||||||||||||||
Basic | 41,870 | 45,130 | 43,733 | 46,006 | ||||||||||||
Diluted | 42,080 | 45,405 | 43,940 | 46,450 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
REGENT COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
September 30, | December 31, | |||||||
2005 | 2004 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 975 | $ | 1,246 | ||||
Accounts receivable, net of allowance of $953 and $844 at September 30, 2005 and December 31, 2004, respectively | 14,460 | 13,618 | ||||||
Assets held for sale | — | 465 | ||||||
Other current assets | 1,669 | 889 | ||||||
Total current assets | 17,104 | 16,218 | ||||||
Property and equipment, net | 36,790 | 36,944 | ||||||
Intangible assets, net | 308,554 | 309,116 | ||||||
Goodwill | 34,451 | 32,990 | ||||||
Other assets | 1,600 | 2,093 | ||||||
Total assets | $ | 398,499 | $ | 397,361 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 5,200 | $ | 4,068 | ||||
Accounts payable | 1,727 | 1,772 | ||||||
Accrued compensation | 1,520 | 2,075 | ||||||
Other current liabilities | 4,544 | 3,710 | ||||||
Total current liabilities | 12,991 | 11,625 | ||||||
Long-term debt, less current portion | 83,050 | 72,450 | ||||||
Other long-term liabilities | 459 | 965 | ||||||
Deferred taxes | 28,327 | 23,495 | ||||||
Total liabilities | 124,827 | 108,535 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Common stock, $.01 par value, 100,000,000 shares authorized; 48,085,992 and 48,083,492 shares issued at September 30, 2005 and December 31, 2004, respectively | 481 | 481 | ||||||
Treasury stock, 6,284,028 and 2,958,466 shares, at cost at September 30, 2005 and December 31, 2004, respectively | (35,828 | ) | (15,994 | ) | ||||
Additional paid-in capital | 348,419 | 347,990 | ||||||
Accumulated other comprehensive income (loss), net of tax | 94 | (144 | ) | |||||
Accumulated deficit | (39,494 | ) | (43,507 | ) | ||||
Total stockholders’ equity | 273,672 | 288,826 | ||||||
Total liabilities and stockholders’ equity | $ | 398,499 | $ | 397,361 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
REGENT COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Nine Months Ended | ||||||||
September 30, | ||||||||
2005 | 2004 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 4,013 | $ | 10,714 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 4,102 | 3,643 | ||||||
Deferred income tax expense | 3,005 | 6,964 | ||||||
Gain on sale of radio stations | — | (9,311 | ) | |||||
Non-cash compensation expense | 1,008 | 599 | ||||||
Other, net | 689 | 557 | ||||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||
Accounts receivable | (1,193 | ) | (1,205 | ) | ||||
Other assets | (218 | ) | (180 | ) | ||||
Current and long-term liabilities | 630 | 689 | ||||||
Net cash provided by operating activities | 12,036 | 12,470 | ||||||
Cash flows from investing activities: | ||||||||
Acquisition of radio stations and related acquisition costs, net of cash acquired | (509 | ) | (6,635 | ) | ||||
Capital expenditures | (3,205 | ) | (2,844 | ) | ||||
Other | 452 | 30 | ||||||
Net cash used in investing activities | (3,262 | ) | (9,449 | ) | ||||
Cash flows from financing activities: | ||||||||
Principal payments on long-term debt | (9,768 | ) | (7,045 | ) | ||||
Long-term debt borrowings | 21,500 | 13,000 | ||||||
Purchase of treasury shares | (20,654 | ) | (8,996 | ) | ||||
Other | (123 | ) | (127 | ) | ||||
Net cash used in financing activities | (9,045 | ) | (3,168 | ) | ||||
Net decrease in cash and cash equivalents | (271 | ) | (147 | ) | ||||
Cash and cash equivalents at beginning of period | 1,246 | 1,673 | ||||||
Cash and cash equivalents at end of period | $ | 975 | $ | 1,526 | ||||
Supplemental schedule of non-cash financing and investing activities: | ||||||||
Value of Erie and Lancaster stations exchanged for Bloomington stations | $ | — | $ | 37,143 | ||||
Value of Duluth stations exchanged for Evansville stations | $ | — | $ | 5,300 | ||||
Capital lease obligations incurred | $ | 64 | $ | 145 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT POLICIES
Preparation of Interim Financial Information
Regent Communications, Inc. (including its wholly-owned subsidiaries, the “Company” or “Regent”) was formed to acquire, own and operate radio stations in medium-sized and small markets in the United States.
The condensed consolidated financial statements of Regent have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, include all adjustments necessary for a fair presentation of the results of operations, financial position and cash flows for each period shown. All adjustments are of a normal and recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to SEC rules and regulations. Results for interim periods may not be indicative of results for the full year. The December 31, 2004 condensed consolidated balance sheet was derived from audited consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in Regent’s Form 10-K for the year ended December 31, 2004.
Broadcast Revenue
Broadcast revenue for commercial broadcasting advertisements is recognized when the commercial is broadcast. Revenue is reported net of agency commissions. Agency commissions are calculated based on a stated percentage applied to gross billing revenue for advertisers that use agencies. Agency commissions were approximately $2.5 million and $2.4 million for the three months ended September 30, 2005 and 2004, respectively, and approximately $6.9 million and $6.4 million for the nine months ended September 30, 2005 and 2004, respectively.
Barter Transactions
Barter transactions (advertising provided in exchange for goods and services) are reported at the estimated fair value of the products or services received. Revenue from barter transactions is recognized when advertisements are broadcast, and merchandise or services received are charged to expense when received or used. If merchandise or services are received prior to the broadcast of the advertising, a liability (deferred barter revenue) is recorded. If advertising is broadcast before the receipt of the goods or services, a receivable is recorded. Barter revenue and expense for the three- and nine-month periods ended September 30, 2005 and 2004 were as follows (in thousands):
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Barter revenue | $ | 1,022 | $ | 1,051 | $ | 2,627 | $ | 2,852 | ||||||||
Barter expense | $ | 880 | $ | 934 | $ | 2,450 | $ | 2,557 |
6
REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Comprehensive Income
The following table shows the components of comprehensive income for the three and nine months ended September 30, 2005 and 2004 (in thousands):
Three months | Three months | Nine months | Nine months | |||||||||||||
ended | ended | ended | ended | |||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Net income | $ | 1,403 | $ | 8,060 | $ | 4,013 | $ | 10,714 | ||||||||
Gain (loss) on hedge agreement, net of income taxes | 68 | (62 | ) | 238 | (131 | ) | ||||||||||
Comprehensive income | $ | 1,471 | $ | 7,998 | $ | 4,251 | $ | 10,583 | ||||||||
Stock-based Compensation Plans
The Company accounts for its stock-based compensation plans under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations, under which compensation expense is recorded only to the extent that the market price of the underlying common stock on the date of grant exceeds the exercise price. No expense was recorded related to the Company’s stock-based compensation plans for the three months ended September 30, 2004. During the first quarter of 2004, the Company accelerated the vesting of stock options granted to employees terminated due to the then-pending disposition of certain radio stations. This change in vesting created a new measurement date. Accordingly, the Company recorded expense of approximately two thousand dollars for the difference between the price of the common stock underlying the options at the new measurement date and the exercise price of the options. On August 31, 2005, the Company’s board of directors granted immediate vesting and an extension of the life for all unexercised stock options held by the Company’s Chief Executive Officer, Terry S. Jacobs, in anticipation of his retirement on September 1, 2005. Under this extension, each option will remain available for exercise through its contractual life. The Company recorded pre-tax non-cash compensation expense of approximately $508,000 related to the extension of life for those options.
The following table illustrates the effect on net income and income per share if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), to stock-based employee compensation (in thousands, except per share information):
7
REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Net income, as reported | $ | 1,403 | $ | 8,060 | $ | 4,013 | $ | 10,714 | ||||||||
Add: Stock-based employee compensation included in reported net income, net of related tax effects | 335 | - | 335 | 1 | ||||||||||||
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects | (1,040 | ) | (381 | ) | (1,868 | ) | (1,103 | ) | ||||||||
Pro forma net income | $ | 698 | $ | 7,679 | $ | 2,480 | $ | 9,612 | ||||||||
Earnings per share: | ||||||||||||||||
Basic — as reported | $ | 0.03 | $ | 0.18 | $ | 0.09 | $ | 0.23 | ||||||||
Basic — pro forma | $ | 0.02 | $ | 0.17 | $ | 0.06 | $ | 0.21 | ||||||||
Diluted — as reported | $ | 0.03 | $ | 0.18 | $ | 0.09 | $ | 0.23 | ||||||||
Diluted — pro forma | $ | 0.02 | $ | 0.17 | $ | 0.06 | $ | 0.21 |
For the three and nine months ended September 30, 2005, stock-based compensation in the above table includes approximately $600,000 of proforma expense related to the vesting acceleration for stock options held by Mr. Jacobs.
The fair value of each option grant and each share of common stock issued under the Company’s Employee Stock Purchase Plan is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions as of September 30, 2005 and 2004:
2005 | 2004 | |||||||
Dividends | None | None | ||||||
Volatility | 52.3% — 65.7 | % | 58.9% — 61.1 | % | ||||
Risk-free interest rate | 3.72% — 4.18 | % | 2.80% — 3.93 | % | ||||
Expected term | 5 years | 5 years |
Discontinued Operations
In 2004, the Company disposed of its Duluth, Minnesota, and Erie and Lancaster-Reading, Pennsylvania markets. Regent applied the provisions of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets,” (“SFAS 144”), which requires that in a period in which a component of an entity has
8
REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
been disposed of or is classified as held for sale, the income statement of a business enterprise for current and prior periods shall report the results of operations of the component, including any gain or loss recognized, in discontinued operations. The Company’s policy is to allocate a portion of interest expense to discontinued operations, based upon guidance in EITF 87-24, “Allocation of Interest to Discontinued Operations,” as updated by SFAS 144. As there was no debt required to be repaid as a result of these disposals, nor was there any debt assumed by the buyers, interest expense was allocated to discontinued operations in proportion to the net assets disposed of to total net assets of the Company. Selected financial information related to discontinued operations for the three- and nine-month periods ended September 30, 2005 and 2004 is as follows (in thousands):
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Net revenue | $ | — | $ | — | $ | — | $ | 432 | ||||||||
Depreciation and amortization expense | — | 33 | — | 292 | ||||||||||||
Allocated interest expense | — | 13 | — | 111 | ||||||||||||
Loss before income taxes | — | (45 | ) | (27 | ) | (410 | ) |
Income Taxes
Regent recorded income taxes at an effective rate of 52.1% for the third quarter of 2005. The rate increase is primarily due to income tax return true-ups during the third quarter due to the filing of the Company’s 2004 income tax returns. For the nine months ended September 30, 2005, the effective rate was approximately 43.4%. During the first nine months of 2005, the Company reversed $144,000 of long-term liability, with a corresponding decrease in income tax expense. The reversal of the liability was due primarily to a legislative change in the Commonwealth of Kentucky during the first quarter of 2005 that made the liability unnecessary.
2. CHANGE IN MANAGEMENT
On September 1, 2005, Terry S. Jacobs, the Company’s Chairman of the Board and Chief Executive Officer, retired from the Company. Mr. Jacobs remains on the Company’s Board of Directors in the position of Vice Chairman. The Company recorded approximately $1.2 million in cash and non-cash expense during the third quarter related to Mr. Jacobs’ board-authorized retirement package. Approximately $169,000 of the cash portion of Mr. Jacobs’ retirement package was paid during the third quarter of 2005, with the remaining $504,000 of cash to be paid in bi-weekly installments through December 31, 2006.
9
REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. COMPLETED DISPOSITION
On July 6, 2005, Regent completed the sale of substantially all of the fixed and intangible assets of WRUN-AM in Utica, New York to WAMC, a not-for-profit public radio entity, for $275,000. The Company treated the disposal of WRUN-AM as the disposal of long-lived assets, rather than a business or a component of a business, due to the fact that the station had no independent revenue stream from its operations. The Company recorded a loss of approximately $50,000 related to the sale of WRUN-AM.
4. LONG-TERM DEBT
Long-term debt consisted of the following as of September 30, 2005 and December 31, 2004 (in thousands):
September 30, | December 31, | |||||||
2005 | 2004 | |||||||
Senior reducing term loan | $ | 61,750 | $ | 64,188 | ||||
Senior reducing revolving credit facility | 26,500 | 12,000 | ||||||
Subordinated promissory note | — | 330 | ||||||
88,250 | 76,518 | |||||||
Less: current portion of long-term debt | (5,200 | ) | (4,068 | ) | ||||
$ | 83,050 | $ | 72,450 | |||||
Borrowings under the credit facility bore interest at an average rate of 4.86% at September 30, 2005 and 4.28% at December 31, 2004.
Effective July 26, 2005, the Company and its lenders entered into an amendment to the Company’s credit facility. The material terms of the amendment are: a reduction of the applicable margin on base rate and eurodollar loans under the credit facility, which at the current level of indebtedness reduces the Company’s interest rate by 50 basis points; to revise the definition of permitted acquisition condition (a) to eliminate two leverage ratio tests relating to aggregate acquisitions by Regent in excess of $75 million and in excess of $125 million, which ratios operated to require the prior consent of the lenders for Regent acquisitions in excess of those thresholds, and (b) to eliminate the requirement for prior consent of the lenders for any single acquisition in excess of $50 million; to reset the maximum leverage ratio to 6.25:1.00 which increased the Company’s borrowing capacity under the credit facility, subject to the terms and conditions of the facility, and; to permit Regent to use cash in the amount of up to $50 million to repurchase shares of its common stock for the period commencing July 26, 2005 through the maturity date of the credit facility. Regent incurred approximately $41,000 in financing costs related to the amendment, a portion of which were deferred and are being amortized to interest expense over the remaining life of the credit facility using the effective interest method.
5. SUPPLEMENTAL GUARANTOR INFORMATION
The Company conducts the majority of its business through its subsidiaries (“Subsidiary Guarantors”). The Subsidiary Guarantors are wholly-owned by Regent Broadcasting, Inc.
10
REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(“RBI”), which is a wholly-owned subsidiary of Regent Communications, Inc. (“RCI”). The Subsidiary Guarantors are guarantors of any debt securities that could be issued by RCI or RBI, and are therefore considered registrants of such securities. RCI would also guarantee any debt securities that could be issued by RBI. All such guarantees will be full and unconditional and joint and several. No debt securities have been issued by either RBI or RCI to date.
Set forth below are condensed consolidating financial statements for RCI, RBI and the Subsidiary Guarantors, including the Condensed Consolidating Statements of Operations for the three-month and nine-month periods ended September 30, 2005 and 2004, the Condensed Consolidating Balance Sheets as of September 30, 2005 and December 31, 2004, and the Condensed Consolidating Statements of Cash Flows for the nine-month periods ended September 30, 2005 and 2004. The equity method of accounting has been used by the Company to report its investment in subsidiaries. Substantially all of RCI’s and RBI’s income and cash flows are generated by their subsidiaries. Separate financial statements for the Subsidiary Guarantors are not presented based on management’s determination that they do not provide additional information that is material to investors.
Condensed Consolidating Statements of Operations | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Three Months Ended September 30, 2005 | ||||||||||||||||||||
Subsidiary | ||||||||||||||||||||
RCI | RBI | Guarantors | Eliminations | Total | ||||||||||||||||
Broadcast revenues, net of agency commissions | $ | — | $ | — | $ | 22,931 | $ | — | $ | 22,931 | ||||||||||
Station operating expenses | — | — | 14,576 | — | 14,576 | |||||||||||||||
Depreciation and amortization | 24 | — | 1,321 | — | 1,345 | |||||||||||||||
Corporate general and administrative expenses | 2,764 | 28 | — | — | 2,792 | |||||||||||||||
Loss on sale of long-lived assets | — | — | 28 | — | 28 | |||||||||||||||
Equity (loss) in earnings of subsidiaries | 909 | 3,348 | — | (4,257 | ) | — | ||||||||||||||
Operating (loss) income | (1,879 | ) | 3,320 | 7,006 | (4,257 | ) | 4,190 | |||||||||||||
Interest expense | �� | — | (1,271 | ) | — | — | (1,271 | ) | ||||||||||||
Other income (expense), net | 12 | (3 | ) | — | — | 9 | ||||||||||||||
(Loss) income from operations before income taxes | (1,867 | ) | 2,046 | 7,006 | (4,257 | ) | 2,928 | |||||||||||||
Income tax benefit (expense) | 882 | (1,137 | ) | (3,658 | ) | 2,388 | (1,525 | ) | ||||||||||||
Net (loss) income | $ | (985 | ) | $ | 909 | $ | 3,348 | $ | (1,869 | ) | $ | 1,403 | ||||||||
11
REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Condensed Consolidating Statements of Operations | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Three Months Ended September 30, 2004 | ||||||||||||||||||||
Subsidiary | ||||||||||||||||||||
RCI | RBI | Guarantors | Eliminations | Total | ||||||||||||||||
Broadcast revenues, net of agency commissions | $ | — | $ | — | $ | 22,454 | $ | — | $ | 22,454 | ||||||||||
Station operating expenses | — | — | 14,033 | — | 14,033 | |||||||||||||||
Depreciation and amortization | 22 | — | 1,197 | — | 1,219 | |||||||||||||||
Corporate general and administrative expenses | 1,824 | 18 | — | — | 1,842 | |||||||||||||||
Loss on sale of long-lived assets | — | — | 12 | — | 12 | |||||||||||||||
Equity (loss) in earnings of subsidiaries | 1,788 | 4,139 | — | (5,927 | ) | — | ||||||||||||||
Operating (loss) income | (58 | ) | 4,121 | 7,212 | (5,927 | ) | 5,348 | |||||||||||||
Interest expense | (13 | ) | (1,010 | ) | — | — | (1,023 | ) | ||||||||||||
Other income (expense), net | 2 | (9 | ) | (32 | ) | — | (39 | ) | ||||||||||||
(Loss) income from continuing operations before income taxes | (69 | ) | 3,102 | 7,180 | (5,927 | ) | 4,286 | |||||||||||||
Income tax benefit (expense) | 42 | (1,308 | ) | (3,025 | ) | 2,501 | (1,790 | ) | ||||||||||||
(Loss) income from continuing operations | (27 | ) | 1,794 | 4,155 | (3,426 | ) | 2,496 | |||||||||||||
Income (loss) from discontinued operations, net of income taxes | 5,586 | (6 | ) | (16 | ) | — | 5,564 | |||||||||||||
Net income (loss) | $ | 5,559 | $ | 1,788 | $ | 4,139 | $ | (3,426 | ) | $ | 8,060 | |||||||||
12
REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Condensed Consolidating Statements of Operations | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Nine Months Ended September 30, 2005 | ||||||||||||||||||||
Subsidiary | ||||||||||||||||||||
RCI | RBI | Guarantors | Eliminations | Total | ||||||||||||||||
Broadcast revenues, net of agency commissions | $ | — | $ | — | $ | 64,280 | $ | — | $ | 64,280 | ||||||||||
Station operating expenses | — | — | 43,042 | — | 43,042 | |||||||||||||||
Depreciation and amortization | 71 | — | 4,031 | — | 4,102 | |||||||||||||||
Corporate general and administrative expenses | 6,449 | 65 | — | — | 6,514 | |||||||||||||||
Loss on sale of long-lived assets | — | — | 44 | — | 44 | |||||||||||||||
Equity (loss) in earnings of subsidiaries | 3,484 | 9,696 | — | (13,180 | ) | — | ||||||||||||||
Operating (loss) income | (3,036 | ) | 9,631 | 17,163 | (13,180 | ) | 10,578 | |||||||||||||
Interest expense | (8 | ) | (3,465 | ) | — | — | (3,473 | ) | ||||||||||||
Other income (expense), net | 15 | (6 | ) | 9 | — | 18 | ||||||||||||||
(Loss) income from continuing operations before income taxes | (3,029 | ) | 6,160 | 17,172 | (13,180 | ) | 7,123 | |||||||||||||
Income tax benefit (expense) | 1,316 | (2,676 | ) | (7,460 | ) | 5,726 | (3,094 | ) | ||||||||||||
(Loss) income from continuing operations | (1,713 | ) | 3,484 | 9,712 | (7,454 | ) | 4,029 | |||||||||||||
Loss on discontinued operations, net of income taxes | — | — | (16 | ) | — | (16 | ) | |||||||||||||
Net (loss) income | $ | (1,713 | ) | $ | 3,484 | $ | 9,696 | $ | (7,454 | ) | $ | 4,013 | ||||||||
13
REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Condensed Consolidating Statements of Operations | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Nine Months Ended September 30, 2004 | ||||||||||||||||||||
Subsidiary | ||||||||||||||||||||
RCI | RBI | Guarantors | Eliminations | Total | ||||||||||||||||
Broadcast revenues, net of agency commissions | $ | — | $ | — | $ | 62,075 | $ | — | $ | 62,075 | ||||||||||
Station operating expenses | — | — | 41,384 | — | 41,384 | |||||||||||||||
Depreciation and amortization | 61 | — | 3,290 | — | 3,351 | |||||||||||||||
Corporate general and administrative expenses | 5,576 | 56 | — | — | 5,632 | |||||||||||||||
Loss on sale of long-lived assets | — | — | 36 | — | 36 | |||||||||||||||
Equity (loss) in earnings of subsidiaries | 4,452 | 10,114 | — | (14,566 | ) | — | ||||||||||||||
Operating (loss) income | (1,185 | ) | 10,058 | 17,365 | (14,566 | ) | 11,672 | |||||||||||||
Interest expense | (22 | ) | (2,476 | ) | — | — | (2,498 | ) | ||||||||||||
Other income (expense), net | 8 | (14 | ) | (123 | ) | — | (129 | ) | ||||||||||||
(Loss) income from continuing operations before income taxes | (1,199 | ) | 7,568 | 17,242 | (14,566 | ) | 9,045 | |||||||||||||
Income tax benefit (expense) | 483 | (3,050 | ) | (6,949 | ) | 5,871 | (3,645 | ) | ||||||||||||
(Loss) income from continuing operations | (716 | ) | 4,518 | 10,293 | (8,695 | ) | 5,400 | |||||||||||||
Income (loss) on discontinued operations, net of income taxes | 5,559 | (66 | ) | (179 | ) | — | 5,314 | |||||||||||||
Net income (loss) | $ | 4,843 | $ | 4,452 | $ | 10,114 | $ | (8,695 | ) | $ | 10,714 | |||||||||
14
REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Condensed Consolidating Balance Sheets | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
September 30, 2005 | ||||||||||||||||||||
Subsidiary | ||||||||||||||||||||
RCI | RBI | Guarantors | Eliminations | Total | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 975 | $ | — | $ | — | $ | 975 | ||||||||||
Accounts receivable, net | 14 | — | 14,446 | — | 14,460 | |||||||||||||||
Other current assets | 928 | 149 | 592 | — | 1,669 | |||||||||||||||
Total current assets | 942 | 1,124 | 15,038 | — | 17,104 | |||||||||||||||
Intercompany receivable | — | — | 84,039 | (84,039 | ) | — | ||||||||||||||
Investment in subsidiaries | 258,968 | 428,868 | — | (687,836 | ) | — | ||||||||||||||
Property and equipment, net | 371 | — | 36,419 | — | 36,790 | |||||||||||||||
Intangible assets, net | — | — | 308,554 | — | 308,554 | |||||||||||||||
Goodwill | 1,599 | — | 32,852 | — | 34,451 | |||||||||||||||
Other assets | 13,944 | 1,265 | 41 | (13,650 | ) | 1,600 | ||||||||||||||
Total assets | $ | 275,824 | $ | 431,257 | $ | 476,943 | $ | (785,525 | ) | $ | 398,499 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Current portion of long-term debt | $ | — | $ | 5,200 | $ | — | $ | — | $ | 5,200 | ||||||||||
Accounts payable and accrued expenses | 2,137 | — | 5,654 | — | 7,791 | |||||||||||||||
Intercompany payable | — | 84,039 | — | (84,039 | ) | — | ||||||||||||||
Total current liabilities | 2,137 | 89,239 | 5,654 | (84,039 | ) | 12,991 | ||||||||||||||
Long-term debt, less current portion | — | 83,050 | — | — | 83,050 | |||||||||||||||
Deferred taxes and other long-term liabilities | 15 | — | 42,421 | (13,650 | ) | 28,786 | ||||||||||||||
Total liabilities | 2,152 | 172,289 | 48,075 | (97,689 | ) | 124,827 | ||||||||||||||
Stockholders’ equity | 273,672 | 258,968 | 428,868 | (687,836 | ) | 273,672 | ||||||||||||||
Total liabilities and stockholders’ equity | $ | 275,824 | $ | 431,257 | $ | 476,943 | $ | (785,525 | ) | $ | 398,499 | |||||||||
15
REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Condensed Consolidating Balance Sheets | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
December 31, 2004 | ||||||||||||||||||||
Subsidiary | ||||||||||||||||||||
RCI | RBI | Guarantors | Eliminations | Total | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 1,246 | $ | — | $ | — | $ | 1,246 | ||||||||||
Accounts receivable, net | 14 | — | 13,604 | — | 13,618 | |||||||||||||||
Other current assets | 382 | — | 972 | — | 1,354 | |||||||||||||||
Total current assets | 396 | 1,246 | 14,576 | — | 16,218 | |||||||||||||||
Intercompany receivable | — | — | 69,938 | (69,938 | ) | — | ||||||||||||||
Investment in subsidiaries | 275,290 | 419,172 | — | (694,462 | ) | — | ||||||||||||||
Property and equipment, net | 388 | — | 36,556 | — | 36,944 | |||||||||||||||
Intangible assets, net | — | — | 309,116 | — | 309,116 | |||||||||||||||
Goodwill | 1,599 | — | 31,391 | — | 32,990 | |||||||||||||||
Other assets | 14,377 | 1,528 | 44 | (13,856 | ) | 2,093 | ||||||||||||||
Total assets | $ | 292,050 | $ | 421,946 | $ | 461,621 | $ | (778,256 | ) | $ | 397,361 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Current portion of long-term debt | $ | 330 | $ | 3,738 | $ | — | $ | — | $ | 4,068 | ||||||||||
Accounts payable and accrued expenses | 2,403 | 521 | 4,633 | — | 7,557 | |||||||||||||||
Intercompany payable | — | 69,938 | — | (69,938 | ) | — | ||||||||||||||
Total current liabilities | 2,733 | 74,197 | 4,633 | (69,938 | ) | 11,625 | ||||||||||||||
Long-term debt, less current portion | — | 72,450 | — | — | 72,450 | |||||||||||||||
Deferred taxes and other long-term liabilities | 491 | 9 | 37,816 | (13,856 | ) | 24,460 | ||||||||||||||
Total liabilities | 3,224 | 146,656 | 42,449 | (83,794 | ) | 108,535 | ||||||||||||||
Stockholders’ equity | 288,826 | 275,290 | 419,172 | (694,462 | ) | 288,826 | ||||||||||||||
Total liabilities and stockholders’ equity | $ | 292,050 | $ | 421,946 | $ | 461,621 | $ | (778,256 | ) | $ | 397,361 | |||||||||
16
REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Condensed Consolidating Statements of Cash Flows | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Nine Months Ended September 30, 2005 | ||||||||||||||||||||
Subsidiary | ||||||||||||||||||||
RCI | RBI | Guarantors | Eliminations | Total | ||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||
Net cash (used in) provided by operating activities | $ | (7,068 | ) | $ | (3,900 | ) | $ | 23,004 | $ | — | $ | 12,036 | ||||||||
Cash flows from investing activities: | ||||||||||||||||||||
Acquisition of radio stations and related acquisition costs, net of cash acquired | — | (509 | ) | — | — | (509 | ) | |||||||||||||
Capital expenditures | (54 | ) | (3,151 | ) | — | — | (3,205 | ) | ||||||||||||
Other | — | — | 452 | — | 452 | |||||||||||||||
Net cash (used in) provided by investing activities | (54 | ) | (3,660 | ) | 452 | — | (3,262 | ) | ||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||
Principal payments on long- Term debt | (330 | ) | (9,438 | ) | — | — | (9,768 | ) | ||||||||||||
Long-term debt borrowings | — | 21,500 | — | — | 21,500 | |||||||||||||||
Purchase of treasury shares | (20,654 | ) | — | — | — | (20,654 | ) | |||||||||||||
Other | 13 | (39 | ) | (97 | ) | — | (123 | ) | ||||||||||||
Net transfers from (to) subsidiaries | 28,093 | (4,734 | ) | (23,359 | ) | — | — | |||||||||||||
Net cash provided by (used in) financing activities | 7,122 | 7,289 | (23,456 | ) | — | (9,045 | ) | |||||||||||||
Net decrease in cash and cash equivalents | — | (271 | ) | — | — | (271 | ) | |||||||||||||
Cash and cash equivalents at beginning of period | — | 1,246 | — | — | 1,246 | |||||||||||||||
Cash and cash equivalents at end of period | $ | — | $ | 975 | $ | — | $ | — | $ | 975 | ||||||||||
17
REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Condensed Consolidating Statements of Cash Flows | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Nine Months Ended September 30, 2004 | ||||||||||||||||||||
Subsidiary | ||||||||||||||||||||
RCI | RBI | Guarantors | Eliminations | Total | ||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||
Net cash (used in) provided by operating activities | $ | (7,746 | ) | $ | (2,689 | ) | $ | 22,905 | $ | — | $ | 12,470 | ||||||||
Cash flows from investing activities: | ||||||||||||||||||||
Acquisition of radio stations and related acquisition costs, net of cash acquired | — | (6,635 | ) | — | — | (6,635 | ) | |||||||||||||
Capital expenditures | (146 | ) | (2,698 | ) | — | — | (2,844 | ) | ||||||||||||
Other | — | — | 30 | — | 30 | |||||||||||||||
Net cash (used in) provided by investing activities | (146 | ) | (9,333 | ) | 30 | — | (9,449 | ) | ||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||
Principal payments on long- term debt | (45 | ) | (7,000 | ) | — | — | (7,045 | ) | ||||||||||||
Long-term debt borrowings | — | 13,000 | — | — | 13,000 | |||||||||||||||
Purchase of treasury shares | (8,996 | ) | — | — | — | (8,996 | ) | |||||||||||||
Other | — | — | (127 | ) | — | (127 | ) | |||||||||||||
Net transfers from (to) subsidiaries | 16,933 | 5,875 | (22,808 | ) | — | — | ||||||||||||||
Net cash provided by (used in) financing activities | 7,892 | 11,875 | (22,935 | ) | — | (3,168 | ) | |||||||||||||
Decrease in cash and cash equivalents | — | (147 | ) | — | — | (147 | ) | |||||||||||||
Cash and cash equivalents at beginning of period | — | 1,673 | — | — | 1,673 | |||||||||||||||
Cash and cash equivalents at end of period | $ | — | $ | 1,526 | $ | — | $ | — | $ | 1,526 | ||||||||||
6. CAPITAL STOCK
The Company’s authorized capital stock consists of 100,000,000 shares of common stock and 40,000,000 shares of preferred stock. No shares of preferred stock were outstanding at September 30, 2005 or December 31, 2004. The Company has in the past designated shares of preferred stock in several different series. Of the available shares of preferred stock, 6,768,862 remain designated in several of those series and 33,231,138 shares are currently undesignated.
18
REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On February 2, 2005, Regent issued 37,517 shares of common stock from treasury shares to four executive officers at an issue price of $5.185 per share as payment of a portion of 2004 bonuses awarded under the Senior Management Bonus Plan. On February 2, 2004, 13,580 shares of Regent common stock were issued from treasury shares to four executive officers at an issue price of $7.00 per share as payment of a portion of 2003 bonuses awarded under the Senior Management Bonus Plan.
During the first nine months of 2005 and 2004, Regent reissued 84,364 shares and 78,056 shares, respectively, of treasury stock, net of forfeited shares, as an employer match to employee contributions under the Company’s 401(k) plan, and to employees enrolled in the Company’s Employee Stock Purchase Plan.
Regent has a stock buyback program, approved by its Board of Directors, which allows the Company to repurchase shares of its common stock at certain market price levels. From inception of the program and through July 2004, the Company expended approximately $16.7 million, the entire amount authorized by the Board under the program as of that date. The amount expended includes repurchases of 1,540,020 shares of Regent common stock at an aggregate purchase price of approximately $9.0 million through the first seven months of 2004. At their subsequent July 2004 meeting, the Board authorized the repurchase of an additional $20.0 million under the stock buyback program. No additional purchases of stock were made during the third quarter of 2004 and the entire $20.0 million of authorized funds were available for repurchase at September 30, 2004. During the second quarter of 2005, the Company repurchased 3,347,443 shares of its common stock for an aggregate purchase price of approximately $20.0 million, thereby exhausting the amount authorized for repurchases by the Board at their July 2004 meeting. At its July 27, 2005 meeting, the Company’s Board of Directors again increased the amount available for repurchases under the Company’s stock buyback program by an additional $20.0 million. In July 2005, the Company’s credit facility was amended to allow repurchases of the Company’s common stock of up to $50.0 million. During the third quarter of 2005, the Company repurchased 18,232 shares of Regent stock for an aggregate purchase price of approximately $92,000. Additionally, on September 1, 2005, the Company repurchased 100,000 shares of Regent common stock from Terry S. Jacobs, its former Chief Executive Officer, at a price of $5.62 per share, pursuant to the terms of Mr. Jacobs’ retirement package authorized by the Company’s Board of Directors. The purchase price was based upon the average of the high and low price for a share of Regent common stock on September 1, 2005.
7. GOODWILL AND OTHER INTANGIBLE ASSETS
Regent’s intangible assets consist principally of the value of FCC licenses and the excess of the purchase price over the fair value of net assets of acquired radio stations (goodwill). The Company follows the provisions of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” (“SFAS 142”), which requires that a company no longer amortize goodwill and intangible assets determined to have an indefinite life and also requires an annual impairment testing of those assets. The Company performs its annual review of goodwill and indefinite-lived intangible assets for impairment during the fourth quarter, or at an earlier date if conditions exist that would indicate the possibility of an impairment issue.
Definite-lived Intangible Assets
19
REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Company has definite-lived intangible assets that continue to be amortized in accordance with SFAS 142, consisting primarily of non-compete agreements, pre-sold advertising contracts and employment and sports rights agreements. Pre-sold advertising contracts are amortized over a six-month period, starting at the earlier of the purchase date or the commencement of a time brokerage agreement. Non-compete, employment and sports rights agreements are amortized over the life of the agreement. The following table presents the gross carrying amount and accumulated amortization for the Company’s definite-lived intangibles at September 30, 2005 and December 31, 2004 (in thousands):
September 30, 2005 | December 31, 2004 | |||||||||||||||
Gross | Gross | |||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | |||||||||||||
Amount | Amortization | Amount | Amortization | |||||||||||||
Non-compete agreements | $ | 1,426 | $ | 1,066 | $ | 1,426 | $ | 685 | ||||||||
Pre-sold advertising contracts | 969 | 969 | 969 | 969 | ||||||||||||
Sports right and employment agreements | 944 | 350 | 944 | 167 | ||||||||||||
Total | $ | 3,339 | $ | 2,385 | $ | 3,339 | $ | 1,821 | ||||||||
The aggregate amortization expense related to the Company’s definite-lived intangible assets for the nine months ended September 30, 2005 and 2004 was approximately $564,000 and $185,000, respectively. For the three months ended September 30, 2005 and 2004, aggregate amortization expense related to the Company’s definite-lived intangible assets was approximately $185,000 and $127,000, respectively. For the three and nine months ended September 30, 2004, approximately $2,000 and $12,000, respectively, of amortization expense previously recorded and related to the operations of markets that were sold was reclassified to discontinued operations under the provisions of SFAS 144. The estimated annual amortization expense for the years ending December 31, 2005, 2006, 2007, 2008 and 2009 is approximately $747,000, $418,000, $146,000, $146,000 and $61,000, respectively.
Indefinite-lived Intangible Assets
The Company’s indefinite-lived intangible assets consist of FCC licenses for radio stations. Upon adoption of SFAS 142, the Company ceased amortizing these assets, and instead tests the assets at least annually for impairment. The following table presents the carrying amount for the Company’s indefinite-lived intangible assets at September 30, 2005 and December 31, 2004 (in thousands):
20
REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, | December 31, | |||||||
2005 | 2004 | |||||||
FCC licenses | $ | 307,600 | $ | 307,598 | ||||
Goodwill
The following table presents the changes in the carrying amount of goodwill for the nine-month period ended September 30, 2005 (in thousands):
Goodwill | ||||
Balance as of December 31, 2004 | $ | 32,990 | ||
Acquisition-related goodwill | 1,461 | |||
Balance as of September 30, 2005 | $ | 34,451 | ||
During the first quarter of 2005, the Company recorded approximately $1.2 million of goodwill related to deferred tax liabilities recorded for the difference between the fair market value and tax basis of the assets and liabilities of Livingston County Broadcasters, which the Company purchased in 2004.
8. EARNINGS PER SHARE
Statement of Financial Accounting Standards No. 128, “Earnings per Share,” (“SFAS 128”) calls for the dual presentation of basic and diluted earnings per share (“EPS”). Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding during the reporting period. The calculation of diluted earnings per share is similar to basic except that the weighted average number of shares outstanding includes the additional dilution that would occur if potential common stock, such as stock options or warrants, were exercised. The number of additional shares is calculated by assuming that outstanding stock options and warrants with an exercise price less than the Company’s average stock price for the period were exercised, and that the proceeds from such exercises were used to acquire shares of common stock at the average market price during the reporting period. Common stock options that were excluded from the calculation due to having an exercise price greater than the Company’s average stock price for the period were 2,226,923 for the three and nine months ended September 30, 2005, and 2,351,623 and 1,783,873 for the three and nine months ended September 30, 2004, respectively.
21
REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Three Months | Three Months | Nine Months | Nine Months | |||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
Income from continuing operations | $ | 1,403 | $ | 2,496 | $ | 4,029 | $ | 5,400 | ||||||||
Income (loss) on discontinued operations, net of taxes | — | 5,564 | (16 | ) | 5,314 | |||||||||||
Net income | $ | 1,403 | $ | 8,060 | $ | 4,013 | $ | 10,714 | ||||||||
Basic and diluted net income per common share: | ||||||||||||||||
Income from continuing operations | $ | 0.03 | $ | 0.06 | $ | 0.09 | $ | 0.12 | ||||||||
Income (loss) from discontinued operations | 0.00 | 0.12 | 0.00 | 0.11 | ||||||||||||
Net income | $ | 0.03 | $ | 0.18 | $ | 0.09 | $ | 0.23 | ||||||||
Weighted average basic common shares | 41,870 | 45,130 | 43,733 | 46,006 | ||||||||||||
Dilutive effect of stock options and warrants | 210 | 275 | 207 | 444 | ||||||||||||
Weighted average diluted common shares | 42,080 | 45,405 | 43,940 | 46,450 | ||||||||||||
Stock options and warrants to purchase shares of common stock assumed exercised and included in the calculation of diluted net income per share: | ||||||||||||||||
Stock options | 2,104 | 1,628 | 2,104 | 2,195 | ||||||||||||
Warrants | 790 | 790 | 790 | 790 |
9. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 123R, as revised, “Share-Based Payment” (“SFAS 123R”). SFAS 123R replaces SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”) and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”). SFAS 123R is applicable to share-based compensation arrangements including stock options, restricted share plans, performance-based awards, stock appreciation rights, and employee stock purchase plans. Formerly, under the provisions of SFAS
22
REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
123, companies were permitted to follow the recognition and measurement principles of APB 25 and provide additional footnote disclosures of what net income or loss would have been had the Company followed the fair-value-based provisions contained in SFAS 123. SFAS 123R requires companies to recognize in their financial statements the compensation expense relating to share-based payment transactions for stock options that have future vesting provisions or as newly granted beginning on the grant date of such options. The Company will be required to implement SFAS 123R in the first quarter of 2006. Assuming there was no change in the variables used to calculate the fair market value of share-based compensation, if the Company had followed the provisions of SFAS 123R for the three-month and nine-month periods ended September 30, 2005 and 2004, net income (loss) and basic and diluted income (loss) per common share would have approximated the proforma amounts disclosed in Footnote 1,Stock-Based Compensation Plans, for those periods. Regent is currently evaluating all of the provisions of SFAS 123R and its expected effect on the Company, including, among other items, reviewing compensation strategies related to stock-based awards, selecting an option pricing model, and determining a transition method.
In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations — an interpretation of FASB Statement No. 143” (“FIN 47”). FIN 47 clarifies certain terminology in FASB Statement No. 143 and the circumstances under which an entity would have sufficient information to reasonably estimate the fair value of asset retirement obligations. The Company is required to implement the provisions in FIN 47 no later than December 31, 2005. Regent is currently evaluating the impact that FIN 47 will have on its operations and cash flows, if any.
In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections — a replacement of APB Opinion No. 20 and FASB Statement No. 3,” (“SFAS 154”). SFAS 154 replaces APB Opinion No. 20, “Accounting Changes” and Statement of Financial Accounting Standards No. 3, “Reporting Changes in Interim Financial Statements,” and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS 154 is applicable for all voluntary changes in accounting principle, as well as changes required by accounting pronouncements that do not include specific transition provisions. SFAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. Under the former standards, most voluntary changes in accounting principle were recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. The Company is required to implement the provisions of SFAS 154 effective January 2006. For any voluntary changes Regent would make to its accounting principles after that date, the provisions of SFAS 154 would be applied.
In June 2005, the Emerging Issues Task Force (“EITF”) issued EITF 05-6, “Determining the Amortization Period for Leasehold Improvements Purchased after Lease Inception or Acquired in a Business Combination (“EITF 05-6”). EITF 05-6 addresses assessing the amortization period for leasehold improvements acquired in a business combination and leasehold improvements placed in service significantly after and not contemplated at the beginning of a lease term. The Company has applied the provisions of EITF 05-6 to all leasehold improvements acquired since the June 2005 ratification of EITF 05-6 with no material impact on the Company’s financial position, cash flows, or results of operations.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
GENERAL
This Form 10-Q includes certain forward-looking statements with respect to our company and its business that involve risks and uncertainties. These statements are influenced by our financial position, business strategy, budgets, projected costs, and the plans and objectives of management for future operations. We use words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “project” and other similar expressions. Although we believe our expectations reflected in these forward-looking statements are based on reasonable assumptions, we cannot assure you that our expectations will prove correct. Actual results and developments may differ materially from those conveyed in the forward-looking statements. For these statements, we claim the protections for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements made in this Form 10-Q include changes in general economic, business and market conditions, as well as changes in such conditions that may affect the radio broadcast industry or the markets in which we operate, including, in particular: increased competition for attractive properties and advertising dollars; increased competition from emerging technologies; fluctuations in the cost of operating radio properties; our ability to effectively integrate our acquisitions; changes in the regulatory climate affecting radio broadcast companies; and cancellations, disruptions or postponements of advertising schedules in response to national or world events. Further information on other factors that could affect the financial results of Regent Communications, Inc. is included in Regent’s other filings with the Securities and Exchange Commission (SEC). These documents are available free of charge at the SEC’s website athttp://www.sec.gov and from Regent Communications, Inc. The forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date of this Form 10-Q. If we do update one or more forward-looking statements, you should not conclude that we will make additional updates with respect to those or any other forward-looking statements.
Regent was formed in November 1996 to acquire, own and operate clusters of radio stations in mid-sized and small markets. We are currently the ninth largest radio company in terms of number of radio stations and twentieth largest radio company in terms of revenue. Our primary objective is to increase Regent’s value to our stockholders by growing the number of radio stations and markets in which we operate and by improving the financial performance of the stations we own and operate in those markets. We measure our progress by evaluating our ability to continue to increase the number of stations we own and to improve the post-acquisition performance of the radio stations we acquire. At times we may seek to enhance our portfolio by selling or exchanging existing stations for stations in markets where there is more opportunity for growth.
Our financial results are seasonal. As is typical in the radio broadcasting industry, we expect our first calendar quarter to produce the lowest revenues for the year, with the revenues generated for the last nine months of the year incurred ratably over the final three quarters. Our operating results in any period may be affected by the incurrence of advertising and promotion expenses that do not necessarily produce commensurate revenues until the impact of the
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advertising and promotion is realized in future periods. Additionally, we may invest in market research projects depending on the competitive environment which may also affect comparability of our operating results between periods.
Our stations compete for advertising revenue with other stations and with other media, including newspapers, broadcast television, cable television, magazines, direct mail, coupons and outdoor advertising. In addition, the radio broadcasting industry is subject to competition from new media technologies that are being developed or introduced, such as the delivery of audio programming by cable or direct broadcast satellite television systems, by satellite-delivered digital audio radio service and by in-band digital audio broadcasting. Two providers of satellite-delivered digital audio broadcasting now deliver to nationwide and regional audiences, multi-channel, multi-format, digital radio services with sound quality equivalent to compact discs. The delivery of information through the Internet also could become a significant form of competition, as could the development of non-commercial low-power FM radio stations that serve small, localized areas.
Executive Overview Update
On September 1, 2005, Terry S. Jacobs, the Company’s Chairman of the Board and Chief Executive Officer, retired from the Company. Mr. Jacobs remains on the Company’s Board of Directors in the position of Vice Chairman. The Company recorded approximately $1.2 million in cash and non-cash expense during the third quarter related to Mr. Jacobs’ board-authorized retirement package. William Stakelin, Regent’s prior President and Chief Operating Officer, succeeded Mr. Jacobs as President and Chief Executive Officer. The role of Chairman has been filled by William Sutter, who has been a member of the company’s Board of Directors since 1999. Additionally, Regent’s Senior Vice President and Chief Financial Officer, Tony Vasconcellos, has been promoted to Executive Vice President and Chief Financial Officer.
On September 1, 2005, the Company repurchased 100,000 shares of Regent common stock from Terry S. Jacobs, its former Chief Executive Officer, at a price of $5.62 per share, pursuant to the terms of Mr. Jacobs’ retirement package authorized by the Company’s Board of Directors. The purchase price was based upon the average of the high and low price for a share of Regent common stock on September 1, 2005.
On July 26, 2005, our credit facility was amended in order for the Company to take advantage of the favorable interest rate pricing in the current market. In addition to reducing our borrowing margins, the amendment allows us to borrow up to $50 million for repurchases of our own stock, subject to certain conditions, and resets our maximum leverage requirements to the levels that were in place in June 2003 at the inception of the existing credit agreement, thus increasing our borrowing capacity.
The Company has approximately $19.0 million remaining under the current stock purchase plan authorized by the Board on July 27, 2005. During the quarter ended September 30, 2005, we repurchased 18,232 shares of Regent common stock at a cost of approximately $92,000, including commissions, at an average price of $5.01 per share. During the fourth quarter of 2005 we have purchased an additional 174,000 shares at a cost of approximately $876,000, including commissions, at an average price of $5.00 per share. While our primary strategy remains focused on the acquisition of radio properties, we have demonstrated that we will also employ capital to repurchase our own stock when the stock price is at a level that we believe to be beneficial to our stockholders to do so.
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In December 2004, we paid a one-time license fee of $300,000 to Ibiquity Digital Corporation for the right to convert 60 of our stations to digital or high definition radio. The contract we have entered into with Ibiquity stipulates that we convert a predetermined number of our stations to high definition radio over a six-year period beginning in 2004. Six of our stations are scheduled for conversion to high definition radio in 2005, and at September 30, 2005 three of those stations were broadcasting in high definition with the other three stations scheduled to be converted by the end of the fourth quarter. The cost of equipment to convert our stations to high definition is currently averaging approximately $160,000 per station. The conversion will enable the stations to broadcast digital quality sound and also provide certain services, such as on-demand traffic, weather and sports scores. Additionally, this new technology will enable each converted radio station to broadcast multiple additional channels of programming for public, private or subscription services. The economic impact on our stations as a result of digital conversion is not known at this time.
Regent’s same station growth continued to outperform the industry in the quarter ended September 30, 2005. Regent reported same station growth of 3.6% while the Radio Advertising Bureau reported that the average of the top 150 markets reported 1% growth for the third quarter. This marks the seventh consecutive quarter that Regent’s same station net revenue growth has surpassed the cumulative average for the top 150 markets. While the majority of our markets have outperformed the industry in the first nine months of 2005 and our advertising revenue was increased in our Lafayette market due to Hurricane Katrina, we have been impacted by the local economies in our Albany, Bloomington and Evansville markets. Advertising revenue in Albany is down approximately 2% compared to the same period in 2004, primarily due to reduced advertising in the automobile category. The local economy for our Bloomington market has been depressed due in part to prolonged summer drought conditions and reduced advertising in the automobile category. Evansville local advertising revenue has been flat in 2005 and we have invested in the promotion of a new station at higher than normal levels. Additionally, the Bloomington and Evansville markets have been subjected to new competitive challenges to some of our formats in these markets.
Outlook
We anticipate completing a transaction in our Ft. Collins-Greeley, Colorado market during the fourth quarter in which we will move our KTRR-FM antenna off of its current tower and onto our KUAD-FM tower. This will enable us to have a better signal into the Ft. Collins-Greeley market, as well as relieve us of a long-term lease for the KTRR-FM antenna. We received the contracted amount of $0.9 million in the third quarter from another operator to complete this transaction and we expect to report a pre-tax gain of approximately $1.0 million in the fourth quarter.
In our Albany, New York market, new programming will begin on December 19, 2005, to replace the Howard Stern show, on our simulcast rock-formatted stations WQBK-FM and WQBJ-FM. The Howard Stern show is moving to satellite radio in 2006. Although the Company as a whole will not be significantly impacted, we anticipate that net broadcasting revenue in Albany will be negatively impacted in the short term by this change but will be mitigated by the elimination of program rights fees related to the airing of the Howard Stern show.
The impact of inflation on our operations has not been significant to date. There can be no assurance, however, that a high rate of inflation in the future would not have an adverse impact on our operating results.
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RESULTS OF OPERATIONS
A comparison of the three and nine months ended September 30, 2005 versus September 30, 2004, and the key factors that have affected our business are discussed and analyzed in the following paragraphs. This commentary should be read in conjunction with our unaudited condensed consolidated financial statements and the related footnotes included herein.
Comparison of three months ended September 30, 2005 to three months ended September 30, 2004
During 2004, we disposed of our Duluth, Minnesota, and Erie and Lancaster-Reading, Pennsylvania markets. Regent applied the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets,” (“SFAS 144”) to the disposal of the Duluth, Erie and Lancaster markets, which requires that in a period in which a component of an entity has been disposed of or is classified as held for sale, the income statement of a business enterprise for current and prior periods shall report the results of operations of the component, including any gain or loss recognized, in discontinued operations. The table below summarizes the effect of the reclassification on third quarter 2005 and 2004 results (in thousands):
2005 | 2004 | |||||||
Net broadcast revenue | $ | — | $ | — | ||||
Station operating expense | — | 1 | ||||||
Depreciation and amortization expense | — | 33 | ||||||
Allocated interest expense | — | 13 | ||||||
Other expense/(gain), net | — | (9,357 | ) | |||||
Income before income taxes | — | 9,310 | ||||||
Income tax expense | — | (3,746 | ) | |||||
Net income | $ | — | $ | 5,564 | ||||
Net broadcast revenues increased 2.1% to approximately $22.9 million in the third quarter of 2005 compared to approximately $22.5 million in the third quarter of 2004. The table below provides a summary of the net broadcast revenue variance between the quarter ended September 30, 2005 and the quarter ended September 30, 2004 (in thousands):
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Net broadcast revenue | ||||||||
variance | ||||||||
Favorable (unfavorable) | ||||||||
$ Chg | % Chg | |||||||
Net broadcast revenue variance: | ||||||||
Local advertising | $ | 466 | 2.6 | % | ||||
National advertising | 94 | 3.4 | % | |||||
Barter revenue | (29 | ) | -2.8 | % | ||||
Other | (54 | ) | -12.4 | % | ||||
Net broadcast revenue variance | $ | 477 | 2.1 | % | ||||
For the quarter, our local revenue grew approximately 2.6%, while our national revenue grew approximately 3.4%. Local and national revenue were negatively impacted in our Bloomington market by the drought in the state of Illinois. Local and national revenue were favorably impacted by Hurricane Katrina in our Lafayette market. Additionally, 2004 quarterly results included approximately $100,000 of political revenue from several of Regent’s markets located in, what were, battleground states during the 2004 election year.
Station operating expenses increased approximately $543,000 or 3.9% to approximately $14.6 million in the third quarter of 2005, from approximately $14.0 million in the third quarter of 2004. The table below provides a summary of station operating expense variance between the quarter ended September 30, 2005 and the quarter ended September 30, 2004 (in thousands):
Station operating expense | ||||||||
variance | ||||||||
Favorable (unfavorable) | ||||||||
$ Chg | % Chg | |||||||
Station operating expense variance: | ||||||||
Technical expenses | $ | (49 | ) | -6.1 | % | |||
Programming expenses | (204 | ) | -4.6 | % | ||||
Promotional expense | (33 | ) | -5.8 | % | ||||
Sales expenses | (61 | ) | -1.3 | % | ||||
Administrative expenses | (250 | ) | -7.6 | % | ||||
Barter expense | 54 | 6.1 | % | |||||
Total station operating expense variance | $ | (543 | ) | -3.9 | % | |||
The increase in programming expenses was in part due to increased compensation costs to talent, primarily in our Grand Rapids market as we launched a new morning team, increased bonuses related to ratings increases, increased research expenses, and increased music license fees. Sales expenses increased as a result of the increase in broadcasting revenues. The increase in administrative expenses was due primarily to increases in health care costs, personal property taxes and professional fees.
Depreciation and amortization expense increased 10.3%, from approximately $1.2 million in 2004 to approximately $1.3 million in 2005. The increase consists primarily of
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additional amortization and depreciation expense of approximately $0.1 million related to the Bloomington stations acquired in July 2004 and approximately $0.1 million of depreciation related to the Ft. Collins stations acquired in November 2004, offset by some reductions at our other markets.
Corporate general and administrative expense was approximately $2.8 million in the third quarter of 2005, compared to approximately $1.8 million in the third quarter of 2004. The third quarter of 2005 included approximately $1.2 million related to the retirement package for Terry S. Jacobs, the Company’s former CEO and Chairman of the Board, who retired as of September 1, 2005. Excluding the retirement package, general and administrative expense declined approximately $0.2 due to reduced incentive-based compensation and lower costs associated with compliance with Sarbanes-Oxley Section 404 regulations.
Interest expense increased from approximately $1.0 million during the third quarter of 2004, to approximately $1.3 million during the third quarter of 2005. The increase in interest expense was due to a combination of higher average interest rates and increased average outstanding credit facility balances in the third quarter of 2005. Subsequent to the third quarter of 2004, we borrowed to fund the purchases of our Ft. Collins stations and to purchase 335,100 shares of Regent common stock during the third quarter of 2004, at a cost of approximately $2.0 million. In the second quarter of 2005, we borrowed to fund the purchase of approximately 3.3 million shares of Regent common stock at a total cost of approximately $20.0 million.
The effective income tax rate for the third quarter 2005 and 2004 was 52.1% and 41.8%, respectively. Income tax expense was recorded at the federal statutory rate of 34% for the third quarter of both 2005 and 2004. In the third quarter of 2005, current and deferred state income taxes, net of federal benefit, were recorded at 14.2%. Income tax of 3.9% was related to other permanent items. For the third quarter of 2004, current and deferred state income taxes, net of federal benefit, were recorded at a 7.3% rate and other permanent items represent an additional 0.5%. The increase in the state rate in 2005 was due primarily to the combination of legislative changes in New York and Kentucky and the true-up of deferred state income taxes.
Net income per common share was $0.03 for the third quarter of 2005 and $0.18 for the third quarter of 2004. Income from continuing operations was $0.06 per share in the third quarter of 2004.
While acquisitions affect the comparability of our 2005 operating results to those of 2004, we believe meaningful quarter-to-quarter net broadcast revenue comparisons can be made for those markets in which we have been operating for five full quarters, excluding the effect of barter transactions and any markets sold or held for sale during those periods. Our revenues are produced exclusively by our radio stations and we believe that an analysis of the net broadcast revenues of stations we owned for the entire third quarters of both 2005 and 2004 is important because it presents a more direct view of the operating effectiveness of our stations. Nevertheless, this measure should not be considered in isolation or as a substitute for net broadcast revenue, operating income, income from continuing operations, net income, net cash provided by operating activities or any other measure for determining our operating performance or liquidity that is calculated in accordance with generally accepted accounting principles. The effect of barter is excluded in this comparison, as it customarily results in volatility between quarters, although differences over the full year are not material. This group of comparable markets (the “same station group”) is currently represented by 14 markets and 68 radio stations.
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For the same station group for the three months ended September 30, 2005, as compared to the same period in 2004, our net broadcast revenues increased 3.6%.
Quarter 3 Same Station Data
Quarter 3 | % | |||||||||||
2005 | 2004 | Change | ||||||||||
Revenue | ||||||||||||
Net broadcast revenue | $ | 22,931 | $ | 22,454 | 2.1 | % | ||||||
Less: | ||||||||||||
Net results of barter transactions and stations not included in same station category | 2,782 | 3,010 | ||||||||||
Same station net broadcast revenue | $ | 20,149 | $ | 19,444 | 3.6 | % | ||||||
Comparison of nine months ended September 30, 2005 to nine months ended September 30, 2004
Results of operations for the nine months ended September 30, 2005 compared to September 30, 2004 were affected by a time brokerage agreement with Citadel Broadcasting Company and related entities where we assumed the operations of five stations serving the Bloomington, Illinois market and Citadel assumed the operations of six radio stations in our Erie and Lancaster-Reading, Pennsylvania markets effective February 1, 2004. The effect of this transaction resulted in recording eight months of activity for our Bloomington market in 2004 compared to the nine full months in 2005. Additionally, and to a lesser extent, results were impacted by the operations of one new station in our Ft.Collins market that began operating January 1, 2005.
Regent applied the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets,” (“SFAS 144”) to the disposal of the Duluth, Erie and Lancaster markets, which requires that in a period in which a component of an entity has been disposed of or is classified as held for sale, the income statement of a business enterprise for current and prior periods shall report the results of operations of the component, including any gain or loss recognized, in discontinued operations. The table below summarizes the effect of the reclassification on the year to date period ended September 30, 2005 and September 30, 2004 (in thousands):
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2005 | 2004 | |||||||
Net broadcast revenue | $ | — | $ | 432 | ||||
Station operating expense | 18 | 440 | ||||||
Depreciation and amortization expense | — | 292 | ||||||
Allocated interest expense | — | 111 | ||||||
Other expense/(income), net | 9 | (9,311 | ) | |||||
(Loss)/income before income taxes | (27 | ) | 8,900 | |||||
Income tax benefit/(expense) | 11 | (3,586 | ) | |||||
Net (loss)/income | $ | (16 | ) | $ | 5,314 | |||
Net broadcast revenues increased approximately $2.2 million or 3.6% to $64.3 million for the first nine months of 2005 from approximately $62.1 million for the first nine months of 2004. The table below provides a summary of the net broadcast revenue variance for the comparable nine-month periods (in thousands):
Net broadcast revenue | ||||||||
variance | ||||||||
Favorable (unfavorable) | ||||||||
$ Chg | % Chg | |||||||
Net broadcast revenue variance: | ||||||||
Local advertising | $ | 1,839 | 3.7 | % | ||||
National advertising | 731 | 9.5 | % | |||||
Other | (140 | ) | -11.0 | % | ||||
Barter revenue | (225 | ) | -7.9 | % | ||||
Net broadcast revenue variance | $ | 2,205 | 3.6 | % | ||||
The variance in local advertising of 3.7% for the first nine months of 2005 compared to 2004 was due primarily to the improvement in the local economies in our Peoria, St. Cloud, and Flint markets, as well as increased advertising in our Lafayette market due to Hurricane Katrina. The favorable national revenue variance was due to substantial increases in national revenue in a number of our smaller markets, partially offset by decreased national revenue in the Albany, Flint and Bloomington markets.
Station operating expenses increased 4.0%, to approximately $43.0 million for the first nine months of 2005 from approximately $41.4 million for the first nine months of 2004. The table below provides a summary of the station operating expense variance for the nine month periods (in thousands):
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Station operating expense | ||||||||
variance | ||||||||
Favorable (unfavorable) | ||||||||
$ Chg | % Chg | |||||||
Total station operating expense variance: | ||||||||
Technical expenses | $ | (3 | ) | -0.2 | % | |||
Programming expenses | (675 | ) | -5.1 | % | ||||
Promotions expenses | (121 | ) | -5.7 | % | ||||
Sales expenses | (402 | ) | -3.0 | % | ||||
Administrative expenses | (564 | ) | -5.8 | % | ||||
Barter expense | 107 | 4.4 | % | |||||
Total station operating expense variance | $ | (1,658 | ) | -4.0 | % | |||
The increase in programming expenses was due primarily to increased compensation expenses, music license fees and research costs. The increased promotion expenses were due primarily to the launching of a new format in our Evansville market. Sales expenses increased due primarily to compensation costs related to the increased revenue, as well as increased rating service costs. Administrative expenses were higher due to increased overhead expenses, such as health care, personal property taxes, professional and legal fees and bad debt expense associated with increased revenue.
For the first nine months of 2005, depreciation and amortization expense increased 22.4%, to approximately $4.1 million from $3.4 million for the same period in 2004. The acquisition of the Bloomington stations in July 2004 accounted for $0.5 million of the increase and the acquisition of the two stations in Ft Collins in November 2004 accounted for $0.2 million of the increase.
Corporate general and administrative expense was approximately $6.5 million in the first nine months of 2005, compared to approximately $5.6 million in the first nine months of 2004. The 2005 year to date amounts include approximately $1.2 million related to the retirement package for Terry S. Jacobs, the Company’s former CEO and Chairman of the Board, who retired as of September 1, 2005. During the first nine months of 2005, performance-based compensation was approximately $0.2 million lower than the same period of the prior year and expense to comply with Sarbanes-Oxley Section 404 was approximately $0.1 million lower than the same period of the prior year.
Interest expense increased to approximately $3.5 million during the first nine months of 2005 from approximately $2.5 million during the first nine months of 2004. The increase in interest expense was due to a combination of higher average interest rates and increased average outstanding credit facility balances in the first nine months of 2005. Subsequent to the third quarter of 2004 we borrowed to fund the purchases of our Ft. Collins stations and to purchase 335,100 shares of Regent common stock in the third quarter of 2004 at a cost of approximately $2.0 million. In the second quarter of 2005, we borrowed to purchase approximately 3.3 million shares of Regent common stock at a total cost of approximately $20.0 million. Our average debt level for the first nine months of 2005 was approximately $81.9 million, compared to approximately $70.9 million for the same period of 2004.
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The effective income tax rate for the third quarter 2005 and 2004 was 43.4% and 40.3%, respectively. Income tax expense was recorded at the federal statutory rate of 34% for the first nine months of both 2005 and 2004. Current and deferred state income taxes, net of federal benefit, were recorded at 9.2% for the first nine months of 2005 and other permanent items represented 0.2%. For the first nine months of 2004, current and deferred state income taxes, net of federal benefit, were recorded at a 5.8% rate and other permanent items represent an additional 0.5%. The increase in the state rate in 2005 was due primarily to the combination of legislative changes in New York and Kentucky and the true-up of deferred state income taxes.
Net income per common share was $0.09 for the first nine months of 2005 and $0.23 for 2004. Income from continuing operations was $0.12 per share for the first nine months of 2004.
LIQUIDITY AND CAPITAL RESOURCES
Executive Overview
As an acquisitive company, it is critical to us to have the ability to raise capital for acquisitions. Since our inception, we have demonstrated our ability to access the public markets to raise equity, and have also demonstrated our ability to access the commercial bank market, having negotiated three separate credit facilities with several banking institutions since 1998. Access to bank financing is currently very favorable for the radio sector. In December 2004 and again in July 2005, we amended our existing credit facility to reflect the favorable interest rate pricing in the current market. The most recent amendment also allows us to borrow up to $50 million for repurchases of our own stock, subject to certain conditions, and resets our maximum leverage requirements to the levels that were in place at the beginning of the existing credit agreement. At current borrowing levels, the reduced interest rate pricing will generate approximately $450,000 in annualized interest expense savings.
We believe that we have sufficient access to funds so that we will be able to pursue our strategy for the balance of 2005 if we are able to find suitable acquisitions at acceptable prices. We also anticipate that if we were to make an acquisition that would require borrowings in excess of our current borrowing capacity, we would be able to fund our capital requirements by either refinancing our current credit facility, or by obtaining financing through a variety of options available to us, including, but not limited to, access to public capital through our shelf registration statement.
We believe the cash generated from operations and available borrowings under our credit facility will be sufficient to meet our requirements for corporate expenses and capital expenditures for the remainder of 2005, based on our projected operations and indebtedness and after giving effect to scheduled credit facility commitment reductions. We have available borrowings of approximately $56.0 million at September 30, 2005, subject to the terms and conditions of the credit facility. As a result of the July 2005 amendment, we have the capability to borrow up to a leverage ratio of 6.25:1.00 through the end of June 2006. At September 30, 2005 our debt leverage ratio was 4.17:1.00.
Our cash and cash equivalents balance at September 30, 2005 was approximately $1.0 million compared to approximately $1.5 million at September 30, 2004. Cash balances between years fluctuate due to the timing of when monies are received and expenditures are made. We typically maintain a cash balance of approximately one million dollars, as our excess cash generated by operating activities after investing activities is typically utilized to pay down our revolving credit facility.
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Sources of Funds
In the first nine months of 2005, net cash provided by operating activities was approximately $12.0 million, compared to approximately $12.5 million for the first nine months of 2004. The decrease was due primarily to the timing of cash receipts and cash payments in the Company’s working capital accounts.
In June 2003, we secured from a group of lenders a reducing credit agreement that provides for a maximum aggregate principal amount of $150.0 million, consisting of a senior secured revolving credit facility in the aggregate principal amount of $85.0 million and a senior secured term loan facility in the amount of $65.0 million. The credit facility is available for working capital and permitted acquisitions, including related acquisition costs.
Effective July 26, 2005, we completed a new amendment to our credit facility. The material terms of the amendment are: (1) a reduction of the Applicable Margin on Base Rate and Eurodollar loans under the credit facility, which at the current level of indebtedness reduces the Company’s interest rate by 50 basis points; (2) to revise the definition of Permitted Acquisition Condition (a) to eliminate two leverage ratio tests relating to aggregate acquisitions by Regent in excess of $75 million and in excess of $125 million, which ratios operated to require the prior consent of the lenders for Regent acquisitions in excess of those thresholds, and (b) to eliminate the requirement for prior consent of the lenders for any single acquisition in excess of $50 million; (3) to reset the maximum leverage ratio to 6.25:1.00 which increases the Company’s borrowing capacity under the credit facility, subject to the terms and conditions of the facility; and (4) to permit Regent to use cash in the amount of up to $50 million to repurchase shares of its common stock for the period commencing July 26, 2005 through the maturity date of the credit facility.
At September 30, 2005, we had borrowings under the credit facility of approximately $88.3 million, comprised of a $61.8 million term loan and $26.5 million of revolver borrowings, and available borrowings of $56.0 million, subject to the terms and conditions of the facility.
The term loan commitment reduces over six years beginning on December 31, 2004, and the revolving commitment reduction began on June 30, 2005. On a quarterly basis in 2005 and 2006, the commitment after reduction is approximately as follows (in thousands):
Revolving | Term Loan | Total | ||||||||||
Period Ending | Commitment | Commitment | Commitment | |||||||||
September 30, 2005 | $ | 82,450 | $ | 61,750 | $ | 144,200 | ||||||
December 31, 2005 | 81,175 | 60,450 | 141,625 | |||||||||
March 31, 2006 | 79,900 | 59,150 | 139,050 | |||||||||
June 30, 2006 | 77,563 | 57,850 | 135,413 | |||||||||
September 30, 2006 | 75,225 | 56,550 | 131,775 |
Under the credit facility, we are subject to a maximum leverage ratio, minimum interest coverage ratio, and minimum fixed charge coverage ratio, as well as to negative covenants customary for facilities of this type. Borrowings under the amended credit facility bear interest at a rate equal to, at our option, either (a) the higher of the rate announced or published publicly from time to time by the agent as its corporate base rate of interest or the Federal Funds Rate plus 0.5% in either case plus the applicable margin determined under the credit facility, which varies between 0.0% and 0.5 % depending upon our leverage ratio, or (b) the Eurodollar Rate plus the applicable margin, which varies
34
between 0.75% and 1.50%, depending upon our leverage ratio. Borrowings under the credit facility bore interest at an average rate of 4.86% and 4.22% at September 30, 2005 and September 30, 2004, respectively. Our weighted-average interest rate for the nine months ended September 30, 2005 and September 30, 2004 was 4.42% and 3.47%, respectively. We are required to pay certain fees to the agent and the lenders for the underwriting commitment and the administration and use of the credit facility. The underwriting commitment varies between 0.25% and 0.50% depending upon the amount of the credit facility utilized.
One half of our term loan borrowings are subject to a LIBOR-based forward interest rate swap agreement, which effectively converts approximately $30.9 million from variable-rate debt to a fixed rate. The swap agreement became effective on June 30, 2004 and expires June 30, 2006. Under this agreement, payments are made based on a fixed rate of 3.69%, plus applicable margin, which we set in August 2003 based on the market for a financial instrument of this type at that date.
Generally, we have incurred debt in order to acquire radio properties, to make large capital expenditures, and to repurchase shares of our common stock, and have opportunistically accessed the public equity markets to de-lever our balance sheet.
In March 2002, we filed a Registration Statement on Form S-3 covering a combined $250.0 million of common stock, convertible preferred stock, depository shares, debt securities, warrants, stock purchase contracts and stock purchase units (the “Shelf Registration Statement”). The Shelf Registration Statement also covers debt securities that could be issued by one of our subsidiaries, and guarantees of such debt securities by us and our subsidiaries. We used approximately $78.8 million of the amounts available under the Shelf Registration Statement for our April 2002 offering of common stock, leaving us with capacity of approximately $171.2 million if we were to seek to raise monies in the public markets.
In July 2005, we completed the sale of substantially all of the fixed and intangible assets of WRUN-AM in Utica, New York to WAMC, a not-for-profit public radio entity, for $275,000.
Uses of Funds
Net cash used in investing activities was approximately $3.3 million for the first nine months of 2005, compared to approximately $9.4 million for the first nine months of 2004. The greater amount in the first nine months of 2004 was due primarily to the completion of the exchange with Clear Channel of our four stations serving the Duluth, Minnesota market and payment of $2.7 million in cash for Clear Channel’s five stations serving the Evansville, Indiana market and the completion of the exchange with Citadel of our four stations serving the Erie, Pennsylvania market and our two stations serving the Lancaster-Reading, Pennsylvania market and $3.7 million cash for Citadel’s five stations serving the Bloomington, Illinois market.
In the first nine months of 2005 we funded capital expenditures of approximately $3.2 million compared to $2.8 million in the first nine months of 2004. Approximately $0.9 million of the capital expenditures in the first nine months of 2005 was to consolidate the multiple facilities in our Albany market, a project that began in 2004 and was completed in the second quarter of 2005. Also in the first nine months of 2005 approximately $0.8 million was spent on our high definition radio project. The remaining $1.5 million was for maintenance capital expenditures. In the first nine months of 2004, approximately $1.1 million of capital expenditures was for consolidation projects in our Peoria and Albany markets. Maintenance capital expenditures were approximately $1.8 million in the first nine months of 2004. We
35
expect capital expenditures to be approximately $0.4 million in the fourth quarter of 2005, of which approximately $0.3 million is projected to be maintenance capital expenditures and approximately $0.1 million is for our high definition radio project.
Net cash used in financing activities for the first nine months of 2005 was approximately $9.0 million, compared to approximately $3.2 million used during the same period of 2004. During the 2005 period we utilized approximately $21.5 million of borrowings under our credit facility to repurchase approximately $20.1 million of stock through the Company’s authorized stock buyback program and to repurchase approximately $0.6 million of stock pursuant to the retirement of our former Chief Executive Officer. We utilized cash from operating activities to repay approximately $9.8 million of long-term debt. During the first nine months of 2004, approximately $13.0 million was borrowed under the credit facility, of which approximately $7.0 million was repaid, and approximately $9.0 million of stock was repurchased under the stock buyback program.
Off-Balance Sheet Financing Arrangements
We have no material off-balance sheet financing arrangements with related or unrelated parties and no unconsolidated subsidiaries.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 123R, as revised, “Share-Based Payment” (“SFAS 123R”). SFAS 123R replaces SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”) and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”). SFAS 123R is applicable to share-based compensation arrangements including stock options, restricted share plans, performance-based awards, stock appreciation rights, and employee stock purchase plans. Formerly, under the provisions of SFAS 123, companies were permitted to follow the recognition and measurement principles of APB 25 and provide additional footnote disclosures of what net income or loss would have been had the Company followed the fair-value-based provisions contained in SFAS 123. SFAS 123R requires companies to recognize in their financial statements the compensation expense relating to share-based payment transactions for stock options that have future vesting provisions or as newly granted beginning on the grant date of such options. We will be required to implement SFAS 123R in the first quarter of 2006. Assuming there was no change in the variables used to calculate the fair market value of share-based compensation, if we had followed the provisions of SFAS 123R for the quarters ended March 31, 2005 and 2004, net income (loss) and basic and diluted income (loss) per common share would have approximated the proforma amounts disclosed in Footnote 1,Stock-Based Compensation Plans, for those periods. We are currently evaluating all of the provisions of SFAS 123R and its expected effect on us, including, among other items, reviewing compensation strategies related to stock-based awards, selecting an option pricing model, and determining a transition method.
In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations — an interpretation of FASB Statement No. 143” (“FIN 47”). FIN 47 clarifies certain terminology in FASB Statement No. 143 and the circumstances under which an entity would have sufficient information to reasonably estimate the fair value of asset retirement obligations. We are required to implement the provisions in FIN 47 no later than December 31, 2005, and are currently evaluating the impact that FIN 47 will have on our operations and cash flows, if any.
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In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections — a replacement of APB Opinion No. 20 and FASB Statement No. 3,” (“SFAS 154”). SFAS 154 replaces APB Opinion No. 20, “Accounting Changes” and Statement of Financial Accounting Standards No. 3, “Reporting Changes in Interim Financial Statements,” and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS 154 is applicable for all voluntary changes in accounting principle, as well as changes required by accounting pronouncements that do not include specific transition provisions. SFAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. Under the former standards, most voluntary changes in accounting principle were recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. We are required to implement the provisions of SFAS 154 effective January 2006. For any voluntary changes we would make to our accounting principles after that date, the provisions of SFAS 154 would be applied.
In June 2005, the Emerging Issues Task Force (“EITF”) issued EITF 05-6, “Determining the Amortization Period for Leasehold Improvements Purchased after Lease Inception or Acquired in a Business Combination (“EITF 05-6”). EITF 05-6 addresses assessing the amortization period for leasehold improvements acquired in a business combination and leasehold improvements placed in service significantly after and not contemplated at the beginning of a lease term. We have applied the provisions of EITF 05-6 to all leasehold improvements acquired since the June 2005 ratification of EITF 05-6 with no material impact on our financial position, cash flows, or results of operations.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to the impact of interest rate changes as borrowings under our credit facility bear interest at variable rates. It is our policy to enter into interest rate transactions only to the extent considered necessary to meet our objectives. In August 2003, we entered into a LIBOR-based forward interest rate swap agreement which effectively converted $32.5 million of our variable-rate debt under the credit facility at that date to a fixed rate, beginning June 30, 2004 and expiring June 30, 2006. Under this agreement, payments are made based on a fixed rate of 3.69% plus applicable margin, a rate which was set in August 2003 based on the market for a financial instrument of this type at that date. We have classified the swap agreement as a cash-flow hedge, in which we are hedging the variability of cash flows related to our variable-rate debt. Based on our exposure to variable rate borrowings at September 30, 2005, a one percent (1%) change in the weighted-average interest rate would change our annualized interest expense by approximately $574,000.
ITEM 4. CONTROLS AND PROCEDURES.
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” in Rule 13a-15(e). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
The Company has carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.
There have been no changes in the Company’s internal controls over financial reporting for the quarter ended September 30, 2005, or in other factors that could significantly affect the internal controls subsequent to the date the Company completed its evaluation. Therefore, no corrective actions were taken.
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We currently and from time to time are involved in litigation incidental to the conduct of our business. In the opinion of our management, we are not a party to any lawsuit or legal proceeding that is likely to have a material adverse effect on our business or financial condition.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
2(c)
Approximate | ||||||||||||||||
Dollar Value of | ||||||||||||||||
Total Number of | Shares that May | |||||||||||||||
Total Number | Shares Purchased | Yet be Purchased | ||||||||||||||
of Shares | Average Price Paid | as Part of Publicly | under the Plan(1) | |||||||||||||
Period | Purchased(2) | per Share | Announced Plan(1) | (in thousands) | ||||||||||||
July 1, 2005 — July 31, 2005 | 0 | — | 0 | $ | 20,000 | |||||||||||
August 1, 2005 — August 31, 2005 | 0 | — | 0 | $ | 20,000 | |||||||||||
September 1, 2005 — September 30, 2005 | 118,232 | $ | 5.53 | 18,232 | $ | 19,908 | ||||||||||
Total | 118,232 | $ | 5.53 | 18,232 | $ | 19,908 |
(1) | On June 1, 2000, Regent’s Board of Directors approved a stock buyback program for an initial amount of $10.0 million, which authorized the Company to repurchase shares of its common stock at certain market price levels. Through October 2002, the Company repurchased approximately $6.7 million of its common stock under the plan, which amount the Board later replenished under the Plan at their October 2002 meeting. As of July 31, 2004, the Company had expended the entire $16.7 million authorized under the Plan. At its July 2004 meeting, the Company’s Board of Directors increased the amount authorized under the repurchase plan by an additional $20.0 million. In December 2004, we completed an amendment of our credit facility, which provided us with more favorable pricing and increased the amount of our stock that we were able to buy back, subject to certain conditions, by $40.0 million, twice the amount then approved by our Board of Directors. The entire $20.0 million of additional repurchases available under the Plan was expended during the second quarter of 2005. At its July 2005 meeting, the Company’s Board of Directors replenished Regent’s stock buyback program by authorizing the Company to expend up to $20.0 million more for stock repurchases. Effective July 26, 2005, the Company modified its credit facility to, among other things, permit Regent to use up to $50.0 million in cash to repurchase shares of its common stock. During the third quarter of 2005, the Company expended approximately $92,000 of the $20.0 million authorized by the Board under the Plan at their July 2005 meeting. | |
(2) | On September 1, 2005, the Company repurchased 100,000 shares of Regent stock from Terry S. Jacobs, its former Chief Executive Officer, at a price of $5.62 per share, pursuant to the terms of Mr. Jacobs’ retirement package authorized by the Company’s Board of Directors. The purchase price was based upon the average of the high and low price for a share of Regent common stock on September 1, 2005. |
ITEM 6. EXHIBITS.
Exhibits
The exhibits identified as Part II Exhibits on the following Exhibit Index, which is incorporated herein by this reference, are filed or incorporated by reference as exhibits to Part II of this Form 10-Q.
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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, hereunto duly authorized.
REGENT COMMUNICATIONS, INC. | |||||
Date: November 9, 2005 | By: | /s/ William L. Stakelin | |||
William L. Stakelin, Chief Executive | |||||
Officer and President | |||||
Date: November 9, 2005 | By: | /s/ Anthony A. Vasconcellos | |||
Anthony A. Vasconcellos, Chief | |||||
Financial Officer and Executive Vice President | |||||
(Chief Accounting Officer) |
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EXHIBIT INDEX
The following exhibits are filed, or incorporated by reference where indicated, as part of Part II of this report on Form 10-Q:
EXHIBIT | ||
NUMBER | EXHIBIT DESCRIPTION | |
3(a)* | Amended and Restated Certificate of Incorporation of Regent Communications, Inc., as amended by a Certificate of Designation, Number, Powers, Preferences and Relative, Participating, Optional and Other Special Rights and the Qualifications, Limitations, Restrictions, and Other Distinguishing Characteristics of Series G Preferred Stock of Regent Communications, Inc., filed January 21, 1999 (previously filed as Exhibit 3(a) to the Registrant’s Form 10-K for the year ended December 31, 1998 and incorporated herein by this reference) | |
3(b)* | Certificate of Amendment of Amended and Restated Certificate of Incorporation of Regent Communications, Inc. filed with the Delaware Secretary of State on November 19, 1999 (previously filed as Exhibit 3(b) to the Registrant’s Form 10-Q for the quarter ended June 30, 2001 and incorporated herein by this reference) | |
3(c)* | Certificate of Decrease of Shares Designated as Series G Convertible Preferred Stock of Regent Communications, Inc., filed with the Delaware Secretary of State on June 21, 1999 amending the Amended and Restated Certificate of Incorporation of Regent Communications, Inc., as amended (previously filed as Exhibit 3(c) to the Registrant’s Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by this reference) | |
3(d)* | Certificate of Designation, Number, Powers, Preferences and Relative, Participating, Optional and Other Special Rights and the Qualifications, Limitations, Restrictions, and Other Distinguishing Characteristics of Series H Preferred Stock of Regent Communications, Inc., filed with the Delaware Secretary of State on June 21, 1999 amending the Amended and Restated Certificate of Incorporation of Regent Communications, Inc., as amended (previously filed as Exhibit 3(d) to the Registrant’s Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by this reference) | |
3(e)* | Certificate of Decrease of Shares Designated as Series G Convertible Preferred Stock of Regent Communications, Inc., filed with the Delaware Secretary of State on August 23, 1999 amending the Amended and Restated Certificate of Incorporation of Regent Communications, Inc., as amended (previously filed as Exhibit 3(e) to the Registrant’s Form 10-Q for the quarter ended September 30, 1999 and incorporated herein by this reference) | |
3(f)* | Certificate of Increase of Shares Designated as Series H Convertible Preferred Stock of Regent Communications, Inc., filed with the Delaware Secretary of State on August 23, 1999 amending the Amended and Restated Certificate of Incorporation of Regent Communications, Inc., as amended (previously filed as Exhibit 3(f) to the Registrant’s Form 10-Q for the quarter ended September 30, 1999 and incorporated herein by this reference) |
E-1
EXHIBIT | ||
NUMBER | EXHIBIT DESCRIPTION | |
3(g)* | Certificate of Designation, Number, Powers, Preferences and Relative, Participating, Optional, and Other Special Rights and the Qualifications, Limitations, Restrictions, and Other Distinguishing Characteristics of Series K Preferred Stock of Regent Communications, Inc., filed with the Delaware Secretary of State on December 13, 1999 amending the Amended and Restated Certificate of Incorporation of Regent Communications, Inc., as amended (previously filed as Exhibit 3(g) to Amendment No. 1 to the Registrants Form S-1 Registration Statement No. 333-91703 filed December 29, 1999 and incorporated herein by this reference) | |
3(h)* | Certificate of Amendment of Amended and Restated Certificate of Incorporation of Regent Communications, Inc. filed with the Delaware Secretary of State on March 13, 2002 (previously filed as Exhibit 3(h) to the Registrant’s Form 10-K for the year ended December 31, 2001 and incorporated herein by this reference) | |
3(i) | Amended and Restated By-Laws of Regent Communications, Inc. adopted July 27, 2005 | |
4(a)* | Credit Agreement dated as of June 30, 2003 among Regent Broadcasting, Inc., Regent Communications, Inc., Fleet National Bank, as Administrative Agent, Fleet National Bank, as Issuing Lender, US Bank, National Association, as Syndication Agent, Wachovia Bank, National Association and Suntrust Bank, as co-Documentation Agents, and the several lenders party thereto (previously filed as Exhibit 10.1 to the Registrant’s Form 8-K filed July 1, 2003 and incorporated herein by this reference) | |
4(b)* | Amendment and Consent under Credit Agreement dated as of December 15, 2004, by and among Regent Broadcasting, Inc., the financial institutions from time to time party to the Credit Agreement as lenders thereunder, Fleet National Bank, as the administrative agent for the Lenders, US Bank, National Association, as the syndication agent for the Lenders, Wachovia Bank, National Association, and Suntrust Bank, as co-documentation agents for the Lenders (previously filed as Exhibit 4(b) to the Registrant’s Form 10-K for the year ended December 31, 2004 and incorporated herein by this reference) | |
4(c)* | Amendment under Credit Agreement dated as of July 12, 2005, by and among Regent Broadcasting, LLC, formerly Regent Broadcasting, Inc., Regent Communications, Inc., the several financial institutions from time to time party to the Credit Agreement as lenders thereunder, Bank of America, N.A. (successor by merger to Fleet National Bank), as the administrative agent for the Lenders, US Bank, National Association, as the syndication agent for the Lenders, Wachovia Bank, National Association, and Suntrust Bank., as co-documentation agents for the Lenders (previously filed as Exhibit 4(a) to the Registrant’s Form 8-K filed August 1, 2005 and incorporated herein by this reference) | |
10(a)* | Separation Agreement and General Release by and between Terry S. Jacobs and Regent Communications, Inc. dated September 1, 2005 (previously filed as Exhibit 10(a) to the Registrant’s Form 8-K filed September 8, 2005 and incorporated herein by this reference) |
E-2
EXHIBIT | ||
NUMBER | EXHIBIT DESCRIPTION | |
31(a) | Chief Executive Officer Rule 13a-14(a)/15d-14(a) Certification | |
31(b) | Chief Financial Officer Rule 13a-14(a)/15d-14(a) Certification | |
32(a) | Chief Executive Officer Section 1350 Certification | |
32(b) | Chief Financial Officer Section 1350 Certification |
* | Incorporated by reference. |
E-3