UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
COMMISSION FILE NUMBER: 001-14461
Entercom Communications Corp.
----------------------------------------
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1701044
(State or other jurisdiction of incorporation of organization) (I.R.S. Employer Identification No.)
401 CITY AVENUE, SUITE 409
BALA CYNWYD, PENNSYLVANIA 19004
(Address of principal executive offices and Zip Code)
(610) 660-5610
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class A Common Stock, $.01 par value -
34,791,041 Shares Outstanding as of November 2, 2001
Class B Common Stock, $.01 par value -
10,531,805 Shares Outstanding as of November 2, 2001
ENTERCOM COMMUNICATIONS CORP.
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements ........................................... 3
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................... 16
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk ..... 23
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings .............................................. 23
ITEM 2. Changes in Securities and Use of Proceeds ...................... 24
ITEM 3. Defaults Upon Senior Securities ................................ 24
ITEM 4. Submission of Matters to a Vote of Security Holders ............ 24
ITEM 5. Other Information .............................................. 24
ITEM 6. Exhibits and Reports on Form 8-K ............................... 24
SIGNATURES .................................................................. 26
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
ASSETS
SEPTEMBER
---------
DECEMBER 31, 30,
------------ ---
2000 2001
---- ----
CURRENT ASSETS
Cash and cash equivalents $ 13,257 $ 12,915
Accounts receivable, net of allowance for doubtful accounts 70,937 69,740
Prepaid expenses and deposits 3,852 4,465
Prepaid and refundable federal and state income taxes 705 5,065
Deferred tax assets 1,499 4,982
Station deposits and acquisition costs 688 878
----------- -----------
Total current assets 90,938 98,045
----------- -----------
INVESTMENTS 12,116 15,408
----------- -----------
PROPERTY AND EQUIPMENT - AT COST
Land, land easements and land improvements 10,082 10,184
Buildings 10,404 10,561
Equipment 77,409 81,164
Furniture and fixtures 12,125 12,527
Leasehold improvements 8,967 11,380
----------- -----------
118,987 125,816
Accumulated depreciation and amortization (26,532) (34,753)
----------- -----------
92,455 91,063
Capital improvements in progress 1,498 643
----------- -----------
Net property and equipment 93,953 91,706
----------- -----------
RADIO BROADCASTING LICENSES AND OTHER INTANGIBLES - NET 1,265,816 1,240,917
----------- -----------
DEFERRED CHARGES AND OTHER ASSETS - NET 11,105 10,156
----------- -----------
TOTAL $ 1,473,928 $ 1,456,232
=========== ===========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
SEPTEMBER
---------
DECEMBER 31, 30,
------------ ---
2000 2001
---- ----
CURRENT LIABILITIES
Accounts payable $ 18,967 $ 14,019
Accrued liabilities:
Salaries 6,042 5,964
Interest 1,744 4,261
Other 1,017 1,026
Derivative instruments -- 7,453
Current portion of long-term debt 11 12,201
----------- -----------
Total current liabilities 27,781 44,924
----------- -----------
SENIOR DEBT 461,249 401,127
DEFERRED TAX LIABILITIES 124,197 137,403
----------- -----------
Total liabilities 613,227 583,454
----------- -----------
COMPANY - OBLIGATED MANDATORILY REDEEMABLE CONVERTIBLE
PREFERRED SECURITIES OF SUBSIDIARY HOLDING SOLELY CONVERTIBLE
DEBENTURES OF THE COMPANY 125,000 125,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Class A common stock 342 348
Class B common stock 105 105
Class C common stock 5 --
Additional paid-in capital 747,442 750,605
Accumulated deficit (11,850) (225)
Unearned compensation (329) (233)
Accumulated other comprehensive loss (14) (2,822)
----------- -----------
Total shareholders' equity 735,701 747,778
----------- -----------
TOTAL $ 1,473,928 $ 1,456,232
=========== ===========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
(UNAUDITED)
NINE MONTHS ENDED
-----------------
SEPTEMBER 30,
-------------
2000 2001
---- ----
NET REVENUES $ 260,280 $ 249,217
------------ ------------
OPERATING EXPENSES (INCOME):
Station operating expenses 155,223 153,037
Depreciation and amortization 32,147 34,681
Corporate general and administrative expenses 9,203 9,380
Net expense from time brokerage agreement fees 9 --
Net(gain) loss on sale of assets (41,465) 22
------------ ------------
Total operating expenses 155,117 197,120
------------ ------------
OPERATING INCOME 105,163 52,097
------------ ------------
OTHER EXPENSE (INCOME):
Interest expense 28,512 21,703
Financing cost of Company-obligated mandatorily redeemable convertible preferred
securities of subsidiary holding solely convertible debentures
of the Company 5,859 5,859
Interest income (342) (234)
Equity loss from unconsolidated affiliate -- 2,889
Net loss on derivative instruments -- 1,349
------------ ------------
Total other expense 34,029 31,566
------------ ------------
INCOME BEFORE INCOME TAXES AND ACCOUNTING CHANGE 71,134 20,531
INCOME TAXES 28,571 8,340
------------ ------------
INCOME BEFORE ACCOUNTING CHANGE 42,563 12,191
Cumulative effect of accounting change, net of taxes of $377 -- (566)
------------ ------------
NET INCOME $ 42,563 $ 11,625
============ ============
NET INCOME PER SHARE - BASIC:
Income before accounting change $ 0.94 $ 0.27
Cumulative effect of accounting change, net of taxes -- (0.01)
------------ ------------
NET INCOME PER SHARE - BASIC $ 0.94 $ 0.26
============ ============
NET INCOME PER SHARE - DILUTED:
Income before accounting change $ 0.93 $ 0.26
Cumulative effect of accounting change, net of taxes -- (0.01)
------------ ------------
NET INCOME PER SHARE - DILUTED $ 0.93 $ 0.25
============ ============
WEIGHTED AVERAGE SHARES:
Basic 45,201,433 45,282,555
============ ============
Diluted 45,645,496 46,026,312
============ ============
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
------------------
SEPTEMBER 30,
-------------
2000 2001
---- ----
NET REVENUES $ 92,462 $ 85,136
------------ ------------
OPERATING EXPENSES (INCOME):
Station operating expenses 53,471 52,621
Depreciation and amortization 11,033 11,677
Corporate general and administrative expenses 2,729 2,921
Net expense from time brokerage agreement fees 4 --
Net(gain) loss on sale of assets (41,472) 7
------------ ------------
Total operating expenses 25,765 67,226
------------ ------------
OPERATING INCOME 66,697 17,910
------------ ------------
OTHER EXPENSE (INCOME):
Interest expense 9,488 6,710
Financing cost of Company-obligated mandatorily redeemable convertible preferred
securities of subsidiary holding solely convertible debentures
of the Company 1,953 1,953
Interest income (135) (45)
Equity loss from unconsolidated affiliate -- 1,009
Net loss on derivative instruments -- 1,428
------------ ------------
Total other expense 11,306 11,055
------------ ------------
COME BEFORE INCOME TAXES 55,391 6,855
INCOME TAXES 22,205 2,779
------------ ------------
NET INCOME $ 33,186 $ 4,076
============ ============
NET INCOME PER SHARE:
NET INCOME PER SHARE - BASIC $ 0.73 $ 0.09
============ ============
NET INCOME PER SHARE - DILUTED $ 0.71 $ 0.09
============ ============
WEIGHTED AVERAGE SHARES:
45,214,957 45,314,925
============ ============
Diluted 48,409,950 45,976,747
============ ============
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6
ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
-----------------
SEPTEMBER 30,
-------------
2000 2001
---- ----
NET INCOME $ 42,563 $ 11,625
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX BENEFIT OR PROVISION
Unrealized gain(loss) on investments - net of tax benefit of $1,535 in 2000 and
tax provision of $192 in 2001 (2,303) 289
Unrealized net loss on hedged derivatives from cumulative effect of accounting change - net
of tax benefit of $457 in 2001 -- (685)
Unrealized net loss on hedged derivatives - net of tax benefit of $1,608 in 2001 -- (2,412)
-------- --------
COMPREHENSIVE INCOME $ 40,260 $ 8,817
======== ========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7
ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
------------------
SEPTEMBER 30,
-------------
2000 2001
---- ----
NET INCOME $ 33,186 $ 4,076
OTHER COMPREHENSIVE LOSS, NET OF TAX BENEFIT
Unrealized loss on investments - net of tax benefit of $1,306 and $1,473 in
2000 and 2001, respectively (1,960) (2,210)
Unrealized net loss on hedged derivatives - net of tax benefit of $185 in 2001 -- (277)
-------- --------
COMPREHENSIVE INCOME $ 31,226 $ 1,589
======== ========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8
ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
NINE MONTHS ENDED
-----------------
SEPTEMBER 30,
-------------
2000 2001
---- ----
OPERATING ACTIVITIES:
Net income $ 42,563 $ 11,625
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 32,147 34,681
Deferred taxes 30,513 11,595
Tax benefit on exercise of options (211) (682)
Provision for bad debts 2,475 2,608
Non-cash stock-based compensation expense 517 417
(Gain) loss on disposition of assets (41,465) 22
Equity loss from unconsolidated affiliate -- 2,889
Net loss on derivative instruments -- 1,349
Cumulative effect of accounting change -- 943
Changes in assets and liabilities which (used) provided cash:
Accounts receivable (23,229) (1,411)
Prepaid expenses and deposits (2,907) (613)
Prepaid and refundable income taxes (1,511) (3,678)
Accounts payable and accrued liabilities 301 (2,500)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 39,193 57,245
-------- --------
INVESTING ACTIVITIES:
Additions to property and equipment (5,972) (6,221)
Proceeds from sale of property, equipment and other assets 57,196 133
Purchases of radio station assets (98,556) --
Deferred charges and other assets (1,375) (518)
Purchase of investments (8,936) (5,721)
Proceeds from investments -- 21
Station acquisition costs 191 (190)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (57,452) (12,496)
-------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 47,000 7,078
Payments on long-term debt (27,508) (55,011)
Proceeds from issuance of common stock related to incentive plans 492 413
Proceeds from exercise of stock options 823 2,429
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 20,807 (45,091)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,548 (342)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 11,262 13,257
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 13,810 $ 12,915
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -
Cash paid during the period for:
Interest $ 27,996 $ 21,109
======== ========
Interest on TIDES $ 3,906 $ 3,906
======== ========
Income taxes $ 515 $ 45
======== ========
SUPPLEMENTAL DISCLOSURE ON FINANCING ACTIVITY -
In connection with the issuance of certain awards of Restricted Stock during the
nine months ended September 30, 2000, the Company issued 5,000 shares of Class A
Common Stock and increased its additional paid-in-capital by $266.
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements for Entercom
Communications Corp. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments, consisting of only normal recurring accruals,
considered necessary for a fair presentation have been included.
This Form 10-Q should be read in conjunction with the financial
statements and notes thereto included in the Company's audited financial
statements as of December 31, 2000, and filed with the Securities and Exchange
Commission (the "SEC") on March 21, 2001, as part of the Company's Form 10-K.
Operating results for the interim periods presented are not necessarily
indicative of the results that may be expected for the full fiscal year. Certain
prior year amounts have been reclassified to conform to the current year's
presentation, which had no effect on the financial position, results of
operations or cash flows of the Company.
RECENT ACCOUNTING PRONOUNCEMENTS
Effective January 1, 2001, the Company adopted the Financial Accounting
Standards Board's ("FASB") Statement of Accounting Standards ("SFAS") No. 133
entitled "Accounting for Derivative Instruments and Hedging Activities," that
was amended by SFAS No. 137 and SFAS No. 138. SFAS No. 133 established
accounting and reporting standards for (1) derivative instruments, including
certain derivative instruments embedded in other contracts, which are
collectively referred to as derivatives and (2) hedging activities. The
accounting for changes in the fair value of a derivative depends on the intended
use of the derivative and the resulting designation. All derivatives, whether
designated in hedging relationships or not, are required to be recorded on the
balance sheet at fair value. If the derivative is designated as a fair value
hedge, the changes in the fair value of the derivative and the hedged item are
recognized in the statement of operations. If the derivative is designated as a
cash flow hedge, changes in the fair value of the derivative are recorded in
other comprehensive income (loss) and are recognized in the statement of
operations when the hedged item affects net income (loss). SFAS No. 133 defines
new requirements for designation and documentation of hedging relationships as
well as on going effectiveness assessments in order to use hedge accounting
under this standard. A derivative that does not qualify as a hedge is marked to
fair value through the statement of operations. The Company formally documents
all relationships between hedging instruments and hedged items, as well as its
risk-management objective and strategy for undertaking various hedge
transactions. This process includes relating all derivatives that are designated
as fair value or cash flow hedges to specific assets and liabilities on the
balance sheet or to specific firm commitments or forecasted transactions. The
Company also formally assesses, both at the inception of the hedge and on an
ongoing basis, whether each derivative is highly effective in offsetting changes
in fair values or cash flows of the hedged item. If it is determined that a
derivative is not highly effective as a hedge or if a derivative ceases to be a
highly effective hedge, the Company will discontinue hedge accounting
prospectively.
For those derivatives that did not qualify for hedge accounting
treatment with an aggregate notional amount of $30.0 million, the Company
recorded to the statement of operations: (1) for the nine months ended September
30, 2001, a $0.4 million loss under the cumulative effect of accounting change
as an accumulated transition adjustment and (2) for the nine months and three
months ended September 30, 2001, a $2.0 million loss and a $1.6 million loss,
respectively, under net loss on derivative instruments. For those derivatives
designated as cash flow hedges that qualify for hedge accounting treatment with
an aggregate notional amount of $233.0 million, the Company recorded: (1) the
ineffective amount of the hedges to the statement of operations for the nine
months ended September 30, 2001, as a $0.6 million loss under the cumulative
effect of accounting change as an accumulated transition adjustment and for the
nine months and three months ended September 30, 2001, as a $0.7 million gain
and a $0.2 million gain, respectively, under net loss on derivative instruments
and (2) the effective amount of the hedges to the statement of other
comprehensive income for the nine months ended September 30, 2001, as a $1.1
million loss under the cumulative effect of accounting change as an accumulated
transition adjustment and for the nine months and three months ended September
30, 2001, as a $4.0 million loss and a $0.5 million loss, respectively, to
unrealized net loss on hedged derivatives. The Company has calculated the
transition and current period adjustments in accordance with tentative
accounting guidance issued by the Derivatives Implementation Group ("DIG"), and
therefore, the guidance could be subject to change. The DIG is a committee
appointed by the FASB and assigned the responsibility of answering
implementation and interpretation questions related to this new accounting
standard.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations."
Statement No. 141 addresses financial accounting and reporting for business
combinations and supersedes Accounting Principles Board ("APB") Opinion No. 16,
10
"Business Combinations" and FASB Statement No. 38, "Accounting for
Preacquisition Contingencies of Purchased Enterprises." Statement No. 141 is
effective for all business combinations initiated after June 30, 2001 and
eliminates the pooling-of-interest method of accounting for business
combinations except for qualifying business combinations that were initiated
prior to July 1, 2001. Statement No. 141 also changes the criteria to recognize
intangible assets apart from goodwill. The Company adopted this statement on
July 1, 2001. The Company has historically used the purchase method to account
for all business combinations and the adoption of this statement did not have an
impact on the Company's financial position, cash flows or results of operations.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets" that requires the use of a non-amortization approach to
account for purchased goodwill and certain intangibles. Under a non-amortization
approach, goodwill and certain intangibles will not be amortized into results of
operations, but instead will be reviewed for impairment and written down and
charged to results of operations only in the periods in which the recorded value
of goodwill and certain intangibles is greater than its fair value. This
statement, which applies to goodwill and certain other intangible assets
acquired prior to June 30, 2001, will be adopted by the Company on January 1,
2002. The Company expects that adoption of this accounting standard on January
1, 2002, will have the impact of reducing the non-cash amortization expense for
goodwill and broadcasting licenses and will have a material impact on the
Company's financial statements as the amount currently recorded for the
amortization of goodwill and broadcasting licenses is significant. In addition,
upon adoption, the Company will perform the first of the required impairment
tests of goodwill and broadcasting licenses which may result in future periodic
write-downs. The Company has not yet determined what the effect of these tests
will be on the Company's financial position, cash flows or results of
operations.
The following unaudited pro forma summary presents the Company's
estimate of the effect of the adoption of SFAS No. 142 as of the beginning of
the periods presented as reported income before accounting change and net income
are adjusted to eliminate the amortization expense recognized in those periods
related to goodwill and broadcasting licenses as goodwill and broadcasting
licenses would not be amortized under this new accounting standard. These pro
forma amounts do not include any adjustments for potential write-downs which
could result based on the performance of the required impairment tests under the
provisions of SFAS No. 142.
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 2001 2000 2001
---- ---- ---- ----
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
Reported income before accounting change $ 42,563 $ 12,191 $ 33,186 $ 4,076
Add back: amortization of goodwill, net of tax
provision of $33 and $36 for the nine months ended
and $12 and $12 for the three months ended
September 30, 2000 and 2001, respectively 49 54 18 18
Add back: amortization of broadcasting licenses, net of
tax provision of $9,020 and $9,930 for the nine months
and $2,784 and $3,310 for the three months ended
September 30, 2000 and 2001, respectively 13,530 14,895 4,175 4,965
----------- ----------- ----------- -----------
Pro forma income before accounting change 56,142 27,140 37,379 9,059
Reported cumulative effect of accounting change, net of taxes -- (566) -- --
----------- ----------- ----------- -----------
Pro forma net income $ 56,142 $ 26,574 $ 37,379 $ 9,059
=========== =========== =========== ===========
Net income per share - basic:
Reported income before accounting change $ 0.94 $ 0.27 $ 0.73 $ 0.09
Goodwill amortization, net of taxes 0.00 0.00 0.00 0.00
Broadcasting licenses amortization, net of taxes 0.30 0.33 0.09 0.11
----------- ----------- ----------- -----------
Pro forma income before accounting change - basic 1.24 0.60 0.82 0.20
Reported cumulative effect of accounting change, net of taxes -- (0.01) -- --
----------- ----------- ----------- -----------
Pro forma net income per share - basic $ 1.24 $ 0.59 $ 0.82 $ 0.20
=========== =========== =========== ===========
Net income per share - diluted:
Reported income before accounting change $ 0.93 $ 0.26 $ 0.71 $ 0.09
Goodwill amortization, net of taxes 0.00 0.00 0.00 0.00
Broadcasting licenses amortization, net of taxes 0.30 0.33 0.09 0.11
----------- ----------- ----------- -----------
Pro forma income before accounting change - diluted 1.23 0.59 0.80 0.20
11
Reported cumulative effect of accounting change, net of taxes -- (0.01) -- --
----------- ----------- ----------- -----------
Pro forma net income per share - diluted $ 1.23 $ 0.58 $ 0.80 $ 0.20
=========== =========== =========== ===========
Weighted average shares:
As reported and pro forma - basic 45,201,433 45,282,555 45,214,957 45,314,925
=========== =========== =========== ===========
As reported and pro forma - diluted 45,645,496 46,026,312 48,409,950 45,976,747
=========== =========== =========== ===========
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" that applies to legal obligations associated with the
retirement of a tangible long-lived asset that results from the acquisition,
construction, or development and/or the normal operation of a long-lived asset.
Adoption of this Statement by the Company will be effective on January 1, 2003.
The Company does not believe that adoption of this Statement will materially
impact the Company's financial position, cash flows or results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement supersedes FASB
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," and the accounting and reporting
provisions of APB Opinion No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions" for the disposal of
a segment of a business. This Statement also amends Accounting Research Bulletin
No. 51, "Consolidated Financial Statements," to eliminate the exception to
consolidation for a subsidiary for which control is likely to be temporary. This
Statement provides guidance on financial accounting and reporting for the
impairment or disposal of long-lived assets. Adoption of this Statement by the
Company will be effective on January 1, 2002. The Company does not believe that
adoption of this Statement will materially impact the Company's financial
position, cash flows or results of operations.
2. UNAUDITED PRO FORMA INFORMATION FOR ACQUISITIONS AND DISPOSITIONS
The following unaudited pro forma summary presents the consolidated
results of operations as if the transactions which occurred during the period of
January 1, 2000 through September 30, 2001, had all occurred as of January 1,
2000, after giving effect to certain adjustments, including depreciation and
amortization of assets and interest expense on any debt incurred to fund
acquisitions, net of dispositions, which would have been incurred had such
acquisitions, divestitures and other events (including significant sports
contracts) occurred as of January 1, 2000. For a discussion of these
acquisitions, dispositions and other events, refer to the Company's Form 10-K
and 8-K filed with the Securities and Exchange Commission on March 21, 2001 and
July 31, 2001, respectively. These unaudited pro forma results have been
prepared for comparative purposes only and do not purport to be indicative of
(1) what would have occurred had the acquisitions and other transactions been
made as of that date or (2) results which may occur in the future.
NINE MONTHS ENDED
-----------------
SEPTEMBER 30,
-------------
(AMOUNTS IN THOUSANDS, EXCEPT PER
SHARE)
2000 2001
---- ----
PRO FORMA PRO FORMA
--------- ---------
Net revenues $ 261,867 $ 248,718
========= =========
Income before (gain) loss on sale of assets and accounting change $ 17,854 $ 13,004
========= =========
Cumulative effect of accounting change, net of taxes $ -- $ (566)
========= =========
Net income $ 42,733 $ 12,424
========= =========
Net income per share - basic $ 0.95 $ 0.27
========= =========
Net income per share - diluted $ 0.94 $ 0.27
========= =========
3. DEBT
The Company has a bank credit agreement (the "Bank Facility") with a
syndicate of banks which provides for senior secured credit of $650.0 million
consisting of: (1) a $325.0 million reducing revolving credit facility
("Revolver") and (2) a $325.0 million multi-draw term loan ("Term Loan"). The
Revolver and Term Loan, which mature on September 30, 2007, each reduce on a
quarterly basis beginning September 30, 2002, in quarterly amounts that vary
from $12.2 million to $16.3 million for each loan. As of September 30, 2001, the
Company had $413.0 million of borrowings outstanding under the Bank Facility
($88.0 million under the Revolver and $325.0 million under the Term Loan), in
addition to an
12
outstanding Letter of Credit in the amount of $5.8 million. In connection with
an amendment to the Bank Facility on May 31, 2001, the period through which the
Company may solicit additional incremental loans of up to $350.0 million,
subject to syndicate approval, and such additional loans to be governed under
the same terms as the Term Loan, has been extended to December 31, 2002.
The Company enters into interest rate transactions with different banks
to diversify its risk associated with interest rate fluctuations against the
variable rate debt under the Bank Facility and to comply with certain covenants
under the Bank Facility. These transactions are accounted for in accordance with
SFAS No. 133 as described in Note 1. Under these transactions, the Company
agrees with other parties to exchange, at specified intervals, the difference
between fixed rate and floating rate interest amounts calculated by reference to
an agreed notional principal amount against the variable debt. The total
notional amount of these transactions was $263.0 million as of September 30,
2001. These agreements, with initial terms that vary from 2 years to 7 years,
effectively fix the interest at rates that vary from 5.8% to 8.5% on current
borrowings equal to the total notional amount.
4. COMMITMENTS AND CONTINGENCIES
Pending Acquisition
The Company entered into a preliminary agreement on February 6, 1996,
to acquire the assets of radio station KWOD-FM, Sacramento, California, from
Royce International Broadcasting Corporation ("Royce"), subject to approval by
the FCC, for a purchase price of $25.0 million. Notwithstanding efforts by the
Company to pursue this transaction, Royce has been non-responsive. On July 28,
1999, the Company commenced a legal action seeking to enforce this agreement,
and subsequently Royce filed a cross-complaint against the Company asking for
treble damages, an injunction, attorney's fees and costs and filed a separate
action against the Company's President. This separate action against the
Company's President was dismissed without leave to amend in February 2000. In
addition, portions of Royce's cross-complaint have been dismissed and the
Company is pursuing its legal action against Royce and seeking dismissal of the
remaining portions of the cross-complaint. The Company estimates that the impact
of an unfavorable outcome will not materially impact the financial position,
results of operations or cash flows of the Company. However, the Company cannot
determine if and when the transaction might occur.
Contingencies
In October 1999, The Radio Music License Committee, of which the
Company is a participant, filed a motion in the New York courts against
Broadcast Music, Inc. commencing a rate-making proceeding, on behalf of the
radio industry, seeking a determination of fair and reasonable industry-wide
license fees. The Company is currently operating under interim license
agreements for the period commencing January 1, 1997, at the rates and terms
reflected in prior agreements. The Company's management estimates that the
impact of an unfavorable outcome of the motion will not materially impact the
financial position, results of operations or cash flows of the Company.
In December 2000, the U.S. Copyright Office, under the Digital
Millennium Copyright Act, issued a final rule that AM and FM radio broadcast
signals transmitted simultaneously over a digital communications network are
subject to the sound recording copyright owner's exclusive right of performance.
This would result in the imposition of license fees for Internet streaming and
other digital media. As a result of this decision, the Company is now
participating in an arbitration proceeding at the U.S. Copyright Office to
determine the amount of the fees that are due from the use of sound recordings
in Internet streaming. The Company, along with other broadcasters and the
National Association of Broadcasters ("NAB"), previously commenced a legal
action in New York challenging the imposition of these license fees. This New
York action has been withdrawn and the Company has commenced a legal action,
together with other radio broadcasters, seeking declaratory relief as to the
impact of the final rule of the Copyright Office. The court in this action has
recently upheld the Copyright Office decision. The Company, along with other
broadcasters and the NAB, has decided to pursue an appeal of this decision. The
Company cannot determine the likelihood of success of this appeal. The Company's
management estimates that the impact of an unfavorable determination will not
materially impact the financial position, results of operations or cash flows of
the Company.
The Company is subject to various outstanding claims which arose in the
ordinary course of business and to other legal proceedings. In the opinion of
management, any liability of the Company which may arise out of or with respect
to these matters will not materially affect the financial position, results of
operations or cash flows of the Company.
5. CONVERTIBLE PREFERRED SECURITIES
On October 6, 1999, the Company sold 2,500,000 Convertible Preferred
Securities, Term Income Deferrable Equity Securities ("TIDES"), including
underwriters' over-allotments, at an offering price of $50.00 per TIDES. The net
proceeds to the Company, after deducting underwriting discounts and other
offering expenses, were $120.5 million. Subject to certain deferral provisions,
the trust pays quarterly calendar distributions. The first distribution was paid
on December 31, 1999. The TIDES represent undivided preferred beneficial
ownership interest in the assets of the trust. The trust used the proceeds to
purchase from the Company an equal amount of 6.25% Convertible Subordinated
Debentures due 2014. The Company owns all of the common securities issued by the
trust. The trust exists for the sole purpose of issuing the common
13
securities and the TIDES. The trust is a wholly-owned subsidiary of the Company,
with the sole assets of the trust consisting of the $125.0 million aggregate
principal amount of the Company's 6.25% Convertible Subordinated Debentures due
September 30, 2014. The Company has entered into several contractual
arrangements for the purpose of fully, irrevocably and unconditionally
guaranteeing the trust's obligations under the TIDES. The holders of the TIDES
have a preference with respect to each distribution and amount payable upon
liquidation, redemption or otherwise over the holders of the common securities
of the trust. Each TIDES is convertible into shares of the Company's Class A
Common Stock at the rate of 1.1364 shares of Class A Common Stock for each
TIDES. As of September 30, 2001, there were 2.5 million TIDES outstanding as no
holder of the TIDES had converted their shares into Class A Common Stock.
6. SHAREHOLDERS' EQUITY
During the nine months ended September 30, 2000 and 2001, the Company
issued non-qualified options to purchase 666,000 shares and 852,500 shares,
respectively, of its Class A Common Stock at prices ranging from $31.88 to
$59.44 and $27.75 to $52.05, respectively, per share. All of the options vest
ratably on the first four anniversary dates of their respective dates of grant.
In connection with the grant of options to employees with exercise prices below
fair market value at the time of grant and the grant of performance-based
options, the Company recognized non-cash stock-based compensation expense in the
amounts of $422,000 and $321,000 for the nine months ended September 30, 2000
and 2001, respectively and a credit of $6,000 and an expense of $50,000 for the
three months ended September 30, 2000 and 2001, respectively.
During the nine months ended September 30, 2000, the Company issued
Restricted Stock awards, consisting of rights to 5,000 shares of Class A Common
Stock. Such shares vest ratably on the first four anniversary dates of their
respective dates of grant. In connection with awards in 1999 and with this
award, the Company recognized non-cash stock-based compensation expense in the
amounts of $95,000 and $96,000 for the nine months ended September 30, 2000 and
2001, respectively and $32,000 for each of the three months ended September 30,
2000 and 2001.
During February and May of 2001, J.P. Morgan Partners, formerly known
as Chase Capital, converted all remaining 495,669 shares of Class C Common Stock
to 495,669 shares of Class A Common Stock.
On May 4, 2001, the shareholders of the Company approved an amendment
to the Company's 1998 Equity Compensation Plan to increase the number of shares
issuable under the plan by 2.5 million shares.
7. NET INCOME PER SHARE
The net income per share ("EPS") is calculated in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" which
requires presentation of basic net income per share and diluted net income per
share. Basic net income per share excludes dilution and is computed by dividing
net income available to common shareholders by the weighted average number of
common shares outstanding for the period. Diluted net income per share is
computed in the same manner as basic net income after assuming issuance of
common stock for all potentially dilutive equivalent shares, which includes (1)
stock options (using the treasury stock method) and (2) the Term Income
Deferrable Equity Securities ("TIDES") after eliminating from net income the
interest expense, net of taxes, on the TIDES. Anti-dilutive instruments are not
considered in this calculation. The effect of the stock options in the
calculation of net income per share was dilutive for the nine-month and
three-month periods ended September 30, 2001 and 2000. The effect of the TIDES,
which is convertible into 2,841,000 shares of Class A Common Stock, was not
included in the calculation of net income per share for the nine month-periods
ended September 30, 2001 and 2000 and the three-month period ended September 30,
2001, as it was anti-dilutive. The effect of the TIDES was dilutive for the
three-month period ended September 30, 2000 and 2,841,000 shares of Class A
Common Stock was included in the calculation of net income per share.
NINE MONTHS ENDED
-----------------
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
------------------ ------------------
INCOME SHARES EPS INCOME SHARES EPS
------ ------ --- ------ ------ ---
Basic net income per share:
Income before accounting change $ 42,563 45,201,433 $ 0.94 $ 12,191 45,282,555 $ 0.27
Cumulative effect of accounting
change, net of taxes $ -- -- $ -- $ (566) -- $ (0.01)
----------- ---------- -------- ----------- ---------- -------
Net income $ 42,563 45,201,433 $ 0.94 $ 11,625 45,282,555 $ 0.26
======== =======
Impact of options $ -- 444,063 $ -- 743,757
----------- ---------- ----------- ----------
Diluted net income per share:
Net income $ 42,563 45,645,496 $ 0.93 $ 11,625 46,026,312 $ 0.25
=========== ========== ======== =========== ========== =======
14
For the nine months ended September 30, 2001 and 2000, outstanding
options to purchase 642,571 and 659,751 shares, respectively, of Class A Common
Stock at option exercise prices ranging from $46.70 to $59.44 and from $44.82 to
$59.44 per share, respectively, were excluded from the computation of diluted
net income per share as the options' exercise price was greater than the average
market price of the stock.
THREE MONTHS ENDED
------------------
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
------------------ ------------------
INCOME SHARES EPS INCOME SHARES EPS
------ ------ --- ------ ------ ---
Basic net income per share:
Net income $ 33,186 45,214,957 $0.73 $ 4,076 45,314,925 $ 0.09
===== ======
Impact of options $ -- 353,993 $ -- 661,822
----------- -------
Impact of TIDES $ 1,172 2,841,000
----------- ---------
Diluted net income per share:
Net income $ 34,358 48,409,950 $0.71 $ 4,076 45,976,747 $ 0.09
=========== ========== ===== =========== ========== ======
For the three months ended September 30, 2001 and 2000, outstanding
options to purchase 1,182,680 and 791,803 shares, respectively, of Class A
Common Stock at option exercise prices ranging from $41.07 to $59.44 and from
$43.31 to $59.44 per share, respectively, were excluded from the computation of
diluted net income per share as the options' exercise price was greater than the
average market price of the stock.
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This report contains, in addition to historical information, statements
by us with regard to our expectations as to financial results and other aspects
of our business that involve risks and uncertainties and may constitute forward
looking statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. These statements
reflect our current views and are based on certain assumptions. Actual results
could differ materially from those currently anticipated as a result of a number
of factors, including, but not limited to, the following: (1) the highly
competitive nature of, and new technologies in, the radio broadcasting industry;
(2) our dependence upon our Seattle radio stations; (3) the risks associated
with our acquisition strategy generally; (4) the control of us by Joseph M.
Field and members of his immediate family; (5) our vulnerability to changes in
federal legislation or regulatory policies; (6) those matters discussed below;
and (7) the risks disclosed in our reports previously filed with the Securities
and Exchange Commission.
GENERAL
Founded in 1968, we are the fifth largest radio broadcasting company in
the United States based upon revenues derived from the latest edition of BIA
Consulting, Inc. We have assembled a nationwide portfolio of 95 stations in 18
markets. Based upon Duncan's Radio Market Guide (2001 ed.), we operate in 10 of
the country's top 50 radio markets and our station groups rank among the top
three in revenue market share in 15 of the 16 measured markets in which we
operate.
A radio broadcasting company derives its revenues primarily from the
sale of broadcasting time to local and national advertisers. The advertising
rates that a radio station is able to charge and the number of advertisements
that can be broadcast without jeopardizing listener levels largely determine
those revenues. Advertising rates are primarily based on three factors: (1) a
station's audience share in the demographic groups targeted by advertisers, as
measured principally by quarterly reports issued by the Arbitron Ratings
Company; (2) the number of radio stations in the market competing for the same
demographic groups; and (3) the supply of and demand for radio advertising time.
Several factors may adversely affect a radio broadcasting company's
performance in any given period. In the radio broadcasting industry, seasonal
revenue fluctuations are common and are due primarily to variations in
advertising expenditures by local and national advertisers. Typically, revenues
are lowest in the first calendar quarter of the year. We generally incur
advertising and promotional expenses to increase "listenership" and Arbitron
ratings. However, since Arbitron reports ratings quarterly, any increased
ratings and therefore increased advertising revenues tend to lag behind the
incurrence of advertising and promotional spending.
We include revenues recognized under a time brokerage agreement or a
similar sales agreement for stations operated by us in net revenues and we
reflect operating expenses associated with these stations in station operating
expenses. Consequently, there is no difference in the method of revenue and
operating expense recognition between a station operated by us under a time
brokerage agreement or similar sales agreement and a station owned and operated
by us.
In the following analysis, we discuss broadcast cash flow, broadcast
cash flow margin and after tax cash flow. Broadcast cash flow consists of
operating income before depreciation and amortization, net expense (income) from
time brokerage agreement fees, corporate general and administrative expenses and
gain or loss on sale of assets. Broadcast cash flow margin represents broadcast
cash flow as a percentage of net revenues. After tax cash flow consists of
income before accounting change, plus the following: depreciation and
amortization, non-cash compensation expense (which is otherwise included in
corporate general and administrative expenses), deferred tax provision and the
elimination of any gain or loss, net of current tax, on sale of assets,
investments and derivative instruments. Although broadcast cash flow, broadcast
cash flow margin and after tax cash flow are not measures of performance or
liquidity calculated in accordance with generally accepted accounting
principles, we believe that these measures are useful to an investor in
evaluating our performance because they are widely used in the broadcast
industry to measure a radio company's operating performance. However, you should
not consider broadcast cash flow, broadcast cash flow margin and after tax cash
flow in isolation or as substitutes for net income, operating income, cash flows
from operating activities or any other measure for determining our operating
performance or liquidity that is calculated in accordance with generally
accepted accounting principles. In addition, because broadcast cash flow,
broadcast cash flow margin and after tax cash flow are not calculated in
accordance with generally accepted accounting principles, they are not
necessarily comparable to similarly titled measures employed by other companies.
We calculate "same station" results by comparing the performance of
stations operated by us throughout a relevant period to the comparable
performance in the prior year's corresponding period, adjusted for significant
changes to sports contracts. "Same station broadcast cash flow margin" is the
broadcast cash flow margin of the stations included in our same station
calculations.
RESULTS OF OPERATIONS
The following presents the results of our operations for the nine month
and the three month periods ended September 30, 2001 and September 30, 2000, and
should be read in conjunction with our condensed consolidated financial
statements and the related notes included elsewhere in this Form 10-Q. Our
results of operations represent the operations of
16
the radio stations owned or operated pursuant to time brokerage agreements or
joint sales agreements during the relevant periods.
NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 2000
NINE MONTHS ENDED
-----------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
NET REVENUES $260,280 $249,217
Decrease of $(11,063) or (4.3)%
--------------------------------------------------------------------
Net revenues decreased 4.3% to $249.2 million for the nine months ended
September 30, 2001 from $260.3 million for the nine months ended September 30,
2000. On a same station basis, net revenues decreased 5.0% to $248.7 million
from $261.9 million. Same station net revenues declined due to a combination of
general weakness in the advertising sector, comparisons to the prior year's
period in which we experienced 14.5% growth and the effect of the tragic events
of September 11, 2001, whereby radio advertising was severely curtailed for
several days. The overall decline in net revenues was also affected by
acquisitions and divestitures. For the nine-month periods ended September 30,
2001 and 2000, we acquired stations with net revenues of $15.9 million and $5.4
million, respectively. For the nine months ended September 30, 2001, we
terminated sports contracts under which we sold advertising of $0.5 million; for
the nine months ended September 30, 2000, we divested stations with net revenues
of $3.2 million, plus $2.0 million in net revenues from terminated sports
contracts under which we sold advertising.
NINE MONTHS ENDED
-----------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
STATION OPERATING EXPENSES $155,223 $153,037
Decrease of $ (2,186) or (1.4)%
-----------------------------------------------------------------
Percentage of Net Revenues 59.6% 61.4%
Station operating expenses decreased 1.4% to $153.0 million for the
nine months ended September 30, 2001 from $155.2 million for the nine months
ended September 30, 2000. On a same station basis, station operating expenses
decreased 2.5% to $151.2 million from $155.0 million. Same station operating
expenses declined due to: (1) a decrease in sales expense as a result of a
decrease in same station net revenues and (2) cost reduction efforts. The
overall decrease in station operating expenses was also affected by acquisitions
and divestitures. For the nine-month periods ended September 30, 2001 and 2000,
we acquired stations with operating expenses of $11.2 million and $5.0 million,
respectively. For the nine months ended September 30, 2001, we terminated sports
contracts under which we sold advertising, with operating expenses of $1.2
million; for the nine months ended September 30, 2000, we divested stations with
operating expenses of $2.3 million, plus $1.7 million in operating expenses from
terminated sports contracts under which we sold advertising.
NINE MONTHS ENDED
-----------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
DEPRECIATION AND AMORTIZATION $32,147 $34,681
Increase of $ 2,534 or 7.9%
----------------------------------------------------------------
Percentage of Net Revenues 12.4% 13.9%
Depreciation and amortization increased 7.9% to $34.7 million for the
nine months ended September 30, 2001 from $32.1 million for the nine months
ended September 30, 2000. The increase was primarily attributable to our
acquisitions, net of divestitures, since January 1, 2000. We expect that the
adoption on January 1, 2002 of SFAS No. 142, "Goodwill and Other Intangible
Assets," as described more fully under Recent Accounting Pronouncements, will
have the impact of reducing our non-cash amortization expense for goodwill and
broadcasting licenses and will have a material impact on our financial
statements as the amount currently recorded for the amortization of goodwill and
broadcasting licenses is significant.
NINE MONTHS ENDED
-----------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES $9,203 $9,380
Increase of $ 177 or 1.9%
---------------------------------------------------
Percentage of Net Revenues 3.5% 3.8%
17
Corporate general and administrative expenses increased 1.9% to $9.4
million for the nine months ended September 30, 2001 from $9.2 million for the
nine months ended September 30, 2000. The increase was primarily attributable to
the effect of inflation, offset by cost reduction efforts during the current
period. Also included is non-cash stock-based compensation expense of $0.4
million and $0.5 million for the nine months ended September 30, 2001 and 2000,
respectively.
NINE MONTHS ENDED
-----------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
INTEREST EXPENSE (INCLUDING FINANCING COST OF TIDES) $34,371 $27,562
Decrease of $(6,809) or (19.8)%
---------------------------------------------------------
Percentage of Net Revenues 13.2% 11.1%
Interest expense, including the financing cost of our 6.25% Convertible
Preferred Securities Term Income Deferrable Equity Securities (TIDES), decreased
19.8% to $27.6 million for the nine months ended September 30, 2001 from $34.4
million for the nine months ended September 30, 2000. The decrease in interest
expense was attributable to an overall decrease in outstanding indebtedness and
a decline in interest rates.
NINE MONTHS ENDED
-----------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
INCOME BEFORE INCOME TAXES AND
ACCOUNTING CHANGE $ 71,134 $20,531
Decrease of $(50,603) or (71.1)%
----------------------------------------------------------
Percentage of Net Revenues 27.3% 8.2%
Income before income taxes and accounting change decreased 71.1% to
$20.5 million for the nine months ended September 30, 2001 from $71.1 million
for the nine months ended September 30, 2000. The decrease in income before
income tax and accounting change was primarily attributable to: (1) the decrease
in gain on sale of assets due to the prior year's gain of $41.5 million from the
required divestiture of certain of our Kansas City radio stations; (2) the
increase in equity loss from unconsolidated affiliate of $2.9 million as the
initial investment in this affiliate was made during the later part of the prior
year; (3) the recognition of a net loss on derivative instruments of $1.3
million due to the implementation of a new accounting pronouncement described
under Recent Accounting Pronouncements; and (4) the other factors described
above.
NINE MONTHS ENDED
-----------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
NET INCOME $ 42,563 $11,625
Decrease of $(30,938) or (72.7)%
----------------------------------------------------------
Percentage of Net Revenues 16.4% 4.7%
Net income decreased 72.7% to $11.6 million for the nine months ended
September 30, 2001 from $42.6 million for the nine months ended September 30,
2000. The decrease in net income was primarily attributable to: (1) the other
factors described above, net of taxes; and (2) the cumulative effect of the
accounting change, net of taxes, of $0.6 million.
OTHER DATA NINE MONTHS ENDED
-----------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
BROADCAST CASH FLOW $105,057 $96,180
Decrease of $ (8,877) or (8.4)%
---------------------------------------------------------
Broadcast cash flow decreased 8.4% to $96.2 million for the nine months
ended September 30, 2001 from $105.1 million for the nine months ended September
30, 2000. On a same station basis, broadcast cash flow decreased 8.7% to $97.5
million from $106.8 million primarily due to the decrease in net revenues for
the reasons described above under net revenues. The overall decline in broadcast
cash flow was also affected by acquisitions and divestitures. For the nine-
month periods ended September 30, 2001 and 2000, we acquired stations with
broadcast cash flow of $4.8 million and $0.4 million, respectively. For the nine
months ended September 30, 2001, we terminated sports contracts under which we
sold advertising and incurred a broadcast cash flow deficit of $0.7 million; for
the nine months ended September 30, 2000, we divested stations of $0.9 million
in broadcast cash flow, plus $0.3 million in broadcast cash flow from terminated
sports
18
contracts under which we sold advertising.
NINE MONTHS ENDED
-----------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
BROADCAST CASH FLOW MARGIN 40.4% 38.6%
Decrease of (1.8)% or (4.4)%
----------------------------------------------------------
The broadcast cash flow margin decreased to 38.6% for the nine months
ended September 30, 2001 from 40.4% for the nine months ended September 30,
2000. On a same station basis, our broadcast cash flow margin decreased to 39.2%
from 40.8%.
NINE MONTHS ENDED
-----------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
AFTER TAX CASH FLOW $64,380 $62,998
Decrease of $(1,382) or (2.1)%
-------------------------------------------------------------
After tax cash flow decreased 2.1% to $63.0 million for the nine months
ended September 30, 2001 from $64.4 million for the nine months ended September
30, 2000. The decrease in after tax cash flow was primarily attributable to the
decrease in net revenues, net of tax, for the reasons described above, offset by
(1) the decrease in interest expense, net of tax, due to the overall decrease in
outstanding indebtedness and the decline in interest rates and (2) the tax
benefits from the purchase of radio station assets, net of dispositions, since
January 1, 2000. The amount of the deferred income tax expense, excluding the
deferred tax benefit from the accounting change, was $12.4 million for the nine
months ended September 30, 2001 and $30.5 million, including $16.6 million from
the gain on sale of assets, for the nine months ended September 30, 2000.
The amount of deferred income tax expense reported above may differ
from the amount used for purposes of computing after tax cash flow because the
amount of deferred income tax expense used in computing after tax cash flow is
affected by the elimination of current taxes on gains or losses from the sale of
assets, investments and derivative instruments.
THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2000
THREE MONTHS ENDED
------------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
NET REVENUES $92,462 $85,136
Decrease of $(7,326) or (7.9)%
--------------------------------------------------------------
Net revenues decreased 7.9% to $85.1 million for the three months ended
September 30, 2001 from $92.5 million for the three months ended September 30,
2000. On a same station basis, net revenues decreased 7.2% to $85.1 million from
$91.7 million. Same station net revenues declined due to a general weakness in
the advertising sector, comparisons to the prior year's period in which we
experienced a growth rate of approximately 8% and the effect of the tragic
events of September 11, 2001, whereby radio advertising was severely curtailed
for several days. The overall decline in net revenues was also affected by
acquisitions and divestitures. For the three-month periods ended September 30,
2001 and 2000, we acquired stations with net revenues of $5.8 million and $2.0
million, respectively. For the three months ended September 30, 2000, we
divested stations with net revenues of $0.3 million, plus $1.0 million in net
revenues from terminated sports contracts under which we sold advertising.
THREE MONTHS ENDED
------------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
STATION OPERATING EXPENSES $53,471 $52,621
Decrease of $ (850) or (1.6)%
---------------------------------------------------------------
Percentage of Net Revenues 57.8% 61.8%
Station operating expenses decreased 1.6% to $52.6 million for the
three months ended September 30, 2001 from $53.5 million for the three months
ended September 30, 2000. On a same station basis, station operating expenses
remained flat at $52.6 million. Same station operating expenses remained flat
due to: (1) a decrease in sales expense as a result of a decrease in same
station net revenues; and (2) cost reduction efforts, offset by inflation. The
overall decrease in station operating expenses was also affected by acquisitions
and divestitures. For the three-month periods ended September 30,
19
2001 and 2000, we acquired stations with operating expenses of $3.7 million and
$1.4 million, respectively. For the three months ended September 30, 2000, we
divested stations with operating expenses of $0.2 million, plus $1.0 million in
operating expenses from terminated sports contracts under which we sold
advertising.
THREE MONTHS ENDED
------------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
DEPRECIATION AND AMORTIZATION $11,033 $11,677
Increase of $ 644 or 5.8%
---------------------------------------------------------------
Percentage of Net Revenues 11.9% 13.7%
Depreciation and amortization increased 5.8% to $11.7 million for the
three months ended September 30, 2001 from $11.0 million for the three months
ended September 30, 2000. The increase was primarily attributable to our
acquisitions, net of divestitures, since July 1, 2000. We expect that the
adoption on January 1, 2002 of SFAS No. 142, "Goodwill and Other Intangible
Assets", as described more fully under Recent Accounting Pronouncements, will
have the impact of reducing our non-cash amortization expense for goodwill and
broadcasting licenses and will have a material impact on our financial
statements as the amount currently recorded for the amortization of goodwill and
broadcasting licenses is significant.
THREE MONTHS ENDED
------------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES $2,729 $2,921
Increase of $ 192 or 7.0%
--------------------------------------------------------------
Percentage of Net Revenues 3.0% 3.4%
Corporate general and administrative expenses increased 7.0% to $2.9
million for the three months ended September 30, 2001 from $2.7 million for the
three months ended September 30, 2000. The increase was primarily attributable
to the effect of inflation and the costs associated with an increase in the
weighted average number of stations owned during this period as compared to the
prior year. Also included is non-cash stock-based compensation expense of
$82,000 and $26,000 for the three months ended September 30, 2001 and 2000,
respectively.
THREE MONTHS ENDED
------------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
INTEREST EXPENSE (INCLUDING FINANCING COST OF TIDES) $11,441 $8,663
Decrease of $(2,778) or (24.3)%
--------------------------------------------------------------
Percentage of Net Revenues 12.4% 10.2%
Interest expense, including the financing cost of our 6.25% Convertible
Preferred Securities Term Income Deferrable Equity Securities (TIDES), decreased
24.3% to $8.7 million for the three months ended September 30, 2001 from $11.4
million for the three months ended September 30, 2000. The decrease in interest
expense was primarily attributable to an overall decrease in outstanding
indebtedness and a decline in interest rates.
THREE MONTHS ENDED
------------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
INCOME BEFORE INCOME TAXES $ 55,391 $6,855
Decrease of $(48,536) or (87.6)%
---------------------------------------------------------------
Percentage of Net Revenues 59.9% 8.1%
Income before income taxes decreased 87.6% to $6.9 million for the
three months ended September 30, 2001 from $55.4 million for the three months
ended September 30, 2000. The decrease in income before income tax was primarily
attributable to: (1) the decrease in gain on sale of assets of $41.5 million
from the required divestiture of certain of our Kansas City radio stations in
the prior year; (2) the recognition of a net loss on derivative instruments of
$1.4 million primarily due to the implementation of a new accounting
pronouncement described under Recent Accounting Pronouncements; (3) an equity
loss from unconsolidated affiliate of $1.0 million as the initial investment in
this affiliate was made during the later part of the previous year; and (4) the
other factors described above.
20
THREE MONTHS ENDED
------------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
NET INCOME $ 33,186 $4,076
Decrease of $(29,110) or (87.7)%
----------------------------------------------------------------
Percentage of Net Revenues 35.9% 4.8%
Net income decreased 87.7% to $4.1 million for the three months ended
September 30, 2001 from $33.2 million for the three months ended September 30,
2000. The decrease in net income was primarily attributable to the factors
described above, net of taxes.
OTHER DATA THREE MONTHS ENDED
------------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
BROADCAST CASH FLOW $38,991 $32,515
Decrease of $(6,476) or (16.6)%
--------------------------------------------------------------
Broadcast cash flow decreased 16.6% to $32.5 million for the three
months ended September 30, 2001 from $39.0 million for the three months ended
September 30, 2000. On a same station basis, broadcast cash flow decreased 16.7%
to $32.5 million from $39.1 million as same station net revenues declined for
the reasons described under net revenues. The overall decline in broadcast cash
flow was also affected by acquisitions and divestitures. For the three-month
periods ended September 30, 2001 and 2000, we acquired stations that had
broadcast cash flow of $2.0 million and $0.6 million, respectively. For the
three months ended September 30, 2000, we divested stations that had broadcast
cash flow of $0.1 million.
THREE MONTHS ENDED
------------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
BROADCAST CASH FLOW MARGIN 42.2% 38.2%
Decrease of (4.0)% or (9.4)%
------------------------------------------------------------
The broadcast cash flow margin decreased 9.4% to 38.2% for the three
months ended September 30, 2001 from 42.2% for the three months ended September
30, 2000. On a same station basis, our broadcast cash flow margin decreased to
38.2% from 42.6%.
THREE MONTHS ENDED
------------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
AFTER TAX CASH FLOW $24,296 $21,533
Decrease of $(2,763) or (11.4)%
After tax cash flow decreased 11.4% to $21.5 million for the three
months ended September 30, 2001 from $24.3 million for the three months ended
September 30, 2000. After tax cash flow was negatively affected by the decrease
in net revenues for the reasons described under net revenues, offset by: (1) the
decrease in interest expense, net of tax, due to the overall decrease in
outstanding indebtedness and the decline in interest rates and (2) the tax
benefits from the purchase of radio station assets since July 1, 2000, net of
divestitures. The amount of the deferred income tax expense was $3.7 million for
the three months ended September 30, 2001. The amount of the deferred income tax
expense was $21.4 million for the three months ended September 30, 2000,
including $16.6 million from the gain on sale of assets.
The amount of deferred income tax expense reported above may differ
from the amount used for purposes of computing after tax cash flow because the
amount of deferred income tax expense used in computing after tax cash flow is
affected by the elimination of current taxes on gains or losses from the sale of
assets, investments and derivative instruments.
LIQUIDITY AND CAPITAL RESOURCES
We use a significant portion of our capital resources to consummate
acquisitions. These acquisitions are funded from one or a combination of the
following sources: (1) our bank facility (described below); (2) the sale of
securities; (3) the swapping of our radio stations in transactions which qualify
as "like-kind" exchanges under Section 1031 of the Internal Revenue Code and (4)
internally-generated cash flow.
Net cash flows provided by operating activities were $57.2 million and
$39.2 million for the nine months ended September 30, 2001 and 2000,
respectively. Changes in our net cash flows provided by operating activities are
primarily a result of changes in advertising revenues and station operating
expenses, which are affected by the acquisition and
21
disposition of radio stations during those periods. For the nine months ended
September 30, 2001, cash flows provided by operating activities were only
marginally affected by a $1.4 million increase in accounts receivable as
compared to a $23.2 million increase in accounts receivable for the nine months
ended September 30, 2000 primarily due to the Sinclair acquisition.
Net cash flows used in investing activities were $12.5 million and
$57.5 million for the nine months ended September 30, 2001 and 2000,
respectively. Net cash flows used in financing activities were $45.1 million for
the nine months ended September 30, 2001 and net cash flows provided by
financing activities were $20.8 million for the nine months ended September 30,
2000. The cash flows for the nine months ended September 30, 2001 reflect
additions to property and equipment, investments consummated and the net
increase in payments of long-term debt. The cash flows for the nine months ended
September 30, 2000 reflect acquisitions and investments consummated and the net
increase in borrowings.
During the nine months ended September 30, 2001, we reduced our
outstanding debt by $47.9 million. We also increased the amount of investments
by $5.7 million. As of September 30, 2001, we had $413.0 million of borrowings
outstanding under our bank facility in addition to an outstanding letter of
credit in the amount of $5.8 million. We expect to use the credit available
under the revolving credit facility to fund future acquisitions.
In addition to debt service and quarterly distributions under the
TIDES, our principal liquidity requirements are for working capital and general
corporate purposes, including capital expenditures, and, if appropriate
opportunities arise, acquisitions of additional radio stations. Capital
expenditures for the nine months ended September 30, 2001, were $6.2 million,
which included the balance of a $2.0 million commitment as of December 31, 2000,
to fund construction of a studio relocation project. We estimate that additional
capital expenditures for the balance of the fiscal year 2001 will be between
$3.0 and $4.0 million. We believe that cash from operating activities, together
with available revolving borrowings under our bank facility, should be
sufficient to permit us to meet our financial obligations and fund our
operations. However, we may require additional financing for future
acquisitions, if any, and we cannot assure you that we will be able to obtain
such financing on terms considered favorable by us.
We entered into our bank facility as of December 16, 1999, with a
syndicate of banks for $650.0 million in senior debt consisting of: (1) $325.0
million in a reducing revolving credit facility, $88.0 million of which was
drawn as of September 30, 2001 and (2) $325.0 million in a multi-draw term loan
that was fully drawn as of September 30, 2000. Our bank facility was established
to: (1) refinance existing indebtedness; (2) provide working capital; and (3)
fund corporate acquisitions. At our election, interest on any outstanding
principal accrues at a rate based on either LIBOR plus a spread that ranges from
0.75% to 2.375% or on the prime rate plus a spread of up to 1.125%, depending on
our leverage ratio. Under the bank facility, the reducing revolving credit
facility and the multi-draw term loan mature on September 30, 2007 and reduce on
a quarterly basis beginning September 30, 2002 in quarterly amounts that vary
from $12.2 million to $16.3 million for each loan. Our bank facility requires us
to comply with certain financial covenants and leverage ratios that are defined
terms within the agreement. We believe we are in compliance with the covenants
and leverage ratios. Under our bank facility, as amended on May 31, 2001, the
period through which we may solicit additional incremental loans up to $350.0
million, subject to syndicate approval, and such additional loans to be governed
under the same terms as the Term Loan, has been extended to December 31, 2002.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the FASB issued SFAS No. 141, "Business Combinations."
Statement No. 141 addresses financial accounting and reporting for business
combinations and supersedes Accounting Principles Board ("APB") Opinion No. 16,
"Business Combinations" and FASB Statement No. 38, "Accounting for
Preacquisition Contingencies of Purchased Enterprises." Statement No. 141 is
effective for all business combinations initiated after June 30, 2001 and
eliminates the pooling-of-interest method of accounting for business
combinations except for qualifying business combinations that were initiated
prior to July 1, 2001. Statement No. 141 also changes the criteria to recognize
intangible assets apart from goodwill. We adopted this statement on July 1,
2001. We have historically used the purchase method to account for all business
combinations and the adoption of this statement did not have an impact on our
financial position, cash flows or results of operations.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets" that requires the use of a non-amortization approach to
account for purchased goodwill and certain intangibles. Under a non-amortization
approach, goodwill and certain intangibles will not be amortized into results of
operations, but instead will be reviewed for impairment and written down and
charged to results of operations only in the periods in which the recorded value
of goodwill and certain intangibles is greater than its fair value. This
statement, which applies to goodwill and certain other intangible assets
acquired prior to June 30, 2001, will be adopted by us on January 1, 2002. We
expect that adoption of this accounting standard on January 1, 2002 will have
the impact of reducing our non-cash amortization expense for goodwill and
broadcasting licenses and will have a material impact on our financial
statements as the amount currently recorded for the amortization of goodwill and
broadcasting licenses is significant. In addition, upon adoption, we will
perform the first of the required impairment tests of goodwill and broadcasting
licenses that may result in future periodic write-downs. We have not yet
determined what the effect of these tests will be on our financial position,
cash flows or results of operations.
22
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" that applies to legal obligations associated with the
retirement of a tangible long-lived asset that results from the acquisition,
construction, or development and/or the normal operation of a long-lived asset.
We do not believe that the adoption of this statement will materially impact our
financial position, cash flows or results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement supersedes FASB
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," and the accounting and reporting
provisions of APB Opinion No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions" for the disposal of
a segment of a business. This Statement also amends Accounting Research Bulletin
No. 51, "Consolidated Financial Statements," to eliminate the exception to
consolidation for a subsidiary for which control is likely to be temporary. This
statement provides guidance on financial accounting and reporting for the
impairment or disposal of long-lived assets. Adoption of this statement by us
will be effective on January 1, 2002. We do not believe that the adoption of
this statement will materially impact our financial position, cash flows or
results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our bank facility requires us to protect ourselves from interest rate
fluctuations through the use of derivative rate hedging instruments. As a
result, we have entered into various interest rate transactions with various
banks, which we define as "Rate Hedging Transactions", designed to mitigate our
exposure to significantly higher floating interest rates. A rate cap agreement
establishes an upper limit or "cap" for the base LIBOR rate and a rate floor
agreement establishes a lower limit or "floor" for the base LIBOR rate. Several
of the agreements cover a rate cap and a rate floor and have been entered into
simultaneously with the same bank. Swap agreements require that we pay a fixed
rate of interest on the notional amount to a bank and the bank pay to us a
variable rate equal to three-month LIBOR. As of September 30, 2001, we have Rate
Hedging Transactions in place for a total notional amount of $263.0 million.
All of the Rate Hedging Transactions are tied to the three-month LIBOR
interest rate, which may fluctuate significantly on a daily basis. The valuation
of each of the Rate Hedging Transactions is affected by the change in the
three-month LIBOR rate and the remaining term of the agreement. Any increase in
the three-month LIBOR rate results in a more favorable valuation, while any
decrease in the three-month LIBOR rate results in a less favorable valuation for
each of the Rate Hedging Transactions. For the nine months ended September 30,
2001, we recognized a net loss on derivative instruments in the statement of
operations and unrealized net loss on hedged derivatives in the statement of
other comprehensive income as these net losses were negatively affected by a
decrease in the three-month LIBOR rate at September 30, 2001, as compared to
December 31, 2000, offset by a reduction in the average remaining period under
each of the outstanding Rate Hedging Transactions.
See also additional disclosures regarding "Liquidity and Capital Resources"
made under Item 2, above.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are from time to time involved in litigation incidental to the
conduct of our business, but we are not a party to any lawsuit or proceeding
which, in our opinion, is likely to have a material adverse effect on us.
We entered into a preliminary agreement on February 6, 1996, to acquire
the assets of radio station KWOD-FM, Sacramento, California, from Royce
International Broadcasting Corporation ("Royce"), subject to approval by the
FCC, for a purchase price of $25.0 million. Notwithstanding efforts by us to
pursue this transaction, Royce has been non-responsive. On July 28, 1999, we
commenced a legal action seeking to enforce this agreement, and subsequently
Royce filed a cross-complaint against us asking for treble damages, an
injunction, attorney's fees and costs and filed a separate action against our
President. This separate action against our President was dismissed without
leave to amend in February 2000. In addition, portions of Royce's
cross-complaint have been dismissed and we are pursuing legal action against
Royce and seeking dismissal of the remaining portions of the cross-complaint. We
estimate that the impact of an unfavorable outcome will not materially impact
our financial position, results of operations or cash flows. However, we cannot
determine if and when the transaction might occur.
In October 1999, The Radio Music License Committee, of which we are a
participant, filed a motion in the New York courts against Broadcast Music, Inc.
commencing a rate-making proceeding, on behalf of the radio industry, seeking a
determination of fair and reasonable industry-wide license fees. We are
currently operating under interim license agreements for the period commencing
January 1, 1997 at the rates and terms reflected in prior agreements. We
estimate that the impact of an unfavorable outcome of the motion will not
materially impact our financial position, results of operations or cash flows.
23
In December 2000, the U.S. Copyright Office, under the Digital
Millennium Copyright Act, issued a final rule that AM and FM radio broadcast
signals transmitted simultaneously over a digital communications network, are
subject to the sound recording copyright owner's exclusive right of performance.
This would result in the imposition of license fees for Internet streaming and
other digital media. As a result of this decision, we are now participating in
an arbitration proceeding at the U.S. Copyright Office to determine the amount
of the fees that are due from the use of sound recordings in Internet streaming.
We, along with other broadcasters and the National Association of Broadcasters
("NAB"), previously commenced a legal action in New York challenging the
imposition of these license fees. This New York action has been withdrawn and we
commenced a legal action, together with other radio broadcasters, seeking
declaratory relief as to the impact of the final rule of the Copyright Office.
The court in this action has recently upheld the Copyright Office decision. We,
along with other broadcasters and the NAB, have decided to pursue an appeal of
this decision. We cannot determine the likelihood of success of this appeal. We
estimate that the impact of an unfavorable determination will not materially
impact our financial position, results of operations or cash flows.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None to report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None to report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None to report
ITEM 5. OTHER INFORMATION
None to report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
- ------ -----------
3.01 Amended and Restated Articles of Incorporation of the
Registrant (1)
3.02 Form of Amended and Restated Bylaws of the Registrant (1)
10.01 Employment Agreement, dated June 25, 1993, between the
Registrant and Joseph M. Field, as amended (1)
10.02 Employment Agreement, dated December 17, 1998, between the
Registrant and David J. Field, as amended (1)
10.03 Employment Agreement, dated December 17, 1998, between the
Registrant and John C. Donlevie, as amended (1)
10.04 Employment Agreement, dated November 13, 1998, between the
Registrant and Stephen F. Fisher (1)
10.05 Asset Purchase Agreement, dated as of May 11, 2000, among the
Registrant, Entercom Kansas City, LLC, Entercom Kansas City
License, LLC, and Susquehanna Radio Corp. (See table of
contents for list of omitted schedules and exhibits, which the
Registrant hereby agrees to furnish supplementally to the
Securities and Exchange Commission upon request) (2)
10.06 Credit Agreement, dated as of December 16, 1999, among
Entercom Radio, LLC, as the Borrower, the Registrant, as a
Guarantor, Banc of America Securities LLC, as Sole Lead
Arranger and Book Manager, Key Corporate Capital, Inc., as
Administrative Agent, and Co-Documentation Agent, Bank of
America, N.A., as Syndication Agent, and Co-Documentation
Agent and the Financial Institutions listed therein (4)
10.07 First Amendment to Credit Agreement, dated as of May 31, 2001,
among Entercom Radio, LLC, as the Borrower, the Registrant, as
a Guarantor, Banc of America Securities LLC, as Sole Lead
Arranger and Book Manager, Key Corporate Capital, Inc., as
Administrative Agent, and Co-Documentation Agent, Bank of
America, N.A., as Syndication Agent, and Co-Documentation
Agent and the Financial Institutions listed therein (2)
24
10.08 Amended and Restated Asset Purchase Agreement, dated as of
August 20, 1999, among the Registrant, Sinclair
Communications, Inc., WCGV, Inc., Sinclair Radio of Milwaukee
Licensee, LLC, Sinclair Radio of New Orleans Licensee, LLC,
Sinclair Radio of Memphis, Inc., Sinclair Radio of Memphis
Licensee, Inc., Sinclair Properties, LLC, Sinclair Radio of
Norfolk/Greensboro Licensee, L.P., Sinclair Radio of Buffalo,
Inc., Sinclair Radio of Buffalo Licensee, LLC, WLFL, Inc.,
Sinclair Radio of Greenville Licensee, Inc., Sinclair Radio of
Wilkes-Barre, Inc. and Sinclair Radio of Wilkes-Barre
Licensee, LLC. (See table of contents for list of omitted
schedules and exhibits, which the Registrant hereby agrees to
furnish supplementally to the Securities and Exchange
Commission upon request) (3)
10.09 Asset Purchase Agreement, dated as of August 20, 1999, among
the Registrant, Sinclair Communications, Inc., Sinclair Media
III, Inc. and Sinclair Radio of Kansas City Licensee, LLC.
(See table of contents for list of omitted schedules and
exhibits, which the Registrant hereby agrees to furnish
supplementally to the Securities and Exchange Commission upon
request (3)
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (File No. 333-61381)
(2) Incorporated by reference to the Registrant's Quarterly Report on Form
10Q. (File No. 001-14461)
(3) Incorporated by reference to the Registrant's Registration Statement on
Form S-1. (File No. 333-86397)
(4) Incorporated by reference to the Registrant's Current Report on Form
8-K. (File No. 001-14461)
(b) Reports filed on Form 8-K
On July 31, 2001, we filed an 8-K, reporting under Item 9, Regulation
FD Disclosure, for the purpose of presenting selected, unaudited, pro forma
financial data for the quarterly periods from January 1, 2000 through March 31,
2001 along with the calendar period 2000, as adjusted to reflect the termination
of certain sports contracts.
25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENTERCOM COMMUNICATIONS CORP.
(Registrant)
Date: November 9, 2001 /s/ Joseph M. Field
--------------------------------------------
Name: Joseph M. Field
Title: Chief Executive Officer
Date: November 9, 2001 /s/ David J. Field
--------------------------------------------
Name: David J. Field
Title: President and Chief Operating Officer
Date: November 9, 2001 /s/ Stephen F. Fisher
--------------------------------------------
Name: Stephen F. Fisher
Title: Executive Vice President and Chief
Financial Officer
26