Cox Radio, Inc.

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Cox Radio, Inc.

6205 Peachtree Dunwoody Road
Atlanta, Georgia 30328
U.S.A.
Telephone: (678) 645-0000
Fax: (678) 645-5294
Web site: http://www.coxradio.com

Public Company
Incorporated: 1996
Employees: 2,110
Sales: $440.47 million (2006)
Stock Exchanges: New York
Ticker Symbol: CXR
NAIC: 515112 Radio Stations

BEGINNINGS

COX BROADCASTING: 1964

ACQUISITION SPREE, COX RADIO IPO IN 1996

$380 MILLION ACQUISITION OF HOUSTON, RICHMOND STATIONS IN 2000

PRINCIPAL SUBSIDIARIES

PRINCIPAL COMPETITORS

BEGINNINGS

Cox Radio traces its roots to James Middleton Cox, who was born on a farm in Ohio in 1870. After studying to be a teacher and beginning work at the age of 16, he switched to journalism and in 1898 bought a newspaper, the Dayton Evening News. A reformer with political ambitions, Cox in 1909 won election to the U.S. House of Representatives and later served three terms as governor of Ohio before unsuccessfully seeking the presidency in 1920 with running mate Franklin D. Roosevelt.

In the 1920s Cox revived his interest in newspapers and bought several others in Ohio as well as the Miami, Florida, Metropolis. In 1934 he also helped his son James McMahon Cox buy a radio station in Erie, Pennsylvania, which was then moved to Dayton and renamed WHIO. Its manager would be J. Leonard Reinsch, a 26-year-old who had received a business degree from Northwestern University and was already a ten-year radio veteran.

Cox’s radio holdings were expanded in 1939 when he bought the Atlanta Journal, which also owned powerful station WSB. Cox Enterprises, as the family business was known, subsequently moved its headquarters from Dayton to Atlanta. During these years another radio station was added in Miami, and in 1948 WSB launched a television station and a second radio station on the new higher-fidelity FM band.

Following the death of James Middleton Cox in 1957 his son became head of Cox Enterprises, sharing ownership with sisters Anne and Barbara. By this time, the company had acquired or started a handful of additional radio and television stations, principally in cities where it owned newspapers, and had also diversified into areas including real estate. Total broadcasting revenues at this time stood at about $9 million per year.

In 1962 Cox Enterprises bought a community antenna system in Lewistown, Pennsylvania. The precursor of cable television, such systems had begun to appear around the United States in areas with poor reception, enabling residential customers to have crisp pictures via large antennas connected to a wired network.

COX BROADCASTING: 1964

In 1964, to resolve operational difficulties within Cox Enterprises, the firm’s broadcasting and community antenna interests were spun off as a unit called Cox Broadcasting Corp. via an initial public offering (IPO) of 650,000 shares on the New York Stock Exchange. The Cox family would continue to hold a 70 percent stake, with James Cox serving as chairman and J. Leonard Reinsch as president. Based in Atlanta, Cox Broadcasting owned radio and television stations in its home town, Charlotte, North Carolina, and Dayton, Ohio, as well as a radio station in Miami, a television station in San Francisco, and community antenna systems in Washington and Oregon.

In the fall the firm bought NBC-affiliated WIIC-TV of Pittsburgh for $20.5 million, while its cable television unit began acquiring community antenna systems around the United States. Revenues for 1964 were $21.4 million.

During the mid-1960s Cox Broadcasting entered a number of different business areas, in 1965 forming a joint venture with Kaiser Industries to manufacture community antenna system equipment (which it soon exited) and purchasing an 80 percent stake in magazine and catalog publisher United Technical Publications; in 1966 and 1967 buying TV production firms Walter Schwimmer, Inc., and Bing Crosby Productions; and in 1968 paying $6 million to acquire Manheim Auto Auction of Pennsylvania, the nation’s largest used-car auction.

In the fall of 1968 Cox Broadcasting made a public offering of 490,000 shares in its rapidly growing Cox Cable Communications, Inc., subsidiary, keeping a 56 percent stake. Two years later the firm sold the Walter Schwimmer television unit to Telecom Productions, and in 1972 acquired TeleRep, a national television sales representation firm.

In 1973 Cox Broadcasting bought Los Angeles radio station KFI for $15.1 million, along with a sales firm that represented the station called Christal Co. At year’s end J. Leonard Reinsch gave up the job of president to become chairman, and Clifford M. Kirt-land, Jr., was given the top job. In 1974 James McMahon Cox died, and his sisters Anne and Barbara became the company’s primary owners.

In early 1977 the firm bought FM radio stations in Baltimore and Philadelphia, and in the summer it took Cox Cablevision private. A year later General Electric made an offer to buy Cox Broadcasting, ultimately offering close to $570 million before the Cox family abruptly called off the deal. During the lengthy negotiation period the firm also sold its publishing unit to Hearst Corp. for $26 million and dissolved Bing Crosby Productions. After the deal fell apart most of Cox Cablevision’s management team left and agreements to sell five TV and eight radio stations to comply with federal ownership restrictions were canceled.

In 1982 the firm’s name was changed to Cox Communications, and the next year it swapped a Baltimore FM radio station and $9 million for a Chicago station owned by Island Broadcasting Co.

In 1985 the outstanding shares of Cox Communications, which owned five AM and seven FM radio stations, along with seven TV stations, several auto auctions, and cable systems serving 1.5 million customers, were purchased and merged into Cox Enterprises (which itself published 21 daily newspapers) for $1.26 billion. In 1988 Barbara Cox Anthony’s son James Cox Kennedy was installed as chairman and CEO of Cox Enterprises. By the early 1990s the firm’s radio station holdings were generating annual revenues of close to $100 million.

COMPANY PERSPECTIVES

Cox Radio knows its comfort zone and it’s all about radio. We love the medium and every day, we work to make our stations as exciting, informative and listener-perfect as possible. We understand the intimacy of radio whether it’s in the car, on the desk or under the kitchen counter. We know radio audiences tune in to a particular station because it meets their expectations. Radio gives them a steady, but interesting, diet of what they want to hear. Most radio listeners find a place on the dial that they call home and, more and more, those homes belong to Cox Radio.

In 1993 the company added FM stations in Chicago, Birmingham, and Tampa, the latter received in trade for a Dallas station and $4.7 million. In 1994 Cox bought an FM station in Atlanta for $9.4 million and began operating another under contract in Los Angeles, which it acquired the next year for $11.7 million.

The firm’s strategy was to acquire underperforming stations in areas with growing populations such as the Sun Belt states; Cox would then reprogram to boost listenership, enabling the company to increase advertising rates and revenues. The Tampa station, for example, was given new call letters and began to feature 1970s oldies, which helped raise its average audience size from 13th in the market to sixth.

ACQUISITION SPREE, COX RADIO IPO IN 1996

When Congress relaxed radio station ownership limits via the Telecommunications Act of 1996, an unprecedented wave of industry consolidation followed as radio companies rushed to create clusters of stations that shared functions to reduce costs and maximize profits. After the bill was signed into law in early February, Cox announced acquisitions in Louisville, Kentucky; Syracuse, New York; and Miami and Tampa, Florida; as well as a deal to trade two stations in Chicago for three in Orlando, and another to sell a Miami station for $13 million. In July an agreement was also reached to buy NewCity Communications, Inc., which owned 18 stations, for $253 million.

To help fund the NewCity purchase, Cox Enterprises spun off its radio holdings as Cox Radio, Inc. The firm would be headed by Robert F. Neil, who had served as Cox’s executive vice-president for radio since 1992. A public offering was completed in September on the New York Stock Exchange that raised $120 million, with Cox Enterprises retaining a 70 percent ownership stake. Cox Radio would be one of the top ten radio groups in the United States, with stations in such major markets as Atlanta, Miami, Tampa, Orlando, Los Angeles, Louisville, Tulsa, San Antonio, Syracuse, and Birmingham, Alabama. Its stations offered a variety of formats that ranged from news/talk to country to adult contemporary music.

By year’s end Cox owned or was finalizing deals that would give it a total of 43 stations, 28 of them on the FM band and 15 on AM, in 12 markets. A handful of stations were owned by other parties but operated in whole or part by Cox through arrangements known as local marketing agreements or joint sales agreements. For its first year in operation, the firm reported revenues of $132.9 million.

In 1997 Cox Radio added 11 more stations, which were largely split into serving the Birmingham, Alabama, and San Antonio, Texas, markets, as well as boosting the total in Dayton by one. The following year the firm’s holdings increased to 59 with the addition of stations in Orlando, San Antonio, and Nassau-Suffolk, New York, where four stations were purchased for $48 million, one of which was later sold.

During 1998 Cox began syndicating investment advice program The Motley Fool and later added others hosted by consumer adviser Clark Howard and political commentator Neal Boortz. National sales would be handled by agency MediaAmerica. A private placement of notes worth $200 million was also completed, and the firm invested $2.5 million in USA Digital Radio, which had been formed by a dozen leading radio operators to develop technology for the broadcast of digital audio on the radio spectrum.

KEY DATES

1934:: James Cox buys a radio station in Pennsylvania and moves it to Dayton, Ohio.
1939:: Acquisition of Atlanta newspaper brings Cox powerful WSB radio station.
1948:: Cox Enterprises launches new FM radio andtelevision stations in Atlanta.
1964:: Cox Broadcasting Corp. subsidiary isfounded; company makes initial publicoffering.
1970s:: Cox Broadcasting adds radio stations in LosAngeles, Baltimore, and Philadelphia.
1985:: Cox Enterprises takes broadcasting unitprivate.
1996:: Cox Radio is formed, makes initial publicoffering to fund acquisitions.
1998:: Firm begins syndicating radio programs byThe Motley Fool and others.
2000:: Company pays $380 million for stations inHouston, Texas, and Richmond, Virginia.

Growth continued in 1999 with a swap of the firm’s Syracuse stations plus $94 million in cash for two in Tampa and two in Louisville that were owned by Clear Channel Communications and Jacor Communications, who were merging and had to eliminate stations to comply with federal limits. Cox also exchanged two of its Los Angeles stations with AMFM, Inc., for six in Jacksonville, Florida, and others in Miami, Atlanta, and southern Connecticut, purchased a station in Athens, Georgia, for $78 million that was then moved closer to Atlanta, and bought three in Honolulu, Hawaii, for $18 million, while selling stations in Long Island and Louisville. A sister unit within Cox Enterprises, Cox Interactive Media, was also developing ad-supported web sites for the firm’s stations that would feature streaming audio in conjunction with MP3.com, Inc. The company was the fifth largest radio holding company in the United States in terms of revenues, which topped $300 million for the year. Net income was $55 million, and the value of its stock had more than quintupled since its 1996 offering.

$380 MILLION ACQUISITION OF HOUSTON, RICHMOND STATIONS IN 2000

In 2000 Cox Radio entered two new markets with the $380 million purchase of three stations in Houston and four in Richmond, Virginia, that became available when AMFM merged with Clear Channel. The company also cut a deal to acquire WTMI-FM in Miami for approximately $100 million, and bought WALR-FM of Atlanta for $280 million, after which it was exchanged along with San Antonio and Tampa stations for KHPT-FM of Houston. Cox would continue to broadcast WALR’s content via one of its other Atlanta stations, which was then renamed WALR-FM. In other deals the firm paid $52.5 million for another Richmond FM station and two in Greenville, South Carolina, and issued another $500 million in bonds.

Radio advertising declined as the U.S. economy faltered in the early 2000s, however, and between 2001 and 2004 Cox Radio’s expansion was put on hold, with the firm taking on sales and marketing duties for an additional Richmond station and selling smaller ones in Orlando, Tulsa, Honolulu, Jacksonville, and Richmond. In 2002 the company pledged to sever all ties to independent music promoters, after an industry scandal that involved payments for song plays.

In August 2004 Cox Radio bought two AM stations in Honolulu and traded them for KGMZ-FM there, which it had run since 1999 under a joint sales agreement. The firm also continued to tweak its existing properties, making occasional format changes to reposition stations with new blends of music or talk that better fit local listener demographics, or in some cases intentionally reducing the number of ads to stand out from competitors.

In September 2006 Cox Radio expanded its Jacksonville, Florida, cluster by purchasing WOKV-FM for $7.7 million. The firm was in the process of upgrading its stations with new digital HD-Radio transmitters, and it also launched secondary digital channels in four cities. Revenues for the fiscal year topped $440 million, up slightly from 2005, but the company recorded a net loss of $24.4 million, down from earnings of $61.3 million the year before. The red ink was due to a $176.3 million impairment charge taken on assets in five markets, which had been adjusted downward to their fair market value.

More than seven decades after the Cox family bought its first radio station, Cox Radio, Inc., had grown to become one of the largest radio companies in the United States. The 80 stations the firm owned or operated were clustered in 18 markets around the country, primarily in the growing Sun Belt, and still included two that James M. Cox had acquired in the 1930s. Though radio was struggling to hold onto its audience in the face of iPods, satellite radio, video games, television, and the Internet, the firm remained profitable as advertisers saw the value of a medium that was used daily by millions of Americans in their cars, at home, and at work.

Frank Uhle