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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 0-15392
REGENT COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 31-1492857
- ------------------------------- -------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
100 EAST RIVERCENTER BOULEVARD
9TH FLOOR
COVINGTON, KENTUCKY 41011
----------------------------------------
(Address of Principal Executive Offices)
(Zip Code)
(859) 292-0030
---------------------------------------------------
(Registrant's Telephone Number, including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- ----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.01 par value - 33,862,518 shares outstanding as of May 10, 2001
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REGENT COMMUNICATIONS, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2001
INDEX
PART I FINANCIAL INFORMATION PAGE
NUMBER
------
Item 1. Financial Statements
Condensed Consolidated Statements of Operations
for the three months ended March 31, 2001
(unaudited) and March 31, 2000 (unaudited)........... 3
Condensed Consolidated Balance Sheets
As of March 31, 2001 (unaudited) and
December 31, 2000.................................... 4
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 2001
(unaudited) and March 31, 2000 (unaudited)........... 5
Notes to Condensed Consolidated Financial Statements
(unaudited).......................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk.......................................... 13
PART II OTHER INFORMATION
Item 1. Legal Proceedings...................................... 14
Item 2. Changes in Securities and Use of Proceeds.............. 14
Item 6. Exhibits and Reports on Form 8-K....................... 14
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REGENT COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share amounts)
Three Months Ended
March 31,
------------------
2001 2000
---- ----
Gross broadcast revenues $ 12,403 $ 8,097
Less agency commissions 1,069 620
-------- --------
Net broadcast revenues 11,334 7,477
Station operating expenses 8,441 5,673
Depreciation and amortization 3,352 1,505
Corporate general and administrative expenses 1,326 986
-------- --------
Operating loss (1,785) (687)
Interest expense (986) (2,236)
Other (expense) income, net (137) 248
-------- --------
Loss before income taxes and extraordinary items (2,908) (2,675)
Income tax benefit 1,900 -
-------- --------
Loss before extraordinary item (1,008) (2,675)
Extraordinary loss on extinguishment of debt, net of taxes - (1,114)
-------- --------
Net loss $ (1,008) $ (3,789)
======== ========
Loss applicable to common shares:
Net loss $ (1,008) $ (3,789)
Preferred stock dividend requirements - (629)
Preferred stock accretion - (26,611)
-------- --------
Loss applicable to common shares $ (1,008) $(31,029)
======== ========
Basic and diluted loss per common share:
Loss before extraordinary items $ (0.03) $ (1.24)
Extraordinary items - (.05)
-------- --------
Net loss per common share $ (0.03) $ (1.29)
======== ========
Weighted average number of common shares used
in basic and diluted calculations 33,810 24,100
The accompanying notes are an integral part of these financial statements.
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REGENT COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
March 31, December 31,
2001 2000
----------------- ---------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,110 $ 778
Accounts receivable, less allowance of $499 and
$403 at March 31, 2001 and December 31, 2000,
respectively 8,790 10,639
Other current assets 503 595
--------- ---------
Total current assets 10,403 12,012
Property and equipment, net 20,830 20,716
Intangible assets, net 215,357 217,897
Other assets, net 2,048 2,108
--------- ---------
Total assets $ 248,638 $ 252,733
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,383 $ 1,672
Accrued compensation 750 932
Other current liabilities 1,952 2,298
--------- ---------
Total current liabilities 4,085 4,902
Long-term debt, less current portion 44,495 45,010
Deferred taxes and other long-term liabilities 2,475 4,401
--------- ---------
Total liabilities 51,055 54,313
Commitments and Contingencies
Stockholders' equity:
Common stock, $.01 par value, 60,000,000 shares authorized;
35,226,270 and 35,158,349 shares issued at March 31, 2001
and December 31, 2000, respectively 352 352
Treasury shares, 1,363,752 shares, at cost, at March 31, 2001
and December 31, 2000 (7,063) (7,063)
Additional paid-in capital 259,557 259,386
Retained deficit (55,263) (54,255)
--------- ---------
Total stockholders' equity 197,583 198,420
--------- ---------
Total liabilities and stockholders' equity $ 248,638 $ 252,733
========= =========
The accompanying notes are an integral part of these financial statements.
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REGENT COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Three months ended March 31,
------------------------------------
2001 2000
------------- -------------
Cash flows from operating activities:
Net cash provided by (used in) operating activities $ 1,800 $ (39)
Cash flows from investing activities:
Acquisitions of radio stations, net of cash acquired
and other acquisition costs (69) (67,667)
Proceeds from insurance claim and sales of assets 19 98
Capital expenditures (920) (197)
Escrow deposit for acquisition of radio stations - (5,000)
-------- --------
Net cash used in investing activities (970) (72,766)
Cash flows from financing activities:
Proceeds from issuance of common and
convertible preferred stocks 17 156,900
Payment on buyback of treasury shares - (1,513)
Dividends paid on all series of preferred stock - (8,153)
Redemption of Series B preferred stock - (5,000)
Principal payments on long-term debt (1,515) (24,778)
Long-term debt borrowings 1,000 -
Payments for deferred financing costs - (1,843)
Payment of issuance costs - (11,431)
-------- --------
Net cash (used in) provided by financing activities (498) 104,182
-------- --------
Net increase in cash and cash equivalents 332 31,377
Cash and cash equivalents at beginning of period 778 3,410
-------- --------
Cash and cash equivalents at end of period $ 1,110 $ 34,787
======== ========
Supplemental schedule of non-cash financing
and investing activities:
Common stock issued in conjunction with the
acquisition of stations in Utica-Rome and
Watertown, New York $ - $ 850
The accompanying notes are an integral part of these financial statements.
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REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
Regent Communications, Inc. (including its wholly-owned subsidiaries, the
"Company" or "Regent") was formed to acquire, own and operate radio stations in
medium-sized and small markets in the United States.
The condensed consolidated financial statements of Regent have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC) and, in the opinion of management, include all adjustments
necessary for a fair presentation of the results of operations, financial
position and cash flows for each period shown. All adjustments are of a normal
and recurring nature. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to SEC rules and
regulations. Results for interim periods may not be indicative of results for
the full year. The December 31, 2000 condensed balance sheet was derived from
audited financial statements. These financial statements should be read in
conjunction with the financial statements and notes thereto included in Regent's
Form 10-K for the year ended December 31, 2000.
2. COMPLETED AND PENDING ACQUISITIONS AND DISPOSITIONS
On May 15, 2001 the Company entered into a definitive agreement with Two
Petaz, Inc.; WFYR, Inc.; Winston Communications, Inc. of Illinois; and the
Cromwell Group, Inc., to acquire (i) substantially all the assets of WGLO(FM),
WPPY(FM), WRVP(FM) and WVEL(AM), serving the Peoria, Illinois market for a
purchase price of approximately $14.0 million in cash and (ii) the capital stock
of the corporations owning radio stations WFYR(FM) and WIXO(FM), also serving
the Peoria market, in exchange for $6.0 million in shares of Regent common
stock. Regent delivered an irrevocable letter of credit in the amount of $1.0
million to secure its obligations under the agreement. The Company expects the
transactions to close in the third quarter of 2001.
On May 9, 2001, the Company completed the acquisition by merger with
StarCom, Inc. of two FM and one AM radio stations (KKRS-FM, KLZZ-FM and KXSS-AM)
serving the St. Cloud, Minnesota market for approximately $5.0 million in cash.
The purchase was funded by borrowings under Regent's bank credit facility. Prior
to the closing of the purchase, the Company provided programming and other
services to the stations under a time brokerage agreement which began in July
2000.
On December 28, 2000, the Company entered into a definitive agreement with
NextMedia Group II, Inc. to acquire WJET-FM serving the Erie, Pennsylvania
market, for approximately $5.0 million in cash. Regent delivered an irrevocable
letter of credit in the amount of $250,000 to secure its obligations under the
agreement. The Federal Communications Commission has approved the assignment of
the station licenses, and the Company anticipates closing this acquisition in
the third quarter 2001. The closing of this transaction had been delayed by the
FCC's analysis of market revenue share in Erie, Pennsylvania .
On November 3, 2000, the Company entered into a definitive agreement to
sell substantially all the assets of its three Southern California radio
stations (KTPI-FM and KAVC-
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AM licensed to Mojave and Tehachapi, and KOSS-FM licensed to Rosamond) to
Concord Media Group, Inc. for approximately $13.5 million. The Federal
Communications Commission has approved the assignment of the station licenses,
and the Company anticipates closing the transaction in the second quarter 2001.
Action on the FCC application for approval of this sale had been delayed due to
the filing of an objection by the owner of a competing station in the market.
The following unaudited pro forma data summarize the combined results of
operations of Regent, together with the operations of the stations acquired
prior to 2001.
Three Months Ended March 31,
----------------------------
2001 2000
---- ----
(unaudited)
(In thousands, except per share amounts)
Net broadcast revenues $ 11,334 $ 10,854
Loss before extraordinary items $ (1,008) $ (743)
Net loss $ (1,008) $ (1,857)
Net loss per common share before extraordinary items:
Basic and diluted $ (0.03) $ (0.02)
Net loss per common share:
Basic and diluted $ (0.03) $ (0.05)
These unaudited pro forma amounts do not purport to be indicative of the
results that might have occurred if the foregoing transactions had been
consummated at the beginning of the three-month periods.
3. LONG-TERM DEBT
In January of 2000, the Company entered into a credit agreement with a
group of lenders which provides for a senior reducing revolving credit facility
expiring December 31, 2006 with an initial aggregate revolving commitment of up
to $125.0 million (including a commitment to issue letters of credit of up to
$25.0 million in aggregate face amount, subject to the maximum revolving
commitment available) and additional borrowing capacity of a maximum aggregate
amount of $50.0 million available, which subfacility would convert in January
2002 to a term loan maturing December 31, 2006. The credit facility is available
for working capital and acquisitions, including related acquisition expenses. At
March 31, 2001, there were borrowings of $44.0 million outstanding under this
facility and there were approximately $81.0 million of available borrowings,
subject to the terms and conditions of the credit facility.
Under the credit facility, the Company is required to maintain a minimum
interest rate coverage ratio, minimum fixed charge coverage ratio, maximum
corporate overhead, and maximum financial leverage ratio and to observe negative
covenants customary for facilities of this type. Borrowings under the credit
facility bear interest at a rate equal to, at the Company's option, either (a)
the higher of the rate announced or published publicly from time to time by the
agent as its corporate base of interest or the Overnight Federal Funds Rate plus
0.5%, in either case plus the applicable margin determined under the credit
facility, or (b) the reserve-adjusted
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Eurodollar Rate plus the applicable margin, which varies between 1.25% and 2.75%
depending upon the Company's financial leverage. Borrowings under the credit
facility bore interest at the rate of 6.54% as of March 31, 2001. The Company is
required to pay certain fees to the agent and the lenders for the underwriting
commitment, administration and use of the credit facility. The Company's
indebtedness under this credit facility is collateralized by liens on
substantially all of its assets and by a pledge of its operating and license
subsidiaries' stock and is guaranteed by these subsidiaries.
4. CAPITAL STOCK
The Company's authorized capital stock consists of 60,000,000 shares of
common stock and 40,000,000 shares of preferred stock. No shares of preferred
stock were issued at March 31, 2001. Of the authorized but unissued preferred
stock, 620,000 shares are designated as Series A convertible preferred stock,
1,000,000 shares as Series B senior convertible preferred stock, 4,000,000
shares as Series C convertible preferred stock, 1,000,000 shares as Series D
convertible preferred stock, 5,000,000 shares as Series E convertible preferred
stock, 4,100,000 million shares as Series F convertible preferred stock,
1,800,000 shares as Series G convertible preferred stock, 2,200,000 shares as
Series H convertible preferred stock and 4,100,000 shares of Series K
convertible preferred stock.
On March 20, 2001, Regent issued 37,230 shares of its common stock to River
Cities Capital Fund Limited Partnership upon the exercise in full, on a cashless
net issue basis, of outstanding warrants which provided for the purchase of a
total of 100,000 shares of Regent common stock at $5.00 per share. These
warrants had been issued in 1998 in connection with the issuance of Series B and
F convertible preferred stock. Regent's remaining warrants, which expire in
2003, entitle the holders to purchase a total of 790,000 shares of Regent's
common stock at $5.00 per share.
During the third quarter of 2000, Regent's Board of Directors approved a
program to buy back up to $10.0 million of its common stock. There were no
purchases of common stock by Regent under this program in the first quarter of
2001.
5. EARNINGS PER SHARE
Regent has adopted the provisions of SFAS 128, "Earnings Per Share." SFAS
128 calls for the dual presentation of basic and diluted earnings per share
("EPS"). Basic EPS is based upon the weighted average common shares outstanding
during the period. Diluted EPS reflects the potential dilution that would occur
if common stock equivalents were exercised. The effects of the assumed exercise
of outstanding options to purchase 1,971,058 of common stock and warrants to
purchase 790,000 shares of common stock would not be dilutive for all periods
presented. Therefore, basic EPS and diluted EPS are the same for all periods
presented.
6. INCOME TAXES
The Company's effective tax rate differs from that computed at the federal
statutory rate of 34% principally because of the effect of state income taxes of
2.5%, net of federal benefit, and an increase in deferred tax assets for true-up
of net operating loss carry-forwards.
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7. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) has issued an Exposure
Draft, Proposed Statement of Financial Accounting Standards, Business
Combinations and Intangible Assets-Accounting for Goodwill. The Exposure Draft
contains the FASB's tentative decisions about requiring the use of a
non-amortization approach to account for certain purchased intangible assets.
Under the non-amortization approach, certain intangible assets would be tested
for impairment, rather than being amortized to earnings.
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 prescribes the accounting
treatment for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
Regent may employ financial instruments to manage its exposure to fluctuations
in interest rates. Regent does not hold or issue such financial instruments for
trading purposes. In June 2000, the FASB issued SFAS 138, an amendment to SFAS
133. Regent has adopted SFAS 133 and related amendments, as required in the year
2001, and has determined the impact of adoption to be immaterial.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The performance of a radio station group, such as ours, is customarily
measured by its ability to generate broadcast cash flow. The term "broadcast
cash flow" means operating income (loss) before depreciation and amortization
and corporate general and administrative expenses, excluding barter activity.
Although broadcast cash flow is not a measure of performance calculated in
accordance with generally accepted accounting principles, we believe that
broadcast cash flow is accepted by the broadcasting industry as a generally
recognized measure of performance and is used by analysts who report publicly on
the performance of broadcasting companies. Nevertheless, this measure should not
be considered in isolation or as a substitute for operating income, net income,
net cash provided by operating activities or any other measure for determining
our operating performance or liquidity that is calculated in accordance with
generally accepted accounting principles.
This Form 10-Q includes certain forward-looking statements with respect to
our company that involve risks and uncertainties. These statements are
influenced by our financial position, business strategy, budgets, projected
costs, and plans and objectives of management for future operations. They may
use words such as "anticipate," "believe," "plan," "estimate," "expect,"
"intend," "project" and other similar expressions. Although we believe our
expectations reflected in these forward-looking statements are based on
reasonable assumptions, we cannot assure you that our expectations will prove
correct. Actual results and developments may differ materially from those
conveyed in the forward-looking statements. For these statements, we claim the
protections of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.
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Important factors that could cause actual results to differ materially from
the expectations reflected in the forward-looking statements include changes in
general economic, business and market conditions, as well as changes in such
conditions that may affect the radio broadcast industry or the markets in which
we operate, including, in particular, increased competition for attractive radio
properties and advertising dollars, fluctuations in the cost of operating radio
properties, and changes in the regulatory climate affecting radio broadcast
companies. These forward-looking statements speak only as of the date on which
they are made, and we undertake no obligation to update any forward-looking
statement to reflect events or circumstances after the date of this Form 10-Q.
If we do update or correct one or more forward-looking statements, you should
not conclude that we will make additional updates or corrections with respect to
those or any other forward-looking statements.
RESULTS OF OPERATIONS
A comparison of the three months ended March 31, 2001 versus March 31, 2000
follows:
Our results from operations for the first three months of 2001 showed
significant increases over the same period of 2000, primarily due to the
acquisitions of stations in Grand Rapids, Michigan and Albany, New York in the
third quarter of 2000 and, to a lesser extent, the acquisitions of stations in
Watertown, New York, Utica, New York and El Paso Texas in the first quarter of
2000. Net broadcast revenues in the first quarter of 2001 increased by 52% from
$7.5 million in the first quarter of 2000 to $11.3 million, station operating
expenses increased 49% from $5.7 million to $8.4 million, and depreciation and
amortization increased 123% from $1.5 million to $3.4 million. During the first
quarter of 2001, in comparison to the same period of 2000, our broadcast cash
flow increased by 60% from $1.8 million to $2.9 million.
While the acquisitions mentioned above have affected the comparability of
our 2001 results from operations to those of 2000, we believe meaningful
quarter-to-quarter comparisons can be made for results of operations for those
markets in which we have been operating for five full quarters, exclusive of any
markets held for sale. This group of comparable markets is currently represented
by five markets and 19 radio stations. In these comparable markets, for the
three months ended March 31, 2001, as compared to the same period in 2000, our
net broadcast revenues, excluding barter revenues, increased 9.1% and broadcast
cash flow increased by 18.4%. The increases were due primarily to a combination
of larger and better trained local sales departments at the radio stations,
contributing to increased revenues and increased cost efficiencies.
Corporate general and administrative expenses increased 30% from
approximately $1.0 million to $1.3 million in the first quarter of 2001 compared
to 2000 as a result of increasing the corporate infrastructure to support a
larger company and from costs related to preparing our technical infrastructure
for further growth. Interest expense decreased 56% from approximately $2.2
million to $1.0 million in 2001, primarily as a result of $1.5 million of
interest expense recorded in the first quarter of 2000 related to an increase in
warrant liability which was adjusted to fair value and reclassed to additional
paid-in capital at the completion of our initial public offering in January
2000.
The effective tax rate differs from that computed at the federal statutory
rate of 34% principally because of the effect of state income taxes of 2.5%, net
of federal benefit, and an increase in deferred tax assets for true-up of net
operating loss carry-forwards.
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In the first quarter of 2000, we recognized an extraordinary charge of
approximately $1.1 million related to the write-off of deferred financing fees
associated with the payoff of our former credit facility in January of 2000.
Net loss per common share for the first quarter of 2001 was $0.03 compared
to a net loss of $1.29 in 2000. The large variance was primarily the result of
preferred stock dividends and preferred stock and warrant accretion from January
1, 2000 through completion of our initial public offering on January 28, 2000
and, to a lesser extent, a lower weighted average number of common shares in the
first quarter of 2000.
LIQUIDITY AND CAPITAL RESOURCES
Our cash balance at March 31, 2001 was approximately $1.1 million compared
to $34.8 million at March 31, 2000. The large cash balance in 2000 resulted from
the net proceeds from our initial public offering that were not used for
acquisitions until the third quarter of 2000. Net cash provided by operating
activities was $1.8 million in 2001 compared to $39,000 of cash used in
operating activities in 2000. The increase was due primarily to the operating
activities of radio stations acquired in 2000. Cash flow used in investing
activities decreased to $970,000 in 2001 compared to $72.8 million used in 2000,
due primarily to the acquisition of radio stations in Utica, New York,
Watertown, New York, and El Paso, Texas in the first quarter of 2000. Cash flows
used in financing activities were $498,000 in 2001 compared to $104.2 million
provided by financing activities in 2000, with the change due primarily to net
proceeds received from our initial public offering in January 2000.
Sources of funds
In January 2000, we entered into a $125.0 million senior secured seven-year
reducing revolving bank credit facility maturing December 31, 2006. This
facility also provides for an additional $50.0 million of borrowing capacity on
substantially the same terms to fund future acquisitions, which subfacility
would convert in January 2002 to a term loan maturing December 31, 2006. The
credit facility permits the borrowing of available credit for working capital
requirements and general corporate purposes, including transaction fees and
expenses, and to fund permitted acquisitions. The facility also permits us to
request from time to time that the lenders issue letters of credit in an
aggregate amount up to $25.0 million in accordance with the same lending
provisions. The commitment, and our maximum borrowings, will reduce over five
years beginning in 2002 as follows (In thousands):
December 31, Commitment Amount
------------ -----------------
2001 $125,000
2002 106,250
2003 87,500
2004 62,500
2005 37,500
2006 0
The $25.0 million letter of credit sub-limit also reduces proportionately
but not below $15.0 million. Mandatory prepayments and commitment reductions
will also be required from certain asset sales, subordinated debt proceeds,
excess cash flow amounts and sales of equity securities.
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Under the terms of the facility, we are required to maintain a minimum
interest rate coverage ratio, minimum fixed charge coverage ratio, maximum
corporate overhead and maximum financial leverage ratio and to observe negative
covenants customary for facilities of this type. Borrowings under the new credit
facility bear interest at a rate equal to (a) the higher of the rate announced
or published publicly from time to time by the agent as its corporate base of
interest or the Overnight Federal Funds Rate plus 0.5%, in either case plus the
applicable margin determined under the credit facility, or (b) the
reserve-adjusted Eurodollar Rate plus the applicable margin, which varies
between 1.25% and 2.75% depending upon our financial leverage. Borrowings
outstanding at March 31, 2001 bore interest at the rate of 6.54%.
We are required to pay certain fees to the agent and the lenders for the
underwriting commitment, administration and use of the credit facility. Our
indebtedness under this credit facility is collateralized by liens on
substantially all of our assets and by a pledge of our operating and license
subsidiaries' stock and is guaranteed by these subsidiaries.
At May 10, 2001 there were borrowings of $49.0 million outstanding under
our facility, and there were approximately $76.0 million of available
borrowings, subject to the terms and conditions of the credit facility.
Uses of funds
On May 9, 2001, we completed the acquisition by merger with StarCom, Inc.
of two FM and one AM radio stations (KKRS-FM, KLZZ-FM and KXSS-AM) serving the
St. Cloud, Minnesota market for approximately $5.0 million in cash, which was
funded from the credit facility. Prior to the closing of the purchase, we
provided programming and other services to the stations under a time brokerage
agreement which began in July 2000.
In the first quarter of 2001, we funded capital expenditures of $920,000,
of which approximately $650,000 was related to the acquisition of a new
broadcasting tower in our Flint, Michigan market. The remaining balance was
utilized to upgrade our equipment and facilities, primarily at stations acquired
in 2000, in order to remain competitive and to create cost savings over the long
term. We expect capital expenditures in 2001 to increase by approximately $1.0
million compared to last year due to various capital projects related to the
radio stations we acquired in 2000 and the correlating increase in the size of
our infrastructure.
Pending acquisitions and dispositions
On May 15, 2001 we entered into a definitive agreement with Two Petaz,
Inc.; WFYR, Inc.; Winston Communications, Inc. of Illinois; and the Cromwell
Group, Inc., to acquire (i) substantially all the assets of WGLO(FM), WPPY(FM),
WRVP(FM) and WVEL(AM), serving the Peoria, Illinois market for a purchase price
of approximately $14.0 million in cash and (ii) the capital stock of the
corporations owning radio stations WFYR(FM) and WIXO(FM), also serving the
Peoria market, in exchange for $6.0 million in shares of our common stock. We
delivered an irrevocable letter of credit in the amount of $1.0 million to
secure our obligations under the agreement. We anticipate closing these
transactions in the third quarter of 2001.
On December 28, 2000 we entered into a definitive agreement with NextMedia
Group II, Inc. and its affiliate to acquire substantially all of the assets of
WJET-FM serving the Erie, Pennsylvania market for approximately $5.0 million in
cash. We delivered an irrevocable letter of credit in the amount of $250,000 to
secure our obligations under the agreement. The Federal Communications
Commission has approved the assignment of the station licenses, and we
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anticipate closing this acquisition in the third quarter 2001. The closing of
this transaction had been delayed by the FCC's analysis of market revenue share
in Erie, Pennsylvania.
On November 3, 2000, we entered into a definitive agreement to sell
substantially all the assets of our three Southern California radio stations
(KTPI-FM and KAVC-AM licensed to Mojave and Tehachapi, and KOSS-FM licensed to
Rosamond) to Concord Media Group, Inc. for approximately $13.5 million. The
Federal Communications Commission has approved the assignment of the station
licenses, and we anticipate closing this transaction in the second quarter 2001.
Action on the FCC application for approval of this sale had been delayed due to
the filing of an objection by the owner of a competing station in the market
based on the alleged ownership concentration claimed to be allocable to the
proposed buyer following the sale. We intend to apply the net proceeds of this
sale to temporarily pay down our credit facility until we need to re-borrow it
for future acquisitions or other corporate purposes.
We believe the cash generated from operations and available borrowings
under our credit facility will be sufficient to complete our pending
acquisitions and to meet our requirements for corporate expenses and capital
expenditures for the foreseeable future, based on our projected operations and
indebtedness. After giving effect to all pending transactions, the outstanding
borrowings under our credit facility would be approximately $54.5 million with
available borrowings of approximately $70.5 million, subject to the terms and
conditions of the credit facility.
Recently issued accounting pronouncements
The Financial Accounting Standards Board (FASB) has issued an Exposure
Draft, Proposed Statement of Financial Accounting Standards, Business
Combinations and Intangible Assets-Accounting for Goodwill. The Exposure Draft
contains the FASB's tentative decisions about requiring the use of a
non-amortization approach to account for certain purchased intangible assets.
Under the non-amortization approach, certain intangible assets would be tested
for impairment, rather than being amortized to earnings.
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 prescribes the accounting
treatment for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. We
may employ financial instruments to manage our exposure to fluctuations in
interest rates. We do not hold or issue such financial instruments for trading
purposes. In June 2000, the FASB issued SFAS 138, an amendment to SFAS 133. We
have adopted SFAS 133 and related amendments, as required in the year 2001, and
have determined the impact of adoption to be immaterial.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to the impact of interest rate changes as borrowings under
our credit facility bear interest at variable interest rates. It is our policy
to enter into interest rate transactions only to the extent considered necessary
to meet our objectives. As of March 31, 2001, we have not employed any financial
instruments to manage our interest rate exposure. Based on our exposure to
variable rate borrowings at March 31, 2001, a one percent (1%) change in the
weighted average interest rate would change our annual interest expense by
$440,000.
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PART II- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We currently and from time to time are involved in litigation incidental to
the conduct of our business. In the opinion of our management, we are not a
party to any lawsuit or legal proceeding which is likely to have a material
adverse effect on our business or financial condition.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On March 20, 2001, we issued 37,230 shares of our common stock to River
Cities Capital Fund Limited Partnership upon the exercise in full, on a cashless
"net issue" basis, of outstanding warrants which provided for the purchase of a
total of 100,000 shares of our common stock at $5.00 per share. These warrants
had been issued in 1998 in connection with the issuance of Series B and F
convertible preferred stock, which converted to our common stock in January
2000.
In the first quarter of 2001, we issued 8,345 shares of common stock on the
exercise of stock options under both our 1998 Management Stock Option Plan and
Faircom Conversion Stock Option Plan at stated exercise prices ranging from
$1.56 to $5.00 per share.
We claimed exemptions from registration under Section 4(2) of the
Securities Act of 1933 for the transactions described above, which we believe
did not involve a public offering based on the number and nature of the persons
involved and the generally private character of the transactions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits identified as Part II Exhibits on the following Exhibit
Index, which is incorporated herein by this reference, are filed or incorporated
by reference as exhibits to Part II of this Form 10-Q.
(b) Reports on Form 8-K
No Forms 8-K were filed during the first quarter of 2001.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
REGENT COMMUNICATIONS, INC.
Date: May 15, 2001 By: /s/ Terry S. Jacobs
--------------------------------------
Terry S. Jacobs, Chairman of the Board
and CEO
Date: May 15, 2001 By: /s/ Anthony A. Vasconcellos
--------------------------------------
Anthony A. Vasconcellos, Chief
Financial Officer and Senior Vice
President (Chief Accounting Officer)
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EXHIBIT INDEX
The following exhibits are filed, or incorporated by reference where
indicated, as part of Part II of this report on Form 10-Q:
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
3(a)* Amended and Restated Certificate of Incorporation of Regent
Communications, Inc., as amended by a Certificate of Designation,
Number, Powers, Preferences and Relative, Participating, Optional
and Other Special Rights and the Qualifications, Limitations,
Restrictions, and Other Distinguishing Characteristics of Series
G Preferred Stock of Regent Communications, Inc., filed January
21, 1999 (previously filed as Exhibit 3(a) to Amendment No. 1 to
the Registrant's Form S-1 Registration Statement No. 333-91703
filed December 29, 1999 and incorporated herein by this
reference)
3(b)* Certificate of Decrease of Shares Designated as Series G
Convertible Preferred Stock of Regent Communications, Inc., filed
with the Delaware Secretary of State on June 21, 1999 amending
the Amended and Restated Certificate of Incorporation of Regent
Communications, Inc., as amended (previously filed as Exhibit
3(c) to the Registrant's Form 10-Q Fourth Quarter Ended June 30,
1999 and incorporated herein by this reference)
3(c)* Certificate of Designation, Number, Powers, Preferences and
Relative, Participating, Optional and Other Special Rights and
the Qualifications, Limitations, Restrictions, and Other
Distinguishing Characteristics of Series H Preferred Stock of
Regent Communications, Inc., filed with the Delaware Secretary of
State on June 21, 1999 amending the Amended and Restated
Certificate of Incorporation of Regent Communications, Inc., as
amended (previously filed as Exhibit 3(d) to the Registrant's
Form 10-Q for the Quarter Ended June 30, 1999 and incorporated
herein by this reference)
3(d)* Certificate of Decrease of Shares Designated as Series G
Convertible Preferred Stock of Regent Communications, Inc., filed
with the Delaware Secretary of State on August 23, 1999 amending
the Amended and Restated Certificate of Incorporation of Regent
Communications, Inc., as amended (previously filed as
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Exhibit 3(e) to the Registrant's Form 10-Q for the Quarter Ended
on September 30, 1999 and incorporated herein by this reference)
3(e)* Certificate of Increase of Shares Designated as Series H
Convertible Preferred Stock of Regent Communications, Inc., filed
with the Delaware Secretary of State on August 23, 1999 amending
the Amended and Restated Certificate of Incorporation of Regent
Communications, Inc., as amended (previously filed as Exhibit
3(f) to the Registrant's Form 10-Q for the Quarter Ended on
September 30, 1999 and incorporated herein by this reference)
3(f)* Certificate of Designation, Number, Powers Preferences and
Relative, Participating, Optional, and Other Special Rights and
the Qualifications, Limitations, Restrictions, and Other
Distinguishing Characteristics of Series K Preferred Stock of
Regent Communications, Inc., filed with the Delaware Secretary of
State on December 13, 1999 amending the Amended and Restated
Certificate of Incorporation of Regent Communications, Inc., as
amended (previously filed as Exhibit 3(g) to Amendment No. 1 to
the Registrants Form S-1 Registration Statement No. 333-91703
filed December 29, 1994 and incorporated herein by this
reference)
3(g)* Amended and Restated By-Laws of Regent Communications, Inc.
(previously filed as Exhibit 3(b) to the Registrant's Form S-4
Registration Statement No. 333-46435 effective May 7, 1998 and
incorporated herein by this reference).
3(h)* Amendments to By-Laws of Regent Communications, Inc. adopted
December 13, 1999 (previously filed as Exhibit 3(h) to Amendment
No. 1 to the Registrant's Form S-1 Registration Statement No.
333-91703 filed December 29, 1999 and incorporated herein by this
reference)
4(a)* Credit Agreement dated as of January 27, 2000 among Regent
Broadcasting, Inc., Regent Communications, Inc., Fleet National
Bank, as administrative agent, Fleet National Bank, as issuing
lender, General Electric Capital Corporation, as syndication
agent, Dresdner Bank AG, New York and Grand Cayman Branches, as
document agent, and the several lenders party thereto (excluding
exhibits not deemed material or filed separately in executed
form) (previously filed as Exhibit 4(a) to the Registrant's Form
8-K filed February 10, 2000 and incorporated herein by this
reference)
4(b)* Omnibus Amendment No. 1 and Amendment No. 1 to Credit Agreement
dated as of February 4, 2000 among Regent Broadcasting, Inc.,
Regent Communications, Inc., Fleet National Bank, as
administrative agent, Fleet National Bank, as issuing lender,
General Electric Capital Corporation, as syndication agent,
Dresdner Bank AG, New York and Grand Cayman Branches, as document
agent, and the several lenders party thereto (previously filed as
Exhibit 4(e) to the Registrant's Form 8-K filed February 10, 2000
and incorporated herein by this reference)
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4(c)* Amendment No. 2 and Consent, dated as of August 23, 2000, to the
Credit Agreement dated as of January 27, 2000, as amended, among
Regent Broadcasting, Inc., Regent Communications, Inc., Fleet
National Bank, as administrative agent, Fleet National Bank, as
issuing lender, General Electric Capital Corporation, as
syndication agent, Dresdner Bank AG, New York and Grand Cayman
Branches, as document agent, and the several lenders party
thereto (previously filed as Exhibit 4(c) to the Registrant's
Form 10-K for the year ended December 31, 2000 and incorporated
herein by this reference)
4(d)* Amendment No. 3 dated as of December 1, 2000, to the Credit
Agreement dated as of January 27, 2000, as amended, among Regent
Broadcasting, Inc., Regent Communications, Inc., Fleet National
Bank, as administrative agent, Fleet National Bank, as issuing
lender, General Electric Capital Corporation, as syndication
agent, Dresdner Bank AG, New York and Grand Cayman Branches, as
document agent, and the several lenders party thereto (previously
filed as Exhibit 4(d) to the Registrant's Form 10-K for the year
ended December 31, 2000 and incorporated herein by this
reference)
4(e)* Revolving Credit Note dated as of February 7, 2000 made by Regent
Broadcasting, Inc. in favor of Fleet National Bank in the
original principal amount of $25 million (previously filed as
Exhibit 4(f) to the Registrant's Form 8-K filed February 10, 2000
and incorporated herein by this reference) (See Note 1 below)
4(f)* Subsidiary Guaranty Agreement dated as of January 27, 2000 among
Regent Broadcasting, Inc., Regent Communications, Inc. and each
of their subsidiaries and Fleet National Bank, as collateral
agent (previously filed as Exhibit 4(c) to the Registrant's Form
8-K filed February 10, 2000 and incorporated herein by this
reference)
4(g)* Pledge Agreement dated as of January 27, 2000 among Regent
Broadcasting, Inc., Regent Communications, Inc. and each of their
subsidiaries and Fleet National Bank, as collateral agent
(previously filed as Exhibit 4(d) to the Registrant's Form 8-K
filed February 10, 2000 and incorporated herein by this
reference)
4(h)* Security Agreement dated as of January 27, 2000 among Regent
Broadcasting, Inc., Regent Communications, Inc. and each of their
subsidiaries and Fleet National Bank, as collateral agent
(previously filed as Exhibit 4(b) to the Registrant's Form 8-K
filed February 10, 2000 and incorporated herein by this
reference)
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10(a) Regent Communications, Inc. 1998 Management Stock Option Plan, as
amended through March 30, 2001
10(b) Executive Employment Agreement dated as of March 1, 2001 between
Regent Communications, Inc. and Terry S. Jacobs
10(c) Executive Employment Agreement dated as of March 1, 2001 between
Regent Communications, Inc. and William L. Stakelin
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