Filed pursuant to Rule 424(b)(1)
Registration No. 333-82542
PROSPECTUS SUPPLEMENT TO PROSPECTUS
dated February 27, 2002
[ENTERCOM LOGO]
ENTERCOM COMMUNICATIONS CORP.
- --------------------------------------------------------------------------------
3,500,000 SHARES
CLASS A COMMON STOCK
- --------------------------------------------------------------------------------
This is a public offering of Class A common stock of Entercom Communications
Corp. We are offering 3,500,000 shares of our Class A common stock. Our Class
A common stock is traded on the New York Stock Exchange under the symbol
"ETM". On February 27, 2002, the last reported sale price of our Class A
common stock was $51.55 per share.
INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE S-9.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<Table>
<Caption>
PER SHARE TOTAL
Public offering price $51.25 $179,375,000
Underwriting discounts and commissions $ 2.31 $ 8,071,875
Proceeds, before expenses, to Entercom $48.94 $171,303,125
</Table>
We have granted the underwriters the right to purchase up to 525,000
additional shares of Class A common stock to cover over-allotments.
Concurrent with this offering, our wholly owned subsidiaries, Entercom Radio,
LLC and Entercom Capital, Inc., are offering $150.0 million in aggregate
principal amount of 7 5/8% Senior Subordinated Notes due 2014 in a separate
offering. We, along with certain of our other direct and indirect
subsidiaries, will guarantee the notes. This offering and the offering of
notes are not contingent on each other.
Joint Book-Running Managers
DEUTSCHE BANC ALEX. BROWN CREDIT SUISSE FIRST BOSTON
---------------------------------------
BANC OF AMERICA SECURITIES LLC
GOLDMAN, SACHS & CO.
JPMORGAN
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS FEBRUARY 27, 2002.
[MAP DEPICTING LOCATION AND CALL LETTERS OF RADIO STATION PORTFOLIO]
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement is a supplement to the accompanying prospectus
that is also a part of this document. This prospectus supplement and the
accompanying prospectus are part of a registration statement that we filed with
the Securities and Exchange Commission that, in part, utilizes a "shelf"
registration process. Under the shelf registration process, we may sell shares
of our Class A common stock, par value $.01 per share, and shares of our
preferred stock, par value $.01 per share, up to a total dollar amount of gross
proceeds to us of $250,000,000, of which this offering is a part. In this
prospectus supplement, we provide you with specific information about the terms
of this offering and certain other information. Both this prospectus supplement
and the accompanying prospectus include important information about us, the
Class A common stock being offered and other information you should know before
investing in our Class A common stock.
This prospectus supplement and the accompanying prospectus incorporates by
reference important business and financial information about us and our
consolidated subsidiaries that is not included in or delivered with these
documents. Entercom Communications is Entercom Radio's sole member. All of
Entercom Communications' operating assets, including all of its radio station
licenses, are held by direct and indirect subsidiaries of Entercom Radio, LLC.
Entercom Communications is the sole member of Entercom Radio, LLC. Unless
specifically stated, or the context otherwise so requires, the terms "Entercom,"
"we," "us," or similar terms in this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference herein and therein refer
to Entercom Communications and its consolidated subsidiaries, excluding Entercom
Communications Capital Trust.
You should read both this prospectus supplement and the accompanying
prospectus as well as the additional information described under the heading
"Where You Can Find More Information" beginning on page S-71 of this prospectus
supplement before investing in our Class A common stock. This prospectus
supplement adds to, updates and changes information contained in the
accompanying prospectus and the information incorporated by reference. To the
extent that any statement that we make in this prospectus supplement is
inconsistent with the statements made in the accompanying prospectus or the
information incorporated by reference, the statements made in the accompanying
prospectus or the information incorporated by reference are deemed modified or
superseded by the statements made in this prospectus supplement.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus may contain
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements are not statements
of historical facts, but rather reflect our current expectations concerning
future results and events. You can identify these forward-looking statements by
our use of words such as "anticipates," "believes," "continues," "expects,"
"intends," "likely," "may," "opportunity," "plans," "potential," "project,"
"will," and similar expressions to identify forward-looking statements, whether
in the negative or the affirmative. We cannot guarantee that we will actually
achieve these plans, intentions or expectations. These forward-looking
statements are subject to risks, uncertainties and other factors, some of which
are beyond our control, which could cause actual results to differ materially
from those forecast or anticipated in such forward-looking statements. The pro
forma information contained herein reflects adjustments and is presented for
comparative purposes only and does not purport to be indicative of what has
occurred or of future operating results or financial position.
S-i
These risks, uncertainties and factors include, but are not limited to:
- the impact of general economic conditions in the United States;
- the highly competitive nature of, and uncertain effect of new
technologies on, the radio broadcasting industry;
- the risks associated with our acquisition strategy generally;
- the control of us by Joseph M. Field and members of his immediate family;
- our vulnerability to changes in federal legislation or regulatory policy;
- our dependence on our Seattle radio stations;
- our substantial indebtedness and debt service needs; and
- the other factors described in "Risk Factors."
You should not place undue reliance on these forward-looking statements,
which reflect our view only as of the date of this prospectus supplement. Except
as may be required by law, we undertake no obligation to update these statements
or publicly release the result of any revisions to these statements to reflect
events or circumstances after the date of this prospectus supplement or to
reflect the occurrence of unanticipated events.
We urge you to review carefully "Risk Factors" in this prospectus
supplement for a more complete discussion of the risks of an investment in our
Class A common stock.
INFORMATION ABOUT STATION AND MARKET DATA
We have based or derived the station and market data we present in this
prospectus supplement from third-party sources, including primarily:
- 2000 market rank by metro population and by radio revenue from Duncan's
Radio Market Guide (2001 ed.);
- 2000 Entercom market revenue rank from Duncan's Radio Market Guide (2001
ed.);
- 2001 Entercom market revenue rank from market total cash performance
summaries prepared by Miller, Kaplan, Arase & Co. LLP (December 2001);
- Audience share and audience rank in target demographic data from the Fall
2001 Radio Market Report published by The Arbitron Ratings Company; and
- 2000 radio broadcasting industry rank from report of BIA Consulting, Inc.
(January 7, 2002).
While we believe these industry publications are reliable, we have not
independently verified them, and we make no representation as to their accuracy.
S-ii
SUMMARY
This summary highlights selected information contained in greater detail
elsewhere in this prospectus supplement, the accompanying prospectus and the
documents incorporated herein and therein by reference. This summary may not
contain all of the information that you should consider before investing in our
Class A common stock. You should carefully read the entire prospectus
supplement, the accompanying prospectus, and the documents we incorporate by
reference herein and therein before making an investment decision. Unless
specifically stated or the context otherwise so requires, the terms "Entercom,"
"we," "us," or similar terms in this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference herein and therein refer
to Entercom Communications and its consolidated subsidiaries, excluding Entercom
Communications Capital Trust.
OUR BUSINESS
Entercom Communications is one of the five largest radio broadcasting
companies in the United States based upon 2000 revenues pro forma for completed
and pending acquisitions. We have assembled, after giving effect to completed
and pending acquisitions, a nationwide portfolio of 101 stations in 19 markets,
including 11 of the country's top 50 radio revenue markets. Our station groups
rank among the top three in revenue market share in 18 of the 19 markets in
which we operate. We derive 90% of our revenues from markets where we rank
either first or second in market radio revenues.
We operate a wide range of formats in geographically diverse markets across
the United States. Our largest markets, in order of our 2001 revenues, including
pro forma revenues for completed and pending acquisitions, are Seattle, Boston,
Kansas City, Denver, Sacramento, Portland and New Orleans.
COMPLETED AND PENDING ACQUISITIONS
On November 29, 2001, we entered into an agreement with WCCB-TV, Inc., a
subsidiary of Bahakel Communications, Ltd., to acquire the assets of WKSI-FM and
WPET-AM, serving the Greensboro, North Carolina radio market, for a purchase
price of $20.8 million in cash. On December 5, 2001, we began operating these
stations under a time brokerage agreement. This transaction closed on February
8, 2002 and increased our ownership to six radio stations in the Greensboro,
North Carolina radio market.
On December 24, 2001, we entered into an agreement with Tribune
Broadcasting Company to acquire the assets of KOSI-FM, KKHK-FM and KEZW-AM,
serving the Denver, Colorado radio market, for a purchase price of $180.0
million in cash, of which we paid $18.0 million as a deposit on January 2, 2002.
On February 1, 2002, we began operating these stations under a time brokerage
agreement. The time brokerage agreement may run for a period of up to three
years at Tribune's option. The closing of this transaction may be delayed at the
option of Tribune, not to exceed three years, and also is conditioned on the
approval of the FCC.
On February 12, 2002, we entered into an agreement with subsidiaries of
Emmis Communications Corporation to acquire the assets of KALC-FM, serving the
Denver, Colorado radio market, for a purchase price of $88.0 million in cash, of
which we paid $8.8 million as a deposit on February 15, 2002. We will begin
operating this station under a time brokerage agreement upon the expiration or
termination of all applicable antitrust waiting periods. We expect the closing
of this transaction, which is conditioned on the receipt of all necessary
regulatory approvals, to occur in the second quarter of 2002.
S-1
OUR STATION PORTFOLIO
The following table sets forth selected information about the markets where
we operate and where we expect to operate, pro forma for completed and pending
acquisitions. You should refer to the "Business" section of this prospectus
supplement for further information about our station portfolio.
<Table>
<Caption>
2000 MARKET RANK 2001
-------------------- ENTERCOM STATIONS ENTERCOM MARKET
METRO RADIO ------------------- REVENUE
MARKET(1) POPULATION REVENUE FM AM RANK
- --------- ---------- ------- -------- -------- ---------------
Boston, MA(2)........................... 8 8 2 3 2
Seattle, WA............................. 14 13 5 3 1
Denver, CO.............................. 23 15 3 1 2
Portland, OR............................ 25 22 4 3 2
Sacramento, CA.......................... 29 27 4 1 2
Kansas City, MO......................... 30 29 5 3 1
Milwaukee, WI........................... 31 34 2 1 3
Norfolk, VA............................. 36 42 4 -- 1
New Orleans, LA......................... 41 40 4 2 1
Greensboro, NC.......................... 42 51 4 2 2
Buffalo, NY(2).......................... 45 45 2 4 2
Memphis, TN............................. 46 41 2 1 4
Rochester, NY........................... 52 53 3 1 3
Greenville/Spartanburg, SC.............. 58 56 4 3 2
Wilkes-Barre/Scranton, PA............... 64 71 6 3 1
Wichita, KS............................. 84 72 4 3 3
Gainsville/Ocala, FL.................... 90 127 2 -- --
Madison, WI(2).......................... 120 67 3 -- 3
Longview/Kelso, WA...................... -- -- 2 2 --
-- --
All Markets......................... 65 36
</Table>
- ---------------
(1) Our radio stations are in some instances licensed to communities other than
the named principal community for the market.
(2) Entercom market revenue rank for Boston, Buffalo, Denver and Madison is for
2000.
OUR ACQUISITION STRATEGY
Through our disciplined acquisition strategy, we seek to (i) build
top-three station clusters principally in large growth markets and (ii) acquire
underdeveloped properties that offer the potential for significant improvements
in revenues and broadcast cash flow through the application of our operational
expertise. Although we typically focus on radio stations in top 50 markets, we
also acquire stations in top 75 markets that otherwise meet our acquisition
criteria.
OUR OPERATING STRATEGY
The principal components of our operating strategy are to:
- Develop Market Leading Station Clusters. We are among the three largest
clusters in 18 of our 19 markets, including pending acquisitions. We
derive 90% of our revenues from markets where we rank either first or
second in market radio revenues. To enhance our competitive position, we
strategically align our stations' formats and sales efforts within each
market to optimize their performance, both individually and collectively.
S-2
- Recruit, Develop, Motivate And Retain Superior Employees. We believe that
station operators differentiate themselves from their peers primarily
through their ability to recruit, develop, motivate and retain superior
management, programming and sales talent. Accordingly, we strive to
establish a compelling corporate culture that is attractive to superior
performers. We encourage our stations to build strong community bonds
through local and company-wide community service programs, which
facilitate strong local business relationships and provide employees with
opportunities for enhanced job fulfillment. We offer competitive
compensation packages with performance-based incentives for our key
employees. We utilize best practices to facilitate development and
implementation of advantageous operational tools and strategies. In
addition, we provide employees with opportunities for personal growth and
advancement through training, seminars and other educational programs.
- Build Strongly-Branded Franchises. We analyze market research and
competitive factors to identify the format opportunity, music selection
and rotation, presentation and other key programming attributes that we
believe will best position each station to develop a distinctive identity
and to strengthen the station's local "brand" or "franchise" value. We
believe that this will enable us to maximize our audience share and
consequently our revenues and broadcast cash flow.
- Leverage Station Clusters To Capture Greater Share Of Advertising
Revenue. We believe radio will continue to gain revenue share from other
media. As a result of deregulation in the radio broadcasting industry,
operators can now create radio station clusters that have the critical
mass of audience reach and marketing resources necessary to pursue
incremental advertising and promotional revenues more aggressively. We
continue to capitalize on this opportunity by developing specialized
teams in many of our markets to work with advertisers to create and
develop marketing programs and solutions across our multi-station market
clusters. We derive 90% of our revenues from markets where we rank either
first or second in market radio revenues. In 2001, as in 2000, we gained
revenue market share in the majority of the markets in which we operate
and for our company as a whole.
- Acquire And Develop Under-Performing Stations. We seek to acquire and
develop under-performing stations, which has often enabled us to achieve
superior same station revenue and broadcast cash flow growth. We utilize
a variety of techniques to develop underachieving properties. These
techniques include: strategic market research and analysis; management
enhancements; improved sales training and techniques; technical upgrades;
programming and marketing enhancements; refocused expenditures; and
facility consolidations.
- Maximize Technical Capabilities. We seek to operate stations with the
strongest signals in their respective markets. In addition, on various
occasions we have identified opportunities to acquire and upgrade
low-powered or out-of-market stations and transform them into competitive
signals, thus increasing their value significantly.
CONCURRENT NOTES OFFERING
Concurrently with this offering, our wholly owned subsidiaries, Entercom
Radio, LLC and Entercom Capital, Inc., are offering $150.0 million in aggregate
principal amount of 7 5/8% Senior Subordinated Notes due 2014 by means of a
separate prospectus supplement. We, along with certain of our other direct and
indirect subsidiaries, will guarantee the notes. This offering and the notes
offering are not contingent on each other.
S-3
THE OFFERING
Class A common stock offered
by us......................... 3,500,000 shares
Common stock to be outstanding
after this offering........... 38,353,955 shares of Class A common stock
10,531,805 shares of Class B common stock
-- shares of Class C common stock
----------
48,885,760 total shares of common stock
----------
----------
Voting rights................. Each share of Class A common stock is entitled
to one vote.
We also have Class B common stock and Class C
common stock with different voting rights. The
Class A common stock and the Class B common
stock generally vote together as a single class
on all matters submitted to a vote of
shareholders. Each share of Class B common
stock is entitled to ten votes, except:
- any share of Class B common stock not voted
by either Joseph M. Field or David J. Field
is entitled to one vote;
- the holders of Class A common stock, voting
as a separate class, are entitled to elect
two directors;
- each share of Class B common stock is
entitled to one vote with respect to any
"going private" transaction under the
Exchange Act; and
- as required by law.
The shares of Class C common stock have no
voting rights, except as required by law.
Joseph M. Field and David J. Field beneficially
hold all of our Class B common stock. Following
this offering, the Class B common stock will
represent 73.3% of the combined voting power of
our common stock, assuming the underwriters do
not exercise their over-allotment option.
Dividend policy............... We intend to retain future earnings for use in
our business and do not anticipate declaring or
paying any cash or stock dividends on shares of
our Class A common stock in the foreseeable
future. In addition, our ability to declare
dividends is restricted under our credit
facility and the indenture governing the notes
to be offered concurrently with this offering.
Use of proceeds............... We intend to contribute the net proceeds from
this offering to Entercom Radio to pay down
revolving indebtedness under our credit
facility and to finance pending acquisitions.
We intend to use any remaining proceeds for
general corporate purposes, including repayment
of indebtedness under the credit facility,
future acquisitions and working capital.
Pending application of the net proceeds from
this offering, we may invest in commercial
paper or short-term investment grade interest
bearing securities.
S-4
New York Stock Exchange
Symbol........................ ETM
The number of shares of our Class A common stock outstanding assuming the
completion of the offering is 38,353,955 as of February 27, 2002. This number
does not include the following shares of our Class A common stock:
- 525,000 shares that the underwriters have the option to purchase to cover
over-allotments;
- 4,377,603 shares reserved for the exercise of options having a weighted
average exercise price of $38.75 per share;
- 2,837,256 shares eligible for future grants of options;
- 1,794,264 shares reserved for issuance under our employee stock purchase
plan; and
- 2,841,000 shares that are reserved for issuance upon conversion of the
6 1/4% Convertible Preferred Securities, Term Income Deferrable Equity
Securities (TIDES).
RISK FACTORS
You should read the "Risk Factors" section beginning on page S-9 of this
prospectus supplement, as well as the other cautionary statements throughout the
entire prospectus supplement, the accompanying prospectus and the documents
incorporated by reference herein and therein.
S-5
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table is a summary of financial data of Entercom
Communications and its consolidated subsidiaries for the periods presented. You
should read this data in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
prospectus supplement and our consolidated financial statements and related
notes in our Annual Report on Form 10-K for the year ended December 31, 2001,
incorporated by reference herein and in the accompanying prospectus, including
the consolidated financial information contained therein. Historical results are
not necessarily indicative of results to be expected for any future period. As
you review the information contained in the following table, you should also
carefully read the financial information in "Selected Consolidated Financial
Data" included in this prospectus supplement.
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
---------------------------------------
1999 2000 2001
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING DATA:
Net revenues......................................... $ 215,001 $ 352,025 $ 332,897
--------- --------- ---------
Operating expenses (income):
Station operating expenses......................... 135,943 206,608 201,257
Depreciation and amortization...................... 21,564 43,475 46,509
Corporate general and administrative expenses...... 8,100 12,497 12,335
Net expense (income) from time brokerage agreement
fees............................................ 652 11 --
Net (gains) losses on sale of assets............... (1,986) (41,465) 16
--------- --------- ---------
Total operating expenses................... 164,273 221,126 260,117
--------- --------- ---------
Operating income..................................... 50,728 130,899 72,780
Other expense (income):
Interest expense................................... 11,182 37,760 27,583
Financing cost of Company-obligated mandatorily
redeemable convertible preferred securities of
subsidiary holding solely convertible debentures
of the Company (TIDES).......................... 1,845 7,813 7,813
Interest income.................................... (3,253) (512) (262)
Equity loss from unconsolidated affiliate.......... -- 1,100 4,706
Loss on investments................................ -- 5,688 2,000
Net loss on derivative instruments................. -- -- 912
--------- --------- ---------
Total other expense........................ 9,774 51,849 42,752
--------- --------- ---------
Income before income taxes, extraordinary item and
accounting change.................................. 40,954 79,050 30,028
Income taxes......................................... 100,913 31,796 12,194
--------- --------- ---------
(Loss) income before extraordinary item and
accounting change.................................. (59,959) 47,254 17,834
Extraordinary item, net of taxes..................... (918) -- --
--------- --------- ---------
(Loss) income before accounting change............... (60,877) 47,254 17,834
Cumulative effect of accounting change, net of
taxes.............................................. -- -- (566)
--------- --------- ---------
Net (loss) income.................................... $ (60,877) $ 47,254 $ 17,268
========= ========= =========
</Table>
S-6
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
---------------------------------------
1999 2000 2001
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net (loss) income per share -- basic:
(Loss) income before extraordinary item and
accounting change............................... $ (1.58) $ 1.05 $ 0.39
Extraordinary item, net of taxes................... (0.03) -- --
--------- --------- ---------
(Loss) income before accounting change............. (1.61) 1.05 0.39
Cumulative effect of accounting change, net of
taxes........................................... -- -- (0.01)
--------- --------- ---------
Net (loss) income per share -- basic................. $ (1.61) $ 1.05 $ 0.38
========= ========= =========
Net (loss) income per share -- diluted:
(Loss) income before extraordinary item and
accounting change............................... $ (1.58) $ 1.04 $ 0.39
Extraordinary item, net of taxes................... (0.03) -- --
--------- --------- ---------
(Loss) income before accounting change............. (1.61) 1.04 0.39
Cumulative effect of accounting change, net of
taxes........................................... -- -- (0.01)
--------- --------- ---------
Net (loss) income per share -- diluted............... $ (1.61) $ 1.04 $ 0.38
========= ========= =========
Weighted average shares -- basic..................... 37,922 45,209 45,295
========= ========= =========
Weighted average shares -- diluted................... 37,922 45,614 45,994
========= ========= =========
PRO FORMA DATA(1):
Income before income taxes and extraordinary item.... $ 40,954
Pro forma income taxes............................... 20,278
---------
Pro forma income before extraordinary item........... 20,676
Extraordinary item, net of pro forma taxes......... (918)
---------
Pro forma net income................................. $ 19,758
=========
Pro forma basic income per share before extraordinary
item............................................... $ 0.55
=========
Pro forma diluted income per share before
extraordinary item................................. $ 0.54
=========
Pro forma basic net income........................... $ 0.52
=========
Pro forma diluted net income......................... $ 0.51
=========
Pro forma weighted average common shares
outstanding -- basic............................... 37,922
=========
Pro forma weighted average common shares
outstanding -- diluted............................. 38,238
=========
OTHER DATA:
Broadcast cash flow(2)(6)............................ $ 79,058 $ 145,417 $ 131,640
Broadcast cash flow margin(3)(6)..................... 36.8% 41.3% 39.5%
EBITDA before net expense (income) from time
brokerage agreement fees(4)(6)..................... $ 71,749 $ 133,577 $ 119,842
After tax cash flow(5)(6)............................ 52,465 89,721 87,084
Cash flows related to:
Operating activities............................... 40,700 69,475 85,243
Investing activities............................... (712,323) (64,684) (17,891)
Financing activities............................... 676,416 (2,796) (69,858)
</Table>
S-7
<Table>
<Caption>
DECEMBER 31, 2001
------------------------
AS
ACTUAL ADJUSTED(7)
---------- -----------
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents and short-term investments........ $ 10,751 $ 264,304
Intangibles and other assets................................ 1,244,957 1,249,207
Total assets................................................ 1,438,740 1,696,543
Senior debt, including current portion...................... 388,323 325,323
7 5/8% Senior Subordinated Notes due 2014................... -- 150,000
TIDES....................................................... 125,000 125,000
Total shareholders' equity.................................. 755,881 926,684
</Table>
- ---------------
(1) For purposes of our historical financial statement, the term pro forma
refers solely to the adjustments necessary to reflect our status as if we
were a C corporation rather than an S corporation for income tax purposes
for the period presented.
(2) 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 net gains (losses) on sale
of assets.
(3) Broadcast cash flow margin represents broadcast cash flow as a percentage of
net revenues.
(4) EBITDA before net expense (income) from time brokerage agreement fees
consists of operating income plus depreciation and amortization, non-cash
compensation expense (which is otherwise included in corporate general and
administrative expenses) and the elimination of net expense (income) from
time brokerage agreement fees and net gains (losses) on sale of assets.
(5) After tax cash flow consists of income (loss) before extraordinary item and
accounting change, plus the following: depreciation and amortization,
non-cash compensation expense (which is otherwise included in corporate
general and administrative expense), deferred taxes, the elimination, net of
taxes, of equity loss from unconsolidated affiliate, any net gains or losses
on sale of assets, investments and derivative instruments. For the year
ended December 31, 1999, after tax cash flow consists of pro forma income
before extraordinary item, to reflect taxes as if we were a C corporation
during the period presented.
(6) Although broadcast cash flow, EBITDA before net expense (income) from time
brokerage agreement fees 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, EBITDA before net
expense (income) from time brokerage agreement fees and after tax cash flow
in isolation or as substitutes for 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,
EBITDA before net expense (income) from time brokerage agreement fees 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.
(7) The as adjusted balance sheet data summarized above reflects the application
of the estimated net proceeds from this offering at the public offering
price of $51.25 per share, assuming the underwriters do not exercise their
over-allotment option, and the estimated net proceeds from the concurrent
offering of $150.0 million in aggregate principal amount of 7 5/8% Senior
Subordinated Notes due 2014 by our subsidiaries, Entercom Radio and Entercom
Capital.
S-8
RISK FACTORS
Investing in our Class A common stock involves a high degree of risk. You
should carefully consider the following risk factors and all other information
contained in this prospectus supplement and the accompanying prospectus before
purchasing our Class A common stock. The risks and uncertainties described below
are not the only ones facing us. Additional risks and uncertainties that we are
unaware of, or that we currently deem immaterial, also may become important
factors that affect us.
If any of the following risks occur, our business, financial condition or
results of operations could be materially and adversely affected. In that case,
the trading price of our Class A common stock could decline, and you may lose
some or all of your investment.
RISKS RELATED TO OUR BUSINESS
WE FACE MANY UNPREDICTABLE BUSINESS RISKS, BOTH GENERAL AND SPECIFIC TO THE
RADIO BROADCASTING INDUSTRY, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
FUTURE OPERATIONS.
Our future operations are subject to many business risks, including those
risks that specifically influence the radio broadcasting industry, which could
have a material adverse effect on our business including:
- economic conditions, both generally and relative to the radio
broadcasting industry;
- shifts in population, demographics or audience tastes;
- the level of competition for advertising revenues with other radio
stations, satellite radio, television stations and other entertainment
and communications media;
- technological changes and innovations;
- new laws, including proposals to eliminate the tax deductibility of
certain expenses incurred by advertisers; and
- changes in governmental regulations and policies and actions of federal
regulatory bodies, including the United States Department of Justice, the
Federal Trade Commission and the FCC.
Given the inherent unpredictability of these variables, we cannot with any
degree of certainty predict what effect, if any, these variables will have on
our future operations. Generally, advertising tends to decline during an
economic recession or downturn, both nationally and in particular markets. Our
advertising revenue has been adversely affected by the recent downturn in the
United States economy. In particular, the general economic downturn and decrease
in advertising activity following the events of September 11, 2001 adversely
affected, and may continue to hinder the growth of, our advertising revenue.
OUR RADIO STATIONS MAY NOT BE ABLE TO COMPETE EFFECTIVELY IN THEIR RESPECTIVE
MARKETS FOR ADVERTISING REVENUES.
Our radio broadcasting stations are in a highly competitive business. Our
radio stations compete for audiences and advertising revenues within their
respective markets directly with other radio stations, as well as with other
media, such as newspapers, magazines, network and cable television, outdoor
advertising and direct mail. Audience ratings and market shares are subject to
change, and any change in a particular market could have a material adverse
effect on the revenue of our stations located in that market. While we already
compete in some of our markets with other stations with similar programming
formats, if another radio station in a market were to convert its programming
format to a format similar to one of our stations, if a
S-9
new station were to adopt a comparable format or if an existing competitor were
to strengthen its operations, our stations could suffer a reduction in ratings
and/or advertising revenue and could incur increased promotional and other
expenses. Other radio broadcasting companies may enter into the markets in which
we operate or may operate in the future. These companies may be larger and have
more financial resources than we have. We cannot assure you that any of our
stations will be able to maintain or increase their current audience ratings and
advertising revenues.
WE ARE DEPENDENT ON FEDERALLY-ISSUED LICENSES TO OPERATE OUR RADIO STATIONS AND
ARE SUBJECT TO EXTENSIVE FEDERAL REGULATION.
The radio broadcasting industry is subject to extensive regulation by the
FCC under the Communications Act of 1934. We are required to obtain licenses
from the FCC to operate our radio stations. Licenses are normally granted for a
term of eight years and are renewable. Although the vast majority of FCC radio
station licenses are routinely renewed, we cannot assure you that the FCC will
approve our future renewal applications or that the renewals will not include
conditions or qualifications. The non-renewal, or renewal with substantial
conditions or modifications, of one or more of our licenses could have a
material adverse effect on us.
We must comply with extensive FCC regulations and policies in the ownership
and operation of our radio stations. FCC regulations limit the number of radio
stations that a licensee can own in a market, which could restrict our ability
to consummate future transactions and in certain circumstances could require us
to divest some radio stations. For example, in connection with the Sinclair
Kansas City acquisition we were required to dispose of three radio stations in
Kansas City. The FCC also requires radio stations to comply with certain
technical requirements to limit interference between two or more radio stations.
If the FCC relaxes these technical requirements, it could impair the signals
transmitted by our radio stations and could have a material adverse effect on
us. Moreover, these FCC regulations and others may change over time, and we
cannot assure you that those changes would not have a material adverse effect on
us.
WE MAY NOT BE SUCCESSFUL IN IDENTIFYING AND CONSUMMATING FUTURE ACQUISITIONS,
WHICH IS AN IMPORTANT ELEMENT OF OUR BUSINESS STRATEGY.
We pursue growth, in part, through the acquisition of individual radio
stations and groups of radio stations. Our consummation of all future
acquisitions will be subject to various conditions, including FCC and other
regulatory approvals. The FCC must approve any transfer of control or assignment
of broadcast licenses. In addition, acquisitions may encounter intense scrutiny
under federal and state antitrust laws. Our future acquisitions may be subject
to notification under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
and to a waiting period and possible review by the Department of Justice and the
Federal Trade Commission.
Any delays, injunctions, conditions or modifications by any of these
federal agencies could have a negative effect on us and result in the
abandonment of all or part of attractive acquisition opportunities. As a result,
under certain circumstances, all or a partial amount of our deposits of $26.8
million, made in connection with the pending acquisitions, could be forfeited if
we are unable to timely consummate all or any of our pending acquisitions. We
cannot predict whether we will be successful in identifying future acquisition
opportunities or what the consequences will be of any acquisitions.
Depending on the nature, size and timing of future acquisitions, we may
require additional financing. We cannot assure you that additional financing
will be available to us on acceptable terms. Radio broadcasting is a rapidly
consolidating industry, with many companies seeking to consummate acquisitions
and increase their market share. In this environment, we compete and will
continue to compete with many other buyers for the acquisition of radio
stations. Some of
S-10
those competitors may be able to outbid us for acquisitions because they have
greater financial resources. As a result of these and other factors, our ability
to identify and consummate future acquisitions is uncertain.
WE MAY BE UNABLE TO EFFECTIVELY INTEGRATE OUR ACQUISITIONS.
The integration of acquisitions involves numerous risks, including:
- difficulties in the integration of operations and systems and the
management of a large and geographically diverse group of stations;
- the diversion of management's attention from other business concerns; and
- the potential loss of key employees of acquired stations.
We cannot assure you that we will be able to integrate successfully any
operations, systems or management that might be acquired in the future. In
addition, in the event that the operations of a new business do not meet
expectations, we may restructure or write-off the value of some or all of the
assets of the new business.
OUR CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER EFFECTIVELY CONTROLS OUR
COMPANY, AND MEMBERS OF HIS IMMEDIATE FAMILY ALSO OWN A SUBSTANTIAL EQUITY
INTEREST IN US. THEIR INTERESTS MAY CONFLICT WITH YOURS.
As of January 31, 2002, Joseph M. Field, our Chairman of the Board and
Chief Executive Officer, beneficially owns 1,002,586 shares of our Class A
common stock and 9,782,555 shares of our Class B common stock, representing
approximately 70.4% of the total voting power of all of our outstanding common
stock. As of January 31, 2002, David J. Field, our President, Chief Operating
Officer, one of our directors and the son of Joseph M. Field, beneficially owns
2,029,143 shares of our Class A common stock and 749,250 shares of our
outstanding Class B common stock, representing approximately 6.8% of the total
voting power of all of our outstanding common stock. Collectively, Joseph M.
Field and David J. Field beneficially own all of our outstanding Class B common
stock. Other members of the Field family also own shares of Class A common
stock. In addition, both Joseph M. Field and David J. Field are members of the
Board of Managers of Entercom Radio.
Shares of Class B common stock are transferable only to Joseph M. Field,
David J. Field, certain of their family members or trusts for any of their
benefit. Upon any other transfer, shares of our Class B common stock convert
automatically into shares of our Class A common stock on a share-for-share
basis. Shares of our Class B common stock are entitled to ten votes only when
they are voted by Joseph M. Field or David J. Field, subject to certain
exceptions where they are restricted to one vote. Joseph M. Field effectively is
able to control the vote on all matters submitted to the vote of shareholders
and, therefore, is able to direct our management and policies, except with
respect to those matters where the shares of our Class B common stock are only
entitled to one vote and those matters requiring a class vote under the
provisions of our articles of incorporation, bylaws or applicable law,
including, without limitation, the election of the two Class A directors.
Without the approval of Joseph M. Field, we will be unable to consummate
transactions involving an actual or potential change of control, including
transactions in which investors might otherwise receive a premium for your
shares over then current market prices.
WE DEPEND HEAVILY ON OUR SEATTLE RADIO STATIONS.
The radio stations we own or operate in Seattle generated between 20% and
25% of our net revenues and broadcast cash flows for 2001. Accordingly, we may
have greater exposure to any operating difficulties that may arise at our
Seattle stations or to adverse events or conditions that affect the Seattle
economy than if we were more geographically diverse.
S-11
WE MUST RESPOND TO THE RAPID CHANGES IN TECHNOLOGY, SERVICES AND STANDARDS THAT
CHARACTERIZE OUR INDUSTRY IN ORDER TO REMAIN COMPETITIVE.
The radio broadcasting industry is subject to rapid technological change,
evolving industry standards and the emergence of new media technologies and
services. We cannot assure you that we will have the resources to acquire new
technologies or to introduce new services that could compete with these new
technologies. Several new media technologies and services are being developed or
introduced, including the following:
- satellite delivered digital audio radio service, has resulted in the
introduction of new subscriber based satellite radio services with
numerous niche formats;
- audio programming by cable systems, direct broadcast satellite systems,
personal communications systems, Internet content providers and other
digital audio broadcast formats;
- in-band on-channel digital radio, which provides multi-channel,
multi-format digital radio services in the same bandwidth currently
occupied by traditional AM and FM radio services; and
- low-power FM radio, which could result in additional FM radio broadcast
outlets.
We cannot predict the effect, if any, that competition arising from new
technologies or regulatory change may have on the radio broadcasting industry or
on the financial condition and results of operations of our company.
THE LOSS OF KEY PERSONNEL COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
Our business depends upon the continued efforts, abilities and expertise of
our executive officers and other key executives. We believe that the loss of one
or more of these individuals could have a material adverse effect on our
business.
RISKS RELATED TO THIS OFFERING
OUR STOCK PRICE MAY BE VOLATILE AND COULD DECLINE SUBSTANTIALLY.
The stock market has, from time to time, experienced extreme price and
volume fluctuations that are unrelated to the operating performance of
particular companies. Over the course of the last 12 months, the price of our
common stock has ranged from $30.00 per share to $55.00 per share. The market
price of our Class A common stock may fluctuate in response to many factors
including:
- our operating results failing to meet the expectations of securities
analysts or investors in any quarter;
- downward revisions in securities analysts' estimates;
- material announcements by us or our competitors;
- governmental regulatory action;
- investor perceptions of our industry or prospects or those of our
customers;
- adverse changes in general market conditions or economic trends; and
- public sales of a substantial number of shares of our Class A common
stock following this offering.
In the past, companies that have experienced volatility in the market price
of their stock have been the subject of securities class action litigation. If
we become involved in a securities
S-12
class action litigation in the future, it could result in substantial costs and
diversion of management's attention and resources, which could have a material
adverse affect on our business.
PROVISIONS IN OUR CHARTER DOCUMENTS MIGHT DETER ACQUISITION BIDS FOR US.
Certain provisions of Pennsylvania law and our amended and restated
articles of incorporation and amended and restated bylaws could make it
difficult for a potential acquirer to acquire us, whether through merger, tender
offer or proxy contest, even if an acquisition could be beneficial to the
interests of our shareholders. Such provisions could also limit the price that
certain investors might be willing to pay in the future for shares of our Class
A common stock. See "Description of Capital Stock -- Certain Provisions of the
Amended and Restated Articles of Incorporation and Amended and Restated Bylaws"
in the accompanying prospectus.
THE CONVERSION OF TIDES INTO SHARES OF OUR CLASS A COMMON STOCK WOULD BE
DILUTIVE TO HOLDERS OF CLASS A COMMON STOCK.
Holders of TIDES have the right, at any time, to convert their TIDES into
an aggregate of 2,841,000 shares of Class A common stock, at a conversion price
equivalent to $44.00 per share of Class A common stock. To the extent that
holders of TIDES elect to convert their TIDES into shares of our Class A common
stock, other holders of our Class A common stock will be diluted.
In addition, at any time after October 3, 2002, we have the right to redeem
any or all of the TIDES for a cash redemption price equal to $51.563 per TIDES.
This redemption price will step down to $51.042 on September 30, 2003; to
$50.521 on September 30, 2004; and to $50.00 on September 30, 2005. Holders of
TIDES have the right to convert their TIDES into shares of our Class A common
stock rather than receive the cash redemption price, which is likely to occur if
we elect to redeem the TIDES at a time when the market price for our Class A
common stock is higher than the applicable TIDES redemption price and would have
the effect of diluting other holders of our Class A common stock. As of February
27, 2002, the closing price of our Class A common stock was $51.55.
BECAUSE OF OUR HOLDING COMPANY STRUCTURE, WE DEPEND ON OUR SUBSIDIARIES FOR CASH
FLOW, AND OUR ACCESS TO THIS CASH FLOW IS RESTRICTED.
We operate as a holding company. All of our radio stations are currently
owned and operated by our direct and indirect subsidiaries. As a holding
company, our only source of cash to pay our obligations, including corporate
overhead and other trade payables, is distributions from our subsidiaries of
their net earnings and cash flow. We currently expect that our subsidiaries will
retain and use their net earnings and cash flow in their operations, including
to service their debt obligations, before making distributions to us. Moreover,
we cannot assure you that applicable state law and contractual restrictions,
including the dividend covenants contained in the credit facility and the
indenture governing the notes to be offered concurrently with this offering,
would permit dividends or distributions from our subsidiaries to us.
OUR ABILITY TO INCUR SUBSTANTIAL INDEBTEDNESS COULD HAVE IMPORTANT CONSEQUENCES
TO YOU.
We have the ability to incur indebtedness that is substantial in relation
to our shareholders' equity. As of December 31, 2001, we had $388.0 million
outstanding indebtedness under our credit facility, and shareholders' equity of
approximately $755.9 million. As of December 31, 2001 up to an additional $255.8
million was available under our credit facility, subject to compliance with
certain financial ratios and covenants. See "Capitalization," and "Management's
Discussion and Analysis of Financial Condition and Results of Operation --
Liquidity and Capital Resources."
S-13
If we were to incur a substantial amount of indebtedness under the credit
facility, it could have several important consequences to the holders of our
Class A common stock, including, but not limited to, the following:
- a substantial portion of our cash flow from operations could be dedicated
to debt service and would not be available for other purposes, including
for funding future expansion and ongoing capital expenditures;
- our ability to obtain additional financing for working capital, capital
expenditures, acquisitions and general corporate or other purposes could
be impaired;
- our leveraged position and the covenants contained in the credit facility
could limit our ability to compete, expand and make capital improvements;
- our level of indebtedness could make us more vulnerable to economic
downturns, limit our ability to withstand competitive pressures and
reduce our flexibility in responding to changing business, regulatory and
economic conditions; and
- certain restrictive covenants contained in the credit facility could
limit our ability to pay dividends and make other distributions to our
shareholders.
THE INDENTURE FOR THE NOTES AND OUR CREDIT FACILITY CONTAIN VARIOUS COVENANTS
THAT RESTRICT OUR FINANCIAL AND OPERATIONAL FLEXIBILITY.
The indenture governing the notes to be issued concurrently with this
offering and our credit facility contain various provisions that restrict our
ability to:
- incur additional debt;
- pay dividends and make other distributions;
- make investments and other restricted payments;
- create liens;
- swap or sell assets; and
- enter into certain transactions with affiliates.
These restrictions on our ability to operate our business could have a
material adverse effect on our business.
In addition, our credit facility requires that we maintain specified
financial ratios. Our ability to meet these financial ratios can be affected by
operating performance or other events beyond our control, and we cannot assure
you that we will meet those ratios.
If we default under any financing agreements, our lenders could:
- elect to declare all amounts borrowed to be immediately due and payable,
together with accrued and unpaid interest; and/or
- terminate their commitments, if any, to make further extensions of
credit.
If we are unable to pay our obligations to our senior secured lenders, they
could proceed against any or all of the collateral securing our indebtedness to
them. The collateral under our credit facility consists of substantially all of
our consolidated assets and the stock of our subsidiaries to secure the debt
under our credit facility. If the amounts outstanding under the credit facility
were accelerated, the lenders could proceed against our consolidated assets and
the equity interests in our subsidiaries. In addition, a breach of certain of
these restrictions or covenants, or an acceleration by our senior secured
lenders of our obligations to them, would cause a default under the indenture
governing the notes, which could have an adverse effect on our financial
condition and the trading price of our Class A common stock.
S-14
USE OF PROCEEDS
Our net proceeds from the sale of shares of our Class A common stock
offered hereby will be approximately $170.8 million, based on the public
offering price of $51.25 per share and after deducting underwriting discounts
and commissions and estimated offering expenses payable by us, assuming the
underwriters do not exercise their over-allotment option. We expect the
aggregate net proceeds from this offering (which we intend to contribute to
Entercom Radio) and the concurrent notes offering by Entercom Radio and Entercom
Capital will be approximately $316.6 million. Entercom Radio will use these
aggregate proceeds to pay down revolving indebtedness under our credit facility
and to finance pending acquisitions. We intend to use any remaining proceeds for
general corporate purposes, including repayment of indebtedness under the credit
facility, future acquisitions and working capital. Pending application of the
net proceeds from this offering, we may invest in commercial paper or short-
term investment grade interest bearing securities.
As of December 31, 2001, we had $388.0 million outstanding indebtedness
under our credit facility, which includes $63.0 million of revolving
indebtedness, and our weighted average interest rate on borrowings under our
credit facility was 2.8% or 4.3% taking into account the impact of our
derivative interest rate swaps and collars. The term and revolving loan portions
of our credit facility mature on September 30, 2007. On January 2, 2002, we
incurred $18.0 million of indebtedness under our credit facility to fund the
deposit for our pending acquisition of three stations in the Denver, Colorado
market. On February 8, 2002, we incurred $14.5 million of indebtedness under our
credit facility to fund a portion of the balance of the purchase price for the
acquisition of two radio stations in the Greensboro, North Carolina market. On
February 15, 2002, we incurred $8.8 million of indebtedness under our credit
facility to fund the deposit for our pending acquisition of an additional
station in the Denver, Colorado market. Other than the amounts set forth above,
all other borrowings under our credit facility since January 1, 2001, have been
used for working capital and certain investing and financing purposes.
S-15
PRICE RANGE OF OUR CLASS A COMMON STOCK
Our Class A common stock is traded on the NYSE under the symbol "ETM." The
following table sets forth, for the periods indicated, the high and low sales
prices per share of our Class A common stock as reported on the NYSE:
<Table>
<Caption>
PRICE RANGE OF OUR
CLASS A COMMON STOCK
--------------------
HIGH LOW
------- -------
Year Ended December 31, 2000:
First Quarter............................................. $68.69 $38.13
Second Quarter............................................ 50.75 35.81
Third Quarter............................................. 50.56 25.31
Fourth Quarter............................................ 39.81 25.31
Year Ended December 31, 2001:
First Quarter............................................. $50.50 $31.63
Second Quarter............................................ 54.40 35.75
Third Quarter............................................. 54.25 30.00
Fourth Quarter............................................ 50.92 32.75
Year Ended December 31, 2002:
First Quarter (through February 27)....................... $55.00 $44.00
</Table>
On February 27, 2002, the last reported sale price of our Class A common
stock on the NYSE was $51.55 per share. As of January 31, 2002, there were
approximately 75 stockholders of record of our Class A common stock.
DIVIDEND POLICY
Since becoming a public company in January 1999, we have not declared any
dividends on our common stock. We have no plans to declare or pay cash dividends
in the foreseeable future because we intend to retain our earnings, if any, to
finance the expansion of our business and for general corporate purposes. Any
payment of future dividends will be at the discretion of the board of directors
and will depend upon, among other factors, our earnings, financial condition,
capital requirements, level of indebtedness, contractual restrictions, including
the provisions of our credit facility and provisions applicable to the 6 1/4%
Convertible Preferred Securities Term Income Deferrable Equity Securities
(TIDES) of our subsidiary trust, and other considerations that the board of
directors deems relevant. In addition, both the terms of the indenture governing
the notes to be issued concurrently with this offering and our credit facility
restrict our ability to pay cash dividends.
S-16
CAPITALIZATION
The following table sets forth, on a consolidated basis, our cash and cash
equivalents, short-term investments and capitalization as of December 31, 2001,
on an actual basis and an as adjusted basis giving effect to this offering,
assuming the underwriters do not exercise their over-allotment option, and the
concurrent offering by Entercom Radio and Entercom Capital of $150.0 million in
aggregate principal amount of 7 5/8% Senior Subordinated Notes due 2014, and the
application of the net proceeds herefrom and therefrom to pay down $63.0 million
of revolving indebtedness.
The information in this table should be read in conjunction with our
consolidated financial statements and the related notes in our Annual Report on
Form 10-K for the year ended December 31, 2001, incorporated by reference in
this prospectus supplement and the accompanying prospectus, and "Use of
Proceeds," and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this prospectus supplement.
<Table>
<Caption>
DECEMBER 31, 2001
------------------------
AS ADJUSTED
FOR THE
ACTUAL OFFERINGS
---------- -----------
(IN THOUSANDS)
Cash and cash equivalents and short-term investments........ $ 10,751 $ 264,304
========== ==========
Senior debt, including current portion...................... $ 388,323 $ 325,323
7 5/8% Senior Subordinated Notes due 2014................... -- 150,000
---------- ----------
Total long-term debt................................... 388,323 475,323
TIDES....................................................... 125,000 125,000
Shareholders' equity........................................ 755,881 926,684
---------- ----------
Total capitalization................................... $1,269,204 $1,527,007
========== ==========
</Table>
S-17
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth the selected historical financial data of
Entercom Communications and its consolidated subsidiaries for the periods
presented. The selected historical consolidated financial data have been derived
from our consolidated financial statements for the fiscal years ended September
30, 1997 and 1998, the three months ended December 31, 1998, and the fiscal
years ended December 31, 1999 and 2000, which have been audited by Deloitte &
Touche LLP, independent public accountants, and for the fiscal year ended
December 31, 2001, which has been audited by Arthur Andersen LLP, independent
public accountants. The selected historical consolidated financial data for the
three months ended December 31, 1997 and the twelve months ended December 31,
1998 have been derived from our unaudited consolidated financial statements. You
should read the selected historical consolidated financial data in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus supplement and our
consolidated financial statements and related notes in our Annual Report on Form
10-K for the year ended December 31, 2001, incorporated by reference herein and
in the accompanying prospectus.
Until December 31, 1998, we operated with an October 1st to September 30th
fiscal year. Effective January 1, 1999, we changed for financial reporting
purposes from a fiscal year ending September 30th to a fiscal year ending
December 31st. Accordingly, the selected historical financial data includes
information as of and for the three-month transition period ended December 31,
1998, and, for comparison purposes, the three months ended December 31, 1997 and
the twelve months ended December 31, 1998.
Immediately prior to our initial public offering in January 1999, Chase
Capital converted a 7% Subordinated Convertible Note due 2003 in the principal
amount of $25 million into 2,327,500 shares of our Class A common stock and
1,995,669 shares of our Class C common stock. The Chase Capital convertible
subordinated note has been retired, and we have no further obligation with
respect to the note.
Before completing our initial public offering, we were an S corporation,
and accordingly, we were not liable for federal and certain state corporate
income taxes. Instead, our shareholders included our taxable income or loss in
their federal and certain state income tax returns. Immediately before our
initial public offering, we converted to a C corporation, and accordingly, we
were then subject to federal and state corporate income taxes. The pro forma
amounts shown in the table reflect provisions for state and federal income
taxes, applied to income before income taxes and extraordinary item and the
effect of the adjustment to reflect indexing of the Chase Capital convertible
subordinated note (the amount of this adjustment is not tax deductible), as if
we had been taxed as a C corporation.
As a result of our conversion to a C corporation immediately prior to our
initial public offering, generally accepted accounting principles required us to
provide for deferred income taxes of $79.8 million to reflect the cumulative
temporary differences between book and income tax bases of our assets and
liabilities.
For purposes of our historical financial statements, the term pro forma
refers solely to the adjustments necessary to reflect our status as if we were a
C corporation rather than an S corporation throughout the periods presented.
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 gains (losses) on sale of assets.
Broadcast cash flow margin represents broadcast cash flow as a percentage
of net revenues.
S-18
EBITDA before net expense (income) from time brokerage agreement fees
consists of operating income plus depreciation and amortization, non-cash
compensation expense (which is otherwise included in corporate general and
administrative expenses) and the elimination of net expense (income) from time
brokerage agreement fees and gains (losses) on sale of assets.
After tax cash flow consists of income (loss) before extraordinary item and
accounting change, plus the following: depreciation and amortization, non-cash
compensation expense (which is otherwise included in corporate general and
administrative expense), deferred taxes, the elimination, net of taxes, of
equity loss from unconsolidated affiliate, any gains or losses on sale of
assets, investments and derivative instruments and the elimination of any
adjustments to reflect the indexing of the convertible subordinated note. For
the years and periods prior to 2000, after tax cash flow consists of pro forma
income (loss) before extraordinary item, to reflect taxes as if we were a C
corporation during the periods presented.
The data is presented in thousands, other than income (loss) per share.
Although broadcast cash flow, EBITDA before net expense (income) from time
brokerage agreement fees 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, EBITDA before net expense (income) from time
brokerage agreement fees and after tax cash flow in isolation or as substitutes
for 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, EBITDA before net expense (income) from time brokerage
agreement fees 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.
<Table>
<Caption>
TWELVE
YEAR ENDED THREE MONTHS ENDED MONTHS
SEPTEMBER 30, DECEMBER 31, ENDED YEAR ENDED DECEMBER 31,
--------------------- ---------------------- DECEMBER 31, ------------------------------------
1997 1998 1997 1998 1998 1999 2000 2001
--------- --------- ----------- -------- ------------ ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
OPERATING DATA:
Net revenues.............. $ 93,862 $ 132,998 $ 28,399 $ 47,363 $ 151,962 $ 215,001 $ 352,025 $ 332,897
--------- --------- -------- -------- --------- ---------- ---------- ----------
Operating expenses
(income):
Station operating
expenses............... 61,280 88,599 18,868 29,990 99,721 135,943 206,608 201,257
Depreciation and
amortization........... 7,685 13,066 2,880 4,358 14,544 21,564 43,475 46,509
Corporate general and
administrative
expenses............... 3,249 4,527 849 1,850 5,528 8,100 12,497 12,335
Net expense (income) from
time brokerage
agreement fees......... (476) 2,399 -- 1,236 3,635 652 11 --
Net (gains) losses on
sale of assets......... (197,097) (8,661) (43) (69,648) (78,266) (1,986) (41,465) 16
--------- --------- -------- -------- --------- ---------- ---------- ----------
Total operating
(income)
expenses.......... (125,359) 99,930 22,554 (32,214) 45,162 164,273 221,126 260,117
--------- --------- -------- -------- --------- ---------- ---------- ----------
Operating income.......... 219,221 33,068 5,845 79,577 106,800 50,728 130,899 72,780
Other expense (income):
Interest expense......... 11,388 14,663 2,996 5,732 17,399 11,182 37,760 27,583
</Table>
S-19
<Table>
<Caption>
TWELVE
YEAR ENDED THREE MONTHS ENDED MONTHS
SEPTEMBER 30, DECEMBER 31, ENDED YEAR ENDED DECEMBER 31,
--------------------- ---------------------- DECEMBER 31, ------------------------------------
1997 1998 1997 1998 1998 1999 2000 2001
--------- --------- ----------- -------- ------------ ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
Financing cost of
Company-obligated
mandatorily redeemable
convertible preferred
securities of
subsidiary holding
solely convertible
debentures of the
Company (TIDES)........ -- -- -- -- -- 1,845 7,813 7,813
Adjustment to reflect
indexing of the
convertible
subordinated note...... 29,070 8,841 14,903 29,503 23,441 -- -- --
Interest income.......... (482) (410) (127) (146) (429) (3,253) (512) (262)
Equity loss from
unconsolidated
affiliate.............. -- -- -- -- -- -- 1,100 4,706
Loss on investments...... -- -- -- -- -- -- 5,688 2,000
Net loss on derivative
instruments............ -- -- -- -- -- -- -- 912
Other non-operating
expenses............... 1,986 82 25 723 780 -- -- --
--------- --------- -------- -------- --------- ---------- ---------- ----------
Total other
expense........... 41,962 23,176 17,797 35,812 41,191 9,774 51,849 42,752
--------- --------- -------- -------- --------- ---------- ---------- ----------
Income (loss) before
income taxes,
extraordinary item and
accounting change........ 177,259 9,892 (11,952) 43,765 65,609 40,954 79,050 30,028
Income taxes.............. 489 453 81 310 682 100,913 31,796 12,194
--------- --------- -------- -------- --------- ---------- ---------- ----------
Income (loss) before
extraordinary item and
accounting change........ 176,770 9,439 (12,033) 43,455 64,927 (59,959) 47,254 17,834
Extraordinary item, net of
taxes.................... -- (2,376) -- -- (2,376) (918) -- --
--------- --------- -------- -------- --------- ---------- ---------- ----------
Income (loss) before
accounting change........ 176,770 7,063 (12,033) 43,455 62,551 (60,877) 47,254 17,834
Cumulative effect of
accounting change, net of
taxes.................... -- -- -- -- -- -- -- (566)
--------- --------- -------- -------- --------- ---------- ---------- ----------
Net income (loss)......... $ 176,770 $ 7,063 $(12,033) $ 43,455 $ 62,551 $ (60,877) $ 47,254 $ 17,268
========= ========= ======== ======== ========= ========== ========== ==========
Net income (loss) per
share -- basic:
(Loss) income before
extraordinary item and
accounting change...... $ (1.58) $ 1.05 $ 0.39
Extraordinary item, net
of taxes............... (0.03) -- --
---------- ---------- ----------
(Loss) income before
accounting change...... (1.61) 1.05 0.39
Cumulative effect of
accounting change, net
of taxes............... -- -- (0.01)
---------- ---------- ----------
Net (loss) income per
share -- basic........... $ (1.61) $ 1.05 $ 0.38
========== ========== ==========
</Table>
S-20
<Table>
<Caption>
TWELVE
YEAR ENDED THREE MONTHS ENDED MONTHS
SEPTEMBER 30, DECEMBER 31, ENDED YEAR ENDED DECEMBER 31,
--------------------- ---------------------- DECEMBER 31, ------------------------------------
1997 1998 1997 1998 1998 1999 2000 2001
--------- --------- ----------- -------- ------------ ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
Net (loss) income per
share -- diluted:
(Loss) income before
extraordinary item and
accounting change...... $ (1.58) $ 1.04 $ 0.39
Extraordinary item, net
of taxes............... (0.03) -- --
---------- ---------- ----------
(Loss) income before
accounting change...... (1.61) 1.04 0.39
Cumulative effect of
accounting change, net
of taxes............... -- -- (0.01)
---------- ---------- ----------
Net (loss) income per
share -- diluted......... $ (1.61) $ 1.04 $ 0.38
========== ========== ==========
Weighted average
shares -- basic.......... 21,534 22,239 21,534 24,742 24,104 37,922 45,209 45,295
========= ========= ======== ======== ========= ========== ========== ==========
Weighted average
shares -- diluted........ 21,534 22,239 21,534 24,742 24,104 37,922 45,614 45,994
========= ========= ======== ======== ========= ========== ========== ==========
PRO FORMA DATA:
Income (loss) before
income taxes and
extraordinary item....... $ 177,259 $ 9,892 $(11,952) $ 43,765 $ 65,609 $ 40,954
Pro forma income taxes.... 78,405 7,119 1,121 27,842 33,840 20,278
--------- --------- -------- -------- --------- ----------
Pro forma income (loss)
before extraordinary
item..................... 98,854 2,773 (13,073) 15,923 31,769 20,676
Extraordinary item, net of
pro forma taxes.......... -- (1,488) -- -- (1,488) (918)
--------- --------- -------- -------- --------- ----------
Pro forma net income
(loss)................... $ 98,854 $ 1,285 $(13,073) $ 15,923 $ 30,281 $ 19,758
========= ========= ======== ======== ========= ==========
Pro forma basic income
(loss) per share before
extraordinary item....... $ 4.59 $ 0.12 $ (0.61) $ 0.64 $ 1.32 $ 0.55
========= ========= ======== ======== ========= ==========
Pro forma diluted income
(loss) per share before
extraordinary item....... $ 4.59 $ 0.12 $ (0.61) $ 0.64 $ 1.32 $ 0.54
========= ========= ======== ======== ========= ==========
Pro forma basic net income
(loss)................... $ 4.59 $ 0.06 $ (0.61) $ 0.64 $ 1.26 $ 0.52
========= ========= ======== ======== ========= ==========
Pro forma diluted net
income (loss)............ $ 4.59 $ 0.06 $ (0.61) $ 0.64 $ 1.26 $ 0.51
========= ========= ======== ======== ========= ==========
Pro forma weighted average
common shares
outstanding -- basic..... 21,534 22,239 21,534 24,742 24,104 37,922
Pro forma weighted average
common shares
outstanding -- diluted... 21,534 22,239 21,534 24,742 24,104 38,238
</Table>
S-21
<Table>
<Caption>
TWELVE
YEAR ENDED THREE MONTHS ENDED MONTHS
SEPTEMBER 30, DECEMBER 31, ENDED YEAR ENDED DECEMBER 31,
--------------------- ---------------------- DECEMBER 31, ------------------------------------
1997 1998 1997 1998 1998 1999 2000 2001
--------- --------- ----------- -------- ------------ ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
OTHER DATA:
Broadcast cash flow....... $ 32,582 $ 44,399 $ 9,531 $ 17,373 $ 52,241 $ 79,058 $ 145,417 $ 131,640
Broadcast cash flow
margin................... 34.7% 33.4% 33.6% 36.7% 34.4% 36.8% 41.3% 39.5%
EBITDA before net expense
(income) from time
brokerage agreement
fee...................... $ 29,333 $ 39,872 $ 8,682 $ 15,523 $ 46,713 $ 71,419 $ 133,577 $ 119,842
After tax cash flow....... 16,590 21,028 5,003 7,985 24,010 52,465 89,721 87,084
Cash flows related to:
Operating activities..... 8,859 23,019 7,341 11,158 26,836 40,700 69,475 85,243
Investing activities..... (13,695) (153,651) (17,470) (86,894) (223,075) (712,323) (64,684) (17,891)
Financing activities..... 3,170 133,672 10,000 75,539 199,211 676,416 (2,796) (69,858)
BALANCE SHEET DATA (AT END
OF PERIOD):
Cash and cash
equivalents.............. $ 3,626 $ 6,666 $ 3,497 $ 6,469 $ 6,469 $ 11,262 $ 13,257 $ 10,751
Intangibles and other
assets................... 300,029 428,763 313,889 504,825 504,825 1,225,335 1,277,609 1,244,957
Total assets.............. 364,743 522,945 378,138 681,034 681,034 1,396,048 1,473,928 1,438,740
Senior debt, including
current portion.......... 117,000 253,784 127,000 330,281 330,281 465,770 461,260 388,323
Total shareholders'
equity................... 179,019 182,970 166,986 225,467 225,467 686,611 735,701 755,881
</Table>
S-22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
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:
- a station's audience share in the demographic groups targeted by
advertisers, as measured principally by quarterly reports issued by The
Arbitron Ratings Company;
- the number of radio stations in the market competing for the same
demographic groups; and
- the supply of, and demand for, radio advertising time.
In 2001, we generated 79.8% of our net revenues from local advertising,
which is sold primarily by each individual local radio station's sales staff,
and 17.9% from national spot advertising, which is sold by independent
advertising sales representatives. We generated the balance of our 2001 revenues
principally from network advertising, event revenue and rental income from tower
sites. Our most significant station operating expenses are employees'
compensation, and programming and promotional expenses.
We include revenues recognized under a time brokerage agreement or a
similar sales agreement for stations operated by us prior to acquiring the
stations in net revenues, while we reflect operating expenses associated with
these stations in station operating expenses. Consequently, there is no
difference in the method of revenue and operating expense recognition between a
station operated by us under a time brokerage agreement or similar sales
agreement and a station owned and operated by us.
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 audiences. However, because
Arbitron reports ratings quarterly, any changed ratings, and therefore its
effect on advertising revenues, tend to lag behind the incurrence of advertising
and promotional spending. As a result of the tragic events of September 11,
2001, radio advertising was severely curtailed for several days and the negative
effects on advertisers and radio broadcasters continued into the next quarter.
We calculate same station results by comparing the performance of stations
operated by us throughout the relevant period to the comparable performance in
the prior year's corresponding period, adjusted for significant changes to
sports contracts.
For purposes of the following discussion, pro forma net income represents
historical income before income taxes, extraordinary item and accounting change
adjusted as if we were treated as a C corporation during all relevant periods at
an effective tax rate of 38%, applied to income before income taxes,
extraordinary item and accounting change and the effect of the adjustment to
reflect indexing of the convertible subordinated note (the amount of this
adjustment is not tax deductible).
RECENT EVENTS
On November 29, 2001, we entered into an agreement with WCCB-TV, Inc., a
subsidiary of Bahakel Communications, Ltd. to acquire the assets of WKSI-FM and
WPET-AM, serving the Greensboro, North Carolina radio market, for a purchase
price of $20.8 million in cash. On
S-23
December 5, 2001, we began operating these stations under a time brokerage
agreement. This transaction closed on February 8, 2002 and increased our
ownership to six radio stations in the Greensboro, North Carolina radio market.
On December 24, 2001, we entered into an agreement with Tribune
Broadcasting Company to acquire the assets of KOSI-FM, KKHK-FM and KEZW-AM,
serving the Denver, Colorado radio market, for a purchase price of $180.0
million in cash, of which we paid $18.0 million as a deposit on January 2, 2002.
On February 1, 2002, we began operating these stations under a time brokerage
agreement. The time brokerage agreement may run for a period of up to three
years at Tribune's option. The closing of this transaction may be delayed at the
option of Tribune, not to exceed three years, and is conditioned on the approval
of the FCC.
On February 1, 2002, we entered into an agreement effective February 28,
2002, to terminate our joint sales agreement for KING-FM in the Seattle,
Washington radio market, that was due to expire on June 30, 2002.
On February 12, 2002, we entered into an agreement with subsidiaries of
Emmis Communications Corporation to acquire the assets of KALC-FM, serving the
Denver, Colorado radio market, for a purchase price of $88.0 million in cash, of
which we paid $8.8 million as a deposit on February 15, 2002. We will begin
operating this station under a time brokerage agreement upon the expiration or
termination of all applicable antitrust waiting periods. We expect the closing
of this transaction, which is conditioned on the receipt of all necessary
regulatory approvals, to occur in the second quarter of 2002.
RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our consolidated
financial statements and related notes in our Annual Report on Form 10-K for the
year ended December 31, 2001, incorporated by reference herein and in the
accompanying prospectus. The following results of operations include a
discussion of the year ended December 31, 2001 as compared to the year ended
December 31, 2000 and a discussion of the year ended December 31, 2000 as
compared to the year ended December 31, 1999. Our results of operations
represent the operations of the radio stations owned or operated pursuant to
time brokerage agreements or joint sales agreements during the relevant periods.
Our results of operations for the year ended December 31, 2000 as compared to
the year ended December 31, 1999 were heavily impacted by our acquisition of
radio stations from Sinclair Broadcast Group, Inc. in 2000 and 1999.
YEAR ENDED DECEMBER 31, 2001 COMPARED TO THE YEAR ENDED DECEMBER 31, 2000
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
NET REVENUES................................................ $352,025 $332,897
Decrease of $(19,128) or (5.4%)
</Table>
Net revenues decreased 5.4% to $332.9 million for the year ended December
31, 2001 from $352.0 million for the year ended December 31, 2000. On a same
station basis, net revenues decreased 5.9% to $332.2 million from $353.2
million. Net revenues and same station net revenues declined due to a
combination of general weakness in the advertising sector, comparisons to the
prior year in which we experienced 12.7% growth and the effect of the tragic
events of September 11, 2001, when radio advertising was severely curtailed for
several days and its negative effects continued into the next quarter. The
overall decline in net revenues was also affected by acquisitions and
divestitures. For the years ended December 31, 2001 and 2000, we acquired
stations with net revenues of $22.0 million and $10.1 million,
S-24
respectively. For the year ended December 31, 2001, we terminated sports
contracts under which we sold advertising with net revenues of $0.5 million; and
for the year ended December 31, 2000, we divested stations with net revenues of
$3.2 million, plus $2.3 million in net revenues from terminated sports contracts
under which we sold advertising.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
STATION OPERATING EXPENSES.................................. $206,608 $201,257
Decrease of $(5,351) or (2.6%)
Percentage of Net Revenues.................................. 58.7% 60.5%
</Table>
Station operating expenses decreased 2.6% to $201.3 million for the year
ended December 31, 2001 from $206.6 million for the year ended December 31,
2000. On a same station basis, station operating expenses decreased 2.9% to
$199.3 million from $205.3 million. Station operating expenses and same station
operating expenses declined due to a decrease in sales expense as a result of a
decrease in same station net revenues and cost reduction efforts. The overall
decrease in station operating expenses was also affected by acquisitions and
divestitures. For the years ended December 31, 2001 and 2000, we acquired
stations with operating expenses of $15.1 million and $8.8 million,
respectively. For the year ended December 31, 2001, we terminated sports
contracts under which we sold advertising with operating expenses of $1.2
million; and for the year ended December 31, 2000, we divested stations with
operating expenses of $2.3 million, plus $2.4 million in operating expenses from
terminated sports contracts under which we sold advertising.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
DEPRECIATION AND AMORTIZATION............................... $ 43,475 $ 46,509
Increase of $3,034 or 7.0%
Percentage of Net Revenues.................................. 12.3% 14.0%
</Table>
Depreciation and amortization increased 7.0% to $46.5 million for the year
ended December 31, 2001 from $43.5 million for the year ended December 31, 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 Pronouncements," will materially reduce our non-cash
amortization expense for goodwill and broadcasting licenses which will have a
material impact on our financial statements because the amount currently
recorded for the amortization of goodwill and broadcasting licenses is
significant. For the years ended December 31, 2001 and 2000, the amounts of
amortization expense for goodwill and broadcasting licenses were $0.1 million
and $33.1 million and $0.1 million and $32.0 million, respectively. However,
this reduction in our non-cash amortization expense does not include any
adjustments for potential write-downs that could result based on the outcome of
the required impairment tests under the provisions of SFAS No. 142.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES............... $ 12,497 $ 12,335
Decrease of $(162) or (1.3%)
Percentage of Net Revenues.................................. 3.6% 3.7%
</Table>
S-25
Corporate general and administrative expenses decreased 1.3% to $12.3
million for the year ended December 31, 2001 from $12.5 million for the year
ended December 31, 2000. The decrease was primarily attributable to cost
reduction efforts, offset by the effect of inflation and the growth in the
number of stations. Also included for the years ended December 31, 2001 and 2000
is $0.5 million and $0.7 million, respectively, in non-cash stock-based
compensation expense.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
INTEREST EXPENSE (INCLUDING THE FINANCING COST OF TIDES).... $ 45,573 $35,396
Decrease of $(10,177) or (22.3%)
Percentage of Net Revenues.................................. 12.9% 10.6%
</Table>
Interest expense, including the financing cost on our 6.25% Convertible
Preferred Securities Term Income Deferrable Equity Securities (TIDES), decreased
22.3% to $35.4 million for the year ended December 31, 2001 from $45.6 million
for the year ended December 31, 2000. The decrease in interest expense was
primarily attributable to an overall decrease in outstanding indebtedness under
our credit facility and a decline in interest rates.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
INCOME BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND
ACCOUNTING CHANGE......................................... $ 79,050 $30,028
Decrease of $(49,022) or (62.0)%
Percentage of Net Revenues.................................. 22.5% 9.0%
</Table>
Income before income taxes, extraordinary item and accounting change
decreased 62.0% to $30.0 million for the year ended December 31, 2001 from $79.1
million for the year ended December 31, 2000. The decrease in income before
income taxes, extraordinary item and accounting change was primarily
attributable to: (1) the factors described above; (2) the decrease in gain on
sale of assets compared to the prior year's gain of $41.5 million from the
required divestiture of certain of our Kansas City radio stations; (3) the
increase in equity loss from unconsolidated affiliate of $3.6 million because
the initial investment in this affiliate was made during the later part of the
prior year; and (4) the recognition of a net loss on derivative instruments of
$0.9 million due to the application of a new accounting pronouncement.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
NET INCOME.................................................. $ 47,254 $17,268
Decrease of $(29,986)
</Table>
Net income decreased to $17.3 million for the year ended December 31, 2001
from $47.3 million for the year ended December 31, 2000. The decrease in net
income was primarily attributable to: (1) the factors described above, net of
taxes; and (2) the cumulative effect of the accounting change, net of taxes, of
$0.6 million.
S-26
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
OTHER DATA
BROADCAST CASH FLOW....................................... $145,417 $131,640
Decrease of $(13,777) or (9.5)%
</Table>
Broadcast cash flow decreased 9.5% to $131.6 million for the year ended
December 31, 2001 from $145.4 million for the year ended December 31, 2000. On a
same station basis, broadcast cash flow decreased 10.1% to $132.9 million from
$147.9 million as same station net revenues declined, offset by a decline in
same station operating expenses. The overall decline in broadcast cash flow was
affected by acquisitions and divestitures. For the years ended December 31, 2001
and 2000, we acquired stations with broadcast cash flow of $7.0 million and $1.3
million, respectively. For the year ended December 31, 2001, we terminated
sports contracts under which we sold advertising and incurred a broadcast cash
flow deficit of $0.7 million and for the year ended December 31, 2000, we
divested stations with $0.9 million in broadcast cash flow, plus $0.1 million
incurred as a broadcast cash flow deficit from terminated sports contracts under
which we sold advertising.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
BROADCAST CASH FLOW MARGIN.................................. 41.3% 39.5%
Decrease of (1.8)% or (4.3)%
</Table>
Our broadcast cash flow margin decreased to 39.5% for the year ended
December 31, 2001 from 41.3% for the year ended December 31, 2000. On a same
station basis, our broadcast cash flow margin decreased to 40.0% from 41.9%.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
AFTER TAX CASH FLOW......................................... $89,721 $87,084
Decrease of $(2,637) or (2.9)%
</Table>
After tax cash flow decreased 2.9% to $87.1 million for the year ended
December 31, 2001 from $89.7 million for the year ended December 31, 2000. After
tax cash flow was negatively impacted by the 9.5% decrease in broadcast cash
flow, offset by the decrease in interest expense, net of tax, and the tax
benefits from the purchase of radio station assets since January 1, 2000. The
effective tax rate during these periods was positively affected by amortization
of intangibles that were deductible for tax purposes in excess of the amounts
reflected for book purposes.
YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31, 1999
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
NET REVENUES................................................ $215,001 $352,025
Increase of $137,024 or 63.7%
</Table>
Net revenues increased 63.7% to $352.0 million for the year ended December
31, 2000 from $215.0 million for the year ended December 31, 1999. Of the
increase, $101.5 million was attributable to stations that we acquired or that
we were in the process of acquiring since
S-27
January 1, 1999, offset by $5.2 million for stations that we divested (including
$1.8 million in revenues from a sports contract for which we discontinued
selling advertising) during the same period. On a same station basis, net
revenues increased 12.7% to $338.4 million from $300.4 million. Same station
revenue growth was led by increases in Sacramento, Milwaukee, Norfolk,
Greenville and Boston due to improved selling efforts.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
STATION OPERATING EXPENSES.................................. $135,943 $206,608
Increase of $70,665 or 52.0%
Percentage of Net Revenues.................................. 63.2% 58.7%
</Table>
Station operating expenses increased 52.0% to $206.6 million for the year
ended December 31, 2000 from $135.9 million for the year ended December 31,
1999. Of the increase, $63.6 million is attributable to stations that we
acquired or that we were in the process of acquiring since January 1, 1999,
offset by $6.6 million for stations that we divested (including $4.4 million in
expenses from a sports contract for which we discontinued selling advertising)
during the same period. On a same station basis, station operating expenses
increased 5.1% to $195.9 million from $186.3 million.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
DEPRECIATION AND AMORTIZATION............................... $21,564 $43,475
Increase of $21,911 or 101.6%
Percentage of Net Revenues.................................. 10.0% 12.3%
</Table>
Depreciation and amortization increased 101.6% to $43.5 million for the
year ended December 31, 2000 from $21.6 million for the year ended December 31,
1999. The increase was primarily attributable to our acquisitions since January
1, 1999, offset by divestitures during the same period. We expect that the
adoption on January 1, 2002 of SFAS No. 142, "Goodwill and Other Intangible
Assets", as described more fully under "Recent Pronouncements," will materially
reduce our non-cash amortization expense for goodwill and broadcasting licenses
which will have a material impact on our financial statements because the amount
currently recorded for the amortization of goodwill and broadcasting licenses is
significant. For the years ended December 31, 2000 and 1999, the amounts of
amortization expense for goodwill and broadcasting licenses were $0.1 million
and $32.0 million and $0.1 million and $14.8 million, respectively. However,
this reduction in our non-cash amortization expense does not include any
adjustments for potential write-downs that could result based on the outcome of
the required impairment tests under the provisions of SFAS No. 142.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES............... $8,100 $12,497
Increase of $4,397 or 54.3%
Percentage of Net Revenues.................................. 3.8% 3.6%
</Table>
Corporate general and administrative expenses increased 54.3% to $12.5
million for the year ended December 31, 2000 from $8.1 million for the year
ended December 31, 1999. The increase was primarily attributable to higher
administrative expenses associated with supporting
S-28
our growth. Also included in the years ended December 31, 2000 and 1999 is $0.7
million and $0.5 million, respectively, in non-cash stock-based compensation
expense.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
INTEREST EXPENSE (INCLUDING THE FINANCING COST OF TIDES).... $13,027 $45,573
Increase of $32,546 or 249.8%
Percentage of Net Revenues.................................. 6.1% 12.9%
</Table>
Interest expense, including the financing cost on our 6 1/4% Convertible
Preferred Securities Term Income Deferrable Equity Securities (TIDES), increased
249.8% to $45.6 million for the year ended December 31, 2000 from $13.0 million
for the year ended December 31, 1999. The increase in interest expense was
primarily attributable to (1) an overall increase in outstanding indebtedness
used to fund the acquisition of radio station assets, and (2) the financing cost
of the TIDES, offset by (1) a reduction in the outstanding indebtedness due to
the use of the proceeds from our October 1999 Class A Common Stock and TIDES
offerings and (2) a reduction in outstanding indebtedness due to the use of the
proceeds from the disposition of radio station assets.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM........... $40,954 $79,050
Increase of $38,096 or 93.0%
Percentage of Net Revenues.................................. 19.0% 22.5%
</Table>
Income before income taxes and extraordinary item increased 93.0% to $79.1
million for the year ended December 31, 2000 from $41.0 million for the year
ended December 31, 1999. The increase was primarily attributable to (1) an
increase in gains on sale of assets of $41.5 million primarily from the gain on
the disposition of two radio stations in the current period; and (2) an increase
in operating income, exclusive of the gains on sale of assets, of $40.7 million
due to increases in revenues from existing and newly acquired stations and
improved expense management from newly acquired stations, offset by: (1) an
increase of $32.5 million in net interest expense and financing costs as a
result of the factors described above under interest expense; (2) an increase in
expense of $6.8 million from the recognition of a loss on investments and an
equity loss from an unconsolidated affiliate; and (3) a decrease in interest
income of $2.7 million as a result of the absence this year of excess cash
available from our October 1999 Class A Common Stock and TIDES offerings during
the period prior to the closing on December 16, 1999, of the acquisition of 42
radio stations from Sinclair, including a radio station under a time brokerage
agreement.
EXTRAORDINARY ITEM, NET OF TAXES
The extraordinary item for the year ended December 31, 1999 resulted from
the write-off of $1.5 million ($0.9 million, net of taxes) of unamortized
finance charges due to the early extinguishment of debt. The early
extinguishment of debt resulted from the refinancing of our previous credit
facility.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
NET INCOME (LOSS)........................................... $(60,877) $47,254
Increase of $108,131
</Table>
S-29
Net income increased to $47.3 million for the year ended December 31, 2000
from a net loss of $60.9 million for the year ended December 31, 1999. The
increase was primarily attributable to: (1) the absence this year of an
adjustment made during the prior year to record a one-time non-cash deferred
income tax expense of $79.8 million as a result of the revocation of our S
Corporation election and our conversion to a C Corporation (we recorded this
expense to reflect the cumulative effect of temporary differences between the
tax and financial reporting bases of our assets and liabilities attributable to
our conversion to a C Corporation); (2) a net increase in gain on sale of assets
of $24.9 million, net of tax, primarily from the disposition of two radio
stations in the current period; and (3) an improvement in operating income,
excluding gains on sale of assets, of $24.4 million, net of tax, primarily as a
result of an improvement in revenues of existing and newly acquired stations and
an improvement in expense management of newly acquired stations, offset by : (1)
an increase in interest expense of $19.5 million, net of tax, for the factors
described under interest expense; (2) an increase in expense of $4.0 million,
net of tax, from the recognition of a loss on investments and an equity loss
from an unconsolidated affiliate and (3) a decrease in interest income of $1.6
million, net of tax, as a result of the absence this year of excess cash
available from our October 1999 Class A Common Stock and TIDES offerings during
the period prior to the closing on December 16, 1999, of the acquisition of 42
radio stations from Sinclair, including a radio station under a time brokerage
agreement.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
NET INCOME TO PRO FORMA NET INCOME.......................... $19,758 $47,254
Increase of $27,496 or 139.2%
</Table>
Net income increased 139.2% to $47.3 million for the year ended December
31, 2000 from pro forma net income of $19.8 million for the year ended December
31, 1999. The increase was primarily attributable to the factors described under
net income (loss) above, except for the adjustment to record a one-time non-cash
deferred income tax expense of $79.8 million, which is excluded from the
definition of pro forma net income.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
OTHER DATA
BROADCAST CASH FLOW......................................... $79,058 $145,417
Increase of $66,359 or 83.9%
</Table>
Broadcast cash flow increased 83.9% to $145.4 million for the year ended
December 31, 2000 from $79.1 million for the year ended December 31, 1999. Of
the increase, $38.0 million is attributable to stations that we acquired or that
we were in the process of acquiring since January 1, 1999 and $2.6 million was
primarily attributable to the elimination of a broadcast cash flow deficit from
a sports contract for which we discontinued selling advertising, offset by $1.2
million for stations that we divested during the same period. On a same station
basis, broadcast cash flow increased 25.4% to $140.7 million from $112.3
million.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
BROADCAST CASH FLOW MARGIN.................................. 36.8% 41.3%
Increase of 4.5% or 12.3%
</Table>
S-30
Our broadcast cash flow margin increased to 41.3% for the year ended
December 31, 2000 from 36.8% for the year ended December 31, 1999. The increase
is attributable to improved revenues and expense management. On a same station
basis, our broadcast cash flow margin increased to 41.6% from 37.4%.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
AFTER TAX CASH FLOW TO PRO FORMA AFTER TAX CASH FLOW........ $52,465 $89,721
Increase of $37,256 or 71.0%
</Table>
After tax cash flow increased 71.0% to $89.7 million for the year ended
December 31, 2000 from pro forma after tax cash flow of $52.5 million for the
year ended December 31, 1999. The increase was primarily attributable to
improved operations of existing stations and the net effect of newly acquired
properties, taking into consideration pro forma income taxes as though we had
reported as a C corporation during the prior period. The amount of the deferred
income tax expense was $33.0 million for the year ended December 31, 2000 and
the amount of the pro forma deferred income tax expense was $11.0 million for
the year ended December 31,1999. The amount of the deferred income tax expense
attributable to the gains on sale of assets, loss on investments and equity loss
from an unconsolidated affiliate was $13.9 million for the year ended December
31, 2000 and $27,000 for the year ended December 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
We use a significant portion of our capital resources to reduce outstanding
debt and to consummate acquisitions. Acquisitions are funded from one or a
combination of the following sources: (1) our credit facility (described below);
(2) the sale of our 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. Our results of
operations for the years ended December 31, 2001 and 2000 as compared to the
years ended December 31, 2000 and 1999, respectively, were heavily impacted by
our acquisition of the radio stations from Sinclair in 2000 and 1999.
OPERATING ACTIVITIES
Net cash flows provided by operating activities were $85.2 million for the
year ended December 31, 2001, as compared to $69.5 million and $40.7 million for
the years ended December 31, 2000 and 1999, respectively. Changes in our net
cash flows provided by operating activities are primarily a result of changes in
advertising revenues and station operating expenses, which are affected by the
acquisition and disposition of stations during those periods. For the year ended
December 31, 2001, net cash provided by operating activities increased $15.8
million as compared to the year ended December 31, 2000, primarily due to a
reduction in net cash flows utilized for working capital. For the year ended
December 31, 2000, cash flows provided by operating activities were positively
affected primarily by: (1) the acquisition of radio stations from Sinclair,
excluding the station in Kansas City we acquired from Sinclair and immediately
sold, and (2) other radio station acquisitions, offset by the required
divestiture of two radio stations in Kansas City, and an increase in accounts
receivable on acquired stations, net of the Kansas City divestiture.
INVESTING AND FINANCING ACTIVITIES
Net cash flows used in investing activities declined to $17.9 million for
the year ended December 31, 2001, as compared to $64.7 million and $712.3
million for the years ended December 31, 2000 and 1999, respectively, primarily
as a result of the net impact of
S-31
acquisitions, divestitures and capital expenditures in the prior years. Net cash
flows used by financing activities were $69.9 million for the year ended
December 31, 2001, as compared to $2.8 million for the year ended December 31,
2000 and net cash flows provided by financing activities of $676.4 million for
the year ended December 31, 1999. The cash flows for the year ended December 31,
2001 reflect a net reduction in outstanding debt of $72.9 million, an increase
of $68.4 million as compared to the prior year, primarily due to the absence
this year of any station acquisitions. The cash flows for the year ended
December 31, 2000, reflect (1) acquisitions and investments consummated and the
related borrowings and (2) the proceeds from the required disposition of certain
of the Kansas City stations. The cash flows for the year ended December 31,
1999, reflect (1) acquisitions consummated and the related borrowings; (2) net
proceeds from our initial public offering and the related payment of long-term
debt; (3) net proceeds from our October 1999 Class A Common Stock and TIDES
offerings and the related payment of long-term debt; and (4) the distribution to
our S corporation shareholders of $88.1 million primarily from the funds
available from the sale of our Tampa stations.
Our business generally does not require substantial investment of capital.
Our capital expenditures totaled $9.8 million in the year ended December 31,
2001, as compared to $9.5 million and $14.4 million in the years ended December
31, 2000 and 1999, respectively. Despite an increase in the average number of
radio stations owned throughout this year as compared to the average number of
radio stations owned throughout the prior year, primarily from the acquisition
of radio stations in the Wichita and Madison markets during the prior year, and
despite the continued relocation of studio facilities in certain markets, our
capital expenditures increased only marginally for the year ended December 31,
2001 as compared to the prior year.
On February 3, 1999, upon the consummation of our initial public offering,
we received net proceeds of $236.2 million, after deducting expenses,
underwriting discounts and commissions. We used these proceeds to reduce
outstanding indebtedness under our former credit facility and to pay other
corporate obligations. Shortly after reducing indebtedness under our former
credit facility, in February 1999 we borrowed approximately $58.0 million to
purchase three Boston radio stations from CBS. On October 6, 1999, we completed
our Class A Common Stock and TIDES offerings and received $276.1 million and
$120.5 million in proceeds, respectively, after deducting discounts,
commissions, fees and expenses. The proceeds were used to reduce outstanding
indebtedness. We used the net proceeds from our October 1999 Class A Common
Stock offering and the TIDES offering, together with cash on hand and proceeds
from our credit facility, to finance the $700.4 million purchase of radio
stations from Sinclair on December 16, 1999.
We currently have transactions pending pursuant to agreements to purchase
four radio stations in the Denver, Colorado radio market having an aggregate
purchase price of $268.0 million. Under these agreements, we have funded $26.8
into escrow deposits to be applied against the purchase price upon closing.
Closing on one of these transactions can be deferred for up to three years at
the seller's option. We intend to finance the pending acquisitions primarily
from this offering and the concurrent notes offering. Additionally, we may seek
to obtain other funding or additional financing from time-to-time. Our credit
facility requires that at the time of closing on these transactions, we must be
in compliance with the terms of the credit facility. We believe that we will
maintain compliance with the terms of our credit facility. If we are not in
compliance, there can be no assurance that we will be successful in amending or
entering into a new credit facility, obtaining additional financing or that we
will be able to obtain such financing on terms acceptable to us, which could
delay or impair our efforts to consummate the pending transactions.
In addition to debt service and quarterly distributions under the TIDES,
our principal liquidity requirements will be for working capital and general
corporate purposes, including capital
S-32
expenditures, and acquisitions of additional radio stations. For year 2002, we
estimate that capital expenditures, necessary for maintaining our facilities,
will be between $9.0 million and $11.0 million. We are also committed to fund an
investment focused on minority-owned businesses in the amount of approximately
$0.6 million as of December 31, 2001. We believe that cash flow from operating
activities, together with available revolving and term credit borrowings under
our credit facility, should be sufficient to permit us to fund our current
operations. However, in order to finance the pending acquisitions and future
acquisitions, if any, we may require additional financing and there can be no
assurance that we will be able to obtain such financing on terms acceptable to
us. As of December 31, 2001, we had approximately $388.0 million of borrowings
outstanding under our credit facility (in addition to an outstanding letter of
credit in the amount of $6.2 million), of which most was incurred in connection
with the acquisition of radio stations from Sinclair.
We entered into our credit facility as of December 16, 1999, with a
syndicate of banks for $650.0 million in senior secured credit consisting of:
(1) $325.0 million in a reducing revolving credit facility; and (2) $325.0
million in a multi-draw term loan that was fully drawn as of September 30, 2000.
Our credit facility was established to: (1) refinance our 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 KeyBank N.A.'s
base rate plus a spread of up to 1.125%, depending on our leverage ratio.
Although we may borrow, repay and re-borrow under the revolving credit facility,
the aggregate maximum amount that we can have outstanding at any one time is
reduced on a quarterly basis beginning on September 30, 2002 in amounts that
vary from $12.2 million to $16.3 million for each loan. Under the credit
facility, the reducing revolving credit facility and multi-draw term loan mature
on September 30, 2007. Our credit 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. We expect to use the credit available under the revolving credit
facility to fund pending and future acquisitions. The amount available under the
credit facility was $255.8 million as of December 31, 2001. Our credit facility
also provides that at any time prior to December 31, 2002 we may solicit
additional incremental loans of up to $350.0 million, thereby increasing our
credit facility to $1.0 billion, and we will be governed under the same terms as
the existing credit facility. However, there can be no guarantee that, upon
request, we will receive commitments for any of the incremental loans.
S-33
SUMMARY DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
The following tables reflect a summary of our contractual cash obligations
and other commercial commitments as of December 31, 2001:
<Table>
<Caption>
PAYMENTS DUE BY PERIOD
-----------------------------------------------------
LESS THAN 1 TO 3 4 TO 5 AFTER 5
TOTAL 1 YEAR YEARS YEARS YEARS
-------- --------- -------- -------- --------
(AMOUNTS IN THOUSANDS)
CONTRACTUAL CASH
OBLIGATIONS:
Long-term debt(1)....... $388,323 $24,389 $121,906 $144,287 $ 97,741
TIDES(2)................ 125,000 -- -- -- 125,000
Operating leases........ 57,073 6,473 12,148 10,655 27,797
Sports programming...... 42,978 16,718 17,760 8,500 --
On-air talent........... 29,046 15,171 13,368 507 --
Television
advertising........... 4,599 1,533 3,066 -- --
Other operating
contracts............. 11,714 5,379 6,304 31 --
-------- ------- -------- -------- --------
Total Contractual
Cash
Obligations...... $658,733 $69,663 $174,552 $163,980 $250,538
======== ======= ======== ======== ========
</Table>
- ---------------
(1) Under our credit facility, the maturity on our outstanding debt could be
accelerated if we do not maintain certain covenants.
(2) Entercom Communications Capital Trust, our wholly-owned subsidiary, pays
quarterly calendar distributions. The TIDES represent undivided preferred
beneficial ownership interest in the assets of the trust. The trust used the
proceeds from the sale of the TIDES to purchase from us an equal amount of
6 1/4% Convertible Subordinated Debentures due 2014. Under certain
circumstances, the TIDES could be redeemed in cash by us at our option or
converted to equity at the holder's option.
<Table>
<Caption>
AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
-------------------------------------------------
TOTAL
AMOUNTS LESS THAN 1 TO 3 4 TO-5 AFTER 5
COMMITTED 1 YEAR YEARS YEARS YEARS
--------- --------- ------ ------ -------
(AMOUNTS IN THOUSANDS)
OTHER COMMERCIAL COMMITMENTS:
Letter of Credit(1)............. $ 6,200 $ (800) $ (500) $7,500 $ --
Guarantee(2).................... 2,700 675 675 675 675
Partnership(3).................. 588 588 -- -- --
Derivatives(4).................. 7,045 3,529 1,613 -- 1,903
------- ------ ------ ------ ------
Total Other Commercial
Commitments.............. $16,533 $3,992 $1,788 $8,175 $2,578
======= ====== ====== ====== ======
</Table>
- ---------------
(1) In connection with a sports contract, we are obligated to provide a letter
of credit during the term of the sports contract.
(2) We have a contingent liability to the national sales representative of the
former owner of one of our markets. This obligation is the responsibility of
our current national sales representative and arose in connection with our
acquisition of the stations involved.
(3) Under a partnership agreement, carried as an investment, we are obligated to
increase our investment.
S-34
(4) At December 31, 2001, we have interest rate transactions outstanding where
we agree 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 amount against the variable debt. The
notional amount outstanding at December 31, 2001 was $263.0 million. The
marked to market valuation is determined by using quoted market prices from
the counter-parties to these agreements. Under certain circumstances, the
interest rate transaction liability of $7.0 million at December 31, 2001,
could be due and payable prior to the expiration of the agreements.
RECENTLY ISSUED PRONOUNCEMENTS
In June 2001, the FASB issued SFAS No. 141, "Business Combinations," which
addresses financial accounting and reporting for business combinations and
supersedes Accounting Principle Board ("APB") Opinion No. 16, "Business
Combinations" and FASB Statement No. 38, "Accounting for Preacquisition
Contingencies of Purchased Enterprises." Statement No. 141 applies to 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 we do not
believe adoption of this statement will materially impact our financial
position, cash flows or results of operations.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets" which requires that goodwill and certain intangibles not be amortized.
Instead, these assets will be reviewed annually 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 more than its fair value. This
Statement applies to goodwill and certain intangible assets acquired prior to
June 30, 2001 and was adopted by us on January 1, 2002. Because the amount
previously recorded for the amortization of goodwill and broadcasting licenses
is significant, we expect that adoption of this accounting standard 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. For the years ended December 31, 1999, 2000 and 2001, the amounts of
amortization expense for goodwill and broadcasting licenses were $0.1 million
and $14.8 million, $0.1 million and $32.0 million and $0.1 million and $33.1
million, respectively. The required impairment tests of goodwill and
broadcasting licenses may result in future period write-downs.
In order to complete the transitional assessment of goodwill and
non-amortizing intangible assets impairment, we will need to: (1) identify the
reporting units; (2) determine the carrying value of each reporting unit; and
(3) determine the fair value of each reporting unit. We will have up to six
months from the date of adoption to determine the fair value of each reporting
unit and compare it to the reporting unit's carrying amount. To the extent a
reporting unit's carrying amount exceeds its fair value, the reporting unit's
goodwill and non-amortizing intangible assets may be impaired, and we must
perform the second step of the transitional impairment test. In the second step,
we must compare the implied fair value of the reporting unit's goodwill,
determined by allocating the reporting unit's fair value to all of its assets
and liabilities in a manner similar to a purchase price allocation in accordance
with SFAS No. 141, to its carrying amount, both of which would be measured as of
the date of adoption. This second step is required to be completed as soon as
possible, but no later than the end of the year of adoption. Any transitional
impairment loss will be recognized as the cumulative effect of a change in
accounting principle on our consolidated statement of operations. As of the date
of adoption, we have unamortized goodwill and unamortized broadcasting licenses
in the amounts
S-35
of $4.2 million and $1,228.4 million, respectively. We have not yet determined
what the effect of these tests will be on our financial position, cash flows or
results of operations.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" which 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.
Under this standard, guidance is provided on measuring and recording the
liability. We intend to adopt this statement effective January 1, 2003. We do
not believe that adoption of this statement will materially impact our financial
position, results of operations or cash flows.
In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets" which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. While SFAS No.
144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" it removes goodwill from its scope
and retains the requirements of SFAS No. 121 regarding the recognition of
impairment losses on long-lived assets held for use. SFAS No. 144 also
supercedes 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. However,
it retains the requirement in Opinion 30 to report separately discontinued
operations and extends that reporting to a component of an entity that either
has been disposed of (by sale, abandonment, or in a distribution to owners) or
is classified as held for sale. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001 and interim periods within those fiscal years.
We are in the process of evaluating the impact that adoption of SFAS No. 144 may
have on our financial position, cash flows or results of operations. However,
such impact, if any, is not known or reasonably estimable at this time.
INTANGIBLES
As of December 31, 2001, approximately 85.8% of our total assets consisted
of intangible assets, such as radio broadcast licenses and goodwill, the value
of which depends significantly upon the operational results of our business. We
could not operate the radio stations without the related FCC license for each
station. FCC licenses are renewed every eight years; consequently, we
continually monitor the activities of our stations to ensure they comply with
all regulatory requirements. Historically, all of our licenses have been renewed
at the end of their respective eight-year periods, and we expect that all
licenses will continue to be renewed in the future.
INFLATION
Inflation has affected our performance in terms of higher costs for radio
station operating expenses, including wages, and equipment. The exact impact is
indeterminable.
S-36
BUSINESS
OVERVIEW
We are one of the five largest radio broadcasting companies in the United
States based upon 2000 revenues pro forma for completed and pending
acquisitions. We have assembled, after giving effect to completed and pending
acquisitions, a nationwide portfolio of 101 stations in 19 markets, including 11
of the country's top 50 radio revenue markets. Our station groups rank among the
top three in revenue market share in 18 of the 19 markets in which we operate.
We derive 90% of our revenues from markets where we rank either first or second
in market radio revenues.
We operate a wide range of formats in geographically diverse markets across
the United States. Our largest markets, in order of our 2001 revenues, including
pro forma revenues for completed and pending acquisitions, are Seattle, Boston,
Kansas City, Denver, Sacramento, Portland and New Orleans.
OUR ACQUISITION STRATEGY
Through our disciplined acquisition strategy, we seek to (1) build
top-three station clusters principally in large growth markets and (2) acquire
underdeveloped properties that offer the potential for significant improvements
in revenues and broadcast cash flow through the application of our operational
expertise. Although we typically focus on radio stations in top 50 markets, we
also acquire stations in top 75 markets that meet the above criteria.
OUR OPERATING STRATEGY
The principal components of our operating strategy are to:
- Develop Market Leading Station Clusters. We are among the three largest
clusters in 18 of our 19 markets, including pending acquisitions. We
derive 90% of our revenues from markets where we rank either first or
second in market radio revenues. To enhance our competitive position, we
strategically align our stations' formats and sales efforts within each
market to optimize their performance, both individually and collectively.
- Recruit, Develop, Motivate And Retain Superior Employees. We believe
that station operators differentiate themselves from their peers
primarily through their ability to recruit, develop, motivate and retain
superior management, programming and sales talent. Accordingly, we strive
to establish a compelling corporate culture that is attractive to
superior performers. We encourage our stations to build strong community
bonds through local and company-wide community service programs, which
facilitate strong local business relationships and provide employees with
opportunities for enhanced job fulfillment. We offer competitive
compensation packages with performance-based incentives for our key
employees. We utilize best practices to facilitate development and
implementation of advantageous operational tools and strategies. In
addition, we provide employees with opportunities for personal growth and
advancement through training, seminars and other educational programs.
- Build Strongly-Branded Franchises. We analyze market research and
competitive factors to identify the format opportunity, music selection
and rotation, presentation and other key programming attributes that we
believe will best position each station to develop a distinctive identity
and to strengthen the station's local "brand" or "franchise" value. We
believe that this will enable us to maximize our audience share and
consequently our revenues and broadcast cash flow.
S-37
- Leverage Station Clusters To Capture Greater Share Of Advertising
Revenue. We believe radio will continue to gain revenue share from other
media. As a result of deregulation in the radio broadcasting industry,
operators can now create radio station clusters that have the critical
mass of audience reach and marketing resources necessary to pursue
incremental advertising and promotional revenues more aggressively. We
continue to capitalize on this opportunity by developing specialized
teams in many of our markets to work with advertisers to create and
develop marketing programs and solutions across our multi-station market
clusters. We derive 90% of our revenues from markets where we rank either
first or second in market radio revenues. In 2001, as in 2000, we gained
revenue market share in the majority of the markets in which we operate
and for the company as a whole.
- Acquire And Develop Under-Performing Stations. We seek to acquire and
develop under-performing stations, which has often enabled us to achieve
superior same station revenue and broadcast cash flow growth. We utilize
a variety of techniques to develop underachieving properties. These
techniques include: strategic market research and analysis; management
enhancements; improved sales training and techniques; technical upgrades;
programming and marketing enhancements; refocused expenditures; and
facility consolidations.
- Maximize Technical Capabilities. We seek to operate stations with the
strongest signals in their respective markets. In addition, on various
occasions we have identified opportunities to acquire and upgrade
low-powered or out-of-market stations and transform them into competitive
signals, thus increasing their value significantly.
OUR CORPORATE HISTORY
Our Chairman of the Board and Chief Executive Officer, Joseph M. Field,
founded Entercom in 1968 on the conviction that FM broadcasting, then in its
infancy, would surpass AM broadcasting as the leading aural medium. In the
mid-1980's, with FM at critical mass, we began a deliberate multi-year effort to
enhance our operations at both the corporate and station levels by changing or
adjusting program formats to appeal to mainstream audiences in order to compete
for greater shares of audience and advertising dollars in our markets. With the
advent of the duopoly rules in 1992, which permitted expansion of ownership in a
market from one to two stations in each radio band, we began to "double up" in
our markets. Since the passage of the Telecommunications Act of 1996, which
permitted ownership of up to eight radio stations in most major markets, we have
pursued a creative acquisition and development strategy by which we have
acquired multiple stations in markets where we identified opportunities to
improve station operating performance and to develop market leading clusters. We
have taken advantage of the Telecommunications Act of 1996 by capitalizing on
these opportunities, as a significant amount of our growth has occurred during
the past five years.
S-38
OUR STATION PORTFOLIO
The following table sets forth selected information about our portfolio of
radio stations and gives effect to our pending acquisitions:
<Table>
<Caption>
2000 MARKET RANK AUDIENCE
-------------------- SHARE
METRO RADIO YEAR TARGET IN TARGET
MARKET/STATION(1) POPULATION REVENUE ACQUIRED FORMAT DEMOGRAPHIC DEMOGRAPHICS
- ----------------- ---------- ------- -------- ------------------------------- ----------- ------------
Boston, MA 8 8
WEEI-AM 1998
} Sports Talk Men 25-54 6.1
WVEI-AM(2) 1999
WRKO-AM 1998 Talk Adults 2.7
25-54
WAAF-FM 1999 Active Rock Men 18-34 10.4
WQSX-FM 1999 Rhythmic Adult Contemporary Women 25-54 5.7
Seattle, WA(3) 14 13
KBSG-AM/FM 1996 Oldies Adults 4.5
25-54
KIRO-AM 1997 News/Talk/Sports Adults 7.7
25-54
KQBZ-FM 1997 Talk Men 25-54 4.7
KISW-FM 1997 Classic Rock Men 25-54 5.8
KMTT-FM 1973 Adult Rock Adults 4.1
25-54
KNWX-AM 1997 News/Business Adults 1.5
35-64
KNDD-FM 1996 Modern Rock Men 18-34 8.0
Denver, CO 23 15
KOSI-FM pending Adult Contemporary Women 25-54 10.1
KKHK-FM pending Classic Rock Men 25-54 3.7
KEZW-AM pending Nostalgia Adults 1.8
35-64
KALC-FM pending Hot Adult Contemporary Women 18-49 4.1
Portland, OR 25 22
KFXX-AM 1998
} Sports Talk Men 25-54 2.6
KSLM-AM(4) 1998
KGON-FM 1995 Classic Rock Men 25-54 10.0
KKSN-AM 1995 Nostalgia Adults 0.7
35-64
KKSN-FM 1998 Oldies Adults 4.8
25-54
KNRK-FM 1995 Modern Rock Men 18-34 9.9
KRSK-FM 1998 Hot Adult Contemporary Women 25-54 6.1
Sacramento, CA 29 27
KCTC-AM 1998 Nostalgia Adults 1.6
35-64
KRXQ-FM 1997 Active Rock Men 18-34 13.1
KSEG-FM 1997 Classic Rock Men 25-54 6.5
KSSJ-FM 1997 Smooth Jazz Adults 5.9
25-54
KDND-FM 1997 Contemporary Hit Radio Women 18-34 6.7
Kansas City, MO 30 29
KMBZ-AM 1997 News/Talk/ Sports Men 25-54 5.9
KUDL-FM 1998 Adult Contemporary Women 25-54 7.9
KYYS-FM 1997 Album Oriented Rock Men 25-54 8.1
WDAF-AM 1998 Country Adults 5.1
35-64
KWSJ-AM(5) 1999 Spanish Adults nmf(8)
25-54
KXTR-AM(5) 1999 Classical Adults 0.3
25-54
KQRC-FM 2000 Active Rock Men 18-34 23.2
KCIY-FM 2000 Smooth Jazz Adults 3.7
25-54
KRBZ-FM 2000 Hot Adult Contemporary Women 18-34 6.3
Milwaukee, WI 31 34
WEMP-AM 1999 Religious Adults 0.4
35-64
WMYX-FM 1999 Adult Contemporary Women 25-54 10.1
WXSS-FM 1999 Contemporary Hit Radio Women 18-34 10.6
Norfolk, VA 36 42
WPTE-FM 1999 Modern Adult Contemporary Women 25-54 5.7
WWDE-FM 1999 Adult Contemporary Women 25-54 12.5
WVKL-FM 1999 Urban Adult Contemporary Women 25-54 7.2
WNVZ-FM 1999 Contemporary Hit Radio Women 18-34 9.4
New Orleans, LA 41 40
WSMB-AM 1999 Talk Adults 0.7
35-64
WWL-AM 1999 News/Talk/Sports Men 25-54 12.8
WEZB-FM 1999 Contemporary Hit Radio Women 18-34 7.9
WLMG-FM 1999 Adult Contemporary Women 25-54 9.1
WKZN-FM 1999 Hot Adult Contemporary Women 18-49 4.5
WTKL-FM 1999 Oldies Adults 4.8
25-54
<Caption>
AUDIENCE
RANK
IN TARGET
MARKET/STATION(1) DEMOGRAPHICS
- ----------------- ------------
Boston, MA
WEEI-AM
4
WVEI-AM(2)
WRKO-AM 13(tie)
WAAF-FM 2
WQSX-FM 4
Seattle, WA(3)
KBSG-AM/FM 5
KIRO-AM 1
KQBZ-FM 5
KISW-FM 3
KMTT-FM 6
KNWX-AM 20
KNDD-FM 3
Denver, CO
KOSI-FM 2
KKHK-FM 7
KEZW-AM 14
KALC-FM 6(tie)
Portland, OR
KFXX-AM
14
KSLM-AM(4)
KGON-FM 1
KKSN-AM 23
KKSN-FM 6(tie)
KNRK-FM 2(tie)
KRSK-FM 5
Sacramento, CA
KCTC-AM 17
KRXQ-FM 1
KSEG-FM 4
KSSJ-FM 2(tie)
KDND-FM 4(tie)
Kansas City, MO
KMBZ-AM 5
KUDL-FM 2
KYYS-FM 2
WDAF-AM 6
KWSJ-AM(5) nmf(8)
KXTR-AM(5) 23(tie)
KQRC-FM 1
KCIY-FM 15
KRBZ-FM 7
Milwaukee, WI
WEMP-AM nmf(8)
WMYX-FM 2
WXSS-FM 4
Norfolk, VA
WPTE-FM 7
WWDE-FM 1
WVKL-FM 4
WNVZ-FM 4
New Orleans, LA
WSMB-AM 19(tie)
WWL-AM 1
WEZB-FM 3
WLMG-FM 3
WKZN-FM 7
WTKL-FM 8
</Table>
S-39
<Table>
<Caption>
2000 MARKET RANK AUDIENCE
-------------------- SHARE
METRO RADIO YEAR TARGET IN TARGET
MARKET/STATION(1) POPULATION REVENUE ACQUIRED FORMAT DEMOGRAPHIC DEMOGRAPHICS
- ----------------- ---------- ------- -------- ------------------------------- ----------- ------------
Greensboro, NC 42 51
WMQX-FM 1999 Oldies Adults 6.7
25-54
WJMH-FM 1999 Urban Contemporary Adults 16.1
18-34
WEAL-AM 1999 Gospel Adults 1.0
35-64
WQMG-FM 1999 Urban Adult Contemporary Adults 8.0
25-54
WKSI-FM 2002 Hot Adult Contemporary Women 25-54 5.6
WPET-AM 2002 Religious Adults 0.3
35-64
Buffalo, NY 45 45
WBEN-AM 1999 News/Talk Men 25-54 6.8
WTSS-FM 1999 Adult Contemporary Women 25-54 9.9
WWKB-AM 1999 Business News Adults 0.4
35-64
WKSE-FM 1999 Contemporary Hit Radio Women 18-34 21.1
WGR-AM 1999 Sports/Talk Men 25-54 5.6
WWWS-AM 1999 Urban Oldies Adults 1.0
25-54
Memphis, TN 46 41
WMBZ-FM 1999 Modern Adult Contemporary Women 18-34 7.2
WJCE-AM 1999 Nostalgia Adults 1.2
35-64
WRVR-FM 1999 Adult Contemporary Women 25-54 6.8
Rochester, NY 52 53
WBZA-FM 1998 80's - based Adult Contemporary Women 25-54 4.8
WBEE-FM 1998 Country Adults 13.5
25-54
WBBF-AM/FM 1998 Oldies Adults 2.4
25-54
Greenville/Spartanburg,
SC 58 56
WFBC-FM 1999 Contemporary Hit Radio Women 18-34 11.4
WSPA-FM 1999 Adult Contemporary Women 25-54 9.7
WYRD-AM(6) 1999
} News/Talk Adults 4.5
25-54
WORD-AM(6) 1999
WSPA-AM 1999 Full Service/Talk Adults 0.7
35-64
WOLI-FM(6) 1999
} 80's - based Adult Contemporary Women 25-54 4.3
WOLT-FM(6) 1999
Wilkes-Barre/Scranton, PA 64 71
WGBI-AM(7) 1999 Adults 2.6
35-64
WOGY-AM(7) 1999
} News/Talk/Sports
WILK-AM(7) 1999
WGGI-FM(7) 1999 Adults 12.2
25-54
} Country
WGGY-FM(7) 1999
WKRZ-FM(7) 1999
} Contemporary Hit Radio Women 18-49 16.9
WKRF-FM(7) 2000
WBZJ-FM(7) 1999
} 80's - based Adult Contemporary Women 25-54 6.6
WBZH-FM(7) 1999
Wichita, KS 84 72
KEYN-FM 2000 Oldies Adults 5.8
25-54
KFBZ-FM 2000 Hot Adult Contemporary Women 25-54 4.2
KQAM-AM 2000 Sports Men 25-54 2.6
KFH-AM 2000 Talk Men 25-54 6.1
KNSS-AM 2000 News Adults 3.3
25-54
KDGS-FM 2000 Rhythmic Contemporary Hit Radio Adults 9.0
18-34
KWSJ-FM 2000 Smooth Jazz Women 25-54 1.8
Gainesville/ Ocala, FL 90 127
WKTK-FM 1986 Adult Contemporary Women 25-54 14.3
WSKY-FM 1998 News/Talk Adults 7.6
25-54
Madison, WI 120 67
WOLX-FM 2000 Oldies Adults 6.3
25-54
WMMM-FM 2000 Adult Alternative Adults 6.1
25-54
WBZU-FM 2000 80's - based Adult Contemporary Women 25-54 3.0
Longview/
Kelso, WA n/a n/a
KBAM-AM 1998 Country Adults n/a
25-54
KEDO-AM 1997 Oldies Adults n/a
25-54
KLYK-FM 1997 Adult Contemporary Women 25-54 n/a
KRQT-FM 1998 Classic Rock Men 25-54 n/a
<Caption>
AUDIENCE
RANK
IN TARGET
MARKET/STATION(1) DEMOGRAPHICS
- ----------------- ------------
Greensboro, NC
WMQX-FM 4
WJMH-FM 1
WEAL-AM 17(tie)
WQMG-FM 2
WKSI-FM 6
WPET-AM nmf(8)
Buffalo, NY
WBEN-AM 5
WTSS-FM 3(tie)
WWKB-AM 25
WKSE-FM 1
WGR-AM 6(tie)
WWWS-AM 15
Memphis, TN
WMBZ-FM 3(tie)
WJCE-AM 21(tie)
WRVR-FM 4
Rochester, NY
WBZA-FM 7
WBEE-FM 1
WBBF-AM/FM 12
Greenville/Spartanburg,
SC
WFBC-FM 1(tie)
WSPA-FM 3(tie)
WYRD-AM(6)
7
WORD-AM(6)
WSPA-AM 23(tie)
WOLI-FM(6)
8
WOLT-FM(6)
Wilkes-Barre/Scranton, PA
WGBI-AM(7) 7(tie)
WOGY-AM(7)
WILK-AM(7)
WGGI-FM(7) 1
WGGY-FM(7)
WKRZ-FM(7)
1
WKRF-FM(7)
WBZJ-FM(7)
4
WBZH-FM(7)
Wichita, KS
KEYN-FM 5
KFBZ-FM 8(tie)
KQAM-AM 16
KFH-AM 4
KNSS-AM 14
KDGS-FM 2(tie)
KWSJ-FM 18
Gainesville/ Ocala, FL
WKTK-FM 1
WSKY-FM 3(tie)
Madison, WI
WOLX-FM 5
WMMM-FM 6
WBZU-FM 9
Longview/
Kelso, WA
KBAM-AM n/a
KEDO-AM n/a
KLYK-FM n/a
KRQT-FM n/a
</Table>
S-40
- ---------------
(1) Our radio stations are in some instances licensed to communities other than
the named principal community for the market.
(2) Station competes in the adjacent community of Worcester, Massachusetts and
simulcasts virtually all of the programming of WEEI-AM.
(3) We also sell substantially all of the advertising time of a sixth FM station
in the Seattle market under a joint sales agreement. On February 1, 2002, we
entered into an agreement to terminate, effective February 28, 2002, the
joint sales agreement that was due to expire on June 30, 2002.
(4) KSLM-AM is licensed to Salem, Oregon, within the Portland market and
simulcasts KFXX-AM programming.
(5) The FCC rules require that by the end of a five-year transition period, that
ends in October 2006, we must elect to operate only one of the two stations
and surrender the other station to the FCC. However, we may be required to
make this election as early as May 2003.
(6) Each of the following groups of stations simulcast their programming:
WYRD-AM and WORD-AM; and WOLI-FM and WOLT-FM.
(7) Each of the following groups of stations simulcast their programming:
WGBI-AM, WOGY-AM and WILK-AM; WGGI-FM and WGGY-FM; WKRZ-FM and WKRF-FM; and
WBZJ-FM and WBZH-FM.
(8) Fall 2001 ratings data not statistically meaningful.
S-41
COMPETITION; CHANGES IN BROADCASTING INDUSTRY
The radio broadcasting industry is highly competitive. The success of each
of our stations depends largely upon its audience ratings and its share of the
overall advertising revenue within its market. Our stations compete for
listeners and advertising revenue directly with other radio stations within
their respective markets. Radio stations compete for listeners primarily on the
basis of program content that appeals to a particular demographic group. By
building a strong listener base consisting of a specific demographic group in
each of our markets, we are able to attract advertisers seeking to reach those
listeners.
The following are some of the factors that are important to a radio
station's competitive position:
- management experience;
- the station's local audience rank in its market;
- transmitter power;
- assigned frequency;
- audience characteristics;
- local program acceptance; and
- the number and characteristics of other radio stations and other
advertising media in the market area.
In addition, we attempt to improve our competitive position with
promotional campaigns aimed at the demographic groups targeted by our stations
and by sales efforts designed to attract advertisers.
Radio station operators are subject to the possibility of another station
changing programming formats to compete directly for listeners and advertisers
or launching an aggressive promotional campaign in support of an already
existing competitive format. If a competitor, particularly one with substantial
financial resources, were to attempt to compete in either these fashions, the
broadcast cash flow of our affected station could decrease due to increased
promotional and other expenses and/or lower advertising revenues. There can be
no assurance that any one of our radio stations will be able to maintain or
increase its current audience ratings and radio advertising revenue market
share.
The operation of a radio broadcast station requires a license from the FCC.
The number of radio stations that can operate in a given market is limited by
strict AM interference criteria and the availability of FM radio frequencies
allotted by the FCC to communities in that market. The number of stations that a
single entity may operate in a market is further limited by the FCC's multiple
ownership rules that regulate the number of stations serving the same area that
may be owned or controlled by a single entity. However, the FCC announced on
November 8, 2001 that it is in the process of examining and amending its rules
and policies on ownership and operation of multiple local radio stations. The
FCC has established interim rules for the review of pending applications. The
impact that these new rules will have on our business is uncertain.
Our stations compete for audiences and advertising revenues within their
respective markets directly with other radio stations, as well as with other
media such as newspapers, magazines, over-the-air and cable television, outdoor
advertising and direct mail. In addition, the radio broadcasting industry is
subject to competition from new media technologies that are being developed or
introduced such as (1) satellite-delivered digital audio radio service, which
has resulted in the near term introduction of new subscriber based satellite
radio services with numerous niche formats; (2) audio programming by cable
systems, direct broadcast satellite systems, Internet content providers,
personal communications services and other digital audio
S-42
broadcast formats; and (3) in-band on-channel digital radio, which provides
multi-channel, multi-format digital radio services in the same bandwidth
currently occupied by traditional AM and FM radio services. The FCC adopted a
plan in 1999 for the establishment of "microbroadcasting" stations, low-powered
FM stations that will be designed to serve small localized areas and that in
some localized areas may cause interference with regular broadcasts by existing
radio stations. The radio broadcasting industry historically has grown despite
the introduction of new technologies for the delivery of entertainment and
information, such as television broadcasting, cable television, audio tapes and
compact discs. A growing population and greater availability of radios,
particularly car and portable radios, have contributed to this growth. There can
be no assurances, however, that this historical growth will continue or that the
development or introduction in the future of any new media technology will not
have an adverse effect on the radio broadcasting industry.
The FCC has adopted licensing and operating rules for satellite delivered
audio and in April 1997 awarded two licenses for this service. Satellite
delivered audio may provide a medium for the delivery by satellite or
supplemental terrestrial means of multiple new audio programming formats to
local and/or national audiences. XM Satellite Radio launched its commercial
service on September 25, 2001, and Sirius Satellite Radio is scheduled to launch
service in 2002. Digital technology also may be used in the future by
terrestrial radio broadcast stations either on existing or alternate
broadcasting frequencies, and the FCC has stated that it will consider making
changes to its rules to permit AM and FM radio stations to offer digital signals
following industry analysis of technical standards. In addition, the FCC has
authorized an additional 100 kHz of bandwidth for the AM band and has allotted
frequencies in this new band to certain existing AM station licensees that
applied for migration to the expanded AM band, subject to the requirement that
at the end of a transition period, those licensees return to the FCC either the
license for their existing AM band or for the expanded AM band. Upon the
completion of the migration process, it is expected that some AM stations will
have improved coverage because of reduced interference. We have not yet
evaluated the impact of the migration process on our business but do not believe
that such impact, if any, will be material.
We cannot predict what other matters might be considered in the future by
the FCC, nor can we assess in advance what impact, if any, the implementation of
any of these proposals or changes might have on our business.
FEDERAL REGULATION OF RADIO BROADCASTING
The radio broadcasting industry is subject to extensive and changing
regulation of, among other things, program content, advertising content,
technical operations and business and employment practices. The ownership,
operation and sale of radio stations are subject to the jurisdiction of the FCC.
Among other things, the FCC:
- assigns frequency bands for broadcasting;
- determines the particular frequencies, locations, operating power, and
other technical parameters of stations;
- issues, renews, revokes and modifies station licenses;
- determines whether to approve changes in ownership or control of station
licenses; and
- adopts and implements regulations and policies that directly affect the
ownership, operation and employment practices of stations.
The FCC has the power to impose penalties for violations of its rules or
the Communications Act, including the imposition of monetary forfeitures, the
issuance of short-term licenses, the imposition of a condition on the renewal of
a license and the revocation of operating authority.
S-43
For further information concerning the nature and extent of federal
regulation of radio stations, you should refer to the Communications Act, FCC
rules and FCC public notices and rulings.
FCC LICENSES. Radio stations operate pursuant to renewable broadcasting
licenses that are ordinarily granted by the FCC for maximum terms of eight
years. The FCC licenses for our stations are held by some of our subsidiaries. A
station may continue to operate beyond the expiration date of its license if a
timely filed license renewal application is pending. During the periods when
renewal applications are pending, petitions to deny license renewals can be
filed by interested parties, including members of the public and interest
groups. The FCC is required to hold hearings on a station's renewal application
if a substantial or material question of fact exists as to whether the station
has served the public interest, convenience and necessity. If, as a result of an
evidentiary hearing, the FCC determines that the licensee has failed to meet
certain requirements and that no mitigating factors justify the imposition of a
lesser sanction, then the FCC may deny a license renewal application.
Historically, FCC licenses have generally been renewed. We have no reason to
believe that our licenses will not be renewed in the ordinary course, although
there can be no assurance to that effect. The non-renewal of one or more of our
licenses could have a material adverse effect on our business.
The FCC classifies each AM and FM station. An AM station operates on either
a clear channel, regional channel or local channel. A clear channel is one on
which AM stations are assigned to serve wide areas. Clear channel AM stations
are classified as either: Class A stations, which operate on an unlimited time
basis and are designed to render primary and secondary service over an extended
area; Class B stations, which operate on an unlimited time basis and are
designed to render service only over a primary service area; or Class D
stations, which operate either during daytime hours only, during limited times
only or on an unlimited time basis with low nighttime power. A regional channel
is one on which Class B and Class D AM stations may operate and serve primarily
a principal center of population and the rural areas contiguous to it. A local
channel is one on which AM stations operate on an unlimited time basis and serve
primarily a community and the suburban and rural areas immediately contiguous
thereto. Class C AM stations operate on a local channel and are designed to
render service only over a primary service area that may be reduced as a
consequence of interference.
The minimum and maximum facilities requirements for an FM station are
determined by its class. FM class designations depend upon the geographic zone
in which the transmitter of the FM station is located. In general, commercial FM
stations are classified as follows, in order of increasing power and antenna
height: Class A, B1, C3, B, C2, C1, CO and C. The FCC has recently adopted a new
rule that subjects Class C FM stations that do not meet certain antenna-height
parameters to an involuntary downgrade in class to Class CO under certain
circumstances.
S-44
The following table sets forth the metropolitan market served (city of
license may differ), call letters, FCC license classification, antenna height
above average terrain ("HAAT"), power, frequency and FCC license expiration date
of each of the stations that we own or operate and gives effect to our
consummation of our pending acquisitions.
<Table>
<Caption>
FCC HAAT POWER IN EXPIRATION DATE OF
MARKET STATION CLASS (IN METERS) FREQUENCY KILOWATTS(1) FCC LICENSE
- ------ --------- ----- ----------- --------- ------------ ------------------
BOSTON, MA........... WEEI-AM B * 850 kHz 50 April 1, 2006
WRKO-AM B * 680 kHz 50 April 1, 2006
WAAF-FM B 239 107.3 MHz 20 April 1, 2006
WQSX-FM B 179 93.7 MHz 34 April 1, 2006
WVEI-AM B * 1440 kHz 5 April 1, 2006
SEATTLE, WA.......... KBSG-AM B * 1210 kHz 27.5-D/10-N February 1, 2006
KBSG-FM C 729 97.3 MHz 55 February 1, 2006
KIRO-AM A * 710 kHz 50 February 1, 2006
KISW-FM C 714 99.9 MHz 58 February 1, 2006
KMTT-FM C 714 103.7 MHz 58 February 1, 2006
KQBZ-FM C 714 100.7 MHz 58 February 1, 2006
KNWX-AM B * 770 kHz 50-D/5-N February 1, 2006
KNDD-FM C 714 107.7 MHz 58 February 1, 2006
DENVER, CO........... KOSI-FM C 495 101.1 MHz 100 April 1, 2005
KKHK-FM C 495 99.5 MHz 100 April 1, 2005
KEZW-AM B * 1430 kHz 10-D/5-N April 1, 2005
KALC-FM C 448 105.9 MHz 100 April 1, 2005
PORTLAND, OR......... KFXX-AM B * 910 kHz 5 February 1, 2006
KGON-FM C 386 92.3 MHz 100 February 1, 2006
KKSN-AM B * 1520 kHz 50-D/15-N February 1, 2006
KKSN-FM C 386 97.1 MHz 100 February 1, 2006
KNRK-FM C2 259 94.7 MHz 17 February 1, 2006
KRSK-FM C 576 105.1 MHz 100 February 1, 2006
KSLM-AM B * 1390 kHz 5-D/0.69-N February 1, 2006
SACRAMENTO, CA....... KCTC-AM B * 1320 kHz 5 December 1, 2005
KRXQ-FM B 152 98.5 MHz 50 December 1, 2005
KSEG-FM B 152 96.9 MHz 50 December 1, 2005
KSSJ-FM B1 99 94.7 MHz 25 December 1, 2005
KDND-FM B 123 107.9 MHz 50 December 1, 2005
KANSAS CITY, MO...... KMBZ-AM B * 980 kHz 5 February 1, 2005
KUDL-FM C 303 98.1 MHz 100 June 1, 2005
KYYS-FM C 308 99.7 MHz 100 February 1, 2005
WDAF-AM B * 610 kHz 5 February 1, 2005
KWSJ-AM(2) B * 1250 kHz 25-D/3.7-N June 1, 2005
KXTR-AM(2) B * 1600 kHz 10-D/1-N June 1, 2005
KQRC-FM C 322 98.9 MHz 100 February 1, 2005
KCIY-FM C1 299 106.5 MHz 100 February 1, 2005
KRBZ-FM C 300 96.5 MHz 100 February 1, 2005
MILWAUKEE, WI........ WEMP-AM B * 1250 kHz 5 December 1, 2003
WMYX-FM B 137 99.1 MHz 50 December 1, 2003
WXSS-FM B 257 103.7 MHz 19.5 December 1, 2003
NORFOLK, VA.......... WPTE-FM B 152 94..9 MHz 50 October 1, 2003
WWDE-FM B 152 101.3 MHz 50 October 1, 2003
WVKL-FM B 268 95.7 MHz 40 October 1, 2003
WNVZ-FM B 146 104.5 MHz 50 October 1, 2003
</Table>
S-45
<Table>
<Caption>
FCC HAAT POWER IN EXPIRATION DATE OF
MARKET STATION CLASS (IN METERS) FREQUENCY KILOWATTS(1) FCC LICENSE
- ------ --------- ----- ----------- --------- ------------ ------------------
NEW ORLEANS, LA...... WSMB-AM B * 1350 kHz 5 June 1, 2004
WWL-AM A * 870 kHz 50 June 1, 2004
WEZB-FM C 300 97.1 MHz 100 June 1, 2004
WLMG-FM C 300 101.9 MHz 100 June 1, 2004
WKZN-FM C1 275 105.3 MHz 100 June 1, 2004
WTKL-FM C 300 95.7 MHz 100 June 1, 2004
GREENSBORO, NC....... WMQX-FM C 335 93.1 MHz 100 December 1, 2003
WJMH-FM C 367 102.1 MHz 100 December 1, 2003
WEAL-AM D * 1510 kHz 1-D December 1, 2003
WQMG-FM C 375 97.1 MHz 100 December 1, 2003
WKSI-FM C 316 98.7 MHz 100 December 1, 2003
WPET-AM D * 950 kHz 0.5-D/0.08-N December 1, 2003
BUFFALO, NY.......... WBEN-AM B * 930 kHz 5 June 1, 2006
WTSS-FM B 408 102.5 MHz 110 June 1, 2006
WWKB-AM A * 1520 kHz 50 June 1, 2006
WKSE-FM B 128 98.5 MHz 46 June 1, 2006
WGR-AM B * 550 kHz 5 June 1, 2006
WWWS-AM C * 1400 kHz 1 June 1, 2006
MEMPHIS, TN.......... WMBZ-FM C2 144 94.1 MHz 50 August 1, 2004
WJCE-AM B * 680 kHz 10-D/5-N August 1, 2004
WRVR-FM C1 229 104.5 MHz 100 August 1, 2004
ROCHESTER, NY........ WBZA-FM B 172 98.9 MHz 37 June 1, 2006
WBEE-FM B 152 92.5 MHz 50 June 1, 2006
WBBF-AM B * 950 kHz 1 June 1, 2006
WBBF-FM A 117 93.3 MHz 4.4 June 1, 2006
GREENVILLE/
SPARTANBURG, SC.... WFBC-FM C 564 93.7 MHz 100 December 1, 2003
WSPA-FM C 580 98.9 MHz 100 December 1, 2003
WYRD-AM B * 1330 kHz 5 December 1, 2003
WORD-AM B * 910 kHz 3.6-D/0.89-N December 1, 2003
WSPA-AM B * 950 kHz 5 December 1, 2003
WOLI-FM A 100 103.9 MHz 6 December 1, 2003
WOLT-FM A 151 103.3 MHz 2.7 December 1, 2003
WILKES-BARRE/
SCRANTON, PA....... WGBI-AM B * 910 kHz 1-D/0.5-N August 1, 2006
WOGY-AM B * 1300 kHz 5-D/0.5-N August 1, 2006
WILK-AM B * 980 kHz 5-D/1-N August 1, 2006
WGGI-FM A 100 95.9 MHz 6 August 1, 2006
WGGY-FM B 338 101.3 MHz 7 August 1, 2006
WKRZ-FM B 357 98.5 MHz 8.7 August 1, 2006
WKRF-FM A 267 107.9 MHz 0.84 August 1, 2006
WBZJ-FM A 22 102.3 MHz 5.8 August 1, 2006
WBZH-FM A 207 103.1 MHz 0.73 August 1, 2006
WICHITA, KS.......... KEYN-FM C1 307 103.7 MHz 95 June 1, 2005
KFBZ-FM C 301 105.3 MHz 100 June 1, 2005
KQAM-AM B * 1480 kHz 5-D/1-N June 1, 2005
KFH-AM B * 1330 kHz 5-D/5-N June 1, 2005
KNSS-AM C * 1240 kHz 0.63 June 1, 2005
KDGS-FM C3 100 93.9 MHz 25 June 1, 2005
KWSJ-FM C2 150 98.7 MHz 50 June 1, 2005
</Table>
S-46
<Table>
<Caption>
FCC HAAT POWER IN EXPIRATION DATE OF
MARKET STATION CLASS (IN METERS) FREQUENCY KILOWATTS(1) FCC LICENSE
- ------ --------- ----- ----------- --------- ------------ ------------------
GAINESVILLE/ OCALA,
FL................. WKTK-FM C1 299 98.5 MHz 100 February 1, 2004
WSKY-FM C2 289 97.3 MHz 13.5 February 1, 2004
MADISON, WI.......... WOLX-FM B 396 94.9 MHz 37 December 1, 2004
WMMM-FM A 175 105.5 MHz 2 December 1, 2004
WBZU-FM A 74 105.1 MHz 6 December 1, 2004
LONGVIEW/KELSO, WA... KBAM-AM D * 1270 kHz 5-D/0.083-N February 1, 2006
KEDO-AM C * 1400 kHz 1 February 1, 2006
KLYK-FM A 262 105.5 MHz 0.7 February 1, 2006
KRQT-FM C3 528 107.1 MHz 0.74 February 1, 2006
</Table>
- ---------------
* Not applicable for AM transmission facilities.
(1) Pursuant to FCC rules and regulations, many AM radio stations are licensed
to operate at a reduced power during the nighttime broadcasting hours, which
results in reducing the radio station's coverage during the nighttime hours
of operation. Both power ratings are shown, where applicable. For FM
stations, the maximum effective radiated power in the main lobe is given.
(2) The FCC rules require that by the end of a five-year transition period,
which expires in October 2006, we must elect to operate on either the 1250
kHz frequency or the 1660 kHz frequency and surrender the other frequency to
the FCC. However, we may be required to make such election as early as May
2003.
EMPLOYEES
On January 31, 2002, we had a staff of 1,641 full-time employees and 658
part-time employees. We are a party to collective bargaining agreements with the
American Federation of Television and Radio Artists (AFTRA), which apply to some
of our programming personnel, and we are a party to a collective bargaining
agreement with the International Brotherhood of Electrical Workers (IBEW), which
applies to some of our engineering personnel. The Boston AFTRA collective
bargaining agreement, as extended, expired on September 14, 1999, the Kansas
City AFTRA collective bargaining agreement expired on September 29, 2001, and
the Seattle AFTRA collective bargaining agreement expired on January 31, 2002.
We are currently renegotiating these agreements and cannot predict the outcome
of these negotiations. The Boston IBEW collective bargaining agreement will
expire on April 30, 2002. We believe that our relations with our employees are
good.
ENVIRONMENTAL
As the owner, lessee or operator of various real properties and facilities,
we are subject to various federal, state and local environmental laws and
regulations. Historically, compliance with these laws and regulations has not
had a material adverse effect on our business. There can be no assurance,
however, that compliance with existing or new environmental laws and regulations
will not require us to make significant expenditures of funds.
SEASONALITY
Seasonal revenue fluctuations are common in the radio broadcasting industry
and are due primarily to fluctuations in advertising expenditures by retailers.
Our revenues and broadcast cash flows are typically lowest in the first calendar
quarter.
S-47
MANAGEMENT
The following table provides information concerning our directors and
executive officers as of January 31, 2002.
<Table>
<Caption>
NAME AGE POSITION
- ---- --- --------
Joseph M. Field..................... 70 Chairman and Chief Executive Officer
David J. Field...................... 39 President, Chief Operating Officer and Director
John C. Donlevie.................... 55 Executive Vice President, Secretary, General
Counsel and Director
Stephen F. Fisher................... 49 Executive Vice President and Chief Financial Officer
Herbert Kean, M.D................... 71 Director
S. Gordon Elkins.................... 71 Director
Thomas H. Ginley, Jr................ 77 Director
Lee Hague........................... 55 Director
Marie H. Field...................... 64 Director
David J. Berkman.................... 42 Director
Michael R. Hannon................... 41 Director
</Table>
Joseph M. Field founded Entercom in 1968, has served since our inception as
our Chairman of the Board and Chief Executive Officer and was our President
until September 1998. Before entering the broadcasting business, he practiced
law for 14 years in New York (including service as an Assistant United States
Attorney) and Philadelphia. Mr. Field served on the Board of Directors of the
National Association of Broadcasters for four years as a representative of the
major radio group broadcasters. He currently serves on the Boards of Directors
of The Mary Louise Curtis Bok Foundation, the Settlement Music School, the
American Interfaith Institute, the National Liberty Museum, The Philadelphia
Orchestra, the Curtis Institute of Music, the Jewish Education and Vocational
Service (JEVS) and the Philadelphia Chamber Music Society. Mr. Field has a B.A.
from the University of Pennsylvania and an L.L.B. from Yale Law School. He is
the spouse of Marie H. Field and the father of David J. Field. Mr. Field's term
as a director expires at the 2002 annual meeting of shareholders.
David J. Field has served as our President since 1998, our Chief Operating
Officer since 1996 and one of our directors since 1995. He also served as our
Chief Financial Officer from 1992 to 1998. Mr. Field joined us in 1987 and
served as our Director of Finance and Corporate Development from 1987 to 1988,
Vice President-Finance and Corporate Development from 1988 to 1992, Vice
President-Operations and Chief Financial Officer from 1992 to 1995 and Senior
Vice President-Operations and Chief Financial Officer from 1995 to 1996. Prior
to joining us, he was an investment banker with Goldman, Sachs & Co. Mr. Field
currently serves on the Boards of Directors of the Radio Advertising Bureau, the
Philadelphia Zoo and The Wilderness Society. He has a B.A. from Amherst College
and an M.B.A. from the Wharton School of the University of Pennsylvania. Mr.
Field is the son of Joseph M. Field and Marie H. Field. Mr. Field's term as a
director expires at the 2002 annual meeting of shareholders.
John C. Donlevie has served as our Executive Vice President, General
Counsel and one of our directors since 1989, our Secretary since 1998 and was
our Vice President-Legal and Administrative from 1984 when he joined us to 1989.
Prior to joining us, Mr. Donlevie practiced law for 11 years, most recently as
Corporate Counsel of Ecolaire Incorporated in Malvern, Pennsylvania. He has a
B.S. in Engineering from Drexel University and a J.D. from Temple University
School of Law. Mr. Donlevie's term as a director expires at the 2002 annual
meeting of shareholders.
Stephen F. Fisher has served as our Executive Vice President since 2000 and
our Chief Financial Officer since 1998. From 1994 to 1998, he was a Managing
Director with a private
S-48
equity firm located in Bala Cynwyd, Pennsylvania. From 1978 to 1994, Mr. Fisher
held numerous operational and financial management positions with Westinghouse
Broadcasting Company (now part of Viacom Inc.), including the positions of
Executive Vice President, General Manager of their Los Angeles news radio
station and Controller of the Radio Group. He has an M.A. from Bob Jones
University and an M.B.A. from the University of South Carolina.
Herbert Kean, M.D. has served as one of our directors since our inception.
In addition, he served as our Secretary from our inception until 1984. Dr. Kean
is currently a medical physician in private practice in the Philadelphia area.
He has a B.S. from the University of Pennsylvania and an M.D. from Hahnemann
University. He is a clinical professor at Thomas Jefferson University Medical
College and Chairman of the Public Health Committee of the Philadelphia County
Medical Society. Dr. Kean's term as a director expires at the 2002 annual
meeting of shareholders
S. Gordon Elkins has served as one of our directors since 1978. He was a
partner in the law firm of Stradley, Ronon, Stevens & Young from September 1962
through January 1999 and currently is affiliated with the firm. Mr. Elkins has a
B.S. from Temple University, graduating first in his class, and an L.L.B. from
Yale Law School. Mr. Elkins' term as a director expires at the 2002 annual
meeting of shareholders.
Thomas H. Ginley, Jr., M.D. has served as one of our directors since 1971
and previously served as our Secretary from 1984 to 1998. Dr. Ginley is
President and a director of the A & T Development Corporation and Treasurer and
a director of Vanessa Noel Couture, Inc. Dr. Ginley is also a gemologist and
president of Gem Treasury International Inc. He is a diplomat of the National
Board as well as a fellow of the American College of Surgeons. Dr. Ginley has an
M.D. from Georgetown University. Dr. Ginley's term as a director expires at the
2002 annual meeting of shareholders.
Lee Hague has served as one of our directors since 1980. Mr. Hague is
currently the Chairman of the Board and Chief Executive Officer of Aspect
Holdings Inc. Prior to joining Aspect Holdings Inc. in 1998, he served as
President of Hague & Company over a period of 20 years. He has served as an
independent consultant to various broadcasting groups and provides financial
advisory and media brokerage services to the industry. Mr. Hague has over 20
years' experience in the radio industry. He has a B.S. from Northwestern
University and an M.M. from the J.L. Kellogg Graduate School of Management,
Northwestern University. Mr. Hague's term as a director expires at the 2002
annual meeting of shareholders.
Marie H. Field has served as one of our directors since 1989. She served
for over 25 years as a teacher in public and private schools in New York and
Philadelphia. Mrs. Field serves on the Board of Directors of the Ovarian Cancer
Research Fund in New York, the Board of Overseers of the University of
Pennsylvania School of Social Work, the Education Board of the National Liberty
Museum and the Board of Project Forward Leap. She has a B.A. from Barnard
College. Mrs. Field is the spouse of Joseph M. Field and the mother of David J.
Field. Mrs. Field's term as a director expires at the 2002 annual meeting of
shareholders.
David J. Berkman has served as one of our directors since the consummation
of our initial public offering in January 1999. He is the Managing Partner of
Liberty Associated Partners, LP, a venture capital firm primarily engaged in the
telecommunications, media and internet market segments. Liberty Associated
Partners, LP was founded by principals of The Associated Group, Inc., which
prior to its sale in 2000 was a multi-billion dollar publicly-traded owner and
operator of communications related businesses of which Mr. Berkman was Executive
Vice President. He also currently serves on the Boards of Directors of Internet
Capital Group, Inc., Clearwire, Inc., V-Span, Inc., the Philadelphia Regional
Performing Arts Center and the Franklin Institute. Mr. Berkman has a B.S. from
the Wharton School of the University of Pennsylvania. Mr. Berkman's term as a
director expires at the 2002 annual meeting of shareholders.
S-49
Michael R. Hannon has served as one of our directors since December 1998.
He is a Partner of J.P. Morgan Partners ("JPMP"), a partnership with over $20
billion under management. JPMP invests in a wide variety of international
private equity opportunities including management buyouts, growth equity, and
venture capital situations. JPMP's principal limited partner is J.P. Morgan
Chase & Co., one of the largest bank holding companies in the United States. Mr.
Hannon worked at Morgan Stanley & Co. Incorporated prior to joining JPMP in
1988. He received his B.A. degree from Yale University and an M.B.A. from
Columbia Business School. He is currently on the board of directors of Telecorp
PCS, Telesystem International Wireless and several privately-held media and
telecom firms. Mr. Hannon's term as a director expires at the 2002 annual
meeting of shareholders.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board has adopted certain standing committees including: (1) audit, (2)
compensation and (3) nominating.
Audit Committee. The audit committee consists of Messrs. Berkman, Hague
and Elkins, each of whom is independent as the term independence is defined in
Section 3.03.01 (B)(2)(a) and (3) of the listing standards of the New York Stock
Exchange. The audit committee met five times in 2001. The responsibilities of
the audit committee include:
- recommending to the board of directors the independent public accountants
to conduct the annual audit of our financial statements;
- reviewing the proposed scope of the audit and approving the audit fees to
be paid;
- reviewing our accounting and financial controls with the independent
public accountants and our financial and accounting staff; and
- reviewing and discussing financial statements with management.
Compensation Committee. Our compensation committee consists of Mr. Hannon
and Doctors Ginley and Kean. Our compensation committee met once in 2001. The
compensation committee conducts a general review of our compensation plans to
ensure that they meet corporate objectives, including review and approval of all
compensation paid to our executive officers. The responsibilities of the
compensation committee also include administering and interpreting our Employee
Stock Purchase Plan and the Entercom 1998 Equity Compensation Plan, including
selecting the officers, employees and other qualified recipients that will be
granted awards under the Entercom 1998 Equity Compensation Plan.
Nominating Committee. Our nominating committee consists of David Berkman,
Lee Hague and Michael Hannon and met four times in 2001. The nominating
committee is responsible for the recommendation of criteria for selection of
board members and assisting the board in identifying candidates for the board.
S-50
The following table provides summary information concerning compensation
paid to or earned by our Chief Executive Officer and our other most highly
compensated executive officers for services rendered during the years ended
1999, 2000 and 2001 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG TERM
COMPENSATION
--------------------
ANNUAL COMPENSATION NUMBER OF SECURITIES
------------------- OTHER ANNUAL UNDERLYING OPTIONS
NAME AND PRINCIPAL POSITION PERIOD SALARY BONUS(1) COMPENSATION GRANTED
- --------------------------- ------ -------- -------- ------------ --------------------
Joseph M. Field, Chairman
of the Board and Chief
Executive Officer....... 1999 $563,320 $250,000 (2) 372,223
2000 600,000 400,000 100,000
2001 600,000 267,000 100,000
David J. Field, President
and Chief Operating
Officer................. 1999 350,000 200,000 (2) 258,334
2000 450,000 350,000 100,000
2001 450,000 267,000 100,000
Stephen F. Fisher,
Executive Vice President
and Chief Financial
Officer................. 1999 250,000 150,000 (2) 116,667
2000 300,000 200,000 75,000
2001 300,000 175,000 50,000
John C. Donlevie, Executive
Vice President, Secretary
and General Counsel..... 1999 225,000 125,000 (2) 115,556
2000 265,000 150,000 25,000
2001 265,000 100,000 25,000
</Table>
- ---------------
(1) Includes amounts accrued during the year presented but paid in the
subsequent year.
(2) Value of perquisites and other personal benefits paid does not exceed the
lesser of $50,000 or 10% of the total annual salary and bonus reported for
the Named Executive Officer and, therefore, is not required to be disclosed
pursuant to rules of the Commission.
S-51
STOCK OPTION TABLES
Our Named Executive Officers are eligible to receive stock option grants
under the Entercom 1998 Equity Compensation Plan. The following table contains
information concerning the stock option grants made to each of the Named
Executive Officers, discussed above, during the year ended December 31, 2001:
STOCK OPTION GRANTS FOR YEAR ENDED DECEMBER 31, 2001
<Table>
<Caption>
PERCENTAGE POTENTIAL REALIZABLE VALUE
NUMBER OF OF AT ASSUMED ANNUAL RATES
SECURITIES TOTAL OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE MARKET PRICE FOR OPTION TERMS
OPTIONS EMPLOYEES IN OR BASE ON AND EXPIRATION ----------------------------
GRANTED YEAR PRICE GRANT DATE DATE 5% 10%
---------- ------------- -------- ------------ ---------- ------------ ------------
Joseph M. Field...... 100,000 11.6% $40.00 $40.00 01/09/11 $2,515,579 $6,374,970
David J. Field....... 100,000 11.6 40.00 40.00 01/09/11 2,515,579 6,374,970
Stephen F. Fisher.... 50,000 5.8 40.00 40.00 01/09/11 1,257,789 3,187,485
John C. Donlevie..... 25,000 2.9 40.00 40.00 01/09/11 628,895 1,593,742
</Table>
- ---------------
(1) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the rules of the Commission. There can be no assurance that
the actual stock price appreciation over the ten-year option term will be at
the assumed 5% and 10% levels or at any other defined level. Unless the
market price of our Class A common stock appreciates over the option term,
no value will be realized from the option grants. The potential realizable
value is calculated by assuming that the fair market value of our Class A
common stock on the date of grant of the options appreciates at the
indicated rate for the entire term of the option and that the option is
exercised at the exercise price and sold on the last day at the appreciated
price.
The following table sets forth information concerning each option exercised
by the Named Executive Officers during the year ended December 31, 2001 and
option holdings at December 31, 2001 by the Named Executive Officers:
STOCK OPTION EXERCISES AND YEAR-END VALUE
<Table>
<Caption>
SHARES NUMBER OF SHARES VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNDERLYING UNEXERCISED IN-THE-MONEY
NAME EXERCISE REALIZED OPTIONS AT YEAR END OPTIONS AT YEAR END(1)
- ---- ----------- -------- --------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Joseph M. Field........ -- $ -- 211,112 361,111 $3,846,205 $5,958,678
David J. Field......... -- -- 154,168 304,166 2,884,939 4,997,375
Stephen F. Fisher...... 5,000 158,450 72,084 164,583 698,716 1,994,001
John C. Donlevie....... -- -- 64,028 101,528 1,121,709 1,649,834
</Table>
- ---------------
(1) Value is determined by subtracting the exercise price from the fair market
value of our Class A common stock multiplied by the number of shares
underlying the options. Fair market value is based on the New York Stock
Exchange closing price of our Class A common stock on December 29, 2001 of
$50.00 per share. Options which are not in the money, of which there were
none, are not considered for purposes of this computation.
EMPLOYEE STOCK PURCHASE PLAN
A total of up to 1,850,000 shares of our Class A common stock may be issued
under the Employee Stock Purchase Plan, subject to adjustment. Under our
Employee Stock Purchase Plan, we will withhold a specified percentage (not to
exceed 10%) of the compensation paid
S-52
to each participant, and the amount withheld (and any additional amount
contributed by the participant which together with payroll withholdings does not
exceed 10% of the participant's compensation) will be used to purchase our Class
A common stock on the last day of each purchase period. The purchase price will
be the value of the stock on the last day of the purchase period less a discount
not to exceed 15% as determined by the compensation committee in advance of the
purchase period. The length of each purchase period shall be specified by the
compensation committee. The maximum value of shares that a participant in the
Employee Stock Purchase Plan may purchase during any calendar year is $25,000.
EMPLOYMENT AGREEMENTS
JOSEPH M. FIELD EMPLOYMENT AGREEMENT. We have entered into an employment
agreement with Joseph M. Field pursuant to which Mr. Field serves as our Chief
Executive Officer. The employment agreement may be terminated upon written
notice no less than 30 days prior to the end of any calendar year. Mr. Field's
salary for the year 2001 was $600,000. The board of directors may approve
additional salary, bonuses, fees, or other compensation. Absent our express
prior written consent, Mr. Field is prohibited, in the event of his termination
by resignation or for cause, for a period of two years following the termination
of the employment agreement, from engaging in any broadcast business that we
compete with in any standard metropolitan statistical area in which we are then
operating a broadcast property.
DAVID J. FIELD EMPLOYMENT AGREEMENT. We have entered into an employment
agreement with David J. Field, pursuant to which Mr. Field serves as our
President and Chief Operating Officer. The employment agreement provides that
Mr. Field's employment may be terminated at will by either party (1) immediately
if good cause for termination exists, or (2) upon thirty days notice in the
absence of good cause. Pursuant to this employment agreement, Mr. Field's salary
for the year 2001 was $450,000. The board of directors may approve additional
salary, bonuses, fees, or other compensation.
JOHN C. DONLEVIE EMPLOYMENT AGREEMENT. We have entered into an employment
agreement with John C. Donlevie pursuant to which Mr. Donlevie serves as our
Executive Vice President, Secretary and General Counsel. The employment
agreement provides that Mr. Donlevie's employment may be terminated at will by
either party (1) immediately if good cause for termination exists, or (2) upon
thirty days notice in the absence of good cause. Pursuant to this employment
agreement, Mr. Donlevie's salary for the year 2001 was $265,000. The board of
directors may approve additional salary, bonuses, fees, or other compensation.
STEPHEN F. FISHER EMPLOYMENT AGREEMENT. We are in the process of
negotiating a new employment agreement with Stephen F. Fisher, to serve as our
Chief Financial Officer and Executive Vice President, that will replace the
employment agreement that expired as of December 31, 2001.
DIRECTOR COMPENSATION
All of our non-employee directors receive a fee of $1,000 for each board
meeting that they attend in person, $500 for each committee meeting that they
attend in person and $250 for each telephonic meeting of the board or a
committee. Employee directors are not entitled to receive additional
compensation for their services as directors. In addition, during the first
quarter of 2001, Marie H. Field, S. Gordon Elkins, Lee Hague, Thomas H. Ginley,
Jr., M.D., Herbert Kean, M.D., Michael R. Hannon and David J. Berkman received
stock options under the Entercom 1998 Equity Compensation Plan.
S-53
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of January 31, 2002
regarding the beneficial ownership of our common stock by:
- each person known by us to beneficially own more than 5% percent of any
class of common stock;
- each of our directors and Named Executive Officers; and
- all of our directors and executive officers as a group.
Each shareholder possesses sole voting and investment power with respect to
the shares listed, unless otherwise noted.
<Table>
<Caption>
COMMON STOCK
-----------------------------------------------
CLASS A(1) CLASS B(2)
---------------------- ----------------------
NUMBER OF NUMBER OF PERCENT OF PERCENT
SHARES PERCENT SHARES PERCENT TOTAL OF TOTAL
BENEFICIALLY OF BENEFICIALLY OF ECONOMIC VOTING
NAME OF BENEFICIAL OWNER OWNED(3) CLASS OWNED(3) CLASS INTEREST POWER
- ------------------------ ------------ ------- ------------ ------- ---------- --------
Joseph M. Field(4)(5)........... 1,002,586 2.9% 9,782,555 92.9% 23.6% 70.4%
David J. Field(4)(6)............ 2,029,143 5.8 749,250 7.1 6.1 6.8
John C. Donlevie................ 91,702 * -- -- * *
Stephen F. Fisher............... 97,143 * -- -- * *
Herbert Kean, M.D............... 710,238 2.0 -- -- 1.6 *
S. Gordon Elkins(4)(7).......... 2,519,003 7.2 -- -- 5.6 1.8
Thomas H. Ginley, M.D.(8)....... 711,859 2.0 -- -- 1.6 *
Lee Hague....................... 11,251 * -- -- * *
Marie H. Field(4)(9)............ 1,002,586 2.9 380,000 3.6 3.1 1.0
Michael R. Hannon(10)........... 7,804 * -- -- * *
David J. Berkman................ 9,584 * -- -- * *
Putnam Investments, LLC(11)
One Post Office Square
Boston, MA 02109.............. 3,568,856 10.2 -- -- 7.9 2.6
All directors and executive
officers as a group (11
persons)...................... 3,995,981 11.2 10,531,805 100 31.5 77.6
</Table>
- ---------------
* Less than one percent.
(1) For the purpose of calculating the percentage of Class A common stock held
by each shareholder, the total number of shares of Class A common stock
outstanding does not include the shares of Class A common stock issuable
upon conversion of the outstanding shares of Class B common stock. The
number of shares of Class A common stock also includes all issued shares of
restricted stock.
(2) The Class A common stock and the Class B common stock vote together as a
single class on all matters submitted to a vote of shareholders. Each share
of Class A common stock is entitled to one vote. Each share of Class B
common stock is entitled to ten votes, except: (a) any share not voted by
either Joseph M. Field or David J. Field is entitled to one vote; (b) the
holders of Class A common stock, voting as a separate class, are entitled
to elect two directors; (c) each share of Class B common stock is entitled
to one vote with respect to any "going private" transactions under the
Exchange Act; and (d) as required by law. The shares of Class B common
stock are convertible in whole or in part, at the option of the holder,
subject to certain conditions, into the same number of shares of Class A
common stock.
S-54
(3) Shares beneficially owned and percentage ownership are based on 34,829,917
shares of Class A common stock and 10,531,805 shares of Class B common
stock outstanding as of January 31, 2002. The number of shares of Class A
common stock also includes all issued shares of restricted stock.
(4) The address of these shareholders is 401 City Avenue, Suite 409, Bala
Cynwyd, Pennsylvania 19004.
(5) Includes (a) 558,607 shares of Class A common stock beneficially owned by
Marie H. Field, wife of Joseph M. Field, (b) 380,000 shares of Class B
common stock beneficially owned by Marie H. Field, (c) 38,578 shares of
Class A common stock held of record by Joseph M. Field as trustee of a
trust for the benefit of a sister of Marie H. Field, (d) 106,549 shares of
Class A common stock beneficially owned by Joseph M. Field as a director
and officer of the Joseph and Marie Field Foundation, (e) 291,668 shares of
Class A common stock which may be acquired through the exercise of options
and (f) 7,084 shares of Class A common stock which may be acquired by Marie
H. Field, wife of Joseph M. Field, through the exercise of options. The
total economic interest and total voting power of Mr. Field includes
380,000 shares of Class B common stock owned by Marie H. Field which Mr.
Field has the power to vote pursuant to a revocable proxy. See Note 2
above.
(6) Includes (a) 306,094 shares of Class A common stock held of record by David
J. Field as co-trustee of a trust for the benefit of Nancy E. Field, (b)
513,876 shares of Class A common stock held of record by David J. Field as
co-trustee of a trust for the benefit of David J. Field and his children
and (c) 996,572 shares of Class A common stock held of record by David J.
Field as co-trustee of two trusts for the benefit of the descendants of
David J. Field and Nancy E. Field and (d) 212,501 shares of Class A common
stock which may be acquired through the exercise of options.
(7) Includes (a) 996,572 shares of Class A common stock held of record by Mr.
Elkins as co-trustee of two trusts for the benefit of the descendants of
David J. Field and Nancy E. Field, respectively (b) 513,876 shares of Class
A common stock held of record by Mr. Elkins as co-trustee of a trust for
the benefit of David J. Field and his children, (c) 613,150 shares of Class
A common stock held of record by Mr. Elkins as co-trustee of a trust for
the benefit of Nancy E. Field and her children, (d) 277,994 shares of Class
A common stock held of record by Mr. Elkins as trustee of a trust for the
benefit of Marie H. Field, (e) 106,549 shares of Class A common stock
beneficially owned by Mr. Elkins as a director and officer of the Joseph
and Marie Field Foundation and (f) 7,084 shares of Class A common stock
which may be acquired through the exercise of options.
(8) Includes (a) 556,775 shares of Class A common stock held by Dr. Ginley in
joint tenancy with his spouse, of which 250,000 shares are pledged to Bear
Stearns & Co. pursuant to a pre-paid forward purchase contract, (b) 74,000
shares of Class A common stock owned of record by his spouse, all of which
are pledged to Bear Stearns & Co. pursuant to a pre-paid forward purchase
contract, (c) 74,000 shares of Class A common stock held of record by his
spouse as co-trustee of two trusts for the benefit of their children, of
which 37,000 shares are pledged to Bear Stearns & Co. pursuant to a
pre-paid forward purchase contract and (d) 7,084 shares of Class A common
stock which may be acquired through the exercise of options.
(9) Includes (a) 147,368 shares of Class A common stock held of record by Marie
H. Field as co-trustee of a trust for the benefit of David J. Field, (b)
306,094 shares of Class A common stock held of record by Marie H. Field as
co-trustee of a trust for the benefit of Nancy E. Field, (c) 38,578 shares
of Class A common stock held of record by Joseph M. Field, husband of Marie
H. Field, as trustee of a trust for the benefit of a sister of Marie H.
Field, (d) 106,549 shares of Class A common stock beneficially owned by
S-55
Marie H. Field as a director and officer of the Joseph and Marie Field
Foundation, (e) 7,084 shares of Class A common stock which may be acquired
through the exercise of options and (f) 291,668 shares of Class A common
stock which may be acquired by Joseph M. Field, husband of Marie H. Field,
through the exercise of options. Does not include 9,402,555 shares of Class
B common stock held by Joseph M. Field, Marie H. Field's spouse. See Note 2
above.
(10) Includes 7,084 shares of Class A common stock which may be acquired through
the exercise of options.
(11) Includes 3,287,176 shares owned by Putnam Investment Management, LLC,
281,680 shares owned by The Putnam Advisory Company, LLC and 1,965,000
shares owned by Putnam New Opportunities Fund, each affiliates of Putnam
Investments, LLC. Putnam Investments LLC, has shared voting power with
respect to 58,200 shares and shared investment power with respect to all
3,568,856 shares. Putnam Investment Management, LLC exercises sole voting
power over none of the shares, but has shared investment power with respect
to 3,287,176 shares. The Putnam Advisory Company, LLC exercises shared
voting power over 58,200 shares and shared investment power over 281,680
shares.
S-56
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summary of our credit facility does not purport to be
complete and is qualified in its entirety by reference to the agreements
described, including the definitions of certain capitalized terms used in this
section, copies of which are available upon request. Any capitalized terms not
defined in "Credit Facility" are defined in the documentation for our credit
facility. See "Where You Can Find More Information."
CREDIT FACILITY
GENERAL
Pursuant to a credit agreement dated as of December 16, 1999, as amended,
among Entercom Radio, LLC, as borrower, Entercom Communications Corp., as
guarantor, Key Corporate Capital Inc., as administrative agent and
co-documentation agent, Banc of America Securities LLC, as sole lead arranger
and book manager, Bank of America, N.A., as syndication agent and
co-documentation agent, and certain other lenders, we received commitments for
up to $650.0 million in financing (subject to increase under certain
circumstances up to $1.0 billion). The credit facility consists of:
- a $325.0 million term loan facility terminating on September 30, 2007;
and
- a $325.0 million automatically reducing revolving loan facility
terminating on September 30, 2007 including a $50.0 million letter of
credit facility.
AMORTIZATION
On each date set forth in the table below, the principal amount of the term
loan shall be repaid in an amount equal to the percentage of the principal
amount of the term loan outstanding as of September 30, 2002 (before giving
effect to the payment required on that date) set forth for such date in such
table:
<Table>
<Caption>
YEAR MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- ---- -------- ------- ------------ -----------
2002............................... --% --% 3.750% 3.750%
2003............................... 4.375 4.375 4.375 4.375
2004............................... 5.000 5.000 5.000 5.000
2005............................... 5.000 5.000 5.000 5.000
2006............................... 5.000 5.000 5.000 5.000
2007............................... 5.000 5.000 5.000 --
</Table>
On each date set forth in the table below, the commitment to lend revolving
loans shall automatically reduce by that percentage of the revolving commitment
as in effect on September 30, 2002 (before giving effect to the reduction
required on that date) set forth for such date in such table:
<Table>
<Caption>
YEAR MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- ---- -------- ------- ------------ -----------
2002............................... --% --% 3.750% 3.750%
2003............................... 4.375 4.375 4.375 4.375
2004............................... 5.000 5.000 5.000 5.000
2005............................... 5.000 5.000 5.000 5.000
2006............................... 5.000 5.000 5.000 5.000
2007............................... 5.000 5.000 5.000 --
</Table>
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PREPAYMENTS
Loans are required to be prepaid with:
- 100% of the net proceeds of all non-ordinary course asset sales or other
dispositions of the property by us and our subsidiaries or insurance
proceeds which we have not reinvested in our business within one year
after receipt of the proceeds, subject to limited exceptions, if our
Leverage Ratio is greater than 5.5 to 1.0;
- 50% (or, if an Event of Default is continuing, 100%) of annual excess
cash flow if our Leverage Ratio is 5.0 to 1.0 or greater;
- the lesser of (i) 50% of the cash proceeds of equity issuances or sales
and (ii) the amount of such proceeds that would cause our Leverage Ratio
to equal 6.0 to 1.0;
- the amount by which the outstanding amounts under the term facility
exceed the total amount committed under the term facility; and
- the amount by which the outstanding amounts under the revolving facility
exceed the total amount committed under the revolving facility.
INTEREST
The term loan and the revolving loan facilities will bear interest through
maturity: (1) if a Base Rate (as defined below) loan, then at the sum of the
Base Rate plus the Applicable Margin (as defined below), or (2) if a LIBOR loan,
then at the sum of LIBOR plus the Applicable Margin.
The Base Rate is the higher of: (1) the administrative agent's prime rate
or (2) the rate which is 0.5% in excess of the Federal Funds Effective Rate
(defined as a fluctuating interest rate equal for each day during any period to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day by the Federal Reserve Bank of New York, or, if such rate
is not so published, the average of the quotations for such day on such
transactions received by the administrative agent from three Federal funds
brokers of recognized standing selected by the administrative agent).
The Applicable Margin for Base Rate Loans will range, based on the Leverage
Ratio, from 0.000% to 1.125%. The Applicable Margin for LIBOR Loans will range,
based on the Leverage Ratio, from 0.750% to 2.375%.
COLLATERAL
The loans under the credit facility are secured by a lien on substantially
all of our tangible and intangible property, including accounts receivable,
inventory, equipment and intellectual property, and by a pledge of all of the
shares of stock, partnership interests and limited liability company interests
of our direct and indirect domestic subsidiaries, of which we now own or later
acquire more than a 50% interest.
COVENANTS
In addition to certain customary covenants, the credit facility restricts,
among other things, our ability and our subsidiaries' ability to:
- declare dividends or redeem or repurchase capital stock;
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- prepay, redeem or purchase debt;
- incur liens and engage in sale-leaseback transactions;
- make loans and investments;
- incur or guaranty additional indebtedness;
- incur certain conditional sale or rental obligations;
- enter into capital leases;
- sell or discount notes and accounts receivable;
- amend or otherwise alter debt and other material agreements;
- change our name, identity, organizational structure or governing
documents;
- issue or transfer capital stock;
- make capital expenditures;
- enter into management agreements;
- change our fiscal year;
- engage in mergers, acquisitions and asset sales;
- transact with affiliates; and
- alter the business we conduct.
FINANCIAL COVENANTS
The credit facility contains financial covenants including a minimum ratio
of Operating Cash Flow to consolidated interest expense, a maximum ratio of
consolidated total debt to Operating Cash Flow, a minimum ratio of Operating
Cash Flow to pro forma debt service and a minimum ratio of Operating Cash Flow
to fixed charges.
EVENTS OF DEFAULT
Events of default under the credit facility include:
- our failure to pay principal or interest when due;
- our material breach of any representation or warranty contained in the
loan documents;
- covenant defaults;
- events of bankruptcy;
- cross-defaults to other indebtedness;
- termination of licenses or operating agreements or a cessation of
operations; and
- a change of control.
CONVERTIBLE PREFERRED SECURITIES, TERM INCOME DEFERRABLE EQUITY SECURITIES
(TIDES)
On October 6, 1999, Entercom Communications Capital Trust, our wholly owned
subsidiary, sold 2,500,000 6 1/4% Convertible Preferred Securities, Term Income
Deferrable Equity Securities (TIDES), at an offering price of $50.00 per
security. The trust used the proceeds from the TIDES offering to purchase from
us an equal amount of our 6 1/4% Convertible Subordinated Debentures due 2014.
The net proceeds to us after deducting underwriting discounts and other offering
expenses, were $120.5 million.
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We created the trust for the sole purpose of issuing the TIDES. The TIDES
represent an undivided preferred beneficial ownership interest in the assets of
the trust. The trust's sole assets consist of the $125.0 million aggregate
principal amount of the debentures, including accrued interest. Subject to
certain deferral provisions, the holders of the TIDES are entitled to quarterly
calendar distributions paid by the trust. The first distribution was paid on
December 31, 1999. We have also irrevocably guaranteed payments of distributions
and other amounts due under the TIDES (to the extent the trust has funds
available for the payment of those distributions).
Unless redeemed or repurchased, the debentures mature on September 30,
2014. Under the terms of the indenture governing the debentures, we have the
right to defer the payment of interest on the debentures at any time prior to
maturity for a period not exceeding 20 consecutive quarters. Upon the expiration
of any such deferral period, we must pay all interest then accrued and unpaid on
the debentures, together with interest on the accrued and unpaid amount. We may
elect after October 3, 2002, to redeem the debentures in accordance with the
terms of the TIDES. Upon the due date of the debentures, we will pay the
outstanding amount due to the trust and the trust will redeem all of the
outstanding TIDES.
The holders of the TIDES have a preference with respect to each
distribution and amounts payable upon liquidation, redemption or otherwise over
us as holders of the common stock of the trust. Each TIDES is convertible into
shares of our Class A common stock at the rate of 1.1364 shares of Class A
common stock for each TIDES, equaling a conversion price of $44.00 per share. We
have entered into several contractual arrangements for the purpose of fully,
irrevocably and unconditionally guaranteeing the trust's obligations under the
TIDES.
As of December 31, 2001, there were 2,500,000 outstanding TIDES as no
holder of the TIDES had converted its shares into our Class A common stock.
7 5/8% SENIOR SUBORDINATED NOTES DUE 2014
Concurrently with this offering, our wholly owned subsidiaries, Entercom
Radio and Entercom Capital are offering $150.0 million in aggregate principal
amount of 7 5/8% Senior Subordinated Notes due 2014. We, along with certain of
our direct and indirect subsidiaries, are guaranteeing the issuers' obligations
under the notes on a senior subordinated basis.
The notes are unsecured senior subordinated obligations of Entercom Radio
and each guarantor, ranking pari passu with any existing and future senior
subordinated obligations and senior in right of payment to any existing and
future subordinated indebtedness. The notes will not be secured by any of the
issuers' or the guarantors' assets, and as such will be effectively subordinated
to any secured debt that the issuers or the guarantors have now, including all
of the borrowings under our credit facility, or may incur in the future to the
extent of the value of the assets securing that debt.
Interest on the notes will be payable semi-annually in arrears on March 1
and September 1 each year. The first payment of interest on the notes will be on
September 1, 2002. Interest on the notes will accrue at a rate of 7 5/8% per
annum. Prior to March 1, 2005, the issuers may redeem up to 35% of the notes
with the proceeds of one or more specified equity offerings. On or after March
1, 2007, the issuers may redeem some or all of the notes at any time.
The indenture governing the notes will contain certain covenants,
restricting our ability to, among other things, incur debt, merge or sell
assets, incur liens, make restricted payments and enter into transactions with
affiliates.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the material federal income and
estate tax consequences of the ownership and disposition of our Class A common
stock applicable to Non-United States Holders. A "Non-United States Holder" is a
beneficial owner of our Class A common stock that holds our Class A common stock
as a capital asset and who is generally an individual, corporation, estate or
trust other than:
- an individual who is a citizen or resident of the United States for
federal income tax purposes;
- a corporation (or entity treated as a corporation for federal income tax
purposes) created or organized in or under the laws of the United States,
any state thereof or the District of Columbia;
- an estate the income of which is subject to United States federal income
tax regardless of its source; and
- a trust, if either (i) a court within the United States is able to
exercise primary supervision over the administration of the trust, and
one or more United States persons have the authority to control all
substantial decisions of the trust or (ii) the trust was in existence on
August 20, 1996, was treated as a United States person on that date and
has elected to be treated as a United States person at all times
thereafter.
If a partnership or other entity taxable as a partnership holds our Class A
common stock, the tax treatment of a partner will generally depend on the status
of the partner and the activities of the partnership. Such partner should
consult its tax advisors as to the tax consequences.
The following discussion does not consider specific facts and circumstances
that may be relevant to a particular Non-United States Holder's tax position and
does not consider state and local or non-United States tax laws. Further, it
does not include all of the rules which may affect Non-United States Holders.
For example, special rules not discussed herein may apply to you if you are:
- a broker-dealer or a dealer in securities or currencies;
- a bank, thrift or other financial institution;
- an insurance company;
- holding our Class A common stock as a part of a hedge, straddle,
conversion or other risk reduction transaction; or
- holding our Class A common stock through a partnership or other
pass-through entity.
The discussion is based on the following materials, all as the date hereof:
- the Internal Revenue Code;
- current, temporary and proposed Treasury Regulations promulgated under
the Internal Revenue Code;
- the legislative history of the Internal Revenue Code;
- current administrative interpretations and practices of the Internal
Revenue Service; and
- judicial decisions.
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Legislation, judicial decisions, or administrative changes may be
forthcoming that could effect the accuracy of the statements included in this
summary, possibly on a retroactive basis. We have not requested, and do not plan
to request, any rulings from the Internal Revenue Service concerning the tax
treatment of the Class A common stock. The statements in this prospectus
supplement are not binding on the Internal Revenue Service or any court. Thus,
we can provide no assurance that the statements contained in this prospectus
supplement will not be challenged by the Internal Revenue Service, or that they
would be sustained by a court if they were so challenged.
THIS FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION. ACCORDINGLY,
EACH PROSPECTIVE NON-UNITED STATES HOLDER IS URGED TO CONSULT A TAX ADVISOR WITH
RESPECT TO THE FEDERAL, STATE, LOCAL OR NON-UNITED STATES TAX CONSEQUENCES OF
HOLDING AND DISPOSING OF THE CLASS A COMMON STOCK.
UNITED STATES TRADE OR BUSINESS INCOME
For purposes of the following discussion, dividends and gains on the sale,
exchange or other disposition of our common stock will be considered to be
"United States trade or business income" if such income or gain is (i)
effectively connected with the conduct of a United States trade or business or
(ii) in the case of a treaty resident, attributable to a permanent establishment
(or, in the case of an individual, a fixed base) in the United States.
Generally, United States trade or business income is subject to federal income
tax on a net income basis at regular graduated tax rates. Any United States
trade or business income received by a Non-United States Holder that is a
corporation may, under specific circumstances, be subject to an additional
"branch profits tax" at a 30% rate or a lower rate that an applicable income tax
treaty may specify.
DIVIDENDS
Dividends paid to a Non-United States Holder of Class A common stock
generally will be subject to withholding of United States federal income tax at
a 30% rate unless the dividends are United States trade or business income and
the Non-United States Holder files a properly executed IRS Form W-8ECI (or in
certain cases, a properly executed IRS Form 8BEN) with the withholding agent.
The 30% withholding rate may be reduced if the Non-United States Holder is
eligible for the benefits of an income tax treaty that provides for a lower
rate. Generally, to claim the benefits of an income tax treaty, a Non-United
States Holder of Class A common stock will be required to provide a properly
executed IRS Form W-8BEN and satisfy applicable certification and other
requirements. A Non-United States Holder of Class A common stock that is
eligible for a reduced rate of withholding under an income tax treaty may obtain
a refund or credit of any excess amounts withheld by filing an appropriate claim
for a refund with the Internal Revenue Service. A Non-United States Holder
should consult its tax advisor on its entitlement to benefits under a relevant
income tax treaty.
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DISPOSITION OF CLASS A COMMON STOCK
A Non-United States Holder generally will not be subject to federal income
tax in respect of gain recognized on a disposition of Class A common stock
unless:
- the gain is United States trade or business income;
- the Non-United States Holder is an individual who is present in the
United States for 183 or more days in the taxable year of the disposition
and meets other requirements;
- the Non-United States Holder is subject to United States tax under
provisions applicable to certain United States expatriates (including
certain former citizens or residents of the United States); or
- we are or have been a "U.S. real property holding corporation" for
federal income tax purposes at any time during the shorter of the
five-year period ending on the date of disposition and the Non-United
States Holder's holding period for the Class A common stock.
The tax relating to stock in a U.S. real property holding corporation does
not apply to a Non-United States Holder whose holdings, actual and constructive,
at all times during the applicable period, amount to 5% or less of our Class A
common stock, provided that the common stock is regularly traded on an
established securities market. Generally, a corporation is a U.S. real property
holding corporation if the fair market value of its "U.S. real property
interests" equals or exceeds 50% of the sum of the fair market value of its
worldwide real property interests and its other assets used or held for use in a
trade or business. We believe that we have not been and are not currently a U.S.
real property holding corporation and we do not anticipate becoming a U.S. real
property holding corporation in the future.
FEDERAL ESTATE TAXES
Class A common stock owned or treated as owned by an individual who is a
Non-United States Holder at the time of death will be included in the
individual's gross estate for federal estate tax purposes and may be subject to
federal estate tax, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
DIVIDENDS
We must report annually to the Internal Revenue Service and to each
Non-United States Holder any dividend income that is subject to withholding or
that is exempt from withholding tax pursuant to an income tax treaty. Copies of
these information returns may also be made available under the provisions of a
specific treaty or agreement to the tax authorities of the country in which the
Non-United States Holder resides. Dividends paid to Non-United States Holders of
Class A common stock generally will be exempt from backup withholding if the
Non-United States Holder provides a properly executed IRS Form W-8BEN or
otherwise establishes an exemption.
DISPOSITION OF CLASS A COMMON STOCK
The payment of the proceeds from the disposition of Class A common stock to
or through the United States office of any broker will be subject to information
reporting and possible backup withholding unless the owner properly certifies
that it is a Non-United States Holder under penalties of perjury or otherwise
establishes an exemption, provided that the broker does not have actual
knowledge (or reason to know) that the holder is a United States person. The
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payment of the proceeds from the disposition of Class A common stock to or
through a non-United States office of a non-United States broker will not be
subject to information reporting or backup withholding unless the non-United
States broker has certain types of relationships with the United States (a "U.S.
related person"). In the case of the payment of the proceeds from the
disposition of common stock to or through a non-United States office of a broker
that is either a United States person or a U.S. related person, the Treasury
regulations require information reporting (but not backup withholding) on the
payment unless the broker has documentary evidence in its files that the owner
is a Non-United States Holder and the broker has no knowledge (or reason to
know) to the contrary. Non-United States Holders should consult their own tax
advisors on the application of information withholding and backup withholding to
them in their particular circumstances (including upon their disposition of the
Class A common stock).
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to a Non-United States Holder will be
refunded or credited against the holder's federal income tax liability, if any,
if the holder provides the required information to the Internal Revenue Service.
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UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives Deutsche Banc Alex.
Brown Inc. and Credit Suisse First Boston Corporation have severally agreed to
purchase from us the following respective number of shares of Class A common
stock at a public offering price less the underwriting discounts and commissions
set forth on the cover page of this prospectus supplement:
<Table>
<Caption>
NUMBER
UNDERWRITERS OF SHARES
- ------------ -----------
Deutsche Banc Alex. Brown Inc. ............................. 1,120,000
Credit Suisse First Boston Corporation...................... 1,120,000
Banc of America Securities LLC.............................. 320,000
Goldman, Sachs & Co. ....................................... 320,000
J.P. Morgan Securities Inc. ................................ 320,000
Bear, Stearns & Co., Inc. .................................. 100,000
Salomon Smith Barney Inc. .................................. 100,000
William Blair & Company, L.L.C. ............................ 100,000
-----------
Total..................................................... 3,500,000
===========
</Table>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of Class A common stock offered hereby are
subject to certain conditions precedent and that the underwriters will purchase
all of the shares of Class A common stock offered by this prospectus supplement,
other than those covered by the over-allotment option described below, if any of
these shares are purchased.
We have been advised by the representatives of the underwriters that the
underwriters propose to offer the shares of Class A common stock to the public
at the public offering price set forth on the cover of this prospectus
supplement and to dealers at a price that represents a concession not in excess
of $1.38 per share under the public offering price. The underwriters may allow,
and these dealers may re-allow, a concession of not more than $0.10 per share to
other dealers. After the public offering, representatives of the underwriters
may change the offering price and other selling terms.
We have granted to the underwriters an option, exercisable not later than
30 days after the date of this prospectus, to purchase up to 525,000 additional
shares of Class A common stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus supplement. The underwriters may exercise this option only to cover
over-allotments made in connection with the sale of the Class A common stock
offered by this prospectus supplement. To the extent that the underwriters
exercise this option, each of the underwriters will become obligated, subject to
conditions, to purchase approximately the same percentage of these additional
shares of Class A common stock as the number of shares of Class A common stock
to be purchased by it in the above table bears to the total number of shares of
Class A common stock offered by this prospectus. We will be obligated, pursuant
to the option, to sell these additional shares of Class A common stock to the
underwriters to the extent the option is exercised. If any additional shares of
Class A common stock are purchased, the underwriters will offer the additional
shares on the same terms as those on which the initial shares are being offered.
The underwriting discounts and commissions per share are equal to the
public offering price per share of Class A common stock less the amount paid by
the underwriters to us per share of Class A common stock. The underwriting
discounts and commissions are 4.50% of the public
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offering price. We have agreed to pay the underwriters the following discounts
and commissions, assuming either no exercise or full exercise by the
underwriters of the underwriters' over-allotment option:
<Table>
<Caption>
TOTAL FEES
--------------------------------------
WITHOUT EXERCISE WITH FULL EXERCISE
OF OVER-ALLOTMENT OF OVER-ALLOTMENT
FEE PER SHARE OPTION OPTION
------------- ----------------- ------------------
Discounts and commissions paid by
us............................... $2.31 $8,071,875 $9,282,656
</Table>
In addition, we estimate that our share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $500,000.
We, for a period of 90 days, and certain of our directors, officers,
members of senior management and stockholders, each for a period of 60 days,
have agreed that we will not offer, sell, contract to sell or otherwise dispose
of, directly or indirectly, or file with the Commission a registration statement
under the Securities Act of 1933, as amended, (the "Securities Act") relating
to, any additional shares of our Class A common stock or securities convertible
into or exchangeable or exercisable for any shares of our capital stock or
publicly disclose the intention to make an offer, sale, pledge, disposition or
filing without the prior written consent of Deutsche Banc Alex. Brown Inc. and
Credit Suisse First Boston Corporation, except (1) with respect to us, pursuant
to or in connection with employee stock option or employee stock purchase plans
or other employee or non-employee director or key advisor compensation
arrangements or agreements, in effect on the date of this prospectus supplement,
(2) in connection with the conversion of shares of Class A common stock, Class B
common stock or Class C common stock solely into another class of common stock
or (3) shares sold in this offering pursuant to the over-allotment option.
We have agreed to indemnify the underwriters against some specified types
of liabilities, including liabilities under the Securities Act and to contribute
to payments the underwriters may be required to make in respect of any of these
liabilities.
The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
Our Class A common stock is traded on the New York Stock Exchange under the
symbol ETM.
In connection with the offering, the underwriters may purchase and sell
shares of our Class A common stock in the open market. These transactions may
include short sales, purchases to cover positions created by short sales and
stabilizing transactions.
Short sales involve the sale by the underwriters of a greater number of
shares than they are required to purchase in the offering. Covered short sales
are sales made in an amount not greater than the underwriters' option to
purchase additional shares of Class A common stock from us in the offering. The
underwriters may close out any covered short position by either exercising their
option to purchase additional shares or purchasing shares in the open market. In
determining the source of shares to close out the covered short position, the
underwriters will consider, among other things, the price of shares available
for purchase in the open market as compared to the price at which they may
purchase shares through the over-allotment option.
Naked short sales are any sales in excess of the over-allotment option. The
underwriters must close out any naked short position by purchasing shares in the
open market. A naked short position is more likely to be created if underwriters
are concerned that there may be
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downward pressure on the price of the shares in the open market prior to the
completion of the offering.
Stabilizing transactions consist of various bids for or purchases of our
Class A common stock made by the underwriters in the open market prior to the
completion of the offering.
The underwriters may impose a penalty bid. This occurs when a particular
underwriter repays to the other underwriters a portion of the underwriting
discount received by it because the representatives of the underwriters have
repurchased shares sold by or for the account of that underwriter in stabilizing
or short covering transactions.
Purchases to cover a short position and stabilizing transactions may have
the effect of preventing or slowing a decline in the market price of our Class A
common stock. Additionally, these purchases, along with the imposition of the
penalty bid, may stabilize, maintain or otherwise affect the market price of our
Class A common stock. As a result, the price of our Class A common stock may be
higher than the price that might otherwise exist in the open market. These
transactions may be affected on the New York Stock Exchange, in the over-the-
counter market or otherwise.
A copy of this prospectus supplement and the underlying prospectus in
electronic format may be made available on Internet web sites maintained by one
or more of the lead underwriters of this offering. Other than the prospectus
supplement and prospectus in electronic format, the information on any
underwriter's web site and any information contained in any other web site
maintained by an underwriter is not part of the prospectus or the registration
statement of which the prospectus forms a part.
Some of the underwriters or their affiliates have provided investment
services to us in the past and may do so in the future. They receive customary
fees and commissions for these services.
Affiliates of Deutsche Banc Alex. Brown Inc., Credit Suisse First Boston
Corporation, Banc of America Securities LLC and J.P. Morgan Securities Inc. are
lenders to us under our existing credit facility, and an affiliate of Banc of
America Securities LLC is the syndication agent and co-documentation agent under
our credit facility. A portion of the proceeds from this offering will be used
to repay our existing credit facility. In addition, Credit Suisse First Boston
Corporation, Deutsche Banc Alex. Brown Inc. and Banc of America Securities LLC
are acting as underwriters for our concurrent notes offering. In connection with
the notes offering, each will be paid customary fees and be reimbursed by us for
related expenses.
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NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Class A common stock in Canada is being made only
on a private placement basis exempt from the requirement that we prepare and
file a prospectus with the securities regulatory authorities in each province
where trades of Class A common stock are made. Any resale of the Class A common
stock in Canada must be made under applicable securities laws, which will vary
depending on the relevant jurisdiction, and which may require resales to be made
under available statutory exemptions or under a discretionary exemption granted
by the applicable Canadian securities regulatory authority. Purchasers are
advised to seek legal advice prior to any resale of the Class A common stock.
REPRESENTATIONS OF PURCHASERS
By purchasing Class A common stock in Canada and accepting a purchase
confirmation a purchaser is representing to us and the dealer from whom the
purchase confirmation is received that:
- the purchaser is entitled under applicable provincial securities laws to
purchase the Class A common stock without the benefit of a prospectus
qualified under those securities laws,
- where required by law, that the purchaser is purchasing as principal and
not as agent, and
- the purchaser has reviewed the text above under Resale Restrictions.
RIGHTS OF ACTION -- ONTARIO PURCHASERS ONLY
Under Ontario securities legislation, a purchaser who purchases a security
offered by this prospectus supplement during the period of distribution will
have a statutory right of action for damages, or while still the owner of the
Class A common stock, for rescission against us in the event that this
prospectus supplement contains a misrepresentation. A purchaser will be deemed
to have relied on the misrepresentation. The right of action for damages is
exercisable not later than the earlier of 180 days from the date the purchaser
first had knowledge of the facts giving rise to the cause of action and three
years from the date on which payment is made for the Class A common stock. The
right of action for rescission is exercisable not later than 180 days from the
date on which payment is made for the Class A common stock. If a purchaser
elects to exercise the right of action for rescission, the purchaser will have
no right of action for damages against us. In no case will the amount
recoverable in any action exceed the price at which the Class A common stock was
offered to the purchaser and if the purchaser is shown to have purchased the
securities with knowledge of the misrepresentation, we will have no liability.
In the case of an action for damages, we will not be liable for all or any
portion of the damages that are proven to not represent the depreciation in
value of the Class A common stock as a result of the misrepresentation relied
upon. These rights are in addition to, and without derogation from, any other
rights or remedies available at law to an Ontario purchaser. The foregoing is a
summary of the rights available to an Ontario purchaser. Ontario purchasers
should refer to the complete text of the relevant statutory provisions.
ENFORCEMENT OF LEGAL RIGHTS
All of our directors and officers as well as the experts named herein may
be located outside of Canada and, as a result, it may not be possible for
Canadian purchasers to effect service of process within Canada upon us or those
persons. All or a substantial portion of our assets and the assets of those
persons may be located outside of Canada and, as a result, it may not be
S-68
possible to satisfy a judgment against us or those persons in Canada or to
enforce a judgment obtained in Canadian courts against us or those persons
outside of Canada.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of Class A common stock should consult their own legal
and tax advisors with respect to the tax consequences of an investment in the
Class A common stock in their particular circumstances and about the eligibility
of the Class A common stock for investment by the purchaser under relevant
Canadian legislation.
RELATIONSHIPS WITH AFFILIATES OF CERTAIN UNDERWRITERS
Affiliates of Deutsche Banc Alex. Brown Inc., Credit Suisse First Boston
Corporation, Banc of America Securities LLC and J.P. Morgan Securities Inc. are
lenders to us under our existing credit facility, and an affiliate of Banc of
America Securities LLC is the syndication agent and co-documentation agent under
our credit facility. A portion of the proceeds from this offering will be used
to repay our existing credit facility. The decision of these underwriters to
underwrite this offering was made independent of their respective affiliates
that are lenders under our existing credit facility, which had no involvement in
determining whether or when to distribute the Class A common stock under this
offering or the terms of this offering. In addition, Credit Suisse First Boston
Corporation, Deutsche Banc Alex. Brown Inc. and Banc of America Securities LLC
are acting as underwriters for our concurrent notes offering. In connection with
the notes offering, each will be paid customary fees and be reimbursed by us for
related expenses. None of Deutsche Banc Alex. Brown Inc., Credit Suisse First
Boston Corporation, Banc of America Securities LLC or J.P. Morgan Securities
Inc. will receive any benefit from this offering or the concurrent notes
offering, other than its respective portion of the underwriting fee as paid by
us. See "Underwriting."
S-69
LEGAL MATTERS
John S. Donlevie, Esq., Executive Vice President, Secretary and General
Counsel, will issue an opinion with respect to certain legal matters with
respect to the validity of the shares of the Class A common stock. Mr. Donlevie
is a full time employee of Entercom and owns beneficial interests in less than
one percent of our Class A common stock. Latham & Watkins, Washington D.C., will
opine as to certain other matters. The underwriters will be advised about
various other legal matters relating to this offering by Weil, Gotshal & Manges
LLP, New York, New York.
EXPERTS
The consolidated financial statements and schedule as of December 31, 2001
and for the year then ended incorporated by reference in this prospectus
supplement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report. Reference is made to
said report, which includes an explanatory paragraph with respect to a change in
accounting for derivative instruments and hedging activities pursuant to the
provisions of Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Hedging Activities."
The consolidated financial statements and related consolidated financial
statement schedule as of December 31, 2000, and for each of the two years in the
period ended December 31, 2000 incorporated in this prospectus supplement by
reference from Entercom Communications Corp.'s Annual Report on Form 10-K for
the year ended December 31, 2001 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
S-70
WHERE YOU CAN FIND MORE INFORMATION
Entercom Communications Corp. is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended, and files annual, quarterly
and special reports, proxy statements and other information with the SEC. You
may read and copy any reports, proxy statements and other information we file at
the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference room. You may also access filed documents at the SEC's web site
at www.sec.gov.
We are incorporating by reference some information about us that we file
with the SEC. We are disclosing important information to you by referencing
those filed documents. Any information that we reference this way is considered
part of this prospectus supplement. The information in this prospectus
supplement supercedes information incorporated by reference that we have filed
with the SEC prior to the date of this prospectus supplement, while information
that we file with the SEC after the date of this prospectus supplement that is
incorporated by reference will automatically update and supersede this
information.
We incorporate by reference the following documents we have filed, or may
file, with the SEC:
- Entercom Communications Corp.'s Annual Report on Form 10-K for its fiscal
year ended December 31, 2001;
- all documents filed by Entercom Communications Corp. with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this prospectus supplement and before termination of this offering.
You may request a free copy of any of the documents incorporated by
reference in this prospectus supplement by writing or telephoning us at the
following address:
ENTERCOM COMMUNICATIONS CORP.
401 CITY AVENUE, SUITE 409
BALA CYNWYD, PA 19004
(610) 660-5610
S-71
$250,000,000
ENTERCOM COMMUNICATIONS CORP.
Class A Common Stock and Preferred Stock
---------------------
$250,000,000
ENTERCOM RADIO, LLC
ENTERCOM CAPITAL, INC.
Debt Securities
---------------------
Entercom Communications may from time to time offer up to $250,000,000 in
aggregate offering price of its Class A common stock, par value $.01 per share,
and its preferred stock, par value $.01 per share, or any combination of its
Class A common stock and preferred stock.
Entercom Communications' Class A common stock is traded on the New York
Stock Exchange under the symbol "ETM." On February 27, 2002, the last reported
sale price for Entercom Communications' Class A common stock on the New York
Stock Exchange was $51.55 per share.
Entercom Radio may from time to time offer up to $250,000,000 in aggregate
principal amount or initial accreted value of its debt securities. The debt
securities that Entercom Radio may issue may consist of debentures, notes or
other types of debt. Any debt securities issued by Entercom Radio will be
co-issued by Entercom Capital, Inc. Entercom Radio's payment obligations under
any series of debt securities will be guaranteed by Entercom Communications and
may be guaranteed by one or more of the Co-Registrants.
This prospectus provides a general description of the securities we may
offer. The specific terms of the securities offered by this prospectus will be
set forth in a supplement to this prospectus and will include:
- in the case of Class A common stock, the number of shares, purchase price
and terms of the offering and sale thereof;
- in the case of preferred stock, the specific designation, number of
shares, liquidation preference, purchase price, dividend, voting,
redemption and conversion provisions, and any other specific terms of the
preferred stock; and
- in the case of debt securities, the specific designation, aggregate
principal amount, purchase price, maturity, interest rate, time of
payment of interest, terms (if any) for the subordination or redemption
thereof, and any other specific terms of the debt securities;
You should read this prospectus and any prospectus supplement carefully
before you invest in any securities we offer. This prospectus may not be used to
consummate a sale of securities unless accompanied by the applicable prospectus
supplement.
---------------------
These securities have not been approved by the Securities and Exchange
Commission or any state securities commission, nor have these organizations
determined that this prospectus is accurate or complete. Any representation to
the contrary is a criminal offense.
---------------------
The date of this prospectus is February 27, 2002
WE HAVE NOT AUTHORIZED ANY DEALER, SALESMAN OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND THE ACCOMPANYING SUPPLEMENT TO
THIS PROSPECTUS. YOU MUST NOT RELY UPON ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT. THIS PROSPECTUS AND THE ACCOMPANYING SUPPLEMENT TO THIS
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH THEY RELATE,
NOR DOES THIS PROSPECTUS AND THE ACCOMPANYING SUPPLEMENT TO THIS PROSPECTUS
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SECURITIES IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. THE INFORMATION CONTAINED IN THIS PROSPECTUS
AND THE SUPPLEMENT TO THIS PROSPECTUS IS ACCURATE AS OF THE DATES ON THEIR
COVERS. WHEN WE DELIVER THIS PROSPECTUS OR A SUPPLEMENT OR MAKE A SALE PURSUANT
TO THIS PROSPECTUS OR A SUPPLEMENT, WE ARE NOT IMPLYING THAT THE INFORMATION IS
CURRENT AS OF THE DATE OF THE DELIVERY OR SALE.
---------------------
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
About This Prospectus................. i
Where You Can Find More Information... i
Disclosure Regarding Forward Looking
Statements.......................... ii
The Company........................... 1
Use of Proceeds....................... 1
Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends........................... 2
</Table>
<Table>
<Caption>
PAGE
----
Description of Capital Stock.......... 3
Description of Debt Securities........ 7
Plan of Distribution.................. 14
Legal Matters......................... 15
Experts............................... 15
</Table>
---------------------
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement filed with the
Securities and Exchange Commission by Entercom Communications, Entercom Radio,
Entercom Capital and the co-registrant subsidiaries of Entercom Radio (the
"Registrants") utilizing a "shelf" registration process. This prospectus
provides you with a general description of the securities that the Registrants
may offer. Each time the Registrants sell securities, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus
and any prospectus supplement together with additional information described
under the next heading "Where You Can Find More Information."
Unless the context requires otherwise, "Entercom," "we," "us" or similar
terms refer to Entercom Communications Corp., Entercom Radio, LLC, a wholly
owned subsidiary of Entercom Communications, Entercom Capital, Inc., a wholly
owned subsidiary of Entercom Radio, and Entercom Communications' consolidated
subsidiaries, excluding Entercom Communications Capital Trust. The direct and
indirect subsidiaries of Entercom Radio hold all of our radio station licenses
and related assets.
WHERE YOU CAN FIND MORE INFORMATION
Entercom Communications files annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You can inspect and copy these reports, proxy statements and other information
at the public reference facility of the Commission, in Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Please call the
Commission at 1-800-SEC-0330 for further information on the public reference
room. The Commission also maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission (http://www.sec.gov). You can inspect reports
and other information Entercom Communications files at the office of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Registrants have filed a registration statement and related exhibits
with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). The registration statement contains additional information
about us, Entercom Communications' Class A common stock and preferred stock and
Entercom
i
Radio's debt securities. You may inspect the registration statement and exhibits
without charge at the office of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and you may obtain copies from the Commission at
prescribed rates.
The Commission allows us to "incorporate by reference" the information
Entercom Communications files with it, which means that we can disclose
important information to you by referring to those documents. The information
incorporated by reference is an important part of this prospectus, and
information that Entercom Communications files subsequent to the date of this
prospectus with the Commission will automatically update and supersede this
information. We incorporate by reference the following documents Entercom
Communications filed with the Commission pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"):
- Annual Report on Form 10-K for the fiscal year ended December 31, 2001;
and
- Description of our Class A common stock contained in our registration
statement on Form 8-A that was filed with the Commission on September 15,
1998.
We are also incorporating by reference into this prospectus all documents
filed by the Registrants with the Commission pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this prospectus and before we
cease offering the securities under this prospectus (other than those portions
of such documents described in paragraphs (i), (k), and (l) of Item 402 of
Regulation S-K promulgated by the Commission).
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Corporate Secretary
Entercom Communications Corp.
401 City Avenue, Suite 409
Bala Cynwyd, Pennsylvania 19004
(610) 660-5610
You should rely only on the information incorporated by reference or
provided in this prospectus and any supplement. We have not authorized anyone
else to provide you with different information.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the documents that we incorporate by reference
herein, 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 and Section
21E of the Exchange Act. These statements reflect our current views and are
based on certain assumptions. Actual results could differ materially from those
currently anticipated as a result of a number of factors, including, but not
limited to, the following: (1) the highly competitive nature of, and new
technologies in, the radio broadcasting industry; (2) our dependence upon our
Seattle radio stations; (3) the risks associated with our acquisition strategy
generally; (4) the control of us by Joseph M. Field and members of his immediate
family; (5) our vulnerability to changes in federal legislation or regulatory
policies; and (6) the risks disclosed in Entercom Communications' reports
previously filed with the Commission.
These important factors are discussed in more detail under "Risk Factors"
in Entercom Communications' Annual Report on Form 10-K for the year ended
December 31, 2001 and in any accompanying prospectus supplements and in other
documents the Registrants may file with the Commission and which will be
incorporated by reference herein. You may obtain copies of these documents as
described under "Where You Can Find More Information" in this prospectus.
We assume no obligation to update any forward-looking statements as a
result of new information or future events or developments, except as required
under federal securities laws. Investors are cautioned not to place undue
reliance on any forward-looking statements, which speak only as of the date of
this prospectus or, in the case of any document we incorporate by reference, the
date of such document.
Investors also should understand that it is not possible to predict or
identify all factors and should not consider the risks set forth above to be a
complete statement of all potential risks and uncertainties. If the expectations
or assumptions underlying our forward-looking statements prove inaccurate or if
risks or uncertainties arise, actual results could differ materially from those
predicted in any forward-looking statement.
ii
THE COMPANY
We are one of the five largest radio broadcasting companies in the United
States based upon pro forma 2000 revenues for pending acquisitions, as derived
from the January 7, 2002 edition of BIA Consulting, Inc. We have assembled,
after giving effect to the pending acquisitions of three stations in the Denver
market and two stations in the Greensboro market, a nationwide portfolio of 100
stations in 19 markets, including 11 of the country's top 50 radio revenue
markets. Based upon Duncan's Radio Market Guide (2001 ed.), our station groups,
including pending acquisitions, rank among the top three in revenue market share
in 18 of the 19 markets in which we operate. Over 85% of our revenues are
derived from markets where we ranked as either first or second in market radio
revenues.
We operate a wide range of formats in geographically diverse markets across
the United States. Our largest markets, in order of our revenues, including pro
forma for pending acquisitions, are Seattle, Boston, Kansas City, Sacramento,
Portland, New Orleans and Denver.
Through our disciplined acquisition strategy, we seek to (1) build
top-three station clusters principally in large growth markets and (2) acquire
underdeveloped properties that offer the potential for significant improvements
in revenues and broadcast cash flow through the application of our operational
expertise. Although our focus has been on radio stations in top 50 markets, we
also acquire stations in top 75 markets which meet these criteria.
Our principal executive offices are located at 401 City Avenue, Suite 409,
Bala Cynwyd, Pennsylvania 19004, and our telephone number is (610) 660-5610.
USE OF PROCEEDS
Unless we indicate otherwise in the applicable prospectus supplement, we
anticipate that we will use any net proceeds from the sale of securities offered
by this prospectus and the applicable prospectus supplement for general
corporate purposes, including repaying or refinancing our senior bank facility,
or redeeming or repurchasing our Convertible Preferred Securities, Term Income
Deferrable Equity Securities (TIDES), and for acquisitions, working capital, and
other capital expenditures or any other purpose permitted under our senior bank
facility. The factors which we will consider in any refinancing will include the
amount and characteristics of any debt securities issued and may include, among
others, the impact of such refinancing on our interest coverage, debt-to-capital
ratio, liquidity and earnings per share. We may temporarily invest funds not
required immediately for such purposes in short term investment grade
securities.
1
RATIO OF EARNINGS TO FIXED CHARGES
AND
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
Entercom Communications' ratio of earnings to fixed charges and the ratio
of earnings to combined fixed charges and preferred stock dividends for each of
the two fiscal years ending September 30, 1997 and 1998 and for each of the
three fiscal years ending December 31, 1999, 2000 and 2001, respectively, are
set forth below. Any debt securities issued by Entercom Radio will be guaranteed
by Entercom Communications. The ratio of earnings to fixed charges and ratio of
earnings to combined fixed charges and preferred stock dividends are identical
for all periods because Entercom Communications had no outstanding preferred
stock during such periods. The information set forth below should be read in
conjunction with the financial information incorporated by reference herein. For
purposes of these calculations, "earnings" represents pretax income from
continuing operations before loss on equity investments and fixed charges and
"fixed charges" consist of interest expense, amortization of debt financing
costs and an amount equivalent to interest included in rental charges. We have
assumed that one-third of rental expense is representative of the interest
factor.
<Table>
<Caption>
FISCAL YEAR
ENDED FISCAL YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
-------------- ------------------
1997 1998 1999 2000 2001
------ ----- ---- ---- ----
Ratio of earnings to fixed charges................. 15.02 1.62 3.81 2.65 1.90
Ratio of earnings to combined fixed charges and
preferred stock dividends........................ 15.02 1.62 3.81 2.65 1.90
</Table>
2
DESCRIPTION OF CAPITAL STOCK
Authorized capital stock of Entercom Communications as of January 31, 2002
consisted of:
- 200,000,000 shares of Class A common stock, of which 34,829,917 shares
were issued and outstanding;
- 75,000,000 shares of Class B common stock, of which 10,531,805 shares
were issued and outstanding;
- 50,000,000 shares of Class C common stock, none of which were issued and
outstanding; and
- 25,000,000 shares of preferred stock, none of which were issued or
outstanding.
We have reserved for issuance under our 1998 Equity Compensation Plan, as
amended, shares of Class A common stock equal to the sum of 2,500,000 and 10% of
the number of total outstanding shares of common stock of all classes. As of
January 31, 2002, 3,617,645 shares of Class A common stock were available for
future grants under this plan. We also have reserved 1,850,000 shares of Class A
common stock for issuance under our Employee Stock Purchase Plan, of which
1,794,264 shares were available for purchase as of January 31, 2002.
The following summary describes the material terms of our capital stock.
However, you should refer to the actual terms of our capital stock contained in
our amended and restated articles of incorporation and amended and restated
bylaws and to the applicable provisions of the Pennsylvania Business Corporation
Law of 1988.
COMMON STOCK
The rights of holders of the common stock are identical in all respects,
except as discussed below. All of the outstanding shares of Class A common stock
and Class B common stock are, and the shares of Class A common stock sold in the
Class A common stock offering will be, upon issuance and payment of the purchase
price therefor, validly issued, fully paid and nonassessable.
DIVIDENDS
Subject to the right of the holders of any class of preferred stock,
holders of shares of our common stock are entitled to receive dividends that may
be declared by our board of directors out of legally available funds. No
dividend may be declared or paid in cash or property on any share of any class
of common stock unless simultaneously the same dividend is declared or paid on
each share of that and every other class of common stock; provided, that, in the
event of stock dividends, holders of a specific class of common stock shall be
entitled to receive only additional shares of that class.
VOTING RIGHTS
The Class A common stock and the Class B common stock vote together as a
single class on all matters submitted to a vote of shareholders. Each share of
Class A common stock is entitled to one vote and each share of Class B common
stock is entitled to ten votes, except:
- any share of Class B common stock not voted by either Joseph M. Field or
David J. Field, in his own right or pursuant to a proxy, is entitled to
one vote;
- the holders of Class A common stock, voting as a separate class, are
entitled to elect two Class A directors;
- each share of Class B common stock is entitled to one vote with respect
to any Going Private Transaction (defined as a "Rule 13e-3 transaction"
under the Exchange Act); and
- as required by law.
The Class A directors serve one-year terms and must be "independent
directors." For this purpose, an "independent director" means a person who is
not an officer or employee of us or any of our subsidiaries, and who does not
have a relationship which, in the opinion of the board of directors, would
interfere with the exercise of independent judgment in carrying out the
responsibilities of a director. Holders of common stock are not entitled to
cumulate votes in the election of directors.
3
LIQUIDATION RIGHTS
Upon our liquidation, dissolution or winding-up, the holders of our common
stock are entitled to share ratably in all assets available for distribution
after payment in full to creditors and holders of our preferred stock, if any.
CONVERSION OF CLASS A COMMON STOCK
Shares of Class A common stock owned by a Regulated Entity (defined as
either an entity that is a "bank holding company" under the Bank Holding Company
Act of 1956 or a non-bank subsidiary of such an entity, or an entity that,
pursuant to Section 8(a) of the International Banking Act of 1978 is subject to
the provisions of the Bank Holding Company Act, or any non-bank subsidiary of
such an entity), are convertible at any time, at the option of the holder, into
an equal number of fully paid and non-assessable shares of Class C common stock.
All conversion rights of Class A common stock are subject to any necessary FCC
approval.
CONVERSION, TRANSFERABILITY OF CLASS B COMMON STOCK
Shares of Class B common stock are convertible at any time, at the option
of the holder, into an equal number of fully paid and non-assessable shares of
Class A common stock. All conversion rights of Class B common stock are subject
to any necessary FCC approval. Shares of Class B common stock transferred to a
party other than Joseph M. Field, David J. Field, a spouse or lineal descendant
of either Joseph M. Field or David J. Field or any spouse of such lineal
descendant, a trustee of a trust established for the benefit of any such persons
or the estate of any such persons are automatically converted into an equal
number of fully paid and non-assessable shares of Class A common stock.
CONVERSION, TRANSFERABILITY OF CLASS C COMMON STOCK
Shares of Class C common stock are convertible at any time, subject to
certain restrictions, at the option of the holder thereof, into an equal number
of fully paid and non-assessable shares of Class A common stock. A Regulated
Entity may not convert shares of Class C common stock into Class A common stock
if, as a result of such conversion it would own more than 4.99% of the Class A
common stock unless such conversion is permitted under our amended and restated
articles of incorporation or otherwise under the Banking Holding Company Act.
All conversion rights of Class C common stock are subject to any necessary FCC
approval. In general, shares of Class C common stock transferred to a party
other than a Regulated Entity are automatically converted into an equal number
of fully paid and non-assessable shares of Class A common stock. Shares of Class
C common stock may be transferred by a Regulated Entity under a limited set of
circumstances.
OTHER PROVISIONS
The holders of common stock are not entitled to preemptive or similar
rights.
PREFERRED STOCK
We are authorized to issue 25,000,000 shares of preferred stock, par value
$.01 per share. Our board of directors, in its sole discretion, may designate
and issue one or more series of preferred stock from the authorized and unissued
shares of preferred stock. Subject to limitations imposed by law or our amended
and restated articles of incorporation, the board of directors is empowered to
determine:
- the designation of and the number of shares constituting a series of
preferred stock;
- the dividend rate, if any, for the series;
- the terms and conditions of any voting and conversion rights, if any, for
the series;
- the number of directors, if any, which the series shall be entitled to
elect;
- the amounts payable on the series upon our liquidation, dissolution or
winding-up;
4
- the redemption prices and terms, if any, applicable to the series; and
- the preferences and relative rights among the series of preferred stock.
Such rights, preferences, privileges and limitations of preferred stock
could adversely affect the rights of holders of common stock. There are
currently no shares of preferred stock outstanding.
When we offer to sell a particular class or series of preferred securities,
we will describe the specific terms and conditions of such class or series in a
supplement to this prospectus.
Unless otherwise specified in the applicable prospectus supplement, the
preferred stock will, with respect to rights to the payment of dividends and
distribution of our assets and rights upon our liquidation, dissolution or
winding up, rank:
- senior to all classes or series of our common stock and to all of our
equity securities the terms of which provide that those equity securities
are subordinated to the preferred stock;
- junior to all of our equity securities which the terms of that preferred
stock provide will rank senior to it; and
- on a parity with all of our equity securities other than those referred
to in the clauses above.
FOREIGN OWNERSHIP
Our amended and restated articles of incorporation restrict the ownership,
voting and transfer of our capital stock, including our common stock, in
accordance with the Communications Act and the rules of the FCC, which currently
prohibit the issuance of more than 25% of our outstanding capital stock (or more
than 25% of the voting rights it represents) to or for the account of aliens or
corporations otherwise subject to domination or control by aliens. In addition,
the amended and restated articles authorize our board of directors to take
action to enforce these prohibitions, including requiring redemptions of common
stock and placing a legend regarding restrictions on foreign ownership on the
certificates representing the common stock.
CERTAIN PROVISIONS OF OUR AMENDED AND RESTATED ARTICLES OF INCORPORATION AND
AMENDED AND RESTATED BYLAWS
Our amended and restated articles of incorporation and amended and restated
bylaws include provisions that could have an anti-takeover effect. These
provisions are intended to preserve the continuity and stability of our board of
directors and the policies formulated by our board of directors. These
provisions are also intended to help ensure that the board of directors, if
confronted by an unsolicited proposal from a third party that has acquired a
block of our stock, will have sufficient time to review the proposal, to
consider appropriate alternatives to the proposal and to act in what it believes
to be the best interests of the shareholders.
The following is a summary of the provisions of our amended and restated
articles of incorporation that we consider material, but does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
provisions of our amended and restated articles of incorporation. The board of
directors has no current plans to formulate or effect additional measures that
could have an anti-takeover effect.
Exculpation. Directors and officers shall not be personally liable for
monetary damages (including, without limitation, any judgment, amount paid in
settlement, penalty, punitive damages or expense of any nature (including,
without limitation, attorneys' fees and disbursements)) for any action taken, or
any failure to take any action, unless (1) the director has breached or failed
to perform the duties of his or her office and (2) the breach or failure to
perform constitutes self-dealing, willful misconduct or recklessness.
Indemnification. To the fullest extent permitted by the Pennsylvania
Business Corporation Law, we will indemnify any person who was, is, or is
threatened to be made, a party to a proceeding by reason of the fact that he or
she (1) is or was our director or officer or (2) while our director or officer,
is or was serving at our request as a director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another foreign
or domestic corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise.
5
Blank Check Preferred Stock. Our board of directors may authorize the
issuance of up to 25,000,000 shares of preferred stock in one or more classes or
series and may designate the dividend rate, voting rights and other rights,
preferences and restrictions of each such class or series. Our board of
directors has no present intention to issue any preferred stock; however, our
board of directors has the authority, without further shareholder approval, to
issue one or more series of preferred stock that could, depending on the terms
of such series, either impede or facilitate the completion of a merger, tender
offer or other takeover attempt. Although our board of directors is required to
make any determination to issue such stock based on its judgment as to the best
interests of our shareholders, our board of directors could act in a manner that
would discourage an acquisition attempt or other transaction that some, or a
majority, of the shareholders might believe to be in their best interests or in
which shareholders might receive a premium for their stock over the then market
price of such stock. Our board of directors does not intend to seek shareholder
approval prior to any issuance of such stock, unless otherwise required by law.
PENNSYLVANIA CONTROL-SHARE ACQUISITIONS LAW
We are subject to the Pennsylvania Business Corporation Law. Generally,
subchapters 25E, F, G, H, I and J of the Pennsylvania Business Corporation Law
place procedural requirements and establish restrictions upon the acquisition of
voting shares of a corporation which would entitle the acquiring person to cast
or direct the casting of a certain percentage of votes in an election of
directors. Subchapter 25E of the PBCL provides generally that, if we were
involved in a "control transaction," our shareholders would have the right to
demand from a "controlling person or group" payment of the fair value of their
shares. For purposes of subchapter 25E, a "controlling person or group" is a
person or group of persons acting in concert that, through voting shares, has
voting power over at least 20% of the votes which our shareholders would be
entitled to cast in the election of directors. A control transaction arises, in
general, when a person or group acquires the status of a controlling person or
group. In general, Subchapter 25F of the Pennsylvania Business Corporation Law
delays for five years and imposes conditions upon "business combinations"
between an "interested shareholder" and us. The term "business combination" is
defined broadly to include various merger, consolidation, division, exchange or
sale transactions, including transactions utilizing our assets for purchase
price amortization or refinancing purposes. An "interested shareholder," in
general, would be a beneficial owner of at least 20% of our voting shares.
In general, Subchapter 25G of the Pennsylvania Business Corporation Law
suspends the voting rights of the "control shares" of a shareholder that
acquires for the first time 20% or more, 33 1/3% or more or 50% or more of our
shares entitled to be voted in an election of directors. The voting rights of
the control shares generally remain suspended until such time as our
"disinterested" shareholders vote to restore the voting power of the acquiring
shareholder.
Subchapter 25H of the Pennsylvania Business Corporation Law provides
circumstances for our recovery of profits made upon the sale of our common stock
by a "controlling person or group" if the sale occurs within 18 months after the
controlling person or group became such and the common stock was acquired during
such 18 month period or within 24 months prior thereto. In general, for purposes
of Subchapter 25H, a "controlling person or group" is a person or group that (1)
has acquired, (2) offered to acquire or (3) publicly disclosed or caused to be
disclosed an intention to acquire voting power over shares that would entitle
such person or group to cast at least 20% of the votes that our shareholders
would be entitled to cast in the election of directors.
If our disinterested shareholders vote to restore the voting power of a
shareholder who acquires control shares subject to Subchapter 25G, we would then
be subject to subchapters 25I and J of the Pennsylvania Business Corporation
Law. Subchapter 25I generally provides for a minimum severance payment to
certain employees terminated within two years of such approval. Subchapter 25J,
in general, prohibits the abrogation of certain labor contracts prior to their
stated date of expiration.
The foregoing summary describes some of the material terms of certain
subchapters of the Pennsylvania Business Corporation Law. However, you should
refer to the actual statute.
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TRANSFER AGENT AND REGISTRAR
Transfer Agent and Registrar for our common stock is First Union National
Bank.
DESCRIPTION OF DEBT SECURITIES
This prospectus describes certain general terms and provisions of our debt
securities. When we offer to sell a particular series of debt securities, we
will describe the specific terms of the series in a supplement to this
prospectus. We will also indicate in the applicable prospectus supplement
whether the general terms and provisions described in this prospectus apply to a
particular series of debt securities.
Entercom Radio may offer under this prospectus up to $250,000,000 aggregate
principal amount of debt securities, or if debt securities are issued at a
discount, or in a foreign currency or composite currency, such principal amount
as may be sold for an aggregate public offering price of up to $250,000,000.
Unless otherwise specified in a supplement to this prospectus, the debt
securities will be the direct, unsecured obligations of Entercom Radio and will
rank equally with all of its other unsecured and unsubordinated indebtedness.
Any debt securities issued by Entercom Radio will be co-issued by Entercom
Capital, the wholly owned subsidiary of Entercom Radio. Entercom Radio's payment
obligations under any series of debt securities will be guaranteed by Entercom
Communications and may be guaranteed by one or more Co-Registrants.
The debt securities will be issued under an indenture between us and a
trustee, as trustee. We have summarized select portions of the indenture below.
The summary is not complete. The form of the indenture has been filed as an
exhibit to the registration statement and you should read the indenture for
provisions that may be important to you. Capitalized terms used in the summary
have the meaning specified in the indenture.
When we refer to "we," "our" and "us" in this section, we mean Entercom
Radio, LLC and Entercom Capital, Inc., as co-issuers, unless the context
otherwise requires or as otherwise expressly stated.
GENERAL
The terms of each series of debt securities will be established by or
pursuant to a resolution of our Board of Directors and set forth or determined
in the manner provided in an officers' certificate or by a supplemental
indenture. The particular terms of each series of debt securities will be
described in a prospectus supplement relating to such series, including any
pricing supplement.
We may issue an unlimited amount of debt securities under the indenture
that may be in one or more series with the same or various maturities, at par,
at a premium, or at a discount. We will set forth in a prospectus supplement,
including any pricing supplement, relating to any series of debt securities
being offered, the aggregate principal amount and the following terms of the
debt securities:
- the title of the debt securities;
- the price or prices (expressed as a percentage of the principal amount)
at which we will sell the debt securities;
- any limit on the aggregate principal amount of the debt securities;
- the date or dates on which we will pay the principal on the debt
securities;
- the rate or rates (which may be fixed or variable) per annum or the
method used to determine the rate or rates (including any commodity,
commodity index, stock exchange index or financial index) at which the
debt securities will bear interest, the date or dates from which interest
will accrue, the date or dates on which interest will commence and be
payable and any regular record date for the interest payable on any
interest payment date;
- whether the debt securities rank as senior subordinated debt securities
or subordinated debt securities, or any combination thereof;
- the form and terms of any guarantee of any debt securities;
- any depositories, interest rate calculation agents or other agents with
respect to the debt securities;
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- whether, the ratio at which and the terms and conditions upon which, if
any, the debt securities will be convertible into or exchangeable for our
common stock or our other securities or securities of another person;
- the place or places where principal of, premium, if any, and interest, if
any, on the debt securities will be payable or the method of such
payment, if by wire transfer, mail or by other means;
- the terms and conditions upon which we may redeem the debt securities;
- any obligation we have to redeem or purchase the debt securities pursuant
to any sinking fund or analogous provisions or at the option of a holder
of debt securities;
- the dates on which and the price or prices at which we will repurchase
debt securities at the option of the holders of debt securities and other
detailed terms and provisions of these repurchase obligations;
- the dates, if any, on which, and the price or prices at which, the debt
securities will be repurchased at the option of the holders thereof and
other detailed terms and provisions of such repurchase obligations;
- the denominations in which the debt securities will be issued, if other
than denominations of $1,000 and any integral multiple thereof;
- whether the debt securities will be issued in bearer or fully registered
form (and if in fully registered form, whether the debt securities will
be issuable, in whole or in part, as global debt securities);
- the portion of principal amount of the debt securities payable upon
declaration of acceleration of the maturity date, if other than the
principal amount;
- the currency of denomination of the debt securities;
- the designation of the currency, currencies or currency units in which
payment of principal of, premium and interest on the debt securities will
be made;
- if payments of principal of, premium or interest on the debt securities
will be made in one or more currencies or currency units other than that
or those in which the debt securities are denominated, the manner in
which the exchange rate with respect to these payments will be
determined;
- the manner in which the amounts of payment of principal of, or premium or
interest on the debt securities will be determined, if these amounts may
be determined by reference to an index based on a currency or currencies
other than that in which the debt securities are denominated or
designated to be payable or by reference to a commodity, commodity index,
stock exchange index or financial index;
- any provisions relating to any security provided for the debt securities;
- any addition to or change in the events of default described in this
prospectus or in the indenture with respect to the debt securities and
any change in the acceleration provisions described in this prospectus or
in the indenture with respect to the debt securities;
- any addition to, change in or deletion from, the covenants described in
this prospectus or in the indenture with respect to the debt securities;
- any other terms of the debt securities, which may modify, supplement or
delete any provision of the indenture as it applies to that series; and
- any depositaries, interest rate calculation agents, exchange rate
calculation agents or other agents with respect to the debt securities.
In addition, the indenture does not limit our ability to issue subordinated
debt securities. Any subordination provisions of a particular series of debt
securities will be set forth in the officer's certificate or supplemental
indenture related to that series of debt securities and will be described in the
relevant prospectus supplement.
8
We may issue debt securities that provide for an amount less than their
stated principal amount to be due and payable upon declaration of acceleration
of their maturity pursuant to the terms of the indenture. We will provide you
with information on the federal income tax considerations and other special
considerations applicable to any of these debt securities in the applicable
prospectus supplement.
If we denominate the purchase price of any of the debt securities in a
foreign currency or currencies or a foreign currency unit or units, or if the
principal of and any premium and interest on any series of debt securities is
payable in a foreign currency or currencies or a foreign currency unit or units,
we will provide you with information on the restrictions, elections, general tax
considerations, specific terms and other information with respect to that issue
of debt securities and such foreign currency or currencies or foreign currency
unit or units in the applicable prospectus supplement.
TRANSFER AND EXCHANGE
Each debt security will be represented by either one or more global
securities registered in the name of The Depository Trust Company, as
depositary, or a nominee (we will refer to any debt security represented by a
global debt security as a "book-entry debt security"), or a certificate issued
in definitive registered form (we will refer to any debt security represented by
a certificated security as a "certificated debt security") as set forth in the
applicable prospectus supplement. Except as set forth under the heading "Global
Debt Securities and Book-Entry System" below, book-entry debt securities will
not be issuable in certificated form.
CERTIFICATED DEBT SECURITIES. You may transfer or exchange certificated
debt securities at any office we maintain for this purpose in accordance with
the terms of the indenture. No service charge will be made for any transfer or
exchange of certificated debt securities, but we may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
with a transfer or exchange.
You may effect the transfer of certificated debt securities and the right
to receive the principal of, premium and interest on certificated debt
securities only by surrendering the certificate representing those certificated
debt securities and either reissuance by us or the trustee of the certificate to
the new holder or the issuance by us or the trustee of a new certificate to the
new holder.
GLOBAL DEBT SECURITIES AND BOOK-ENTRY SYSTEM. Each global debt security
representing book-entry debt securities will be deposited with, or on behalf of,
the depositary, and registered in the name of the depositary or a nominee of the
depositary.
The depositary has indicated it intends to follow the following procedures
with respect to book-entry debt securities.
Ownership of beneficial interests in book-entry debt securities will be
limited to persons that have accounts with the depositary for the related global
debt security, which we refer to as participants, or persons that may hold
interests through participants. Upon the issuance of a global debt security, the
depositary will credit, on its book-entry registration and transfer system, the
participants' accounts with the respective principal amounts of the book-entry
debt securities represented by such global debt security beneficially owned by
such participants. The accounts to be credited will be designated by any
dealers, underwriters or agents participating in the distribution of the
book-entry debt securities. Ownership of book-entry debt securities will be
shown on, and the transfer of such ownership interests will be effected only
through, records maintained by the depositary for the related global debt
security (with respect to interests of participants) and on the records of
participants (with respect to interests of persons holding through
participants). The laws of some states may require that certain purchasers of
securities take physical delivery of such securities in definitive form. These
laws may impair the ability to own, transfer or pledge beneficial interests in
book-entry debt securities.
So long as the depositary for a global debt security, or its nominee, is
the registered owner of that global debt security, the depositary or its
nominee, as the case may be, will be considered the sole owner or holder of the
book-entry debt securities represented by such global debt security for all
purposes under the indenture. Except as described below, beneficial owners of
book-entry debt securities will not be entitled to have securities registered in
their names, will not receive or be entitled to receive physical delivery of a
certificate in
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definitive form representing securities and will not be considered the owners or
holders of those securities under the indenture. Accordingly, each person
beneficially owning book-entry debt securities must rely on the procedures of
the depositary for the related global debt security and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interest, to exercise any rights of a holder under the indenture.
We understand, however, that under existing industry practice, the
depositary will authorize the persons on whose behalf it holds a global debt
security to exercise certain rights of holders of debt securities, and the
indenture provides that we, the trustee and our respective agents will treat as
the holder of a debt security the persons specified in a written statement of
the depositary with respect to that global debt security for purposes of
obtaining any consents or directions required to be given by holders of the debt
securities pursuant to the indenture.
We will make payments of principal of, and premium and interest on
book-entry debt securities to the depositary or its nominee, as the case may be,
as the registered holder of the related global debt security. We, the trustee
and any other agent of ours or agent of the trustee will not have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a global debt
security or for maintaining, supervising or reviewing any records relating to
beneficial ownership interests.
We expect that the depositary, upon receipt of any payment of principal of,
premium or interest on a global debt security, will immediately credit
participants' accounts with payments in amounts proportionate to the respective
amounts of book-entry debt securities held by each participant as shown on the
records of such depositary. We also expect that payments by participants to
owners of beneficial interests in book-entry debt securities held through those
participants will be governed by standing customer instructions and customary
practices, as is now the case with the securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of those participants.
We will issue certificated debt securities in exchange for each global debt
security if the depositary is at any time unwilling or unable to continue as
depositary or ceases to be a clearing agency registered under the Securities
Exchange Act of 1934, as amended, or Exchange Act, and a successor depositary
registered as a clearing agency under the Exchange Act is not appointed by us
within 90 days. In addition, we may at any time and in our sole discretion
determine not to have the book-entry debt securities of any series represented
by one or more global debt securities and, in that event, will issue
certificated debt securities in exchange for the global debt securities of that
series. Global debt securities will also be exchangeable by the holders for
certificated debt securities if an event of default with respect to the
book-entry debt securities represented by those global debt securities has
occurred and is continuing. Any certificated debt securities issued in exchange
for a global debt security will be registered in such name or names as the
depositary shall instruct the trustee. We expect that such instructions will be
based upon directions received by the depositary from participants with respect
to ownership of book-entry debt securities relating to such global debt
security.
We have obtained the foregoing information concerning the depositary and
the depositary's book-entry system from sources we believe to be reliable, but
we take no responsibility for the accuracy of this information.
CHANGE OF CONTROL
Unless we state otherwise in the applicable prospectus supplement, the debt
securities will not contain any provisions which may afford holders of the debt
securities protection in the event we undergo a change in control or in the
event of a highly leveraged transaction (whether or not such transaction results
in a change in control) which could adversely affect holders of debt securities.
COVENANTS
We will set forth in the applicable prospectus supplement any restrictive
covenants applicable to any issue of debt securities.
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CONSOLIDATION, MERGER AND SALE OF ASSETS
Unless otherwise stated in the applicable prospectus supplement, we may not
consolidate with or merge with or into, or convey, transfer or lease all or
substantially all of our properties and assets to, any person, which we refer to
as a successor person, unless:
- we are the surviving corporation or the successor person (if other than
Entercom Radio or Entercom Capital, as applicable) is a corporation
organized and validly existing under the laws of any U.S. domestic
jurisdiction and expressly assumes our obligations on the debt securities
and under the indenture;
- immediately after giving effect to the transaction, no event of default,
and no event which, after notice or lapse of time, or both, would become
an event of default, shall have occurred and be continuing under the
indenture; and
- certain other conditions that may be set forth in the applicable
prospectus supplement are met.
EVENTS OF DEFAULT
Unless otherwise stated in the applicable prospectus supplement, event of
default means, with respect to any series of debt securities, any of the
following:
- default in the payment of any interest upon any debt security of that
series when it becomes due and payable, and continuance of that default
for a period of 30 days (unless the entire amount of the payment is
deposited by us with the trustee or with a paying agent prior to the
expiration of the 30-day period);
- default in the payment of principal of or premium on any debt security of
that series when due and payable at maturity, upon redemption or
otherwise;
- default in the deposit of any sinking fund payment, when and as due in
respect of any debt security of that series;
- default in the performance or breach of any other covenant or warranty by
us in the indenture (other than a covenant or warranty that has been
included in the indenture solely for the benefit of a series of debt
securities other than that series), which default continues uncured for a
period of 60 days after we receive written notice from the trustee or we
and the trustee receive written notice from the holders of not less than
a majority in principal amount of the outstanding debt securities of that
series as provided in the indenture;
- certain events of bankruptcy, insolvency or reorganization; and
- any other event of default provided with respect to debt securities of
that series that is described in the applicable prospectus supplement
accompanying this prospectus.
No event of default with respect to a particular series of debt securities
(except as to certain events of bankruptcy, insolvency or reorganization)
necessarily constitutes an event of default with respect to any other series of
debt securities. The occurrence of an event of default may constitute an event
of default under our bank credit agreements in existence from time to time. In
addition, the occurrence of certain events of default or an acceleration under
the indenture may constitute an event of default under certain of our other
indebtedness outstanding from time to time.
If an event of default with respect to debt securities of any series at the
time outstanding occurs and is continuing, then the trustee or the holders of
not less than a majority in principal amount of the outstanding debt securities
of that series may, by a notice in writing to us (and to the trustee if given by
the holders), declare to be due and payable immediately the principal (or, if
the debt securities of that series are discount securities, that portion of the
principal amount as may be specified in the terms of that series) of and accrued
and unpaid interest, if any, on all debt securities of that series. In the case
of an event of default resulting from certain events of bankruptcy, insolvency
or reorganization, the principal (or such specified amount) of and accrued and
unpaid interest, if any, on all outstanding debt securities will become and be
immediately due and payable without any declaration or other act on the part of
the trustee or any holder of outstanding debt
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securities. At any time after a declaration of acceleration with respect to debt
securities of any series has been made, but before a judgment or decree for
payment of the money due has been obtained by the trustee, the holders of a
majority in principal amount of the outstanding debt securities of that series
may rescind and annul the acceleration if all events of default, other than the
non-payment of accelerated principal and interest, if any, with respect to debt
securities of that series, have been cured or waived as provided in the
indenture. We refer you to the prospectus supplement relating to any series of
debt securities that are discount securities for the particular provisions
relating to acceleration of a portion of the principal amount of such discount
securities upon the occurrence of an event of default.
The indenture provides that the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
holder of outstanding debt securities, unless the trustee receives indemnity
satisfactory to it against any loss, liability or expense. Subject to certain
rights of the trustee, the holders of a majority in principal amount of the
outstanding debt securities of any series will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the trustee or exercising any trust or power conferred on the trustee with
respect to the debt securities of that series.
Unless stated otherwise in the applicable prospectus supplement, no holder
of any debt security of any series will have any right to institute any
proceeding, judicial or otherwise, with respect to the indenture or for the
appointment of a receiver or trustee, or for any remedy under the indenture,
unless:
- that holder has previously given to the trustee written notice of a
continuing event of default with respect to debt securities of that
series; and
- the holders of at least a majority in principal amount of the outstanding
debt securities of that series have made written request, and offered
reasonable indemnity, to the trustee to institute the proceeding as
trustee, and the trustee has not received from the holders of a majority
in principal amount of the outstanding debt securities of that series a
direction inconsistent with that request and has failed to institute the
proceeding within 60 days.
Notwithstanding the foregoing, the holder of any debt security will have an
absolute and unconditional right to receive payment of the principal of, premium
and any interest on that debt security on or after the due dates expressed in
that debt security and to institute suit for the enforcement of payment.
The indenture requires us, within 120 days after the end of our fiscal
year, to furnish to the trustee a statement as to compliance with the indenture.
The indenture provides that the trustee may withhold notice to the holders of
debt securities of any series of any default or event of default (except in
payment on any debt securities of that series) with respect to debt securities
of that series if it in good faith determines that withholding notice is in the
interest of the holders of those debt securities.
MODIFICATION AND WAIVER
We may modify and amend the indenture with the consent of the holders of at
least a majority in principal amount of the outstanding debt securities of each
series affected by the modifications or amendments. We may not make any
modification or amendment without the consent of the holders of each affected
debt security then outstanding if that amendment will:
- reduce the amount of debt securities whose holders must consent to an
amendment or waiver;
- reduce the rate of or extend the time for payment of interest (including
default interest) on any debt security;
- reduce the principal of or premium on or change the fixed maturity of any
debt security or reduce the amount of, or postpone the date fixed for,
the payment of any sinking fund or analogous obligation with respect to
any series of debt securities;
- reduce the principal amount of discount securities payable upon
acceleration of maturity;
- waive a default in the payment of the principal of, premium or interest
on any debt security (except a rescission of acceleration of the debt
securities of any series by the holders of at least a majority in
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aggregate principal amount of the then outstanding debt securities of
that series and a waiver of the payment default that resulted from such
acceleration);
- make the principal of or premium or interest on any debt security payable
in currency other than that stated in the debt security;
- make any change to certain provisions of the indenture relating to, among
other things, the right of holders of debt securities to receive payment
of the principal of, premium and interest on those debt securities and to
institute suit for the enforcement of any such payment and to waivers or
amendments; or
- waive a redemption payment with respect to any debt security.
Except for certain specified provisions, the holders of at least a majority
in principal amount of the outstanding debt securities of any series may on
behalf of the holders of all debt securities of that series waive our compliance
with provisions of the indenture. The holders of a majority in principal amount
of the outstanding debt securities of any series may on behalf of the holders of
all the debt securities of such series waive any past default under the
indenture with respect to that series and its consequences, except a default in
the payment of the principal of, premium or any interest on any debt security of
that series or in respect of a covenant or provision which cannot be modified or
amended without the consent of the holder of each outstanding debt security of
the series affected; provided, however, that the holders of a majority in
principal amount of the outstanding debt securities of any series may rescind an
acceleration and its consequences, including any related payment default that
resulted from the acceleration.
DEFEASANCE OF DEBT SECURITIES AND CERTAIN COVENANTS IN CERTAIN CIRCUMSTANCES
LEGAL DEFEASANCE. The indenture provides that, unless otherwise provided
by the terms of the applicable series of debt securities, we may be discharged
from any and all obligations in respect of the debt securities of any series
(except for certain obligations to register the transfer or exchange of debt
securities of such series, to replace stolen, lost or mutilated debt securities
of such series, and to maintain paying agencies and certain provisions relating
to the treatment of funds held by paying agents). We will be so discharged upon
the deposit with the trustee, in trust, of money and/or U.S. government
obligations or, in the case of debt securities denominated in a single currency
other than U.S. dollars, foreign government obligations, that, through the
payment of interest and principal in accordance with their terms, will provide
money in an amount sufficient in the opinion of a nationally recognized firm of
independent public accountants to pay and discharge each installment of
principal, premium and interest on and any mandatory sinking fund payments in
respect of the debt securities of that series on the stated maturity of those
payments in accordance with the terms of the indenture and those debt
securities.
This discharge may occur only if, among other things, we have delivered to
the trustee an opinion of counsel stating that we have received from, or there
has been published by, the United States Internal Revenue Service a ruling or,
since the date of execution of the indenture, there has been a change in the
applicable United States federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the holders of the debt
securities of that series will not recognize income, gain or loss for United
States federal income tax purposes as a result of the deposit, defeasance and
discharge and will be subject to United States federal income tax on the same
amounts and in the same manner and at the same times as would have been the case
if the deposit, defeasance and discharge had not occurred.
DEFEASANCE OF CERTAIN COVENANTS. The indenture provides that, unless
otherwise provided by the terms of the applicable series of debt securities,
upon compliance with certain conditions:
- we may omit to comply with the covenant described under the heading
"Consolidation, Merger and Sale of Assets" and certain other covenants
set forth in the indenture, as well as any additional covenants which may
be set forth in the applicable prospectus supplement; and
- any omission to comply with those covenants will not constitute a default
or an event of default with respect to the debt securities of that
series, or covenant defeasance.
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The conditions include:
- depositing with the trustee money and/or U.S. government obligations or,
in the case of debt securities denominated in a single currency other
than U.S. dollars, foreign government obligations, that, through the
payment of interest and principal in accordance with their terms, will
provide money in an amount sufficient in the opinion of a nationally
recognized firm of independent public accountants to pay and discharge
each installment of principal of, premium and interest on and any
mandatory sinking fund payments in respect of the debt securities of that
series on the stated maturity of those payments in accordance with the
terms of the indenture and those debt securities; and
- delivering to the trustee an opinion of counsel to the effect that the
holders of the debt securities of that series will not recognize income,
gain or loss for United States federal income tax purposes as a result of
the deposit and related covenant defeasance and will be subject to United
States federal income tax on the same amounts and in the same manner and
at the same times as would have been the case if the deposit and related
covenant defeasance had not occurred.
COVENANT DEFEASANCE AND EVENTS OF DEFAULT. In the event we exercise our
option to effect covenant defeasance with respect to any series of debt
securities and the debt securities of that series are declared due and payable
because of the occurrence of any event of default, the amount of money and/or
U.S. government obligations or foreign government obligations on deposit with
the trustee will be sufficient to pay amounts due on the debt securities of that
series at the time of their stated maturity but may not be sufficient to pay
amounts due on the debt securities of that series at the time of the
acceleration resulting from the event of default. However, we shall remain
liable for those payments.
GUARANTEES
Our payment obligations under any series of debt securities will be
guaranteed by Entercom Communications, and may be guaranteed by one or more of
the Co-Registrants. The terms of any such guarantee will be set forth in the
applicable prospectus supplement.
PLAN OF DISTRIBUTION
We may sell the securities to one or more underwriters for public offering
and sale by them and may also sell the securities to investors directly or
through agents. We will name any underwriter or agent involved in the offer and
sale of securities in the applicable prospectus supplement. We have reserved the
right to sell or exchange securities directly to investors on our own behalf in
those jurisdictions where we are authorized to do so.
We may distribute the securities from time to time in one or more
transactions:
- at a fixed price or prices, which may be changed;
- at market prices prevailing at the time of sale;
- at prices related to such prevailing market prices; or
- at negotiated prices.
We may also, from time to time, authorize dealers, acting as our agents, to
offer and sell securities upon the terms and conditions set forth in the
applicable prospectus supplement. In connection with the sale of securities, we,
or the purchasers of securities for whom the underwriters may act as agents, may
compensate underwriters in the form of underwriting discounts or commissions.
Underwriters may sell the securities to or through dealers, and those dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agent. Unless otherwise indicated in a prospectus supplement, an agent
will be acting on a best efforts basis and a dealer will purchase securities as
a principal, and may then resell the securities at varying prices to be
determined by the dealer.
14
We will describe in the applicable prospectus supplement any compensation
we pay to underwriters or agents in connection with the offering of securities,
and any discounts, concessions or commissions allowed by underwriters to
participating dealers. Dealers and agents participating in the distribution of
securities may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the securities may
be deemed to be underwriting discounts and commissions. We may enter into
agreements to indemnify underwriters, dealers and agents against certain civil
liabilities, including liabilities under the Securities Act, and to reimburse
these persons for certain expenses.
To facilitate the offering of securities, certain persons participating in
the offering may engage in transactions that stabilize, maintain, or otherwise
affect the price of the securities. This may include over-allotments or short
sales of the securities, which involve the sale by persons participating in the
offering of more securities than we sold to them. In these circumstances, these
persons would cover such over-allotments or short positions by making purchases
in the open market or by exercising their over-allotment option, if any. In
addition, these persons may stabilize or maintain the price of the securities by
bidding for or purchasing securities in the open market or by imposing penalty
bids, whereby selling concessions allowed to dealers participating in the
offering may be reclaimed if securities sold by them are repurchased in
connection with stabilization transactions. The effect of these transactions may
be to stabilize or maintain the market price of the securities at a level above
that which might otherwise prevail in the open market. These transactions may be
discontinued at any time.
Certain of the underwriters, dealers or agents and their associates may
engage in transactions with and perform services for us in the ordinary course
of our business.
LEGAL MATTERS
John C. Donlevie, Esq., Executive Vice President, Secretary and General
Counsel of Entercom, and Executive Vice President, Secretary and General Counsel
of Entercom Radio, will issue an opinion with respect to certain legal matters
with respect to the validity of the shares of Entercom's Class A common stock
and preferred stock. Latham & Watkins, Washington, D.C. will issue an opinion
with respect to certain legal matters with respect to Entercom Radio's debt
securities. Any underwriters will be advised about the other issues relating to
any offering by their own legal counsel. Mr. Donlevie is a full time employee of
Entercom and owns beneficial interests in less than one percent of our Class A
common stock.
EXPERTS
The consolidated financial statements and schedule as of December 31, 2001
and for the year then ended incorporated by reference in this prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report. Reference is made to said report,
which includes an explanatory paragraph with respect to a change in accounting
for derivative instruments and hedging activities pursuant to the provisions of
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Hedging Activities."
The consolidated financial statements and related consolidated financial
statement schedule as of December 31, 2000, and for each of the two years in the
period ended December 31, 2000 incorporated in this Prospectus by reference from
Entercom Communications Corp.'s Annual Report on Form 10-K for the year ended
December 31, 2001 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report which, is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
15
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS THAT IS ALSO PART
OF THIS DOCUMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT
FROM THAT CONTAINED OR INCORPORATED IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY,
SHARES OF CLASS A COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED OR INCORPORATED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF
SUCH INFORMATION, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS OR OF ANY SALE OF OUR CLASS A COMMON
STOCK.
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
PROSPECTUS SUPPLEMENT
About this Prospectus Supplement............. S-i
Special Note Regarding Forward-Looking
Statements................................. S-i
Information About Station and Market Data.... S-ii
Summary...................................... S-1
Risk Factors................................. S-9
Use of Proceeds.............................. S-15
Price Range of Our Class A Common Stock...... S-16
Dividend Policy.............................. S-16
Capitalization............................... S-17
Selected Consolidated Financial Data......... S-18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. S-23
Business..................................... S-37
Management................................... S-48
Principal Shareholders....................... S-54
Description of Certain Indebtedness.......... S-57
Certain Federal Income Tax Considerations.... S-61
Underwriting................................. S-65
Notice to Canadian Residents................. S-68
Legal Matters................................ S-70
Experts...................................... S-70
Where You Can Find More Information.......... S-71
PROSPECTUS
About this Prospectus........................ i
Where You Can Find More Information.......... i
Disclosure Regarding Forward-Looking
Statements................................. ii
The Company.................................. 1
Use of Proceeds.............................. 1
Ratio of Earnings to Fixed Charges and Ratio
of Earnings to Combined Fixed Charges and
Preferred Stock Dividends.................. 2
Description of Capital Stock................. 3
Description of Debt Securities............... 7
Plan of Distribution......................... 14
Legal Matters................................ 15
Experts...................................... 15
</Table>
[ENTERCOM LOGO]
3,500,000 Shares
Class A Common Stock
Deutsche Banc Alex. Brown
Credit Suisse First Boston
Banc of America Securities LLC
Goldman, Sachs & Co.
JPMorgan
Prospectus Supplement
February 27, 2002